1 00:00:13,680 --> 00:00:17,560 Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast. 2 00:00:17,640 --> 00:00:20,360 Speaker 1: My name is Mike Reagan. I'm a senior editor at Bloomberg. 3 00:00:20,760 --> 00:00:24,400 Speaker 1: And my colleague Vildana Hirich, who typically co hosts with me, 4 00:00:24,560 --> 00:00:27,280 Speaker 1: is off this week, so it's just me and this 5 00:00:27,360 --> 00:00:30,720 Speaker 1: week on the show. Well, the stock market has obviously 6 00:00:30,800 --> 00:00:33,559 Speaker 1: been on fire this year, there's no doubt about that, 7 00:00:34,120 --> 00:00:37,480 Speaker 1: but there's trouble brewing in another market that is very 8 00:00:37,560 --> 00:00:41,839 Speaker 1: systemically important, commercial real estate. In fact, concern about this 9 00:00:41,880 --> 00:00:45,159 Speaker 1: market has reached the magazine cover phase. This week, New 10 00:00:45,200 --> 00:00:48,760 Speaker 1: York's magazine featured a picture of the Manhattan Skyline with 11 00:00:48,840 --> 00:00:51,839 Speaker 1: the headline Worthless, and it pointed out some of the 12 00:00:51,880 --> 00:00:55,840 Speaker 1: more high profile troubles among those famous skyscrapers. And a 13 00:00:55,880 --> 00:00:58,640 Speaker 1: few weeks ago, our own Business Week magazine featured a 14 00:00:58,680 --> 00:01:02,960 Speaker 1: headline that said commercial real estate is getting scary and 15 00:01:03,040 --> 00:01:06,160 Speaker 1: a picture of those creepy twin ghosts from the Shining 16 00:01:06,240 --> 00:01:09,520 Speaker 1: standing at the end of an office hallway. How scary 17 00:01:09,600 --> 00:01:12,000 Speaker 1: is it? Are we at Shining level scary yet in 18 00:01:12,000 --> 00:01:14,360 Speaker 1: commercial real estate? I don't know, but we're going to 19 00:01:14,400 --> 00:01:16,600 Speaker 1: get into it with a guest this week who knows 20 00:01:16,720 --> 00:01:20,759 Speaker 1: quite a bit about the commercial real estate sector. In fact, 21 00:01:20,800 --> 00:01:23,000 Speaker 1: he's one of those guests who if I were to 22 00:01:23,040 --> 00:01:25,520 Speaker 1: read you a list of everything he's involved in, well, 23 00:01:25,560 --> 00:01:27,240 Speaker 1: it would probably take up all the time we have 24 00:01:27,400 --> 00:01:29,520 Speaker 1: for the podcast, so I'm just going to stick with 25 00:01:29,560 --> 00:01:31,720 Speaker 1: the highlights. As I introduced him here. He is the 26 00:01:31,800 --> 00:01:34,039 Speaker 1: chairman and CEO of Suffolk, which is one of the 27 00:01:34,160 --> 00:01:37,920 Speaker 1: largest privately owned construction firms in the country. He's also 28 00:01:37,959 --> 00:01:41,559 Speaker 1: the chair of the Real Estate Roundtable trade group. Also, 29 00:01:41,600 --> 00:01:44,480 Speaker 1: he's the chair of Boston College as well as the 30 00:01:44,520 --> 00:01:48,040 Speaker 1: former chair of the Federal Reserve Bank of Boston. His 31 00:01:48,160 --> 00:01:50,160 Speaker 1: name is John Fish. John, Welcome to the show. 32 00:01:50,480 --> 00:01:52,440 Speaker 2: Mike. It's a pleasure to be here. Thank you very much. 33 00:01:52,520 --> 00:01:54,400 Speaker 1: That's a lot of chairs, John, I was saying, but 34 00:01:54,400 --> 00:01:55,960 Speaker 1: it's good to have you in our chair this week 35 00:01:56,000 --> 00:01:58,800 Speaker 1: to talk about this commercial real estate issue going on. 36 00:01:58,920 --> 00:02:02,000 Speaker 1: But I'll toll us a little bit about Suffolk for 37 00:02:02,280 --> 00:02:05,760 Speaker 1: those who aren't familiar with your business. You guys were 38 00:02:05,800 --> 00:02:08,160 Speaker 1: involved in what I consider to be one of the 39 00:02:08,160 --> 00:02:11,919 Speaker 1: coolest buildings in the US, which is in Hollywood, Florida, 40 00:02:12,200 --> 00:02:16,000 Speaker 1: the hard Rock Hotel, which is basically designed like a 41 00:02:16,000 --> 00:02:19,360 Speaker 1: giant guitar. I think that's one of my favorite buildings 42 00:02:19,400 --> 00:02:19,800 Speaker 1: ever built. 43 00:02:19,880 --> 00:02:21,840 Speaker 2: Yeah, Mike, the job you're reported to is called the 44 00:02:21,840 --> 00:02:24,280 Speaker 2: Hollywood High Rocks, about one point eight billion dollar project 45 00:02:24,320 --> 00:02:26,079 Speaker 2: we built down there about four years ago for the 46 00:02:26,160 --> 00:02:29,160 Speaker 2: seminal drive down there, which are very apportionate. The company 47 00:02:29,200 --> 00:02:31,840 Speaker 2: started back in nineteen eighty two. I came from a 48 00:02:31,919 --> 00:02:34,760 Speaker 2: four generation family of business, my brother who was a 49 00:02:34,840 --> 00:02:36,680 Speaker 2: year old that took over the family business. My dad 50 00:02:36,800 --> 00:02:39,600 Speaker 2: lent me eighty thousand dollars to start Suffolk as a 51 00:02:39,639 --> 00:02:42,560 Speaker 2: non union business, and through a lot of great help 52 00:02:42,600 --> 00:02:44,760 Speaker 2: and a lot of support across the board, we've grown 53 00:02:44,800 --> 00:02:47,720 Speaker 2: the business nationally into about a five point six to 54 00:02:47,880 --> 00:02:50,840 Speaker 2: six billion dollar business. And I feel very humbled and 55 00:02:50,919 --> 00:02:52,679 Speaker 2: lucky to be able to say that to you and 56 00:02:52,919 --> 00:02:55,040 Speaker 2: to me as an organization. And how we've done that 57 00:02:55,240 --> 00:02:59,000 Speaker 2: is we've created an environment really based on people and 58 00:02:59,240 --> 00:03:02,120 Speaker 2: understanding how how important culture is to a go organization. 59 00:03:02,280 --> 00:03:05,560 Speaker 2: As we often say, culture eats strategy for lunch at 60 00:03:05,560 --> 00:03:07,640 Speaker 2: the end of the day. And we have it Suffolk. 61 00:03:07,639 --> 00:03:09,760 Speaker 2: What does it call it? Cult like culture? Now? What 62 00:03:09,880 --> 00:03:13,079 Speaker 2: Suffolk does. We're a general contracting business, but also we 63 00:03:13,240 --> 00:03:16,799 Speaker 2: have different tentacles we call verticals that is, we have 64 00:03:16,840 --> 00:03:20,040 Speaker 2: a technology company called Suffolk Technology. We just raised and 65 00:03:20,120 --> 00:03:23,600 Speaker 2: closed one hundred million dollars regulated fund last week, which 66 00:03:23,680 --> 00:03:27,320 Speaker 2: invest in prop tech, construction tech solutions. We've made about 67 00:03:27,360 --> 00:03:30,520 Speaker 2: thirty investments. There's a seed in Series A investments. We're 68 00:03:30,600 --> 00:03:33,480 Speaker 2: very proud of that. We also have a Suffolk Capital Arm. 69 00:03:34,240 --> 00:03:37,160 Speaker 2: We don't compete with our clients. We invest with our 70 00:03:37,200 --> 00:03:40,800 Speaker 2: clients in the GP stack of the development capital stack, 71 00:03:41,200 --> 00:03:43,520 Speaker 2: and that provides us with a sense of alignment of 72 00:03:43,600 --> 00:03:46,840 Speaker 2: interest in the construction, which typically doesn't happen, so therefore 73 00:03:46,920 --> 00:03:49,840 Speaker 2: people partner together much nicer. We also have a design 74 00:03:49,960 --> 00:03:53,120 Speaker 2: firm and it's really digital design. It's not the typical 75 00:03:53,200 --> 00:03:57,040 Speaker 2: design firm. We do design support, we design assist, and 76 00:03:57,080 --> 00:03:59,680 Speaker 2: we do design built. And the idea is how do 77 00:03:59,760 --> 00:04:03,560 Speaker 2: we leverage technology and artificial intelligence in the twenty first 78 00:04:03,600 --> 00:04:07,360 Speaker 2: century to create a more predictable, accurate design. And we're 79 00:04:07,400 --> 00:04:10,560 Speaker 2: not fully there yet. We're leveraging some very good solutions 80 00:04:11,160 --> 00:04:14,160 Speaker 2: in the country right now and globally that allowing ourselves 81 00:04:14,200 --> 00:04:17,600 Speaker 2: to provide that much more accurate and level of predictability 82 00:04:17,800 --> 00:04:19,960 Speaker 2: in the design process of the job. And then lastly, 83 00:04:20,440 --> 00:04:23,000 Speaker 2: we have a self perform arm that provides you know, 84 00:04:23,240 --> 00:04:26,960 Speaker 2: material deliveries, equipment and concrete and label the typic type 85 00:04:26,960 --> 00:04:29,840 Speaker 2: of self performed projects around the country. So overall, our 86 00:04:30,000 --> 00:04:33,400 Speaker 2: ultimate vision as a company is how do we integrate 87 00:04:34,080 --> 00:04:38,760 Speaker 2: the entire built world into a seamless platform by leveraging 88 00:04:39,520 --> 00:04:43,840 Speaker 2: data and technology. Now, Mike, why I say data is 89 00:04:43,920 --> 00:04:47,320 Speaker 2: because we're probably one of the few construction companies in 90 00:04:47,360 --> 00:04:50,040 Speaker 2: the country that have a clean data link. It's taken 91 00:04:50,120 --> 00:04:52,600 Speaker 2: us at probably about seven or eight years to accomplish that. 92 00:04:53,080 --> 00:04:55,279 Speaker 2: We have probably got twenty nine to thirty data analysts 93 00:04:55,279 --> 00:04:58,360 Speaker 2: in the company. Probably out five years ago. We started 94 00:04:58,480 --> 00:05:01,880 Speaker 2: using and leveraging data to provide a sense of predictability 95 00:05:02,320 --> 00:05:04,240 Speaker 2: and accuracy to what we're doing the role. 96 00:05:05,000 --> 00:05:07,120 Speaker 1: It's funny, John, I thought this was going to be 97 00:05:07,400 --> 00:05:09,479 Speaker 1: the week where I get a break from talking about 98 00:05:09,520 --> 00:05:12,600 Speaker 1: AI in the markets, but uh, I guess not. It's 99 00:05:12,720 --> 00:05:16,160 Speaker 1: fascinating to me that AI is even finding some applications 100 00:05:16,279 --> 00:05:18,560 Speaker 1: in the construction industry, and I want to get into 101 00:05:18,600 --> 00:05:21,400 Speaker 1: that later. But first let's get into that commercial real 102 00:05:21,560 --> 00:05:24,760 Speaker 1: estate topic that I started this all off with, because 103 00:05:24,760 --> 00:05:27,560 Speaker 1: I think it is very much front and center for 104 00:05:27,640 --> 00:05:30,680 Speaker 1: a lot of investors. These days of exactly what's going 105 00:05:30,760 --> 00:05:33,600 Speaker 1: on in the cre market. You know, it's fascinating you. 106 00:05:33,760 --> 00:05:35,960 Speaker 1: You mentioned an eighty thousand loan from your father to 107 00:05:36,000 --> 00:05:38,840 Speaker 1: get this huge company going, so clearly you know a 108 00:05:38,880 --> 00:05:42,200 Speaker 1: little bit about how to handle the financing of this business. 109 00:05:42,320 --> 00:05:45,719 Speaker 1: But I want to start with the basic John, because 110 00:05:46,120 --> 00:05:48,000 Speaker 1: I think for a lot of people who aren't in 111 00:05:48,080 --> 00:05:52,240 Speaker 1: the weeds in this sector, they don't quite appreciate the 112 00:05:52,320 --> 00:05:56,320 Speaker 1: differences between residential and commercial real estate financing. You know, 113 00:05:56,440 --> 00:05:58,680 Speaker 1: most of us we look forward to that day where 114 00:05:58,720 --> 00:06:01,600 Speaker 1: we finally make the final payment on our thirty year 115 00:06:01,839 --> 00:06:05,240 Speaker 1: fixed rate mortgage and we pop the champagne and burn 116 00:06:05,320 --> 00:06:09,599 Speaker 1: the mortgage. It's a much different ballgame in commercial real estate. 117 00:06:09,880 --> 00:06:13,359 Speaker 1: So talk to us about that difference, how the financing 118 00:06:13,440 --> 00:06:17,839 Speaker 1: of these projects is different, and why this spectacular rise 119 00:06:18,080 --> 00:06:21,160 Speaker 1: in interest rates that we've experienced this year is so 120 00:06:21,360 --> 00:06:22,360 Speaker 1: dangerous to this sector. 121 00:06:22,800 --> 00:06:24,839 Speaker 2: I really think you need to take a step back 122 00:06:24,880 --> 00:06:27,839 Speaker 2: and really unpack what has transpired over the last fifteen 123 00:06:27,839 --> 00:06:29,960 Speaker 2: to twenty years to get to that answer. And again 124 00:06:30,000 --> 00:06:31,800 Speaker 2: I think we all agree sort of hit up against 125 00:06:31,800 --> 00:06:33,600 Speaker 2: the black Swan event, That's what I would call at 126 00:06:33,600 --> 00:06:35,920 Speaker 2: the end of the day. And you couple that with 127 00:06:36,480 --> 00:06:40,480 Speaker 2: prior monetary policy back after two thousand and seven, and 128 00:06:40,600 --> 00:06:43,679 Speaker 2: fiscal policy basically living at the zero bound of interest 129 00:06:43,720 --> 00:06:45,680 Speaker 2: rates over a ten year period. To poll, I call 130 00:06:46,000 --> 00:06:48,640 Speaker 2: that people sort of drinking from the punch bowl generally speaking, 131 00:06:49,040 --> 00:06:50,800 Speaker 2: and continue on, and all of a sudden we have 132 00:06:51,279 --> 00:06:54,680 Speaker 2: the pandemic. The world basically stopped. And when the world stopped, 133 00:06:54,720 --> 00:06:57,680 Speaker 2: all of a sudden, the government injected almost two and 134 00:06:57,720 --> 00:07:01,320 Speaker 2: a half trillion dollars worth of money to stimulate the 135 00:07:01,400 --> 00:07:03,640 Speaker 2: comedy and coup with that, then they went forward to 136 00:07:03,680 --> 00:07:05,640 Speaker 2: build back better in the Chips Act, so a total 137 00:07:05,680 --> 00:07:09,640 Speaker 2: of six point five trillion dollars of stimulus. And so therefore, 138 00:07:09,680 --> 00:07:11,800 Speaker 2: all of a sudden, in a very very short period 139 00:07:11,840 --> 00:07:15,800 Speaker 2: of time, we had inflated amount of capital in the 140 00:07:15,880 --> 00:07:19,360 Speaker 2: system on a global basis, not just nationally here. And 141 00:07:19,400 --> 00:07:21,800 Speaker 2: as a result of that, what happened is interest rates. 142 00:07:22,560 --> 00:07:25,840 Speaker 2: I mean, the inflations started the spike, and I think 143 00:07:25,920 --> 00:07:29,240 Speaker 2: the Fed candidly, I think misjudged this concept of transitory 144 00:07:29,280 --> 00:07:32,880 Speaker 2: and non transitory, and they classified as a transittory. We 145 00:07:33,080 --> 00:07:36,000 Speaker 2: found out that it really wasn't transfittory. It was embedded 146 00:07:36,040 --> 00:07:39,080 Speaker 2: in the system, and I don't think the Fed responded 147 00:07:39,200 --> 00:07:41,480 Speaker 2: quick enough to the situation. Again, I'm not trying to 148 00:07:41,520 --> 00:07:43,880 Speaker 2: blame anybody, but I think nobody had a glass ball. 149 00:07:44,400 --> 00:07:46,880 Speaker 2: And once they did react back in November twenty second, 150 00:07:47,040 --> 00:07:49,720 Speaker 2: it was almost too late. Inflation had junk grewing to 151 00:07:49,840 --> 00:07:52,000 Speaker 2: nine percent. All of a sudden, you had the supply 152 00:07:52,120 --> 00:07:54,600 Speaker 2: chain issues going on, the material rates went up at 153 00:07:54,640 --> 00:07:57,000 Speaker 2: the end of the day, and the cost of construction, 154 00:07:57,680 --> 00:08:01,480 Speaker 2: first time in history, was greater than the value that 155 00:08:01,560 --> 00:08:04,080 Speaker 2: you were creating from the building itself. We've never seen 156 00:08:04,160 --> 00:08:07,040 Speaker 2: that before. So all of a sudden, over twelve month, 157 00:08:07,120 --> 00:08:09,560 Speaker 2: thirteen to fourteen month period of time, the Federal Reserve 158 00:08:10,080 --> 00:08:12,840 Speaker 2: slams on the brakes, has over five hundred and twenty 159 00:08:12,880 --> 00:08:17,720 Speaker 2: five basis points jumping rates, which really causes at the 160 00:08:17,840 --> 00:08:21,080 Speaker 2: end of the day, a complete shock to the system. 161 00:08:21,680 --> 00:08:24,960 Speaker 2: People that were buying capital were borrowing capital at that 162 00:08:25,040 --> 00:08:28,040 Speaker 2: point in time at three, four, five six percent. Now 163 00:08:28,080 --> 00:08:30,320 Speaker 2: all of a sudden, are in double digits. And when 164 00:08:30,360 --> 00:08:33,079 Speaker 2: you talk about these large structures, especially in New York 165 00:08:33,120 --> 00:08:35,400 Speaker 2: City and that article you're talking about, you get all 166 00:08:35,520 --> 00:08:38,640 Speaker 2: these buildings out there, amazing almost one hundred million square 167 00:08:38,679 --> 00:08:41,760 Speaker 2: feet a vacant office space is staggering at the end 168 00:08:41,760 --> 00:08:44,600 Speaker 2: of the day. And you say to yourself, well, right now, 169 00:08:44,800 --> 00:08:48,160 Speaker 2: we're in a situation where those buildings about forty five, 170 00:08:48,280 --> 00:08:51,319 Speaker 2: fifty five, sixty five percent occupied, and all of a sudden, 171 00:08:51,400 --> 00:08:54,640 Speaker 2: the cost of capitals is what those buildings is almost doubled. 172 00:08:55,080 --> 00:08:57,439 Speaker 2: So you've got a double Whimmen, You've got vacancy down, 173 00:08:57,559 --> 00:08:59,679 Speaker 2: so the value is down as less income coming in, 174 00:09:00,200 --> 00:09:02,720 Speaker 2: and the cost of capital has gone up exponentially at 175 00:09:02,720 --> 00:09:04,840 Speaker 2: the end of the day. So you've got a situation 176 00:09:04,960 --> 00:09:11,199 Speaker 2: where timing is really, really, really impacted the development industry substantially. Now, 177 00:09:11,720 --> 00:09:13,640 Speaker 2: when you take a look at that, the biggest problem 178 00:09:13,720 --> 00:09:17,520 Speaker 2: right now is because of that, the capital markets nationally 179 00:09:17,920 --> 00:09:21,240 Speaker 2: are frozen. And the reason why they're frozen is because 180 00:09:21,280 --> 00:09:27,640 Speaker 2: nobody understands value. We can't evaluate price discovery because very 181 00:09:27,720 --> 00:09:31,920 Speaker 2: few assets have traded during this period of time, nobody 182 00:09:32,040 --> 00:09:36,959 Speaker 2: understands where bottom is. Therefore, until we achieve some sense 183 00:09:37,040 --> 00:09:41,160 Speaker 2: of price discovery, if people understand value, will never work 184 00:09:41,240 --> 00:09:43,679 Speaker 2: ourselves through that. Now, what I would say to you 185 00:09:43,840 --> 00:09:46,360 Speaker 2: is late at the end of the tunnel came just 186 00:09:46,440 --> 00:09:49,760 Speaker 2: a little bit. Was back in June twenty ninth when 187 00:09:49,800 --> 00:09:53,959 Speaker 2: the occ the FDIC and the federal government provided policy 188 00:09:54,040 --> 00:09:57,640 Speaker 2: guidance to the industry as a whole. And that policy 189 00:09:57,720 --> 00:10:01,640 Speaker 2: guidance I think is very very important for a couple reasons. One, 190 00:10:02,600 --> 00:10:05,360 Speaker 2: it shows the government with a sense of leadership on 191 00:10:05,480 --> 00:10:08,079 Speaker 2: this issue because it's this issue that people don't want 192 00:10:08,120 --> 00:10:10,640 Speaker 2: to touch, because it really can be cosynogenetic at the 193 00:10:10,679 --> 00:10:13,319 Speaker 2: end of the day. It also provides a sense of 194 00:10:13,440 --> 00:10:17,240 Speaker 2: direction and support for the lending community and the borrowers 195 00:10:17,280 --> 00:10:20,599 Speaker 2: as well. And by doing such what happens now is 196 00:10:20,920 --> 00:10:23,800 Speaker 2: the clarity. Basically what they're saying, it's similar to trouble 197 00:10:23,840 --> 00:10:28,400 Speaker 2: debt restruction program. They're saying, listen, any asset out there, Well, 198 00:10:28,440 --> 00:10:32,760 Speaker 2: you've got a qualified borrower and you've got a quality asset. 199 00:10:34,200 --> 00:10:38,400 Speaker 2: We will allow you to work with that borrower to 200 00:10:38,640 --> 00:10:41,640 Speaker 2: ensure you can create the gre create the value that 201 00:10:41,800 --> 00:10:44,920 Speaker 2: was once in that asset itself. It will give you 202 00:10:45,600 --> 00:10:48,920 Speaker 2: eighteen to thirty six month extension basically pretend to extend. 203 00:10:49,559 --> 00:10:52,079 Speaker 2: Whereas what happened in two thousand and nine that was 204 00:10:52,200 --> 00:10:56,199 Speaker 2: more of a long term forward guidance proposal and it 205 00:10:56,320 --> 00:10:59,400 Speaker 2: really impacted the cities at the end of the stategically 206 00:10:59,400 --> 00:11:04,880 Speaker 2: important finn institutions. This policy direction is really geared towards 207 00:11:05,200 --> 00:11:07,959 Speaker 2: the regional banking system. And like why I say that 208 00:11:08,480 --> 00:11:11,480 Speaker 2: because right now the Ciffies do not have what the 209 00:11:11,559 --> 00:11:14,320 Speaker 2: Jesus the call today don't have a real big book 210 00:11:14,320 --> 00:11:17,240 Speaker 2: of real estate debt on their books, probably less than 211 00:11:17,360 --> 00:11:21,040 Speaker 2: eight or seven percent, whereas the regional banks across the 212 00:11:21,120 --> 00:11:24,360 Speaker 2: country right now, thousands of them have over probably thirty 213 00:11:24,559 --> 00:11:26,600 Speaker 2: to thirty five and some even up to forty percent 214 00:11:26,960 --> 00:11:30,480 Speaker 2: of their book in real estate. So that forward guidance 215 00:11:30,640 --> 00:11:32,800 Speaker 2: gave at least the good assets and the good bars 216 00:11:33,120 --> 00:11:34,880 Speaker 2: and opportunity to go through a workout at the end 217 00:11:34,880 --> 00:11:35,240 Speaker 2: of the day. 218 00:11:35,920 --> 00:11:38,160 Speaker 1: You know, it's funny, John, I was going to respond 219 00:11:38,240 --> 00:11:40,640 Speaker 1: to your answer by saying, is this extended and pretend? 220 00:11:40,720 --> 00:11:40,880 Speaker 2: You know? 221 00:11:40,920 --> 00:11:43,840 Speaker 1: It's that seems to me almost like a derogatory thing 222 00:11:44,280 --> 00:11:47,160 Speaker 1: phrase that people use for this type of guidance from 223 00:11:47,160 --> 00:11:50,520 Speaker 1: the FED or this type of approach to solving this problem. 224 00:11:50,640 --> 00:11:52,559 Speaker 1: But is is that the wrong way to think about it? 225 00:11:52,720 --> 00:11:54,920 Speaker 1: Is extend and pretend? Actually the way to get us 226 00:11:54,920 --> 00:11:57,440 Speaker 1: out of this mess at least, you know, stop stop 227 00:11:57,520 --> 00:11:58,520 Speaker 1: the bleeding this some degree. 228 00:11:58,920 --> 00:12:00,440 Speaker 2: Let me say this to you. I think some many 229 00:12:00,520 --> 00:12:04,680 Speaker 2: well known financial guru stated that this was not material 230 00:12:04,760 --> 00:12:09,080 Speaker 2: to the overall economy, okay, and I'm not sure that's 231 00:12:09,160 --> 00:12:11,480 Speaker 2: the case. I don't want to challenge that individual. I 232 00:12:11,520 --> 00:12:14,520 Speaker 2: don't use a name. But when I think about the 233 00:12:14,679 --> 00:12:18,880 Speaker 2: impact that this has in the regional banking system, basically Suburbia, USA, 234 00:12:19,440 --> 00:12:21,880 Speaker 2: we had Silicon Valley Bank go down, we had Signature 235 00:12:21,920 --> 00:12:24,760 Speaker 2: Bank go on, we Serve Republic go down. If we 236 00:12:24,960 --> 00:12:28,719 Speaker 2: have a systemic problem in the regional banking system, the 237 00:12:29,120 --> 00:12:34,199 Speaker 2: unintended consequences of that could be catatonic. In addition to that, 238 00:12:34,960 --> 00:12:37,880 Speaker 2: what will happen is when real estate values go down. 239 00:12:38,160 --> 00:12:41,280 Speaker 2: Seventy percent of all revenue in cities in America today 240 00:12:41,480 --> 00:12:44,079 Speaker 2: come from real estate. So all of a sudden you 241 00:12:44,280 --> 00:12:48,160 Speaker 2: start lowering and putting these buildings in the foreclosure. The 242 00:12:48,800 --> 00:12:52,000 Speaker 2: financial spicket stops right all of a sudden, the tax 243 00:12:52,080 --> 00:12:54,880 Speaker 2: rivers go down, and people think, okay, that's okay. Well 244 00:12:54,920 --> 00:12:58,719 Speaker 2: what happens is you talk about firemen, policemen, teachers in 245 00:12:58,880 --> 00:13:01,760 Speaker 2: main street USA. At the end of the day, we've 246 00:13:01,840 --> 00:13:04,240 Speaker 2: never gone through something as tumultuous as this. Right now, 247 00:13:04,559 --> 00:13:07,520 Speaker 2: I think back into I think nineteen late sixties, and 248 00:13:07,640 --> 00:13:10,480 Speaker 2: we have to be very, very cautious that we don't 249 00:13:10,679 --> 00:13:14,040 Speaker 2: tip over the building that we think is really stable. 250 00:13:14,160 --> 00:13:22,120 Speaker 1: At the end of the day, as you point out, 251 00:13:22,160 --> 00:13:25,920 Speaker 1: it's really those regional banks that probably are the biggest players, 252 00:13:25,960 --> 00:13:29,800 Speaker 1: at least from you know, public equity banks that we track, 253 00:13:30,280 --> 00:13:33,640 Speaker 1: some of the biggest players in commercial real estate. But 254 00:13:34,000 --> 00:13:39,200 Speaker 1: even today and today's Wednesday, July nineteenth, Goldman Socks came 255 00:13:39,280 --> 00:13:42,200 Speaker 1: out with its earnings. And you don't think of Goldman 256 00:13:42,200 --> 00:13:45,040 Speaker 1: as being a huge property lender, but of course they 257 00:13:45,120 --> 00:13:47,600 Speaker 1: had they do have some commercial real estate on their books, 258 00:13:47,760 --> 00:13:50,200 Speaker 1: and they blamed real estate for about a billion dollar 259 00:13:50,480 --> 00:13:51,880 Speaker 1: hits or earnings. And I know a lot of the 260 00:13:51,920 --> 00:13:56,679 Speaker 1: other big banks are increasing loan loss provisions for real estate. Oddly, 261 00:13:57,000 --> 00:14:00,360 Speaker 1: Goldman's stock rallied on the day. You know, the equity 262 00:14:00,440 --> 00:14:03,880 Speaker 1: market is in this risk on mode. This seems like 263 00:14:03,960 --> 00:14:06,640 Speaker 1: it's a problem that's going to linger with us for 264 00:14:06,920 --> 00:14:10,160 Speaker 1: years and sort of be a very slow to unfold. 265 00:14:10,600 --> 00:14:12,240 Speaker 1: Do you think the equity markets, you know, if you 266 00:14:12,280 --> 00:14:14,679 Speaker 1: had to put your spuddy senses on, are they sort 267 00:14:14,679 --> 00:14:16,480 Speaker 1: of whistling past the graveyard on this issue? 268 00:14:16,559 --> 00:14:18,920 Speaker 2: Do you think it's one of the questions of the day. 269 00:14:19,000 --> 00:14:20,960 Speaker 2: To be very very candid with you. First off, I 270 00:14:21,000 --> 00:14:23,200 Speaker 2: would say about Goldman's earnings today when they go down, 271 00:14:23,240 --> 00:14:25,640 Speaker 2: I think fifty six percent from last quarter, and I 272 00:14:25,720 --> 00:14:28,080 Speaker 2: think you can sort of put that in a category 273 00:14:28,160 --> 00:14:32,880 Speaker 2: of Goldman is more of a transactional institution versus b 274 00:14:33,560 --> 00:14:37,320 Speaker 2: JP Morgan, whereas really a lending institution, so interest income, 275 00:14:37,680 --> 00:14:40,160 Speaker 2: mortgages and so forth and so on. But Goldman, I 276 00:14:40,200 --> 00:14:43,360 Speaker 2: think is really interesting thing because one maybe billion dollars 277 00:14:43,440 --> 00:14:46,600 Speaker 2: in real estate, but also what it's saying out there, 278 00:14:46,720 --> 00:14:51,680 Speaker 2: there is instability in the financial markets. Overall transactions, IPOs, 279 00:14:51,840 --> 00:14:55,280 Speaker 2: various other types of issues that go on really are 280 00:14:55,520 --> 00:14:59,400 Speaker 2: frozen right now. And that's not good for main street America, 281 00:15:00,600 --> 00:15:02,680 Speaker 2: the community at all. And what we need to figure 282 00:15:02,720 --> 00:15:04,360 Speaker 2: out is, I'm going to come back to this issue 283 00:15:04,480 --> 00:15:07,640 Speaker 2: of a level of stability, a level of pictability. I 284 00:15:07,720 --> 00:15:09,320 Speaker 2: think you hit a fifty two week high. I think 285 00:15:09,920 --> 00:15:13,000 Speaker 2: this weeks my knowledge, and you back and set yourself. 286 00:15:13,640 --> 00:15:16,520 Speaker 2: You've got someone almost like a point in time. We 287 00:15:16,640 --> 00:15:18,560 Speaker 2: take a look at version of of the two and 288 00:15:18,640 --> 00:15:21,920 Speaker 2: ten right, which is sort of an indie indicator. Somewhere 289 00:15:22,360 --> 00:15:26,520 Speaker 2: you've got consumer spending right now still relatively strong, but 290 00:15:26,600 --> 00:15:28,480 Speaker 2: I would caution people right now, we had two and 291 00:15:28,520 --> 00:15:31,360 Speaker 2: a half trillion dollars of consumer spending probably back two 292 00:15:31,360 --> 00:15:33,160 Speaker 2: and a half years ago when we were all this 293 00:15:33,280 --> 00:15:35,080 Speaker 2: money was given us by the federal goverment. We're down 294 00:15:35,120 --> 00:15:37,240 Speaker 2: to five hundred billion right now, so I think that's 295 00:15:37,280 --> 00:15:39,400 Speaker 2: done to wind down a little bit more. We've got 296 00:15:39,520 --> 00:15:41,880 Speaker 2: inflation that's gone from nine percent down to three. But 297 00:15:41,960 --> 00:15:44,000 Speaker 2: I think let's not talk about inflation. Let's talk about 298 00:15:44,000 --> 00:15:46,640 Speaker 2: core because cores at four point eight, we're still stubborn 299 00:15:47,120 --> 00:15:50,120 Speaker 2: on the energy side of things, on the housing side 300 00:15:50,160 --> 00:15:53,160 Speaker 2: of things. Then I'd say, take a look the labor markets, Candlely, Mike, 301 00:15:53,720 --> 00:15:56,560 Speaker 2: we are at zero one employment in construction okay, we 302 00:15:56,680 --> 00:15:58,520 Speaker 2: on at three point four to three point six. Where 303 00:15:58,560 --> 00:16:01,880 Speaker 2: at zero okay? How set in an economy that basically 304 00:16:01,880 --> 00:16:04,240 Speaker 2: is notting to freeze itself up. And lastly, I think 305 00:16:04,240 --> 00:16:06,480 Speaker 2: from a foreign policy point of view, we don't know 306 00:16:06,520 --> 00:16:08,480 Speaker 2: where the Ukrainian thing is going, not even to mention 307 00:16:08,600 --> 00:16:12,000 Speaker 2: the China situation in Taiwan. And I think overall, when 308 00:16:12,080 --> 00:16:15,800 Speaker 2: you put all those pieces of the puzzle together, it's 309 00:16:15,960 --> 00:16:19,800 Speaker 2: really the equation we've used the form of views in 310 00:16:19,840 --> 00:16:23,720 Speaker 2: the past of two percent inflation. I don't think that's 311 00:16:23,840 --> 00:16:27,040 Speaker 2: as applicable today as it was in the past. Larry 312 00:16:27,120 --> 00:16:29,240 Speaker 2: Summers was asked a question on your show of Bloomberg 313 00:16:29,280 --> 00:16:32,600 Speaker 2: with David weston what he thought about two percent inflation? 314 00:16:32,880 --> 00:16:36,080 Speaker 2: Is that really something that's mandated by the Fed? Yes, 315 00:16:36,160 --> 00:16:37,960 Speaker 2: it is the mandated they served in the FED, So 316 00:16:38,040 --> 00:16:41,520 Speaker 2: I understand that, but really I'm not sure that's really 317 00:16:41,560 --> 00:16:43,440 Speaker 2: what we need to be shooting for. And to me, 318 00:16:43,560 --> 00:16:45,840 Speaker 2: what we need to be shooting for is probably something 319 00:16:45,960 --> 00:16:48,240 Speaker 2: more than the three three and a quarter range. And 320 00:16:48,440 --> 00:16:51,160 Speaker 2: why I say that is because I think that one 321 00:16:51,200 --> 00:16:53,800 Speaker 2: of the underbellies of what's going on right now is 322 00:16:54,760 --> 00:16:58,080 Speaker 2: inflation was at a long period of time zero bounce 323 00:16:58,840 --> 00:17:03,880 Speaker 2: because there was a lot of phasis on globalization, and 324 00:17:04,000 --> 00:17:07,720 Speaker 2: all of a sudden, material costs and labor costs that 325 00:17:07,840 --> 00:17:11,560 Speaker 2: we were offshoring was substantially lower than what's we're doing 326 00:17:11,600 --> 00:17:14,400 Speaker 2: when were on shore those type of things. Now, all 327 00:17:14,440 --> 00:17:17,560 Speaker 2: of a sudden, the Trump administration, we start to nationalize things, 328 00:17:18,240 --> 00:17:21,200 Speaker 2: and i'd say week in our relationship with places like China, 329 00:17:22,320 --> 00:17:24,800 Speaker 2: the cost of labor on shore and the cost of 330 00:17:24,880 --> 00:17:28,200 Speaker 2: material on sure is moving up, So all of a 331 00:17:28,280 --> 00:17:31,800 Speaker 2: sudden you're in a situation where it shouldn't be a 332 00:17:31,880 --> 00:17:35,760 Speaker 2: real surprise as we nationalize and on shore and reindustrialize 333 00:17:35,800 --> 00:17:38,720 Speaker 2: our country and the less reliant of the European Union 334 00:17:39,600 --> 00:17:43,440 Speaker 2: and China and India, Okay, that we're having this sort 335 00:17:43,440 --> 00:17:45,760 Speaker 2: of sticky inflation at the end of the day. So 336 00:17:46,080 --> 00:17:47,600 Speaker 2: I think, what's going to happen. We're going to go 337 00:17:47,640 --> 00:17:49,760 Speaker 2: through a cycle over the next twelve to twenty four months. 338 00:17:50,280 --> 00:17:52,280 Speaker 2: We're really going to understand for the first time in 339 00:17:52,320 --> 00:17:57,399 Speaker 2: the twenty first century how important globalization is to the 340 00:17:57,480 --> 00:18:01,120 Speaker 2: overall impact of our US economy. I think it's extremely important. 341 00:18:01,520 --> 00:18:04,080 Speaker 2: I think we need to reindustrialize America and on shore things. 342 00:18:04,200 --> 00:18:06,080 Speaker 2: America is the best country in the world by far, 343 00:18:06,400 --> 00:18:08,320 Speaker 2: but at the end of the day, in the global economy, 344 00:18:08,359 --> 00:18:10,120 Speaker 2: we need to be able to compete, and I think 345 00:18:10,200 --> 00:18:13,080 Speaker 2: this issue of globalization is a very very important equation 346 00:18:13,520 --> 00:18:15,239 Speaker 2: or element for us to compete. Right. 347 00:18:15,800 --> 00:18:20,359 Speaker 1: As you alluded to briefly, interest rates are obviously the 348 00:18:20,600 --> 00:18:24,080 Speaker 1: major pressure point on commercial real estate right now, but 349 00:18:24,240 --> 00:18:25,800 Speaker 1: not the only one. You know, we went through this 350 00:18:26,000 --> 00:18:30,520 Speaker 1: pandemic the entire world went to work at home for months, 351 00:18:30,640 --> 00:18:33,680 Speaker 1: if not years, or at least the entire office workforce 352 00:18:33,960 --> 00:18:36,919 Speaker 1: went home. I know a lot of big companies are 353 00:18:37,160 --> 00:18:41,439 Speaker 1: very actively trying to get everyone back into the office 354 00:18:41,720 --> 00:18:45,800 Speaker 1: on a more regular basis. Big city mayors politicians are 355 00:18:46,240 --> 00:18:49,160 Speaker 1: very actively in that camp too. But to some degree, 356 00:18:49,200 --> 00:18:51,600 Speaker 1: I feel like the horses out of the barn and 357 00:18:52,040 --> 00:18:54,320 Speaker 1: the world has learned that a lot of these jobs 358 00:18:54,440 --> 00:18:59,640 Speaker 1: can be done effectively, productively at home, and I can't 359 00:18:59,680 --> 00:19:02,639 Speaker 1: help but wonder if that is just a game changer 360 00:19:02,760 --> 00:19:05,479 Speaker 1: for commercial real estate going forward. The idea of ever 361 00:19:05,640 --> 00:19:09,359 Speaker 1: getting back to the values of these office buildings before 362 00:19:10,040 --> 00:19:13,240 Speaker 1: the pandemic seems like such a long shot to me. 363 00:19:13,359 --> 00:19:16,080 Speaker 1: I mean, is that you know, when you think of 364 00:19:16,119 --> 00:19:17,840 Speaker 1: it in the sober light of days, is that the 365 00:19:17,960 --> 00:19:20,520 Speaker 1: right way to think about this or not? 366 00:19:20,960 --> 00:19:23,880 Speaker 2: Mike. I think Jim Collins talks about not all points 367 00:19:23,920 --> 00:19:27,040 Speaker 2: in time are equal in his books, and to me, 368 00:19:27,240 --> 00:19:29,440 Speaker 2: we're at a point in time where really it's a 369 00:19:29,480 --> 00:19:32,159 Speaker 2: new era. I think we've got a generational issue. I 370 00:19:32,200 --> 00:19:33,840 Speaker 2: think this is going to be around for you at 371 00:19:33,880 --> 00:19:35,600 Speaker 2: least a half or if not more, of a decade 372 00:19:36,040 --> 00:19:38,720 Speaker 2: because of the individuals that grow up during this time period. 373 00:19:39,600 --> 00:19:40,720 Speaker 2: But at the end of the day, I think what 374 00:19:40,840 --> 00:19:43,400 Speaker 2: we need is a recalibration. And I don't think it's 375 00:19:43,440 --> 00:19:45,159 Speaker 2: weird it is today. I think there's somewhere in the 376 00:19:45,160 --> 00:19:47,160 Speaker 2: middle between where it is today and where it was before, 377 00:19:47,640 --> 00:19:50,240 Speaker 2: and I think we as a capitalist society will get there. 378 00:19:50,400 --> 00:19:51,920 Speaker 2: It might take two or three or four years to 379 00:19:51,960 --> 00:19:55,359 Speaker 2: get there, but I would say this, I really believe 380 00:19:55,440 --> 00:19:59,320 Speaker 2: strongly for the sake of Main Street USA. We all 381 00:19:59,480 --> 00:20:04,200 Speaker 2: have recent wantsibility. The downtowns of America San Francisco, Seattle, 382 00:20:04,600 --> 00:20:06,840 Speaker 2: even Boston right now in New York City are hurting. 383 00:20:07,400 --> 00:20:11,560 Speaker 2: We have a responsibility both economically and socially to come 384 00:20:11,640 --> 00:20:13,920 Speaker 2: back to work at some point in time. And if 385 00:20:13,960 --> 00:20:15,880 Speaker 2: we don't come back to work, we need to allow 386 00:20:15,960 --> 00:20:20,240 Speaker 2: the competitive forces to dictate next steps. Meaning if people 387 00:20:20,280 --> 00:20:23,080 Speaker 2: are working from home, that means we can offshore things 388 00:20:23,119 --> 00:20:25,879 Speaker 2: to India and China at half that cost. And I 389 00:20:25,920 --> 00:20:28,480 Speaker 2: think eventually, what's going to happen as part of that equilibrium. 390 00:20:28,720 --> 00:20:31,560 Speaker 2: That's exactly what's going to happen. Okay, in the sake 391 00:20:31,600 --> 00:20:35,480 Speaker 2: of downtown's the peacher shops, coffee shops, the school teachers. Okay, 392 00:20:35,800 --> 00:20:38,920 Speaker 2: we need to think about the unintended consequences of this 393 00:20:39,040 --> 00:20:41,119 Speaker 2: strategy moting for work, John, I'm. 394 00:20:41,000 --> 00:20:45,240 Speaker 1: Wondering from the perspective of the head of a construction company. 395 00:20:45,880 --> 00:20:48,240 Speaker 1: You know, a lot of times when this issue of 396 00:20:48,520 --> 00:20:51,520 Speaker 1: office vacancy comes up, a lot of people, granted, people 397 00:20:52,040 --> 00:20:56,359 Speaker 1: not intimately familiar with this industry, you think, well, you know, 398 00:20:56,600 --> 00:20:59,200 Speaker 1: some of these cities still have a strong demand for 399 00:20:59,320 --> 00:21:04,639 Speaker 1: residential buildings. Can't we just convert these office buildings into residential? 400 00:21:05,000 --> 00:21:07,040 Speaker 1: And I know you know enough spend said about the 401 00:21:07,160 --> 00:21:09,800 Speaker 1: difficulties involved in that. You know, big office building, it 402 00:21:09,880 --> 00:21:13,879 Speaker 1: doesn't have the plumbing, the electric, enough windows to convert 403 00:21:13,920 --> 00:21:18,359 Speaker 1: everything into apartments. But I wonder is it feasible to 404 00:21:18,480 --> 00:21:22,719 Speaker 1: think about going forward that when you build a building, 405 00:21:23,480 --> 00:21:25,360 Speaker 1: is it possible to do it in a way where 406 00:21:25,400 --> 00:21:31,200 Speaker 1: it's flexible to go residential if that's the in demand market, 407 00:21:31,400 --> 00:21:34,280 Speaker 1: convert back to office. I mean, is that too far 408 00:21:34,400 --> 00:21:37,040 Speaker 1: fetched to think think about when you're building a building, 409 00:21:37,080 --> 00:21:38,879 Speaker 1: too impractical or too like? 410 00:21:39,400 --> 00:21:42,440 Speaker 2: I think you hit the spot on. I think absolutely 411 00:21:42,560 --> 00:21:45,320 Speaker 2: if you're doing what is a clear, spare building with 412 00:21:45,400 --> 00:21:48,440 Speaker 2: a concrete plat, late construction will get too technical and 413 00:21:48,800 --> 00:21:52,040 Speaker 2: your free columns columns. Look at in certain areas, you 414 00:21:52,119 --> 00:21:55,760 Speaker 2: know what your core is. If you design that initially, again, 415 00:21:55,960 --> 00:21:58,920 Speaker 2: you can't be as efficient both in the commercial side 416 00:21:58,960 --> 00:22:00,960 Speaker 2: and the residential side as you want to be. They 417 00:22:01,000 --> 00:22:04,680 Speaker 2: would be compromises across the board. I don't think we're 418 00:22:04,680 --> 00:22:06,560 Speaker 2: going to get to that. I think about thirty percent 419 00:22:06,640 --> 00:22:08,560 Speaker 2: of twenty five percent of billions out there have the 420 00:22:08,640 --> 00:22:11,080 Speaker 2: ability to be converted. I think when you really talk 421 00:22:11,119 --> 00:22:14,840 Speaker 2: about residential, it's a whole different sort of kettle offish 422 00:22:15,359 --> 00:22:19,320 Speaker 2: what I mean by that residential shortfall. We have right 423 00:22:19,359 --> 00:22:22,119 Speaker 2: now about six million units of housing that we need 424 00:22:22,160 --> 00:22:24,240 Speaker 2: to create in America. We're only creating about a million 425 00:22:24,240 --> 00:22:26,919 Speaker 2: to a million a half a year. That four million. 426 00:22:27,880 --> 00:22:30,639 Speaker 2: We need to come together as business and government and 427 00:22:30,760 --> 00:22:35,680 Speaker 2: develop thoughtful policy to incentivize people to want to build, 428 00:22:36,280 --> 00:22:40,760 Speaker 2: both from transit type of environment to a nimbiism not 429 00:22:40,800 --> 00:22:43,880 Speaker 2: in my backyard. We need to forestall all those particular 430 00:22:44,000 --> 00:22:47,680 Speaker 2: things and allow the real estate construction be able to 431 00:22:47,800 --> 00:22:51,440 Speaker 2: produce what they're capable of producing in an expedited way. 432 00:22:51,800 --> 00:22:54,639 Speaker 2: In today, the prices of homes the boss I read 433 00:22:54,680 --> 00:22:58,000 Speaker 2: in the Boston Globe this morning, nine hundred thousand dollars 434 00:22:58,119 --> 00:23:00,159 Speaker 2: was the average price of a home in round the 435 00:23:00,200 --> 00:23:03,840 Speaker 2: Boston community. How do you expect a family raising two 436 00:23:03,880 --> 00:23:06,840 Speaker 2: or three children, even both parents working bill a ford 437 00:23:07,040 --> 00:23:09,840 Speaker 2: and nine hundred thousand dollars mortgage. So I think what 438 00:23:09,960 --> 00:23:12,119 Speaker 2: we need to do is we need to have very 439 00:23:12,280 --> 00:23:18,560 Speaker 2: thoughtful incentivized programs to allow more building ubiquitously throughout the 440 00:23:18,640 --> 00:23:19,600 Speaker 2: United States of America. 441 00:23:20,320 --> 00:23:22,840 Speaker 1: And I assume that labor issue that you mentioned is 442 00:23:23,080 --> 00:23:26,680 Speaker 1: a big part of sort of what's going on in 443 00:23:26,760 --> 00:23:29,960 Speaker 1: the construction market these days. You know, I mean, look, 444 00:23:30,000 --> 00:23:32,920 Speaker 1: the labor market's tight everywhere, but wow, you said it's 445 00:23:33,440 --> 00:23:37,000 Speaker 1: they're near close to zero percent on employment in construction. 446 00:23:37,480 --> 00:23:40,840 Speaker 1: What do you suppose is driving that? Is it immigration 447 00:23:41,040 --> 00:23:46,119 Speaker 1: lack of immigration? Is it better opportunities elsewhere? All the above? 448 00:23:46,600 --> 00:23:49,439 Speaker 1: Why is labor so tight in the construction market right now? 449 00:23:49,600 --> 00:23:52,159 Speaker 2: It is somewhat complicated, But let's try to unpack it 450 00:23:52,200 --> 00:23:54,280 Speaker 2: a little bit. When I think about this is if 451 00:23:54,280 --> 00:23:57,360 Speaker 2: we take a look back two thousand eight, construction employment 452 00:23:57,480 --> 00:24:00,520 Speaker 2: was at seven point seven million. It wasn't until twenty 453 00:24:00,640 --> 00:24:05,840 Speaker 2: eleven construction got down to about five point four and 454 00:24:05,920 --> 00:24:08,480 Speaker 2: that was a two point four roughly million decrease, so 455 00:24:08,640 --> 00:24:12,520 Speaker 2: there's a lag in construction when the economy stats turning 456 00:24:12,560 --> 00:24:15,320 Speaker 2: itself or slowing itself down at the end of the day. Second, 457 00:24:15,440 --> 00:24:17,040 Speaker 2: I think, what's a big problem right now is when 458 00:24:17,080 --> 00:24:19,320 Speaker 2: I think about this, you know, as I unpacked this 459 00:24:19,800 --> 00:24:23,280 Speaker 2: interest rates. Right now, people cannot move out of their 460 00:24:23,320 --> 00:24:26,199 Speaker 2: homes when they're locked into a thirty rate fixed at 461 00:24:26,240 --> 00:24:27,879 Speaker 2: three and a half to four percent, and you're going 462 00:24:27,920 --> 00:24:29,960 Speaker 2: to buy into a six or seven percent lorgust. So 463 00:24:30,080 --> 00:24:32,239 Speaker 2: therefore people aren't moving out. But then again, we need 464 00:24:32,320 --> 00:24:34,480 Speaker 2: to generate no housing, so there's a really you know, 465 00:24:34,560 --> 00:24:37,159 Speaker 2: sort of inequilibrium there. Then you take a look at 466 00:24:37,160 --> 00:24:39,920 Speaker 2: the demand for housing, which I spoke about the Amouney units. Next, 467 00:24:40,040 --> 00:24:42,800 Speaker 2: you talk about the fiscal policy right now, Not only 468 00:24:42,920 --> 00:24:44,639 Speaker 2: do you two and a half trillion dollars of cash 469 00:24:45,160 --> 00:24:47,919 Speaker 2: right we get built back better the chips build all 470 00:24:47,960 --> 00:24:49,840 Speaker 2: of a sudden, we get six point five trillion dollars 471 00:24:49,880 --> 00:24:51,480 Speaker 2: pumped in the economy, which is creating a lot of 472 00:24:51,520 --> 00:24:53,879 Speaker 2: demand at the end of the day. And lastly, I 473 00:24:53,920 --> 00:24:55,840 Speaker 2: would say most importantly, I would say that so the 474 00:24:56,080 --> 00:25:00,240 Speaker 2: icing on the cake of this discussion is immigration. We 475 00:25:00,440 --> 00:25:03,639 Speaker 2: right now are bringing in as few immigrants in the 476 00:25:03,760 --> 00:25:06,000 Speaker 2: United States and notcerent citizenship. I think probably in the 477 00:25:06,080 --> 00:25:08,680 Speaker 2: last twenty five to thirty years at a point in 478 00:25:08,800 --> 00:25:12,280 Speaker 2: time needs to be the opposite. But to me, this 479 00:25:12,400 --> 00:25:16,520 Speaker 2: issue has become politicized. We need to recognize the only 480 00:25:16,560 --> 00:25:19,479 Speaker 2: way we can grow our economy is grow our ability 481 00:25:19,480 --> 00:25:22,720 Speaker 2: to consume seventy percent of GDP's consumption. If we don't 482 00:25:22,760 --> 00:25:25,680 Speaker 2: grow our economy, we don't grow our population. We grow 483 00:25:25,720 --> 00:25:27,560 Speaker 2: ability to consume. We're not going to work ourselves out 484 00:25:27,600 --> 00:25:31,480 Speaker 2: of this. Secondly, workforce participation as low as sixty two 485 00:25:31,480 --> 00:25:35,080 Speaker 2: percent today, the lowest right now on record. Okay, people 486 00:25:35,160 --> 00:25:38,359 Speaker 2: don't want to work, COVID post retirees at fifty five 487 00:25:38,440 --> 00:25:41,680 Speaker 2: years old. And lastly, people don't want to get involved 488 00:25:41,760 --> 00:25:44,560 Speaker 2: in a hardcore construction business. It's changed, and what we 489 00:25:44,680 --> 00:25:47,560 Speaker 2: rely on is a lot of first generation members give 490 00:25:47,600 --> 00:25:50,239 Speaker 2: into our business. We recruit as a company right now 491 00:25:50,320 --> 00:25:52,719 Speaker 2: out of community college's both tech schools. We don't need 492 00:25:52,760 --> 00:25:55,720 Speaker 2: a college degree. All we want is a heart and 493 00:25:55,840 --> 00:25:58,280 Speaker 2: a desire to want to work. We'll train them ourselves, 494 00:25:58,760 --> 00:26:01,480 Speaker 2: and I think that is is one of the reasons 495 00:26:01,800 --> 00:26:04,480 Speaker 2: or solutions to this unemployment crisis at the end of 496 00:26:04,480 --> 00:26:07,040 Speaker 2: the day. But to me, what we need to do 497 00:26:07,240 --> 00:26:10,720 Speaker 2: is we need to let the COVID in the pandemic 498 00:26:10,920 --> 00:26:13,440 Speaker 2: go through a digestive system. So we come out to 499 00:26:13,520 --> 00:26:15,960 Speaker 2: that new Norman about I think twelve to eighteen months, 500 00:26:16,320 --> 00:26:18,879 Speaker 2: and we'll understand how to solve this issue with a 501 00:26:19,240 --> 00:26:21,400 Speaker 2: much more degree of accuracy at that point in time. 502 00:26:36,560 --> 00:26:38,480 Speaker 1: John, if I could ask you to sort of think 503 00:26:38,560 --> 00:26:41,000 Speaker 1: back to your days at the Boston FED and put 504 00:26:41,080 --> 00:26:43,800 Speaker 1: that central banker hat on again for us. One of 505 00:26:43,880 --> 00:26:48,880 Speaker 1: the interesting disconnects between the markets and what Chair pal 506 00:26:49,000 --> 00:26:51,760 Speaker 1: and other members of the FED have been saying this 507 00:26:51,960 --> 00:26:54,680 Speaker 1: year is the notion of when the FED will actually 508 00:26:54,760 --> 00:26:57,200 Speaker 1: pivot and start cutting rates. If you look at the 509 00:26:57,560 --> 00:27:00,720 Speaker 1: short term interest rate markets FED fund futures all year, 510 00:27:00,800 --> 00:27:05,080 Speaker 1: they've been convinced that a pivot to lower rates is 511 00:27:05,160 --> 00:27:07,640 Speaker 1: on the horizon. You know, earlier in this year, they're 512 00:27:07,760 --> 00:27:10,359 Speaker 1: pricing cuts by the end of this year. Now that 513 00:27:10,520 --> 00:27:14,360 Speaker 1: hasn't happened, they're pricing cuts pretty aggressive cuts for next year. 514 00:27:15,040 --> 00:27:17,560 Speaker 1: Is the market right about that? And is it this 515 00:27:17,680 --> 00:27:21,119 Speaker 1: commercial real estate issue that possibly could prove them to 516 00:27:21,200 --> 00:27:24,280 Speaker 1: be right if it causes enough ripple effects in the economy. 517 00:27:24,520 --> 00:27:26,880 Speaker 2: Mike, let me go back to two thousand and eight 518 00:27:27,000 --> 00:27:28,639 Speaker 2: and nine when I was at the FED and then 519 00:27:28,640 --> 00:27:32,159 Speaker 2: I became the cheer of the FED. I was amazed 520 00:27:32,440 --> 00:27:36,080 Speaker 2: at once we're going through the tumult. Back then, the 521 00:27:36,920 --> 00:27:40,399 Speaker 2: way that the researchers at the FED were understanding what 522 00:27:40,640 --> 00:27:44,360 Speaker 2: was going on. They were using a lot of historical 523 00:27:44,680 --> 00:27:48,800 Speaker 2: formulas to try to understand what was currently going on 524 00:27:49,000 --> 00:27:52,240 Speaker 2: this great financial crisis, and not a lot of it 525 00:27:52,640 --> 00:27:55,000 Speaker 2: added up to the end of the day. And so 526 00:27:55,119 --> 00:27:57,600 Speaker 2: I think some of the ways they look at things 527 00:27:57,760 --> 00:27:59,760 Speaker 2: might be a little bit outdated. And who am I 528 00:27:59,800 --> 00:28:02,040 Speaker 2: to because I'm not an economist. I respect Janet Yell 529 00:28:02,080 --> 00:28:06,080 Speaker 2: and I respect J. Powell. But today, right now, with 530 00:28:06,240 --> 00:28:09,320 Speaker 2: this high interest rate environment, I think what a lot 531 00:28:09,359 --> 00:28:12,680 Speaker 2: of people are clamoring for. We need to give it time. 532 00:28:13,000 --> 00:28:17,479 Speaker 2: All of a sudden, we've reduced inflation in less than 533 00:28:17,560 --> 00:28:21,760 Speaker 2: twelve months from nine to three, from core from almost 534 00:28:21,840 --> 00:28:27,800 Speaker 2: ten to four point eight. That is monumental. We need 535 00:28:27,960 --> 00:28:31,240 Speaker 2: to give the prescription that the FED has given the 536 00:28:31,280 --> 00:28:36,600 Speaker 2: patient time to get through the system. I believe the 537 00:28:36,680 --> 00:28:38,480 Speaker 2: twenty fifth, twenty six we're going to see a twenty 538 00:28:38,520 --> 00:28:42,520 Speaker 2: five basis point jump I'm hoping that through August they 539 00:28:42,600 --> 00:28:46,160 Speaker 2: take a little siesta, we can back in September and 540 00:28:46,240 --> 00:28:49,160 Speaker 2: all of a sudden, the data is pointing out that 541 00:28:49,280 --> 00:28:52,400 Speaker 2: the prescription they've given the patient is working, and let's 542 00:28:52,440 --> 00:28:54,640 Speaker 2: take the foot off the gas, and then I think 543 00:28:54,680 --> 00:28:57,920 Speaker 2: if we stabilize, as you know, historically, anytime the FED 544 00:28:58,960 --> 00:29:01,200 Speaker 2: to high time before they raise interest rates and stop 545 00:29:01,280 --> 00:29:04,720 Speaker 2: raising interest rates is at the lowest end nine months 546 00:29:05,240 --> 00:29:07,360 Speaker 2: up to the highest end I think thirteen to fourteen months. 547 00:29:07,800 --> 00:29:11,800 Speaker 2: So I'm hoping we hit that nine month trigger sometime 548 00:29:11,880 --> 00:29:14,160 Speaker 2: this fall, and then nine months from now it was 549 00:29:14,240 --> 00:29:18,000 Speaker 2: seven months now, we start seeing a reduction in those rates, 550 00:29:18,360 --> 00:29:20,360 Speaker 2: and that would be my prediction. So I'm sitting back 551 00:29:20,440 --> 00:29:23,280 Speaker 2: saying to myself late spring of next year, we're going 552 00:29:23,320 --> 00:29:26,320 Speaker 2: to start seeing some adjustments to the overall federal funds rates, 553 00:29:26,600 --> 00:29:29,600 Speaker 2: which I think once people know, though, in my opinion, 554 00:29:30,040 --> 00:29:31,720 Speaker 2: that the FED is no longer going to get you 555 00:29:31,920 --> 00:29:33,760 Speaker 2: raising the rates, I think that's going to be a 556 00:29:33,800 --> 00:29:37,160 Speaker 2: harborde for the economy to start turning itself and give 557 00:29:37,520 --> 00:29:40,560 Speaker 2: much more stability to the capital markets and allow us 558 00:29:40,560 --> 00:29:42,560 Speaker 2: to achieve the sense of price stability that we really 559 00:29:42,680 --> 00:29:44,640 Speaker 2: need to move the real estate industry forward. 560 00:29:44,880 --> 00:29:48,240 Speaker 1: Will it require some significant pain between now and then 561 00:29:48,520 --> 00:29:49,200 Speaker 1: for that to happen? 562 00:29:49,720 --> 00:29:52,280 Speaker 2: Mike, I am concerned. Scott Reckler, a very good friend 563 00:29:52,280 --> 00:29:55,520 Speaker 2: of mine from Eric, talks about he sees this slow 564 00:29:55,640 --> 00:29:58,480 Speaker 2: running train going forward. I would see the momentum of 565 00:29:58,560 --> 00:30:00,680 Speaker 2: the train in the last three or four five months 566 00:30:01,160 --> 00:30:04,680 Speaker 2: is picked up quite substantially. And I just am concerned 567 00:30:04,720 --> 00:30:07,880 Speaker 2: for the unintended consequences of what comes out of this mess. 568 00:30:08,360 --> 00:30:11,640 Speaker 2: And I think it's all avoidable in many respects. No 569 00:30:11,840 --> 00:30:14,120 Speaker 2: taxpayer bailout at the end of the day. It's a 570 00:30:14,200 --> 00:30:17,240 Speaker 2: lot of people working with each other understand the implications 571 00:30:17,640 --> 00:30:20,280 Speaker 2: in the material nature of real estate having on our 572 00:30:20,360 --> 00:30:21,400 Speaker 2: overall national economy. 573 00:30:21,840 --> 00:30:25,040 Speaker 1: Right, John, Like we mentioned at the beginning, I was 574 00:30:25,200 --> 00:30:28,719 Speaker 1: surprised to find out that you're paying very close attention 575 00:30:29,280 --> 00:30:32,280 Speaker 1: and perhaps even utilizing artificial intelligence. You know, I think 576 00:30:32,320 --> 00:30:36,440 Speaker 1: of construction as sort of this industry that's not, you know, 577 00:30:36,840 --> 00:30:40,800 Speaker 1: prone to technological disruption like many other industries. But I 578 00:30:40,840 --> 00:30:43,320 Speaker 1: guess I'm wrong about that. Talk to us about the 579 00:30:43,680 --> 00:30:46,680 Speaker 1: idea of AI in construction. Where it's headed, you know, 580 00:30:47,080 --> 00:30:50,640 Speaker 1: are you using it now? How could it help you 581 00:30:51,040 --> 00:30:52,240 Speaker 1: run your business potentially. 582 00:30:52,960 --> 00:30:54,720 Speaker 2: Let me sure a brief story. Last week, I was 583 00:30:54,800 --> 00:30:57,320 Speaker 2: up in New Hampshire at Manchester Hampshire with a guy 584 00:30:57,640 --> 00:30:59,680 Speaker 2: by the name of Dean Kayman a company. 585 00:30:59,480 --> 00:31:03,200 Speaker 1: Called Deck this segue inventor right exactly, and he. 586 00:31:03,200 --> 00:31:06,040 Speaker 2: Owns a company called Army. And what he's doing using 587 00:31:06,160 --> 00:31:09,640 Speaker 2: artificial intelligence to manufacture of organs. 588 00:31:10,040 --> 00:31:10,280 Speaker 1: Wow. 589 00:31:10,360 --> 00:31:14,760 Speaker 2: And I was completely mic blown away. So that's the extreme, 590 00:31:14,960 --> 00:31:17,160 Speaker 2: and I applaud him for what he's doing, and I 591 00:31:17,280 --> 00:31:20,600 Speaker 2: was just overly overly impressed, and I just want to 592 00:31:20,600 --> 00:31:23,120 Speaker 2: wish him the best of luck. On the construction side, 593 00:31:23,640 --> 00:31:29,160 Speaker 2: I think AI can be the single most impactful solution 594 00:31:29,360 --> 00:31:31,880 Speaker 2: that's ever had on our industry. Let me tell you 595 00:31:32,000 --> 00:31:36,320 Speaker 2: why productivity and construction in the last fifty years has 596 00:31:36,480 --> 00:31:39,960 Speaker 2: actually gone down. It's the only category of an hunting 597 00:31:40,040 --> 00:31:44,480 Speaker 2: and fishing okay that productivity has lowered. True story, Okay. 598 00:31:45,120 --> 00:31:49,040 Speaker 2: And therefore, when you think about technology solutions in a 599 00:31:49,080 --> 00:31:52,520 Speaker 2: blue collar environment. The biggest challenge in construction real estate, 600 00:31:52,800 --> 00:31:55,360 Speaker 2: I put it in two things. One the design of 601 00:31:55,400 --> 00:31:58,160 Speaker 2: the building and the schedule of the building. If we're 602 00:31:58,280 --> 00:32:04,520 Speaker 2: able to leverage official intelligence through generative design okay, like 603 00:32:05,360 --> 00:32:09,600 Speaker 2: Elon Musk does like Boeing does. Okay, there's no doubt 604 00:32:09,840 --> 00:32:13,520 Speaker 2: if we improve the accuracy of those design documents, we 605 00:32:13,640 --> 00:32:17,360 Speaker 2: will move mountains. As ways to costs and predictability. Just 606 00:32:17,440 --> 00:32:20,520 Speaker 2: think about the Empire State building. It took fourteen months 607 00:32:20,560 --> 00:32:22,920 Speaker 2: to building in the thirties. It takes five years to 608 00:32:22,960 --> 00:32:25,960 Speaker 2: Buili Bilding today. Now look at the schedule side of things. 609 00:32:26,040 --> 00:32:29,040 Speaker 2: We have a very difficult time measuring productivity if we 610 00:32:29,240 --> 00:32:31,800 Speaker 2: leverage AI. There's a solution out they call open Space, 611 00:32:31,840 --> 00:32:33,440 Speaker 2: which is one of the company that we invested in. 612 00:32:33,880 --> 00:32:37,120 Speaker 2: It adds to contract labor productivity and labor production on 613 00:32:37,200 --> 00:32:40,320 Speaker 2: a job site. We never had that type of artificial 614 00:32:40,400 --> 00:32:44,000 Speaker 2: tool before in our toolbox. Now we do that. So 615 00:32:44,160 --> 00:32:46,840 Speaker 2: I think over the next eighteen months to thirty six months, 616 00:32:47,320 --> 00:32:51,120 Speaker 2: we're going to see more creative and interesting solutions that 617 00:32:51,280 --> 00:32:54,560 Speaker 2: impact productivity and lower costs in our business that we've 618 00:32:54,600 --> 00:32:56,680 Speaker 2: seen in the last thirty forty years. 619 00:32:57,480 --> 00:33:01,040 Speaker 1: Fascinating stuff. You know, the mind reels when you think 620 00:33:01,080 --> 00:33:04,160 Speaker 1: of all the potential applications of AI and how disruptive 621 00:33:04,360 --> 00:33:07,280 Speaker 1: it can be throughout the economy. I never would have 622 00:33:07,360 --> 00:33:09,520 Speaker 1: thought of it in the construction industry. It makes total 623 00:33:09,640 --> 00:33:12,320 Speaker 1: sense now that you laid out for me. I appreciate that, 624 00:33:12,600 --> 00:33:16,080 Speaker 1: John Fish. He is chairman and CEO of the construction 625 00:33:16,200 --> 00:33:20,640 Speaker 1: company Suffolk. He is also chair of the Real Estate Roundtable. 626 00:33:21,240 --> 00:33:23,760 Speaker 1: Really a privilege to hear your thoughts. John. I can't 627 00:33:23,840 --> 00:33:26,080 Speaker 1: let you go quite just yet. Though. We do have 628 00:33:26,120 --> 00:33:28,479 Speaker 1: a tradition on this show where we're going to make 629 00:33:28,560 --> 00:33:31,080 Speaker 1: you tell us the craziest thing you've seen in markets 630 00:33:31,120 --> 00:33:32,440 Speaker 1: this week. I hope you're prepared. 631 00:33:32,680 --> 00:33:33,960 Speaker 2: What I always says, I'm gonna go back to that. 632 00:33:34,120 --> 00:33:36,840 Speaker 2: You know, Dean came an issue, okay, and that maybe 633 00:33:36,920 --> 00:33:39,840 Speaker 2: not in markets, but what it gives to me, it 634 00:33:40,040 --> 00:33:43,160 Speaker 2: brethes new life into what's possible. 635 00:33:43,640 --> 00:33:43,840 Speaker 1: Yeah. 636 00:33:44,280 --> 00:33:47,760 Speaker 2: And as we often look at the glass half full, okay, 637 00:33:48,000 --> 00:33:49,800 Speaker 2: I mean half empty, I look at a half full 638 00:33:50,360 --> 00:33:53,719 Speaker 2: and I see the potential of something like artificial intelligence 639 00:33:54,080 --> 00:33:57,760 Speaker 2: on our construction category. On other categories, you know, whether 640 00:33:57,760 --> 00:34:01,200 Speaker 2: it be educational situation, you know, boss, in college admissions. 641 00:34:01,480 --> 00:34:03,520 Speaker 2: I'm a severe dyslexic, so all of a sudden, using 642 00:34:03,600 --> 00:34:05,880 Speaker 2: series series my best friend to be honest with you, 643 00:34:06,680 --> 00:34:07,960 Speaker 2: and then I take a look at what's going on 644 00:34:08,000 --> 00:34:10,200 Speaker 2: in the hospital system of bringing on this hospital, you know, 645 00:34:10,600 --> 00:34:15,000 Speaker 2: radiology your DNA sequencing. People don't know one or four 646 00:34:15,080 --> 00:34:18,800 Speaker 2: colonospits are bad. And so if we're able to improve 647 00:34:18,880 --> 00:34:22,520 Speaker 2: the radiology and the accuracy of that type of studies, 648 00:34:22,680 --> 00:34:25,120 Speaker 2: I mean, it's going to change the world. So to me, 649 00:34:26,080 --> 00:34:27,520 Speaker 2: how do we take a look at it with the 650 00:34:27,600 --> 00:34:31,960 Speaker 2: proper guardrails Artificial intelligence which is a conversation of the 651 00:34:32,040 --> 00:34:35,080 Speaker 2: day in a way that a better is man and 652 00:34:35,160 --> 00:34:38,160 Speaker 2: doesn't destroy man. And I would like to see us all, 653 00:34:38,400 --> 00:34:42,120 Speaker 2: especially the business community, not look the government to take 654 00:34:42,160 --> 00:34:45,719 Speaker 2: the lead in this, but carry on the conversation with 655 00:34:45,880 --> 00:34:49,160 Speaker 2: a sense of entrepreneurialism and knowing that this can give 656 00:34:49,280 --> 00:34:51,560 Speaker 2: our country a competitive vantage. One last thing I want 657 00:34:51,560 --> 00:34:53,520 Speaker 2: to point out to you is that when you take 658 00:34:53,560 --> 00:34:57,239 Speaker 2: a look at artificial intelligence, over the last three or 659 00:34:57,280 --> 00:35:00,879 Speaker 2: four years, this past year, the United States America has 660 00:35:00,960 --> 00:35:06,760 Speaker 2: invested over fifty billion dollars artificial intelligence. The Chinese invested fourteen, 661 00:35:07,120 --> 00:35:12,239 Speaker 2: okay UK has invested four, and Israel invested three. So 662 00:35:12,440 --> 00:35:16,360 Speaker 2: we have a substantial jump on this conversation. And I 663 00:35:16,480 --> 00:35:18,920 Speaker 2: sit back and say to myself, how do we come 664 00:35:19,000 --> 00:35:22,520 Speaker 2: together as a country, government and business to leverage the 665 00:35:22,600 --> 00:35:25,200 Speaker 2: hell out of this tool that's in our box today 666 00:35:25,560 --> 00:35:27,480 Speaker 2: that could change the world the way we live. 667 00:35:28,160 --> 00:35:31,200 Speaker 1: That's great to hear the thoughts of a glass half full. Guy. 668 00:35:31,280 --> 00:35:32,840 Speaker 1: I think many of us when we hear about this 669 00:35:33,040 --> 00:35:36,920 Speaker 1: new disruptive technology, we go half empty immediately. But it's 670 00:35:37,000 --> 00:35:39,560 Speaker 1: nice to hear the glass half full angle on it, John, 671 00:35:39,600 --> 00:35:43,160 Speaker 1: I appreciate that. I'll give you my craziest thing, John, 672 00:35:43,200 --> 00:35:46,719 Speaker 1: I like the alternative asset classes. The more alternative the better. 673 00:35:47,480 --> 00:35:49,560 Speaker 1: And one of the funniest things. I think it's not funny. 674 00:35:49,600 --> 00:35:53,399 Speaker 1: I guess it makes sense, is old Apple products, first 675 00:35:53,440 --> 00:35:56,520 Speaker 1: generation Apple products. When they come up for auction, they 676 00:35:56,600 --> 00:35:59,920 Speaker 1: can sell for some surprising prices. And the latest example 677 00:36:00,440 --> 00:36:04,799 Speaker 1: is an original iPhone. So the first iPhone that came 678 00:36:04,880 --> 00:36:06,719 Speaker 1: out in I think it was two thousand and seven, 679 00:36:06,880 --> 00:36:10,480 Speaker 1: courtesy have a story in Fortune. Its dubbed the Holy 680 00:36:10,600 --> 00:36:14,560 Speaker 1: Grail iPhone to collectors because they did a four gigabyte 681 00:36:14,680 --> 00:36:17,160 Speaker 1: model and an eight gigabyte model, but no one bought 682 00:36:17,200 --> 00:36:21,400 Speaker 1: the four gigabyte, so it was discontinued very quickly. There's 683 00:36:21,560 --> 00:36:25,560 Speaker 1: very few specimens of it available, especially still unused in 684 00:36:25,640 --> 00:36:29,520 Speaker 1: the box, never activated like this, So to the type 685 00:36:29,520 --> 00:36:31,880 Speaker 1: of people that are interested in this stuff, God bless them, 686 00:36:32,040 --> 00:36:34,719 Speaker 1: but this is what they're after. So I regret to 687 00:36:34,800 --> 00:36:36,799 Speaker 1: inform you John good news and bad news. Bad news 688 00:36:36,920 --> 00:36:39,440 Speaker 1: is you're a contestant on a game show. Here we 689 00:36:39,600 --> 00:36:42,200 Speaker 1: like to call the prices precise. The good news is 690 00:36:42,280 --> 00:36:44,759 Speaker 1: Baldonna's off, so you're the only contestant. You're gonna win 691 00:36:44,800 --> 00:36:48,600 Speaker 1: no matter what. But what do you think this iPhone 692 00:36:48,800 --> 00:36:54,080 Speaker 1: Holy Grail original iPhone four gigabyte in the box, unactivated, 693 00:36:54,360 --> 00:36:59,960 Speaker 1: sold for at auction by LCG Auctions. Mindy, this was 694 00:37:00,080 --> 00:37:01,640 Speaker 1: a few hundred bucks. I think when it first came 695 00:37:01,680 --> 00:37:02,720 Speaker 1: out it was under a thousand. 696 00:37:02,760 --> 00:37:05,120 Speaker 2: I think I would ask me maybe twenty five thousand dollars. 697 00:37:05,360 --> 00:37:09,080 Speaker 1: Twenty five thousand, that's that's a good guess. I one 698 00:37:09,160 --> 00:37:12,719 Speaker 1: hundred and ninety thousand for an iPhone, So I think 699 00:37:12,719 --> 00:37:15,480 Speaker 1: they said three hundred times the original price. 700 00:37:16,040 --> 00:37:18,080 Speaker 2: Mike, I would say you, this is I think the 701 00:37:18,400 --> 00:37:22,640 Speaker 2: iPhone introduction, the iPhone was revolutionary. People can look at 702 00:37:22,800 --> 00:37:24,440 Speaker 2: that and that was a point in time when the 703 00:37:24,520 --> 00:37:27,320 Speaker 2: world started to change. Yeah, I think right at that 704 00:37:27,440 --> 00:37:30,080 Speaker 2: same point in time today with AI, all of a sudden, 705 00:37:30,080 --> 00:37:31,920 Speaker 2: people look back ten years, twenty years when I when 706 00:37:31,920 --> 00:37:34,279 Speaker 2: did this? You know, November twenty two when Open Ai 707 00:37:34,440 --> 00:37:36,319 Speaker 2: came up with this conversation, all of a sudden, it's 708 00:37:36,320 --> 00:37:38,919 Speaker 2: been the headlines every single day. So I think we're 709 00:37:39,920 --> 00:37:42,880 Speaker 2: very similar points in time as it relates to evolution, 710 00:37:43,480 --> 00:37:45,600 Speaker 2: and I think it's an exciting point in time to 711 00:37:45,680 --> 00:37:48,080 Speaker 2: be honest with and I feel that this could really 712 00:37:48,120 --> 00:37:50,120 Speaker 2: really help America in a very very positive way. 713 00:37:50,680 --> 00:37:53,360 Speaker 1: Yeah, you're absolutely right that the launch of that product 714 00:37:53,719 --> 00:37:56,719 Speaker 1: really change. It changed all our lives, you know, significantly. 715 00:37:57,360 --> 00:38:01,920 Speaker 1: It's fascinating how disruptive that was to the electronics industry, 716 00:38:02,400 --> 00:38:05,440 Speaker 1: and I think you're right in that. Who knows all 717 00:38:05,600 --> 00:38:08,880 Speaker 1: the various ways that AI will be disruptive, but without 718 00:38:08,920 --> 00:38:11,800 Speaker 1: a doubt, it's a game changer and really fascinating to 719 00:38:11,880 --> 00:38:14,800 Speaker 1: hear your take on that and commercial real estate and 720 00:38:14,880 --> 00:38:17,520 Speaker 1: everything else. John Fish, hope we can have you back 721 00:38:17,520 --> 00:38:18,080 Speaker 1: again someday. 722 00:38:18,440 --> 00:38:20,440 Speaker 2: Thank you very much to honor and prose to be here. 723 00:38:29,200 --> 00:38:31,520 Speaker 1: What goes up. We'll be back next week. Until then, 724 00:38:31,520 --> 00:38:34,200 Speaker 1: you can find us on the Bloomberg Terminal website and app, 725 00:38:34,440 --> 00:38:37,319 Speaker 1: or wherever you get your podcast. We'd love it if 726 00:38:37,360 --> 00:38:39,239 Speaker 1: you took the time to rate and review the show 727 00:38:39,360 --> 00:38:42,600 Speaker 1: on Apple Podcasts. So more listeners can find us, and 728 00:38:42,760 --> 00:38:45,560 Speaker 1: you can find us on Twitter, follow me at break Anonymous. 729 00:38:46,280 --> 00:38:49,919 Speaker 1: Wildna Hirich is at Bildna Hirich. You can also follow 730 00:38:49,960 --> 00:38:54,520 Speaker 1: Bloomberg Podcasts at Podcasts. What Goes Up is produced by 731 00:38:54,640 --> 00:38:57,279 Speaker 1: Stacy Wang. Thanks for listening, See you next time.