Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston bringing you
Speaker 2: stories of capitalism. This week, opportunity and why it's getting
Speaker 2: harder to succeed on our own merits and the companionship
Speaker 2: of our pets, and how it's led to a multi
Speaker 2: billion dollar industry. We start with the story about prudence,
Speaker 2: about getting the balance just right in life, in business,
Speaker 2: and when it comes to managing money, knowing when to
Speaker 2: take risks, the right risks to take, and when to
Speaker 2: avoid risks altogether.
Speaker 3: We obviously take credit risk and other risks, but people
Speaker 3: who operate in a community tend to know the good
Speaker 3: players and the bad players.
Speaker 2: That's Bill Dempschak, who, as CEO of PANC manages risk
Speaker 2: for a living. P and C is one of the
Speaker 2: so called regional banks that are at the core of
Speaker 2: the US banking system. They're not as big as money
Speaker 2: center banks like JP Morgan, Bank of America, and Wells Fargo,
Speaker 2: which have assets of just under ten trillion dollars combined,
Speaker 2: but they can be much larger than the community banks
Speaker 2: catering to individuals and local businesses, which are less than
Speaker 2: ten billion dollars in assets each. PNC, for example, is
Speaker 2: one of the largest regional banks with assets of over
Speaker 2: five hundred billion dollars. For a critical segment of American business,
Speaker 2: Regional banks get the balance just right. They lend to
Speaker 2: businesses like Perimunt Company, a privately held firm based in
Speaker 2: P andc's hometown of Pittsburgh. The company has grown to
Speaker 2: become one of the top five producers of titanium in
Speaker 2: the world and it's been banking with P and C
Speaker 2: since the very beginning.
Speaker 4: Where what you would call a medium fish or not
Speaker 4: a big fish, but our track record is unmatchable in
Speaker 4: our in the metals industry, and we like our position
Speaker 4: where we're at, you know, very we are very loyal.
Speaker 4: Our first meeting with PNC occurred in my parents' basement
Speaker 4: when we were just starting our company, and you know,
Speaker 4: it was over a couple of fold out tables where
Speaker 4: the bank came in and we pitched our plan to
Speaker 4: them on what we were going to do, and along
Speaker 4: with our business plan, along with our ideas, our vision
Speaker 4: or strategy. They said to my father, yes, Jim, we'll
Speaker 4: back you. And the relationship started there and it's done
Speaker 4: nothing but grow immensely over the years.
Speaker 2: Knowing its customers well over long periods of time helps
Speaker 2: the bank assess the risks it takes, but it can
Speaker 2: also make original Bank a true partner for local companies
Speaker 2: when they face turning points in their businesses, as Perman
Speaker 2: did when it moved to expand its world class titanium
Speaker 2: business into melting operations and faced a challenge that might
Speaker 2: have taken it outside of Pittsburgh.
Speaker 4: In two thousand and five, we were at the point
Speaker 4: we needed to expand significantly in our capabilities. We needed
Speaker 4: more facilities and more land, which we were at the
Speaker 4: point of growing out of space in some of our
Speaker 4: campuses in this region. Well, we were having a very
Speaker 4: hard time getting additional land for this expansion, and we
Speaker 4: started looking at the State of Virginia. Well, in the
Speaker 4: eleventh hour, I came to my executives here at PNC
Speaker 4: and said, Hey, this is what's happening. We can't get
Speaker 4: what we need in the region. Well, they immediately got
Speaker 4: in touch with the governor who started moving the roadblocks
Speaker 4: that were in place, and lo and behold that allowed
Speaker 4: us to grow further in this region, not leave the
Speaker 4: city not leave Pennsylvania, and PNC was a key.
Speaker 1: Part of that bill.
Speaker 2: Dempjack Ce's support for companies like perimunt as the core
Speaker 2: of his business, a basic banking business, serving customers and
Speaker 2: providing credit for key parts of the economy, knowing when
Speaker 2: and how to take risk and avoiding growth for growth's sake.
Speaker 3: Maybe it's part of our Pittsburgh roots. But what I've
Speaker 3: come to understand and all the years I've worked, is
Speaker 3: banking really is three yards in a cloud of dust.
Speaker 3: There isn't a magic answer. There isn't something that's going
Speaker 3: to cause you to you know, as we've seen double
Speaker 3: and triple in size safely. It's hard work, it's sticking
Speaker 3: to what you know. It's being relevant to clients.
Speaker 2: In the spring of twenty twenty three, regional banks were
Speaker 2: put in the spotlight, but the failure of Silicon Valley,
Speaker 2: Signature and First Republic banks, with questions raised about whether
Speaker 2: they were inherently more risky.
Speaker 3: What hit the news was than this notion of you know,
Speaker 3: regional banks as a group are in trouble, and the
Speaker 3: g sifies the giant money center banks are safe in
Speaker 3: you know, you saw a market share move to the
Speaker 3: larger banks during that period of time. Some of that
Speaker 3: was fair in the sense that people said, look, if
Speaker 3: I put my money at a JP Morgan, government will
Speaker 3: never let them fail, my money will be safe. And
Speaker 3: that's unfortunate because the descriptor of smaller necessarily being more
Speaker 3: risky is just fundamentally wrong. But I understood the mentality.
Speaker 2: Former Federal Reserve Governor Dan Trulo agrees that it was
Speaker 2: a mistake to lump in a bank like PNC with
Speaker 2: smaller versions of regional banks, and Tarula worries that the
Speaker 2: smaller regionals may get caught in a squeeze.
Speaker 5: So I think here's the dilemma, David. On the one hand,
Speaker 5: the regional banks that I'm talking about, a group between
Speaker 5: seventy and eighty billion and two hundred and twenty billion,
Speaker 5: are in a business model squeeze. They cannot compete with
Speaker 5: the pncs and USBs of the world, much less less
Speaker 5: with Chase Manhattan and Bank of America. They just don't
Speaker 5: have the scale to do it. Scale is becoming increasingly
Speaker 5: important as digitization, tech and eventually artificial intelligence become important
Speaker 5: parts of the banking business model. On the other hand,
Speaker 5: what's left of genuine relationship banking, that is banking in
Speaker 5: which subjective judgments about a potential borrower's position and ability
Speaker 5: to repay are of significant importance, where it hasn't mostly
Speaker 5: been reduced to numbers. That's where the community banks, fourteen eighteen,
Speaker 5: twenty twenty two billion dollar banks, that's where they have
Speaker 5: an advantage. And I think it's that group in the middle,
Speaker 5: which has neither the scale nor the capacity to be
Speaker 5: true local relationship lenders that are facing the squeeze. And
Speaker 5: I don't think it's a coincidence that those are the
Speaker 5: banks on which people feared runs a year and a
Speaker 5: half ago.
Speaker 2: And Bill Demchek agrees that regional banks like his have
Speaker 2: a vital role to play, but he's not sure that
Speaker 2: regulators have figured out what it is.
Speaker 3: One of the things I've asked all of the regulatory
Speaker 3: groups what their vision of banking is, and more often
Speaker 3: than they'll not they'll say, that's not my problem. Our
Speaker 3: problem is to keep banks safe. And if you point
Speaker 3: out to them the change in the banking landscape where
Speaker 3: you know a JP Morgan or a Bank America have
Speaker 3: organically grown a PNC every three years, you know they're
Speaker 3: I don't know what is it six seven times our
Speaker 3: size even though we are as an institution. If we
Speaker 3: just do what we're doing today, I think you'll have
Speaker 3: three or four banks that'll consolidate the whole country. With
Speaker 3: the exception of true community banks, which I think everybody
Speaker 3: up and down agrees as do I, serve a really
Speaker 3: important purpose in our country.
Speaker 2: Whatever the role of regional banks ultimately proves to be.
Speaker 2: Bankers like Bill Dempcheck doubt that the current approach to
Speaker 2: bank regulation accomplishes what it's meant to.
Speaker 3: In the end. If and I don't think we need this,
Speaker 3: but if they said, you know what, the banking system
Speaker 3: just needs more capital because we'll sleep better at night,
Speaker 3: I'd rather have them just say hold more capital, but
Speaker 3: then get out of my hair so that they don't
Speaker 3: tell me how I'm supposed to allocate it. We know
Speaker 3: how to allocate it. That's our business. You know. All
Speaker 3: of the rules they hit you with ultimately cause all
Speaker 3: the banks to kind of look the same based on
Speaker 3: whatever the FED models say, which aren't always the right models.
Speaker 3: It's a problem. I think we're long past a world
Speaker 3: where bankers are high flyers and are trying to bet
Speaker 3: on red I think that ended definitively in the financial crisis.
Speaker 3: I worry more about by putting everybody under the same
Speaker 3: microscope with the same models, we're replicating the same problems
Speaker 3: across the entirety of the system. You know, if the
Speaker 3: FED says in a stress test that this type of
Speaker 3: loan is bad, then nobody will do it because regulatory
Speaker 3: capital is too high. FED says this type of loan
Speaker 3: is good. What if it isn't everybody does it because
Speaker 3: the FED said so.
Speaker 2: If regulators are looking for systemic risk to address, Bill
Speaker 2: Demscheck suggests they look at the movement of assets outside
Speaker 2: the regulated banking system to the non bank banks, in
Speaker 2: part because of their growing codependency with other financial institutions.
Speaker 3: The shift of assets outside of the banking system, leverage
Speaker 3: lending and mortgage, we miss opportunities. Leverage lending is in
Speaker 3: our core target. You know, our clients are right there
Speaker 3: in Pittsburgh or Cleveland or Texas, and they're real companies
Speaker 3: and they're not necessarily catered to private equity or other
Speaker 3: buyout funds. But down the road it matters. I think
Speaker 3: mortgage matters a lot.
Speaker 2: Increasingly we see the non banks doing business with the banks.
Speaker 2: They're banking with the banks. Is there a potential risk
Speaker 2: in that basically that it could what has been thought
Speaker 2: to be a non systemic risk could actually get into
Speaker 2: the system particular, we're not able to see what's going on.
Speaker 3: Yeah, it's it's a really good question. You will probably remember,
Speaker 3: having seen recent comments and f SOOC notes if you
Speaker 3: read that stuff where the regulators are starting to say, wait,
Speaker 3: where's the interconnectedness here? And you know, all of the
Speaker 3: shadow banking system, you know, if it's still called that,
Speaker 3: from the retail lenders through to the leverage finance lenders,
Speaker 3: through to hedge funds. They exist because banks provide liquidity
Speaker 3: to them, so we empower You think about what's happened
Speaker 3: to the mortgage business. I think seventy five percent of
Speaker 3: it it's left banking and gone to not terribly well
Speaker 3: capitalized or funded institutions, and then banking provided them with
Speaker 3: liquidity lines for their warehouse. Things get bad, all those
Speaker 3: liquidity lines go away and they're left hanging. So it's
Speaker 3: the right conversation to have. And if you look specifically
Speaker 3: at that outcome, is that a good outcome? I moved
Speaker 3: it out of the banks. The banks still finance it all.
Speaker 3: I don't have line of sight into it anymore. But
Speaker 3: you know, I feel great about the banks. I just
Speaker 3: don't necessarily feel great about everything that now is non
Speaker 3: bank that I pushed out of the system, and we're
Speaker 3: gonna we'll have a day of reckoning with that at some.
Speaker 2: Point, whether you talk with a former regulator like Dan
Speaker 2: Trulum or a banker like PNC's Bill Demchek. The future
Speaker 2: of regional banks looks like it will lie with further consolidation,
Speaker 2: something that raises its own issues with integration and of
Speaker 2: course pricing, but that could make the system stronger if
Speaker 2: done right.
Speaker 3: I think mergers consolidation has to be a big part
Speaker 3: of the future of banking. One of the challenges everybody
Speaker 3: faces in this world of increasing technology spend in cyber
Speaker 3: and what clients expect in terms of the product delivery
Speaker 3: makes it hard for two medium size banks to get
Speaker 3: together and be anything other than larger, but not necessarily
Speaker 3: be any any better. You know, it gives them perhaps
Speaker 3: an expense platform where over multiple years they now have
Speaker 3: more to invest, but they are at a structural disadvantage.
Speaker 2: But whatever further mergers or acquisitions may lie in PNC's future.
Speaker 2: It's CEO and at least one of its longtime clients.
Speaker 2: I believe this regional bank will retain deep roots in Pittsburgh. Next,
Speaker 2: the billions of dollars we spend to keep our pets healthy.
Speaker 2: Here on Wall Street Week.
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Speaker 2: This is a story about companionship, the kind that eighty
Speaker 2: seven million households enjoying in the United States. It's the
Speaker 2: kind that can come only from pets, and Americans are
Speaker 2: willing to pay a good deal of money to make
Speaker 2: sure they can have it for as long as possible.
Speaker 8: Look at some of the incredible studies on this.
Speaker 6: Eighty six percent of pet owners would spend whatever it
Speaker 6: takes to take care of their animal fit was sick.
Speaker 6: And we said, okay, what if there was a twenty
Speaker 6: percent reduction in your take home income, would you change
Speaker 6: what you spend for your pet when it's sick?
Speaker 8: And they wouldn't change it at dime.
Speaker 6: It's a member of your family, and I think that
Speaker 6: really does change what you're willing to spend as well
Speaker 6: as the conditions that you're really going to pay attention to.
Speaker 2: That's Kristin Peck, CEO zoetis the largest animal healthcare company
Speaker 2: in the world, and she knows whereof she speaks. Last year,
Speaker 2: Americans spent thirty eight billion dollars to keep their pets healthy,
Speaker 2: up from fourteen billion dollars a decade ago, a jump
Speaker 2: of one hundred and seventy percent. That's more than people
Speaker 2: spent on gym memberships, and twice what they spent on
Speaker 2: takeout pizza or going to the movies. There's also a
Speaker 2: big business in the health and welfare of livestock, but
Speaker 2: it's the pets side of things that's showing the most growth.
Speaker 2: Pfizer spun off to at US eleven years ago. It's
Speaker 2: gone from focusing mainly on livestock to dedicating the lion's
Speaker 2: share of resources to our pets.
Speaker 6: It's evolved dramatically since our IPO about eleven years ago.
Speaker 6: Back then we were sixty five percent livestock, thirty five
Speaker 6: percent pet care. We've really invested aggressively in science based
Speaker 6: innovation and.
Speaker 8: Now it's actually flopped completely.
Speaker 6: We're now about sixty five percent in pet care and
Speaker 6: thirty five percent in livestock.
Speaker 2: The overall animal healthcare business grows between four and six
Speaker 2: percent a year, but since it's IPO, Zoetis has averaged
Speaker 2: a compound annual growth rate of eight percent, something Kristen
Speaker 2: Peck attributes to investment in research and development to create
Speaker 2: new treatments.
Speaker 6: That difference is really the science based innovation that we bring,
Speaker 6: bringing new treatments to new unmet medical needs. And as
Speaker 6: I look to the future, there's no reason that should stop.
Speaker 6: There are significant unmet medical needs across both companion and livestock.
Speaker 6: Major diseases such as chronic kidney disease and renal disease
Speaker 6: that right now has no treatment for cats and dogs.
Speaker 2: And beating the market as you have done. How much
Speaker 2: of that is organic? I would say internally generated as
Speaker 2: opposed to acquisitions.
Speaker 8: So almost all of it for us has been organic.
Speaker 6: We look very closely to what are the customer needs
Speaker 6: across the globe and meeting those needs. We have a
Speaker 6: very large R and D organization, and we spent five
Speaker 6: billion dollars in R and D. For example, since we
Speaker 6: iPod and our R and D expense grows double digits.
Speaker 6: We're really excited to discover the future of what animals need.
Speaker 2: Discovering that future and creating it could be the core
Speaker 2: of Zoetta's success story, and it's the purview of Rob Bohlzer,
Speaker 2: the man who oversees the firm's R and D efforts
Speaker 2: from its headquarters in Michigan.
Speaker 10: R and D within Zoetis represents about fifteen hundred colleagues
Speaker 10: across the globe. Nearly a thousand of those colleagues work
Speaker 10: here in Kalamazoo and in the Richland Farm area, and
Speaker 10: it's really at the core of the innovation for the company.
Speaker 10: So we really pride ourselves as a company to develop
Speaker 10: innovative medicines that are based in science, and you know,
Speaker 10: the R and D function is really key to bring
Speaker 10: those new innovations, you know, forward to marketed products for
Speaker 10: the company.
Speaker 2: Like other drug makers, Zoettas has made a business of
Speaker 2: taking big risks and hope of earning big rewards. Take
Speaker 2: for example, Zoeta's treatment for hermatitis in dogs historically treated
Speaker 2: with steroids mantil. Zoetis made a substantial investment in a
Speaker 2: new way to address the problem.
Speaker 10: At its core, R and D did a lot of
Speaker 10: the basic biology to understand, well, what is causing itch
Speaker 10: within dogs? Can we intervene safely? And the answer was yes.
Speaker 10: So through that research we identified that the jack pathways,
Speaker 10: it's a janis kindase, it's a group of enzymes were
Speaker 10: responsible for sending out chemical messagers in the body of
Speaker 10: the dog that made them mitche And through the work
Speaker 10: with our chemists, we designed a molecule that blocked that
Speaker 10: that communication, that messaging pathway, and you know, ensured that
Speaker 10: we had the right product profile because we wanted to
Speaker 10: be able to treat seasonal allergies as well as chronic
Speaker 10: itch in dogs. And you know, through that process spent
Speaker 10: about seven eight years developing that product, getting it to
Speaker 10: the regulatory thought news, and eventually getting on the market.
Speaker 10: And now after eleven years and twenty eight million dogs
Speaker 10: treat it, I think we have a lot of happy
Speaker 10: customers and less toy dogs out there.
Speaker 2: All that is good news for twenty eight million dogs,
Speaker 2: but also for Zoweta's bottom line after it took the
Speaker 2: risk and invested in Rob Pohlzer's research team to develop
Speaker 2: a new product based on an assessment of the likelihood
Speaker 2: of success and the possible payoff. As a CEO, perhaps
Speaker 2: your most important job is allocational capital. How do you
Speaker 2: decide how much capital to allocate toward.
Speaker 3: R and D.
Speaker 8: It's a robust process.
Speaker 6: I get this question a lot from investors, like what's
Speaker 6: the right amount and how do you know?
Speaker 8: And as we've talked.
Speaker 6: About, we spend a lot over five hundred million dollars
Speaker 6: a year in R and D and we've been growing
Speaker 6: that number double digits, and that's because we've had an
Speaker 6: incredibly successful R and D engine and we have a
Speaker 6: rigorous process where every project gets prioritized, it has a
Speaker 6: expected return on investment, and that's based on the probability
Speaker 6: that technically that program will be successful, and that there's
Speaker 6: a regulatory pathway to make it successful. And we prioritize
Speaker 6: all those and then we come up with an answer.
Speaker 6: But we don't stop there because there may be some
Speaker 6: big bets you want to make that you know you're
Speaker 6: not really sure what that value is going to be.
Speaker 6: I'll look at, for example, dermatology. Back when we launched
Speaker 6: the product in twenty fourteen, that's where like you know, steroids,
Speaker 6: they're fine, they should be fined.
Speaker 8: It was one hundred million dollar market. How valuable is
Speaker 8: that going to be? Maybe it's one hundred million dollars.
Speaker 6: So sometimes you've got to make bets because you really believed,
Speaker 6: even if the market doesn't see it today, that you
Speaker 6: think that's going to be big.
Speaker 8: That was the right bet. One hundred million dollar market
Speaker 8: in twenty.
Speaker 6: Fourteen is now one point five billion dollar market, of
Speaker 6: which were more than one point two billion dollars of that.
Speaker 2: Zoetis and others weighing the costs and benefits of research bets,
Speaker 2: now have a new partner in the form of artificial intelligence,
Speaker 2: something that experts like doctor Casey Kaser of Cornell say
Speaker 2: is one of the most significant additions to the field.
Speaker 9: I think there are several new so exciting developments in
Speaker 9: terms of drugs and treatments available for pets and veterinary
Speaker 9: medicine in general, and a lot of those are actually
Speaker 9: using artificial intelligence to help develop them or create them.
Speaker 9: For example, there are a lot of new efforts to
Speaker 9: create diagnostic tests using artificial intelligence that can do things
Speaker 9: like talith a dog or cat has kidney disease earlier
Speaker 9: than we currently can, or look at radiographs or X
Speaker 9: rays and help us diagnose things like hip displaysia in dogs,
Speaker 9: which is a degenerative and genetic condition. Other people are
Speaker 9: using generative AI, which is like chat GPT, So the
Speaker 9: Cornell University Feline Health Center has created a cat GPT
Speaker 9: which provides cat owners with helpful information online about their
Speaker 9: cat's health, so that people have a reliable resource to
Speaker 9: go to rather than just Google.
Speaker 2: As much as we anticipate that artificial intelligence is going
Speaker 2: to help us around the corner in diagnosing humans, Chris
Speaker 2: pet says that in animal healthcare it's already being used
Speaker 2: extensively and with immediate results.
Speaker 8: People talk about the future being AI.
Speaker 6: The future is here in AI in animal health, and
Speaker 6: we have multiple applications that we're currently using at the
Speaker 6: vet and with the pet owner. So the images platform,
Speaker 6: for example, is really fascinating in that we partnered with
Speaker 6: a company called tech Site. They had this technology where
Speaker 6: they believed firmly that they could take a really good
Speaker 6: picture and then you could use AI to compare it.
Speaker 6: But we had all the data, right, we have all
Speaker 6: the samples where we could train. We could train the
Speaker 6: AI with blood samples or with fecal samples to help
Speaker 6: it learn faster. And so it was really the partnership
Speaker 6: of a sort of AI company with the biology, the chemistry,
Speaker 6: the science that Zoett has had. And now we have
Speaker 6: six indications on this one platform. But we're looking at
Speaker 6: other applications of AI and using them today. So one
Speaker 6: of the things we hear from our customers is that
Speaker 6: it's so hard to get your cat in a carrier
Speaker 6: and get it to the vet and you don't know
Speaker 6: that there's a treatment or know your cat has it.
Speaker 8: Is it worth it?
Speaker 6: Well, you can now upload a video of your cat
Speaker 6: walking around your house, going up the stairs, and you
Speaker 6: can upload it to cat pain Iq and we can
Speaker 6: tell you the likelihood that cat has osteothritis and whether
Speaker 6: it would be worth it to bring your cat in.
Speaker 2: So what's next for animal healthcare? Cornell's doctor Kaser says
Speaker 2: she's focused on trying to fix a problem that we
Speaker 2: created ourselves, resistance to antibiotics.
Speaker 9: I'm looking at that in both animals and human species.
Speaker 9: So I'm particularly excited about how we're paying more attention
Speaker 9: to how antibiotics are used in our pets and our
Speaker 9: dogs and cats. So I think historically a lot of
Speaker 9: us have focused on resistant bacteria and people and also
Speaker 9: in live stock, and we've kind of ignored the animals
Speaker 9: that are sleeping in our beds, living in our houses,
Speaker 9: and licking in our faces.
Speaker 2: Back at Zoetas, Rob Polzer is turning his research team
Speaker 2: to focus on cancer and on kidney diseases.
Speaker 10: So on a therapeutic area perspective, you know a lot
Speaker 10: of advances in oncology, so not surprising, I think to
Speaker 10: many of your viewers, Ammino oncology has really advanced on
Speaker 10: the human health side to treat cancer. Certainly, that's a
Speaker 10: space we're interested in. On the animal health side. In
Speaker 10: canine renal disease is another, you know, critical disease in
Speaker 10: both dogs and cats. And what we see is that
Speaker 10: you know, for older cats, you know, typically by the
Speaker 10: age of thirteen, about eighty percent of cats will have
Speaker 10: some form of renal disease. Older dogs have you know,
Speaker 10: about ten percent of that population face renal disease, and
Speaker 10: there's no good therapy out there. Most of the approaches
Speaker 10: today are to try to go and manage the clinical
Speaker 10: symptoms that are occurring from renal disease, but actually not
Speaker 10: slowing the progression.
Speaker 8: Of the disease.
Speaker 2: Poles are and others see a bright future for animal
Speaker 2: health care. And underlying it all the research and the
Speaker 2: investment in the large and growing market is the emotional
Speaker 2: attachment so many of us have to animals in our lives.
Speaker 2: That drives the business.
Speaker 8: I think it's true.
Speaker 6: I mean, you know, one of the examples I give
Speaker 6: is what you're willing to spend on your animal when
Speaker 6: it's in your backyard versus when it enters your house
Speaker 6: versus when it sleeps on your bed is just different.
Speaker 6: And I think you know, maybe twenty thirty years ago,
Speaker 6: a lot of the animals spent most of their day outside.
Speaker 8: They entered your house.
Speaker 6: Now that's interacting with your family, and you want to
Speaker 6: make sure that you're protecting against diseases.
Speaker 8: It goes regularly.
Speaker 6: Well, now that it's on your bed, you're worried about
Speaker 6: it's emotional well being. You're paying attention to different things,
Speaker 6: and the animals are living longer.
Speaker 2: And maybe that's why leaders in the industry like zoea
Speaker 2: Is Kristin Peck have a lifelong attachment of their own
Speaker 2: to animals.
Speaker 6: I love our purpose as a company. I grew up
Speaker 6: with animals.
Speaker 8: My whole life.
Speaker 6: My family raised horses and we had four dogs and
Speaker 6: cats and birds.
Speaker 8: My first job actually.
Speaker 6: Was for a company called American Equine Products when I
Speaker 6: was in high school, which is, believe it or not,
Speaker 6: a legacy Zoetas company and the small world. So I
Speaker 6: don't know that I thought when I was little and
Speaker 6: I loved animals, that that would be my career. But
Speaker 6: what I saw our purpose, which is to nurture the
Speaker 6: world in humankind by advancing care for animals. I was
Speaker 6: a business person with a finance background in private equity
Speaker 6: and consulting.
Speaker 8: It really spoke to me.
Speaker 2: Coming up. Is America still the land of opportunity? That's
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Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is a story about opportunity, the opportunity to succeed
Speaker 2: in life on your own merits, to do better than
Speaker 2: your parents by working hard and playing by the rules,
Speaker 2: something in the United States, the so called land of opportunity,
Speaker 2: has long embraced, and something that education was supposed to
Speaker 2: help provide.
Speaker 12: You are investing in helping people better their lives when you.
Speaker 8: Invest in people's education.
Speaker 12: And in turn, that means that they are bettering the
Speaker 12: lives of the people around them.
Speaker 2: Heather Coleman works at Amazon, and she's living the story
Speaker 2: of upward mobility, thanks in marge part to her employer's
Speaker 2: career choice program that made it possible for her to
Speaker 2: complete an associate's degree and earn a BS while working
Speaker 2: full time and raising three children. But the United States
Speaker 2: might be less of a land of opportunity than it
Speaker 2: used to be. In his book Ours Was a Shining Future,
Speaker 2: David Lionhardt reports that the likelihood of Americans would make
Speaker 2: more than their parents went from ninety percent for those
Speaker 2: born in nineteen forty to eighty percent for the boomers
Speaker 2: born between nineteen forty six and nineteen sixty four, to
Speaker 2: just sixty percent for Gen xers. And all the way
Speaker 2: down to fifty percent for the millennials born between nineteen
Speaker 2: eighty and nineteen ninety six. Dan Porterfield helped run Georgetown University,
Speaker 2: was president of Franklin and Marshall, and now runs the
Speaker 2: Aspen Institute. He says there are obstacles to opportunity, but
Speaker 2: changes in higher education are a big fact.
Speaker 11: The role of higher education in enabling economic mobility has
Speaker 11: been threatened over the years. One reason why is because
Speaker 11: of the rising cost of tuition. Another reason has been
Speaker 11: that the middle class has found some parts of higher
Speaker 11: education to be unaffordable. And then finally, one of the
Speaker 11: issues is that lower income people have not always had
Speaker 11: confidence that college is there for them, and so really
Speaker 11: talented students have not been applying as much as they
Speaker 11: might in earlier years have done.
Speaker 2: When lower income students do decide to apply to college
Speaker 2: and the system they confront does not always welcome them.
Speaker 2: One man trying to change that Michael Crowe, president of
Speaker 2: Arizona State University.
Speaker 7: So the model for the New American University is built
Speaker 7: around this premise of can we build a new kind
Speaker 7: of institution which is simultaneously very very accessible, egalitarian, That
Speaker 7: is families from every socioeconomic background can come into a modern,
Speaker 7: high intensity, discovery oriented, creativity oriented university. Those things don't
Speaker 7: have to be separated. So right now, we have universities
Speaker 7: that have gone off and become very much measured by
Speaker 7: who they exclude and the quality of their research. And
Speaker 7: there's other universities that have become very much measured by
Speaker 7: just being the most efficient machine that they can be
Speaker 7: in terms of producing students. And so in our case,
Speaker 7: we're trying to which we have make the point, prove
Speaker 7: the point, and demonstrate the model that you can build
Speaker 7: an institution deeply connected to the fullest spectrum of the
Speaker 7: population possible to move them forward from an educational perspective,
Speaker 7: while at the same time creating for them an educational
Speaker 7: opportunity and a learning experience equal to that which any
Speaker 7: other university can put together.
Speaker 2: There was a time when the United States led the
Speaker 2: world in education innovation with the creation of public land
Speaker 2: grant colleges in the nineteenth century, by making public high
Speaker 2: school mandatory in the nineteen twenties, and then passing the
Speaker 2: gi Bill to allow soldiers coming back from World War
Speaker 2: Two to get a college degree. But Michael Crowe says
Speaker 2: that over the decades, the US became too complacent.
Speaker 7: We began to become self satisfied with our model as
Speaker 7: the country continued to grow and the world continued to complexify,
Speaker 7: and so we didn't build for scale, and we didn't
Speaker 7: build for complexity in the way that we should have,
Speaker 7: and so we stopped innovating at the rate that we
Speaker 7: should have kept innovating. What's happened is that more than
Speaker 7: half the students that go to a university in the
Speaker 7: United States never graduate. So that's unparalleled among the industrial countries.
Speaker 7: Number one. Number two. It turns out that you've got
Speaker 7: universities that have become so selective where everybody graduates from
Speaker 7: those places. Because the students are hand picked, they also
Speaker 7: get a huge amount of the resources. And then you've
Speaker 7: got other universities in which most people don't graduate. And
Speaker 7: so then you create this expectation frustration. I sent my
Speaker 7: kid to college, they encounter debt, they took on debt,
Speaker 7: and they didn't graduate. So the debt crisis is, in
Speaker 7: my view, not a debt crisis. The debt crisis is
Speaker 7: a graduation crisis. The debt crisis is a performance crisis.
Speaker 2: If students are frustrated about the prospects of making it
Speaker 2: all the way through college to get a degree. They
Speaker 2: have good reason. Although the percentage of Americans receiving bachelor's
Speaker 2: degrees has steadily risen since nineteen sixty, less than two
Speaker 2: thirds of those starting out managed to get a bachelor's
Speaker 2: degree within six years, with the numbers for private, for
Speaker 2: profit schools much worse than public or private nonprofit universities.
Speaker 2: To improve the odds, Arizona State has built an educational
Speaker 2: gateway for students across income ranges that's very different from
Speaker 2: what most schools provide.
Speaker 7: So a few years ago, we had an engineering school
Speaker 7: of about six thousand students. We weren't doing very well
Speaker 7: in freshman retention. We were in the old weed out
Speaker 7: mode of thinking about engineering. We decided to change everything.
Speaker 7: We graduated about nine hundred engineers a year. This was
Speaker 7: about thirteen years ago. We decided to change everything, change culture,
Speaker 7: change design, change intellectual structure, use technology, move in new directions,
Speaker 7: and then we began measuring learning outcomes, finding new ways
Speaker 7: to teach math, new ways to teach each calculus, new
Speaker 7: ways to teach biology, new ways to teach chemistry. Graduates
Speaker 7: last year, we graduated seventy two hundred graduates in an
Speaker 7: engineering school. That's not six thousand students, but thirty two
Speaker 7: thousand students. Its level of research activity has accelerated, its
Speaker 7: level of excellence has accelerated, and the market value of
Speaker 7: the students coming from the school are greatly altered. And
Speaker 7: so the measurement is measurement of everything, learning outcomes by
Speaker 7: student learning outcomes within certain courses. Graduation success is changing everything.
Speaker 7: So in fact, it is the measurement of everything that
Speaker 7: is a critical tool in driving one to innovative success.
Speaker 2: Here, if graduation success is the ultimate goal, exclusivity in
Speaker 2: admissions is not necessarily the best way to get there.
Speaker 2: Izona State has greatly expanded the size of its student
Speaker 2: body and in the process the path for those coming
Speaker 2: from lower income households.
Speaker 7: The notion of success through exclusion success by who you
Speaker 7: don't admit, the measurement of success by how many people
Speaker 7: you turn away. That's not a theme for a public
Speaker 7: university to be maximally impactful. So what we've done is
Speaker 7: we found a way to say, you know, if you
Speaker 7: work hard, if you study hard, if you get prepared,
Speaker 7: if you're willing to do some things. If you work
Speaker 7: with our tools, we'll find a way for you to
Speaker 7: be successful at the university, and we're not going to
Speaker 7: turn you away. And it turns out, by the way,
Speaker 7: that smallness is also a narrowness in thinking, a lower
Speaker 7: probabilistic set of potential creative outcomes. And so we think
Speaker 7: that you can have small colleges and small programs. Certainly,
Speaker 7: but smallness doesn't really mean anything in a country of
Speaker 7: three hundred and forty five million people.
Speaker 2: Smallness is not a problem at ASU. By some counts,
Speaker 2: it's the largest university in the United States, and since
Speaker 2: two thousand, it's enrollment has nearly tripled. Much of that
Speaker 2: growth has come from students outside the campus walls, and
Speaker 2: the Aspen Institute's Dan Porterfield says that's not a bad thing.
Speaker 11: Online education can be a component of learning of all types,
Speaker 11: from you know, early education through adult learning, and in
Speaker 11: fact that in the workplaces of today and tomorrow, more
Speaker 11: and more people are going to lead their own learning
Speaker 11: through online platforms. I think AI might make online learning
Speaker 11: more personalized. So I don't fear it, I welcome.
Speaker 2: It, certainly. Heather Cooleman, you took advantage of the online
Speaker 2: opportunities at Southern New Hampshire University when she pursued her
Speaker 2: two degrees while working at Amazon.
Speaker 1: Being able to.
Speaker 12: Go to school online and not have set times for
Speaker 12: my classes where I didn't have to be here at
Speaker 12: two o'clock. Instead I just had deadlines was much more
Speaker 12: beneficial for me.
Speaker 7: Well, I mean, if you think about it, and you
Speaker 7: think about your life between you know, let's say teenager
Speaker 7: to your eighties, nineties, or hundreds or however many years
Speaker 7: people are going to live in the future, you're going
Speaker 7: to need access to advanced learning in one way or
Speaker 7: another across the entirety of your life, and it being
Speaker 7: delivered to you wherever you are, whenever you need it,
Speaker 7: however you need it. What's going to happen with online
Speaker 7: education as it is improved and enhanced and run by
Speaker 7: real faculty, like our faculty run all of our online programs,
Speaker 7: design all of our online programs. As the quality goes up,
Speaker 7: it's going to become a mainstay. It's going to be
Speaker 7: you know, you're not just going to watch television when
Speaker 7: you go home. You're going to be involved in these
Speaker 7: learning activities. You're going to do this, You're going to
Speaker 7: be involved in immersive experiences that are digital. We, for instance,
Speaker 7: now have nine thousand biology majors at ASU, half online,
Speaker 7: half on campus. And what we're finding is that the
Speaker 7: learning outcomes of all these biology majors are about the same,
Speaker 7: which is a tremendous outcome.
Speaker 2: To make sure that those who start out with less
Speaker 2: can move up the socioeconomic ladder, places like Arizona State
Speaker 2: are delivering and are keeping track of just how well
Speaker 2: they're doing.
Speaker 7: And so what we found is that the ROI for
Speaker 7: our degrees range between seven percent per year and twenty
Speaker 7: three percent per year depending on the degree, all of
Speaker 7: which are substantial returns. The average ROI for US is
Speaker 7: fourteen percent ROI per year after you at your degree.
Speaker 7: That's a substantial return on your investment just looking at
Speaker 7: it from a simple business investment perspective. We also know
Speaker 7: that life outcomes are significantly positive. Health outcomes, education of
Speaker 7: your children, happiness indicators. We've looked at all of those things,
Speaker 7: so we measure all those things. Now, the system's far
Speaker 7: from perfect. I think almost four hundred thousand people have
Speaker 7: graduated from ASU since I've been the president, and I
Speaker 7: can't say that all four hundred thousand people are living
Speaker 7: in nirvana. But what I can say is that we
Speaker 7: have created a mechanism by which people from every family
Speaker 7: background have access, if they want it, to pathway for
Speaker 7: which they will get substantial return on their time and treasure.