Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. Hi, I'm
Speaker 1: Jason Kelley and I'm Carol Masser. Welcome to the weekend
Speaker 1: edition of Bloomberg Business Week. Another very busy week on
Speaker 1: the corporate front, and certainly when it came to news
Speaker 1: out of Washington. Jason, absolutely, we had trade, we had impeachment.
Speaker 1: We had more details about how you might need to
Speaker 1: hire mercenaries to smuggle yourself out in a box if you,
Speaker 1: you know, don't think you're gonna have a fair trial
Speaker 1: in Japan. I gotta say that's one of my favorite stories.
Speaker 1: We really get into the details of how Carlos going
Speaker 1: his great escape from Tokyo, and we also get into
Speaker 1: because I feel like this story has gotten hidden, about
Speaker 1: the legal implications and the legal issues still facing Mr. Gone.
Speaker 1: Plus you mentioned trade and impeachment and politics. We caught
Speaker 1: up with both black Stones, Steve Schwartzman, he was in
Speaker 1: the room when the trade deal was signed, and you
Speaker 1: caught up with New Jersey Governor Phil Murphy about the
Speaker 1: state of the state and the state of politics. We did, indeed,
Speaker 1: Plus Apollos greed it is this week's cover's story. It's
Speaker 1: a story that really hasn't been told, but our team
Speaker 1: they got the interview with Leon Black first to the
Speaker 1: big story of the week. So, China has made substantial
Speaker 1: and enforceable commitments regarding the protection of American ideas, trade secrets, patents,
Speaker 1: and trademarks. China has also pledged firm action to confront
Speaker 1: pirated and counterfeit goods, which is a big problem for
Speaker 1: many of the people in the room. And that was
Speaker 1: President Trump after the US and China signed that phase
Speaker 1: one of the trade deal, a lot of pump and
Speaker 1: circumstance down in Washington, a full room, the President name
Speaker 1: checking a lot of his friends there in the audience.
Speaker 1: Let's get more on the economics of the trade deal.
Speaker 1: Let's bring in Shawn Donna in DC with his story.
Speaker 1: And how now comes the hard part? After the handshake.
Speaker 1: We've seen the photo ops. This is the tough part.
Speaker 1: Why is it so hard? Sean? President Trump is not
Speaker 1: the first president to make a deal with China. In fact,
Speaker 1: he referenced that when he was signing this, saying that
Speaker 1: he was righting the wrongs of the past, writing the
Speaker 1: issues that his predecessors had not addressed in terms of
Speaker 1: dealing with China. President Clinton, of course, brought China into
Speaker 1: the w t O. George W. Bush had his own
Speaker 1: dealings with China. So did Barack Obama, who not only
Speaker 1: had a constant economic dialogue with China but also was
Speaker 1: looking for his own trade deals to try and deal
Speaker 1: with the threat of China. That was the Transpacific Partnership.
Speaker 1: The common thread through all of this has been that
Speaker 1: the consensus here in Washington certainly is that China just
Speaker 1: hasn't lived up to its promises in these past deals.
Speaker 1: And that's where the China moment is for Donald Trump.
Speaker 1: Right now, He's got his deal. Now will China live
Speaker 1: up to it? And so what does enforcement look like, Sean,
Speaker 1: What does it look like on the ground and where
Speaker 1: does the rubber meet the road here? Right So, the
Speaker 1: thing that the administration says is very different about this deal,
Speaker 1: and the reason they think they can get China to
Speaker 1: live up to its commitments is this enforcement mechanism that's
Speaker 1: in there. Essentially, it sets the stage for if the
Speaker 1: U S has any complaints or any inkling that China
Speaker 1: isn't living up to the deal. There's this kind of
Speaker 1: ninety day process of consultations at the end of which
Speaker 1: you can whack the Chinese with tariffs if you choose to.
Speaker 1: That's uh, that's good. That seems to be a mechanism
Speaker 1: that could work. But it's also an unwinding of the
Speaker 1: kind of global system that was set up in the
Speaker 1: nineteen nineties, and that's essentially the World Trade Organization, which
Speaker 1: was set up to be a neutral arbiter in disputes
Speaker 1: like this, and the Trump administration is just going around that.
Speaker 1: And that has big consequences for everyone else in the
Speaker 1: world because it means that that's going to reduce the
Speaker 1: credibility of the w t O and its ability to
Speaker 1: keep the peace and global trade at a time when
Speaker 1: the Trump administration is already undermining it by by failing
Speaker 1: to a point or blocking the appointment of of new judges.
Speaker 1: So there's big consequences for not just the US and
Speaker 1: China in terms of trying to get China to live
Speaker 1: up to this deal, but also for the rest of
Speaker 1: the world and global trade. You know, I mean the
Speaker 1: whole idea of the w t OS to avoid trade wars.
Speaker 1: Donald Trump has gone down the path of trade wars. Uh,
Speaker 1: and now he's promising more trade wars to try and
Speaker 1: enforce deals essentially, if that's if that becomes the issue.
Speaker 1: And that's Sean Donn and senior trade reporter for Bloomberg Carroll.
Speaker 1: Let's turn now from trade to the twenty twenty presidential campaign.
Speaker 1: Here's Josh Green with the story on the Terminal and
Speaker 1: online how Bernie Sanders is poised for an upset. You know, Josh,
Speaker 1: it does seem Bernie is out there to win this one.
Speaker 1: What's different about the team presidential race and his run
Speaker 1: to get the nomination versus today and Kenny Win. Bernie Sanders,
Speaker 1: who was all but forgotten about three months after he
Speaker 1: suffered a heart attack, is in first place in the
Speaker 1: race in Iowa. And yet I still think there's a
Speaker 1: sense in Washington and on Wall Street that there's no
Speaker 1: way Bernie can possibly win. So what I do in
Speaker 1: the magazine this week is do a deep dive into
Speaker 1: Sanders and look at what is different about his race
Speaker 1: this time around. Uh, the main thing is he's running
Speaker 1: to win. Last time around, when he was running against
Speaker 1: Hillary Clinton, he was in the race. I think more
Speaker 1: to make a point, but the key takeaway here is
Speaker 1: that Bernie is playing to win, and he is actually
Speaker 1: in position to be able to do so, and Josh
Speaker 1: tell us about that Warren v. Sanders battle that is
Speaker 1: shaping up. While I was out there in Iowa, Politico
Speaker 1: reported that Bernie's campaign had been giving it surrogate's talking points,
Speaker 1: telling them to tell voters to attack Elizabeth Warren as
Speaker 1: an elitist and somebody who couldn't unify the party and
Speaker 1: beat Donald Trump. Uh. That is a harsh attack from
Speaker 1: someone supposed to be an ally. The story went public,
Speaker 1: and it looks like in retaliation, Warren's camp leaked that
Speaker 1: in a in a private meeting between the two of them,
Speaker 1: at the beginning of this cycle, Sanders had said to Warren,
Speaker 1: I don't think a woman can win this race. Now,
Speaker 1: none of this was ever spoken of. It only came
Speaker 1: to light a few days before this past weekend's debate,
Speaker 1: and it's set off a firestorm, as you might expect,
Speaker 1: with the political press out there putting pressure on Warren
Speaker 1: to say, you know, is this true. Well, after about
Speaker 1: a day of being quiet, Warren put out a public statement.
Speaker 1: It was like pouring gasoline on a fire. Josh, thanks
Speaker 1: so much. That's Bloomberg's Josh Green. He's been following the
Speaker 1: comings and goings of the presidential hopeful, certainly the Democrats.
Speaker 1: And I think this one's an interesting he focused Remember
Speaker 1: last year, Josh focused on Elizabeth Warren, that great story.
Speaker 1: But it's interesting to see how there's a lot of
Speaker 1: attention and for good reason, being paid to Bernie Sanders
Speaker 1: well in the clash between Bernie Sanders and Elizabeth Warren
Speaker 1: seems to be one of the most compelling storylines out
Speaker 1: there right now. You know, I feel like this Carlos
Speaker 1: Gohnes story, Carol, every time we think, wow, that's the
Speaker 1: most interesting thing I've heard, or what a twist or
Speaker 1: what a great details, it is not uh, And thanks
Speaker 1: to some stellar reporting from Matt Campbell, there's just a
Speaker 1: constant stream of new information. He led a team that
Speaker 1: put together a really nice pieces then this week's magazine,
Speaker 1: on the Blueberg Terminal and on Blueberg dot Com. Today,
Speaker 1: Matt joins us on the phone from Bay Route. He's
Speaker 1: still on the ground on the Gun story until Webber,
Speaker 1: the editor Bloomberg Business Week, is here with us in
Speaker 1: our Bloomberg Interactor Broker Studios. So Matt, I gotta ask you,
Speaker 1: especially since you have the perspective of really being in
Speaker 1: this story. What's the thing in this story about the
Speaker 1: escape itself that you really just zero in on as
Speaker 1: the as Carol Master would say, whoa moment. Well, I
Speaker 1: think there's there's quite a lot to say wow about
Speaker 1: in the story. I'm interested in in all the scenarios
Speaker 1: that were examined to get Carlos gone out of out
Speaker 1: of Japan. There's some discussion about and was published notably
Speaker 1: term of sun discussion of actually buying a cargo ship
Speaker 1: and sneaking him onto it, so that was rejected as
Speaker 1: too complicated, and in the end they did get to
Speaker 1: this very dramatic private jet escape that we now know
Speaker 1: a little bit more about, which you know. This to me,
Speaker 1: Um and the wonder of this story, it's like we
Speaker 1: all these little dribs and drabs that have come out
Speaker 1: over the last week and change. Actually ever since the
Speaker 1: story really broke at the beginning of the year, you know,
Speaker 1: we've all been captivated by part of what made this
Speaker 1: be Um. I think this epic part three of this
Speaker 1: story that Matt's been kind of shepherding, is this inside
Speaker 1: the plan of of how to get how to get
Speaker 1: somebody out of the country, how to extract someone and
Speaker 1: you know, it's a very movie esque, but you know
Speaker 1: the reason it can be movie esque is because of
Speaker 1: like real reporting and and Matt, can you kind of
Speaker 1: walk us through how the story opens. Well, so the
Speaker 1: story opens with a security contract or an Asia, uh,
Speaker 1: someone who does this kind of saying s quoting v
Speaker 1: I P s as protecting cargoes. He gets a call
Speaker 1: a few months ago from someone he knows who's looking
Speaker 1: to hire for a job in Japan, looking particularly to
Speaker 1: escort someone out of the country and looking for operatives
Speaker 1: with Asian East Asian faces particularly, and and the security
Speaker 1: contractor was sort of noncommittal, and no one really came
Speaker 1: to mind, and he never really thought of it again.
Speaker 1: So of course he saw the news along with the
Speaker 1: rest of the world on New Year's Eve, and that's
Speaker 1: when you connect the dots and and uh what you know,
Speaker 1: one of the things that I've been kind of captivated
Speaker 1: by and this is like, obviously Carlos going had the
Speaker 1: means to actually, you know, fund something like this, but
Speaker 1: what what kind of what would it go down for?
Speaker 1: Like what what is the service actually cost someone? Well,
Speaker 1: that's that's a very good question. One estimate that I've heard, uh,
Speaker 1: was fifteen million dollars, which when I first heard it
Speaker 1: sounded insanely high. But the person who was proplaying an
Speaker 1: estimate to be that then took me through the mass.
Speaker 1: And and one thing that you have to add at
Speaker 1: every point in that calculation is, for lack of a
Speaker 1: better term, a risk premium. This is flagrantly illegal. Everyone
Speaker 1: involved could be exposed to arrest obviously, uh. And people
Speaker 1: need to be compensated for that kind of risk taking. Yeah.
Speaker 1: And when you say everyone, we've actually got some names.
Speaker 1: You've got a Michael Taylor and then you've got a
Speaker 1: buddy of Michael Taylor. I mean, we've got names on
Speaker 1: the individuals who are believed to have helped Carlos Gone
Speaker 1: get out of Japan. That's right, so far, just two names,
Speaker 1: Michael Taylor being the leader of the group. Very interesting
Speaker 1: guy with a somewhat checkered history. Uh. Former Green Beret,
Speaker 1: very experienced Special Forces operator, ended up in the private
Speaker 1: security business, but actually ended up going to jail in
Speaker 1: the Mids over federal charges to do with allegedly bribing
Speaker 1: his way as to a contract in Afghanistan. So really,
Speaker 1: someone has operated in some gray areas and they pulled
Speaker 1: off this amazing coup on behalf of Carlos Bone. So
Speaker 1: I mentioned earlier that this is sort of the part
Speaker 1: three in the Magazine of Carlos Gone trilogy that you've
Speaker 1: basically been steering from the moment. Uh. You know that
Speaker 1: Japanese officials basically arrested him on a tarmac year and
Speaker 1: change ago. Um, so, what what have you learned? And
Speaker 1: what is what is this escape? What you know? Put
Speaker 1: put it all in context? What what does it mean
Speaker 1: for uh, for people to know? Well, I think the
Speaker 1: big scene here is that he has now turned the tables.
Speaker 1: Over the last year. He seemed pretty helpless, this real
Speaker 1: Titan business is very respected corporate figure, was suddenly just
Speaker 1: completely at the mercy of the Japanese justice system. And
Speaker 1: and none of all these none of the advantages he had, money, connections,
Speaker 1: access to media or whatever. It didn't see the count
Speaker 1: for anything. And it was, you know, really a tale
Speaker 1: of a guy kind of alone, kind of abandoned and
Speaker 1: facing a pretty grim fate that's now completely changed. He
Speaker 1: has gotten out of the threat of being sent to
Speaker 1: a Japanese prison, though he's certainly not out of the
Speaker 1: woods yet. As as we discussed in the story what right,
Speaker 1: and and I want to end on that note that
Speaker 1: if we can, I mean, not out of the woods,
Speaker 1: because he's essentially, without overstating it, sort of a different
Speaker 1: type of prisoner at this point. By by some accounts,
Speaker 1: he's not free to go in any sense. Right, Well,
Speaker 1: he is, Jason certainly free to live here in Lebanon,
Speaker 1: at least as far as we know there. There is
Speaker 1: a judicial proceeding that is going to run its course here,
Speaker 1: but it's very unlikely to be extracited. So he is,
Speaker 1: he's fine to be here for now. Uh. He certainly
Speaker 1: can travel anywhere, except perhaps to France, where he's also
Speaker 1: a citizen. Uh. And the other thing is, you know,
Speaker 1: his reputation has not yet been rehabilitated, and I think
Speaker 1: if he entertained thoughts of a comeback, which which he
Speaker 1: very well might, there's a long way to go to that.
Speaker 1: And I'm just gonna say, as you so rightfully, including
Speaker 1: your story, it's another case of the winner take all
Speaker 1: in the game of twenty one century capitalism. If you've
Speaker 1: got money and means, you can get yourself out, Matt
Speaker 1: just quickly. Indeed, Yeah, well it's it turns out that,
Speaker 1: you know, we were very surprised and you have that
Speaker 1: he couldn't beat the system, but he was able to
Speaker 1: exit the system, which is not something that's the most criminal.
Speaker 1: The other option, if you can't beat the system, just
Speaker 1: change the system altogether, exactly. You got to get in
Speaker 1: the box. That's Bloomberg reporter Matthew Campbell and Business Week
Speaker 1: editor in chief Joe Webber. Jason, this story just gets
Speaker 1: more and more interesting, and I've got to take my
Speaker 1: hat off to our team here at Bloomberg who has
Speaker 1: done great investor gate of journalism and is really getting
Speaker 1: to the details the names of the individuals behind that
Speaker 1: great escape of Carlos Gone and how it all came down.
Speaker 1: It is now approximately three weeks since Carlos go in
Speaker 1: the ousted head of Nissan and Renault escape from Japan.
Speaker 1: And while we're all obsessed Jason easily with the Hollywood
Speaker 1: like feel of this story, real story, there are still
Speaker 1: something we can't forget and that's the legal side of
Speaker 1: this story. A lot of questions still, absolutely and we've
Speaker 1: talked a lot about, as you say, the escape, the
Speaker 1: dramatic you know, sort of in the box literally like
Speaker 1: getting to Lebanon. But what happens from here from a
Speaker 1: legal perspective, that's what we really want to dig into. Now.
Speaker 1: Greg Farrell is here with this. He has unpacked this
Speaker 1: in a way that few have and is here to
Speaker 1: provide some historical perspective as you look at this, what
Speaker 1: are the key legal issues here? The case against gone
Speaker 1: is not like a lot of cases brought against CEOs
Speaker 1: in the United States, where it's a clear case of
Speaker 1: either inside or trading or accounting fraud in order to
Speaker 1: goose up or an so that you can get your bonus,
Speaker 1: the end ron stuff that we all remember from fifteen
Speaker 1: twenty years ago. The case against Gone h is unusual
Speaker 1: in so far as it's a he's been accused of
Speaker 1: helping himself to more money than he deserved or somehow
Speaker 1: finagling away to get the board to approve or unbeknownst
Speaker 1: to the board and even bigger pay packages than he
Speaker 1: was entitled to, which is uncommon. It's seen rarely here. Basically,
Speaker 1: to my mind, it brought back the case against former
Speaker 1: Tycho CEO Dennis Kozlowski and his CFO, brought not by
Speaker 1: the federal government but by the Manhattan District attorney Bob
Speaker 1: morgan Thou back in the oh four oh five era,
Speaker 1: and that was kind of a messy case. It was
Speaker 1: not clear they went after him on books and records issues, etcetera.
Speaker 1: But we did not have that clear resonance that an
Speaker 1: accounting fraud securities fraud case has. Tycho shareholders were not
Speaker 1: really burned by this, Yes, Becauselowski helped himself to more
Speaker 1: money than you know, the board had a proved But
Speaker 1: unlike Endron, unlike Health South, unlike some of these other
Speaker 1: world calm, Tycho was a real profitable company and his
Speaker 1: shareholders were doing well. So this falls into that category.
Speaker 1: Going was accused of helping himself to more than he
Speaker 1: deserved and basically parleying his position to enrich himself. Another
Speaker 1: thing that was missing from you know, morgan Thou's case
Speaker 1: against Tycho, but clearly present here is the plan and
Speaker 1: Carlos Going referred to this in his press conference last week,
Speaker 1: to basically fold Nissan into a wider global automotive group
Speaker 1: that would basically, you know, uh, remove the essential Japanese
Speaker 1: element from it or make it less of a Japanese
Speaker 1: champion brand that had been and you know, I think
Speaker 1: He's actually got a point there that this is something
Speaker 1: that didn't go over well. But it was in the works.
Speaker 1: It was in the works. It was in the works.
Speaker 1: It's more than a coincidence. I think that this very
Speaker 1: aggressive regulatory legal action and prosecution of Going took place
Speaker 1: at a time when Nissan was, in fact, you know,
Speaker 1: drifting towards becoming an international brand, unless of a Japanese brand.
Speaker 1: What's interesting, I want to go back to what you
Speaker 1: said of you know, perhaps Carlos Gone helping himself to
Speaker 1: more than he was allowed. Is that a simple legal
Speaker 1: case to figure out? In other words, do you just
Speaker 1: go back to the employment contracts and here's what they say,
Speaker 1: you weren't allowed to have this house or so and
Speaker 1: so forth, or when it comes to this kind of thing,
Speaker 1: because I could certainly see with a board that's really
Speaker 1: happy with its CEO, and Carlos Gone was lauded as
Speaker 1: this incredible auto executive in the industry and really globally
Speaker 1: as an executive. And I do wonder whether it's like, oh, yeah,
Speaker 1: we like him, Yeah you can have that, or you
Speaker 1: can do this, Like how do you go about legally
Speaker 1: proving it what's required? There are a lot of wiggle room.
Speaker 1: How You've made a very good point here, and that
Speaker 1: is he was a superstar CEO by the time this
Speaker 1: all unfolded a little more than a year ago. And
Speaker 1: as you pointed out in his press conference last week, UH,
Speaker 1: somewhere near twenty books have been written for case studies
Speaker 1: in business schools about his phenomenon. We would ter you
Speaker 1: him saying, what a right, But this is at the
Speaker 1: far end of a twenty year reign. Certainly, when you
Speaker 1: have that much success over a period of time, Uh,
Speaker 1: there are certain realities that happen. We've seen it here
Speaker 1: in the US with very powerful uh you know UH
Speaker 1: CEOs who developed sort of a there's a hero worship.
Speaker 1: And after a while, technically all you know, boards of
Speaker 1: directors are independent, but over particularly twenty year period where
Speaker 1: you know, new board members come on, etcetera, after a while,
Speaker 1: the board becomes, if not a wholly owned subsidiary, far
Speaker 1: less of an independent watchdog. But then what you know,
Speaker 1: shareholder activists would would like us to have, they do
Speaker 1: become that becomes a very comfortable relationship between the board
Speaker 1: and the CEO because everybody's doing well, why rock the boat?
Speaker 1: And in that gray area is um whether or not
Speaker 1: you know, uh, Going is entitled to this h the board,
Speaker 1: you know, So there'll be different claims if this ever
Speaker 1: went to trial, that the board was not aware that
Speaker 1: he paying himself, that Going could say no, why I
Speaker 1: told them this, or they knew that, or we had
Speaker 1: a discussion at the end of the last board meeting
Speaker 1: where I said I'd be interested in this, but the
Speaker 1: money went through and somebody yes, exactly. And there were
Speaker 1: lawyers for every board meeting, in board minutes, etcetera. So
Speaker 1: these are not like secret meetings that happen and people
Speaker 1: forget um. So you know, that is a very great area.
Speaker 1: And that's Greg Ferrell, one of the legal legals here
Speaker 1: at Bloomberg. And what I loved about his conversation was
Speaker 1: he put it in context, historical context. He's followed everything
Speaker 1: from Enron to Tycho, and those connections that he made
Speaker 1: to the Dennist Kauselowski story I thought were fascinating. I
Speaker 1: also think it was funny that in starting to talk
Speaker 1: with him, he's like, wait, I had to remember that
Speaker 1: there were charges. What were the charges specifically against Carlos
Speaker 1: Go And so he gets into the particulars. So obviously
Speaker 1: a store that continues to evolve, it isn't over. As
Speaker 1: you said, Even if you don't know Apoulo management, you
Speaker 1: probably know some of the company's targets, right Jason, We're
Speaker 1: talking about Horris Casinos, Claire's jewelry stores, Linen and things.
Speaker 1: This brings us to the cover story this week, it does,
Speaker 1: and it's really an unbe leavable story that's never been told.
Speaker 1: Leon Black, one of the key figures in the world
Speaker 1: of finance, in the world of philanthropy, and certainly in
Speaker 1: the world of private equity. Caleb Melby and Heather Pearlberg
Speaker 1: wrote the story. Caleb here with us in New York City,
Speaker 1: Leon Black, Where to begin? Where did you begin? Indeed? Yeah,
Speaker 1: Heather and I it took us months to to put
Speaker 1: this together. Um, and we approached it in the summer
Speaker 1: being like, here's this guy. He was in the news
Speaker 1: at the time because of his affiliations with Jeffrey Epstein,
Speaker 1: and like his name was in headlines everywhere, and it
Speaker 1: was suddenly of much broader interest to a much broader
Speaker 1: group of people, and we were like, do people know
Speaker 1: who he is? Like what his story is? The fact
Speaker 1: that he's been at like all the key junctures in
Speaker 1: like American financial history for like half a century. Um,
Speaker 1: So we went and you know, we started talking to
Speaker 1: people all the way back to the nineteen seventies about
Speaker 1: Leon his story, how he came to be one of
Speaker 1: the most powerful and ruthless people in American finance. And
Speaker 1: we do want to take that step back. I mean,
Speaker 1: who is he today? I mean he is when it
Speaker 1: comes to private equity and investors, I mean big deal,
Speaker 1: but someone who's been very quiet. Yes, yeah, he is.
Speaker 1: In private equity. There's there's some people who you can
Speaker 1: think of as kind of ambassadors for for that line
Speaker 1: of work, right probably Steve Schwartzman, chief chief among them.
Speaker 1: Leon Black has not shouldered that responsibility to tell the
Speaker 1: industry's story or anything like that. He's very adverse, uh
Speaker 1: to the press, and we learned about why when we
Speaker 1: talk to him. But yeah, Apollo Global Management now has
Speaker 1: three billion dollars under management. That's a figure that's grown
Speaker 1: sixfold in the last decade. He wants to get up
Speaker 1: to six hundred in the decade after this one. And
Speaker 1: he's worth almost ten billion dollars now. He's chairman of
Speaker 1: the Museum of Modern Art, which in in I feel
Speaker 1: like New York society culture. If you want to be
Speaker 1: the head of a cultural institution in the world, that's
Speaker 1: a big one. That's a cover position. Yeah, I've kind
Speaker 1: of been thinking about it. Is like the iron throne
Speaker 1: for Game of Thrones, for for like the royal houses
Speaker 1: of Manhattan for sure, um and and yeah, mostly he's
Speaker 1: done that. Yeah, much less in the public eye than
Speaker 1: his contemporaries, um and uh. Apollo also has a reputation
Speaker 1: across the street, across the realm of finance for for
Speaker 1: playing harder ball than some of his contemporaries as well.
Speaker 1: And so let's talk about some of those junctures going
Speaker 1: back through history. For for Leon black And one of
Speaker 1: the most notable is his time at Drexel Burnham Lambert
Speaker 1: at the foot, at the side. However you want to
Speaker 1: characterize it of Michael Milkin, you know, a definitive time
Speaker 1: in American finance. As you say, remind us why Drexel
Speaker 1: is so important? Well, yeah, he he learned under Michael
Speaker 1: Milken and h He also served as banker to some
Speaker 1: of the most important corporate waters of the nineteen eighties.
Speaker 1: He was banking for Henry Cravis. He was banking for
Speaker 1: Carl Icon, who would become something of a men tour.
Speaker 1: They'd go on vacations together, play poker together. Um. And Uh.
Speaker 1: Of course Drexel is one of the most famous like
Speaker 1: low points you can probably say in Wall Street financial
Speaker 1: history with the trial of Michael Milken, it's bankruptcy and
Speaker 1: everything else. Um. But also with the time heals all
Speaker 1: wounds Michael Milken, Leon Black, a lot of these guys
Speaker 1: there now you know, they're that's all in the past,
Speaker 1: and and they've risen to become kind of like lord
Speaker 1: and master of of Wall Street. And the Drexel part
Speaker 1: of the story I think is really important because it's
Speaker 1: success and essentially creating the junk bond obviously, and the
Speaker 1: junk bond market is critical for what comes next and
Speaker 1: what comes comes next for Leon Black. But also, and
Speaker 1: you alluded to this, the dissolution of Drexel. The bankruptcy
Speaker 1: makes Apollo possible absolutely so when Leon uh first strikes
Speaker 1: out on his own right around, it's all with like
Speaker 1: Drexel survivors essentially and uh. And at the same time,
Speaker 1: there's this credit crunch Uh in the economy and all
Speaker 1: of the companies that had been bought or we're sitting
Speaker 1: on piles of high yield debt, we're now in trouble.
Speaker 1: And a lot of them, a lot of that debt
Speaker 1: was issued by Drexel, sometimes by Leon himself. He knows
Speaker 1: which are the good companies, which are the bad companies,
Speaker 1: And now all of a sudden, they're all struggling and
Speaker 1: the game is no longer mergers acquisitions l b O
Speaker 1: S is about buying that distressed debt and using it
Speaker 1: to maneuver to take over these companies. And he's had
Speaker 1: a front row seat as that that was being issued.
Speaker 1: And now he forms what's actually called line advisors at first,
Speaker 1: but then later becomes Apollo uh To to go in,
Speaker 1: working with backing from Credit Leon, a French bank, to
Speaker 1: really start to rifle through these distressed companies. And he
Speaker 1: Apollo's really big value at is that they're going for
Speaker 1: the ones that are so distressed that his competitors, your
Speaker 1: Cravis is your icons are not touched them. And he's
Speaker 1: going in there and he and his team are willing to,
Speaker 1: you know, go through the restructuring battles, go through the
Speaker 1: bankruptcy battles to try to make a profit off these companies.
Speaker 1: And I do wonder too, write he's been at the
Speaker 1: right place at the right time and kind of understanding
Speaker 1: the marketplace. Um, but I also do wonder Caleb that
Speaker 1: you know, he has kind of done a service in
Speaker 1: terms of going after some of those companies that maybe
Speaker 1: some of the other private equity firms weren't interested in. Sure, yeah, yeah,
Speaker 1: he would. He would argue that, um, they are the
Speaker 1: truest value investors in private equity, right that that the
Speaker 1: way they think about value is you find a distress
Speaker 1: situation that you are uniquely capable of heading into and
Speaker 1: turning around, and that's going to lower your downside risk
Speaker 1: because you're buying it for so cheap and hopefully also
Speaker 1: boosting your chances of return later on. And one of
Speaker 1: the things that Apollo has notably done and with you know,
Speaker 1: full permission from their investors, is they have had the
Speaker 1: ability to invest all around a company in many ways,
Speaker 1: not just buying at what he not just doing sort
Speaker 1: of a plane vanilla leverage file, but they're buying credit.
Speaker 1: Often they find themselves at different times on different sides
Speaker 1: of a deal, right, absolutely, And that's true for Apollo itself,
Speaker 1: and it's true for Leon as a person too, so
Speaker 1: so so, yeah, he was He worked with companies and
Speaker 1: executives while he was issuing the debt at Drexxel, then
Speaker 1: then at Apollo, buying into those companies, as you say,
Speaker 1: multiple different ways through equity, through debt um and then
Speaker 1: he continues to run into the same people all throughout
Speaker 1: the next few decades. Um he's sometimes competing, as he
Speaker 1: would later do with Icon for control of a company
Speaker 1: or partnering with them. So, okay, I think what's interesting
Speaker 1: about this story. There's so much because you do go
Speaker 1: into family history and and so on. What I also
Speaker 1: think is just novel is that you actually sat down,
Speaker 1: You guys sat down and talked with Lion Block Black.
Speaker 1: This is someone who doesn't give interviews. Tell us little
Speaker 1: bit about the experience and what you got from him. Yeah. So, uh,
Speaker 1: Heather and I got to go sit down with Leon
Speaker 1: at his office at nine West fifty seventh Street. Uh.
Speaker 1: Something that struck me. It's kind of kind of a
Speaker 1: joke in financial journalism, knockout views of Central Park is
Speaker 1: a phrase that gets dropped into a lot of stories.
Speaker 1: This was the most stunning view of Central Park I
Speaker 1: have ever seen, like the whole park splayed out like
Speaker 1: a bocce ball court right in front of you. Truly,
Speaker 1: the most amazing um views I've seen in a Wall
Speaker 1: Street office reporting here. But he um uh. He was
Speaker 1: incredibly clever, uh, funny, very obviously intelligent um, and was
Speaker 1: very interested in trying to communicate to us that he
Speaker 1: he felt his company was misunderstood. That's the first line
Speaker 1: of your story, yes, which is exactly what you said.
Speaker 1: That the most feared man in the most aggressive realm
Speaker 1: of finance, he wants to know why he's been misunderstood, right, Um.
Speaker 1: And there's a few things that play there. One we
Speaker 1: we we deal with this idea of risk and who
Speaker 1: bears risk in any private equity deal, and who bears
Speaker 1: risk in in Leon Black deal specifically. And he makes
Speaker 1: a very good point that well, Claire's or Linen's and
Speaker 1: things or whatever may be a distressed asset that appears risky.
Speaker 1: Of course, the way Apollo goes about it does not
Speaker 1: mean Apollo itself or Apollo's investors are bearing a lot
Speaker 1: of risk. Right. You put a little equity in, you
Speaker 1: get a lot of debts shift shift shift that that
Speaker 1: risk to to your creditors and then of course to
Speaker 1: the target company uh itself. Um, and and we we
Speaker 1: came with a lot of questions. Uh. But that was
Speaker 1: the thing that really really animated him, and and I
Speaker 1: really seemed to both excite and aggravate him in a
Speaker 1: way that I found surprised. The notion of risk and
Speaker 1: the misunderstanding. Yeah, yeah, the misunderstanding of of him and
Speaker 1: his company and and and and yeah, as we said,
Speaker 1: a part of those because he is not proactively told
Speaker 1: his story in a way that a lot of his
Speaker 1: contemporaries do. And and when I was talking to other
Speaker 1: people around the company, they'll say, okay, Caesar's because casinos
Speaker 1: something like at there's only one Apollo and there's like,
Speaker 1: you know, two dozen creditors who all hate how all
Speaker 1: Apollo is going about their line of work there, right,
Speaker 1: So so they feel like there's there's a definitional like
Speaker 1: numeric sort of imbalance and how how their story gets told.
Speaker 1: That's Caleb Melby. He and Heather pearl Berg did this
Speaker 1: cover story, Jason, and what's wonderful about it is, uh
Speaker 1: they spent a long time on it. There's so many
Speaker 1: details about the man, his background, his family, uh, and
Speaker 1: really how he got to where he is today. And
Speaker 1: what's fascinating too is and we talked about it with Caleb,
Speaker 1: is that they actually sat down with Leon Black and
Speaker 1: this is not something that Mr Black does often. The
Speaker 1: insights that they got into him, into the firm, into
Speaker 1: the implications of the business, both there to follow and
Speaker 1: into the broader private equity world totally fascinating. We should
Speaker 1: mention you can get all of our conversation with Caleb
Speaker 1: Melby takes you even deeper into the story. It's our
Speaker 1: Business Week Extra podcast this week, so download that wherever
Speaker 1: you get your podcast. I got a chance to catch
Speaker 1: up with Steve Schwartzman. He is, of course the co
Speaker 1: founder of the chairman and the CEO of the Blackstone Group,
Speaker 1: a confidante of President Trump and of President she He
Speaker 1: played a little bit of a shuttled diplomacy role throughout
Speaker 1: these long trade negotiations. He was in the White House
Speaker 1: for the signing. Here's what he had to say, This
Speaker 1: got to be a deal basically, uh, because it's been
Speaker 1: going on for three years, uh since we really started this. Uh,
Speaker 1: it was two days before Davos three years ago. UH.
Speaker 1: And uh. So so we've had a lot of near
Speaker 1: missus UH, a little bit of success, and now a
Speaker 1: lot of success. UH. And I think it takes a
Speaker 1: while for each country UH to figure out what it
Speaker 1: really wants to get out of a trade agreement, what
Speaker 1: it wants to get out of the compliance um uh
Speaker 1: the opening of its markets. UH. And for China, you
Speaker 1: have to remember that the US in China, other than
Speaker 1: the World Trade Organization deal in two thousand and one,
Speaker 1: fundamentally hasn't had a trade agreement since the nineteen forties.
Speaker 1: So what's been achieved is very very significant. The two
Speaker 1: countries want to work together. That's that's a huge change. UH.
Speaker 1: That tariffs are starting to be reversed their U. There
Speaker 1: are major purchases of things of not just agriculture, but
Speaker 1: other things. Intellectual property has been reversed. Separately, the conversations
Speaker 1: in December regarding fentanyl, which is killing over fifty thousand
Speaker 1: Americans a year in China is really made huge strides
Speaker 1: to cut off the supply of fentanyl. And and so
Speaker 1: what we're seeing is our countries that are competitive but
Speaker 1: also have this huge relations and ship trade wise together
Speaker 1: these two countries. Hard to believe, uh, the way you
Speaker 1: depending upon how you calculated between thirty five of the
Speaker 1: world's economy just in two countries. So the idea of
Speaker 1: decoupling uh and everybody going their own way on virtually
Speaker 1: everything is impractical and it's also not good for the
Speaker 1: world economy. So so what the two countries have done
Speaker 1: now is figure out where they can start the dialogue,
Speaker 1: how they can implement it, uh. And it's a very
Speaker 1: positive feeling. This wasn't a grudging type of deal that's
Speaker 1: been entered into. Alright. So Steve, obviously you've been playing
Speaker 1: a bit of a role of a statesman going back
Speaker 1: and forth between these two leaders that you know very well.
Speaker 1: At the end of the day, you're a businessman, you're
Speaker 1: an investor. What does this do for you as a businessman?
Speaker 1: As an investor sitting at Blackstone? Does it amp will find?
Speaker 1: Does it accelerate investments that you may be making around
Speaker 1: the world and specifically in China. Well, what it does
Speaker 1: is it provides a baseline of of a better world economy,
Speaker 1: and I think you're seeing in the markets over the
Speaker 1: last sort of whatever you want to measure, UH, you know,
Speaker 1: the last year, certainly the last few months as this
Speaker 1: agreement has come together. It's not the only reason for
Speaker 1: strong markets, but it's it's the business community globally UH
Speaker 1: telling you that things are better now in terms of
Speaker 1: prospects than they were before this agreement was entered into.
Speaker 1: And so when you think about Phase two, and we'll
Speaker 1: see when that gets started, what's the most important thing
Speaker 1: for you to see as an investor in a business person? Well,
Speaker 1: I think UH, phase two will cover a number of
Speaker 1: other things, which which which are important. UH. You know,
Speaker 1: things that that you know have not been resolved. There
Speaker 1: are some issues you know regarding UH cyber and non
Speaker 1: tariff trade UH restrictions and and and also tariffs themselves
Speaker 1: have not been fully negotiated out UH in terms of
Speaker 1: where you go when these things UM all unlined, assuming
Speaker 1: you have a successful Phase two, and there are other
Speaker 1: issues as well, UH. And so what's important as a
Speaker 1: business person UH is to know that there's positive momentum.
Speaker 1: There are countries who realize that even though they may
Speaker 1: be rivals in certain areas, that in the commercial area,
Speaker 1: as much cooperation on as fair a basis as you
Speaker 1: can do is better than than countries just sort of
Speaker 1: breaking apart, which is which is deleterious? Uh, world trade
Speaker 1: and for business. And that's my conversation with Steve Schwartzman
Speaker 1: there on the White House lawn. Interesting of course, he
Speaker 1: is a friend and confidante of the President. He's obviously
Speaker 1: very pro this deal. He worked on it. But interesting
Speaker 1: to see what the implications are for his day job,
Speaker 1: you know, running the world's biggest alternative investment manager. I
Speaker 1: gotta say it was just interesting to see who was
Speaker 1: all in that room in the White House as that
Speaker 1: trade deal with signed A very telling story. It is
Speaker 1: the second most popular dating app in the US. It's
Speaker 1: supposed to offer women a better option, but does it.
Speaker 1: We're talking about Bumble. It's the subject of a feature
Speaker 1: in the magazine this week. Clear set Of wrote it
Speaker 1: and it is quite a tale. She's here with us
Speaker 1: in New York City. Alright, where to begin? I guess
Speaker 1: let's begin with what is Bumble. Bumble is a dating app,
Speaker 1: is also a networking app. They have like a platonic
Speaker 1: version and a professional networking version. But essentially, you know,
Speaker 1: you swipe right or left if you like people, and
Speaker 1: if you do, you go on a date, you can
Speaker 1: message them. Um. But it's defining feature that it was
Speaker 1: founded with is that only women can message men first.
Speaker 1: So if you swipe right on a man and he
Speaker 1: swipes on you, the woman, it's on her to message him. Supposedly,
Speaker 1: this is empowering, This allows women to guide the conversation. Um.
Speaker 1: But the issue is there's not really any evidence that
Speaker 1: it actually is empowering or that it's doing what it claims,
Speaker 1: which is supposed to be flipping the script, you know,
Speaker 1: giving women more power and relationships. Right, And I feel
Speaker 1: like she's really on a mission to kind of get
Speaker 1: rid of harassment of women on a dating website and
Speaker 1: you know, maybe a big more broadly like on social media. Right,
Speaker 1: there's a mission. And the she we are talking about,
Speaker 1: Whitney wolf Heard, she came from Tinder, I mean, which
Speaker 1: is an important sort of historical note, right. Yeah, So
Speaker 1: Bumble has like an amazing origin story, which is um,
Speaker 1: it's founded by this woman named Whitney wolf Heard, who
Speaker 1: when she was twenty three, she along with some other people,
Speaker 1: co founded Tinder. She was first vice president of marketing.
Speaker 1: She's sort of engineered tenders like initial explosive app especially
Speaker 1: in college campuses. UM. She's sued Tender for sexual harassment
Speaker 1: in UM. There was an undisclosed settlement, no admission of wrongdoing. UM.
Speaker 1: But you know, she received a lot of harassment online
Speaker 1: during all of this, you know, people calling her names,
Speaker 1: death threats, etcetera. So when she found a bumble, she
Speaker 1: really wanted to combat harassment online and just make a
Speaker 1: place on the Internet that's safer for women. And is
Speaker 1: she I mean, that's the really the big question. I
Speaker 1: feel like you're trying to get to and you look
Speaker 1: at the culture of the company because there's been concerns
Speaker 1: about that and whether or not she's making a difference
Speaker 1: on social media. Yeah, and this story, I will say
Speaker 1: it took me a long time to report because initially,
Speaker 1: when when someone tells you, you know, we're making the
Speaker 1: internet safer for women, we have all of these policies
Speaker 1: in place, you think, Okay, there's the data that sounds great.
Speaker 1: You know, they've banned hate speech. UM. Women have to
Speaker 1: message men first, so it's harder for men to in
Speaker 1: theory anyway harass women. UM, at least out of the blue.
Speaker 1: Then the more that I looked into it and I
Speaker 1: would ask for proof, I couldn't actually get them to
Speaker 1: provide me with any explanation for how this worked. Eventually,
Speaker 1: at one point UM they did tell me their abuse rate,
Speaker 1: which is the number of people who are kicked off
Speaker 1: the app for violating these hate speech and harassment rules,
Speaker 1: is seven to eight percent. But it's been the same
Speaker 1: throughout the entire time. So they've instituted these policies and
Speaker 1: not much is really changing, And there's no real benchmark
Speaker 1: for that, right because we don't know what that rate
Speaker 1: is that other dating sites right exactly. And you know,
Speaker 1: I talked to UM a couple of dating sites off
Speaker 1: the record, and they said, well, we don't know how
Speaker 1: you can compare us because we all have different terms
Speaker 1: of service agreements and different user bases and that sort
Speaker 1: of thing, which it was there. But the reason why
Speaker 1: I started asking these questions is because former employees were
Speaker 1: telling me Bill Bumble doesn't actually check to see if
Speaker 1: anything that it does makes much of a difference. And
Speaker 1: once I heard that from many people, I started to
Speaker 1: sort of rethink, Okay, so what does it mean. You know,
Speaker 1: one of the things that Bumble does is it bans
Speaker 1: shirtless selfies. So their explanation for why they baned shirtless selfies.
Speaker 1: Is that of the accounts that are reported for bad
Speaker 1: behavior have these shirtless selfies in them? So they banned them,
Speaker 1: but you could just upload a different picture. There's no
Speaker 1: real I mean, how does that mean women are safer
Speaker 1: just because you can't take your shirt off into photo anymore.
Speaker 1: So they don't have any explanation for how this actually
Speaker 1: benefits anyone. I want to go back to the culture
Speaker 1: of the company because it in part rests and part
Speaker 1: of the narrative rests on where the company sits sort
Speaker 1: of Organizationally, it's part of a larger company now and
Speaker 1: in fact, Whitney Wolf heard has essentially ascended to to
Speaker 1: an even higher position. Tell us about the company and
Speaker 1: the parent company. Yeah, so if you've heard anything about Bumble,
Speaker 1: you you might know its origins story. But actually from
Speaker 1: the very beginning has been Um, part of a larger
Speaker 1: company originally called Bad. In June there's a structure change
Speaker 1: and now it's called Magic lab Um. But but Do
Speaker 1: is a London based dating app that runs primarily I
Speaker 1: think in Europe and Latin America. Bumble was started sort
Speaker 1: of after the fact and has always been built by
Speaker 1: Bad engineers in London and then marketed and designed by
Speaker 1: Herd and wolf Heard and her team of women in Austin.
Speaker 1: So it's this weird mix of you know, it's a
Speaker 1: scrappy startup, but it's also not And but DO was
Speaker 1: run by a Russian billionaire, right, so many fun facets. Yeah,
Speaker 1: and BED has its own culture problems. There was a
Speaker 1: great Forbes article a few months ago about um allegations
Speaker 1: of sexual harassment over there and just the lack of
Speaker 1: women's ability to advance the workplace at the DO. And
Speaker 1: yet here's Bumble this like, you know, beacon of equality, Claire,
Speaker 1: when you set out to do this story, I mean
Speaker 1: part of it sounds like you wanted to know a
Speaker 1: little bit more about this person and the and the
Speaker 1: identity behind Bumble. I mean, tell us about your mission
Speaker 1: kind of what you what you hope to get out
Speaker 1: of it? What do you think you ultimately got out
Speaker 1: of it it? Yeah, I mean so I came to this
Speaker 1: story because I had read all of the great press
Speaker 1: about Bumble, and I thought, while they are doing so
Speaker 1: many great things, and let's take a look at this company,
Speaker 1: because if we can figure out what Bumble is doing,
Speaker 1: we can figure out, you know, what other companies should
Speaker 1: be doing or how they should be changing their mission.
Speaker 1: But the more that I looked into it, the more
Speaker 1: I realized these problems are really complex. I talked to
Speaker 1: this woman who is um an expert on trying to
Speaker 1: eradicate hate speech, and she talked about working with Facebook,
Speaker 1: and there were specific terms that Facebook wanted to make
Speaker 1: sure that people couldn't say derogatory, but also some of
Speaker 1: those same terms people throw around at each other in
Speaker 1: a sort of endearing kind of way. And so if
Speaker 1: you decide to scrub that entirely from Facebook, you are
Speaker 1: capturing of the posts that use it in sort of
Speaker 1: a nice way, right, nice but whatever, um so, non
Speaker 1: non threatening, jokey kind of way, friend to friend. And
Speaker 1: so what she was saying is that, you know, to
Speaker 1: do this is much harder than just banning something. And
Speaker 1: when I heard that, I thought, Okay, well, mostly what
Speaker 1: Bumble does is banned things. They don't have any explanation
Speaker 1: for how that actually works her high how that's beneficial.
Speaker 1: So I'm not sure that they're really solving anything. That's clear.
Speaker 1: Setteth who did the story on Bumble, and you can
Speaker 1: find that story online and also on the Bloomberg terminal.
Speaker 1: Interesting this woman young, she was a co founder of
Speaker 1: Tinder and here she is behind bumble. But it's interesting
Speaker 1: about a company that sets out with a specific mission
Speaker 1: UH and cleverly digs into does it, you know, live
Speaker 1: up to that mission and does it create what it
Speaker 1: promised well? And this is a story that's ultimately about
Speaker 1: the culture of the company, sort of the culture of
Speaker 1: the world we're living in right now as well even
Speaker 1: lawmaking to some extent, and how corporate influence can play
Speaker 1: a role there. So New Jersey Governor Phil Murphy, he's
Speaker 1: heading into his third year. UH. He did give his
Speaker 1: State of the State. I caught up with him. Talked
Speaker 1: about a variety of things that are going out of
Speaker 1: the state, but we kicked things off with talking about
Speaker 1: that US China trade deal. Here's what the governor had
Speaker 1: to say. Trade impacts US, UM significantly. We have one
Speaker 1: of the biggest ports in the United States. UH. And
Speaker 1: so for that reason alone, never mind our other goods
Speaker 1: and services that are made in New Jersey. UM. I believe, UH,
Speaker 1: at its core, there are legitimate issues with China period UM.
Speaker 1: And and that's that's not to me in question. What
Speaker 1: has been in question is how we've gone about that
Speaker 1: UM and I have not supported the approach to this.
Speaker 1: I would have signed on the dotted line UH A
Speaker 1: lot of what was to go shade of assuming labor
Speaker 1: and consumers were protected. I would assigned what the Obama
Speaker 1: had administration had worked on. But having said all that,
Speaker 1: lowering the trade temperature, as you suggest, taking another distraction
Speaker 1: off the table, I think is a good thing. I'm
Speaker 1: not qualified to tell you that this is a good
Speaker 1: trade deal. Again, I look at any deal through the
Speaker 1: eyes of consumers and labor, but putting aside the specifics,
Speaker 1: anything that can lower the temperature I think is good. Governor,
Speaker 1: talk to us about your kind of what I see
Speaker 1: is like two objectives with his Jobs Jobs New Jersey
Speaker 1: Plan UH an initiative. It is about helping employers access talent.
Speaker 1: It's also about helping residents that are in New Jersey
Speaker 1: develop the skills. I hear this across the country that
Speaker 1: everyone is working on these initiatives. What specifically are you
Speaker 1: going to do to help New Jersey residents have the
Speaker 1: skills that they need for the jobs that are in demand. Yeah,
Speaker 1: you've got it exactly right. First, of all. So the
Speaker 1: notion here is this is what employers need for the
Speaker 1: the econom to me of tomorrow. These are the employees
Speaker 1: that we're producing with the skills they've got. How can
Speaker 1: we as seamlessly as possible shrink the gap and make
Speaker 1: it line up as as best we can? You're write,
Speaker 1: lots of places are doing this, but no place starts
Speaker 1: where we start. Number one public education system in America,
Speaker 1: highest concentration of scientists and engineers per square mile in
Speaker 1: the entire world, a diversity unlike any other American state.
Speaker 1: We just got ranked to be the smartest state in
Speaker 1: the nation. Uh. We start in a very good place,
Speaker 1: but again, getting that match to work. I can't tell
Speaker 1: you how many ceo s board chairs I've sat with
Speaker 1: you say listen, we love it. My first question is
Speaker 1: where am I going to get the workforce for tomorrow?
Speaker 1: And just at this on the other side of the
Speaker 1: coin with recent graduates saying, listen, I feel really good
Speaker 1: about my education, but I want to make sure the
Speaker 1: skills have got will get me the job that I want,
Speaker 1: and so our job is to make that match as
Speaker 1: best we can. I'm understanding. Of course, you guys are
Speaker 1: gradually raising the minimum wage. Small businesses are selling us
Speaker 1: that that is killing them. How do you respond to that?
Speaker 1: And we know small business is always the backbone of
Speaker 1: really our nation's economy. Yeah. By the way, our administration,
Speaker 1: for the first time, Carol has a small business unit
Speaker 1: in our Economic Development Authority. That's never happened before. I
Speaker 1: think six of the employment in our state is technically
Speaker 1: by small businesses as it relates to minimum wage. One.
Speaker 1: One way we're doing this is we're doing it gradually. Uh.
Speaker 1: It's a five year glide path to fifteen dollars an hour. Uh.
Speaker 1: And that's explicitly because of the small business community. Secondly,
Speaker 1: depending on how small you are, there are carve outs
Speaker 1: in the glide path is even longer. UM. I can't
Speaker 1: justify having a two income household earning below the poverty
Speaker 1: line in New Jersey. Uh, it's just it's unacceptable. So
Speaker 1: we had no choice but to go from eight dollars
Speaker 1: and something that we're now at eleven dollars. Uh. In
Speaker 1: in several years from now, we'll get to fifteen dollars.
Speaker 1: It's the right thing to do. I think we're doing
Speaker 1: it in a responsible way, particularly with our small businesses.
Speaker 1: And I hope we can have one of those one
Speaker 1: plus one equal three outcomes. At the other end of
Speaker 1: the spectrum, the millionaires tax. Gotta ask you about it.
Speaker 1: You keep pushing for this millionaires tax. It was in
Speaker 1: your state of the state. Um, you know, your fellow
Speaker 1: Democrats in New Jersey seemed to say it's a dead issue.
Speaker 1: Why do you keep pushing? What chance is there for
Speaker 1: success here? Yeah, I'd say I just challenge a little
Speaker 1: bit the basis of the question, my fellow Democrats. A
Speaker 1: millionaires tax actually in New Jersey polls in the seventies,
Speaker 1: including a wild majority of Democrats and a majority of
Speaker 1: Republicans believe it or not. Why do we want to
Speaker 1: do it? Because it's the right thing to do, and
Speaker 1: we're not begrudging folks who have done well. There are
Speaker 1: twenty two thousand and something folks in this state out
Speaker 1: of nine million who are in this category. Bless them
Speaker 1: for their success. We take our hat off to them.
Speaker 1: We want more of them. That's not the point. It's
Speaker 1: not us versus them. We want them to pay a
Speaker 1: little bit it more. And the reason we want this
Speaker 1: is two reasons. Number One, will take the proceeds and
Speaker 1: will put it directly into the middle class, UH direct
Speaker 1: middle class property tax relief and K through twelve education funding.
Speaker 1: I inherited a state where the middle class had been ravaged.
Speaker 1: We're on a two year run now where we are
Speaker 1: making historic investments. This will allow us to accelerate that.
Speaker 1: And in particular, property tax is the big tax burden
Speaker 1: in the state above all else. And that's Phil Murphy,
Speaker 1: governor of the state of New Jersey, coming off of
Speaker 1: his State of the State address, talking about your home state,
Speaker 1: Carol Master right, my great home state of New Jersey.
Speaker 1: So we did talk about a lot of stuff trade
Speaker 1: because it was in the news. Wanted to see what
Speaker 1: the impact was on the state, but also about his
Speaker 1: mission for the millionaires tax and so much more. So
Speaker 1: fund is to check in with he. He's an interesting
Speaker 1: politician to be se the Opener pursuits. This week, it's
Speaker 1: about building around greenhouse. I know, Jason Kelly, you've been
Speaker 1: thinking about that. I've been thinking so much about it.
Speaker 1: But what we debated our houses, greenhouse conservatory, green house conservatory,
Speaker 1: What to do? What to do? James Tarmy is here
Speaker 1: with us in New York City. Didn't see this one
Speaker 1: coming and yet it's a fascinating tale. So this is
Speaker 1: how people are spending their money. It turns out that
Speaker 1: very wealthy people in the last ten years or so
Speaker 1: have started spending hundreds of thousand dollars of dollars, if
Speaker 1: not millions of dollars, on their own private greenhouses in
Speaker 1: an effort to control where their produce comes from. Is
Speaker 1: this to grow their own kale? What is it? Well? Possibly, yes, kale, tomatoes, lettuce, peppers,
Speaker 1: all the stuff that you would just buy at a
Speaker 1: normal supermarket. People are very aggressively trying to grow on
Speaker 1: their own. So you end up getting tomatoes that if
Speaker 1: you actually advertise the cost of what the actual greenhouse
Speaker 1: costs and so forth costs like forty dollars of tomato
Speaker 1: or whatever. So yes, it's and and let's be honest,
Speaker 1: by grow their own, it's usually hire someone to grow
Speaker 1: their own, or try to hire something. We're getting a
Speaker 1: little bit ahead of ourselves, of course, But the entire
Speaker 1: shoot that many people have run up against is that
Speaker 1: the person who they call their gardener is who's the
Speaker 1: person who trims hedges and you know, transplants things. There's
Speaker 1: not in fact trained in horticulture, and train maybe in landscaping,
Speaker 1: but not horticulture exactly exactly. And so people are discovering
Speaker 1: that they build this massive infrastructure and think that they
Speaker 1: can hire people to actually do what the infrastructure is for, namely,
Speaker 1: grow plans, and end up being in a situation where
Speaker 1: they literally cannot find anyone to actually enact their their plans.
Speaker 1: All right, so let's take a few steps back and
Speaker 1: let's talk about, um, what you found out. I mean,
Speaker 1: it really is kind of going back to what the UK. Right,
Speaker 1: there's lots of greenhouses. Yes, one person, it's one person
Speaker 1: says that greenhouses in the New York UK are what
Speaker 1: garages are to the US, and essentially everyone has them.
Speaker 1: But a bit of a bit of a blow. But um,
Speaker 1: you know, anyone can have a greenhouse technically if it's
Speaker 1: a kind of little glass shack, but really those are
Speaker 1: oftentimes called cold frame houses, um, where it's just sort
Speaker 1: of try to protect the plants from the frost. And
Speaker 1: these can be quite cheap. Once you start getting into
Speaker 1: an actual greenhouse that's meant to nurture and grow in
Speaker 1: winter plants all year round, you end up having to
Speaker 1: control temperature fluctuations during the day and night. You have
Speaker 1: mechanical systems. You have a very very complex series of
Speaker 1: different machines and various calculations that you have to take
Speaker 1: into account when you're constructing this ostensibly kind of you
Speaker 1: calic little idyllic structure. All right, So going back to
Speaker 1: where we started a little bit, there's a greenhouse and
Speaker 1: then there's a conservatory. Conservatory seems much more relaxing. It
Speaker 1: is relaxing, but it's also not great for actually growing plants.
Speaker 1: It's great for keeping plants, right, you know, as as
Speaker 1: many people know, keeping plants in a glassy place during
Speaker 1: the summer and winter means that the plants, if you
Speaker 1: water them, rive. However, it actually is not the best
Speaker 1: place to grow plants, first of all, because you need
Speaker 1: a lot of soil um and you need to water
Speaker 1: them aggressively. But also plants need very different temperatures oftentimes
Speaker 1: than um what you know your fern in your living
Speaker 1: room needs. And so if you're actually taking this seriously
Speaker 1: and trying to grow lettuce or whatever, um, you can't
Speaker 1: really have it attached to your house. You need to
Speaker 1: standalone space, and you need a lot more serious of
Speaker 1: an investment, I think, and maybe plants need a climate
Speaker 1: control that's not exactly comfortable for human beings. Right, So
Speaker 1: now when it comes to cost, then it starts to
Speaker 1: get incredibly expensive, especially if you wanted to look nice.
Speaker 1: So you know, a lot of these companies have a
Speaker 1: kind of base model that are around three graft feet
Speaker 1: that starts starts at approximately fifty dollars um and that
Speaker 1: cost will double when it comes to the mechanicals done
Speaker 1: is being implemented everything. So at the base amount for
Speaker 1: a lot of these people, they're spending at least a
Speaker 1: hundred thousand dollars, if not a lot more. And going
Speaker 1: back to what we were initially discussing, they spend all
Speaker 1: this money. And then one person told me that these
Speaker 1: greenhouses end up being very very expensive storage sheds after
Speaker 1: a little while because they really can find anyone to
Speaker 1: staff it, right, that's really said. The point is though,
Speaker 1: also that there are these companies that are doing it,
Speaker 1: and it sounds like they are more in demand, right,
Speaker 1: that people do want them. These companies have seen their
Speaker 1: sales at the high end treble and in some cases,
Speaker 1: you know, one company went from around fifteen greenhouses annually
Speaker 1: priced above two to more than fifty on an annual
Speaker 1: basis in ten years. That is, I think objectively, an
Speaker 1: explosion in demand. Sounds like the real business opportunity is
Speaker 1: in staff and greenhouses at this point. So good luck,
Speaker 1: good luck following that dream exactly, house tomatoes exactly dreaming
Speaker 1: about Yeah, you know, I mean this has been fun,
Speaker 1: but you know, maybe I need to go staff some
Speaker 1: greenhouse at Tiget need exactly, James Tarry always great, Thank you,
Speaker 1: thank you so much for having me so in pursuits
Speaker 1: this week. It's not a supercar, it's not a race car,
Speaker 1: it's not an exotic concept car. It is a station wagon, or,
Speaker 1: as I have learned to call it, a Carol Carve
Speaker 1: station wagon. Yeah, Hannah Elliott is here. She's telling us
Speaker 1: about this sleek new Audie that's making station wagons sexy,
Speaker 1: although apparently to some people they always were, always were,
Speaker 1: So tell us about the car that you wrote. So
Speaker 1: this is very exciting in the world of station wagons.
Speaker 1: This is the Audi R S six a Vaunt and
Speaker 1: it has not been sold in the United States until
Speaker 1: this year, and it's basically a supercar in station wagon form.
Speaker 1: So if you love station wagons, this is a very
Speaker 1: exciting thing. We're finally getting something fast, powerful, cool, even
Speaker 1: I want to hear about the car. But what is
Speaker 1: it about? Is it that there are a ton more
Speaker 1: wagons over in Europe? Yeah, you know ursus here. Europeans
Speaker 1: have this thing where they respect and honor the tradition
Speaker 1: of the station wagon. Let's not forget this is the
Speaker 1: shooting They call it a shooting break in Europe, and
Speaker 1: that that comes from the tradition of going out on
Speaker 1: the hunt and you take a shooting break and you
Speaker 1: open the back of your car and it's a nice picnic.
Speaker 1: You know, you've got that long roof line. So of
Speaker 1: course that the Europeans get it. We're slowly catching on
Speaker 1: and the automakers have finally decided to give us what
Speaker 1: we want. And so how much of this is about
Speaker 1: just space in the sense that like Europeans, they have
Speaker 1: traditionally like a little less space both in their homes.
Speaker 1: It's a smaller part of the country. Right here in
Speaker 1: the United States, were like bigger is better, whether it's
Speaker 1: a minivan, whether it's an escalator or a suburban or whatever.
Speaker 1: We've gone big and not been as economical. I guess
Speaker 1: with the way we design cars. Is that Does that
Speaker 1: make sense totally? Um? I think the key word here's functionality.
Speaker 1: You get something that is the height of a car
Speaker 1: and the width of a car, so it's smaller than
Speaker 1: a sub, but it has the functionality of an suv.
Speaker 1: So it's maybe the thinking person's sub. It's practical, you
Speaker 1: can put you know, the back door. It probably has
Speaker 1: slightly less space than an suv, but it's as functional,
Speaker 1: I would say. So we're talking functionality, all right, functional,
Speaker 1: But you sounded like this car from driving it, that
Speaker 1: you liked it. Tell us where you drove it and
Speaker 1: what the experience was. Okay, So I took this out
Speaker 1: in the hills in Malibu, and you you may not
Speaker 1: think this because there's there's, of course the highway in Malibu,
Speaker 1: but if you take a hard right and you go
Speaker 1: up in the hills, there are some really aggressive turns
Speaker 1: up there. So I took this a vaunt up there
Speaker 1: and it performed. I had just gotten out of the
Speaker 1: Audi R eight and got into this. Now that rates
Speaker 1: their sports car. It kept right up. It has almost
Speaker 1: six hundred horse power, which is kind of insane, all
Speaker 1: wheel drive, all these crazy drive modes. It was a
Speaker 1: blast and it sounds incredible. Well, talk to us a
Speaker 1: little bit about the growl of the car. You actually
Speaker 1: have a line in the story. Yeah, this is made well,
Speaker 1: oh the R rated line. Yes, it does. It sounds
Speaker 1: like a sports car. And this engine note was made
Speaker 1: specially for the American market because Audie knows Americans again
Speaker 1: might be a little hesitant about the station wagon thing,
Speaker 1: so they made a unique engine note specifically for the
Speaker 1: American market. It does sound really aggressive. And so where
Speaker 1: does this fit? Sort of in the price range? Mean,
Speaker 1: Audi obviously is is higher end, but Mercedes, i think,
Speaker 1: also has a pretty popular Audie I'm sorry. Mercedes does
Speaker 1: make great station wagons. Um that it makes even a
Speaker 1: MG station wagons which are cereals mid six or you know,
Speaker 1: in the six figures. Um. Audie tells me that this
Speaker 1: is going to be roughly a hundred and twenty thousand.
Speaker 1: They haven't come out with official pricing yet, so it's
Speaker 1: very expensive. Audi does make other less expensive wagons that
Speaker 1: are around fifty thousand, so it's a big jump. Um.
Speaker 1: But if you think, okay, portion makes a Panamera sports
Speaker 1: to reasona, which is kind of like a wagon to Again,
Speaker 1: these are all the six figures. Now these are primo cars.
Speaker 1: So alright, so you liked how it drove, tell us
Speaker 1: about the interiors, the exteriors in terms of it. So,
Speaker 1: my favorite thing about the technology on this car is
Speaker 1: in the back. It has a motion sensor that if
Speaker 1: you swipe your foot underneath the back, it opens the
Speaker 1: back hatch, which I think is so cool that my
Speaker 1: whole family made fun of me. When your hands are
Speaker 1: full of its completely it's a great thing. Um to
Speaker 1: your point about the interiors, it comes with two special
Speaker 1: interiors of the R S Spec interiors. You've got this
Speaker 1: honeycomb pattern on the seats. It's basically trim like a
Speaker 1: sports car with perforated leather um. The whole interior is
Speaker 1: gorgeous tradition. And so what does this tell us about
Speaker 1: where the market may go from here? It's very interesting.
Speaker 1: I don't know. The answer is, I don't know. I
Speaker 1: feel like it's a bit of a trial thing. We've
Speaker 1: seen SUVs continue to dominate. There's no sign of that
Speaker 1: changing or slowing down. But this isn't interesting option, and
Speaker 1: it is telling that they are bringing it to market now.
Speaker 1: It's telling that it's not a hybrid it's it's a
Speaker 1: full on V eight car, so we'll see. And fuel efficiency,
Speaker 1: do you get any more efficiency here than you would
Speaker 1: for a big gas guzzling SUV. Yes, you know, I
Speaker 1: will say this is not the most efficient station wagon
Speaker 1: in the world, but yeah, I mean if you drive
Speaker 1: this on long um stretches, you can maybe get twenty
Speaker 1: miles per gallon, so so yes, a little better. Yeah.
Speaker 1: Are you anticipating other folks? Is there anybody else to
Speaker 1: like bring in a wagon? I don't know, I don't
Speaker 1: I don't know, I don't think. So, you know, again,
Speaker 1: this is a really niche audience. We'll see. We'll see.
Speaker 1: It's kind of new and exciting and hasn't really been
Speaker 1: done like this before, so we'll see. I'm excited to
Speaker 1: find out Christmas there could be a bow on this car.
Speaker 1: I love my wagon. I gotta tell you, right, Hannah Elliott,
Speaker 1: thanks a lot, Thank you guys, and that wraps up
Speaker 1: Bomberg Business Week's weekend podcast. Thank you so much for
Speaker 1: joining us. I'm Jason Kelly and I'm Carol Masser. Proud
Speaker 1: of my station wagon. Be sure to tune into Bloomberg
Speaker 1: Business Week Radio Live Monday through Friday. All starts at
Speaker 1: two pm Wall Street Time, And if you can't catch
Speaker 1: us live, get our daily podcast wherever you download your podcast.
Speaker 1: You can also watch the show live on YouTube. Just
Speaker 1: search for Bloomberg Global News and get this week's edition
Speaker 1: of the magazine. It's on newsstands now. We'll be back
Speaker 1: next week at the same time. This is Bloomberg