1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 2 00:00:08,760 --> 00:00:11,440 Speaker 1: Along with my co host Lisa A. Bramowitz. Each day 3 00:00:11,480 --> 00:00:15,000 Speaker 1: we bring you the most important, noteworthy, and useful interviews 4 00:00:15,040 --> 00:00:17,520 Speaker 1: for you and your money, whether you're at the grocery 5 00:00:17,560 --> 00:00:20,560 Speaker 1: store or the trading floor. Find the Bloomberg P and 6 00:00:20,680 --> 00:00:31,840 Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. 7 00:00:31,840 --> 00:00:35,839 Speaker 1: In the nineteen seventies, about twenty million Americans earned their 8 00:00:35,880 --> 00:00:39,519 Speaker 1: paycheck from factory work. Well, today, about twelve and a 9 00:00:39,600 --> 00:00:43,040 Speaker 1: half million workers remain in the industry. Here to tell 10 00:00:43,120 --> 00:00:47,080 Speaker 1: us more about manufacturing in the United States and his movie, 11 00:00:47,159 --> 00:00:52,280 Speaker 1: American Made Movie, is Vincent Vittorio. He is the director. Vincent. 12 00:00:52,320 --> 00:00:55,000 Speaker 1: Thank you very much for being with us. Thanks so 13 00:00:55,040 --> 00:00:57,080 Speaker 1: much for having me on. Can you just start off 14 00:00:57,080 --> 00:01:01,120 Speaker 1: by telling us why did you decide to make this movie? Well, 15 00:01:01,200 --> 00:01:03,080 Speaker 1: but my co director and I both had kind of 16 00:01:03,120 --> 00:01:07,440 Speaker 1: a connection to manufacturing. My wife's parents were from Detroit 17 00:01:07,520 --> 00:01:10,000 Speaker 1: and work to many of the auto manufacturers there, and 18 00:01:10,040 --> 00:01:14,000 Speaker 1: then my business partners also was in Georgia, um a 19 00:01:14,040 --> 00:01:16,040 Speaker 1: lot of the plants there that end up closing down, 20 00:01:16,200 --> 00:01:18,039 Speaker 1: and we started to realize that, you know, with the 21 00:01:18,080 --> 00:01:21,319 Speaker 1: power of documentary filmmaking, we can kind of get people 22 00:01:21,319 --> 00:01:24,400 Speaker 1: to really understand that well, manufacturing isn't what it was, 23 00:01:25,000 --> 00:01:28,800 Speaker 1: that there's still viable jobs for manufacturing, and so we 24 00:01:28,920 --> 00:01:32,559 Speaker 1: produced a film that talks about kind of that, you know, um, 25 00:01:32,600 --> 00:01:36,440 Speaker 1: the spirit of manufacturing that we can awaken with with 26 00:01:37,160 --> 00:01:40,320 Speaker 1: encouraging people to buy from this country, from their community 27 00:01:40,360 --> 00:01:42,920 Speaker 1: and their home state. Speak if you can about some 28 00:01:43,000 --> 00:01:45,800 Speaker 1: of the specifics, because we know a lot of work 29 00:01:45,880 --> 00:01:48,320 Speaker 1: that might have been done by human beings is now 30 00:01:48,400 --> 00:01:53,920 Speaker 1: done by robots or is automated. But manufacturing employment, as 31 00:01:54,640 --> 00:01:57,560 Speaker 1: evidenced by your movie, you can still lead to a 32 00:01:57,600 --> 00:02:01,480 Speaker 1: positive economic outlook. No, definitely, you know there's a ripple 33 00:02:01,520 --> 00:02:04,400 Speaker 1: effect that happens when you have a UM, a line 34 00:02:04,400 --> 00:02:06,800 Speaker 1: of manufacturing that's much different than what it was twenty 35 00:02:06,880 --> 00:02:09,000 Speaker 1: years ago. I mean you think of the way that 36 00:02:09,080 --> 00:02:11,480 Speaker 1: things have advanced and the way that um A lot 37 00:02:11,520 --> 00:02:14,520 Speaker 1: of these jobs are much more technology based, with having 38 00:02:14,520 --> 00:02:17,880 Speaker 1: a background in technical education as opposed to being on 39 00:02:17,919 --> 00:02:20,720 Speaker 1: a line where we're just putting apart together. And I 40 00:02:20,720 --> 00:02:23,240 Speaker 1: think you know that really goes to the education into things. 41 00:02:23,280 --> 00:02:25,000 Speaker 1: I mean, in your state of New York, there's a 42 00:02:25,000 --> 00:02:27,959 Speaker 1: great program the p Tech program that you know, really 43 00:02:28,000 --> 00:02:31,400 Speaker 1: get kids to understand kind of, um, the importance of 44 00:02:31,440 --> 00:02:33,440 Speaker 1: a career pathway. And I think if we can have 45 00:02:33,560 --> 00:02:36,480 Speaker 1: more things like that across this country to get kids 46 00:02:36,480 --> 00:02:38,920 Speaker 1: to really understand that, you know, we don't all have 47 00:02:39,000 --> 00:02:41,680 Speaker 1: to graduate with a liberal arts degree, but we can 48 00:02:41,680 --> 00:02:43,960 Speaker 1: have a job that gets us kind of a foot 49 00:02:44,000 --> 00:02:47,359 Speaker 1: forward with thinking about advanced manufacturing or careers um to 50 00:02:47,600 --> 00:02:50,480 Speaker 1: kind of, I guess, respond to this skills gap. We're 51 00:02:50,520 --> 00:02:54,440 Speaker 1: starting to see, well, a lot of manufacturers, indeed, the 52 00:02:54,440 --> 00:03:00,880 Speaker 1: Manufacturers Association, National Association and manufacturers a big porter President 53 00:03:00,919 --> 00:03:05,040 Speaker 1: Donald Trump. They speak about tax reform and how that 54 00:03:05,080 --> 00:03:08,880 Speaker 1: could spur infrastructure spending. Is that also part of the 55 00:03:09,520 --> 00:03:11,560 Speaker 1: picture when you know you made this movie, You've got 56 00:03:11,560 --> 00:03:13,400 Speaker 1: to find what are the things that are going to 57 00:03:13,800 --> 00:03:18,360 Speaker 1: make manufacturing economically viable? You know? Well, to start with 58 00:03:18,400 --> 00:03:20,280 Speaker 1: the Trump side of things, I think that it's it's 59 00:03:20,360 --> 00:03:22,160 Speaker 1: kind of one of those I don't know what it's 60 00:03:22,160 --> 00:03:26,280 Speaker 1: gonna mean today versus tomorrow. I mean, so I think that, um, 61 00:03:26,600 --> 00:03:28,320 Speaker 1: I don't know where he's going to bring things, but 62 00:03:28,360 --> 00:03:32,200 Speaker 1: I do think the tax reform can definitely incentivize people 63 00:03:32,280 --> 00:03:34,360 Speaker 1: to make things here and to give them a reason 64 00:03:34,440 --> 00:03:36,960 Speaker 1: to not feel like they can go overseas. Um. I 65 00:03:37,080 --> 00:03:39,040 Speaker 1: just you know, I really think it takes a lot 66 00:03:39,120 --> 00:03:41,960 Speaker 1: of bipartisanship to come together to actually approve that on 67 00:03:42,000 --> 00:03:44,360 Speaker 1: all sides. But what you do see is things like 68 00:03:44,400 --> 00:03:47,119 Speaker 1: the fox con plant, you know in Wisconsin, and I mean, 69 00:03:47,160 --> 00:03:49,040 Speaker 1: that's that's a huge thing to see. The fox com 70 00:03:49,040 --> 00:03:51,080 Speaker 1: that we always look at is being a foreign entity 71 00:03:51,080 --> 00:03:54,000 Speaker 1: of sorts that is now going to be manufacturing things 72 00:03:54,360 --> 00:03:56,920 Speaker 1: on you know, our home soil. And I think that's 73 00:03:56,960 --> 00:03:58,480 Speaker 1: that's a beautiful thing. And you see that with a 74 00:03:58,520 --> 00:04:00,960 Speaker 1: lot of auto manufacturers. So I think that we need 75 00:04:01,000 --> 00:04:03,760 Speaker 1: to give them reasons that aren't just about the tax code, 76 00:04:03,800 --> 00:04:07,320 Speaker 1: but about communities reaching out and making them feel like 77 00:04:07,640 --> 00:04:11,440 Speaker 1: the ripple effect that's going to not only help the 78 00:04:11,480 --> 00:04:14,320 Speaker 1: state but help their their um. You know, they're they're 79 00:04:14,360 --> 00:04:18,120 Speaker 1: manufacturing their brand, their their company. And as far as 80 00:04:18,800 --> 00:04:23,000 Speaker 1: examples in the movie, maybe just give people some idea. Well, 81 00:04:23,040 --> 00:04:25,159 Speaker 1: one one really big company which which I've grown to 82 00:04:25,200 --> 00:04:28,040 Speaker 1: love through making the film Son Partly Bias is new balance. 83 00:04:28,480 --> 00:04:31,520 Speaker 1: So new balance sneakers. You know, they make sneakers in 84 00:04:31,520 --> 00:04:33,880 Speaker 1: the United States, not all of them, but a good 85 00:04:33,920 --> 00:04:36,760 Speaker 1: amount of them, and it's grown tremendously in time. It's 86 00:04:36,800 --> 00:04:39,520 Speaker 1: it's actually kind of ironic that, um, the people that 87 00:04:39,560 --> 00:04:43,440 Speaker 1: are buying the most America made sneakers are overseas, which 88 00:04:43,480 --> 00:04:45,599 Speaker 1: I think that goes back to say something about what 89 00:04:45,680 --> 00:04:48,520 Speaker 1: that brand of made an America means. You know, if 90 00:04:48,839 --> 00:04:51,039 Speaker 1: we can't look at that as we go to the 91 00:04:51,040 --> 00:04:53,520 Speaker 1: big box store and think that this is something important 92 00:04:53,520 --> 00:04:56,200 Speaker 1: that we make things here but other countries are noticing it, 93 00:04:56,240 --> 00:04:58,360 Speaker 1: you know we need to take take interest in that. 94 00:04:58,440 --> 00:05:00,280 Speaker 1: But um, New Balance is a great exam up on 95 00:05:00,600 --> 00:05:02,880 Speaker 1: you know the other one that's based in based in Brighton, right, 96 00:05:02,880 --> 00:05:05,839 Speaker 1: I mean they based in in Boston, home to Bloomberg 97 00:05:05,839 --> 00:05:11,160 Speaker 1: one oh six one and Bloomberg. So that is certainly 98 00:05:11,680 --> 00:05:15,279 Speaker 1: a feature of the sort of the made in America, 99 00:05:15,320 --> 00:05:18,840 Speaker 1: made in the USA label, is it is prestigious outside 100 00:05:18,839 --> 00:05:22,080 Speaker 1: the United States? What about making it prestigious inside the 101 00:05:22,120 --> 00:05:24,880 Speaker 1: United States? You know that takes a lot with the marketing. 102 00:05:24,880 --> 00:05:26,839 Speaker 1: I mean you've seen that the last two Super Bowls 103 00:05:26,880 --> 00:05:29,640 Speaker 1: where you see that made an America ad that comes up. 104 00:05:29,960 --> 00:05:32,120 Speaker 1: But I mean, if we can get people today to 105 00:05:32,200 --> 00:05:34,479 Speaker 1: realize kind of what it means to have a personal 106 00:05:34,520 --> 00:05:37,920 Speaker 1: relationship with the product we buy or the brand. I 107 00:05:37,920 --> 00:05:40,960 Speaker 1: think we can do something. I mean Lebron James great example, right, 108 00:05:40,960 --> 00:05:44,320 Speaker 1: He's getting paid millions of dollars to endorse anything and 109 00:05:44,360 --> 00:05:45,960 Speaker 1: people are going to flock to it. I think if 110 00:05:46,000 --> 00:05:48,160 Speaker 1: we can do that same thing with this Maid in 111 00:05:48,200 --> 00:05:51,200 Speaker 1: America brand. I mean, can you imagine if Robert Downey Jr. 112 00:05:51,400 --> 00:05:53,120 Speaker 1: Had like an Iron Man mask and he took it 113 00:05:53,160 --> 00:05:55,160 Speaker 1: off and gave a pitch for the idea that like 114 00:05:55,480 --> 00:05:58,400 Speaker 1: this was made right here in the USA. I mean, like, 115 00:05:58,440 --> 00:06:00,279 Speaker 1: those are the kind of things that we need really 116 00:06:00,360 --> 00:06:02,560 Speaker 1: kind of do to to spark that because there's no 117 00:06:02,600 --> 00:06:05,120 Speaker 1: doubt we're not making you know, good quality stuff and 118 00:06:05,200 --> 00:06:07,520 Speaker 1: you can go buy a desk at Ikea for a 119 00:06:07,600 --> 00:06:10,760 Speaker 1: quarter of the price at the expensive furniture store, but 120 00:06:10,880 --> 00:06:13,800 Speaker 1: you know, the money you're paying it comes across with 121 00:06:13,880 --> 00:06:17,279 Speaker 1: the product you're getting. Things in America are made um 122 00:06:17,320 --> 00:06:19,560 Speaker 1: to last, and I think that's something that I think 123 00:06:19,720 --> 00:06:22,440 Speaker 1: I feel very passionate about with everything that I purchase. 124 00:06:22,640 --> 00:06:26,040 Speaker 1: All right, But having having said that, do you find 125 00:06:26,040 --> 00:06:29,680 Speaker 1: that there's a contradiction because if you go to a 126 00:06:29,800 --> 00:06:33,800 Speaker 1: big box retailer, you're looking for the best price. You're 127 00:06:33,800 --> 00:06:36,160 Speaker 1: not necessarily going to put the item or the palette 128 00:06:36,160 --> 00:06:39,080 Speaker 1: of items back on the shelf because it's made somewhere else. 129 00:06:39,520 --> 00:06:42,840 Speaker 1: And that is what has fueled a lot of innovation 130 00:06:42,880 --> 00:06:45,320 Speaker 1: in the United States in terms of let's say, retailing 131 00:06:45,440 --> 00:06:49,640 Speaker 1: or even making consumer products affordable. No, you're right. I 132 00:06:49,640 --> 00:06:51,640 Speaker 1: mean it's very hard because we live in this kind 133 00:06:51,680 --> 00:06:54,520 Speaker 1: of throwaway society where we don't plan on buying a 134 00:06:54,640 --> 00:06:56,520 Speaker 1: couch that's going to last us more than a couple 135 00:06:56,520 --> 00:06:58,359 Speaker 1: of years. I mean, and I think that's kind of 136 00:06:58,360 --> 00:07:00,960 Speaker 1: a deeper question about like we buy and the way 137 00:07:01,000 --> 00:07:04,839 Speaker 1: we buy. But I think that, um, ultimately it comes 138 00:07:04,920 --> 00:07:09,239 Speaker 1: to supply and demand. If enough people are looking for 139 00:07:09,320 --> 00:07:11,960 Speaker 1: American made products, of enough people are kind of looking 140 00:07:11,960 --> 00:07:14,600 Speaker 1: for that brand, um and making sure they look at 141 00:07:14,600 --> 00:07:17,320 Speaker 1: the label, it can change things. I mean, it's happened 142 00:07:17,320 --> 00:07:21,160 Speaker 1: with the organic food movement. I mean, can you imagine, um, 143 00:07:21,200 --> 00:07:23,040 Speaker 1: you know, ten years ago, if I would have said 144 00:07:23,080 --> 00:07:25,400 Speaker 1: that organic foods would be like they are now, I 145 00:07:25,400 --> 00:07:27,560 Speaker 1: mean you could never find them everywhere. And now I 146 00:07:27,560 --> 00:07:30,680 Speaker 1: mean you've got truck stops, you know, and they're filled 147 00:07:30,680 --> 00:07:34,240 Speaker 1: with healthy options. So I think it's because consumers demanded it. 148 00:07:34,280 --> 00:07:37,360 Speaker 1: And so if consumers can demand um with their purchase 149 00:07:37,440 --> 00:07:39,760 Speaker 1: power American made goods, then I think that the big 150 00:07:39,760 --> 00:07:42,400 Speaker 1: box stores could start to see more of those coming there. 151 00:07:42,520 --> 00:07:44,520 Speaker 1: If you give you a fifteen seconds, is there one 152 00:07:44,600 --> 00:07:46,880 Speaker 1: product that you wish was made in the United States 153 00:07:46,920 --> 00:07:50,840 Speaker 1: but isn't. Oh gosh, I mean, I think the Apple computer. 154 00:07:51,040 --> 00:07:53,240 Speaker 1: I mean, that's that's a really big one because it 155 00:07:53,280 --> 00:07:55,800 Speaker 1: was it was it was grown out of you know, 156 00:07:55,920 --> 00:07:59,720 Speaker 1: my state of California, and with the the the engineering, 157 00:07:59,760 --> 00:08:02,640 Speaker 1: the the prototypes, everything about it, we should make it here. 158 00:08:02,800 --> 00:08:04,600 Speaker 1: I mean, we're making enough money with that. And I 159 00:08:04,600 --> 00:08:06,960 Speaker 1: know that something President Trump and even you know, for 160 00:08:07,160 --> 00:08:09,600 Speaker 1: President Obama was trying to do. I think that there's 161 00:08:09,640 --> 00:08:12,240 Speaker 1: certain things we should really try to make here, and 162 00:08:12,320 --> 00:08:14,480 Speaker 1: I think it's it's important. I want to thank you 163 00:08:14,560 --> 00:08:17,520 Speaker 1: very much for spending time with us. Vincent Victorio. He 164 00:08:17,720 --> 00:08:33,720 Speaker 1: is the director of American Made Movie. All right, let's 165 00:08:33,720 --> 00:08:37,480 Speaker 1: turn our attention now to investments and Mike Mulaney. Mike 166 00:08:37,679 --> 00:08:41,040 Speaker 1: is joining us from Boston Partners. He is the director 167 00:08:41,080 --> 00:08:43,880 Speaker 1: of Global Market Research. Mike, thanks very much for being 168 00:08:44,360 --> 00:08:46,400 Speaker 1: with us. Uh, you know, I want if we get 169 00:08:46,440 --> 00:08:49,560 Speaker 1: start off with You've listed a couple of very important things. 170 00:08:49,559 --> 00:08:51,880 Speaker 1: You've got things such as you know, the Trump bomp 171 00:08:52,920 --> 00:08:57,679 Speaker 1: issues having to do with oil the Japanese market. And 172 00:08:57,679 --> 00:08:59,440 Speaker 1: I'm wondering if we could kind of look at Japan 173 00:08:59,559 --> 00:09:01,840 Speaker 1: first and work our way back to the United States 174 00:09:01,880 --> 00:09:06,280 Speaker 1: because the Prime Minister, Shinzo Abe has called an election, 175 00:09:06,679 --> 00:09:11,599 Speaker 1: and yeah, election, yes to us, it's reminiscent obviously of 176 00:09:11,679 --> 00:09:15,960 Speaker 1: what Teresa May did in June, and yeah, you got 177 00:09:16,040 --> 00:09:20,040 Speaker 1: exactly exactly. Now, this is a scheduled for October twenty two, 178 00:09:20,760 --> 00:09:24,440 Speaker 1: and he's been in power for about five years, which 179 00:09:24,480 --> 00:09:28,000 Speaker 1: is pretty long if you're a Japanese prime minister. But 180 00:09:28,160 --> 00:09:30,719 Speaker 1: he is going to be going against He's going to 181 00:09:30,760 --> 00:09:33,080 Speaker 1: be opposed by the Party of Hope. Now, this is 182 00:09:33,120 --> 00:09:37,199 Speaker 1: this new conservative alliance which is led by the populist 183 00:09:37,240 --> 00:09:41,960 Speaker 1: mayor of Tokyo, Uriko koek and she has previously served 184 00:09:42,000 --> 00:09:44,400 Speaker 1: as Minister of Defense. And I'm wondering if you could 185 00:09:44,440 --> 00:09:50,040 Speaker 1: describe what would happen if indeed shinzo Abe was returned 186 00:09:50,040 --> 00:09:53,480 Speaker 1: to power with a reduced majority, or indeed didn't even 187 00:09:53,679 --> 00:09:56,400 Speaker 1: make it past the post. Well, you have the question 188 00:09:56,440 --> 00:09:59,800 Speaker 1: once again, the progress of of abenamics or abenamics in 189 00:09:59,840 --> 00:10:01,400 Speaker 1: j general, if he was going to be able to 190 00:10:01,400 --> 00:10:04,599 Speaker 1: push through his reforms that he's been relatively successful for 191 00:10:04,720 --> 00:10:07,040 Speaker 1: if you look at both the economy uh and the 192 00:10:07,080 --> 00:10:09,080 Speaker 1: markets in general and Japan. So I think that would 193 00:10:09,080 --> 00:10:12,360 Speaker 1: be the primary question mark whether or not he would 194 00:10:12,400 --> 00:10:14,840 Speaker 1: able to proceed with um with the same kind of 195 00:10:14,920 --> 00:10:17,040 Speaker 1: vigor that he's had up a failure last you know, 196 00:10:17,080 --> 00:10:19,000 Speaker 1: two to three years that that's been in place. Right now, 197 00:10:19,640 --> 00:10:23,080 Speaker 1: looking at the Japanese stock market in dollar terms, up 198 00:10:23,080 --> 00:10:27,080 Speaker 1: about twelve and a quarter percent so far this year. Yeah, 199 00:10:27,160 --> 00:10:29,760 Speaker 1: And the key with the you know, the Japanese market 200 00:10:29,840 --> 00:10:32,600 Speaker 1: is that investors basically have been burned so many times 201 00:10:32,600 --> 00:10:35,200 Speaker 1: in the past about Japan. There's still kind of that 202 00:10:35,320 --> 00:10:38,040 Speaker 1: weary eye about the market in general and the economy 203 00:10:38,040 --> 00:10:40,679 Speaker 1: in general because we've had not just one, but probably 204 00:10:40,679 --> 00:10:43,160 Speaker 1: at least two decades of the you know, the lost decades, 205 00:10:43,240 --> 00:10:45,640 Speaker 1: not just they lost decade as far as Japan's concern, 206 00:10:46,120 --> 00:10:48,040 Speaker 1: that goes to the economy and more or less for 207 00:10:48,080 --> 00:10:50,360 Speaker 1: the markets in general. So I think, you know, we 208 00:10:50,440 --> 00:10:54,480 Speaker 1: have to have a a proof statement coming from from 209 00:10:54,520 --> 00:10:56,600 Speaker 1: this type of a snap election that we can can 210 00:10:56,679 --> 00:10:59,040 Speaker 1: continue to see the improvement that we've seen, like I said, 211 00:10:59,080 --> 00:11:01,880 Speaker 1: most recently from both the economy and the markets. Yeah, well, 212 00:11:01,880 --> 00:11:04,800 Speaker 1: I was even thinking. You know that Governor Karda of 213 00:11:04,840 --> 00:11:09,480 Speaker 1: the Bank of Japan, his reappointment is scheduled for eighteen 214 00:11:10,160 --> 00:11:12,720 Speaker 1: but that could change if we get a new leader 215 00:11:12,720 --> 00:11:16,120 Speaker 1: in Japan, no question, and we you know, if we 216 00:11:16,120 --> 00:11:18,880 Speaker 1: were to air on both the Bank of Japan in 217 00:11:19,000 --> 00:11:21,600 Speaker 1: on the Federal Reserve, we would like to see status quo, 218 00:11:22,040 --> 00:11:24,280 Speaker 1: that being Karada staying in place as well as jon 219 00:11:24,320 --> 00:11:26,280 Speaker 1: and staying in place. Just the stability of the market. 220 00:11:26,720 --> 00:11:29,360 Speaker 1: I think Karroda has done a magnificent job. He's probably 221 00:11:29,400 --> 00:11:32,480 Speaker 1: been the most uh do you want to call it aggressive, 222 00:11:32,559 --> 00:11:36,000 Speaker 1: and it's not just um, you know, more or less 223 00:11:36,240 --> 00:11:40,840 Speaker 1: creative of of the central bankers in the world. And 224 00:11:41,000 --> 00:11:44,359 Speaker 1: once again it's done a good job of a stabilizing 225 00:11:44,400 --> 00:11:47,200 Speaker 1: asset prices and stabilize the economy in general. Well, you're 226 00:11:47,240 --> 00:11:50,200 Speaker 1: being diplomatic because some investors might say that he actually 227 00:11:50,200 --> 00:11:53,040 Speaker 1: fixes the prices of assets because what they have about 228 00:11:53,040 --> 00:11:56,080 Speaker 1: thirty three of the j GB market and like three 229 00:11:56,200 --> 00:12:01,640 Speaker 1: quarters of all Japanese exchange traded funds that are owned 230 00:12:01,640 --> 00:12:04,760 Speaker 1: by the central Bank. That's why I use the word creative, 231 00:12:05,160 --> 00:12:06,880 Speaker 1: because it's something a little bit out of the norm 232 00:12:07,040 --> 00:12:10,839 Speaker 1: that we've seen from other central bankers. But um, you know, 233 00:12:11,040 --> 00:12:14,240 Speaker 1: it's it's a little bit reminiscent of what Mario Draga said, 234 00:12:14,880 --> 00:12:17,320 Speaker 1: it's whatever it takes, and I think Corona has basically 235 00:12:17,400 --> 00:12:19,679 Speaker 1: done that. Okay, so you help me circle back. We're 236 00:12:19,720 --> 00:12:23,000 Speaker 1: gonna go to Europe now and Mario drag the European 237 00:12:23,520 --> 00:12:26,600 Speaker 1: Central Bank tell me what you uh, what your thoughts 238 00:12:26,600 --> 00:12:28,920 Speaker 1: are are there, because I know that later on in 239 00:12:28,960 --> 00:12:31,240 Speaker 1: the week, I believe you know, we're going to get 240 00:12:31,280 --> 00:12:35,160 Speaker 1: some news from the Central Bank of Europe, but also 241 00:12:35,160 --> 00:12:36,640 Speaker 1: we're gonna get the Fed minutes. What are you what 242 00:12:36,679 --> 00:12:39,520 Speaker 1: are you gonna take away from Europe? First? Well, Europe 243 00:12:39,600 --> 00:12:40,679 Speaker 1: is going to be key, is that I think the 244 00:12:40,840 --> 00:12:42,920 Speaker 1: twenty six I think is the meeting in Europe, and 245 00:12:43,000 --> 00:12:45,199 Speaker 1: once again the eyes are gonna be focused on exactly 246 00:12:45,240 --> 00:12:48,360 Speaker 1: what's going to happen with the balance sheet tapering program 247 00:12:48,360 --> 00:12:51,440 Speaker 1: from the e c B. What we're worry about once 248 00:12:51,480 --> 00:12:54,439 Speaker 1: again is that that's going to coincide with potentially the Fed, 249 00:12:54,600 --> 00:12:57,880 Speaker 1: you know, uh, diminishing and dropping their balance sheet this 250 00:12:57,880 --> 00:12:59,839 Speaker 1: this month as well, So we're gonna have a two 251 00:13:00,040 --> 00:13:02,560 Speaker 1: for for the month of October potentially. As far as 252 00:13:02,600 --> 00:13:05,559 Speaker 1: balance sheet um retracement, I guess you could say is 253 00:13:05,600 --> 00:13:09,000 Speaker 1: concerns and we're leary about that because this is still 254 00:13:09,000 --> 00:13:10,920 Speaker 1: a grand experiment, you know, on the way up, it 255 00:13:10,960 --> 00:13:13,280 Speaker 1: was a grand experiment on the balance sheet explosions that 256 00:13:13,320 --> 00:13:16,280 Speaker 1: we've seen around the world, and we're a little bit 257 00:13:16,400 --> 00:13:19,480 Speaker 1: leary and that to think that we don't want to 258 00:13:19,520 --> 00:13:22,040 Speaker 1: be naive to think there's not going to be some 259 00:13:22,120 --> 00:13:27,080 Speaker 1: kind of symmetry between the the benefit of asset prices 260 00:13:27,120 --> 00:13:30,000 Speaker 1: on the upside as balance sheets grew from the central 261 00:13:30,000 --> 00:13:33,160 Speaker 1: banks versus as they shrink them. Um, there will be 262 00:13:33,200 --> 00:13:35,559 Speaker 1: no impact. And I think that's where you know, people 263 00:13:35,640 --> 00:13:38,000 Speaker 1: might be a bit naive. Have you've heard this from 264 00:13:38,480 --> 00:13:40,840 Speaker 1: um Jamie diamond saying that you've got to watch this 265 00:13:40,960 --> 00:13:43,000 Speaker 1: given that it is the grand experiment as far as 266 00:13:43,040 --> 00:13:45,560 Speaker 1: balance sheets A concerned all right, Well as someone I 267 00:13:45,600 --> 00:13:47,880 Speaker 1: know who's got a lot of experienced in fixed income 268 00:13:47,920 --> 00:13:49,960 Speaker 1: markets put that hat on and tell us what do 269 00:13:50,000 --> 00:13:53,840 Speaker 1: you think about the balance sheet unwind? And that gives 270 00:13:53,880 --> 00:13:56,040 Speaker 1: us an opportunity to turn to the United States where 271 00:13:56,000 --> 00:13:57,880 Speaker 1: do you think that's gonna do to yields? For example, 272 00:13:57,920 --> 00:14:00,839 Speaker 1: we got the thirty year today basically on two point 273 00:14:00,880 --> 00:14:05,200 Speaker 1: eight nine, the tenure at two thirty five. Uh. To 274 00:14:05,480 --> 00:14:08,400 Speaker 1: two aspects of the yield story. So the first one 275 00:14:08,440 --> 00:14:10,880 Speaker 1: would be, like you said, as far as the balance sheet, uh, 276 00:14:10,920 --> 00:14:14,560 Speaker 1: you know, the FED owns. I believe it's of all 277 00:14:14,640 --> 00:14:18,120 Speaker 1: mortgage backed securities and also seventeen percent of all treasuries 278 00:14:18,200 --> 00:14:22,160 Speaker 1: right now, so they have been obviously in most recent years, 279 00:14:22,240 --> 00:14:25,040 Speaker 1: the marginal buyer that's been out there for both the 280 00:14:25,080 --> 00:14:28,480 Speaker 1: treasury market and the mortgage back market. So as that unwind, 281 00:14:28,520 --> 00:14:30,200 Speaker 1: it's gonna have you're gonna have to find the next 282 00:14:30,200 --> 00:14:32,160 Speaker 1: marginal buyer. I don't know if it's gonna be Japan. 283 00:14:32,200 --> 00:14:34,200 Speaker 1: I don't know if it's gonna be China, but someone's 284 00:14:34,200 --> 00:14:36,920 Speaker 1: gonna have to take up the slack that that is 285 00:14:37,040 --> 00:14:39,200 Speaker 1: going to become apparent from the lack of FED buying. 286 00:14:39,280 --> 00:14:42,440 Speaker 1: So that's number one. Rates should be higher to attract 287 00:14:42,480 --> 00:14:45,640 Speaker 1: that next marginal buyer. To once again, you've got to 288 00:14:45,640 --> 00:14:48,280 Speaker 1: go back to inflation. And you know, it's been a 289 00:14:49,000 --> 00:14:51,960 Speaker 1: a quandary that the Janet Yellen has been talking about 290 00:14:52,000 --> 00:14:55,680 Speaker 1: for quite some time. We did see some pressure obviously 291 00:14:55,760 --> 00:14:58,920 Speaker 1: on average hourly earnings that came in and the report 292 00:14:58,960 --> 00:15:03,080 Speaker 1: on Friday backup at two point. The question becomes is 293 00:15:03,120 --> 00:15:05,120 Speaker 1: that's going to stick a not or is that once 294 00:15:05,120 --> 00:15:08,400 Speaker 1: again just a byproduct of the hurricanes that we saw 295 00:15:08,520 --> 00:15:11,960 Speaker 1: during the course of the September reporting period where lower 296 00:15:12,000 --> 00:15:15,800 Speaker 1: wage journers fell out of the survey and therefore biased 297 00:15:15,840 --> 00:15:17,840 Speaker 1: the numbers upwards. So we've still got a month to 298 00:15:17,880 --> 00:15:20,160 Speaker 1: figure out if it was just a temporary factor or not. 299 00:15:20,680 --> 00:15:22,640 Speaker 1: But ultimately it's going to be inflation that's going to 300 00:15:22,800 --> 00:15:25,880 Speaker 1: drive where interest rates go. Um. I don't think that 301 00:15:26,760 --> 00:15:29,960 Speaker 1: the FED itself can get too aggressive as far as 302 00:15:30,000 --> 00:15:33,360 Speaker 1: pushing up the overall structure of rates. Thanks very much, 303 00:15:33,480 --> 00:15:36,720 Speaker 1: Mike Mullaney. He is the director of Global market Research 304 00:15:36,800 --> 00:15:53,320 Speaker 1: for Boston Properties. We now call upon Nick Hayman of 305 00:15:53,520 --> 00:15:58,600 Speaker 1: William Blair Global Industrial Infrastructure Expert to tell us about 306 00:15:58,640 --> 00:16:02,080 Speaker 1: a general electric Nick, always a pleasure. What do you 307 00:16:02,240 --> 00:16:05,280 Speaker 1: make of the moves by John Flannery taking the reins 308 00:16:05,360 --> 00:16:10,960 Speaker 1: earlier from Jeffrey Immelt, A new CFO and four vice chairs, 309 00:16:11,120 --> 00:16:16,200 Speaker 1: well three four if you count the CFO leaving the company. Yeah, 310 00:16:16,280 --> 00:16:20,440 Speaker 1: We have obviously a lot of change being implemented in 311 00:16:20,480 --> 00:16:25,440 Speaker 1: a very short time period by John Flannery and it 312 00:16:25,760 --> 00:16:29,520 Speaker 1: UH is leaving no stone unturned. But with regards to 313 00:16:29,840 --> 00:16:34,680 Speaker 1: you know, Jeff Bornstein, the former CFO, and Beth Combstock 314 00:16:34,880 --> 00:16:39,320 Speaker 1: and John Rice, I think that you know, John is 315 00:16:39,320 --> 00:16:43,000 Speaker 1: is really trying to find, if you will, representatives of 316 00:16:43,040 --> 00:16:45,960 Speaker 1: what he sees perhaps is more of the initiatives he's 317 00:16:45,960 --> 00:16:49,360 Speaker 1: going to focus on going forward versus those that were 318 00:16:49,360 --> 00:16:54,160 Speaker 1: really UM stewards of Jeff Emil's former CEO and chairman. 319 00:16:54,320 --> 00:16:58,080 Speaker 1: All right, so what are some of the strategy points 320 00:16:58,200 --> 00:17:02,760 Speaker 1: that John Flannery is into a rely on. Well, I mean, 321 00:17:02,880 --> 00:17:07,320 Speaker 1: very simplistically, he's very UH focused near term on being 322 00:17:07,359 --> 00:17:11,800 Speaker 1: able to help UM improve the cash flow from operating 323 00:17:11,800 --> 00:17:16,120 Speaker 1: activities UM that this year, you know, clearly have been 324 00:17:16,240 --> 00:17:19,160 Speaker 1: under pressure. We think UM they may not even reach 325 00:17:19,200 --> 00:17:21,919 Speaker 1: the low end of their twelve to fourteen billion dollar target, 326 00:17:22,480 --> 00:17:27,879 Speaker 1: and that reflects stepped up UH restructuring on a cash 327 00:17:27,920 --> 00:17:32,199 Speaker 1: basis across all aspects of the company's operations. But I 328 00:17:32,240 --> 00:17:34,840 Speaker 1: think that will lay out a clear plan to improve 329 00:17:34,920 --> 00:17:38,040 Speaker 1: that by fifty or six percent by later this decade 330 00:17:38,040 --> 00:17:42,040 Speaker 1: to eighteen to twenty billion dollars. G needs fifteen sixteen 331 00:17:42,080 --> 00:17:45,840 Speaker 1: billion on a normalized capital spend of two and a 332 00:17:45,840 --> 00:17:48,920 Speaker 1: half to three UH to be able to support HITS 333 00:17:48,960 --> 00:17:52,199 Speaker 1: operations and pay it's eight billion dividend. Let's just go 334 00:17:52,280 --> 00:17:54,800 Speaker 1: through some of the items, perhaps you know this a 335 00:17:54,840 --> 00:17:57,680 Speaker 1: little bit more detailed, maybe getting ready for that November 336 00:17:57,720 --> 00:17:59,920 Speaker 1: thirteenth meeting. I believe that John Sinner is going to 337 00:18:00,080 --> 00:18:04,639 Speaker 1: addressing UH investors. Number One, you write, you talk about 338 00:18:04,680 --> 00:18:09,879 Speaker 1: operationally weaker end market demand for gepower, transportation, and oil 339 00:18:10,280 --> 00:18:13,600 Speaker 1: and transportation, right, yeah, and the oil and gas so 340 00:18:13,720 --> 00:18:16,760 Speaker 1: you have when you're looking to reset, which is one 341 00:18:16,760 --> 00:18:20,240 Speaker 1: of the exercises, He'll go through the two dollar two 342 00:18:20,119 --> 00:18:25,240 Speaker 1: thousand eighteen UM target by jeff eimilt Um. He'll look 343 00:18:25,320 --> 00:18:28,000 Speaker 1: to operationally adjust that for the weaker end market conditions 344 00:18:28,000 --> 00:18:30,280 Speaker 1: you just mentioned. He's going to have some changes in 345 00:18:30,280 --> 00:18:34,000 Speaker 1: the business portfolio, I'm sure for smaller businesses, but he's 346 00:18:34,000 --> 00:18:36,439 Speaker 1: also going to have a tremendously larger I think amount 347 00:18:36,440 --> 00:18:39,000 Speaker 1: of costs out a three billion or more. And then 348 00:18:39,040 --> 00:18:41,639 Speaker 1: in turn he's going to reset the accounting so that 349 00:18:41,720 --> 00:18:46,280 Speaker 1: will include you know, the full impact of contract asset investments. 350 00:18:46,320 --> 00:18:49,240 Speaker 1: As well as their pension costs. Okay, So that and 351 00:18:49,280 --> 00:18:51,480 Speaker 1: then you're talking that would lead you right into your 352 00:18:51,480 --> 00:18:54,119 Speaker 1: second point, which is the portfolio pruning, getting rid of 353 00:18:54,160 --> 00:18:58,119 Speaker 1: businesses that don't necessarily meet their cost to capital. Yes. No, 354 00:18:58,280 --> 00:19:01,320 Speaker 1: there's definitely some peripheral businesses that I would call calls 355 00:19:01,480 --> 00:19:05,440 Speaker 1: on the future him that in turn were funded under Jeff. 356 00:19:05,840 --> 00:19:08,560 Speaker 1: But under John, if you're not earning your cost to capital, 357 00:19:08,800 --> 00:19:11,520 Speaker 1: you're probably not on the team. These are not big 358 00:19:11,600 --> 00:19:14,960 Speaker 1: parts of the company, but smaller adjunct businesses related to 359 00:19:15,000 --> 00:19:18,639 Speaker 1: their core um industrial operations. All right, and you also 360 00:19:18,680 --> 00:19:21,679 Speaker 1: mentioned that you previously mentioned the accounting, So okay, is 361 00:19:21,720 --> 00:19:24,240 Speaker 1: that Is there anything more we need to know there? No, 362 00:19:24,400 --> 00:19:27,600 Speaker 1: I mean accounting obviously has been There's four different sets 363 00:19:27,600 --> 00:19:29,520 Speaker 1: of earnings that he presents, and I think we're going 364 00:19:29,720 --> 00:19:32,679 Speaker 1: streamline this down to something on the order of, you know, 365 00:19:32,800 --> 00:19:36,320 Speaker 1: gap accounting plus or minus um one time positive and 366 00:19:36,400 --> 00:19:39,960 Speaker 1: negative items for restructuring their games. But he's really got 367 00:19:39,960 --> 00:19:42,959 Speaker 1: to focus on getting this cash flow from operating activities up, 368 00:19:42,960 --> 00:19:46,400 Speaker 1: which includes reducing the capital spending to this normalized level 369 00:19:46,440 --> 00:19:48,160 Speaker 1: of two and a half to three billion from three 370 00:19:48,160 --> 00:19:50,199 Speaker 1: and a half to four This year, he's got to 371 00:19:50,280 --> 00:19:54,240 Speaker 1: narrow the focus of digital operation so that in turn 372 00:19:54,480 --> 00:19:57,479 Speaker 1: that can reduce its um R and D and capital 373 00:19:57,480 --> 00:20:00,760 Speaker 1: spending intensity. He's got to take and reduce the contract 374 00:20:00,800 --> 00:20:04,440 Speaker 1: asset investments. And lastly, he's got to work to show 375 00:20:04,560 --> 00:20:08,160 Speaker 1: up the nineteen billion contractual portion of the company's thirty 376 00:20:08,200 --> 00:20:12,280 Speaker 1: one billion pension deficit. Alright, given all that and your 377 00:20:12,320 --> 00:20:18,000 Speaker 1: outperform rating on the shares, is there a connection between 378 00:20:18,080 --> 00:20:22,160 Speaker 1: all of this activity and Nelson pelts ed Garden, UH 379 00:20:22,200 --> 00:20:25,080 Speaker 1: and Try and Fund Management will Try and has been 380 00:20:25,119 --> 00:20:29,199 Speaker 1: involved for quite some time with GE and UM. I 381 00:20:29,240 --> 00:20:32,840 Speaker 1: think at this point clearly UM giving them one of 382 00:20:32,880 --> 00:20:37,200 Speaker 1: the seats on the board as uh Deer's former CEO 383 00:20:37,280 --> 00:20:41,119 Speaker 1: step down, UM gives them an opportunity to continue to 384 00:20:41,160 --> 00:20:46,400 Speaker 1: be a constructive partner in helping John accelerate the transformation 385 00:20:46,440 --> 00:20:50,840 Speaker 1: of GEN. Alright, Having said that, though, Nick, what do 386 00:20:50,880 --> 00:20:53,760 Speaker 1: you think that John would prefer to inherit in terms 387 00:20:53,840 --> 00:20:57,800 Speaker 1: of how GE operates. I think he's trying to change 388 00:20:57,840 --> 00:21:00,800 Speaker 1: what is not a broken company but a bloated company, 389 00:21:01,000 --> 00:21:05,240 Speaker 1: and in turn trying to go across all aspects of 390 00:21:05,359 --> 00:21:07,880 Speaker 1: the cost structure of the company, whether it's the new 391 00:21:07,880 --> 00:21:11,240 Speaker 1: headquarters building, whether it's planes, whether it's cars for their 392 00:21:11,280 --> 00:21:15,080 Speaker 1: management team, there's no stone left unturned PIM. And just 393 00:21:15,119 --> 00:21:18,120 Speaker 1: to finally, Nick, you know, tell people how long you've 394 00:21:18,160 --> 00:21:21,560 Speaker 1: been covering ge and how you see the company coming 395 00:21:21,560 --> 00:21:23,879 Speaker 1: out from all of this. Well, we've been found for 396 00:21:23,880 --> 00:21:27,600 Speaker 1: about thirty four years, and UM, what we're seeing here 397 00:21:27,840 --> 00:21:32,000 Speaker 1: is a dichotomy between perhaps um the focus on their 398 00:21:32,040 --> 00:21:36,440 Speaker 1: earnings reset for cell side analysts typically versus on the 399 00:21:36,520 --> 00:21:40,480 Speaker 1: owners of the shares, a need to have visual improvement 400 00:21:40,920 --> 00:21:44,399 Speaker 1: for actionable steps to lift the cash flow so you 401 00:21:44,400 --> 00:21:47,520 Speaker 1: can sustain the dividend. And if they see that, I 402 00:21:47,520 --> 00:21:52,080 Speaker 1: think the investors are likely to ultimately um rerate the 403 00:21:52,200 --> 00:21:56,080 Speaker 1: yield from four currently to probably something like three over 404 00:21:56,119 --> 00:21:57,879 Speaker 1: the next year. All right, well, we're gonna have to 405 00:21:57,880 --> 00:21:59,560 Speaker 1: wait and see what happens, and we're going to count 406 00:21:59,600 --> 00:22:00,960 Speaker 1: on you. I know you're gonna probably be at that 407 00:22:01,040 --> 00:22:04,120 Speaker 1: November thirteenth meeting, get more details and we could check 408 00:22:04,160 --> 00:22:07,440 Speaker 1: in with you then. Thanks very much, Nick Hayman from 409 00:22:07,720 --> 00:22:12,359 Speaker 1: William Blair Expert when it comes to global industrial infrastructure 410 00:22:12,400 --> 00:22:27,320 Speaker 1: shares u S economist Richard Taylor, one of the founding 411 00:22:27,400 --> 00:22:31,240 Speaker 1: fathers of behavioral economics has won this year's Nobel Prize 412 00:22:31,280 --> 00:22:34,640 Speaker 1: for Economics, and here to tell us more about this 413 00:22:34,800 --> 00:22:38,840 Speaker 1: winner is Simon Kennedy. He is our editor for Brexit, 414 00:22:38,960 --> 00:22:41,359 Speaker 1: amongst other things. Simon, thanks for joining me here in 415 00:22:41,359 --> 00:22:44,240 Speaker 1: the studio. What does it say about the state of 416 00:22:44,400 --> 00:22:49,359 Speaker 1: economics when the winner of this year's prize has this quote? 417 00:22:49,680 --> 00:22:54,560 Speaker 1: Conventional conventional economics assumes that people are highly rational, superrational, 418 00:22:54,600 --> 00:22:58,199 Speaker 1: and unemotional. They can calculate like a computer and have 419 00:22:58,440 --> 00:23:04,240 Speaker 1: no self control problems, meaning that that does not exist. Really, 420 00:23:04,280 --> 00:23:07,480 Speaker 1: it's taken until seventeen for people to get the stamp 421 00:23:07,480 --> 00:23:10,240 Speaker 1: of approval that emotions are what drive markets as much 422 00:23:10,240 --> 00:23:13,359 Speaker 1: as markets. Well, I think we've seen some element in 423 00:23:13,400 --> 00:23:16,639 Speaker 1: the past. Is Daniel Kannaman and Robert Shilow win in 424 00:23:16,680 --> 00:23:19,520 Speaker 1: the PASTA but but I think it's very important for 425 00:23:19,520 --> 00:23:23,440 Speaker 1: the behavioral economics field that Richard failure as one. He's 426 00:23:23,440 --> 00:23:26,239 Speaker 1: been very much a cheerleader for that and and for 427 00:23:26,359 --> 00:23:28,200 Speaker 1: a long period of time, as you you hint had, 428 00:23:28,560 --> 00:23:31,280 Speaker 1: behavior economics was kind of the the ugly member of 429 00:23:31,320 --> 00:23:32,800 Speaker 1: the family. It was pushed to the side. A lot 430 00:23:32,800 --> 00:23:35,000 Speaker 1: of people didn't buy it. People when you say a 431 00:23:35,040 --> 00:23:37,200 Speaker 1: lot of people. You mean a lot of people in academia, 432 00:23:37,240 --> 00:23:40,879 Speaker 1: because certainly in markets, anyone who's an investor knows that 433 00:23:41,040 --> 00:23:44,960 Speaker 1: animal spirits and emotion played very crucial role. But I 434 00:23:45,000 --> 00:23:47,400 Speaker 1: think in mainstream because you couldn't put it in a formula, 435 00:23:47,520 --> 00:23:49,600 Speaker 1: it was kind of rejected as a as not a 436 00:23:49,680 --> 00:23:52,360 Speaker 1: as not it was a party trick, something that's interesting. 437 00:23:52,600 --> 00:23:54,960 Speaker 1: I'll tell someone a good story to dinner party. But 438 00:23:55,040 --> 00:23:59,040 Speaker 1: it wasn't viewed as as important to the mainstream economics. 439 00:23:59,280 --> 00:24:01,240 Speaker 1: And now it quite liarly is. And it's been brought 440 00:24:01,240 --> 00:24:03,960 Speaker 1: in by people a Richard Taylor, by people like Robert Shiller, 441 00:24:04,280 --> 00:24:07,479 Speaker 1: promoted by people like Mia the author and Limberview columnist 442 00:24:07,520 --> 00:24:10,399 Speaker 1: Michael Lewis in his new book, It's very important, and 443 00:24:10,480 --> 00:24:14,000 Speaker 1: so along with the fund stories that are accessible and 444 00:24:14,080 --> 00:24:16,919 Speaker 1: mean that this field of economics, it's perhaps more popular 445 00:24:16,920 --> 00:24:19,120 Speaker 1: parts more interesting. I start into one colleague today who 446 00:24:19,119 --> 00:24:22,280 Speaker 1: said his daughter was interested in it because the kind 447 00:24:22,280 --> 00:24:26,200 Speaker 1: of free economics. I was just going to mention that, yes, indeed, well, 448 00:24:26,880 --> 00:24:30,080 Speaker 1: his book, one of his many books, of Faylor's many 449 00:24:30,080 --> 00:24:32,840 Speaker 1: books that he co authored, this one with the Cass Sunstein, 450 00:24:33,880 --> 00:24:40,160 Speaker 1: is entitled Nudge Right improving decisions about health, wealth and happiness. 451 00:24:41,320 --> 00:24:43,560 Speaker 1: Do you believe that that had an influence on on 452 00:24:43,600 --> 00:24:47,200 Speaker 1: the Nobel Committee that would eventually give him the prize? 453 00:24:47,359 --> 00:24:50,479 Speaker 1: I think so in one way it's already influenced how 454 00:24:50,520 --> 00:24:53,440 Speaker 1: we live our lives. If in the last decade, people 455 00:24:53,480 --> 00:24:56,119 Speaker 1: like Barack Obama in the White House, David Cameron in 456 00:24:56,160 --> 00:24:59,000 Speaker 1: Downing Street in the UK have turned to this kind 457 00:24:59,040 --> 00:25:01,200 Speaker 1: of theory, this theory that you can can do things, 458 00:25:01,240 --> 00:25:03,359 Speaker 1: you can change, you make small incentives and you can 459 00:25:03,440 --> 00:25:09,040 Speaker 1: change how people behave, how vote, how consumers and voters behave. 460 00:25:09,119 --> 00:25:11,240 Speaker 1: And if you can do that in a time of 461 00:25:11,320 --> 00:25:13,200 Speaker 1: a big budget deficits, when you haven't got the money 462 00:25:13,280 --> 00:25:16,440 Speaker 1: to spend to incentivize them, you can you can quote 463 00:25:16,480 --> 00:25:19,520 Speaker 1: unquote nudge them into into doing things you're in. One 464 00:25:19,560 --> 00:25:23,720 Speaker 1: example in the UK, um they discovered that taxes were 465 00:25:23,760 --> 00:25:26,440 Speaker 1: that were paid quicker. If you sent a letter to 466 00:25:26,840 --> 00:25:30,320 Speaker 1: two taxpayers saying everyone in your areal, a lot of 467 00:25:30,359 --> 00:25:33,640 Speaker 1: people in your area have already paid their taxes. Uh, 468 00:25:33,640 --> 00:25:36,080 Speaker 1: And it kind of clicked something intoone's brain. Now, what 469 00:25:36,160 --> 00:25:37,720 Speaker 1: if every if my neighbors have done so, I better 470 00:25:37,720 --> 00:25:40,000 Speaker 1: get on that. And so they are sort of like 471 00:25:40,080 --> 00:25:43,400 Speaker 1: being in a classroom in elementary school and the teacher says, 472 00:25:43,440 --> 00:25:45,880 Speaker 1: everyone else has cleaned up their desk, what about you. Yeah, 473 00:25:45,880 --> 00:25:50,400 Speaker 1: it's it's kind of guilt by by by association, And yeah, 474 00:25:50,400 --> 00:25:52,399 Speaker 1: I was actually talking about it this time my sons 475 00:25:52,440 --> 00:25:54,160 Speaker 1: the other day. When you see a sign that says 476 00:25:54,720 --> 00:25:56,320 Speaker 1: police sir, I don't know if you see them in America, 477 00:25:56,359 --> 00:25:58,480 Speaker 1: but in the UK you'll see these signs saying you're 478 00:25:58,600 --> 00:26:01,159 Speaker 1: entering a police traffic zone. Well, they might just have 479 00:26:01,200 --> 00:26:04,119 Speaker 1: spend money on the sign and that there's no police 480 00:26:04,400 --> 00:26:06,639 Speaker 1: coming up. But does anyone want to trust that they 481 00:26:06,680 --> 00:26:08,399 Speaker 1: want to they're going to slow down. So it's all 482 00:26:08,440 --> 00:26:12,000 Speaker 1: about tricking the brain into behaving in a way that's 483 00:26:12,359 --> 00:26:16,280 Speaker 1: optimal for society. Does does the work of Richard Daylor 484 00:26:16,359 --> 00:26:19,000 Speaker 1: Does it also include the idea that we have tricked 485 00:26:19,000 --> 00:26:22,639 Speaker 1: ourselves into believing that we are rational, that we make decisions, 486 00:26:22,680 --> 00:26:25,040 Speaker 1: and then what we do is we go and find 487 00:26:25,119 --> 00:26:29,320 Speaker 1: evidence to fit the decisions that we've made, not because 488 00:26:29,359 --> 00:26:32,760 Speaker 1: it's true, but because it makes us feel good. Yeah. Absolutely, 489 00:26:32,760 --> 00:26:34,640 Speaker 1: you want to explain why you've done in. One area 490 00:26:34,680 --> 00:26:36,720 Speaker 1: of his work is on quiz shows, So there's a 491 00:26:36,760 --> 00:26:39,080 Speaker 1: quiz show called Deal or No Deal, and it turns 492 00:26:39,080 --> 00:26:42,040 Speaker 1: out that actually people are the further they go into 493 00:26:42,119 --> 00:26:45,440 Speaker 1: the process, their behavior or the choices of which briefcase 494 00:26:45,480 --> 00:26:48,480 Speaker 1: to open up is led by did they get lucky 495 00:26:48,480 --> 00:26:50,160 Speaker 1: earlier in the in the thing. If they feel they're 496 00:26:50,240 --> 00:26:52,040 Speaker 1: they're lucky earlier and they've got this what's called the 497 00:26:52,280 --> 00:26:55,280 Speaker 1: hot hand, they feel that they can continue, and so 498 00:26:55,320 --> 00:26:58,199 Speaker 1: they take risks based on what's happened before, even though 499 00:26:58,240 --> 00:27:00,680 Speaker 1: the odds would suggest that they should have behaved. Does 500 00:27:00,720 --> 00:27:03,000 Speaker 1: that Does that indicate in your mind that what has 501 00:27:03,040 --> 00:27:06,040 Speaker 1: happened is we've used statistics in a way that can't 502 00:27:06,119 --> 00:27:10,200 Speaker 1: necessarily predict the future, but we wish it did. Yeah. Absolutely. 503 00:27:10,240 --> 00:27:12,560 Speaker 1: I think it's because you know, you say, well, all right, 504 00:27:12,640 --> 00:27:15,520 Speaker 1: the probability of something, but the probability of something is 505 00:27:15,560 --> 00:27:19,280 Speaker 1: always yes or no. It's you know, fifty fifty, but 506 00:27:19,320 --> 00:27:21,520 Speaker 1: it doesn't matter how many times you flip the coin. 507 00:27:21,600 --> 00:27:25,560 Speaker 1: That's still the probability. But statistics will tell you something else. Yeah, 508 00:27:25,520 --> 00:27:28,000 Speaker 1: and you're One of the things that was used by 509 00:27:28,000 --> 00:27:30,480 Speaker 1: this money is he's been in the big short film 510 00:27:30,520 --> 00:27:34,640 Speaker 1: talking about c d os and this idea that that yeah, 511 00:27:35,920 --> 00:27:39,240 Speaker 1: that he he brings this idea that you can have 512 00:27:39,280 --> 00:27:42,439 Speaker 1: a hot hand fallacy that that that you you become 513 00:27:42,880 --> 00:27:45,160 Speaker 1: more confident based on what's already well. I can also 514 00:27:45,240 --> 00:27:47,560 Speaker 1: lead to bad decisions and investments, because if you find 515 00:27:47,560 --> 00:27:49,520 Speaker 1: a manager and you look at the track record and 516 00:27:49,520 --> 00:27:51,159 Speaker 1: you say, well, the manager has done great for the 517 00:27:51,240 --> 00:27:54,840 Speaker 1: last twenty years, has nothing really to do with the 518 00:27:54,920 --> 00:27:57,640 Speaker 1: performance for the next year. And it doesn't necessarily mean 519 00:27:57,680 --> 00:27:59,920 Speaker 1: you should drop that manager or add that manager is 520 00:28:00,359 --> 00:28:03,399 Speaker 1: past performance no longer an indgient future. Right, that goes 521 00:28:03,480 --> 00:28:06,480 Speaker 1: right with the police science, right, you know, the disclaimer. 522 00:28:07,320 --> 00:28:09,760 Speaker 1: Last thing to you, if you were to take this 523 00:28:09,840 --> 00:28:12,560 Speaker 1: information and his body of work and try to apply 524 00:28:12,640 --> 00:28:15,800 Speaker 1: it to the world of asset management, where would you 525 00:28:15,840 --> 00:28:18,080 Speaker 1: come out. What would you take away from this? Well, 526 00:28:18,119 --> 00:28:19,680 Speaker 1: I think he's already he's he's spent a lot of 527 00:28:19,760 --> 00:28:22,120 Speaker 1: time on four oh one programs and how they can 528 00:28:22,640 --> 00:28:25,359 Speaker 1: can be incentivize, how people can can save you know, 529 00:28:25,359 --> 00:28:27,480 Speaker 1: obviously savings is a huge thing. We all talked about 530 00:28:27,480 --> 00:28:31,240 Speaker 1: getting our pension up in versus up exactly. So you say, 531 00:28:31,359 --> 00:28:34,399 Speaker 1: if you're a company, um, so traditionally the paper it 532 00:28:34,480 --> 00:28:36,320 Speaker 1: comes in, you're so busy and you never really opted 533 00:28:36,320 --> 00:28:41,000 Speaker 1: in something time has taken. It's actually people. Obviously, pensions 534 00:28:41,000 --> 00:28:43,080 Speaker 1: are are good things for most people. So therefore, if 535 00:28:43,120 --> 00:28:44,320 Speaker 1: you have to opt out, if you have to send 536 00:28:44,360 --> 00:28:46,640 Speaker 1: the paperwork to get out of the pension, it's more 537 00:28:46,680 --> 00:28:49,440 Speaker 1: likely you'll be in the pensions. And do you have 538 00:28:49,520 --> 00:28:51,920 Speaker 1: a copy of Nudge. I've a signed copy of a 539 00:28:52,000 --> 00:28:54,400 Speaker 1: signed copy of the joy that the joy of the 540 00:28:54,440 --> 00:28:57,440 Speaker 1: Nobel Prize today was that that actually, I'm familiar with 541 00:28:57,520 --> 00:28:59,920 Speaker 1: a lot of economies work. There's someone who very familiar 542 00:28:59,920 --> 00:29:01,320 Speaker 1: with so we were able to write good stories on 543 00:29:01,360 --> 00:29:04,760 Speaker 1: the basis that he's very accessible. This is someone who 544 00:29:05,520 --> 00:29:07,960 Speaker 1: it's not he's not just for economists, all right. Thanks 545 00:29:08,040 --> 00:29:11,200 Speaker 1: very much, as Simon Kennedy, part of our Bloomberg Economics team, 546 00:29:11,280 --> 00:29:16,320 Speaker 1: much appreciated the author of Richard Taylor, the author of Nudge, 547 00:29:16,320 --> 00:29:21,080 Speaker 1: winner of the Nobel Prize of Economic Thanks for listening 548 00:29:21,160 --> 00:29:24,040 Speaker 1: to the Bloomberg P and L podcast. You can subscribe 549 00:29:24,080 --> 00:29:27,640 Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever 550 00:29:27,720 --> 00:29:31,200 Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter 551 00:29:31,480 --> 00:29:35,000 Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's 552 00:29:35,040 --> 00:29:38,080 Speaker 1: one before the podcast. You can always catch us worldwide 553 00:29:38,080 --> 00:29:39,040 Speaker 1: on Bloomberg Radio.