Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. Hi. I'm
Speaker 1: Jason Kelly and I'm Carol mass Of the next couple
Speaker 1: of hours, we're gonna bring you news of the week,
Speaker 1: insights from the magazine and more. Well, and we're celebrating
Speaker 1: a birthday ninety years of Bloomberg Business Week, Carol, we are, indeed,
Speaker 1: so we're gonna take you through the decades the history
Speaker 1: of the magazine. The topics that have been covered and
Speaker 1: which I'll find fascinating is some of our editors who
Speaker 1: have been there for a long time. We're also going
Speaker 1: to talk about Boeing halting production of its grounded seven
Speaker 1: three seven Max. We look into what really went wrong
Speaker 1: with a guy who has been following that company so
Speaker 1: closely knows it inside and out for many years. Plus
Speaker 1: a fascinating feature story from Monte Real. He's our projects
Speaker 1: and investigations reporter and man. He took us on a
Speaker 1: trip literally to Madagascar to figure out the wild economics
Speaker 1: of Vanilla, plain old Vanilla. It's a great story and
Speaker 1: adventure story that you probably wouldn't anticipate. But let's start
Speaker 1: with that big birthday. It's the nine the IF for
Speaker 1: business Week doesn't look a day over twenty Economics editor
Speaker 1: Peter Coy discusses the magazine's illustrious history. I was with
Speaker 1: the magazine for one third of its life. I'm pretty
Speaker 1: proud of that, but I was not around in nineteen
Speaker 1: So the fascinating thing is the magazine was launched in
Speaker 1: September of nineteen nine, which history bus will recall was
Speaker 1: just seven weeks before the terrible stock market crash which
Speaker 1: helped helped usher in the Great Depression. So not an
Speaker 1: auspicious time to be launching a magazine. But we survived
Speaker 1: those tough times and ended up thriving eventually huge success,
Speaker 1: and at one point they had more advertising pages than
Speaker 1: any magazine in the country, um and and more circulation
Speaker 1: than any business magazine in the world. And so what
Speaker 1: was the idea. From the beginning, it was McGraw hill
Speaker 1: was the publisher, and they bought a company called A. W.
Speaker 1: Shaw which had a magazine called System, the Magazine of Business,
Speaker 1: and that was a monthly. So they spent about a
Speaker 1: year tinkering with it and relaunched it as a weekly,
Speaker 1: which was originally called The Business Week, and it was
Speaker 1: intended to be in a way very much like what
Speaker 1: we intend to do today, which is be uh a
Speaker 1: quick read for people who care about business, whether you're
Speaker 1: a business person yourself or not, but you're interested. It
Speaker 1: was as opposed to some of the trade magazines which
Speaker 1: were very niche, kind of vertical. It was intended to
Speaker 1: be for everyone, covering all of business. That's what I
Speaker 1: always think is great about this magazine because I feel
Speaker 1: like for most individuals, right they have kind of a
Speaker 1: core thing that they're very interested in, but they're interested
Speaker 1: in the world at large, and as we have learned
Speaker 1: over the decades, increasingly it's all interconnected. It is. And
Speaker 1: you know, if you are working for a tech company,
Speaker 1: you'll be interested in the tech coverage, but you might
Speaker 1: have would be most almost more interested in the coverage
Speaker 1: of adjacent areas because you're not following that at a
Speaker 1: day to day basis, and yet it will impinge on
Speaker 1: your life or politics. Right I think about how the
Speaker 1: tech community is really embroiled in political scrutiny right now.
Speaker 1: So tell us your story. How did you get to
Speaker 1: Business Week? I worked for Associated Press and the guy
Speaker 1: from a p was from Business Week, who covered telecom
Speaker 1: was leaving and he recommended me for the job and
Speaker 1: I managed to get it. So my first job was
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Speaker 1: And then it trans offer into technology, and then there
Speaker 1: was an opening and covering economics and with a really
Speaker 1: smart guy named Michael Mandel, and he trained me up.
Speaker 1: And so I know, not not an economists, but I've
Speaker 1: kind of learned and enjoyed learning about economics over the years.
Speaker 1: And so what was attractive to you at that first
Speaker 1: blush when you were coming from the a P. Was
Speaker 1: it sort of a it was a destination in your
Speaker 1: mind or what were you thinking? The beauty is when
Speaker 1: you're at a P you're on top of the news,
Speaker 1: but you're firing out stories all the time. When when
Speaker 1: you're at a magazine you craft something. You have time
Speaker 1: to step back, make sure you get the headline is
Speaker 1: exactly the way you want it, phrase everything because you
Speaker 1: have a little bit of time. And we also have
Speaker 1: obviously we have shorter term coverage too. We have a
Speaker 1: website with quick hits, but with with a magazine story,
Speaker 1: a lot of eyes on it, um, a lot of
Speaker 1: attention to getting it, you know, tuning it up. You
Speaker 1: can think of it that way for just the way
Speaker 1: you may you want to deliver that message. I think
Speaker 1: it's also interesting and you you really, you guys go
Speaker 1: into it in terms of the early history in particular
Speaker 1: about how this magazine, whether it was through some of
Speaker 1: the economists that were featured in the magazine or some
Speaker 1: of the stories could really kind of put pressure on
Speaker 1: the government in terms of policy, really became kind of
Speaker 1: a must read. I think you're I think you're referring
Speaker 1: to our early coverage of what do you call today
Speaker 1: called Kanesy and economics. John Maynard Keines, the British economist,
Speaker 1: was not well known in the United States. Business Week
Speaker 1: was the first, uh and most important publication that sort
Speaker 1: of champions of his ideas. Remember um, when the the
Speaker 1: depression hit, people had no idea what to do about it.
Speaker 1: Economy took extremely steep. Guy. There were a lot of
Speaker 1: people were saying, Okay, let's let's get rid of the rot.
Speaker 1: You know, Uh, if we could just liquidate all these
Speaker 1: people who took on foolish loans, you know, that'll clean
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Speaker 1: said that No, that's the wrong solution. That'll just spiral
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Speaker 1: You don't put a somebody who's just been in a
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Speaker 1: You've got to help and recover, give him ivy fluids
Speaker 1: and so on. And that's sort of that was the message.
Speaker 1: That's Peter coy And he's been with Business Week for
Speaker 1: about thirty years and so fun to talk with him
Speaker 1: about the history of the magazine, some of the stories
Speaker 1: he's covered, and what's really changed in the world of business. Well,
Speaker 1: and we're reminded how prolific he is because so how
Speaker 1: much the magazine from an economics perspective, just anticipated so
Speaker 1: much and really influenced the conversation. This is what Business
Speaker 1: Week does so well. Jason takes something that many of
Speaker 1: us probably take for granted. And uh, I'm talking about Vanilla. Yeah,
Speaker 1: I certainly take it for granted. It's sitting there in
Speaker 1: the Spice cabinet. Although we have noticed over the last
Speaker 1: couple of years. I think anybody who's paying attention to
Speaker 1: Eve price has spiked at times in a really meaningful way. Well,
Speaker 1: there's a story behind that Monty reel. He has some
Speaker 1: of those interesting assignments, goes to some of the most
Speaker 1: interesting places, and this story took him to Madagascar. Are
Speaker 1: Luckily for us, he's back home in Chicago. That's where
Speaker 1: he joins us. So Monty take us to Madagascar and
Speaker 1: to this market. Yeah, so this is a regional market.
Speaker 1: This is the place where vanilla actually enters the international marketplace.
Speaker 1: And it's really remote, it's really kind of hard to
Speaker 1: get to. It's basically a hut, a wooden hut in
Speaker 1: a really small village in northeastern Madagascar, which is the
Speaker 1: vandilla growing region. And just to give you an idea
Speaker 1: of how tough it is to get there. So you
Speaker 1: fly to Madagascar's capital, you take a small plane to
Speaker 1: a small airport in the northeast. Then you have to
Speaker 1: drive over really really bad roads um to try to
Speaker 1: get to this particular market area. And for example, when
Speaker 1: we did that, our driver couldn't go any further because
Speaker 1: the road we were on was actually swallowed by a river,
Speaker 1: so we had to wade across the river. Luckily it
Speaker 1: wasn't very deep, and then walk for a couple of
Speaker 1: hours beyond that to finally reach this little hut really
Speaker 1: in a in a village where dozens of farmers would
Speaker 1: bring their annual harvest of vanilla, and that's where it
Speaker 1: would be bartered but over by international flavor companies and exporters.
Speaker 1: And then go out into the wider world. Get to say,
Speaker 1: there's a great line of your story. How you talk
Speaker 1: about where you went. Is this great observation lab that
Speaker 1: I want to take your words exposes both the genius
Speaker 1: and the insanity of globalized commerce. I mean, that's exactly
Speaker 1: what you saw at work. Yes, Um, it's almost hard
Speaker 1: to imagine some of the things that happen in the
Speaker 1: vanilla trade in terms of, for example, just how the
Speaker 1: crop is paid for. It's all cash. It's a cash economy,
Speaker 1: so the buyers who go to these markets have to
Speaker 1: get cash, you know, along the same route that we
Speaker 1: took to get there. And the biggest denomination bill in
Speaker 1: Madagascar is worth about five dollars. And these buyers are buying,
Speaker 1: you know, tons of vanilla beans. And these vanilla beans
Speaker 1: can when they're cured can cost as much as six
Speaker 1: dollars per kilo, so they need lots of cash. So
Speaker 1: there's actually they bring bales and bales of cash to
Speaker 1: these markets on the back of motorcycles, uh and and
Speaker 1: just being carried. And that's just one example of kind
Speaker 1: of the the strange market that vanilla is because of
Speaker 1: its isolation there in Madagascar, um and also because of
Speaker 1: the price wings and so Mantya, I have to say
Speaker 1: reading this story and Carolin, I've talked a lot about
Speaker 1: it this week, just between the two of us at
Speaker 1: our desk, This notion of how is this market so
Speaker 1: limited to this one really obscure place because this is
Speaker 1: not one of these things that candidly you read about
Speaker 1: in the back of pursuits, where you know, only people
Speaker 1: who are billionaires can get this. I mean, this is
Speaker 1: something we both have in our homes. How has it
Speaker 1: been so limited to this one? Geography? Well, it comes
Speaker 1: from an orchid. Vanilla grows from the flower of an
Speaker 1: orchid um and it's actually native to Mexico, but many
Speaker 1: years ago it was basically transferred to Africa and it
Speaker 1: was found that it grew very well in Madagascar. Um
Speaker 1: and just um, you know, Vanilla is not one of
Speaker 1: those products that can be grown like soybeans or something
Speaker 1: like that easily managed commodity. It really is a stubborn crop.
Speaker 1: As people grow it, describe it um. It likes to
Speaker 1: grow among other plants um and it's incredibly labor intensive,
Speaker 1: so every step of the growing and cultivation process is
Speaker 1: done by hand. Even the pollination of the flowers to
Speaker 1: get the beans to grow is done by hand. So
Speaker 1: um it. Basically, it comes down to one of the
Speaker 1: main reasons why Madagascar dominates the trade so much is
Speaker 1: labor costs. Um. The minimum wage in Madagascar for agricultural
Speaker 1: workers is about eighteen cents an hour. So you know,
Speaker 1: in talking with people who work for vanilla companies, they
Speaker 1: talk about trying to grow um start plantations in other
Speaker 1: tropical areas like um places like Indonesia. There are countries
Speaker 1: in Africa that have started to develop a vanilla industry.
Speaker 1: But they say that, you know, that works well when
Speaker 1: vanilla prices are at highs, but whenever the prices tank
Speaker 1: the it becomes financially unstable to invest in those kind
Speaker 1: of operations. So, Monty, why do the prices swings so much?
Speaker 1: Is it just a case. I mean, I would think
Speaker 1: demand was fairly consistent, but I'm just curious why do
Speaker 1: we see those kind of wild price swings. There are
Speaker 1: a few reasons, and one of the main reasons is
Speaker 1: because Madagascar dominates the trade so much. Um the infrastructure
Speaker 1: in Madagascar is really undeveloped, and it's also an island
Speaker 1: there in the Indian Ocean that's that's vulnerable to storm. So,
Speaker 1: for example, a few years ago, there was a big
Speaker 1: cyclone that basically leveled the vanilla fields in the northeast.
Speaker 1: And vanilla is a crop that it takes three years
Speaker 1: from the time it's planted for the beans too for
Speaker 1: the plant to be mature enough to produce beans. So
Speaker 1: if you have a concentrated area and something happens to
Speaker 1: that area, it really can set the production and supply back.
Speaker 1: And that's what happened a few years ago. And ever
Speaker 1: since that cyclone that came through in the early two thousand's,
Speaker 1: the market has been really volatile. It's been, you know,
Speaker 1: spiking up to six hundred dollars or so at a
Speaker 1: high per kilo, and then it can go down to
Speaker 1: as low as twenty or thirty. So it's just an
Speaker 1: enormous range, And so would you take a step back
Speaker 1: and think about this story and highly recommend anybody read this, like,
Speaker 1: you know, sit down, you know, take some time over
Speaker 1: the holiday and read it, because you'll learn something about
Speaker 1: economics and politics and trade, aid and all of that.
Speaker 1: But what do you take away as you sort of
Speaker 1: come back to the United States about either the state
Speaker 1: of global trade, the state of demand economics? What is it?
Speaker 1: I think this is actually a really good kind of
Speaker 1: window to look at how global trade works. And the
Speaker 1: surprising thing for me, I think was just how how
Speaker 1: wild some of that is at the most elemental level.
Speaker 1: So that's monte Real. We love catching up with him.
Speaker 1: He does some wonderful deep dive stories. He's our Projects
Speaker 1: and Investigations reporter, so he literally took a trip to
Speaker 1: Madagascar and just wanted to find out Vanilla. We take
Speaker 1: it for granted, Jason, right, It's in all of our pantries.
Speaker 1: We use it for baking and for cooking. But what's
Speaker 1: interesting is what it takes to get those vanilla beans
Speaker 1: basically to all of us. Yeah, who would have thought
Speaker 1: that a story involving vanilla would involve waiting through a
Speaker 1: river sort of chalkboarding and negotiating and bartering. It's a
Speaker 1: really cool story. Loved it. Three poll market. Well, it
Speaker 1: makes some people's eyes glaze over, makes others turn away
Speaker 1: from you at a cocktail party. It's a market that
Speaker 1: always always needs to be explained, Jason, which is why
Speaker 1: we have Joe Wives. He joins us just about every
Speaker 1: day on our daily radio show Pizza, keeps us honest
Speaker 1: about the markets. All right, Joe, you're here with us
Speaker 1: in New York City. Keep us honest on the repo market.
Speaker 1: Why do we care about this? Again? The repo market
Speaker 1: is essentially how various entities, whether it's a bank, whether
Speaker 1: it's a fun hedge fund, money market fund, how they
Speaker 1: financed themselves on an overnight basis. Because nobody wants to
Speaker 1: just hold cash because cash, you know, it doesn't really
Speaker 1: earn anything, and so people always want to be maximizing
Speaker 1: their profits. So what they do when they need liquidity
Speaker 1: is they borrow it overnight, and they might pledge some
Speaker 1: collateral like treasury bonds or mortgage bonds or something like
Speaker 1: that to make the cash bills that they need to
Speaker 1: pay um so that they can make the bills they
Speaker 1: need to pay right. It feels like one of those
Speaker 1: things that no one really cares about until it stops working,
Speaker 1: which is essentially what happened and Tember right exactly right.
Speaker 1: So in September we saw the rates on overnight repo
Speaker 1: borrowing absolutely sore, and it's important to recognize that prior
Speaker 1: to that, for most of the time, it moves roughly
Speaker 1: in line with where the FEDS sets the rate, and
Speaker 1: it's one way, the one mechanism view which the FED
Speaker 1: sort of sets short term interest rates and you expect
Speaker 1: the repo market to behave. The issue is that with
Speaker 1: the the cash that banks have is really reserves held
Speaker 1: at the FED, and the FED, as part of its
Speaker 1: quantitative tightening trying to quote normalize its operations post crisis,
Speaker 1: has been reducing the available supply of cash at the FED.
Speaker 1: At the same time, you have regulators telling banks you
Speaker 1: have to hold a certain amount of cash as part
Speaker 1: of post crisis regulations to ensure that you have adequate liquidity.
Speaker 1: So what we saw in September was this confluence of
Speaker 1: multiple things. There's the FED tightening reducing the amount of
Speaker 1: reserves available. There's the regulatory restraints saying no, you have
Speaker 1: to hold these reserves even though the FED is eliminating
Speaker 1: their existence. And then you had this timing issue. We're
Speaker 1: due to tax payments and treasury auctions and things like that.
Speaker 1: Suddenly that created a lot of demanding system. That's exactly right.
Speaker 1: So this end of quarter payments things like that. There's
Speaker 1: another issue, which is that at quarter end and year
Speaker 1: end is when regulators come and they take a look.
Speaker 1: And the analogy that I like to use is you
Speaker 1: might have a really messy bedroom, but if you know,
Speaker 1: like five minutes before your mom or dad gets home,
Speaker 1: then suddenly you clean up. So occasionally throughout the year,
Speaker 1: the regulators come like peeking in and they want to see, well,
Speaker 1: how liquid is your balance sheet? What kind of assets
Speaker 1: do you hold? So everybody scrambles to hold the highest
Speaker 1: quality and most liquid assets right at the same time.
Speaker 1: The problem is if there's a finite amount of them,
Speaker 1: then you really have to pay to get them. So
Speaker 1: should we expect another squeeze coming in in December? Here
Speaker 1: we're wrapping up not only a quarter but a year.
Speaker 1: This is a really a really big question. And so
Speaker 1: the man that everybody listens to en REPO is this
Speaker 1: strategistic credit squeeze. His Alton posts are whenever he puts
Speaker 1: out a note, everybody wants to get it, like what
Speaker 1: did Sultan say? So he is concerned about this, that
Speaker 1: there's going to be this major liquidity squeeze, is various
Speaker 1: entities demand this liquidity ahead of the regulators checking in
Speaker 1: at the end of the year. The flip side is
Speaker 1: that the FED seems to be way more cognizant of
Speaker 1: the risks this time around. They've certainly stopped shrinking the
Speaker 1: supply of reserve balances so that eases some of the strain.
Speaker 1: They've also engaged in some of these operations where our
Speaker 1: people can borrow essentially liquidity at the FED. So it's
Speaker 1: kind of unclear right now. But perhaps what we saw
Speaker 1: in September and Zoltan's warning themselves may have been what
Speaker 1: kicked regulators in the fit into gear to present a
Speaker 1: blow up, but we don't know for sure. Well, and
Speaker 1: it's interesting, I mean, the number of questions and the
Speaker 1: amount of time that j Pal had to spend during
Speaker 1: his last press conference essentially reassuring answering questions from reporters
Speaker 1: about this. It felt like he did a good job,
Speaker 1: but it was one of those moments where he thought, man,
Speaker 1: he really is talking about this a lot. It's extremely
Speaker 1: complicated stuff, and a lot of people in the market
Speaker 1: still don't get it. Actually, Tracy Halloway, one of the
Speaker 1: authors of the Business Week piece about Postsar and I,
Speaker 1: we had interviewed him for a podcast, and the most
Speaker 1: important thing he said to me. The takeaway is reserve
Speaker 1: balances at the fit. He called them tokens, and so
Speaker 1: you can. And what I love about that analogy is
Speaker 1: you could imagine going to an arcade and everybody has
Speaker 1: enough money to play the games, so no one is
Speaker 1: actually broke. But if the token machine isn't working, or
Speaker 1: maybe some people pocketed tokens, it took him home. You
Speaker 1: people can't play the game. The game is financed. Everyone
Speaker 1: might have money, everyone might have solid balance sheets, and
Speaker 1: you could still have a crisis if the tokens are missing.
Speaker 1: And that's Joe wisintal. We love catching up with him
Speaker 1: on our daily show. He's always got a little bit
Speaker 1: of a quirky perspective, but I have to say he's
Speaker 1: set the table beautifully for this. I feel like now
Speaker 1: every conversation I go into about the repo market and
Speaker 1: arcade is going to pop into my mind. He really
Speaker 1: did explain it well, and it's an important story. It
Speaker 1: really kind of confused the markets, confused investors. But it's
Speaker 1: been a hot topic when it comes to the Federal
Speaker 1: Reserve and j Powell specifically, and one that's going to
Speaker 1: carry us into So definitely check that out. So no
Speaker 1: doubt about it. Jason me too has impact of the
Speaker 1: financial community Wall Street, and yet many might argue that
Speaker 1: it's day of reckoning has yet to come. Well, and
Speaker 1: that's what's so interesting about these remarks is that it
Speaker 1: points out the fact that, yes, there's been a reckoning
Speaker 1: ish so far. Uh And it really when you look
Speaker 1: at it versus entertainment especially, it has not really resonated
Speaker 1: or reverberated, i should say, the way that some expected.
Speaker 1: Max Abelson, he and Cacha Porta Kinski have the remarks
Speaker 1: in this week's magazine. Congrats on this. It's very thought provoking.
Speaker 1: Max joins this here in New York City. So what
Speaker 1: do you set out to do here? Well, first of all,
Speaker 1: I was working with Cachansky and it's basically a fluke
Speaker 1: that I'm here inside of her because it really should
Speaker 1: be her she's really thoughtful about this stuff. But you know,
Speaker 1: sometimes in the news room we sit and look at
Speaker 1: each other and we're like, you know, where is me too?
Speaker 1: In the financial services industry, I mean, we know from
Speaker 1: years of chronicling headphunds and banks and private equity and
Speaker 1: asset management that Wall Street, you know, just like lots
Speaker 1: of other industries, including journalism, has profound imbalances, and women
Speaker 1: quietly say that they are harassed and discriminated against and assaulted,
Speaker 1: and that they fear retribution. But we haven't seen that
Speaker 1: broad moment of change. And what this piece is about
Speaker 1: is this sort of the system, this machine of silence
Speaker 1: that we've discovered piece by piece. That that explains why.
Speaker 1: All right, well, because I do think after me too
Speaker 1: in the entertainment world. Think we all thought, okay, Wall
Speaker 1: Streets next, and it didn't quite happen. I have a
Speaker 1: word for you, arbitration. Arbitration, I'm embarrassed to say, is
Speaker 1: one of those things that I mean, if we we've
Speaker 1: known each other for years, if if you brought that
Speaker 1: word up to me two and a half years ago,
Speaker 1: I'm pretty sure I would more or less draw a blank. Right.
Speaker 1: In fact, I was on the phone with a Wall
Speaker 1: Street veteran who said to me, if you really want
Speaker 1: to understand why we're not seeing me too on Wall
Speaker 1: Street And this was, you know, more than a year ago.
Speaker 1: She was like, you have to look at the invisibility cloak.
Speaker 1: And I was like, invisibility cloak. She was like, the
Speaker 1: system of arbitration. That's the system that's parallel to the courts,
Speaker 1: and it's behind closed doors. It's basically a private justice
Speaker 1: system that used to be relatively obscure sort of for
Speaker 1: you know, fights within an industry, and Wall Street itself
Speaker 1: really helped it expand so that it now covers essentially
Speaker 1: two out of three workers at big US companies. And
Speaker 1: Wall Street, unlike other industries, runs its own arbitration hearings,
Speaker 1: and it's Wall Street. It's definitely a master of arbitration,
Speaker 1: and it really helps explain a lot. I love this
Speaker 1: intens in the story. But the finance industry's mastery of
Speaker 1: this system, meaning forced arbitration, has prevented the revolution of
Speaker 1: the past two years from touching it, meaning the meat
Speaker 1: too revolution. Yes, And look, I mean if a Wall
Speaker 1: Street executive, we're here with us, um I talked to
Speaker 1: them about this all the time. They women, Well, the
Speaker 1: senior executives are all men, but the human resources executives
Speaker 1: are some sometimes women. And I've dealt with wall Shoot
Speaker 1: lawyer's were women foreshore, and so has Katya and so
Speaker 1: is Gavin Lynch who was and Serena Wilmer, who both
Speaker 1: contributed reporting to this piece. They say, look, arbitration. They'll
Speaker 1: say it's quicker, it's cheaper, it's quieter, um, but it's
Speaker 1: just as fair. That's that's what they'll say. That's their
Speaker 1: defensive arbitration. You know, women will say it stops us
Speaker 1: from banning together and from learning about each other, and
Speaker 1: from sort of instituting major change. The kind of class
Speaker 1: action lawsuits that we've written about in the past few years,
Speaker 1: I can't have those with arbitration. Well, and let's talk
Speaker 1: about both systemic and cultural aspects as well, because you
Speaker 1: dig into this two in this heats of the cultures
Speaker 1: of a lot of these firms are set up in
Speaker 1: a way both structurally and just ethos wise that it
Speaker 1: doesn't feel like a safe place to bring these sorts
Speaker 1: of complaints. Even the advocates that there would be advocates
Speaker 1: within the firms. HR for instance, aren't really on the
Speaker 1: side of the employees. They're sort of on the side
Speaker 1: of kind of keeping things quiet and keeping it all
Speaker 1: under wraps. Our story focused on three sort of crystallizing moments.
Speaker 1: One was Candi fisch Gerald, which has to do with arbitration.
Speaker 1: Another was Ken Fisher, who of course had those famous
Speaker 1: comments now at a conference in California. And the third
Speaker 1: was Lloyd's of London. I mentioned Gavin Finch, who just
Speaker 1: did really amazing, amazing work out of London. I mean
Speaker 1: like jealousy inducing, you know, but what is really upsetting
Speaker 1: about it? And CONTI and I talked about this with
Speaker 1: Becca Rebecca Greenfield, our editor, you know what's up sending
Speaker 1: about the Lloyd's story, and a couple of others like
Speaker 1: it is not just that it paints a picture of
Speaker 1: guys behaving like extremely badly. What's profoundly upsetting about the
Speaker 1: Lloyd's story. And another one the firm called MG also
Speaker 1: in London, that also written by Gavin is it gives
Speaker 1: you a sense that these women went to HR and
Speaker 1: and talked about being assaulted for example, or being accosted,
Speaker 1: and that HR was basically like, it'll be bad for
Speaker 1: your career, if you say anything, you know, don't smile
Speaker 1: around him. I think that was a literal response from
Speaker 1: human resources at a big institution that Gavin Finch found,
Speaker 1: don't smile around him, but maybe a dressed differently, you know,
Speaker 1: like change your behavior in order to avoid these situations
Speaker 1: in the future. Right. Well, And what's interesting too is
Speaker 1: I love how you guys kind of breakdown. What's different
Speaker 1: maybe about the financial industry also is that predominantly it's
Speaker 1: been built by men. Still the senior positions are men.
Speaker 1: And there's a lot of money at stake here as well,
Speaker 1: there sure is, and that money equals power there sure is.
Speaker 1: Jean Christensen, who is a lawyer and employee side lawyer
Speaker 1: we door, said to that in almost as well as
Speaker 1: you just did. Well, I kind of was taken home
Speaker 1: fair enough credit where it's but um, listen, you know,
Speaker 1: to speak honestly with you about sort of the experience
Speaker 1: of being a Wall Street reporter and trying to cover
Speaker 1: this stuff like vividly but also fairly right, you know,
Speaker 1: what this story is about is basically this machine, the
Speaker 1: system that Catty and I and Sabrina and Gavin and
Speaker 1: others in the newsroom sort of found ourselves up against.
Speaker 1: But you know, one thing that's nice about working with
Speaker 1: our editor, Rebecca is it she deals with um the
Speaker 1: gender uh pay gap, and with discrimination across capitalism. And
Speaker 1: I think that there's a reasonable point to be made
Speaker 1: that we don't get into the story necessarily, that maybe
Speaker 1: this isn't a Wall Street problem. You know, maybe it's
Speaker 1: a capitalism problem, or a power problem, or a gender problem.
Speaker 1: What about the rest of corporate America? Like for comparison,
Speaker 1: I mean, you guys have done incredible reporting over the
Speaker 1: past couple of years really when it comes to this issue.
Speaker 1: But I do wonder, like I was thinking about when
Speaker 1: I read it, I'm like, Okay, here's a Wall Street,
Speaker 1: but what about the rest of corporate America? Has it
Speaker 1: come along? It's fair to say that, you know, I
Speaker 1: think just about sitting at a Bloomberg and reading the
Speaker 1: news that comes down the wire. You know, McDonald's CEO
Speaker 1: leaves you know that you you do see changes that
Speaker 1: don't necessarily hit Wallstreet. But maybe what we've seen over
Speaker 1: the past year, in addition to learning about this system
Speaker 1: of silence, is maybe we're seeing cracks, you know, learning
Speaker 1: about Ken Fisher, who by all accounts, would say stuff
Speaker 1: like this so sexual references getting into girls pants. He
Speaker 1: tweeted about slavery. People would basically shrug this off, Sabrina
Speaker 1: told us, or you know, like laugh uncomfortably, but like
Speaker 1: that's it. This year something changed. I think about reading
Speaker 1: stories by Annie Massa about Black Rock, literally the biggest
Speaker 1: asset manager in the world, where apparently Larry Fink sat
Speaker 1: down his biggest deputies and we're like, was like, guys,
Speaker 1: like you gotta watch your behavior. Two of the people
Speaker 1: in that top group are now out because I think
Speaker 1: of breaking rules around company relationships. Maybe maybe that means
Speaker 1: we're starting to see cha just but maybe not. But
Speaker 1: the arbitration system still exists. The arbitration system still exist.
Speaker 1: And it's a good question because big tech companies, several
Speaker 1: big tech companies have moved away from having women who
Speaker 1: are claiming harassment go to arbitration. They're letting them out
Speaker 1: of arbitration agreements. Wall Street is different. Wall Street likes
Speaker 1: this system and it helped pioneer it, and Wall Street
Speaker 1: so far is not moving away from it. You closed
Speaker 1: the piece, I think with a really important point and
Speaker 1: a name that looked like it might trigger a whole
Speaker 1: series of revelations and didn't. And that's Jeffrey Epstein. What
Speaker 1: do we know? And what might we have known had
Speaker 1: he not died in jail. It just felt like so
Speaker 1: much was going to come out. There were those moments
Speaker 1: this summer where it was like, what huge names are
Speaker 1: will falling now, because you know, Epstein was close with
Speaker 1: billionaires and with hedge fund managers and with chief executives.
Speaker 1: Instead though he passed away, and it feels like maybe
Speaker 1: that will be um when when I think about whether
Speaker 1: or not we're going to see change, that feels somehow
Speaker 1: like a sign that the status quo kind of somehow.
Speaker 1: Maybe it's arbitration, maybe it's a culture of fear, maybe
Speaker 1: it's money, maybe's human resources. Somehow the status quo wins
Speaker 1: out and maybe it will keep doing that, or maybe
Speaker 1: we're beginning to see change and it it wins out
Speaker 1: at least for now. But when you look back at
Speaker 1: Harvey Weinstein and you think about the times that when
Speaker 1: you read the books now that have been written about
Speaker 1: that case and the reporting that went into it, so
Speaker 1: many times they almost were there, almost were there, and
Speaker 1: then they were And you wonder if that moment is
Speaker 1: coming for what that's right. Well, shout out not only
Speaker 1: to the journalists who covered Harvey Weinstein and to the
Speaker 1: reporters in this newsroom, but also reporters at places at
Speaker 1: are in Bloomberg, and especially shout out to Kasansin, my
Speaker 1: co writer who couldn't join us. Day All right, great story,
Speaker 1: thought provoking, a really interesting to head into twenty big questions,
Speaker 1: more to come for sure, Max Shabelson really appreciate it.
Speaker 1: Thanks ninety years of Business Week, the magazine so many
Speaker 1: changes over the years, including tweks to the name. Someone
Speaker 1: with deep, deep, deep ties to Business Week is none
Speaker 1: other than Jim Ellis, all the way back to nineteen eighty.
Speaker 1: He has seen some things. He's here for us in
Speaker 1: New York City. Talk about Business Week. When you joined
Speaker 1: the nineteen eight what was it like. Oh, it was
Speaker 1: a different magazine. Obviously we were a different place, different owner,
Speaker 1: but there were a lot of things that were surprisingly
Speaker 1: the same. And it's always been a big fault that
Speaker 1: we do more than simply report the news. What we
Speaker 1: want to do is add insight and um, you know,
Speaker 1: add analysis so that the reader can you know, not
Speaker 1: just sort of chronicle of what happened this week, but
Speaker 1: also why it's important, why it matters, and what might
Speaker 1: become of it in the future. And that's the value
Speaker 1: add that I think has sort of gone all the
Speaker 1: way through all ninety years. What's really fun is that
Speaker 1: there are three people. The section that covers ninety years
Speaker 1: of Business Week kicks off identifying three people who span
Speaker 1: the entire lifetime the ninety years of Business Week. You
Speaker 1: are one of them. Not that you go back ninety years.
Speaker 1: But what's fascinating is this whole idea of you know,
Speaker 1: editors and individuals passing down kind of the history of
Speaker 1: the magazine. That's one of the nice things about our
Speaker 1: magazine is that, you know, there's a lot of continuity.
Speaker 1: I might work with people who I have literally known
Speaker 1: for thirty years and um, but one of the nice
Speaker 1: things about that is that we've seen a lot of
Speaker 1: things happen in business, and there's a lot of context
Speaker 1: that you know, we already know. We're not inventing, you know,
Speaker 1: sort of we're not rushing around. Oh my god, I
Speaker 1: was there at the opening of Disney World. I'm sort
Speaker 1: of embarrassed to say I covered that, and um, you know,
Speaker 1: but I covered facult business in the past. I've been
Speaker 1: the editorial page editor. I've been a lot of things here,
Speaker 1: and so a lot of us can easily shift between stories,
Speaker 1: and we all hopefully can add a lot when we
Speaker 1: work with younger reporters as well, because we've seen a
Speaker 1: lot of these stories. For the surprising thing about business
Speaker 1: is that as much as it changes a lot of
Speaker 1: the themes, you know that we thought of when I
Speaker 1: was young in this business, you know, sort of changing technology,
Speaker 1: changing roles of you know, who the consumer is, changing
Speaker 1: roles of women in business, all of those that were
Speaker 1: you know, issues thirty forty years ago or issues today. Well,
Speaker 1: and Jim, one of the roles I believe you played
Speaker 1: and keep me honest here is you're the chief of correspondence,
Speaker 1: and so you were dealing with all the outlying bureaus
Speaker 1: which for so long and obviously now in a different
Speaker 1: context at Bloomberg, that really feeds the magazine in a
Speaker 1: lot of ways. That gives it a feel, I should
Speaker 1: say that is far beyond just a bunch of people
Speaker 1: in New York putting together in magazine. Tell us about that.
Speaker 1: That's one of the strengths that we've always had is
Speaker 1: being able to have a bureau system or a system
Speaker 1: of reporters around the world who are you know, sort
Speaker 1: of close to their companies, but also picking up information
Speaker 1: that it's often difficult to get if you're seven time
Speaker 1: zones away. But um, you know, having people in Asia
Speaker 1: back before uh, you know, before the handover Hong Kong,
Speaker 1: before China was completely open, allowed us to be early
Speaker 1: on stories like that and to understand a lot of
Speaker 1: why things either happen very fast or they don't happen
Speaker 1: nearly as fast as a lot of people in New
Speaker 1: York seemed to think. We've been We've benefited from you know,
Speaker 1: having those bureaus back in the day, but we're especially
Speaker 1: benefiting from that now because Bloomberg has a huge editorial
Speaker 1: staff that we're able to draw on, you know, for stories,
Speaker 1: for reporting, for insight, for you know. This is a
Speaker 1: wonderful place to work simply because you've got you know,
Speaker 1: over two thousand journalists and analysts who can sort of
Speaker 1: you know, throw into a story. If I've got a
Speaker 1: question or a problem about something, I can call somebody
Speaker 1: tomorrow in a cross I can call somebody tomorrow in
Speaker 1: you know, sort of Singapore and we can talk it through. Yeah,
Speaker 1: you really get a feeling of what's going on on
Speaker 1: the ground, and it's so important in terms of reporting.
Speaker 1: Tell us a little bit about a little bit more
Speaker 1: about you know, bringing women into the magazine, uh, and
Speaker 1: the consumer or to like how it's kind of evolved
Speaker 1: it changed because originally Business Week was heavily um sort
Speaker 1: of based on economic coverage. I mean, and you can
Speaker 1: undersange by man written by Man saying that you know,
Speaker 1: it started the year of the Great Depression started and
Speaker 1: so therefore a lot of the early years there was
Speaker 1: a huge emphasis on the economy, which was you had
Speaker 1: completely fallen apart, and you know, there were the debates
Speaker 1: about whether kanziean isn't and you know, and we were
Speaker 1: a big player in that. But as the economy strengthened,
Speaker 1: all of a sudden, you know, the magazine gets an
Speaker 1: opportunity to shift along with society and looking at other things.
Speaker 1: First was the notion that you know, the consumer was changing.
Speaker 1: You know, all of a sudden, we had people who said, oh,
Speaker 1: one size doesn't fit all. It's not Henry Ford again saying,
Speaker 1: you know, you can have the model T in any
Speaker 1: color as long as it's black. You know, all of
Speaker 1: a sudden, market segmentation became this big deal, and also
Speaker 1: new businesses were popping up because technology was suddenly inventing
Speaker 1: new industries, new things that were more consumer focused. And
Speaker 1: what happened is that, you know, we had to figure
Speaker 1: out ways to cover that, but also management had to
Speaker 1: figure out ways to manage that. So the idea of
Speaker 1: a professional manager came up, because before you know, you
Speaker 1: sort of were in a business, you state, in the
Speaker 1: general entire life. But then in the fifties and sixties,
Speaker 1: especially the notion that there could be these nbas, these
Speaker 1: these professional managers who could learn how to run a
Speaker 1: business and not have spent thirty years in it. We
Speaker 1: were early on that we were back in the nineteen fifties. Um,
Speaker 1: in the early fifties we wrote about, um, you know,
Speaker 1: this notion of can a manager be actually trained? And
Speaker 1: it was pegged to um Alfred P. Sloan who was
Speaker 1: the CEO of General Motors and famous management guru who
Speaker 1: who decided to give five million dollars to M I
Speaker 1: T to open up a business school. And people were like,
Speaker 1: what in the world is this for, that a general
Speaker 1: manager can be taught, and we spent a lot of
Speaker 1: time talking about, you know, what are the positives, what
Speaker 1: are the negatives, and and sort of we were early
Speaker 1: on that and it it's served us well. And obviously
Speaker 1: in the by the time we got around to the
Speaker 1: nineteen eighties, we were doing business school rankings and you know,
Speaker 1: and and the NBA was considered to be wow. But
Speaker 1: at the time we started covering this, the whole idea
Speaker 1: of formal management education was was considered to be this
Speaker 1: sort of fringe thought. That's Jim Ellis, our business editor.
Speaker 1: He has been at the magazine for forty years. And
Speaker 1: what's really fascinating we highlight that through three individuals they
Speaker 1: basically their tenure at the magazine covers the span of
Speaker 1: the magazine in its entirety. Jim is one of them.
Speaker 1: He is and his perspective, having overseen the correspondence for
Speaker 1: the magazine now looking after the business section, he knows
Speaker 1: these stories from a lot of different perspective. Tech bubble,
Speaker 1: housing bubble, a bubble and assets. We've seen a few bubbles, Jason,
Speaker 1: in our investment lifetime. The question is, and I love
Speaker 1: this in the remarks this week, have they become a
Speaker 1: necessary evil in order for developed nations to grow. Well,
Speaker 1: it's a big question, and he's always asking big questions.
Speaker 1: Peter coy is in the magazine and bubble are fascinating
Speaker 1: in part because it's such a loaded word at this point.
Speaker 1: I mean, I did an interview recently with an asset
Speaker 1: manager and somebody pulled me aside beforehand and said, be
Speaker 1: really careful if you're going to ask him about a bubble,
Speaker 1: because it just sets off a whole series of rhetorical
Speaker 1: and intellectual thoughts and made people's minds that you take
Speaker 1: on the bubbles here, Well, what when you look back,
Speaker 1: what's happened over the past thirty or so years of business.
Speaker 1: We had the Great economy of the nineteen nineties, the
Speaker 1: dot com boom and massive investment in telecommunications and so on,
Speaker 1: and then it turned out to be probably over investment,
Speaker 1: as was revealed with a big bus that happened right
Speaker 1: around the year two thousand. Shortly after that, the economy
Speaker 1: started to recover again, and this time it was housing. Uh,
Speaker 1: probably over investment in housing, and that was fueled by
Speaker 1: the subprime bubble, the bad mortgages, stupid and fraudulent mortgages,
Speaker 1: and so to two times in a and here we
Speaker 1: are again. The economy is recovering from the worst financial
Speaker 1: crisis is the Great Depression. We've had a very long
Speaker 1: run of growth. But what maybe we're heading into another bubble,
Speaker 1: as evidenced by the lowest interest rates in the history
Speaker 1: of the world. You know, we're in negative territory in
Speaker 1: Europe and Japan as far as I can tell, somebody
Speaker 1: can try to disprove me. This has never happened before.
Speaker 1: And so what happens when rates go so low? Investors
Speaker 1: are desperate for yield, so they look for wherever they
Speaker 1: can get it, which means they take on more risk.
Speaker 1: And that's sort of the definition of a bubble when
Speaker 1: you when you ignore risks and you you just make
Speaker 1: a bet that this asset price is going to go
Speaker 1: up and up and up. Well as you remind us
Speaker 1: that investors get you know, kind of stressed out when
Speaker 1: prices are down in terms of assets. And yet that's
Speaker 1: the point when there's usually opportunity versus when you've got
Speaker 1: valuations at higher levels. Right now, it's a holiday season.
Speaker 1: You know, I'm not gonna sing, but but there's this
Speaker 1: attitude like, hey, times are really good stock market is
Speaker 1: hitting new highs. Just there's a lot of jubilation in
Speaker 1: the air. Well, that's when you should be worrying, because
Speaker 1: that's when you know, bad loans get made in good times.
Speaker 1: And the American economist Time and Minsky said, stability breeds
Speaker 1: instability is exactly when we overreach. Well, and one thing
Speaker 1: I love in your story is you talk about here
Speaker 1: we are ironically low inflation environment, and yet you are
Speaker 1: seeing riots around the world, especially in developing areas about
Speaker 1: the high cost of living. Actually even in our own
Speaker 1: country where there are cities and so on and so forth.
Speaker 1: It doesn't quite make sense, does it. Right. A great
Speaker 1: example actually is Hong Kong. Everybody focuses on how the
Speaker 1: students are protesting against the mainland China, and that's certainly
Speaker 1: part of it, but it's also just there people are
Speaker 1: fed up with the most expensive housing costs in the world. Well,
Speaker 1: what is that. That's a bubble, that's a real residential
Speaker 1: real estate bubble in Hong Kong. And yet here we
Speaker 1: are in this bullmarket that shows no signs of slowing down.
Speaker 1: And there is a case to be made, and we've
Speaker 1: talked about it on this program before. That maybe this
Speaker 1: has been managed the right way all along, despite all
Speaker 1: of those headwinds and warning signs that are out there.
Speaker 1: How do you square that and especially the jubil achan
Speaker 1: and the enthusiasm that you reference that the consumer stuff.
Speaker 1: I'm trying to steer this article away from exactly deciding
Speaker 1: whether how or how much we're over valued or undervalued
Speaker 1: today getting back to the bigger concepts of whether economy.
Speaker 1: The U S economy almost depends on bubbles growth. And
Speaker 1: you know, bubbles are not entirely bad because sometimes that
Speaker 1: exuberance can lead people to invest in things that need
Speaker 1: to be invested in. So we can go back to
Speaker 1: the connect hours and railroads in the nineteenth century, radio
Speaker 1: in the twentieth century, fiber optics in the nineties, or
Speaker 1: even today some of the dot some of the social
Speaker 1: media platforms and so on. If taken in a lot
Speaker 1: of money and good things end up happening for consumers,
Speaker 1: although sometimes the investors lose out. Uh. But the bad
Speaker 1: side of a bubble is the wasted resources. And uh
Speaker 1: go back to all these phantom zombie housing developments that
Speaker 1: were built and then um never occupied. UM. Well, and
Speaker 1: we should point out and maybe this is obvious that
Speaker 1: bus tend to hurt people, like in the sense of
Speaker 1: think about, you know, the recession that came right after
Speaker 1: the dot com bust. Do you think about the Great Recession?
Speaker 1: You know, people lost their jobs, people lost their homes.
Speaker 1: When it busts, it can, it can hurt. The unemployment
Speaker 1: rate is extremely low right now, but um, if we
Speaker 1: hit a bust, then it would shoot it up. And
Speaker 1: of course the last hired first fired, and the people
Speaker 1: who chose to invest, like I feel so sorry for
Speaker 1: those people who bought houses in two thousands six, two
Speaker 1: thousand and seven with bad loans and then we're wiped
Speaker 1: out very quickly. But go back to the question I posed,
Speaker 1: and it was really your question, your story about have
Speaker 1: bubbles become a necessary evil in order for wealthy nations
Speaker 1: to grow? I mean, is it? Is it? I'm curious
Speaker 1: for from the folks that you talked to. There's a
Speaker 1: guy who appears on Bloomberg Television once in a while,
Speaker 1: super smart David Levy. He's from the Jerome Levy Forecasting Center,
Speaker 1: and he's an inheritor of a tradition going back to
Speaker 1: people like him and Minsky mentioned earlier, who would argue
Speaker 1: that he has a paper out called Bubble or Nothing
Speaker 1: where he kind of posites the idea that we all
Speaker 1: maybe that's true. What what Carol said that maybe, Um,
Speaker 1: it's almost as though we're geared to it because balance
Speaker 1: sheets have gotten so big, so top heavy. Um, people
Speaker 1: owe so much money that the only way you can
Speaker 1: relieve some of that debt burden is by kind of
Speaker 1: the interest rates. So whenever there's a financial crisis, the
Speaker 1: interest rate comes down, and we see the Federal Reserve
Speaker 1: of the European Central Bank banker advants on doing that
Speaker 1: push she rates down and down and down. Each of
Speaker 1: cycle we go through, they get lower. Well, guess what,
Speaker 1: they pretty much hit bottom. You cannot go much lower
Speaker 1: than somewhat below zero. The US is above that floor,
Speaker 1: but Europe Japan pretty much as the floor. Right, And
Speaker 1: so what happens next? Right? And the US is flirting
Speaker 1: with rates, and certainly the president has advocated to some
Speaker 1: extent for that. He has h Once you've once you've
Speaker 1: exhausted that weapon against recessions, then you've got a big
Speaker 1: problem in your hands. That's Economics editor Peter Coy and
Speaker 1: I love this story because we've seen so many different
Speaker 1: bubbles in our lifetime, whether it's the tech bubble, whether
Speaker 1: it's the property bubble. And I love that Peter asked
Speaker 1: the question, and I think many are asking the question.
Speaker 1: Do we need bubbles in order to bring about growth,
Speaker 1: especially in a developed economy? Maybe bubbles are kind of
Speaker 1: good for you who knew climate change? We know jay
Speaker 1: and impacts businesses, impacts industries, homes, how people live. But
Speaker 1: the story in the Economic section notes this week that
Speaker 1: it may have helped fuel the popular uprising that is
Speaker 1: seen millions marching on the streets of Chile. This is
Speaker 1: a fascinating and disturbing story. It takes us, as you
Speaker 1: say to Chili. Christina Lynn Blad, our economics editor, fearlessly
Speaker 1: is here talking about this story. There's a lot to
Speaker 1: kind of be disturbed by here, I have to say.
Speaker 1: In the connections that you draw are pretty start Yeah.
Speaker 1: I mean, I think that most of the coverage of
Speaker 1: these protests has focused on dissatisfaction over you know, the
Speaker 1: economic model and how it relates to you know, meager
Speaker 1: pensions and people feel like, you know, the education system
Speaker 1: is you know, is producing inequality and the usual suspects exactly.
Speaker 1: But against But we looked at the backdrop of this,
Speaker 1: which is a ten year mega drought. We have now
Speaker 1: tech mega in front of these events, and that's been
Speaker 1: affecting central Chile where which is where most of the
Speaker 1: population is, the north already very arid, and and so
Speaker 1: we looked at these water fights have been played I
Speaker 1: mean literally that have been playing out, and how these
Speaker 1: protests kind of you can't say they literally jumped from
Speaker 1: rural areas to the city, but there's definitely been this
Speaker 1: echoes of like unequal access to water, equals unequal access
Speaker 1: to education, unequal access to opportunity. You know, we'll tell
Speaker 1: us about the impact that it's had on on the lifestyle,
Speaker 1: think about farmers in Chile and so much more. How
Speaker 1: is it played out? So, I mean we talked to
Speaker 1: to you know, people who have lost more than half
Speaker 1: of their livestock, you know, in the last couple of years.
Speaker 1: And and there's also an area in particular in this
Speaker 1: valley where avocado farming has um you know spread of
Speaker 1: course to feed this global demand for avocados, in particular
Speaker 1: a lot of exports to the UK that valley. And
Speaker 1: in that instance, it's because basically the avocado farmers are
Speaker 1: being accused of exploiting their water rights that they acquired
Speaker 1: years ago and also tapping verse illegally. And so all
Speaker 1: the small farmers in the area, um are you know,
Speaker 1: have have the rainfall has been lacking, so they don't
Speaker 1: have anything to water. The avocado farmers are fine, Yeah,
Speaker 1: but I mean if you look at the photos, it
Speaker 1: is stark. I mean you'll see these hills that are
Speaker 1: all brown and on these avocado farms. Avocado is a
Speaker 1: really water intensive crop, should not really be grown in
Speaker 1: some of these places. So yeah, that's one of those things,
Speaker 1: you know. And one of the issues that this brings
Speaker 1: to mind, I think is income inequality obviously, but also
Speaker 1: this notion of political and economic choices that favor business
Speaker 1: over consumers or people, to get down to it, and
Speaker 1: sort of businesses even over what I think most would
Speaker 1: argue is a basic human right. Well, that's right, And
Speaker 1: I think people were initially surprised about the sort of
Speaker 1: the violence of these demonstrations in Chili, of all places,
Speaker 1: because it has so often been cited as a model
Speaker 1: for the rest of Latin America in terms of how
Speaker 1: it enshrined uh, this neoliberal model you know, its constitution,
Speaker 1: and that constitution dates from the time of the dictatorship,
Speaker 1: and so does a water so and so does a
Speaker 1: water law that basically gives people water rights in perpetuity,
Speaker 1: so companies you know, have them forever, they can trade them.
Speaker 1: You know, there was once upon a time the thought
Speaker 1: was like free markets will help people, you know, be
Speaker 1: careful and the management and use of finite resource. But
Speaker 1: that really has not been the case as we've seen it.
Speaker 1: In some places, mining and and sort of and and
Speaker 1: kind of export oriented agriculture have really kind of priority priory.
Speaker 1: The government has prioritized those kinds of uses for water.
Speaker 1: And so you know, we have now communities in Chile
Speaker 1: that depends on what are getting tructed. I mean, when
Speaker 1: they opened the faucet, nothing comes out. Yeah, it's amazing,
Speaker 1: it's amazing. And I do wonder, you know, what is
Speaker 1: the political backdrop here, because a lot of this unrest,
Speaker 1: as you said at the beginning of the conversation, has
Speaker 1: been tied to the political system. Is there any sense
Speaker 1: that that may change soon? What what's the latest there? Well,
Speaker 1: I mean it's the outcome. It may be quite radical,
Speaker 1: and that um, legislators have sat and agreed on two
Speaker 1: possible means of rewriting the constitution. So now this consensus
Speaker 1: in the country is a fair large consensus that the
Speaker 1: constitution needs to be written because it enshrines this model
Speaker 1: that is no longer like you know that is that
Speaker 1: has caused distortion, essentially not valid the country. Right, So
Speaker 1: we may see as part of that, I mean, they
Speaker 1: haven't started talking about how water is going to play
Speaker 1: into that because that's a separate law, but we could
Speaker 1: see changes in that as well. It's a complete rethinking
Speaker 1: basically of sort of like what do you want to
Speaker 1: be as a country? Well, and I think, yeah, exactly.
Speaker 1: You know, it's interesting. I feel like Chili perhaps the
Speaker 1: extreme case in terms of climate change, right in the
Speaker 1: drought and the impact it's had on the people there.
Speaker 1: But Chile is not the only place where we're seeing
Speaker 1: climate change, a warming climate lead to political strife and
Speaker 1: social unrest. We've seen it around the world. Right in Syria.
Speaker 1: It played a role in the civil war because it
Speaker 1: was like um crop loss and then that pushed up
Speaker 1: the price of bread and the or protests. You know,
Speaker 1: that's sort of more Again, It's like sometimes it's like
Speaker 1: something lights a match, and then all these other demands
Speaker 1: get you know, kind of folded in, you know, but
Speaker 1: I think I think it's you know, if you think
Speaker 1: of his water, you know, to be like inalienable, right right, Well,
Speaker 1: so it like it exercises people that they don't have accent.
Speaker 1: Christina land Blade, thank you, thank you. In twenty nineteen,
Speaker 1: we talked a lot about soft Bank, the Vision Fund,
Speaker 1: and the Japanese billionaire behind it all, Massa Yoshi San. Now,
Speaker 1: the Vision Funds mega investments in some of the world's
Speaker 1: best known and sometimes most controversial startups have captured the
Speaker 1: attention of everyone. This story in the magazine this week
Speaker 1: really peels back the layers of the Fund. Sarah McBride
Speaker 1: joins us from San Francisco to tell us more about
Speaker 1: this cover story. So, Sarah, I do feel like twenty
Speaker 1: nine we did talk a lot about the Vision Fund
Speaker 1: and its investments. What did you set out to do
Speaker 1: with this story? Well, we wanted to take a step
Speaker 1: back and see where they were, especially in the wake
Speaker 1: of what's become a very controversial investment for them in
Speaker 1: we Work, and um, how are things looking now? And uh,
Speaker 1: will they be able to bounce back. Well, and it's interesting, right, because,
Speaker 1: I mean they've kind of been legendary in terms of
Speaker 1: the investments we Work Uber and so on and so forth.
Speaker 1: But you're right, the we Work investment and the governance
Speaker 1: issues and so many other issues made us all think, okay, wait,
Speaker 1: what's going on at the Vision Fund? What is going on? Right?
Speaker 1: So we Work is actually a very small part of
Speaker 1: their total investment portfolio. We make the point in the
Speaker 1: article that Masayashi's son's advisors were much more cautious about
Speaker 1: we Work than he was, And in fact, the Vision
Speaker 1: Fund only committed four point four billion tow we Work.
Speaker 1: I mean only, but compared to the rest of soft Bank,
Speaker 1: which overall invested ten billion, more than ten billion dollars
Speaker 1: in We Work. Uh, the Vision Funds commitment was relatively small.
Speaker 1: So they've got we Work and then they've got some
Speaker 1: much smaller companies that have gone wrong. But because they
Speaker 1: unfolded around the same time as We Work, people are
Speaker 1: paying a lot of attention to them, For example, Wag
Speaker 1: and Brandless, to consumer companies that they really only invested
Speaker 1: a few hundred million dollars in, but because they're high profile,
Speaker 1: people are paying a lot of attention to those in
Speaker 1: a lot of funds. When companies fail, they often fail
Speaker 1: pretty early on in the life of the funds. So
Speaker 1: we're at this interesting inflection point where they also have
Speaker 1: a number of very promising companies that aren't quite at
Speaker 1: the point in their lives where we could point to
Speaker 1: them and say, wow, these are spectacular companies. But for example,
Speaker 1: coup Paying, a big retailer in South Korea, has a
Speaker 1: lot of promise, and another one, Tokopedia, also in Asia,
Speaker 1: is very promising, but the promise hasn't delivered yet the
Speaker 1: disasters have so it's just a bad time for them.
Speaker 1: It is a bad time. What I love about the
Speaker 1: stories I said at the top is that I feel
Speaker 1: like you dig into how investment decisions are made, and
Speaker 1: you also pay some insight into Massa as he is
Speaker 1: universally known. Tell us a little bit about it, because
Speaker 1: sometimes you say, you get one Massa and sometimes you
Speaker 1: get the other. Right, So Massa can be extremely charming
Speaker 1: and very interested in engaging, or he can kind of
Speaker 1: get in a bad mood and pepper people with questions.
Speaker 1: And in the lead we tell the story of one
Speaker 1: time on a call where he berated an investor at
Speaker 1: soft Bank for not being optimistic enough about a company
Speaker 1: called Full Chuck Alliance, which is a company based in
Speaker 1: China that's making good and steady progress, and Massa apparently
Speaker 1: thought it could grow a lot faster and was telling
Speaker 1: the investor, you have to figure out a way to
Speaker 1: make it grow even faster than it is now. And
Speaker 1: other people on the call were cringing and felt that
Speaker 1: that one investor got the brunt of Massa's ire. But
Speaker 1: then other people, particularly company ceo s who go to
Speaker 1: pitch Massa, if he likes your company, you can walk
Speaker 1: out just feeling like you're walking on air. Sometimes he
Speaker 1: tells young startup found ns, oh, you're the next Jack Ma,
Speaker 1: and they just leave feeling so good, especially if it's
Speaker 1: a company where they've been rejected many times before. I
Speaker 1: think what's interesting in your story, too, is how you
Speaker 1: say what kind of sets the Vision Fund apart maybe
Speaker 1: from some other venture capitalists, is that when the Vision
Speaker 1: Fund and when Massa decides to kind of be all
Speaker 1: in on it um, they invest big time and they
Speaker 1: really do push the founders, the entrepreneurs, you know, to
Speaker 1: kind of be more aggressive in their business, maybe expand
Speaker 1: at right right, So they give them the kind of
Speaker 1: money where they can expand much much quicker than they
Speaker 1: would have been able to do otherwise. And sometimes, you know,
Speaker 1: a company that might have been looking for fifty or
Speaker 1: sixty million dollars ends up getting several hundred million from
Speaker 1: soft bank. So soft bank gives a lot of money,
Speaker 1: but then they want you to deliver. So let's say
Speaker 1: you've been planning to roll out in one state. Now
Speaker 1: they want you to do a national roll out and
Speaker 1: think about what's your overseas expansion plan. So they do
Speaker 1: set it up for our company to grow very fast.
Speaker 1: But not every CEO can deliver on that, so it's
Speaker 1: a big challenge for the CEO. But a lot of
Speaker 1: them talk very positively about soft banks big thinking. One
Speaker 1: CEO told me he got an idea for a whole
Speaker 1: new business line that he never would have had without
Speaker 1: soft banked, So to pivot. Yeah, And at the same
Speaker 1: time as these entrepreneurs pivot right, the business grows, the
Speaker 1: valuations grow, right, and Massa and the Vision Fund and
Speaker 1: soft Bank they tend to profit from those growing valuations.
Speaker 1: We certainly saw that. Yeah, a lot of the names.
Speaker 1: That was another interesting thing so we have a situation
Speaker 1: where the accounting rules seem not quite ready for this
Speaker 1: era of multi you know, tens of billion dollars worth
Speaker 1: of valuations of startups. So it's not illegal if your
Speaker 1: startup that you've invested in is suddenly on paper worth
Speaker 1: tens of billions of dollars, to mark it up on
Speaker 1: your books to reflect that paper valuation. Now Soft Bank
Speaker 1: marks up some of its companies that told us, you know,
Speaker 1: we work earlier this year was worth forty seven billion dollars.
Speaker 1: It says it never marked up we work that high.
Speaker 1: But yeah, it marked up some increase in valuation. The
Speaker 1: same with oil hotels, the same with many other companies,
Speaker 1: and now they've had to mark some of those back down.
Speaker 1: So this is the situation. One UH investor to us
Speaker 1: called it unicorn porn. Where accountants can do this, it's
Speaker 1: not illegal, and maybe that's where accounting rules need to
Speaker 1: catch up. Listen. So no doubt about it that Massa
Speaker 1: is the central character when it comes to SoftBank. Obviously
Speaker 1: in the vision fund UH, he's the individual that you're
Speaker 1: focused on, but you also do point out a couple
Speaker 1: of other, um, you know, key players. Um you've got
Speaker 1: Regiev Misera. And you've got some other folks. Tell us
Speaker 1: about those other individuals, and you know why they're important
Speaker 1: to what's going on with the Vision Fund. Right, So
Speaker 1: the Vision Fund is full of larger than life characters.
Speaker 1: Regiev Mistra, very charming guy, likes to vape in meetings.
Speaker 1: He sometimes walks around barefoot. He's just kind of a
Speaker 1: big thinker who does not feel the need to act
Speaker 1: in a conservative way or meet other people's UM standards
Speaker 1: of UH of office UM behavior. Not that he does
Speaker 1: anything untoward, it's more an eccentricity. UM. There's another investor there,
Speaker 1: Jeff Housenbold, who's a larger than life character, has a
Speaker 1: huge wine collection, drives around in a blue Ferrari, but
Speaker 1: then sometimes says things that people find controversial or upsetting. UM.
Speaker 1: The same thing with the CFO of the Vision Fund,
Speaker 1: who a lot of people think is quite difficult to
Speaker 1: work for. Some UM people say he once told a
Speaker 1: former employee who was Mormon to move back to Utah
Speaker 1: and get more wives, or words to that effect. UM.
Speaker 1: The employee did leave. So there are a lot of
Speaker 1: UM incidents where people end up feeling upset. Sorry, just
Speaker 1: to wrap up because there's a lot of great details
Speaker 1: in this story, and I highly recommend that everybody check
Speaker 1: out the story and read all of it um But
Speaker 1: just to wrap up just thirty seconds here, Silicon Valley,
Speaker 1: how do they see the Vision Fund and Massa. I
Speaker 1: think there's a lot of jealousy. I think a lot
Speaker 1: of people wish they had a hundred billion dollars to
Speaker 1: throw around and invest in companies, and they're upset that
Speaker 1: it's crowding out other investors, making it harder for everyone
Speaker 1: to invest in startups and making it harder for startups
Speaker 1: to compete against Vision Fund backed companies. That's Sarah McBride
Speaker 1: and man, there was a team of reporters that worked
Speaker 1: on this story and it is truly a deep dive
Speaker 1: into Soft Bank, the Vision Fund, and Massa Yoshi Son.
Speaker 1: And why you care is because we work with such
Speaker 1: a big story this year and really the failed IPO,
Speaker 1: the governance issue, and the Vision Fund a big investor
Speaker 1: and we work well. And the outsize influence that Soft
Speaker 1: Bank and its Vision Fund has had on the world
Speaker 1: of venture capital and therefore the world of technology, it's
Speaker 1: going to continue to be a big story in well,
Speaker 1: that's gonna wrap up Bloomberg Business Week from Bloomberg Radio.
Speaker 1: Thanks so much for joining us. I'm Jason Kelly and
Speaker 1: I'm Carol Masser. Be sure to tune into Bloomberg Business
Speaker 1: Week Radio Live Monday through Friday, starting at two pm
Speaker 1: Well Street time. And you can't catch us live, get
Speaker 1: our Day League podcast for the ride home. Wherever you
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Speaker 1: the magazine on newsstands now. We'll be back right here
Speaker 1: next week at the same time. Happy holidays everyone. This
Speaker 1: is Bloomberg m