Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Our
Speaker 1: next guest, Doug ditches and collected used cardboard when he
Speaker 1: was a teenager. Today he's a billionaire and business icon.
Speaker 1: I'm talking about Ken Langone, co founder of home Depot
Speaker 1: and former director of the New York Stock Exchange UH
Speaker 1: and founder and chairman of Infamed Associates. Keim. Thank you
Speaker 1: so much for being with us. You have a new
Speaker 1: book out. It has an unambiguous title, I Love Capitalism,
Speaker 1: exclamation point and American Story. What made you write this book? Now?
Speaker 1: It was very interesting. I've been approached by some people
Speaker 1: in the publishing industry about three or four years ago.
Speaker 1: I had a book to write, and I thanked him
Speaker 1: and I said, really, not my thing. And then the
Speaker 1: presidential election showed up in two thousand and sixteen, and
Speaker 1: I happened to be watching Bernie Sanders, and I was
Speaker 1: shocked at the number of young people that were passionately
Speaker 1: and enthusiastically following his message. And it's scared the hell
Speaker 1: out of me, because if people that young give up
Speaker 1: on what brought us to the party and what made
Speaker 1: America great, we really have trouble. Uh. Capitalism to me
Speaker 1: is as magnifficent, very unique engine that only America has
Speaker 1: in where we have it and the results that are
Speaker 1: all around us, you can look and see better lives.
Speaker 1: A poor kid like me, a kid that mediocre student.
Speaker 1: Uh mother and father didn't go past the eighth grade,
Speaker 1: lived from paycheck to paycheck. Uh not easy, but I
Speaker 1: never knew I didn't have anything because I always had
Speaker 1: a warm house and uh plenty of good food. But
Speaker 1: my parents had to work like hell. And here I
Speaker 1: am today, and by the way, whatever success I have,
Speaker 1: and I'll leave it for others to judge that it
Speaker 1: only happened because I had so many people, so many
Speaker 1: many people helped me along the way. I'm not self made.
Speaker 1: I'm anything but self made. But this is a magnificent country.
Speaker 1: And I just thought it was up to me to
Speaker 1: take a stand and say, hey, wait a minute. Let's
Speaker 1: not kill the baby with the bath water. Let's that's
Speaker 1: where the baby out with the bath water, I should say.
Speaker 1: So that's what made me write the book. Ken lang Gone,
Speaker 1: Just so people understand, you persuaded Ross Perro to hire
Speaker 1: you to lead his initial public offering for electronic Data
Speaker 1: Systems co founder of home Depot. I wonder if you
Speaker 1: could just speak a little bit about that June day
Speaker 1: in ninety seven when you graduated from Bucknell. And there's
Speaker 1: a wonderful picture in the book of you and your parents,
Speaker 1: John and Angie Langne, and how you got into Bucknell
Speaker 1: and how you managed to graduate. Well, that's interesting. I
Speaker 1: got into buck Now almost by accident. I had gone up.
Speaker 1: I was a senior in high school. It was nineteen
Speaker 1: fifty three. It was the spring of the year. The
Speaker 1: Korean War was still on. I don't know how. Had
Speaker 1: just been elected. I was going to join the Marine
Speaker 1: Corps here for high school. My mother wouldn't saw it.
Speaker 1: I wouldn't be eighteen until September, and my mother wouldn't
Speaker 1: My brother was already in the military. I only had
Speaker 1: one brother. He was in the military, and my mother
Speaker 1: was adamant. She was not going to sign me and
Speaker 1: if I wanted to wait to lateeen and I wanted
Speaker 1: to go, she couldn't join me about it. But anyway,
Speaker 1: I want to Bucknell for a weekend to visit some ends.
Speaker 1: And it turns out it was we then called house
Speaker 1: party weekend, and boy, I had a hell of a time.
Speaker 1: And I thought, my god, if this is what they
Speaker 1: do in college, and I might want to think about college,
Speaker 1: and and on. And Eisenhower didn't cooperate because he ended
Speaker 1: the Korean War, so there was no water go up
Speaker 1: for and while the weekend I was up at buck
Speaker 1: Now the kids I was seeing the but I used
Speaker 1: to have Saturday classes, and the kids I was here
Speaker 1: to see told me to go see the gold and
Speaker 1: the building up as a guy there registrar, he wasn't
Speaker 1: called at Deana, it's called the Registrar's name was George Faint.
Speaker 1: And I went over and I saw him. Any what
Speaker 1: are you doing you? And I was all My friends
Speaker 1: said I should come and talk to you. What about
Speaker 1: I I don't know, Well, tell me about yourself. I
Speaker 1: was long, I'm in high school and what are you
Speaker 1: going to do? I don't know. I'm thinking about going
Speaker 1: to the Marine Corps. Will I have you applied to college?
Speaker 1: And I said no, Well you want to go to college?
Speaker 1: I said, well, I'm not sure. I thought we had.
Speaker 1: We ended up having a talk for about an hour.
Speaker 1: The following week, he sent me a letter and he said,
Speaker 1: if you want to come to buck now, we'd love
Speaker 1: to have you. But you're gonna have to work much
Speaker 1: harder in college. And you did in high school. Well
Speaker 1: that wasn't hard because I didn't do it. Damn practically
Speaker 1: nothing in high school. But thank god I had a
Speaker 1: good mind. I just didn't put it to much use.
Speaker 1: And so I ended up going to buck Bell and
Speaker 1: I almost flunked out stories in the book, And but
Speaker 1: for a professor who saw something to me, I didn't
Speaker 1: see it myself. He he got all my other professors
Speaker 1: together and they worked to pull me out of this
Speaker 1: nose dive, and I ended up graduating from Buckdell and
Speaker 1: Free are years. I actually graduated in February fifty seven,
Speaker 1: but the ceremony was in June, and I wanted my
Speaker 1: parents to see the graduation. And that's when I went
Speaker 1: back for the graduation, and that's where that picture came from.
Speaker 1: So it was my parents. My parents just couldn't believe
Speaker 1: they had a son who went to college, graduating college.
Speaker 1: It was, it was, it was, it was. It was
Speaker 1: just special. That's why I sorry. I'm sorry. I'm bringing
Speaker 1: up ken Um. You have an amazing story and it's
Speaker 1: a fabulous book. Everybody should read it. I'm wondering, you know,
Speaker 1: I want to talk about what you were saying when
Speaker 1: you said, you know, you saw Britie Sanders and people
Speaker 1: who are kind of challenging the American capitalistic dream. And
Speaker 1: I'm wondering whether you think anything has changed at a
Speaker 1: time when there's one and a half trillion dollars of
Speaker 1: student debt hanging out there and uh and sort of
Speaker 1: the gap between wealthy and poor people has widened. Let
Speaker 1: me show you how much I'm committed to the problem.
Speaker 1: I'm shaman of the n Y you laying own health.
Speaker 1: The Dean and CEO Bob Grossman, and I have one
Speaker 1: remaining major passion. We want to tell every kid that
Speaker 1: comes to our medical school they will no longer pay tuition.
Speaker 1: That will only happen if we can get wealthy people
Speaker 1: to con tribute to our endowment. That we can afford
Speaker 1: to do that now about the trillion dollar, trillion and
Speaker 1: a half dollars of debt. Number one, my father insisted.
Speaker 1: My father was a plumber. But while I was in
Speaker 1: high school, my father insisted I helped him so that
Speaker 1: when I got out of college high school. When I
Speaker 1: got out of high school, I didn't go to college.
Speaker 1: I'd have a trade a plumber. A lot of kids
Speaker 1: that are going to college today and and burdening themselves
Speaker 1: with debt would be better served learning a trade, learning
Speaker 1: a skill. We have an incredible shortage in this city
Speaker 1: of plumbers, carpenters, electricians, and they have great They are
Speaker 1: hundred thousand, hundred thousand dollars a year jobs. These are
Speaker 1: not low paying jobs. First of all, let's start with
Speaker 1: the belief that college isn't for everybody, and you don't
Speaker 1: have to go to college to be successful. Many of
Speaker 1: the people I know I never saw the inside of
Speaker 1: a college, and they were enormously successful. So I think
Speaker 1: we need to take a step back and ask ourselves
Speaker 1: the question, is this the magic pill? No, I don't
Speaker 1: think it is. But if it is, let's figure a
Speaker 1: way out to make it affordable for kids. And I
Speaker 1: don't know the answer to that, except I do know
Speaker 1: that the more money that you raised philanthropically, like Buck Noll,
Speaker 1: like New York University, or I was in a finance
Speaker 1: committee of the university last week. The more endowment we
Speaker 1: can generate, the more income we have that we can
Speaker 1: offer more student subsidization of their courts. There's no easy answer,
Speaker 1: ken Lan gone, would you say that one of the
Speaker 1: magic pills for your life has been your wife? Elaine?
Speaker 1: Oh boy and half, big time, big time talk about
Speaker 1: being us. How big this she is? I'm telling you
Speaker 1: right now, big time. Every crazy idea I had, she
Speaker 1: was always here, you know. And when they didn't work,
Speaker 1: she was there. And when they did work, she was there.
Speaker 1: You know. She's she's my anchor to Winwood. Absolutely. Hey. Look,
Speaker 1: and by the way, every marriage has bumps on the road,
Speaker 1: but that's part of living. Every life has bumps on
Speaker 1: the road. And and and where where? How we how
Speaker 1: do we live? We'd blow to sit down on a
Speaker 1: Sunday and rainy afternoon like it was this past weekend
Speaker 1: and watch a movie. Simple stuff. Anybody can do it,
Speaker 1: um can I just I want to? I want to
Speaker 1: end on a slightly different note. I know that you
Speaker 1: interest in Palenteer, a company that Peter Thiel founded, and
Speaker 1: there's been some discussion that it could potentially be heard
Speaker 1: by the sort of resumption of her Rand's sanctions. What's
Speaker 1: your take on this and do you think it will
Speaker 1: affect the valuations there? I don't, frankly understand. It's a
Speaker 1: complicated situation where I ran, I know this much about
Speaker 1: Palenteer and why I'm excited about it. I know that
Speaker 1: American lives I've been saved by Palenteer. That's a dramatic statement.
Speaker 1: I know that American lives have been saved by what
Speaker 1: Palenteer does. I know that terrorist attacks in America have
Speaker 1: been stopped before they happened because of Palenteer. And I'm
Speaker 1: I'm a proud investor in Palenteer. If I didn't make
Speaker 1: any money you a Palenteer, I'd be fine because what
Speaker 1: they're doing to me is an enormous social good. I
Speaker 1: am a devoted believer in what Palenteer does. I think
Speaker 1: it's a social good. We gotta leave it there. Ken
Speaker 1: lang Gone the co founder of the Home Depot, and
Speaker 1: his new book is entitled I Love Capitalism, an American Story.
Speaker 1: Thank you very much, Ken, langgoing. President Trump has said
Speaker 1: the US is going to withdraw from the Iran Nuclear Agreement,
Speaker 1: and after that announcement, we're getting worried today that sanctions
Speaker 1: are being imposed on a governor of the Central Bank
Speaker 1: of Iran for his role moving quote millions of dollars
Speaker 1: to Hezbollah on behalf of Islamic Revolutionary God Corpse Force.
Speaker 1: This according to the Treasury Department. Joining US now to
Speaker 1: talk a little bit more about what else we can
Speaker 1: expect in the wake of this decision by President Trump
Speaker 1: is Daniel Weger, vice president in the Global Financial Crime
Speaker 1: Compliance division at Lexus Nexus Risk Solutions, a part of
Speaker 1: the ri l X Group based in New York. Daniel,
Speaker 1: thank you so much for joining us UM. You have
Speaker 1: extensive experience working with government agencies with these matters. How
Speaker 1: much do you think that we're going to see these
Speaker 1: types of headlines coming out? I mean, are there gonna
Speaker 1: be quite a few additional sanctions revealed in the next
Speaker 1: couple of weeks. Thank you for having me this morning.
Speaker 1: I think it's going to be a constantly changing environment
Speaker 1: over the next several months, not only as the Treasury
Speaker 1: um imposes UM numerals and regulations, but also as they
Speaker 1: reinstate old licenses UM sunsets and existing licenses UM for
Speaker 1: companies that have engaged with Iran. So it will be
Speaker 1: a constantly changing environment. Well, Daniel. Over the weekend, I
Speaker 1: believe the chief executive A Seaman, said that his company
Speaker 1: could not do any new business in Iran after the
Speaker 1: United States decided to pull out of this deal. And
Speaker 1: indeed there are about forty billion dollars worth of aircraft
Speaker 1: deals for new planes from Boeing as well as air Bus. Uh.
Speaker 1: Do you believe that that that will remain something in place?
Speaker 1: So the Treasury is going to have to examine request
Speaker 1: from companies on an individual basis for licenses and exceptions UM.
Speaker 1: There's also a wind down period place that runs for
Speaker 1: the next several months for companies to wind down existing
Speaker 1: engagements and transactions. But it's certain that to many of
Speaker 1: those deals and any deals that are inflighting enough finalized
Speaker 1: could be in jeopardy. Daniel. I'm struck by what you
Speaker 1: said that the environment is going to be constantly changing.
Speaker 1: So how do companies make sure that they actually comply
Speaker 1: with all of the new sanctions. It's an excellent question.
Speaker 1: The companies like lectus Nectus resolutions focus on providing companies
Speaker 1: with data from government lists as well as information on
Speaker 1: companies and entities throughout the globe to help companies identify customers, counterparties,
Speaker 1: supply chain entities that could bring them risk by way
Speaker 1: of having transactions themselves with irany entities. Now, if you're
Speaker 1: a non US company but the product that you sell
Speaker 1: has ten percent or more of US originating parts, you'd
Speaker 1: be covered by these new sanctions correct um. It's difficult
Speaker 1: to make a single rule on that because there are
Speaker 1: two aspects and two issues of play here. One is
Speaker 1: the sanctions aspect, which prohibits broadly prohibits transactions services are
Speaker 1: goods to be transferred to listed and named entities, But
Speaker 1: there's also issues around the commodities involved so UM components
Speaker 1: of the goods UM goods that are dual use UM
Speaker 1: or armaments or could be used in such products are
Speaker 1: subject to additional restrictions. So for companies UH. Fortunately, most
Speaker 1: have complex structures in place to abide by these rules.
Speaker 1: But it is a multi layered set of rules that
Speaker 1: intertwined with each other and create a great deal of
Speaker 1: confusion for companies that are operating that space. What are
Speaker 1: you saying in terms of the oil industry and companies
Speaker 1: that have longstanding agreements in the region to provide oil
Speaker 1: field services, what is their situation going to be like? Well,
Speaker 1: it would be good to delineate between US companies and
Speaker 1: those that are global UM but which have a presence
Speaker 1: UM either through trading on US exchanges or the sale
Speaker 1: of US goods or as you mentioned before, the use
Speaker 1: of component US goods, because the implications for both will
Speaker 1: be somewhat differ for US companies UM. This period of
Speaker 1: relaxed Iranian sanctions has not actually given much relief to
Speaker 1: US persons or entities to engage in transactions with Iran,
Speaker 1: so for them it will be somewhat less complicated. But
Speaker 1: as you go down the supply chain, as you deal
Speaker 1: with transactional counterparties for financial institutions, UM, global institutions and
Speaker 1: global companies have been engaging in that space and can
Speaker 1: bring risk UM either for themselves or for their US
Speaker 1: company counterparties in such transactions. So, Daniel, I want to
Speaker 1: shift gears a little bit to tap into your vast
Speaker 1: knowledge after having worked at the U S Department of
Speaker 1: Homeland Security, US Custom Service, that's just a part of
Speaker 1: the Department of Treasury and the New York High Intensity
Speaker 1: Financial Crime Area. I want to talk about something happening domestically,
Speaker 1: namely Michael Cohen and the financial records that have been
Speaker 1: widely reported about Essential Consultants, his shell company. And some
Speaker 1: people are saying that the revelation of some of this
Speaker 1: information is illegal because banks are not allowed to share
Speaker 1: this information publicly. What's your take on this? So, the
Speaker 1: Bank Secrecy Act and other related and implementing regulations provide
Speaker 1: for requirements for US financial institutions and other regulated entities
Speaker 1: such as payment processors and money services businesses, casino, etcetera,
Speaker 1: to provide reports to the Treasury, specifically to FINCE in
Speaker 1: the Financial Crimes Enforcement Network part of the Treasury um
Speaker 1: highlighting what they believe to be suspicious or potentially suspicious
Speaker 1: activity by customers. And that information has afforded a great
Speaker 1: deal of secrecy, both to protect the privacy uh and
Speaker 1: the rights of the person or the entity which is
Speaker 1: being referred on the basis of mere suspicion, but also
Speaker 1: to protect the banks and to encourage them to continue
Speaker 1: to file such reports. And it's important to note that
Speaker 1: such reports do not. They're not referenced in court filings,
Speaker 1: they're not designed to being. In fact, they're they're restricted
Speaker 1: from being a referenced It's incumbent upon investigators to review
Speaker 1: them as lead material, to analyze financial records more holistically,
Speaker 1: and then to present an analysis the activity in accordance
Speaker 1: with judicial standards. Does the role of the US dollar
Speaker 1: as the world's reserve currency, does it make it easier
Speaker 1: for US regulators and investigators to actually track that kind
Speaker 1: of misuse of funds. That's a great point. The the
Speaker 1: US dollar, because of its pre eminence nets space, does
Speaker 1: provide an avenue for enforcement and prosecution that has a
Speaker 1: very global reach. And US enforcement and regulatory agencies have
Speaker 1: shown a strong desire through their billions of dollars in
Speaker 1: enforcement penalties and fines that have been levied against corporations
Speaker 1: and banks. So, just to just to wrap up here,
Speaker 1: as we hear all about some of these payments and such,
Speaker 1: what's your big takeaway of some of the suspicious of
Speaker 1: activity around the election? Well, um representing specifically focus on
Speaker 1: the financials um the reference of shell companies. All of
Speaker 1: these things by them selves are are simply suspicion or
Speaker 1: potentially suspicious and things like shell companies are simply a
Speaker 1: flag that require companies and financial institutions to dive deeper
Speaker 1: to engage and enhance due diligence, to understand the people
Speaker 1: behind those entities, the purpose of payment um and it's
Speaker 1: really important that companies, both corporate who operate in the
Speaker 1: global marketplace as well as banks understand their obligations and
Speaker 1: their tremendous exposure UH to enforcement activities if they don't
Speaker 1: exert the right amount of effort on such compliance programs.
Speaker 1: I want to thank you very much for joining us.
Speaker 1: Daniel Wager is a vice president Global financial Crime Compliance
Speaker 1: for Lexus Nexus Risk Solutions, a part of the r
Speaker 1: E l X Group. Talking about Iran and U S sanctions,
Speaker 1: the approaching legalization of cannabis around the United States and
Speaker 1: in Canada, of course, could it be igniting a variety
Speaker 1: of deals. Well, in many cases it already has done so.
Speaker 1: Ken Shay is our senior analyst for Global Food, Beverages
Speaker 1: and Tobacco for Bloomberg Intelligence, and he joins US now. Ken,
Speaker 1: thanks very much for being with us. Okay, so the
Speaker 1: caveat is you're not an expert in the Canadian cannabis market.
Speaker 1: But you know about what happens when a market is
Speaker 1: open for business and you see the seeds pun intended
Speaker 1: of consolidation. Tell us about your outlook and about the industry.
Speaker 1: Oh yeah, sure thing him could be with you today, Yes,
Speaker 1: you know, I look at this industry from a consumer
Speaker 1: products lends an industry that I've been covering for a
Speaker 1: while now, and the idea is that, like in the US, Canada,
Speaker 1: I believe that the growth in the cannabis industry is
Speaker 1: presenting a significant threat but also opportunity for a lot
Speaker 1: of those companies. What we've seen all the last year
Speaker 1: or so, particularly in Canada is the excitement of the
Speaker 1: markets with regard to the pending legalization national legalization of
Speaker 1: both medical and recreational usage, and that's really creating a
Speaker 1: lot of change in the market over there right now.
Speaker 1: You know, I was struck by the volume of pot
Speaker 1: headlines yesterday. I mean really it was just like fast
Speaker 1: and furious. We saw the consolidation of Canadian companies Aurora
Speaker 1: Cannabis and med Relief. Also, though we saw one of
Speaker 1: the errors of the jim Bean Whiskey bourbon empire um
Speaker 1: coming out and saying he thinks that marijuana is the
Speaker 1: looker industry in the nineteen twenties. What's your take on this?
Speaker 1: I mean, do you feel like things are sort of
Speaker 1: escalating at this point? I really do, and high Lisa, Yes,
Speaker 1: I do, Um, And you know, I think what really
Speaker 1: drives that home is really I asked you, I guess. Uh.
Speaker 1: The beer spirits and wine Giant Consolation Brands went on
Speaker 1: board a nine point nine perus an equity stake in
Speaker 1: Cannapa Growth, one of the leading UH growers of cannabis
Speaker 1: and Canada. And I believe, just like our friends over
Speaker 1: a gym being, believe that there really is going to
Speaker 1: be a substitute effect um between cannabis and alcoholic beverage.
Speaker 1: I mean, if you think about it, it's a mood altar, right,
Speaker 1: I mean, and I think a lot of the usage
Speaker 1: recreationally will be looked that way. And that's just not
Speaker 1: Pine in the sky. I mean, that's what Constellation has said,
Speaker 1: and most in Chorus has suggested that's looking at cannabis
Speaker 1: as a uh you know, as a potential opportunity. And
Speaker 1: so I think, to um, the big answer here is
Speaker 1: that I think the next big wave of mergers and acquisitions,
Speaker 1: particularly in Canada. You know the growers now, but I
Speaker 1: think the second wave will be the big consumer package
Speaker 1: goods companies again has the bushes of the world the
Speaker 1: most in cores, the Diaggio's that take a look at
Speaker 1: what Consolation did and maybe pursue the same strategy. Can
Speaker 1: do you believe that there will be a time when
Speaker 1: a company such as Altair or Philip Morris will be
Speaker 1: in this business? Yes, I do, pim Um. You know,
Speaker 1: we learned back in the late seventies when upon discovery
Speaker 1: of a lot of internal documents, we know that tobacco
Speaker 1: companies were very interested in pursuing the marijuana markets. As
Speaker 1: we know now, it didn't become legally at illegal at
Speaker 1: the federal level back then, so it couldn't. But we believe,
Speaker 1: uh that they are looking at very closely. As a
Speaker 1: matter of fact, Um, but one of the largest tobacco
Speaker 1: leaf suppliers to the big tobacco companies, Alliance One, already
Speaker 1: owns a Canadian uh cannabis grower and so if you
Speaker 1: think about it, what that means is that a significant
Speaker 1: supplier of tobacco leaf to the big tobacco companies like
Speaker 1: Philip Morris International and British American Tobacco is also capable
Speaker 1: of supplying them marijuana leaf if it needs to. So yeah,
Speaker 1: I think they are definitely looking at it. Ken, I'm
Speaker 1: sure you're aware of the increase in the popularity of
Speaker 1: vaping and the popularity of a company Jewel and its product.
Speaker 1: Do you believe that they're going to be patent wars
Speaker 1: over the exclusivity of the technology that allows for those
Speaker 1: kinds of devices. Yes, I think there'll be some activity there,
Speaker 1: But you know, one of those, a hugely successful product
Speaker 1: like Jewel is threatening the status quo in this case
Speaker 1: the big not only the big vapor products of the
Speaker 1: big tobacco companies, both of the cigarette market in itself.
Speaker 1: I think you will see some challenges. That said, I mean,
Speaker 1: Altaria's Newmark subsidiary is coming out with a product that
Speaker 1: is very much like Jewel, um, you know, a non
Speaker 1: refillable vaporizer as they call it, and um, you know,
Speaker 1: so I think they're gonna I think most of that
Speaker 1: will be in the marketplace, but you know, as it
Speaker 1: gets closer and closer to what Jewel is, perhaps there
Speaker 1: could be some intellectual property. Um discussions. So, Ken, where
Speaker 1: are we with respect to US legislation and legalization of marijuana. Well,
Speaker 1: in the US, it's really hung up at the federal level.
Speaker 1: As you may know, some twenty nine states have already
Speaker 1: um legalized it for medical use and an additional eight
Speaker 1: for recreational use, and that number just keeps on growing
Speaker 1: um and but nevertheless, you know, without federal without a
Speaker 1: federal mandate, it really is difficult for these operators to
Speaker 1: grow UM. And what I mean is because for instance,
Speaker 1: you can't um because it's a federal illegal product. You
Speaker 1: can't bring cannabis products over state lines. When you, you you know,
Speaker 1: generate income, you're not allowed on your taxes to deduct
Speaker 1: normal operating expenses. So it's very difficult to make money
Speaker 1: in the in the US in this business today. That said,
Speaker 1: capital is still there for the companies that are in
Speaker 1: the business, the thought being at some point enough public
Speaker 1: support will force the hand at the federal level. So,
Speaker 1: just given where we are today, do you know any
Speaker 1: estimates for what the medical marijuana industry is worth, and
Speaker 1: do you then have some kind of sense of what
Speaker 1: it would be worth if you also have recreational use
Speaker 1: thrown in? Well, both recreation and medical in the US
Speaker 1: is an approxly five or six billion dollar business UM.
Speaker 1: The majority of that is still medical UM. And in
Speaker 1: terms of what it's worth, that's a good question because
Speaker 1: there's a lot of capital institutional money on the sidelines
Speaker 1: wants to invest in this business but just can't because
Speaker 1: it's again it's illegal at the federal level, and there's
Speaker 1: a lot of structural issues why they can't. But you know,
Speaker 1: I think the industry was really wanted to push it along. Uh.
Speaker 1: What I think what they ought to consider is because
Speaker 1: the public support for the non th C cannabi oil
Speaker 1: basically the extract from the cannabis plant can be applied
Speaker 1: to so many positive uses, pain relief, glaucoma, etcetera, etcetera, UM,
Speaker 1: that they ought to consider pushing that at the federal
Speaker 1: acceptance level, illegalization level, and worry about the recreational side
Speaker 1: down the road. I mean, you know, there's a lot
Speaker 1: of there's a lot of opponents to recreational still, you know,
Speaker 1: mothers again, drunk driving and so on, and someone there's
Speaker 1: a lot of concerns that you know, um, more easier
Speaker 1: access you know to this drug will could could lead
Speaker 1: to some negative consequences. So what I'm saying is to
Speaker 1: find out what this total market is worth. The easiest
Speaker 1: way to do that is to kind of delineate between
Speaker 1: the non t C S CBD oil opportunity, which I
Speaker 1: think is huge, and the recreational side down the road.
Speaker 1: Thank you so much for being with us. I'm sure
Speaker 1: you're talking with you soon, based on the accelerating volume
Speaker 1: of marijuana stories that we've been seeing these days. Ken Shay,
Speaker 1: senior analyst covering the global food, beverages and tobacco industries
Speaker 1: for Bloomberg Intelligence. Berkshire Hathaway Vice Chairman Charlie Mongers said
Speaker 1: bitcoin is worthless artificial gold. He said, the fact that
Speaker 1: it's clever computer science doesn't mean it should be widely used,
Speaker 1: and that respectable people should encourage other people to speculate
Speaker 1: on it. Well, that has not stopped more than people
Speaker 1: from attending Coin Desks Consensus conference all about cryptocurrencies. They
Speaker 1: paid at least two thousand dollars a ticket to attend
Speaker 1: the three day conference and joining us now as one
Speaker 1: of the speakers and attendees to Bermuda Premier David Burke
Speaker 1: Premier birth Thank you very much, for being with us
Speaker 1: and UM. I want to just offer you the opportunity
Speaker 1: to talk about the criticism having to do with cryptocurrencies.
Speaker 1: And as much as I believe Bermuda is leading the
Speaker 1: charge in terms of legislation regarding cryptocurrencies with the Digital
Speaker 1: Asset Business Act, what was your goal in putting that forward? Well,
Speaker 1: thank you him. I would say that there are a
Speaker 1: wide range of UH cryptocurrencies they're called UM and and
Speaker 1: that deal with lots of different things in the digital
Speaker 1: asset space. What we want to make sure that we
Speaker 1: provide in Bermuda, and knowing that there's going to be
Speaker 1: innovation in this space, and knowing that this space UM
Speaker 1: is going to revolutionize the way that financial services UM
Speaker 1: are delivered throughout the world, we just want to make
Speaker 1: sure that companies that we build on our existing regulations
Speaker 1: that we've been so successful with an insurance and to
Speaker 1: make sure that we transfer those regulations to a digital
Speaker 1: asset space so that players that are serious players that
Speaker 1: want to be in a well regular jurisdiction and abide
Speaker 1: within the law can be and can have a home
Speaker 1: in Bermuda. And you were just saying that Bermuda was
Speaker 1: the first to craft these crypto asset regulations in particular,
Speaker 1: and the goal here is for companies to incorporate and
Speaker 1: operate in Bermuda. How successful have you been so far
Speaker 1: in attracting crypto asset companies? Um? Well, this conference has
Speaker 1: proven incredibly successful. UM. We had the speaking engagement yesterday
Speaker 1: and there were companies that were literally about to go
Speaker 1: somewhere else that are are reconsidering their view and coming
Speaker 1: to Bernuda. So one one pushback maybe people would say,
Speaker 1: is you know, maybe you craft regulations that are regulations,
Speaker 1: but perhaps aren't as strenuous as might be seen in
Speaker 1: a place like the United States. UM. What do you
Speaker 1: say to that? UM? What I would say is that
Speaker 1: if you look at Bermuda's history, we've always been a
Speaker 1: place with excellent regulation. There's only two places that have
Speaker 1: regulatce worre equivalents with both EU UM and the United States,
Speaker 1: and that's Bermuda in Switzerland. We play UM in a
Speaker 1: different class in other countries when it comes to regulation,
Speaker 1: and we're going to lead the way. So our regulation
Speaker 1: is tough. How do you want to implement this new
Speaker 1: Digital Business Act? What is the I know that you're
Speaker 1: looking at. I think Finance is one of the exchanges
Speaker 1: that has already said that they're interested in coming. They're
Speaker 1: going to come to Bermuda. What kind of infrastructure, legal
Speaker 1: infrastructure do you offer? UM, Well, Bermuda has been successful
Speaker 1: for a long time and UH servicing international companies. UH.
Speaker 1: The thing I said yesterday is that it takes longer
Speaker 1: to probably get to j f K than it does
Speaker 1: for the flight from JFK to Bermuda. But you can
Speaker 1: land in Bermuda in the You can leave New York
Speaker 1: in the morning. You can land in Bermuda by noon.
Speaker 1: You can see. But what what what in the I
Speaker 1: guess what I want to understand is what in these
Speaker 1: draft regulations specifically would allow UH Internet coin offerings or
Speaker 1: digital currencies to operate in Bermuda. UM. The regulations basically
Speaker 1: govern the entire suite of digital asset providers. So if
Speaker 1: you are someone who UM is an exchange, if you're
Speaker 1: someone who's a wallet provider, if you're someone who's a
Speaker 1: customer provider, or if you're someone in the business of
Speaker 1: issuing digital assets for others. It is an entire suite
Speaker 1: of regulations that is built on our money service business.
Speaker 1: UM regulations and It flows from the way of which
Speaker 1: we've always regulated companies, requiring mind management and control in Bermuda,
Speaker 1: requiring a physical presence and making sure that the Bermuda
Speaker 1: Monetary authority has access to the people. But what we're
Speaker 1: also going to do is give the regulator a tie in,
Speaker 1: so it's required at any point in time there's any
Speaker 1: suspicious activity, the regulator can actually freeze assets which may
Speaker 1: exist in the digital space. So I'm just wondering. I mean,
Speaker 1: we hear a lot of pain which is talking about
Speaker 1: Warren Buffets, colorful words about bitcoin. A lot of people
Speaker 1: are convinced that this is just a bunch of quacks
Speaker 1: who are trying to create something that will eve operating.
Speaker 1: Is the next Tulip boom um. What do you say
Speaker 1: to that? I mean, how much? What is the proportion
Speaker 1: of you know, quackery or I c o s that
Speaker 1: are essentially just fraud versus something real. I can't necessarily
Speaker 1: speak to what is fraud. What I can speak to
Speaker 1: is the fact that there is real money that is
Speaker 1: going to this space. And you've seen real money coming
Speaker 1: in from Wall Street firms and otherwise investing in digital
Speaker 1: assets and investing in this But I just want to
Speaker 1: clarify here because there's a difference between uh bitcoin and blockchain.
Speaker 1: Where is the where is the opportunity here? Well, the
Speaker 1: opportunity is for people who are going to use blockchain
Speaker 1: technology to build a digital asset business. So that doesn't
Speaker 1: mean that you have to rely on bitcoin or anything
Speaker 1: else you are looking at saying, we recognize that digital
Speaker 1: assets are going through the future. We're going to design
Speaker 1: innovative financial products, whether it's distributed energy, whether it's a
Speaker 1: distributed banking that is going to be more efficient in
Speaker 1: delivering services, and we want those companies to use Bermuda
Speaker 1: as the innovation hub where they can hast out those
Speaker 1: products in our regulatory sandbox and scale them globally. Okay,
Speaker 1: So let's say that you are an investor who is
Speaker 1: intrigued with the notion of cryptocurrencies, and you go and
Speaker 1: you establish your own digital wallet, and you somehow managed
Speaker 1: to acquire a variety of digital currencies. Then one day
Speaker 1: you go and you can't get access to your wallet,
Speaker 1: or you find that the ledger that exists does not
Speaker 1: match what you had the day before. Is there a
Speaker 1: regulatory regime in Bermuda that you can go to that
Speaker 1: will then investigate and if necessary, prosecute any problems related
Speaker 1: to that kind of situation. Absolutely, those are things which
Speaker 1: are spelled out inside of our Digital Asset Business Act,
Speaker 1: and we're going to require providers inside of the space
Speaker 1: to have the security measures in place which are necessary.
Speaker 1: But there's also problems that need to be solved in
Speaker 1: this space. And one of the key points Pim is
Speaker 1: what you spoke about is custody. So the company that
Speaker 1: on Friday at the Ethereal conference announced they're moving to Bermuda,
Speaker 1: um Omega one is looking to solve that problem and
Speaker 1: to find a secure place to keep the keys because
Speaker 1: everything is race on who based on who holds the
Speaker 1: private key, So we need to make sure that we
Speaker 1: have a way to secure those private keys. And that's
Speaker 1: why we're going to innovate in Bermuda because there are
Speaker 1: problems that have to be solved in this space. Why
Speaker 1: do you think other countries have been slow to adopt
Speaker 1: a regulatory framework for crypto assets? Well, what I would
Speaker 1: say is it's a question when you're talking about New York, sorry,
Speaker 1: if you're talking about the United States, you know you
Speaker 1: have the different states, you have the federal level, then
Speaker 1: you have the SEC, the c SEC all the rest.
Speaker 1: In Bermuda, we have one government, one regulator um and
Speaker 1: so we can be a lot more swift. But the
Speaker 1: fact is that we are just building on what we've
Speaker 1: done already. So we've done this successfully already with insurance,
Speaker 1: we've done this successfully in the fund space, and now
Speaker 1: we're just moving the regulation of which we have that
Speaker 1: very high level regulation into a new area of financial services,
Speaker 1: which is digital assets. Thank you so much for being here.
Speaker 1: Really fascinating to hear what you have to say. The R.
Speaker 1: David Burt, he is the Premier of the Bermuda government,
Speaker 1: joining us here in the eleven three oh studios. He
Speaker 1: was here for the Consensus eighteen conference that has been
Speaker 1: taking place starting Sunday in New York City. Yeah, the
Speaker 1: New York Hilton attendees. And the bitcoin right now is
Speaker 1: down three to be exact. Yeah, it's interesting. There's a
Speaker 1: question right of how much sort of cryptocurrencies get conflated
Speaker 1: with bitcoin providers that are being used by the likes
Speaker 1: of HSBC to do trade finance. So definitely a fascinating conversation.
Speaker 1: Thanks for listening to the Bloomberg p m L podcast.
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
Speaker 1: Abramowits one before the podcast. You can always catch us
Speaker 1: worldwide on Bloomberg Radio pek