Speaker 1: From Marhart where Innovation, Money and Power Collie in Silicon.
Speaker 2: Valley, NBN. This is Bloomberg Technology with Caroline Hyde and
Speaker 2: Ed lud Love.
Speaker 3: I'm Karine Hyde at Bloomberg's world headquarters in New York.
Speaker 3: Ed Ludo, who's off today? This is Bloomberg Technology, the
Speaker 3: UK's antitrust watchdog. It strikes again, this time with an
Speaker 3: investigation into Amazon and Microsoft's cloud services. Details on yet
Speaker 3: more concerns that US tech giants could be abusing market
Speaker 3: power for US. It is day two in the historic
Speaker 3: FTX fraud trial. A look into the crypto hedge fund
Speaker 3: at Almedia Research in Caroine Ellison's role.
Speaker 4: And this hour we have.
Speaker 3: An exclusive conversation with San Francisco Fair President Mary Daily
Speaker 3: from the Economics Club of.
Speaker 4: New York, who do not want to miss it. We're
Speaker 4: looking at Amazon, also off by one point four percent. Interesting.
Speaker 3: This is being eyed in the CMA by the UK
Speaker 3: in terms of its home monopolization. They are potentially worried
Speaker 3: about of the cloud market. Remember the FTC analyzing Amazon
Speaker 3: here in the United States about its marketplace. And of
Speaker 3: course this is all in this atmosphere of more regulation
Speaker 3: coming towards some of these big tech companies and the
Speaker 3: worry of the prominence they have. Let's just stick on
Speaker 3: that particular role of Amazon right now. I want to
Speaker 3: bring in Bloomberg's Thomas Seal for more. But the CMA
Speaker 3: is once again trying to show its chops here. They
Speaker 3: did it with Microsoft and Activision Blizzard, and now they're
Speaker 3: analyzing Amazon and Microsoft in this case.
Speaker 5: That's right, it's the next one in the series and
Speaker 5: Microsoft again in the spotlight for another cloud concern. Microsoft
Speaker 5: and Amazon between them occupy about seventy to eighty percent
Speaker 5: of the British cloud computing and storage market. Offcom found
Speaker 5: after it's been looking at this for a year and
Speaker 5: it's decided there are concerns and it's given this to
Speaker 5: the antitrust watchdog, the CMA, which kicks off a huge
Speaker 5: process again.
Speaker 3: Amazon itself has come back and said, you know, you're
Speaker 3: misreading our data.
Speaker 4: Ultimately, what is the argument of offcom. What are they.
Speaker 3: Seeing in terms of pricing power that these two players have.
Speaker 5: Yeah, they really outlined three concerns in the big Offcom study.
Speaker 5: One of them is this thing called egress fees basically
Speaker 5: exit fees if you try to take your data out
Speaker 5: of the cloud, you get charged, especially if it's a
Speaker 5: big amount of data and more and more people are
Speaker 5: doing this, this is something that could lock you in.
Speaker 5: This is what offcom is kind of worrying about. Another
Speaker 5: thing is interoperability. Lots of big companies want to run
Speaker 5: more than one cloud, different clouds for different things. That's
Speaker 5: technically difficult. And the final thing is discounting. For big
Speaker 5: committed spend, this could incentivize keeping all of your eggs
Speaker 5: in one basket, and that's not very competitive. That's another
Speaker 5: worry that the offcome outlined.
Speaker 3: Amazon has come back and said, look, we just agree
Speaker 3: with offcomm's findings. Quite bluntly, they say, we're based on
Speaker 3: a fundamental misconception of how the IT sector functions and
Speaker 3: the services in discounts that they offer remind us Thomas, like,
Speaker 3: this is really expensive.
Speaker 4: To be an offerer of cloud you have to almost
Speaker 4: be a huge player.
Speaker 3: How hard is it to have fundamentally a lot of
Speaker 3: smaller players within this.
Speaker 5: Yeah, I think Amazon and Microsoft didn't fall into this.
Speaker 5: They've really built the backbone of the Internet. You know,
Speaker 5: massive data centers, warehouses, subse cables, increasingly edged data centers
Speaker 5: which are close to cities so that you get that
Speaker 5: snappy five G internet that everyone's going to be increasingly needing.
Speaker 5: So you know, they have put a lot of work
Speaker 5: into maintaining and building this position. But Offcom and now
Speaker 5: the CMA are going to be looking into well, can
Speaker 5: anyone else get into this? Is this going to impact
Speaker 5: on the kinds of services that we have in the future,
Speaker 5: and you know, are their potential concerns for what this
Speaker 5: means for AI, which is going to you know, people
Speaker 5: think youse if more cloud computing than.
Speaker 1: We use today.
Speaker 3: Ultimately we're interested also in just the UK visav the
Speaker 3: US vis a.
Speaker 4: V Germany too.
Speaker 3: I mean, the EU has also been looking into competition
Speaker 3: within the cloud space. How much is that something that
Speaker 3: some of the big tech companies are having to navigate.
Speaker 5: I'm really sorry there, I've lost you. I think you
Speaker 5: were asking about international comparison.
Speaker 4: Yes, let's look at Germany for a moment.
Speaker 5: Yes, I mean it's it's an interesting one for the
Speaker 5: CMA because post Brexit it's sort of out there alone,
Speaker 5: whereas before it was part of Europe. Offcom's report does
Speaker 5: note what's going on in other parts of the world,
Speaker 5: so notes the FTC looking at this, the EU looking
Speaker 5: at this, and ultimately maybe the CMA becomes, you know,
Speaker 5: more of a sideshow as these much bigger regulatory regimes,
Speaker 5: you know, hone in on this same market, and.
Speaker 3: Also start to think not just about the impact from
Speaker 3: well work perspective, social media perspective, but now of course
Speaker 3: generative AI and foundational model perspective. Thomas Seal, great to
Speaker 3: have some time with you. Thank you for laying it
Speaker 3: out when it comes to Amazon. Now let's get back
Speaker 3: to antitrust here in the US, because Google's trial, well,
Speaker 3: it's still under way, and in transcripts unsealed by the
Speaker 3: judge last night, we learned that Apple actually held talks
Speaker 3: with dot Go to replace Google as a default search
Speaker 3: engine for the private mode on Apple Safari browser. Ultimately
Speaker 3: they rejected the idea. Blomberg Sarah Ford and now joins
Speaker 3: us in Washington. And yet more sort of detail.
Speaker 4: Coming out here of just how much Apple had.
Speaker 3: Analyzed other competitive search offerings out there.
Speaker 6: Yes, and exactly the unsealing of this testimony last night
Speaker 6: was really quite extraordinary in a very important part of
Speaker 6: this case. In fact, the judge himself said that he
Speaker 6: read through the testimony which had been taken in a
Speaker 6: sealed courtroom. He read through it line by line and
Speaker 6: felt that that what is being said here by these
Speaker 6: executives really cuts to the heart of the case against Google.
Speaker 6: And this has to do with Google's, you know, twelve
Speaker 6: billion dollar agreement with Apple allows it to be the
Speaker 6: default search engine on all Apple iPhones and other desktops,
Speaker 6: So it gives them access to a tremendous amount of data,
Speaker 6: and we know that data and building scale for a
Speaker 6: search engine is actually key to sort of keeping that that,
Speaker 6: you know, those search results high and quality and dominating
Speaker 6: the market.
Speaker 4: I mean, the level of detail, as you say, is extraordinary.
Speaker 3: Duc dot Go CEO, testifying that what he met with
Speaker 3: Apple twenty meetings in the phone calls with various Apple executives, including.
Speaker 4: The head of Safari.
Speaker 3: Does this, though, ultimately paint a picture that yes, they
Speaker 3: didn't find a better offering out there than what Google
Speaker 3: currently serves to the market. They're not favorizing Google because
Speaker 3: of the money. It's just that it's a better search
Speaker 3: product for the consumer.
Speaker 6: Well, that is true, and in fact, there was testimony
Speaker 6: from the Apple executive who negotiated the deal with Google,
Speaker 6: John John Andrea, and he said ultimately they didn't go
Speaker 6: for an alternative. He also revealed there had been talks
Speaker 6: with Being as well in twenty eighteen twenty nineteen, but
Speaker 6: they ultimately decided that Google was the best. So certainly
Speaker 6: that's a business case. But I think this testimony is
Speaker 6: going to be very critical in terms of how the
Speaker 6: judge ultimately decides about the market issues and the dominance issues.
Speaker 6: And this is not a jury trial, so the judge
Speaker 6: will will be the one to decide this case.
Speaker 3: And is of course earlier this week that the judge
Speaker 3: had from Satin Nadella, the CEO Microsoft, who was trying
Speaker 3: to be out there building Being as a competitor. And
Speaker 3: it's in this moment though, that we feel that there
Speaker 3: is some competition potentially coming from a being with the
Speaker 3: partnership that they have with Open Ai, certainly as search
Speaker 3: perhaps pivots in this generative AI world. From all the
Speaker 3: testimony thus far, is there any weed that you're getting
Speaker 3: as to which direction the judge might end up landing here.
Speaker 6: It's still too soon to say, but certainly the government
Speaker 6: is putting on the best case that it can. This
Speaker 6: is a test case in every way. This has never
Speaker 6: been done before. And this afternoon, actually the expert witness
Speaker 6: for the Justice Department is going to be testifying about
Speaker 6: market definition and so that's going to be key information
Speaker 6: that the judge is going to need in order to
Speaker 6: make this decision.
Speaker 3: We'll keep the rest of it with your help, Sarah Fordon,
Speaker 3: Thank you very much. Indeed, all things regulation at the
Speaker 3: top of this show. Meanwhile, coming up, we're going to
Speaker 3: be looking at another trial, but this one well a
Speaker 3: fraud one Sam Bangwun freed, the disgraced thirty one year
Speaker 3: old preparing to convince a jury that his crypto empire
Speaker 3: wasn't a fraud. And let's take a look at quickly
Speaker 3: it shares as we go to break There's plenty of
Speaker 3: things on the move when you look at the micro
Speaker 3: detail today.
Speaker 4: So apart from the macro.
Speaker 3: Jobs data, we're looking at individual companies that are currently
Speaker 3: not on the downside. On a day of selloff, Rivian
Speaker 3: absolutely tumbling. We saw it as much as nineteen percent.
Speaker 3: This is the company electric vehicle company. It's actually looking
Speaker 3: to sell more convertible debt. What does that mean, Well,
Speaker 3: it could end up booting the supply of shares out there.
Speaker 3: So we're seeing a depressing force on the stock. We're
Speaker 3: off by some twenty percent let's call it nineteen dollars
Speaker 3: is where we trade and also looking.
Speaker 4: At Lucid Group.
Speaker 3: Now interestingly this could be falling in sympathy, but also
Speaker 3: the ev maker actually offering.
Speaker 4: A new, perhaps cheaper model.
Speaker 3: Investors may be reading the worry about whether that's really
Speaker 3: a price cut in this current environment. This sounds on
Speaker 3: nine percent one of the worst performers on the NASAK
Speaker 3: one hundred a day.
Speaker 4: This is a Bloomberg technology.
Speaker 3: We've got to get you up to speed with the
Speaker 3: latest on the trial of former FTX head Sirm Magmund Freed.
Speaker 3: Please to say, not at the courthouse, but here in
Speaker 3: the New York studio is Shnali Bassak, but really keeping
Speaker 3: the context broad here of now, who else is going
Speaker 3: to be giving evidence? What shocking revelations we could hear
Speaker 3: from it?
Speaker 7: Yeah, and I must say it's interesting. I love being
Speaker 7: on set next to you, but that courthouse right now
Speaker 7: is just also fascinating. You have the witnesses one by
Speaker 7: one starting to come up, including a developer at FTX
Speaker 7: who has been speaking about his long friendship with Sam
Speaker 7: Megmin fried since mit.
Speaker 4: As well as what he was told while.
Speaker 7: He was working at the company in the safety and
Speaker 7: security of the firm while he was there. More interestingly,
Speaker 7: you have Gary Wang, who was the former technology officer
Speaker 7: of co founder of FTX, expected to testify as early
Speaker 7: as today. Remember Gary Wang was one of the people
Speaker 7: who had pled guilty and is a cooperating witness for
Speaker 7: the trial. One of three very important key figures from
Speaker 7: the very inner workings of FTX. As we know, the
Speaker 7: prosecution has drawn out that really there were only a
Speaker 7: few people that knew the extent to which this was
Speaker 7: allegedly this fraud was carried out.
Speaker 3: And one of the key people is Caroline Evison Allison,
Speaker 3: who of course was heading up Alameda Research, which Ultimate
Speaker 3: was attested to be sharing and co mingling funds from
Speaker 3: Alari day.
Speaker 7: The Caroline Ellison part of this is just becoming more
Speaker 7: and more pronounced as this trial goes on. She was
Speaker 7: brought up both in the prosecution's opening arguments as well
Speaker 7: as the defense for the prosecution. Remember that in her
Speaker 7: circle I was talking about, they were talking about bringing
Speaker 7: her to the fore along with some of the other
Speaker 7: co founders for them to explain their interactions with Sam
Speaker 7: bankman Fried alongside the evidence that will be presented, the
Speaker 7: prosecution really defines two ways that Alameda had taken money
Speaker 7: through FTX by means of both cash as well as
Speaker 7: through its digital wallets. So they will be using Caroline
Speaker 7: Ellison to show how that exactly had happened and when
Speaker 7: and what Sam bankman Fried knew and what he had
Speaker 7: actually directed. Now, in the defense part of the argument,
Speaker 7: they have said that Caroline Ellison was the one that
Speaker 7: was running Alameda. They had made the case in the
Speaker 7: defense that one person cannot be not one person, that
Speaker 7: one CEO can be at all places at all times,
Speaker 7: and as a shareholder of Alameda, had directed Caroline Ellison
Speaker 7: to do things like hedge the portfolio ahead of the
Speaker 7: crash that had led to the ultimate bankruptcy of FTX,
Speaker 7: despite the alleged co mingling of the funds. So remember
Speaker 7: this is Sam Ingmanfrey's former girlfriend we are talking about,
Speaker 7: who had a lot of details about how Sam operated himself.
Speaker 7: It will be up to the jury to decide whether
Speaker 7: that defense will be sufficient enough to really pin a
Speaker 7: lot of the blame not just on Sam but his
Speaker 7: colleagues who have already played guilty.
Speaker 4: By the way, fascinating.
Speaker 3: Thanks for keeping us up to speed on it, Shannadi
Speaker 3: bus like there with all things FTX. But let's go
Speaker 3: macro now, let's go to the Economic Club new or
Speaker 3: one piece of say our own Lisa Bromowitz A sitting down,
Speaker 3: none of them in the San Francisco Fed President, it's
Speaker 3: very daily listening.
Speaker 8: If it doesn't need to hike again again, I'm going
Speaker 8: to remind everybody my views are my own, and I
Speaker 8: don't speak for anyone on the committee, but that's exactly
Speaker 8: how I think about it. So just instead of that,
Speaker 8: let's go back to the June SEP where, if you
Speaker 8: remember or maybe you don't, I'll remind in the June
Speaker 8: summary efcconomic projections there were two more rate hikes projected
Speaker 8: for this year. Then in July we took one of
Speaker 8: those rate hikes and another one in the September SEP
Speaker 8: was the median outlook. But the bond market has tightened
Speaker 8: quite considerably over about thirty six basis points since we
Speaker 8: met in September. Well, that is equivalent to about a
Speaker 8: rate hike, right, and so then the need to do
Speaker 8: tightening additionally is not there? So from my own perspective,
Speaker 8: that's what I look at my job as I see it.
Speaker 1: Our job, as I see it.
Speaker 8: Is not to tighten, just do our part. It's to
Speaker 8: watch financial conditions. Because monetary policy works, We raise the
Speaker 8: funds rate and it moves through all the other interest rates.
Speaker 8: If financial conditions are sufficiently tight, our work is not necessary.
Speaker 1: Because we don't need to boost them more.
Speaker 9: Yeah, because that makes sense absolutely and reach clared I
Speaker 9: said today that the rise and yields actually does the
Speaker 9: Fed's job for it.
Speaker 1: Would you agree with that?
Speaker 8: Would you sympathize that kind of sentiment, that is actually
Speaker 8: how it works, right, if financial conditions tightened. I mean,
Speaker 8: one of the things that's happened in the last ninety
Speaker 8: days and certainly in the last few weeks, is that
Speaker 8: financial markets have collectively seem to take on board a
Speaker 8: variety of things. But one of the things that I
Speaker 8: heard from many commentators and many of the market outreach
Speaker 8: I do is that they have a general understanding now
Speaker 8: that we are committed at the FMC to keeping rates
Speaker 8: higher for longer in an effort to bring inflation fully
Speaker 8: back down to two percent, And that recognition, along with
Speaker 8: all the other factors we could put in a list
Speaker 8: about why bond yields have risen are affecting certainly the
Speaker 8: financial conditions and the tightening. And I see that as
Speaker 8: a positive outcome that we would have tighter financial conditions,
Speaker 8: because then we can really get the job done of
Speaker 8: putting inflation back to rest.
Speaker 9: When is a sell off something that's welcome from a
Speaker 9: perspective of finding the market is coming to terms with
Speaker 9: what the FED has been saying, and when is it
Speaker 9: disorderly to disruptive on a level that causes concern.
Speaker 8: So you always want an orderly repricing over a disorderly repricing.
Speaker 8: And so far, what I see is this, you know,
Speaker 8: and this is why we watch it so carefully. But
Speaker 8: here's how I'm seeing it is that what we're having,
Speaker 8: what is happening is financial markets. They are actually trying
Speaker 8: to find their footing in the right price for things,
Speaker 8: and they've got to digest a lot of information. One
Speaker 8: is the supply and demand changes in the treasury space
Speaker 8: right so supply is going up and demand is going down,
Speaker 8: especially from foreign buyers. So that is a one factor
Speaker 8: to digest. Another factor to diest is FED policy, and
Speaker 8: for guidance in the SEP. A third factor to digest
Speaker 8: is this increasing conversation people are having about whether the
Speaker 8: real neutral rate of interest is actually risen. So we
Speaker 8: came into the pandemic or with it at about point five,
Speaker 8: which means nominal neutral about two point five. And when
Speaker 8: people say, oh, the neutral rate might have risen for
Speaker 8: variety of factors, I'm hearing everything from meybe it's five
Speaker 8: to something that I would seem more likely, which is
Speaker 8: between two five and three for the nominal neutral.
Speaker 1: You know, probably there is. We don't know if it's risen.
Speaker 8: Frankly, I don't think anybody really knows, but certainly we
Speaker 8: should have those conversations. But then markets try to price
Speaker 8: that in. So all of those factors, and there's lots
Speaker 8: of uncertainty in the economy and geopolitical risk and you know,
Speaker 8: our own fiscal risk, and so that's what markets do.
Speaker 8: They digest a lot of information and try to find
Speaker 8: their footing on it.
Speaker 1: And I think that's what we're seeing.
Speaker 8: But so far it hasn't spilled over into disorderly so far.
Speaker 8: Even today when the job's claims came up and it
Speaker 8: was sort of I don't know what to make of it, right.
Speaker 1: So that's what the market serve ad it.
Speaker 8: You didn't see things shaking up in a wild or
Speaker 8: disorderly fashion.
Speaker 1: So so far, so good.
Speaker 9: Here bond quote of the day, four seventy on the
Speaker 9: tenure I just checked.
Speaker 1: So that's it.
Speaker 9: Seems like yields are coming in as we speak to
Speaker 9: her point about it not being disorderly. Back in March,
Speaker 9: when there was this concern about the banking situation, yields
Speaker 9: were at the low of March. We're about one hundred
Speaker 9: and fifty bases points lower than where they are now.
Speaker 9: Are you seeing the same type of financial distress today
Speaker 9: that you did back then?
Speaker 1: Even on the peripherez?
Speaker 9: How do you rationalize why it hasn't materialized in the
Speaker 9: same kind of way.
Speaker 8: So March was a unique situation, and we want to
Speaker 8: learn from that unique situation.
Speaker 1: But it was an unique situation in this way.
Speaker 8: We had a bank run, an old, very old fashioned
Speaker 8: but true bank run, where the bank's liquidity was completely
Speaker 8: squeezed and it went, it dissolved in a period that
Speaker 8: was it was short, rapid period of dissolution, and then
Speaker 8: that's filled over to two other banks and that was
Speaker 8: the extent. Now, one of the things I always remind
Speaker 8: people of is we have over four thousand banks in
Speaker 8: the country and three failed and all other banks that
Speaker 8: even felt the stresses, and there were a large number
Speaker 8: that felt stresses because they were near neighbors in sort
Speaker 8: of size and balance sheet distribution composition. They felt stresses,
Speaker 8: but they managed those stresses because in part they had
Speaker 8: been a little more effective at edging their risks. And
Speaker 8: then the FED and the Treasure with the Treasury support
Speaker 8: came in with the BTFP, and that produced a lot
Speaker 8: of calmness in the water. So since that time, banking
Speaker 8: stresses have really not been something that when you ask
Speaker 8: people in the community or the business leaders what do
Speaker 8: you top of your worries, that is not something they list.
Speaker 8: They list inflation, uncertainty, etc. So I think one of
Speaker 8: the reasons that we are seeing this yield rising not
Speaker 8: spilling back over is that essentially we know what's going
Speaker 8: on in the banking sector. Investor letters have been published
Speaker 8: for months saying here's what this balance sheet looks like.
Speaker 1: Here's what this balance sheet looks like. So there's not
Speaker 1: a surprise.
Speaker 8: And the second is because the banking system is safe, sound,
Speaker 8: and resilient, and we have remedies in place that solved
Speaker 8: parts of the of the crisis and the stresses. So
Speaker 8: I think we're coming in. It's the same thing when
Speaker 8: you have the rise in yields. We're doing it against
Speaker 8: a strong economy. We're doing it against a strong, a
Speaker 8: solid banking system.
Speaker 1: So that just means that the.
Speaker 8: Ripple effects are not going to be tipping things over.
Speaker 8: The fragility is not there, right, it's a sound system,
Speaker 8: and then you have this and so then you have
Speaker 8: it able to absorb the tension points.
Speaker 1: One thing that there's.
Speaker 9: Been a huge debate around is the long and variable lags,
Speaker 9: And this really speaks to this question of all of
Speaker 9: a sudden, if you think that ten year yields are
Speaker 9: five percent rather than four percent or three and a
Speaker 9: half percent, that changes what implication there is into different
Speaker 9: business models. How much does it change the business model
Speaker 9: of commercial real estate owners of different residential real estate
Speaker 9: owners of some of the constituents for you speak to
Speaker 9: on a regular basis.
Speaker 8: So I'm going to separate that's a terrific question, but
Speaker 8: I'm going to unpack it into two parts. If you
Speaker 8: don't mind the long and variable lags and the how
Speaker 8: are people reacting to that? And I just met with
Speaker 8: a variety of commercial real estate CEOs with national footprints
Speaker 8: on Monday, so I can bring some of that to
Speaker 8: this conversation. But we start with the long and variable
Speaker 8: lags part. So definitely there's always a debate. If you
Speaker 8: want to really get in debate, get a PhD in economics,
Speaker 8: and you know, spend a lot of time if you're
Speaker 8: in macro debating long and variable lags of monetary policy.
Speaker 1: So here's what we can all agree on.
Speaker 8: There are lags and they're variable, and then people even
Speaker 8: debate about long how long are they? But I go
Speaker 8: with long and variable lags, and the question is we
Speaker 8: know that from the FEDS communications to financial markets went quickly,
Speaker 8: and then the question is how long does it take
Speaker 8: to get through the economy. I'm of the view that
Speaker 8: we're still seeing the effects of that. We saw it
Speaker 8: initially in housing, then we started seeing it in investment.
Speaker 8: Now we're starting to see it in the labor market
Speaker 8: and inflation, etc. And so it's absolutely happening and we
Speaker 8: want to continue to watch that. Because we were with
Speaker 8: the risks were balanced on the economy, we could easily
Speaker 8: I think at this point overcorrect than undercorrect, and that's
Speaker 8: why taking the time to do it right is sort
Speaker 8: of where I think we need to be now. On
Speaker 8: what I'm hearing in these was rising yields. They're less
Speaker 8: concerned about. They have been less concerned at least my
Speaker 8: commercial real estate roundtable, less concerned about the lags in
Speaker 8: monetary policy as much as this there is this time
Speaker 8: when people were in one of men, just one person
Speaker 8: described it as sort of it's almost like a foot race, right,
Speaker 8: but it's really just like a I have to see
Speaker 8: if the FED will cut rates before I have to
Speaker 8: refinance my properties, And so you're in a look ahead
Speaker 8: and you're saying, well, if the Fed cuts rates like
Speaker 8: the markets suggest they will markets suggested six months ago,
Speaker 8: early in twenty twenty four, or at least by the
Speaker 8: middle of twenty twenty four, then by the time I refinance,
Speaker 8: I'm golden. But that equation changes if we're higher for
Speaker 8: longer to get inflation down, or if the nominal if
Speaker 8: the yields are just going to be higher, well, then
Speaker 8: projects that penciled out at near zero interest rates or
Speaker 8: something much lower, they don't pencil out at five and
Speaker 8: so I think one of the things that we think
Speaker 8: a lot about is what's the switch point for commercial
Speaker 8: real estate, because you really want that to be an
Speaker 8: orderly repricing, and so far it has been rather than
Speaker 8: a disorderly one.
Speaker 1: But I think that's something that's a.
Speaker 8: Risk worth watching, is that these higher yields change the
Speaker 8: psychology of what's possible for people and they start making
Speaker 8: those adjustments immediately, as opposed to a timeline that goes
Speaker 8: with the REFI schedule.
Speaker 9: Just to build on that, this idea of five percent
Speaker 9: or four point eight or four point seven percent of
Speaker 9: long term rates that's being increasingly priced into markets, how
Speaker 9: much does that imply a significantly greater degree of distress
Speaker 9: in some of these areas like real estate, commercial real
Speaker 9: estate that rely on this idea of refinancing five ten
Speaker 9: years down the line.
Speaker 8: You know, it's I think we have to and this
Speaker 8: is one of the things we're going to have to
Speaker 8: do just as a nation, is if we're in a
Speaker 8: low higher interest rate environment in general, and I can't
Speaker 8: I don't think we should jump to the conclusion that
Speaker 8: that's where we are. I think we should have a
Speaker 8: conversation is it going to be the low interest rate environment,
Speaker 8: or we're going to have a dominal neutral of two
Speaker 8: point five or is it going to be something higher?
Speaker 8: Is are we going to be fighting inflation from above
Speaker 8: our target now for a persistent amount of time, or
Speaker 8: is it going to go back to fighting our target.
Speaker 8: We don't know the answers yet, So I think what
Speaker 8: I'm what I was really important is commercial real estate
Speaker 8: owners and purchasers and things they have to be willing
Speaker 8: to tip to play the longer game. Right, what's the
Speaker 8: longer game look like? And how do I get to
Speaker 8: the longer game? And I'm hearing this in the San
Speaker 8: Francisco CEO round table, and now again these folks have
Speaker 8: a national footprint, but I'll share what I learned is
Speaker 8: that you know they're already trunching their properties. If you've
Speaker 8: got really high quality stuff, you're putting all your work
Speaker 8: in terms of leasing into that property deals to be had,
Speaker 8: so people with income to use they're buying those properties
Speaker 8: up because property ultimately and buildings are valuable down the road.
Speaker 1: If you have.
Speaker 8: Property that you think isn't just in the world of
Speaker 8: higher interest rates and lower in office work, then you
Speaker 8: just say well, okay, I'm going to go back to
Speaker 8: land value, and I'm going to not try to spend
Speaker 8: a lot of time releasing that property or wait it out,
Speaker 8: because and I think that's the repricing we're going to
Speaker 8: need to see. We are just going to need to
Speaker 8: digest some of those losses and position for the new world.
Speaker 8: The yields going up, I think it's just it doesn't
Speaker 8: change that dynamic. It just brings people awareness sharply to
Speaker 8: the problem. Right You could have seen the problem coming,
Speaker 8: and I think many did, which is why I'm not
Speaker 8: I don't have alarm bells ringing commercial real estate people.
Speaker 8: They just tell me this all the time, and I
Speaker 8: have learned to believe them. You really have to have
Speaker 8: a strong constitution to be in commercial real estate because
Speaker 8: it goes through cycles. And the way the successful ones
Speaker 8: persist is they recognize that the downpoint isn't forever, nor
Speaker 8: is the high point, so they get used to it,
Speaker 8: and they stockpile, and they refi early when they see
Speaker 8: interest rates going up. They're trying to put stuff into
Speaker 8: longer maturity so that they can not have to refly
Speaker 8: at the higher interest rates right away.
Speaker 1: So I think that's going on.
Speaker 8: But that is a sector to watch, as all of
Speaker 8: us know, and this will be just another piece. The
Speaker 8: higher bond yields will be another piece that makes the
Speaker 8: scrutiny have to be more intense.
Speaker 9: To connect that to the idea of financial distress, people
Speaker 9: talk about a FED put How high is the bar
Speaker 9: for the FED put How high is the bar for
Speaker 9: financial distress for the FED Reserve to come in and
Speaker 9: to cut rates and to take actions to add liquidity
Speaker 9: to the system. How much higher is the bar at
Speaker 9: a time where inflation is.
Speaker 1: Still running at the level so that it's running.
Speaker 8: So I'm going to separate these two things. I think
Speaker 8: they get pushed together all the time in a way
Speaker 8: that I don't think about, so I want to separate them.
Speaker 8: So there's monetary policy that's about the two goals that
Speaker 8: Congress gave us full employment, price stability, and we raise
Speaker 8: and lower the funds rate to do those types that work.
Speaker 8: And because it's made this is all gets conflated more
Speaker 8: easily because we have a balance sheet policy. So we
Speaker 8: use the asset purchases for two functions, market dysfunction and
Speaker 8: quantitative easing. Right to put additional policy accommodation.
Speaker 1: In when we hit the ZLB. So we have both, but.
Speaker 8: They can't actually persist separately. So let's take the BTFP.
Speaker 8: The BTFP didn't change monetary policy. We went in, we
Speaker 8: saw some stress in the banking sector. With the help
Speaker 8: with the backstop from the treasury open to the BTFP
Speaker 8: facility helped calm the banking stresses, and monetary policy went on.
Speaker 8: And I think that's the way you should think about it.
Speaker 8: So I unpack those things. I hear a lot about the.
Speaker 1: FED put in this. What I really would do is.
Speaker 8: We have tools that can be used, and the tools
Speaker 8: we use for financial location are different than the tools
Speaker 8: we use for monetary policy, and both can occur. So
Speaker 8: we shouldn't have to give up our promise to the
Speaker 8: American people, our commitment to achieve our mandated goals and
Speaker 8: bring inflation back down to price stability, because we have
Speaker 8: some dysfunction in the markets.
Speaker 1: But I right now don't see dysfunction.
Speaker 8: What I see is prices have gone up for bond yields,
Speaker 8: prices have gone down.
Speaker 1: Yields have gone up for bonds.
Speaker 8: The ten year now and other rates look similar to
Speaker 8: what you know. We might have penciled in in a
Speaker 8: sep for how much we were going to hold rates
Speaker 8: higher for longer because of the inflation. And I think
Speaker 8: they'll respond as the data come in to I think
Speaker 8: markets have a better sense now, although you know, I can't.
Speaker 1: Be sure this. I don't want to.
Speaker 8: Say things that I don't have certainty about, but it
Speaker 8: seems there's a more more of an understanding.
Speaker 1: About the fedch reaction function now.
Speaker 8: And big part of the reaction function understanding that seemed
Speaker 8: to be missing was that we want to get inflation
Speaker 8: down to two percent, and in our forecast we don't
Speaker 8: see it coming down to two percent like that, And
Speaker 8: in order to keep it coming down to two percent,
Speaker 8: we have to keep rates restrictive in order to bring
Speaker 8: the economy more into balance, the labor market into balance,
Speaker 8: and inflation down to two.
Speaker 9: You talked about vigilance, and you talked about agility, and
Speaker 9: with respect to agility, you wanted to be able to
Speaker 9: teak policy according to what you're seeing in markets.
Speaker 1: And one thing that people have been speculating.
Speaker 9: And I'm sure this is sort of one of these
Speaker 9: theoreticals that make you roll your eyes.
Speaker 1: My goodness, I never roll my eyes.
Speaker 9: Well, I will say, uh, when people talk about what
Speaker 9: you said in your speech, which is that as inflation
Speaker 9: falls and as growth slows, that the policy rate, even
Speaker 9: by not moving, by keeping it steady, is a policy action,
Speaker 9: and it is actually tightening policy at that point, How
Speaker 9: agile should the FED be to make adjustments to the
Speaker 9: rate so that the restrictive.
Speaker 1: Level is the same.
Speaker 9: That might be lowering rates, but not because of financial distress,
Speaker 9: not because of some sort of recession, not because of weakness.
Speaker 1: So that's a terrific question.
Speaker 8: And I would argue that we're now entering into the
Speaker 8: hardest phases of policy making, right, the hardest part. So
Speaker 8: I think if phase one is the one we just complete,
Speaker 8: the one we completed, we completed it earlier this year,
Speaker 8: rates are too low, inflation's too high. There's only one
Speaker 8: direction north, So everybody can agree, there's no nobody's confused.
Speaker 8: It's just a matter of how quickly can you get
Speaker 8: to restrictive territory and without causing any concerning disruptions.
Speaker 1: So we've accomplished that phase one.
Speaker 8: Phase one was an easy phase. You just have to
Speaker 8: communicate we're going that way. Inflation will come down. The
Speaker 8: biggest concern that I had during that phase one, well,
Speaker 8: I had two, how fast can we go without distressing things?
Speaker 1: And two? Oh, how will we communicate that we're doing that? Right?
Speaker 8: Those are the two things I was worrying about. How
Speaker 8: fast can we go? And how can we communicate that
Speaker 8: so that we don't lose credibility?
Speaker 1: Right? Because I was worried about the inflation expectation. So
Speaker 1: that's down.
Speaker 8: Phase two is fine tuning where we maintain the p grate,
Speaker 8: and then phase three is trying to bring it down
Speaker 8: to two percent. And so right now, the way it's
Speaker 8: penciled in in the SEP, if the inflation forecast holds
Speaker 8: and the inflation forecast you see more generally policy is
Speaker 8: growing more restrictive. So you might ask, well why, Well,
Speaker 8: I think it's because it's challenging to get that super
Speaker 8: core inflation down. We've got the easy ones behind us, right.
Speaker 8: Goods inflation has already come down a lot. Housing inflation
Speaker 8: is in train. We have to keep watching it. But
Speaker 8: that supercore is going to need persistent work. But if
Speaker 8: we saw and the labor market strong, we're doing this
Speaker 8: against a very strong labor market. We'll see tomorrow effe persist.
Speaker 8: But so far, pretty strong, solid labor market, good consumer spending,
Speaker 8: good GDP growth. I mean, there's nothing about the economy
Speaker 8: that's faltering. If that should change, well, then of course
Speaker 8: we could adjust rates so that we keep a level
Speaker 8: of restriction right for the economy we have. I don't
Speaker 8: really want to try to tell you what that's going
Speaker 8: to be, because honestly, that's what the whole speech about
Speaker 8: is about. We have to tolerate our uncertainty of not
Speaker 8: knowing what is going to do next year, but to
Speaker 8: know what elements we have and how would we react
Speaker 8: to whatever situation unfolds. That's ultimately humans hate this and
Speaker 8: markets hate it more. Nobody likes uncertainty, right. They want
Speaker 8: to know people, We all want to know exactly what's.
Speaker 1: Going to happen.
Speaker 8: But I think right now, projecting to confidently what will
Speaker 8: happen is actually a policy mistake because then you end
Speaker 8: up with surprising people and things. So I just I
Speaker 8: think it's really important that we stick to conveying our
Speaker 8: reaction function, conveying how we treat often balance things, how
Speaker 8: we approach the uncertainties, and then as we get more information,
Speaker 8: as everybody does, then we'll of course see what to
Speaker 8: do next with.
Speaker 9: Respect that economy and what's going on and what you
Speaker 9: see going on there. You talk about the labor market
Speaker 9: and how strong the labor market is, and I know
Speaker 9: you've done an incredible amount of research in economic inequality
Speaker 9: and the worker and the labor market through that lens.
Speaker 9: How do you view some of the labor strikes, what's
Speaker 9: going on in Detroit, what's going on with respect to
Speaker 9: the Kaiser health systems, what's going on with just the
Speaker 9: Hollywood strikes which are sort of resolved but.
Speaker 1: Maybe not so.
Speaker 8: I think, you know, the picture of the labor market
Speaker 8: is broader than just the strikes. I think the strikes
Speaker 8: get a lot of because they're big labor actions, But
Speaker 8: in general, we've seen a rebalancing of the labor relationships
Speaker 8: with firms. That is a very common occurrence in an
Speaker 8: extremely tight labor market. Right there, demand for workers is
Speaker 8: outstrip supply of workers. That means that workers would have
Speaker 8: more power to say, I want to live here, do
Speaker 8: this have this other thing? So workers who aren't in
Speaker 8: union and don't have regularly scheduled negotiated contracts, well they
Speaker 8: can make those adjustments more continuously. Right, So a lot
Speaker 8: I'm sure you've experienced this too, But if you're an
Speaker 8: employer in twenty two and even late twenty one, you
Speaker 8: really saw wage demands rise special circumstances. I want to
Speaker 8: live in here and work in there, and I don't
Speaker 8: want to come back to the office.
Speaker 1: A lot of changes in.
Speaker 8: How workers were relating to their employers, and there was
Speaker 8: also a relative demand shock for low wage workers that
Speaker 8: moved restaurant workers to hotel workers, to delivery drivers and
Speaker 8: other things, so that whole work situation was changed. I
Speaker 8: see the labor actions that have been taken recently as
Speaker 8: they're on regularly negotiated contract schedules, and those schedules came
Speaker 8: up and they say, well, we've got to A lot's
Speaker 8: changed since we negotiated the last contract. Pandemic wage rates
Speaker 8: have risen. We have not been in continuous negotiations with you,
Speaker 8: and we want to get in a better negotiation with
Speaker 8: you to ensure that we have some shared responsibility for
Speaker 8: the rapidly rising inflation and rapidly rising changes in the
Speaker 8: contours of the labor market. So I think this is
Speaker 8: so to answer your question, I think this is completely
Speaker 8: predictable given the imbalance we've had between demand and supply
Speaker 8: for workers, and there are going to be some renegotiations,
Speaker 8: either in continuous space like we have been seeing, or
Speaker 8: when contracts become up for negotiation you have to renegotiate
Speaker 8: the terms of employment.
Speaker 9: What's the difference between renegotiating the terms of your employment
Speaker 9: and a wage price spirral.
Speaker 1: Oh, that's a huge difference. So let me I love
Speaker 1: that kind of question. Fantastic. Okay, So that's straight.
Speaker 8: Labor renegotiations are I'm looking at you know what I've
Speaker 8: we had to put up, what I've had to deal with.
Speaker 1: As an employee.
Speaker 8: A lot of it is I've got this wage and
Speaker 8: the inflation's going up this so my real wages falling.
Speaker 8: That's something that was commonly happening in twenty two in
Speaker 8: the United States. Real wages we're falling for many, many
Speaker 8: groups of workers, many tiers of wages. And that's something
Speaker 8: people workers recognize, right, they recognize when they're real wages
Speaker 8: are falling, they're losing purchasing power, they're falling behind even
Speaker 8: though they're earning. So that is what a labor negotiation is.
Speaker 8: It also could be like in healthcare and things, hours work,
Speaker 8: terms of trade, you know, schedules, et cetera. A wage
Speaker 8: price spiral is that people get wage growth and then
Speaker 8: producers I mean you know, firm selling, passed that along
Speaker 8: to consumers. That causes inflation to go up, and then
Speaker 8: they see that inflation and they ask for wage growth
Speaker 8: and you see this high correlation, A fact that's worth
Speaker 8: looking at. It's a very cool plot because it tells
Speaker 8: you why we're not in a wage price spiral right now.
Speaker 8: Is prior to eighty five, the correlation between wage growth
Speaker 8: and price growth was like point eight five. That broke
Speaker 8: down after the vulgar disinflation, and it really is now
Speaker 8: like point two five point three, et cetera. So you
Speaker 8: don't have that one for one pass through of wages
Speaker 8: to prices, prices to wages. It just doesn't work that way.
Speaker 8: And even now you see wage growth moderate rating. And
Speaker 8: I also look at short run inflation expectations. Short run
Speaker 8: inflation expectations are coming down as they come down. Research
Speaker 8: out of the San Francisco FED is shown and others
Speaker 8: have confirmed this that short run inflation expectations are what
Speaker 8: people are using when they go into negotiate wages, and
Speaker 8: so as those come down, you get release of wage pressure.
Speaker 8: So we are the worries about wage price viral. You know,
Speaker 8: people were worried about it in twenty two, and I
Speaker 8: really we took that very seriously.
Speaker 1: We asked how that was going. At this point, those.
Speaker 8: Are really abated, and now we're really at a point
Speaker 8: about getting the wage growth rate to be balanced in
Speaker 8: the economy, bringing the labor market into balance, adding the
Speaker 8: kinds that thout. You know, you knew about a hundred
Speaker 8: that jobs per month to keep pace with the labor
Speaker 8: force growth. At the last call, we were at one
Speaker 8: hundred and fifty. So tomorrow's labor market report will tell
Speaker 8: us whether we've made more progress on that space or
Speaker 8: just sort of in that same place we've been in.
Speaker 8: But that's how it's different. They're completely different. One keeps
Speaker 8: me up at night. One is just a natural part
Speaker 8: of an economy.
Speaker 1: So I love that.
Speaker 9: When we were speaking ahead of this, we were talking
Speaker 9: about anecdotal data, and I said, you know, I love
Speaker 9: that to study the sociology of markets and anecdotes are
Speaker 9: really important, and she said, I don't view them as anecdotes.
Speaker 1: They're qualitative data. I think I said it that way.
Speaker 1: You did, and you corrected me, you said, absolutely not.
Speaker 1: I wouldn't call it anecdotes. It is qualitative data.
Speaker 9: What is the qualitative data or the anecdotes that Here's why.
Speaker 8: I do call the anecdotes, because anecdotes are like I
Speaker 8: talk to Bob in the grocery store and then I
Speaker 8: now I know everything. And that's what people trade anecdotes
Speaker 8: all the time because they heard one person to people,
Speaker 8: four people at a party, say at the FED, the
Speaker 8: regional thread presidents in particular, I think it's one of
Speaker 8: the big benefits of having a regional FED. When the
Speaker 8: when the folks who set this up set it up,
Speaker 8: I think they they thought this would happen, and it
Speaker 8: does happen. Is the regional fed presidents and the entire
Speaker 8: regional FED teams. We're in our districts collecting qualitative information
Speaker 8: by talking to many people like you, having roundtables, et cetera.
Speaker 1: But then we write it up.
Speaker 8: And so the difference in an anecdote and qualitative information
Speaker 8: is we we quantify the qualitative information. If one person
Speaker 8: says it, it does not mean it's the thing we should.
Speaker 1: Take on is fact.
Speaker 8: But if fifty people say the same thing, well, that's
Speaker 8: an early warning sign or a some flavor that helps us,
Speaker 8: you know, push flesh out what the what the what
Speaker 8: the aggregate data are telling it and what the qualitative
Speaker 8: data are telling me or really ill, there's many things,
Speaker 8: but I'll tell you a few. So at the beginning
Speaker 8: of this year, I'd say most of my conversations, when
Speaker 8: I asked them what's your biggest concern?
Speaker 1: They said recession. Then it switched to stagflation.
Speaker 8: They thought we're gonna have high inflation forever, just low
Speaker 8: growth like we did before the pandemic. And now I say,
Speaker 8: what's your biggest worry? And this is really remarkable. They say, well,
Speaker 8: I'm really worried about generative AI and how it changes
Speaker 8: my business in ten years.
Speaker 1: I'm really worried we're not.
Speaker 8: Educating our population enough to keep pace with the jobs
Speaker 8: we are creating.
Speaker 1: So why am I focusing on those?
Speaker 8: Because those are longer term concerns, which means the anxiety
Speaker 8: they have about their short term business has gone down
Speaker 8: and it is being replaced with the things that really
Speaker 8: should keep business leaders up at night, right is how
Speaker 8: is this going to transform my business?
Speaker 1: Do I have the workforce I need? Not? Today? But
Speaker 1: five years from now, ten years from now, what.
Speaker 8: Do I need to do in my communities to ensure
Speaker 8: that we're durable.
Speaker 1: So that has been a ce change.
Speaker 8: And then when you meet, when you drill down, like
Speaker 8: with commercial real estate leaders, of course they're thinking hard
Speaker 8: about Okay, I've got this property, what's the future? But
Speaker 8: their attitude it was really interesting. The board doesn't matter
Speaker 8: what position they're holding, as they say, they're going to
Speaker 8: be losses, but they're going to be opportunities. And what
Speaker 8: I'm trying to do in my business when I went
Speaker 8: around to each of them, is say I'm trying to
Speaker 8: minimize the losses and maximize my ability to see and
Speaker 8: take the opportunities. And so I see that as a
Speaker 8: positive change in the environment we're in. And it's why
Speaker 8: I said in this in the speech that the recession
Speaker 8: fears are being replaced by soft landing. Soft landing is
Speaker 8: just in their description, something that happens that doesn't break
Speaker 8: the economy and bring all their attention to how do
Speaker 8: I manage through a significant downturn? And I am not
Speaker 8: seeing that in there when I take the temperature on that,
Speaker 8: I'm seeing Instead they're talking about these longer term issues
Speaker 8: that they're grappling with.
Speaker 9: Does that mean that they're hoarding labor reluctant to cut
Speaker 9: jobs because they do have this expectation that even if
Speaker 9: there is some sort of slow down, there is going
Speaker 9: to be a brighter future ahead with not as many
Speaker 9: qualified UH employees is available to do the jobs that
Speaker 9: need to get done.
Speaker 8: So I'm gonna I have the benefit of having done
Speaker 8: this work for a while. I was at the FED
Speaker 8: long before I became the president, and I've been a
Speaker 8: labor economist in my whole career. So I would like
Speaker 8: to broaden that that part out just to tad. So,
Speaker 8: it is very common when employers go through big shocks
Speaker 8: that that carries over into their behavior. So let's go
Speaker 8: to the fact that in the financial crisis, employers had
Speaker 8: to cut nominal wages. They hate cutting nominal wages. They
Speaker 8: they because it demoralizes employees, et cetera.
Speaker 1: So that had a long tail. They had to.
Speaker 8: Fire a lot of workers, right, they had to let
Speaker 8: go and they you know, for a lot of employers,
Speaker 8: if you're not the very largest employers in our country,
Speaker 8: you're you're letting go of people. You know, each and
Speaker 8: every member of your team, and you had to let
Speaker 8: those workers go, and then you had to cut nominal wages.
Speaker 8: It's extremely painful. So then they hired extraordinarily slowly and
Speaker 8: kept working people over time and other things, just so
Speaker 8: they didn't have to be in a situation where they
Speaker 8: would have to let go of workers should another shot come.
Speaker 8: So now what I'm seeing is the opposite of this.
Speaker 8: In the pandemic, people lost workers because they were afraid
Speaker 8: to come to work, or they just they decided to
Speaker 8: take early retirement, or they moved away. And so now
Speaker 8: employers are like, oh, gosh, I better keep people. So
Speaker 8: I think we have to put certain amount of this
Speaker 8: behavior we're seeing to that. But the other part is,
Speaker 8: and this is another benefit of doing this for a while,
Speaker 8: I think is another part is that the way it
Speaker 8: works in most cycles is that the very first thing
Speaker 8: that happens is hiring slows. The second thing that happens
Speaker 8: is layoffs occur. You don't have a lot of firms
Speaker 8: laying people off before they slowed their hiring. So when
Speaker 8: I'm looking at metrics for what I think is happening
Speaker 8: to the labor market, I'm looking at hiring statistics, job
Speaker 8: filling rates, you might have postings out there, but you're
Speaker 8: not filling. And what I'm seeing is a general slowdown,
Speaker 8: but not a cliff. But you know, obviously if there
Speaker 8: was a significant downturn then and businesses have to resize,
Speaker 8: but we're not seeing that yet. Even the layoffs we've
Speaker 8: seen have come in the tech sector where they got
Speaker 8: a little bit ahead of themselves on growth and then
Speaker 8: had to rebalance their workforce to meet the actual growth
Speaker 8: they were going to have. So I don't see anything
Speaker 8: out there that is ringing an alarm bell about the workforce.
Speaker 8: And people say labor hoarding, I kind of think of
Speaker 8: it as we're just always fighting the last war.
Speaker 1: And you fight the last war of we had to
Speaker 1: lay off a lot of people. You don't want anybody new.
Speaker 1: You fight the last war of oh my gosh, I
Speaker 1: lost a lot of people. You hang on tight. We're
Speaker 1: also in a very tight labor market.
Speaker 8: From the employer's perspective, it's loosening, but from an employer's perspective,
Speaker 8: they still have to spend a lot of their time
Speaker 8: finding workers to replace workers you leave, or if they
Speaker 8: want to open a new slot, that's expensive, so they
Speaker 8: definitely want to hang on to as many people as possible.
Speaker 9: I have to open it up to questions in a second,
Speaker 9: but I do want to just ask you this before
Speaker 9: I do that. What do you think right now is
Speaker 9: the biggest misconception.
Speaker 3: We're going to leave Lisa Ramowitz there with San Francisco
Speaker 3: FED President Mary Daily talking about the job cuts and
Speaker 3: the tech sector, talking about the implications of generative AI,
Speaker 3: talking about some of the labor relationships that we've seen
Speaker 3: overall in Hollywood. Much more on Live Go if you
Speaker 3: want to be keep on listening in to that macro perspective,
Speaker 3: but stay with us on Broomberg Technology or with that
Speaker 3: with much more to do with the labor market and
Speaker 3: women within it. It is in Bloomberg Technology. So we've
Speaker 3: just been hearing from Mary Daily about the labor market.
Speaker 3: Let's talk about women's presence within it. Because Chief it's
Speaker 3: the private membership network designed to connect and support women
Speaker 3: executive leaders. It's hosting chief X first conference in Palm Springs,
Speaker 3: bringing hundreds of members together in person, thousands virtually. We
Speaker 3: want to check in on really what's being said by
Speaker 3: some of the key speakers they've had across the tech world.
Speaker 3: They've had was the CEO of Slack. There, for example,
Speaker 3: we welcome Chief CEO and co founder Karen Childers. Now,
Speaker 3: I'm pretty sure always great to be in person. What
Speaker 3: is the atmosphere like, how much resilience and optimism is
Speaker 3: there among women in executive roles right now?
Speaker 2: Yeah, well thanks for having us.
Speaker 10: It's really exciting to join from Chief X our first
Speaker 10: ever conference for CHIEF here in Palm.
Speaker 2: Springs, and the energy has just been really magical.
Speaker 10: So CHIEF is the most powerful network of senior executive
Speaker 10: women and we really built CHIEF under the mission of
Speaker 10: changing the face of leadership. And we do that by
Speaker 10: building a great community that can come together and support
Speaker 10: each other and build the connections that are needed to
Speaker 10: really tackle the loneliness and challenges that can come with
Speaker 10: senior executive leadership. And it's been really exciting to have
Speaker 10: a new experience of Chief X of being able to
Speaker 10: bring women from all over the US, in UK here
Speaker 10: in Palm Springs to be to really deepen those relationships
Speaker 10: and have even more inspirational conversations, give us.
Speaker 3: The context the backdrop though with which some of these
Speaker 3: executives find themselves because look, we are saying actually record
Speaker 3: participation rate of women in the labor force.
Speaker 4: But then there's nuance to it, and.
Speaker 3: There's been studies I think just announced the last day
Speaker 3: or so McKenzie lean in and Foundation of course Cheryl Samberg's.
Speaker 4: Looking at how perhaps women aren't managing to break into
Speaker 4: managerial roles.
Speaker 3: We're actually seeing more executive levels c suite, but not
Speaker 3: at the lower sort of funneling points. How are you
Speaker 3: talking about that?
Speaker 10: Yeah, so, I mean Chief is focused on senior executive women.
Speaker 10: Over forty percent of our membership are actually C suite
Speaker 10: and that's where you're actually starting to.
Speaker 2: See some shifts.
Speaker 10: So we've moved from twenty five percent to twenty eight
Speaker 10: percent of C suite positions being held by women, but importantly,
Speaker 10: even within c suite, women of color or only six percent,
Speaker 10: and we have not seen any changes in those numbers.
Speaker 10: And then, as I think you are pointing to, there
Speaker 10: is still very much this broken rung. So even as
Speaker 10: we're starting to see some progress in the c suite,
Speaker 10: that advancement is going to be really challenged when we're
Speaker 10: still seeing a lack of progress in that middle management level.
Speaker 10: And that's where even though you also see that ambition
Speaker 10: is so much greater women are more interested in participating
Speaker 10: in the workplace, People have greater ambition of wanting to
Speaker 10: go up the corporate ladder.
Speaker 2: One of the things that is really highly pointed to.
Speaker 10: Is flexibility being such a key part of allowing for
Speaker 10: that ambition to become reality.
Speaker 4: And what about it in text, You're really fazing right.
Speaker 10: Now as companies that are pulling people back into the
Speaker 10: workplace and removing some of that flexibility, and that's going
Speaker 10: to be a real challenge for us to continue to
Speaker 10: push these numbers.
Speaker 3: Yeah, Carolyn Dwelling on that, because you're a leader in
Speaker 3: the text, how much you seeing a lack of flexibility
Speaker 3: or more in the sector than which we work.
Speaker 10: Yeah, I mean, I think that you are seeing that
Speaker 10: a lot of companies are starting to pull back on
Speaker 10: a lot on those policies. And I think some of
Speaker 10: that has to do with both the economy in a
Speaker 10: way of somewhat reducing their workforce by saying like some
Speaker 10: people will opt out of that and that will actually
Speaker 10: help them as they go through workplace reductions. But I
Speaker 10: think what that people aren't keeping in mind is that
Speaker 10: the people who need the flexibility the most are women
Speaker 10: and underrepresented minorities. Those are the people who have found
Speaker 10: the most benefit from the flexibility that has come into
Speaker 10: the workplace over the last several years. So all of
Speaker 10: these companies who have also had these commitments to DEI,
Speaker 10: that's really going to challenge them as they really pull
Speaker 10: back on the flexibility in the workplace.
Speaker 3: Important message, and it's interesting how some of this focus
Speaker 3: on DEI moves with all the economic economic realities which
Speaker 3: we face as well.
Speaker 4: I'm interested in your own.
Speaker 3: Realities because I mean Chief is a unicorn. From last
Speaker 3: time we counted and you were raising money March twenty
Speaker 3: twenty two, you raised one hundred million, you were one
Speaker 3: point one billion dollar valuation. Is that still standing and
Speaker 3: how is your business growing?
Speaker 2: Yeah?
Speaker 10: Well, we are twenty thousand members strong at CHIEF. It
Speaker 10: has been just phenomenal to see that growth over the
Speaker 10: last several years. But there's still five million women in
Speaker 10: the US alone who are VP level and above.
Speaker 2: So the opportunity is for CHIEF to become an even.
Speaker 10: More powerful community, a powerful network, to really be able
Speaker 10: to create the support and the change that is needed
Speaker 10: to change the face of leadership.
Speaker 2: There's still so much opportunity for us.
Speaker 10: And while I think there is this pressure across the
Speaker 10: ecosystem where companies are pulling back on their commitments to
Speaker 10: DEI and they are pulling back on their commitments to ESG.
Speaker 10: What is needed more than ever are good leaders, regardless
Speaker 10: of gender, regardless of race. And there's still an investment
Speaker 10: that needs to be had there and there's still a
Speaker 10: place for chief to play that role while also really
Speaker 10: continuing to push companies who you know, they made the
Speaker 10: commitments when it was easy, and how do you make
Speaker 10: sure that people are really still holding to those statements
Speaker 10: and the importance and the benefits we all have grown
Speaker 10: to recognize exist for companies who have great diversity in
Speaker 10: their workforce.
Speaker 3: Carolyn Child as Chief, CEO, co founder, we thank you
Speaker 3: for your time that does it for this ad division.
Speaker 4: Of Bloomberg Technology.
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