WEBVTT - Bloomberg Wall Street Week: Summers & Ferguson 0:00:00.160 --> 0:00:03.360 This is Bloomberg Wall Street Week. What's the state of 0:00:03.400 --> 0:00:06.360 corporate governance? It defresent is a real issue. The US 0:00:06.400 --> 0:00:09.719 economy continues to send mixed signals to the financial stories, 0:00:09.760 --> 0:00:12.680 the cheap our word fed action to con concerns over 0:00:12.760 --> 0:00:16.360 dollar liquidity and encouraging China data. The town's reaction to 0:00:16.440 --> 0:00:18.960 news on Brexit. Through the eyes of the most influential 0:00:19.000 --> 0:00:22.240 voices Larry Summers, the former Treasury Secretary, star Ward CEO, 0:00:22.400 --> 0:00:26.040 Kevin Johnson sec Chairman Jake Clayton. Bloomberg wool Street Week 0:00:26.200 --> 0:00:30.400 with David Weston on Bloomberg Radio, Davos decides what the 0:00:30.400 --> 0:00:33.560 world should be concerned about, and competition and streaming video 0:00:33.640 --> 0:00:37.520 heats up. I'm David Weston. Welcome to Bloomberg Wall Street Week. 0:00:37.800 --> 0:00:40.800 This week was the Week of Davos, that annual gathering 0:00:40.840 --> 0:00:43.120 the Swiss Alps, when the great and the good convened 0:00:43.159 --> 0:00:46.080 to reassure one another that they are both great and good. 0:00:46.440 --> 0:00:49.159 We've talked this year about growth and reduced trade tensions 0:00:49.159 --> 0:00:52.720 and high hopes for one of our Wall Street Week contributors, 0:00:52.880 --> 0:00:56.480 Chief Bloomberg economist Stephanie Flanders, was on the scene and 0:00:56.520 --> 0:00:59.320 gave us this week's contributors take they like to talk 0:00:59.440 --> 0:01:02.240 big hit in Davos about the threats the world must 0:01:02.280 --> 0:01:07.000 confront climate change, the dark side of the Internet technology 0:01:07.120 --> 0:01:10.959 turning old business models on their heads, but about the 0:01:11.040 --> 0:01:14.720 short term state of the global economy. The conversation here 0:01:14.720 --> 0:01:18.679 has been remarkably upbeat. But don't be fooled. The past 0:01:18.680 --> 0:01:21.280 two years of drama have come at a cost, and 0:01:21.280 --> 0:01:23.840 if we don't pay it in twenty we will almost 0:01:23.840 --> 0:01:26.640 certainly feel it down the road. And remember, the US 0:01:26.760 --> 0:01:29.400 China trade deal has not removed most of the tariffs 0:01:29.400 --> 0:01:33.240 the Trump administrations slapped on Chinese goods. The average tariff 0:01:33.440 --> 0:01:36.360 on Chinese imports to the US is now nearly twenty 0:01:37.240 --> 0:01:40.479 up from three percent two years ago, and China has 0:01:40.480 --> 0:01:45.319 put similar tariffs on US imports. Everyone agrees all the 0:01:45.360 --> 0:01:48.080 really important stuff has been left for the Phase two deal, 0:01:48.520 --> 0:01:50.840 and there's little chance of that happening to this side 0:01:50.840 --> 0:01:54.440 of the presidential election. And because the US has refused 0:01:54.440 --> 0:01:56.960 to appoint anyone to the appeal system within the World 0:01:57.000 --> 0:02:01.760 Trade Organization, there is now no global system for resolving 0:02:01.840 --> 0:02:05.200 trade disputes. The Europeans say even the U S China 0:02:05.240 --> 0:02:09.440 deal violates w t O rules, but without that appeal system, 0:02:09.560 --> 0:02:12.320 it's not clear they could do anything about it even 0:02:12.360 --> 0:02:15.440 if they were right. So the global trading system has 0:02:15.520 --> 0:02:19.120 taken a hit, and Britain leaving the EU is going 0:02:19.160 --> 0:02:21.919 to make it harder for British companies to do business 0:02:22.200 --> 0:02:25.040 with their most important trading partner in a year's time. 0:02:25.320 --> 0:02:27.560 And that won't sink the UK economy, but it's going 0:02:27.600 --> 0:02:31.320 to make it hard to sustain that Boris bouts. And 0:02:31.400 --> 0:02:35.080 don't forget the most important consequence of all the dramas 0:02:35.120 --> 0:02:39.480 we've seen since the US Central Bank never got to 0:02:39.480 --> 0:02:43.160 take interest rates closer to normal levels, and neither did 0:02:43.200 --> 0:02:46.760 central banks in the Eurozone, China or the UK. So 0:02:46.840 --> 0:02:50.640 after more than a decade of economic recovery, interest rates 0:02:50.960 --> 0:02:55.280 are still at or rather close to record lows. So yes, 0:02:55.800 --> 0:02:57.880 the FED coming to the rescue of the U s 0:02:57.919 --> 0:03:01.200 economy and the financial markets last year has probably put 0:03:01.240 --> 0:03:04.600 off the date of the next recession, but it's also 0:03:04.680 --> 0:03:08.760 taken away central banks ammunition for fighting one when it comes. 0:03:09.440 --> 0:03:12.360 Then I expect the movers and shakers here in Davos 0:03:12.520 --> 0:03:15.000 will be looking for those same governments to all come 0:03:15.040 --> 0:03:18.639 together to collaborate to prop up the global economy as 0:03:18.680 --> 0:03:21.800 they did in two thousand and eight. But after everything 0:03:21.840 --> 0:03:25.560 that's happened, I wonder is there any chance of that 0:03:25.639 --> 0:03:28.360 happening again? Now? To our contributors with us today are 0:03:28.440 --> 0:03:31.120 Larry Summers are Harvard, who is not only an esteemed 0:03:31.160 --> 0:03:33.600 economist in his own right, but the nephew of two 0:03:33.680 --> 0:03:37.240 Nobel laureates and economics Paul Samuelson and Kenneth Arrow. What 0:03:37.360 --> 0:03:39.120 you might not know about Larry, but you should be 0:03:39.120 --> 0:03:42.320 careful about this. He as an undergraduate and M I 0:03:42.400 --> 0:03:45.440 T was a serious debater, qualifying three times for the 0:03:45.520 --> 0:03:48.480 National Debate Tournament, which explains a lot about Larry Summers, 0:03:48.560 --> 0:03:50.520 I think. And Roger Ferguson is with us for t 0:03:50.600 --> 0:03:52.720 I a A. Roger was the only member of the 0:03:52.720 --> 0:03:55.119 Federal Reserve Board in Washington when terrorist attacked the United 0:03:55.120 --> 0:03:57.240 States on nine eleven, and drew on his experience with 0:03:57.280 --> 0:03:59.640 the New York banking system to make sure the financial 0:03:59.640 --> 0:04:02.560 system remained up and running to avoid a possible panic. 0:04:02.880 --> 0:04:05.360 Roger has a long affiliation with Wall Street Week, having 0:04:05.400 --> 0:04:08.560 watched the original Lewis Rockheiser program with his father as 0:04:08.600 --> 0:04:11.400 a young boy growing up in Washington, so welcome, Larry Roger, 0:04:11.480 --> 0:04:13.480 good to have you here. You just heard what Stephie Flanders, 0:04:13.480 --> 0:04:15.920 our contributor, had to say that things look pretty good 0:04:15.920 --> 0:04:17.520 for the short term, but if there's a down term, 0:04:17.520 --> 0:04:20.599 we're not prepared for it. What's your take, Larry, I 0:04:20.600 --> 0:04:23.479 think that's about I think Stephanie was right about that. 0:04:24.080 --> 0:04:26.919 I thought her comments were in general right on the mark. 0:04:27.560 --> 0:04:31.640 I don't think she's right that it's only trade frictions 0:04:31.680 --> 0:04:34.440 and the like that explain why the FED hasn't been 0:04:34.480 --> 0:04:37.039 able to raise interest rates. I think it's the much 0:04:37.040 --> 0:04:39.760 more fundamental things we talked about a couple of weeks ago, 0:04:40.200 --> 0:04:45.200 having to do with secular stagnation, rising savings, diminished investment propensity, 0:04:45.800 --> 0:04:49.039 all that, and I think we have a deep problem 0:04:49.160 --> 0:04:55.400 of maintaining demand without having unsound uh financial conditions, and 0:04:55.839 --> 0:04:58.640 they should be talking about that in Davos, but I 0:04:58.680 --> 0:05:02.560 actually don't think uh they are. I also have to 0:05:02.560 --> 0:05:07.839 say I've been going to Davos probably and last thirty years. 0:05:07.880 --> 0:05:11.520 I missed it this year, And in general, I'm not 0:05:11.560 --> 0:05:13.839 sure it's a leading indicator. I think it might be 0:05:13.880 --> 0:05:18.000 a contrary indicator. When Davos is most optimistic, that's when 0:05:18.040 --> 0:05:21.440 things tend to get worse. When Davos is most pessimistic, 0:05:21.760 --> 0:05:25.040 that's when things tend to get better. Right, I want 0:05:25.040 --> 0:05:27.040 to pick about one thing Larry said, it's not all 0:05:27.080 --> 0:05:29.240 about trade, but people are talking about trade. We had 0:05:29.279 --> 0:05:32.120 Christine Lagarde about what was going on with Europe and 0:05:32.120 --> 0:05:33.560 this is what she said. She said, part of the 0:05:33.560 --> 0:05:36.560 turner in Europe is because of trade. The risks surrounding 0:05:36.600 --> 0:05:44.039 the euro Area growth outlook related to geopolitical factors, rising protectionism, 0:05:44.839 --> 0:05:50.640 and vulnerabilities in emerging markets remain tilted to the downside, 0:05:51.560 --> 0:05:56.000 but have become less pronounced as some of the uncertainty 0:05:56.080 --> 0:05:59.720 surrounding international trade is receding. Okay, so how much of 0:05:59.760 --> 0:06:02.400 them in the economy overall is because of at least 0:06:02.440 --> 0:06:05.440 a receiving of trade tensions. I think fair amount of it. Frankly, 0:06:05.480 --> 0:06:08.360 as one thinks about what was happening last year, a 0:06:08.440 --> 0:06:10.520 year and a half ago, there was anxiety about recession 0:06:10.920 --> 0:06:14.240 that receded anxiety about trade as Trump put on more 0:06:14.240 --> 0:06:16.760 and more terroffs, and indeed, as we got through the 0:06:16.760 --> 0:06:19.400 so called Phase one deal, my senses that markets were 0:06:19.480 --> 0:06:21.960 breathing a bit of a side relief, having set out 0:06:22.000 --> 0:06:23.960 of that. If you listen to everything Christine had to say, 0:06:24.000 --> 0:06:26.400 she also points to a number of other risks, some 0:06:26.520 --> 0:06:29.160 which are still, as she says, tilted the downside. And 0:06:29.200 --> 0:06:31.200 so if I put Christine's comments and a brought a 0:06:31.279 --> 0:06:34.800 context of what's next, partically for the ECB, what I 0:06:34.839 --> 0:06:38.960 take from the entire pictures trade uncertainty perhaps has receded 0:06:39.000 --> 0:06:40.920 that might help growth this a little bit. Okay, we're 0:06:40.960 --> 0:06:43.360 gonna be back with our contributors coming up next from 0:06:43.440 --> 0:06:45.839 Davos to a different kind of entertainment, the kind on 0:06:45.960 --> 0:06:48.479 film that gets Oscars and Emmy's. We talked of the 0:06:48.520 --> 0:06:52.600 streaming media transformation with dean of media analysts, Jessica reef 0:06:52.720 --> 0:06:56.320 Erlick from Back America. This is Boomberg Wall Street greeting. 0:07:01.960 --> 0:07:06.200 This is Bloomberg Wall Street Week with David Weston from 0:07:06.279 --> 0:07:10.360 Bloomberg Radio. Shaping up to be the year of streaming 0:07:10.520 --> 0:07:14.360 video and the competition is really heating up. Comcast Peacock 0:07:14.440 --> 0:07:16.920 app is the latest on the scene, entering a crowded 0:07:16.960 --> 0:07:21.440 space already occupied by Netflix, Amazon and Disney. So consumers 0:07:21.480 --> 0:07:23.600 who were hoping they might just save some money by 0:07:23.640 --> 0:07:26.680 cord cutting are now facing the prospect of paying seven dollars, 0:07:26.720 --> 0:07:31.120 thirteen dollars, fifteen dollars for each of the individual streaming services, 0:07:31.360 --> 0:07:33.680 but so far it isn't slowing them down. Banc of 0:07:33.680 --> 0:07:36.600 America sees people continuing to add to their streaming this 0:07:36.680 --> 0:07:40.080 year and then at least three streaming subscription for each 0:07:40.120 --> 0:07:43.080 of us will become the new norm, and the services 0:07:43.120 --> 0:07:45.120 appear to be willing to spend whatever it takes to 0:07:45.200 --> 0:07:48.320 keep their growing customer base. It that critical race to 0:07:48.360 --> 0:07:51.920 create streaming content. Netflix last year outproduced everybody else with 0:07:51.960 --> 0:07:56.280 nearly sixty releases. Now two of their streaming films, The 0:07:56.360 --> 0:07:59.600 Irishman and Marriage Story are in the Oscar running for 0:07:59.640 --> 0:08:03.040 Best Picture. So, whether you've jumped on the streaming bandwagon 0:08:03.120 --> 0:08:05.680 yet or not, if you're rooting for Robert de Niro 0:08:05.760 --> 0:08:09.200 in The Irishman, you are a streaming fan. We are 0:08:09.200 --> 0:08:11.640 back with Roger Ferguson and Larry Summers, and we welcome 0:08:11.680 --> 0:08:15.200 now our special guest, Jessica reef Erlick from Bank of America. 0:08:15.320 --> 0:08:17.680 Back when I ran the ABC Television Network and then 0:08:17.720 --> 0:08:20.560 ABC News, Jessica was the person on the outside we 0:08:20.600 --> 0:08:23.360 paid attention to when we wanted a smart inform take 0:08:23.400 --> 0:08:25.560 on what was going on in media, generally in the 0:08:25.600 --> 0:08:27.320 companies we were competing with, and I have to say 0:08:27.360 --> 0:08:31.240 sometimes even within our own company. She covers broadcast, cable, satellite, 0:08:31.280 --> 0:08:34.760 filmed entertainment, and now streaming video for Bank of America. Jessica, welcome, 0:08:34.800 --> 0:08:36.640 great to head. Thank you so much. What an introduction. 0:08:36.800 --> 0:08:38.960 It's all true, you know it's all true. So let's 0:08:38.960 --> 0:08:41.800 start with the most basic question. Why is a year 0:08:41.800 --> 0:08:43.800 We've heard about streaming for some time. Now it's coming, 0:08:43.800 --> 0:08:45.800 It's coming, It's coming. You think this is the year. 0:08:46.040 --> 0:08:48.600 This is the year of comody launches. So Disney Plus 0:08:48.679 --> 0:08:51.600 launched well late to thos nineteen, but it was an 0:08:51.640 --> 0:08:54.920 amazing launch, a ten million subscribers the first day and 0:08:55.200 --> 0:08:58.000 way past the estimates. What way I mean they were 0:08:58.080 --> 0:09:01.360 they've been talking about well they said, um sixty ninety 0:09:01.360 --> 0:09:04.839 billion subs in five years, of which would be in 0:09:04.880 --> 0:09:07.400 the US. I mean, they're obviously going to blow past 0:09:07.600 --> 0:09:11.840 their forecasts. Not even a question. But then we have Peacock, 0:09:11.960 --> 0:09:15.240 which is owned by Comcast or NBC Universal parent company 0:09:15.240 --> 0:09:19.480 Comcast launching Phase launched April, and then bigger push behind 0:09:19.520 --> 0:09:23.080 the Olympics, HBO Max is launching. So that's just all 0:09:23.120 --> 0:09:26.200 the traditional media companies have to get in the game. 0:09:26.600 --> 0:09:29.280 Discovery has launched also in a very different way, but 0:09:29.720 --> 0:09:32.800 every media company has got to be in streaming. That is, 0:09:32.920 --> 0:09:35.560 this is the new distribution system. Is this an offensive 0:09:35.600 --> 0:09:37.280 move or a defensive move? I mean, do they see 0:09:37.280 --> 0:09:38.559 a lot of money out there to be made or 0:09:38.559 --> 0:09:40.240 they're saying we have to get there because otherwise we 0:09:40.280 --> 0:09:43.440 lose our base. It's both. I mean it clearly it 0:09:43.480 --> 0:09:45.800 was defensive and they you know, everybody sort of held back. 0:09:45.840 --> 0:09:48.480 But it takes a long time to have the technology, 0:09:48.559 --> 0:09:50.880 and there's a lot of content. It's not just library 0:09:50.880 --> 0:09:53.800 content that's going in but original to keep people on 0:09:54.440 --> 0:09:56.880 and you know, all the strategy strategy is a little 0:09:56.880 --> 0:10:00.480 bit different. But the traditional media companies are compete with 0:10:00.679 --> 0:10:05.720 the fan companies who have not unlimited funds but eumongus 0:10:05.800 --> 0:10:08.280 eumongus balance sheets. Can we talk a bit about those 0:10:08.280 --> 0:10:10.760 funds because if one looks at what Netflix has been doing, 0:10:11.080 --> 0:10:13.960 three billion dollars spend the free crash flow burn rate, 0:10:13.960 --> 0:10:16.280 it is pretty high. The market sort of hoping at 0:10:16.320 --> 0:10:18.800 it settles down to only two and a half bay 0:10:18.840 --> 0:10:22.520 and next year the cost of interests is huge. You've 0:10:22.520 --> 0:10:25.080 had both content and the technology. So how does this 0:10:25.480 --> 0:10:28.079 how does this become profitable for a lot of these businesses. 0:10:28.080 --> 0:10:31.640 It's I mean, the traditional media companies have given a 0:10:31.679 --> 0:10:35.240 path to profitability and they are different. Netflix suspending seventeen 0:10:35.280 --> 0:10:38.000 billion dollars in cash on content this year, and and 0:10:38.160 --> 0:10:40.000 the burn is as you said, the free cashold and 0:10:40.200 --> 0:10:43.320 it's negative more than three billions. So it's and that 0:10:43.400 --> 0:10:47.719 would not be accepted from traditional media investors. Having said that, 0:10:47.760 --> 0:10:50.920 there are advantages that the traditional media companies have. They 0:10:51.080 --> 0:10:54.400 have brands, they have they have content that they already 0:10:54.400 --> 0:10:57.720 produced in any case, they have deep libraries, and maybe 0:10:57.840 --> 0:11:02.240 most important, they have you manga platforms to promote from. 0:11:02.240 --> 0:11:06.720 So think about Peacock's launch. They will launch UM initially Enapril, 0:11:06.800 --> 0:11:10.520 and with all of Comcast properties and its theme parks, films, 0:11:11.080 --> 0:11:13.520 there are a lot of touchpoints cable networks. And then 0:11:13.520 --> 0:11:16.200 when they really fully launched, it will be behind the Olympics. 0:11:16.240 --> 0:11:19.520 Two fifty million people in the US watched the Olympics. 0:11:19.520 --> 0:11:24.760 That's an unparalleled platform. When Disney launched, of the US 0:11:25.040 --> 0:11:27.520 was aware of the service launching, So it's gonna be 0:11:27.559 --> 0:11:30.880 a game where scale will win out, and as you 0:11:30.920 --> 0:11:33.240 point out, the ability to cross market, etcetera. And so 0:11:33.440 --> 0:11:37.040 if one were an investor, maybe you think not as 0:11:37.080 --> 0:11:39.760 much disruption as one might have imagine. And the big names, 0:11:39.840 --> 0:11:44.400 the historic names, the NBC, Universal's, the the Disneys have 0:11:44.480 --> 0:11:47.040 a real shot at holding on and not being disintermediated. 0:11:47.640 --> 0:11:49.960 They sort of have been already and they're fighting back. 0:11:50.160 --> 0:11:52.280 You know, we're going through this transition period and the 0:11:52.320 --> 0:11:56.400 stocks reflect that. We've in my entire career decades, I've 0:11:56.440 --> 0:11:59.560 never seen multiples this low for media. So the stocks 0:11:59.559 --> 0:12:03.120 reflect the worst and now they're coming back. So it's defensive, 0:12:03.160 --> 0:12:07.760 but it's also offensive, and it's it's really interesting. Peacock 0:12:07.840 --> 0:12:12.360 had an analyst event recently, and it's it's a different 0:12:12.360 --> 0:12:16.040 strategy than Disney. You know, Disney is sort of family 0:12:16.080 --> 0:12:20.000 and kids and amazing titles. You know, boys with Marvel, 0:12:20.400 --> 0:12:22.320 you know what you you know exactly what you're not geo. 0:12:22.440 --> 0:12:25.120 You know, you know what you're getting. NBC U or 0:12:25.120 --> 0:12:28.959 Peacock will have news and sports and you know, all 0:12:29.000 --> 0:12:32.720 of their library and original content, but they're also curating 0:12:32.760 --> 0:12:35.440 stuff differently, so it's you know, it's the curating channels 0:12:35.440 --> 0:12:38.079 and it's it is they actually isn't a lot of comedy. 0:12:38.600 --> 0:12:42.320 There's there's my question not about this, not about the 0:12:42.320 --> 0:12:45.360 stock market. It's like a golden age for the viewer. 0:12:46.080 --> 0:12:51.400 There's huge amounts of stuff being produced from lots of sources, 0:12:51.440 --> 0:12:54.640 really high quality. Seems to me as an amateur, really 0:12:54.720 --> 0:12:59.720 high production values. Is it economic to produce as much 0:13:00.240 --> 0:13:04.080 new content, as many new series, as many new films 0:13:04.440 --> 0:13:07.720 as are being produced right now, or are we in 0:13:07.760 --> 0:13:10.760 a situation like when a lot of new airlines crowd 0:13:10.800 --> 0:13:13.680 into a route where sooner or later it shakes out 0:13:14.120 --> 0:13:16.240 and the amount of capacity comes down. Is this a 0:13:16.320 --> 0:13:19.920 golden age that we're going to remember as being special 0:13:19.960 --> 0:13:22.200 in the amount of content that's being produced, or is 0:13:22.240 --> 0:13:25.679 this the new normal? There has to be a shakeout. 0:13:25.960 --> 0:13:28.640 There is no way you can have five hundred plus 0:13:28.679 --> 0:13:32.600 original you know, episodic shows and there's not just no 0:13:32.720 --> 0:13:35.520 time for everyone to watch and and and you know 0:13:35.600 --> 0:13:37.880 viewers are watching YouTube as well. I mean, there's just 0:13:37.920 --> 0:13:40.880 there's just so many options right now, So there has 0:13:40.920 --> 0:13:43.600 to be a shakeout. So it's interesting to see everybody's 0:13:43.640 --> 0:13:47.840 different approaches um different revenue drivers, some the subscription, some 0:13:47.960 --> 0:13:50.680 is advertising. The case of Discovery, there's a big piece 0:13:50.720 --> 0:13:54.920 of e commerce as well. Um, but there's there's no 0:13:55.080 --> 0:13:57.839 question that they can also live with old. This new 0:13:57.880 --> 0:14:04.040 competition is the price for standard properties half an hour 0:14:04.120 --> 0:14:07.560 new show at six thirty in the afternoon, the World, 0:14:07.920 --> 0:14:12.880 the World Series, Uh, the Masters, the NFL. Are the 0:14:12.920 --> 0:14:15.440 prices for those things coming down just because there's so 0:14:15.520 --> 0:14:19.360 much more stuff, or the prices going up because their 0:14:19.360 --> 0:14:21.920 flagships that will bring everything else in, I mean the 0:14:21.960 --> 0:14:24.640 cost of sports. We're all waiting for the NFL to 0:14:24.680 --> 0:14:27.480 be renewed. Um, there is no way that's going down. 0:14:27.520 --> 0:14:29.800 There will be a lot of competition. Our view is 0:14:29.800 --> 0:14:31.880 that it will stay on broadcast TV because of the 0:14:31.880 --> 0:14:35.240 reach and the production capability. But the digital rights there's 0:14:35.240 --> 0:14:37.280 gonna going to be a battle. But there's a real 0:14:37.320 --> 0:14:40.120 bifurcation between live sports on the one hand, that is 0:14:40.200 --> 0:14:42.280 much more resistant to some of the forces we've seen 0:14:42.320 --> 0:14:45.080 as opposed to filmed entertainment. So the sports rice go up, 0:14:45.080 --> 0:14:47.920 as you say, the NFL, NBA, major League Baseball I 0:14:47.920 --> 0:14:50.520 think went out. The sports rights are going to come down. 0:14:50.640 --> 0:14:52.920 You know, they're just not okay. Thanks so much to 0:14:53.000 --> 0:14:55.400 Jessica Weak Girl, We're gonna be back with our contributors. 0:14:55.440 --> 0:15:03.960 This is Bloomberg Wall Street Week. This is Bloomberg Will 0:15:04.080 --> 0:15:08.280 Street Week with David Weston from Bloomberg Radio. The Hills 0:15:08.280 --> 0:15:10.760 were alive this week in Davos with the sounds of 0:15:10.880 --> 0:15:14.440 what everyone's going to do about climate change, from investment 0:15:14.480 --> 0:15:17.000 funds talking about what they would and wouldn't invest in 0:15:17.080 --> 0:15:19.320 the government saying how they were going to invest in 0:15:19.400 --> 0:15:21.920 green or what they've already done for that matter, to 0:15:22.040 --> 0:15:24.400 reports that even the big oil companies were meaning to 0:15:24.440 --> 0:15:26.280 try to come up with a common approach to louving 0:15:26.360 --> 0:15:28.960 CEO two emissions from the oil and gas they produced 0:15:29.120 --> 0:15:32.080 spoiler alert. The reportedly all agreed something needs to be done, 0:15:32.320 --> 0:15:34.600 but they couldn't agree on what to do. Here's a 0:15:34.640 --> 0:15:38.840 sample of what we heard. Given the signs that climate change, 0:15:38.840 --> 0:15:41.920 it requires immediate action. This is the decade and so 0:15:42.080 --> 0:15:44.360 be more need to start by saying, look, let's make 0:15:44.400 --> 0:15:47.720 some good commitments. These issues have moved very swiftly from 0:15:47.760 --> 0:15:52.360 being corporate social responsibility issues or more niche issues within 0:15:52.480 --> 0:15:56.040 finance to fundamental value drivers. You will ultimately invest in 0:15:56.040 --> 0:15:58.240 a company who really think we're not getting the traction 0:15:58.280 --> 0:16:01.800 that we need We do need real breakthroughs. This is 0:16:01.800 --> 0:16:03.640 no one company is going to do this. We do 0:16:03.680 --> 0:16:06.480 a little with millennials in terms of the next generation, 0:16:07.120 --> 0:16:10.840 and clearly they are very focused on the um if 0:16:10.840 --> 0:16:12.800 you we should be ethical signature. We've got to set 0:16:12.880 --> 0:16:15.520 up policies around the world that changes the demand patterns 0:16:16.040 --> 0:16:19.520 of the market, because it isn't supply that creates economics. 0:16:19.520 --> 0:16:22.200 That's supply and demand. Climate change is not going to 0:16:22.240 --> 0:16:25.520 be fixed by a central bank, and it's gonna be 0:16:25.560 --> 0:16:28.400 fixed by combination of public and private. We want to 0:16:28.440 --> 0:16:32.720 invest in clean technology, in the green new procedures. We 0:16:32.800 --> 0:16:35.040 are doing better right now than we've ever done in 0:16:35.120 --> 0:16:38.840 terms of cleanliness, in terms of numbers. We have a 0:16:38.880 --> 0:16:43.040 beautiful ocean called the Pacific Ocean with thousands and thousands 0:16:43.120 --> 0:16:46.320 of tons of garbage flows towards us, and that's put 0:16:46.320 --> 0:16:48.640 there by other countries. It's time now to turn back 0:16:48.680 --> 0:16:51.520 to our contributors, Larry Summers and Roger Ferguson. So Roger, 0:16:51.560 --> 0:16:53.560 I'll pick on you first, because this is not new 0:16:53.600 --> 0:16:55.560 to you at t i A. You've been involved in 0:16:55.560 --> 0:16:57.440 this for some time. What do you do and what 0:16:57.480 --> 0:16:59.320 have you learned from it? All? Right, So you're right, 0:16:59.360 --> 0:17:01.560 it's not new to us. We've been involved in climate 0:17:01.600 --> 0:17:03.480 and E s G issues for about fifty years and 0:17:03.520 --> 0:17:05.679 we're really proud to be one of the leaders. And 0:17:05.720 --> 0:17:07.480 what we've learned over that period of time is you 0:17:07.520 --> 0:17:10.080 have to take a holistic approach. So first, we are 0:17:10.119 --> 0:17:13.040 a very large asset manager, and we think about first 0:17:13.040 --> 0:17:15.280 how do we vote the shares in the proxies And 0:17:15.320 --> 0:17:19.840 we're really proud that we voted with shareholder resolutions about 0:17:19.840 --> 0:17:22.239 eighty two of the time, much higher than a lot 0:17:22.280 --> 0:17:24.560 of others in the industry. And so, you know, the 0:17:24.600 --> 0:17:26.919 first thing is use your voice as a shareholder to 0:17:27.000 --> 0:17:29.800 let management know that your care. The second thing that 0:17:29.840 --> 0:17:31.720 we've learned is really are going to have to start 0:17:31.720 --> 0:17:34.720 to build a databases and to really understand and dig 0:17:34.800 --> 0:17:37.840 in with what companies that actually are doing and use 0:17:37.960 --> 0:17:42.040 that to engage them on getting more transparency, more disclosure, 0:17:42.080 --> 0:17:44.960 including oil companies and others. And the funny thing that 0:17:45.000 --> 0:17:47.600 we've learned in terms of this being a holistic solution 0:17:48.200 --> 0:17:50.960 is we also own and manage a lot of assets 0:17:50.960 --> 0:17:53.520 and think about managing and owning those in a responsible way, 0:17:53.640 --> 0:17:57.920 be real estate agg timber So it's a holistic story. 0:17:58.280 --> 0:18:00.520 Crashings you get credit for that, we get drum credit. 0:18:00.880 --> 0:18:03.360 To be fair, we've got two classes of investors. We've 0:18:03.359 --> 0:18:07.040 got a group for whom E s G. Climate very 0:18:07.080 --> 0:18:09.320 important and they want to put their money there. We 0:18:09.359 --> 0:18:11.880 have a number of brothers who I think are less focused. 0:18:12.359 --> 0:18:14.080 One of the things that we've learned over time, though, 0:18:14.359 --> 0:18:18.120 is all of these factors e s G. Climate, governance, 0:18:18.119 --> 0:18:21.639 et cetera important risks to manage. And now we're starting 0:18:21.640 --> 0:18:24.640 to see the conversation turn towards the fact that this 0:18:24.720 --> 0:18:28.560 is a positive return generator, taking these factors in consideration 0:18:28.920 --> 0:18:31.600 and creating investment thesis around us. So, Larry, can private 0:18:31.640 --> 0:18:34.639 investment make the difference in climate? I think most of 0:18:34.640 --> 0:18:38.720 what you heard is a pretty total avoidance of the 0:18:38.800 --> 0:18:42.199 real problem, and that as long as this kind of 0:18:42.240 --> 0:18:45.119 thing is the focus, the problem is going to get worse. 0:18:45.600 --> 0:18:47.439 There are three things that need to happen if the 0:18:47.440 --> 0:18:50.640 world's are going to make real progress on climate, none 0:18:50.640 --> 0:18:53.400 of which were mentioned by any of those people. One 0:18:53.520 --> 0:18:55.720 is we need to scale back the hundreds of millions 0:18:55.720 --> 0:18:58.320 of dollars that the world spends on fossil fuels and 0:18:58.359 --> 0:19:02.840 fossil fuel subsidies. We need to have governments stop around 0:19:02.920 --> 0:19:08.200 the world subsidizing fossil fuels and their ability and their use. Second, 0:19:08.440 --> 0:19:13.280 we need much more invested by governments in clean energies. 0:19:13.680 --> 0:19:15.960 And the way governments need to get the revenue to 0:19:16.080 --> 0:19:20.520 make those investments is by levying taxes and having the 0:19:20.520 --> 0:19:24.440 people and the organizations represented in that video paying more 0:19:24.480 --> 0:19:27.199 in taxes. And none of them are willing to say that. 0:19:27.240 --> 0:19:30.000 They'd rather talk about how they've got a pied a 0:19:30.400 --> 0:19:34.399 chief Green officer and how they're using a putting up 0:19:34.400 --> 0:19:37.000 solar power plant SOL or something or other on their 0:19:37.119 --> 0:19:40.400 roof than recognize that they need to pay more taxes. 0:19:40.880 --> 0:19:43.840 And the third thing is we need to tax things 0:19:43.840 --> 0:19:46.160 that are bad. Right now, we have a world that's 0:19:46.200 --> 0:19:49.560 oriented to taxing things that are good, like work and saving, 0:19:50.000 --> 0:19:52.080 and we need to think tax things that are bad, 0:19:52.440 --> 0:19:56.200 like putting emissions UH into the air. So as long 0:19:56.240 --> 0:20:01.840 as the word tax and subsidy are outside of the 0:20:01.920 --> 0:20:07.840 conversation and it's all just will feel better if we 0:20:07.920 --> 0:20:11.240 do this, the world's not going to make progress in 0:20:11.840 --> 0:20:17.960 UH solving UH this problem. And the president notwithstanding emissions, 0:20:18.320 --> 0:20:20.919 the idea is that we're supposed to in twenty or 0:20:20.960 --> 0:20:24.679 thirty years, get a mission, get the level of emissions 0:20:24.720 --> 0:20:28.480 to zero. We haven't even achieved the much more modest 0:20:28.520 --> 0:20:33.280 goal of stopping emissions from growing year after year. Okay, 0:20:33.280 --> 0:20:35.440 we will come back with our contributors coming up. Here 0:20:35.520 --> 0:20:38.960 we turn from investing in climate to changing operations on 0:20:39.000 --> 0:20:41.600 the ground and one of the most difficult industries. Sophia 0:20:41.720 --> 0:20:44.400 Mendelssohn is here from Jet Blue who tells how she's 0:20:44.400 --> 0:20:47.600 trying to take an entire airline industry green. This is 0:20:47.680 --> 0:20:57.960 Bloomberg Wall Street Week. This is Bloomberg Wall Street Week 0:20:58.200 --> 0:21:01.359 with David Weston from bloom Bird Radio. We're going to 0:21:01.520 --> 0:21:03.960 stay on the subject of climate and get a second opinion. 0:21:04.000 --> 0:21:06.199 Now that takes us beyond the world of investing in 0:21:06.240 --> 0:21:09.720 economics to the world of operating a company. Sophia Mendelssohn 0:21:09.800 --> 0:21:12.639 is Jet Blues head a sustainability Thank you very much 0:21:12.680 --> 0:21:15.080 for being here. Sylvia, So you're trying to take an 0:21:15.080 --> 0:21:18.360 airline company green, which doesn't sound like an easy thing 0:21:18.400 --> 0:21:21.080 to do. Well, it's not easy, but that doesn't mean 0:21:21.119 --> 0:21:22.639 we can't do it, and we don't have to do 0:21:22.720 --> 0:21:26.720 it quickly. The larger, the polluter. The more you rely 0:21:26.840 --> 0:21:29.720 on fossil fuels, the faster you have to act now. 0:21:29.840 --> 0:21:32.119 And that's why recently Jet Blue has made an announcement 0:21:32.160 --> 0:21:35.200 there we are going carbon neutral on all our domestic flying. 0:21:35.480 --> 0:21:37.840 We're already have a carbon deal for a lot of 0:21:37.840 --> 0:21:40.520