1 00:00:05,800 --> 00:00:08,360 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim 2 00:00:08,400 --> 00:00:11,200 Speaker 1: Fox along with my co host Lisa A. Brahmowitz. Each 3 00:00:11,240 --> 00:00:14,440 Speaker 1: day we bring you the most important, noteworthy, and useful 4 00:00:14,480 --> 00:00:17,079 Speaker 1: interviews for you and your money, whether you're at the 5 00:00:17,120 --> 00:00:20,360 Speaker 1: grocery store or the trading floor. Find the Bloomberg p 6 00:00:20,520 --> 00:00:32,760 Speaker 1: m L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. 7 00:00:32,840 --> 00:00:35,800 Speaker 1: Joining us now is Nathan Sheets, chief economist for pe 8 00:00:35,960 --> 00:00:39,760 Speaker 1: JIM Fixed Income, helping to manage more than seven hundred 9 00:00:39,760 --> 00:00:42,400 Speaker 1: billion dollars. They are based in Newark, New Jersey. He 10 00:00:42,479 --> 00:00:45,280 Speaker 1: joins us here in studio. Nathan Sheets, thank you very 11 00:00:45,360 --> 00:00:47,559 Speaker 1: much for being here. Maybe you could just give us 12 00:00:47,640 --> 00:00:51,600 Speaker 1: your reaction to yesterday's Federal Reserve activity and what you 13 00:00:51,720 --> 00:00:56,480 Speaker 1: think the Fed will do in T nine. So it's uh, 14 00:00:56,640 --> 00:01:00,280 Speaker 1: it's a pleasure to be with you this morning. Uh, 15 00:01:00,360 --> 00:01:04,200 Speaker 1: the Fed took a careful look at the US economy 16 00:01:04,240 --> 00:01:06,080 Speaker 1: and I think on the one hand, they say, well, 17 00:01:06,120 --> 00:01:10,440 Speaker 1: the consumer looks pretty good, and uh, the unemployment rate 18 00:01:10,440 --> 00:01:12,839 Speaker 1: in the labor market they're looking pretty good, and there's 19 00:01:12,959 --> 00:01:17,080 Speaker 1: ongoing fiscal stimulus. So the near term growth look outlook 20 00:01:17,240 --> 00:01:21,000 Speaker 1: is is pretty solid. Now at the same time, they 21 00:01:21,040 --> 00:01:26,160 Speaker 1: also see a housing market the softening and a substantial 22 00:01:26,520 --> 00:01:32,040 Speaker 1: increase in market volatility and concerns in financial markets about 23 00:01:32,080 --> 00:01:35,480 Speaker 1: the medium to long run outlook. And consistent with that, 24 00:01:35,600 --> 00:01:39,200 Speaker 1: the Fed notch down its expectations as to what it 25 00:01:39,240 --> 00:01:43,000 Speaker 1: would need to do for monetary policy and the number 26 00:01:43,040 --> 00:01:46,400 Speaker 1: of rate hikes next year. And uh, you know, I 27 00:01:46,440 --> 00:01:51,800 Speaker 1: think most likely they'll do what they're suggesting in the dots. 28 00:01:52,280 --> 00:01:56,000 Speaker 1: So I'm prepared and expecting a couple of a couple 29 00:01:56,040 --> 00:01:58,600 Speaker 1: of rate hikes next year. But the Fed will be 30 00:01:58,720 --> 00:02:02,920 Speaker 1: very data dependent. Oh, look and see where the economy 31 00:02:03,120 --> 00:02:06,640 Speaker 1: is and whether things are evolving as well as they 32 00:02:06,680 --> 00:02:09,120 Speaker 1: think they will. You know, the focus really after the 33 00:02:09,120 --> 00:02:11,440 Speaker 1: press conference was on the balance sheet and the fact 34 00:02:11,440 --> 00:02:15,680 Speaker 1: that Fed share Powell seemed to dismiss concerns that a 35 00:02:15,880 --> 00:02:19,080 Speaker 1: rolloff of the four trillion dollar federal reserve balance she 36 00:02:19,200 --> 00:02:22,919 Speaker 1: was having a disproportionate effect on markets. Now he seemed 37 00:02:22,960 --> 00:02:24,560 Speaker 1: to say, you know what, this has been put on 38 00:02:24,600 --> 00:02:27,080 Speaker 1: a preset course. We're fine with it, and we're going 39 00:02:27,120 --> 00:02:29,680 Speaker 1: to just focus on rate hikes. Is he wrong? Is 40 00:02:29,680 --> 00:02:33,600 Speaker 1: he too sanguine about the effect here? So? Uh, certainly 41 00:02:33,720 --> 00:02:36,240 Speaker 1: there have been pressures at the short end of the 42 00:02:36,320 --> 00:02:40,760 Speaker 1: yield curve this year, and my reading is that bills 43 00:02:40,840 --> 00:02:45,320 Speaker 1: issue once and some of the after effects of of 44 00:02:45,800 --> 00:02:49,320 Speaker 1: the tax reform are at work. But I think the 45 00:02:49,360 --> 00:02:53,760 Speaker 1: fact that bank reserves in the system are steadily falling 46 00:02:53,800 --> 00:02:58,639 Speaker 1: and likely to continue to fall are also a factor. 47 00:02:59,120 --> 00:03:01,800 Speaker 1: But I think what we're seeing here is the Federal 48 00:03:01,840 --> 00:03:07,560 Speaker 1: Reserve has meaningful political incentives to try to get the 49 00:03:07,639 --> 00:03:11,880 Speaker 1: balance sheet down to the three trillion dollar range that 50 00:03:12,680 --> 00:03:15,880 Speaker 1: the j. Powell told car Wait hold on a second, 51 00:03:15,880 --> 00:03:18,000 Speaker 1: three trillion dollars. If we found that out, that would 52 00:03:18,000 --> 00:03:21,079 Speaker 1: be news. If he confirmed that that was their end target, 53 00:03:21,440 --> 00:03:24,240 Speaker 1: that would actually be even more hawkish for markets. So 54 00:03:24,400 --> 00:03:27,040 Speaker 1: I think that they want to get as close to 55 00:03:27,160 --> 00:03:32,000 Speaker 1: that as they can without creating disruptions in that market 56 00:03:32,560 --> 00:03:36,160 Speaker 1: now in order to to to continue to lean into it. 57 00:03:36,560 --> 00:03:38,960 Speaker 1: I think he's got it for now. Say we're going 58 00:03:39,040 --> 00:03:42,400 Speaker 1: to continue to reduce the balance sheet now. As two 59 00:03:42,440 --> 00:03:45,800 Speaker 1: thousand nineteen unfolds, I'd expect there will be a conversation. 60 00:03:46,320 --> 00:03:49,120 Speaker 1: But the make no mistake, a big balance sheet is 61 00:03:49,120 --> 00:03:52,280 Speaker 1: a political risk for the Federal Reserve. I think they're 62 00:03:52,360 --> 00:03:55,400 Speaker 1: very worried about an interview with the Senate Banking Committee 63 00:03:55,640 --> 00:03:58,080 Speaker 1: where let's say there's a trillion and a half dollars 64 00:03:58,440 --> 00:04:01,320 Speaker 1: uh a bank where reserves out there, and the Fed 65 00:04:01,360 --> 00:04:04,160 Speaker 1: funds rates at three percent, and the members of the 66 00:04:04,200 --> 00:04:07,720 Speaker 1: committee are saying, Mr Chairman, why are you paying the 67 00:04:07,800 --> 00:04:11,840 Speaker 1: US banks forty five billion dollars a year? That's money 68 00:04:11,880 --> 00:04:13,960 Speaker 1: out of the pocket of the U S tax beer. 69 00:04:14,280 --> 00:04:16,960 Speaker 1: That's the that's the downside with the big balance sheet? 70 00:04:17,920 --> 00:04:20,760 Speaker 1: Is there a downside that we enter a period of 71 00:04:20,800 --> 00:04:24,600 Speaker 1: even greater dollar shortage because of the way that the 72 00:04:24,600 --> 00:04:28,039 Speaker 1: Federal Reserve is unwinding the balance sheet? Uh? And that 73 00:04:28,200 --> 00:04:32,440 Speaker 1: is what they're monitoring so far. The Federal Reserve is 74 00:04:32,560 --> 00:04:35,400 Speaker 1: kind of uh pointing at and say, don't look at us, 75 00:04:35,839 --> 00:04:39,080 Speaker 1: look at the treasury because of the fiscal situation in 76 00:04:39,120 --> 00:04:44,880 Speaker 1: the bills issuance. But I think during two thousand nineteen, UH, 77 00:04:44,960 --> 00:04:48,479 Speaker 1: we're likely to see some further stresses and I think ultimately, 78 00:04:48,560 --> 00:04:50,760 Speaker 1: just to be clear, I think they'd like to get 79 00:04:50,800 --> 00:04:52,320 Speaker 1: to three. I don't think they're going to be able 80 00:04:52,320 --> 00:04:54,680 Speaker 1: to get back all the way And there will be 81 00:04:54,760 --> 00:04:59,640 Speaker 1: a discussion of this as markets feel some continued pressures 82 00:04:59,640 --> 00:05:01,320 Speaker 1: at the or in of the curve in the year 83 00:05:01,360 --> 00:05:04,080 Speaker 1: I had. You know, it's I love that you have 84 00:05:04,160 --> 00:05:07,040 Speaker 1: the experience that the Federal Reserve. Uh, you also have 85 00:05:07,240 --> 00:05:10,440 Speaker 1: incredible experience at the Treasury Department. You are the under 86 00:05:10,440 --> 00:05:12,839 Speaker 1: Secretary of the U. S Treasury for International Affairs, and 87 00:05:12,880 --> 00:05:14,719 Speaker 1: that is very much in the four especially as we 88 00:05:14,720 --> 00:05:18,960 Speaker 1: were just hearing about the prosecutors going after hackers in China. 89 00:05:19,240 --> 00:05:22,080 Speaker 1: I just want to read this quote FedEx Chief executive 90 00:05:22,080 --> 00:05:24,680 Speaker 1: Officer Fred Smith saying most of the issues that we're 91 00:05:24,680 --> 00:05:28,120 Speaker 1: dealing with today are induced by bad political choices. Do 92 00:05:28,200 --> 00:05:31,919 Speaker 1: you think that the economy is slowing to the degree 93 00:05:31,960 --> 00:05:35,520 Speaker 1: that it is because of bad political choices? When I 94 00:05:35,680 --> 00:05:39,240 Speaker 1: look at the global economy and I think about headwinds 95 00:05:39,279 --> 00:05:42,120 Speaker 1: that it faces, I mean trade war has got to 96 00:05:42,160 --> 00:05:45,320 Speaker 1: be number one on the list, and that is a 97 00:05:45,520 --> 00:05:50,320 Speaker 1: discrete political choice. I think it's increasing uncertainty. It's likely 98 00:05:50,360 --> 00:05:55,320 Speaker 1: weighing on investment in the United States and probably abroad 99 00:05:55,360 --> 00:05:59,560 Speaker 1: as well. UM I think Brexit is weighing on the outlook, 100 00:05:59,600 --> 00:06:02,080 Speaker 1: and that's a different kind of political choice, but very 101 00:06:02,160 --> 00:06:04,599 Speaker 1: much a political choice. And you could go around the 102 00:06:04,640 --> 00:06:07,760 Speaker 1: world and point to other examples. What's going on in France, 103 00:06:07,760 --> 00:06:11,960 Speaker 1: what's the uncertainties and rests in Italy, UH, the in 104 00:06:12,040 --> 00:06:16,839 Speaker 1: the emerging markets, the new the new administration in Mexico, 105 00:06:17,000 --> 00:06:19,600 Speaker 1: and there's a you know, it's it remains uncertain as 106 00:06:19,640 --> 00:06:22,360 Speaker 1: to what an Omlo government's going to do. But there's 107 00:06:22,400 --> 00:06:25,800 Speaker 1: more uncertainty there than has been the case in the past. 108 00:06:26,040 --> 00:06:29,200 Speaker 1: So I very much agree these geopolitical rest these these 109 00:06:29,480 --> 00:06:33,480 Speaker 1: political decisions, some made by those elected and others quite 110 00:06:33,520 --> 00:06:38,039 Speaker 1: frankly reflecting the outcomes of elections. And I think that's 111 00:06:38,040 --> 00:06:41,640 Speaker 1: a very important point, is what we're seeing in some 112 00:06:41,800 --> 00:06:45,760 Speaker 1: of this is the discontent of the body politic. In 113 00:06:45,880 --> 00:06:49,200 Speaker 1: many countries, are many people that are saying the global 114 00:06:49,279 --> 00:06:52,440 Speaker 1: economy isn't working for me the way I expected to. 115 00:06:53,279 --> 00:06:55,640 Speaker 1: So just give you about twenty seconds. I know it's 116 00:06:55,680 --> 00:06:59,160 Speaker 1: tough to do this. What would be the investment position 117 00:06:59,200 --> 00:07:05,200 Speaker 1: you want to assume whom going into so? Uh. On 118 00:07:05,279 --> 00:07:07,359 Speaker 1: the one hand, I think we have to bear in 119 00:07:07,440 --> 00:07:10,120 Speaker 1: mind that there is a strong there is a strong 120 00:07:10,240 --> 00:07:13,080 Speaker 1: case for that kind of baseline view that the fat 121 00:07:13,200 --> 00:07:17,080 Speaker 1: is articulated that the US economy will be slower next year. 122 00:07:17,720 --> 00:07:20,000 Speaker 1: But by the same token, you've got a hedge against 123 00:07:20,280 --> 00:07:22,800 Speaker 1: you've got a hedge against these kinds of extraordinary tale 124 00:07:22,880 --> 00:07:25,360 Speaker 1: rusks Nathan Sheets. It's always a pleasure having you here. 125 00:07:25,440 --> 00:07:27,400 Speaker 1: Thank you so much for being here, Nathan. She's chief 126 00:07:27,400 --> 00:07:31,360 Speaker 1: economist for Peacham Fixed Income, which oversees more than seven 127 00:07:31,560 --> 00:07:34,600 Speaker 1: billion dollars in Newark, New Jersey, formerly of the FED 128 00:07:34,680 --> 00:07:37,880 Speaker 1: and the Treasure Department, uniquely positioned to talk about the 129 00:07:38,320 --> 00:07:57,440 Speaker 1: current environment. We were just hearing from FBI Director Christopher Ray. 130 00:07:57,600 --> 00:07:59,960 Speaker 1: Before that, we had heard from US Deputy Attorney General 131 00:08:00,200 --> 00:08:05,920 Speaker 1: Rod Rosenstein. Uh, some pretty pretty dramatic language. They're accusing 132 00:08:06,040 --> 00:08:11,920 Speaker 1: state sponsored actors in China of hacking into corporate and 133 00:08:12,280 --> 00:08:17,320 Speaker 1: state Frankly, Uh, you just use the US agencies, including 134 00:08:17,360 --> 00:08:21,400 Speaker 1: some military agencies, US Navy, UM and you know, basically, 135 00:08:21,440 --> 00:08:24,680 Speaker 1: one of the most interesting parts of their words was 136 00:08:24,720 --> 00:08:27,160 Speaker 1: when they really tried to emphasize that they are working 137 00:08:27,200 --> 00:08:30,640 Speaker 1: shoulder to shoulder with American allies. It's not just the 138 00:08:30,760 --> 00:08:34,680 Speaker 1: US unilaterally going after Chinese state sponsored bad actors that 139 00:08:34,720 --> 00:08:39,439 Speaker 1: are hacking into and stealing information from corporations and governments, 140 00:08:40,040 --> 00:08:44,559 Speaker 1: but that other nations are working with them. Really a 141 00:08:44,600 --> 00:08:49,240 Speaker 1: strong language and really highlights a broad based, multi year, 142 00:08:49,640 --> 00:08:54,840 Speaker 1: multifaceted attempt to break in to to to US companies, 143 00:08:54,880 --> 00:08:59,920 Speaker 1: and yes, these folks specifically about the increased enforcement activity 144 00:09:00,000 --> 00:09:03,640 Speaker 1: that would be necessary over cipher mergers and acquisitions as 145 00:09:03,640 --> 00:09:07,520 Speaker 1: well as how to protect our own telecommunications infrastructure. I 146 00:09:07,559 --> 00:09:10,160 Speaker 1: want to bring in Rob Lefforts, Microsoft's corporate vice president 147 00:09:10,160 --> 00:09:12,920 Speaker 1: of Security. Rob. We're so glad to have you today, 148 00:09:13,080 --> 00:09:16,840 Speaker 1: especially given given this news understanding that you don't necessarily 149 00:09:16,840 --> 00:09:19,440 Speaker 1: know the details of this particular indictment that was just 150 00:09:19,760 --> 00:09:24,000 Speaker 1: unsealed moments ago. Does it come as a surprise to 151 00:09:24,040 --> 00:09:28,600 Speaker 1: you that state sponsored activity from China hacking into US 152 00:09:28,720 --> 00:09:30,800 Speaker 1: entities is as widespread as they were making it out 153 00:09:30,840 --> 00:09:34,040 Speaker 1: to be. Well, without making a specific comment about China, 154 00:09:34,200 --> 00:09:36,960 Speaker 1: it unfortunately does not come as a surprise at all. 155 00:09:37,600 --> 00:09:41,760 Speaker 1: This kind of activity is ongoing, uh. And there are 156 00:09:41,800 --> 00:09:46,600 Speaker 1: many organizations, some state sponsored, some purely criminal, who spend 157 00:09:46,640 --> 00:09:49,520 Speaker 1: a great deal of time and investment to break into 158 00:09:49,960 --> 00:09:54,680 Speaker 1: companies cyber infrastructure. And so that means if you have 159 00:09:54,720 --> 00:09:56,800 Speaker 1: a company today, you had need to have a really 160 00:09:56,880 --> 00:10:00,280 Speaker 1: modern security stance thinking about how are you going to 161 00:10:00,320 --> 00:10:03,600 Speaker 1: protect yourself and how are you going to detect when 162 00:10:03,679 --> 00:10:08,120 Speaker 1: these kinds of cyber criminals and experts break into your organization. 163 00:10:08,440 --> 00:10:12,920 Speaker 1: Does that expertise means something different in a world where 164 00:10:12,960 --> 00:10:16,560 Speaker 1: companies are migrating much of their data and operations to 165 00:10:16,600 --> 00:10:20,640 Speaker 1: the cloud. It does. And Uh, in some ways this 166 00:10:20,720 --> 00:10:24,760 Speaker 1: actually creates an opportunity because we're able to bring more 167 00:10:24,960 --> 00:10:29,600 Speaker 1: cloud technology to bear to actually provide more sophisticated protection. 168 00:10:30,000 --> 00:10:33,400 Speaker 1: It just opens up new fields like machine learning, where 169 00:10:33,400 --> 00:10:35,760 Speaker 1: we can really monitor a lot more of what's going 170 00:10:35,800 --> 00:10:40,040 Speaker 1: on and be faster to detect and respond. I gotta say, 171 00:10:40,160 --> 00:10:42,920 Speaker 1: especially when you think back at um what was the 172 00:10:44,320 --> 00:10:50,760 Speaker 1: hotel chain Marriott that the breach about half a billion user, right, 173 00:10:50,800 --> 00:10:53,480 Speaker 1: but it happens over years, and it makes me think 174 00:10:53,559 --> 00:10:56,079 Speaker 1: that just sort of the detection is part of the issue. 175 00:10:56,080 --> 00:11:00,360 Speaker 1: It's hard to detect this, it's critical detect and actually 176 00:11:00,360 --> 00:11:04,960 Speaker 1: gets back into a conservative, old school security stance would say, 177 00:11:05,040 --> 00:11:07,760 Speaker 1: I'm going to build castle walls around my organization and 178 00:11:07,800 --> 00:11:10,760 Speaker 1: make sure that nobody ever gets in. The sad truth 179 00:11:10,840 --> 00:11:13,480 Speaker 1: is people will get in, and so a modern stance says, 180 00:11:13,480 --> 00:11:16,080 Speaker 1: I acknowledge that, and I am ready to detect them 181 00:11:16,120 --> 00:11:18,840 Speaker 1: how and when it happens. In the Marriat case, I heard, 182 00:11:18,880 --> 00:11:21,400 Speaker 1: I wasn't directly involved that they were there in the 183 00:11:21,440 --> 00:11:26,600 Speaker 1: network for four years, and so having modern tools like 184 00:11:26,679 --> 00:11:29,520 Speaker 1: Microsoft Threat Protection is actually the way to think about 185 00:11:29,720 --> 00:11:32,400 Speaker 1: how am I going to be more alert and watching 186 00:11:32,520 --> 00:11:35,520 Speaker 1: the whole ocean of behaviors going on in my environment. 187 00:11:36,120 --> 00:11:40,480 Speaker 1: One of the focus focuses that the Christopher Ray FBI 188 00:11:40,559 --> 00:11:44,199 Speaker 1: director mentioned has to do with who are the people 189 00:11:44,400 --> 00:11:49,680 Speaker 1: behind these attacks? He mentioned hackers, uh, perhaps business people 190 00:11:50,000 --> 00:11:53,640 Speaker 1: in China or around the world that maybe working on 191 00:11:53,720 --> 00:11:58,920 Speaker 1: behalf of Chinese state sponsored entities, but he also mentioned 192 00:11:58,960 --> 00:12:03,840 Speaker 1: the co opting of employees at the very companies whose 193 00:12:03,880 --> 00:12:09,040 Speaker 1: secrets are being targeted. UH. Based on your experience, what 194 00:12:09,120 --> 00:12:12,640 Speaker 1: kinds of procedures or what kinds of activity can companies 195 00:12:12,960 --> 00:12:15,720 Speaker 1: do in order to forestall that? There's two things you 196 00:12:15,720 --> 00:12:17,720 Speaker 1: really need to think about. One is at the hiring 197 00:12:17,760 --> 00:12:19,560 Speaker 1: time when you need to think about how do I 198 00:12:19,640 --> 00:12:23,080 Speaker 1: screen and monitor employees in a way that respects privacy 199 00:12:23,160 --> 00:12:26,400 Speaker 1: and that's honestly hard for all companies to do. It 200 00:12:26,520 --> 00:12:29,440 Speaker 1: is something that cloud companies like Microsoft can do in 201 00:12:29,440 --> 00:12:32,439 Speaker 1: a more robust way. The second thing is you also 202 00:12:32,520 --> 00:12:35,240 Speaker 1: need tools that watch what goes on in your network, 203 00:12:35,280 --> 00:12:38,400 Speaker 1: what employees are doing. Are they trying to gain access 204 00:12:38,400 --> 00:12:41,199 Speaker 1: to servers and data that they wouldn't normally use as 205 00:12:41,240 --> 00:12:45,760 Speaker 1: part of their day job. As far as Microsoft's effort 206 00:12:45,960 --> 00:12:51,760 Speaker 1: to secure the networks of the various customers, one of 207 00:12:51,800 --> 00:12:57,679 Speaker 1: the the Rod Rosenstein mentioned that it was managed service providers, 208 00:12:58,000 --> 00:12:59,880 Speaker 1: and I'm wondering if you could just sort of exp 209 00:13:00,040 --> 00:13:03,240 Speaker 1: and on what technically that means, because he said that 210 00:13:03,320 --> 00:13:06,320 Speaker 1: this was something that is not just about the United States, 211 00:13:06,360 --> 00:13:09,800 Speaker 1: this is throughout the world. Now, well, I'm honestly not 212 00:13:09,840 --> 00:13:11,880 Speaker 1: sure exactly what he meant by that phrase, because it 213 00:13:11,960 --> 00:13:14,080 Speaker 1: is a phrase that could be used to apply to 214 00:13:14,160 --> 00:13:17,120 Speaker 1: a number of different things. But the one comment that 215 00:13:17,160 --> 00:13:20,760 Speaker 1: I will make is that for a modern organization, there's 216 00:13:20,920 --> 00:13:23,640 Speaker 1: lots of moments in the life of your digital data 217 00:13:23,679 --> 00:13:26,640 Speaker 1: as it flows through a network, as it's stored in 218 00:13:26,760 --> 00:13:29,600 Speaker 1: some service, maybe even if one of your employees puts 219 00:13:29,600 --> 00:13:32,520 Speaker 1: it out on the public Internet, and having a big 220 00:13:32,559 --> 00:13:35,120 Speaker 1: picture about all of that, not just what happens to 221 00:13:35,200 --> 00:13:38,280 Speaker 1: laptops and file servers, is a huge challenge and a 222 00:13:38,280 --> 00:13:40,920 Speaker 1: lot of complexity. Uh. The other point I'd like to 223 00:13:40,920 --> 00:13:44,760 Speaker 1: get across is, uh, you talked about the sophistication of 224 00:13:44,800 --> 00:13:48,560 Speaker 1: the attackers, and they are very sophisticated and moving quickly. 225 00:13:48,960 --> 00:13:50,559 Speaker 1: And this is a space where you need to make 226 00:13:50,600 --> 00:13:54,880 Speaker 1: sure that you're taking advantage of good guys and defenders 227 00:13:55,200 --> 00:13:58,560 Speaker 1: who are just as focused on moving quickly and tracking 228 00:13:58,559 --> 00:14:00,839 Speaker 1: what they do. That was actually exactly where I was 229 00:14:00,840 --> 00:14:03,920 Speaker 1: going to head, which is talent and the difficulty finding 230 00:14:03,960 --> 00:14:07,720 Speaker 1: the people who can move just as quickly. You know 231 00:14:07,800 --> 00:14:11,280 Speaker 1: how difficult is that for you? Well across the globe. 232 00:14:11,440 --> 00:14:15,240 Speaker 1: Finding great cybersecurity talent is a crisis h And every 233 00:14:15,280 --> 00:14:18,000 Speaker 1: time I hear a statistic about it, the numbers seem worse. 234 00:14:18,200 --> 00:14:20,920 Speaker 1: I think the last one that I heard was by 235 00:14:21,520 --> 00:14:26,600 Speaker 1: the planet will be short three point five million security professionals. 236 00:14:26,680 --> 00:14:29,080 Speaker 1: They'll have that many more jobs than people who can 237 00:14:29,160 --> 00:14:33,200 Speaker 1: capably fill them. And so as we think about that, 238 00:14:33,240 --> 00:14:36,960 Speaker 1: we think about having a pool of incredibly talented researchers 239 00:14:37,000 --> 00:14:40,680 Speaker 1: at Microsoft and then using tools like machine learning in 240 00:14:40,680 --> 00:14:43,200 Speaker 1: the power of the cloud to bring those talents to 241 00:14:43,280 --> 00:14:46,280 Speaker 1: bear to help companies around the planet and to help 242 00:14:46,320 --> 00:14:49,520 Speaker 1: governments around the planet. Which countries are producing the most 243 00:14:49,680 --> 00:14:54,560 Speaker 1: cybersecurity professionals who are the best? Uh, it's pretty distributed. 244 00:14:55,000 --> 00:14:58,280 Speaker 1: I will say the United States has some great programs 245 00:14:58,320 --> 00:15:03,200 Speaker 1: and we work with research organize stasions there. England Israel 246 00:15:03,240 --> 00:15:06,200 Speaker 1: happens to have a lot of cybersecurity talent. Uh. And 247 00:15:06,680 --> 00:15:09,960 Speaker 1: in places where you find bad guys, you also find 248 00:15:10,000 --> 00:15:12,320 Speaker 1: the potential for talent that wants to help and do 249 00:15:12,400 --> 00:15:15,720 Speaker 1: the right thing. Just to put it into perspective. According 250 00:15:15,800 --> 00:15:22,480 Speaker 1: to your notes, thirty million attempts on average a day 251 00:15:22,640 --> 00:15:29,280 Speaker 1: to log into Microsoft accounts by adversaries. Thirty million a day. Yeah, 252 00:15:30,240 --> 00:15:32,960 Speaker 1: you can't handle those one by one. You need you 253 00:15:33,000 --> 00:15:36,760 Speaker 1: need machines. You need machines and tools that help handle 254 00:15:36,840 --> 00:15:40,800 Speaker 1: that for you. One thing that I'm wondering passwords, Yes, 255 00:15:41,080 --> 00:15:44,560 Speaker 1: password security. I mean, part of the problem with password 256 00:15:44,600 --> 00:15:46,800 Speaker 1: security is that they can become so secure that you 257 00:15:46,840 --> 00:15:48,600 Speaker 1: don't remember any of your own passwords, and then it 258 00:15:48,640 --> 00:15:51,520 Speaker 1: just becomes a huge mess. What's what's sort of the 259 00:15:51,560 --> 00:15:55,240 Speaker 1: what what's the progression here? Yeah? Uh, passwords are bad 260 00:15:55,280 --> 00:15:59,320 Speaker 1: for the planet. Like, let's be clear, people can't remember them. 261 00:15:59,400 --> 00:16:04,080 Speaker 1: They can't. Let's fossil fuels and passwords. Yeah, it is 262 00:16:04,120 --> 00:16:09,680 Speaker 1: true that continuing to use passwords is the easiest way 263 00:16:09,680 --> 00:16:12,080 Speaker 1: for any organization to get in. I don't know how 264 00:16:12,360 --> 00:16:15,720 Speaker 1: these attacks were carried on, but over the attacks on 265 00:16:15,760 --> 00:16:19,000 Speaker 1: any organization are very simple. I'm going to trick you 266 00:16:19,040 --> 00:16:21,120 Speaker 1: into giving away your password, and then I'm just going 267 00:16:21,160 --> 00:16:22,720 Speaker 1: to log in and do a whole bunch of bad 268 00:16:22,720 --> 00:16:26,240 Speaker 1: stuff on your behalf. And so getting people away from 269 00:16:26,280 --> 00:16:28,840 Speaker 1: passwords where they log in using more than one thing 270 00:16:28,880 --> 00:16:31,440 Speaker 1: at a time, So use your phone and a password, 271 00:16:31,840 --> 00:16:35,320 Speaker 1: or even better, get away from passwords all together, where 272 00:16:35,320 --> 00:16:37,920 Speaker 1: you just log in with your phone and biometrics on 273 00:16:37,960 --> 00:16:40,440 Speaker 1: your phone and that's registered to you. You didn't have 274 00:16:40,480 --> 00:16:44,200 Speaker 1: to remember your password, and not only is your experience better, 275 00:16:44,320 --> 00:16:47,520 Speaker 1: but under the covers it was way more secure. Is 276 00:16:47,560 --> 00:16:52,440 Speaker 1: it hackable? Everything is hackable. Everything is hackable if you 277 00:16:52,480 --> 00:16:54,680 Speaker 1: cut off someone's finger and stick it on there. I 278 00:16:54,720 --> 00:16:58,000 Speaker 1: meant once once the information is stored in in some 279 00:16:58,080 --> 00:17:02,560 Speaker 1: kind of device. Uh so, the most of the techniques 280 00:17:02,600 --> 00:17:05,800 Speaker 1: for biometrics keep those biometrics on the device. That's true 281 00:17:05,800 --> 00:17:09,359 Speaker 1: for Windows Hello, So you'd have to have that laptop 282 00:17:09,800 --> 00:17:14,920 Speaker 1: and the finger. So anything is doable, but that's pretty hard. 283 00:17:16,400 --> 00:17:19,119 Speaker 1: One thing that I'm wondering is how well prepared do 284 00:17:19,160 --> 00:17:23,439 Speaker 1: you think that American corporations are against hacking? They are 285 00:17:23,480 --> 00:17:25,560 Speaker 1: not very well prepared. I mean, is it is it 286 00:17:25,640 --> 00:17:27,880 Speaker 1: sort of would we be shocked if we knew how 287 00:17:27,960 --> 00:17:33,120 Speaker 1: unprepared they were. We, the whole industry, and Microsoft as 288 00:17:33,160 --> 00:17:35,919 Speaker 1: a responsible part of that industry, need to push a 289 00:17:35,960 --> 00:17:40,280 Speaker 1: lot harder on making everything much more safe. Do you 290 00:17:40,320 --> 00:17:43,680 Speaker 1: believe that it's going to take some kind of incident 291 00:17:43,800 --> 00:17:47,800 Speaker 1: in order to wake people up in their individual industries. 292 00:17:49,080 --> 00:17:52,919 Speaker 1: Those incidents are happening every day and we read about them. 293 00:17:52,960 --> 00:17:55,800 Speaker 1: You talked about Marriott. If you just look back Sony 294 00:17:55,880 --> 00:18:00,679 Speaker 1: and Target people experience, people are way picking up and 295 00:18:00,720 --> 00:18:02,960 Speaker 1: there is a huge focus on this. I think that's 296 00:18:03,000 --> 00:18:05,600 Speaker 1: why we talk about things like the huge demand for 297 00:18:05,720 --> 00:18:09,160 Speaker 1: talented professionals to help. Thanks very much for being with us, 298 00:18:09,359 --> 00:18:13,080 Speaker 1: Rob Lefforts, appropriate you're here today. Rob Lefforts is corporate 299 00:18:13,160 --> 00:18:17,840 Speaker 1: vice president of Security for Microsoft, telling us about the 300 00:18:17,920 --> 00:18:21,919 Speaker 1: efforts on behalf of corporations and the US government to 301 00:18:21,960 --> 00:18:42,040 Speaker 1: secure our networks. President Trump did decide to pull troops 302 00:18:42,160 --> 00:18:44,560 Speaker 1: out of Syria against the advice of some of his 303 00:18:44,640 --> 00:18:49,639 Speaker 1: closest advisors, creating something of a pushback from even some 304 00:18:49,720 --> 00:18:53,040 Speaker 1: of his staunchest Republican allies, Lindsay Graham writing it is 305 00:18:53,080 --> 00:18:55,880 Speaker 1: not fake news that Russia, Iran, and Assad are unhappy 306 00:18:55,920 --> 00:18:59,200 Speaker 1: about our decision to withdraw from Syria. They are ecstatic. 307 00:18:59,280 --> 00:19:02,320 Speaker 1: This was via Twitter joining us now Toby Harshaw, national 308 00:19:02,359 --> 00:19:05,679 Speaker 1: security writer and editor for a Bloomberg opinion, joining us 309 00:19:05,720 --> 00:19:09,359 Speaker 1: here in the Bloomberg Interactive Broker studio. Uh, Toby, what 310 00:19:09,440 --> 00:19:11,360 Speaker 1: do you make of this move? How do you interpret 311 00:19:11,680 --> 00:19:14,240 Speaker 1: President Trump's decision to do this? Uh? There are a 312 00:19:14,320 --> 00:19:17,560 Speaker 1: few explanations. The first is that this was simply a 313 00:19:17,600 --> 00:19:21,600 Speaker 1: campaign promise, UM, that he's making good on he you know, 314 00:19:21,720 --> 00:19:24,720 Speaker 1: he went against the advice not just of the Pentagon, 315 00:19:24,840 --> 00:19:27,960 Speaker 1: but also of John Bolton, his national security advisor, who 316 00:19:28,000 --> 00:19:31,359 Speaker 1: had really been, you know, the voice in his ear 317 00:19:31,720 --> 00:19:35,720 Speaker 1: on these issues before this. UM. In addition to that, 318 00:19:35,880 --> 00:19:39,800 Speaker 1: I think that UM, he he wants to be very 319 00:19:39,800 --> 00:19:43,200 Speaker 1: careful about Turkey. UM. Turkey had said that they will 320 00:19:43,240 --> 00:19:46,919 Speaker 1: send troops in UH to remove the Kurds who have 321 00:19:47,000 --> 00:19:51,159 Speaker 1: been our allies, the Syrian Democratic Forces. UH. And I 322 00:19:51,200 --> 00:19:54,879 Speaker 1: don't think that, you know, Trump wanted the possibility of 323 00:19:54,920 --> 00:19:59,080 Speaker 1: Tornado allies getting in shooting fight. You tell us the 324 00:19:59,200 --> 00:20:03,480 Speaker 1: disposition of US military assets in the Middle East. UM, 325 00:20:03,520 --> 00:20:07,520 Speaker 1: I can't give you the exact disposition because the Pentagon 326 00:20:07,600 --> 00:20:12,959 Speaker 1: is not releasing UM. The breakdowns from how many troops 327 00:20:12,960 --> 00:20:15,920 Speaker 1: are in which theater. That's a new thing that they're doing. 328 00:20:16,480 --> 00:20:19,200 Speaker 1: Actually that's made a lot of members of Congress unhappy. 329 00:20:19,800 --> 00:20:23,199 Speaker 1: But we know that we have military assets in the 330 00:20:23,240 --> 00:20:28,040 Speaker 1: United Arab Emirates, in Turkey, Saudi Arabia, Qatar, as well 331 00:20:28,080 --> 00:20:34,119 Speaker 1: as in Oman, Kuwait, Jordan's Summon, Israel, Iraq, Egypt, Djibouti. 332 00:20:34,200 --> 00:20:37,600 Speaker 1: The list goes on. At what point does the effort 333 00:20:37,720 --> 00:20:42,600 Speaker 1: on the military front just become a zero sum game 334 00:20:42,640 --> 00:20:45,560 Speaker 1: and the President says, we're not getting anything out of it, 335 00:20:45,840 --> 00:20:49,280 Speaker 1: let's leave. Yeah, I mean most of those uh, most 336 00:20:49,320 --> 00:20:52,159 Speaker 1: of those troops are actually stationed there. I mean Cutter 337 00:20:52,240 --> 00:20:55,040 Speaker 1: is where the giant airbases, Bahrain is where the giant 338 00:20:55,160 --> 00:20:59,200 Speaker 1: naval bases. Those are permanent presences. Um. But yeah, we've 339 00:20:59,240 --> 00:21:03,160 Speaker 1: got we've troops well beyond Iraq and Uh and Syria. 340 00:21:03,160 --> 00:21:06,719 Speaker 1: We've got them in North Africa, We've got them in Jibouti. Um, 341 00:21:07,040 --> 00:21:11,960 Speaker 1: we've uh, yeah, at some point we have expanded too far. Um. 342 00:21:12,000 --> 00:21:15,720 Speaker 1: This war is you know, is based on legally on 343 00:21:15,800 --> 00:21:18,240 Speaker 1: something Congress passed in two thousand and one that they've 344 00:21:18,280 --> 00:21:21,800 Speaker 1: never updated. Uh. And and what we're doing goes way 345 00:21:21,840 --> 00:21:25,160 Speaker 1: beyond the authority that the White House was given. One thing, 346 00:21:25,280 --> 00:21:27,880 Speaker 1: there was a Lumur editorial out today that I thought 347 00:21:27,960 --> 00:21:31,200 Speaker 1: was really interesting talking about how this particular move is 348 00:21:31,240 --> 00:21:34,639 Speaker 1: a little bit different because it comes as something of 349 00:21:34,680 --> 00:21:40,200 Speaker 1: a rude shock and not a pleasant one for our allies. Yeah. Um, 350 00:21:40,240 --> 00:21:43,200 Speaker 1: I mean the Kurds are you know, a rag tag 351 00:21:43,280 --> 00:21:47,159 Speaker 1: militia that we've armed and trained. Um, they're you know, 352 00:21:47,240 --> 00:21:50,240 Speaker 1: not important on the global scale. But if we hang 353 00:21:50,280 --> 00:21:52,400 Speaker 1: them up to dry, if we let either the Turks 354 00:21:52,520 --> 00:21:55,720 Speaker 1: or the Syrians, um simply run over them, as the 355 00:21:55,720 --> 00:21:59,080 Speaker 1: Turks have promised to bury them in the holes they 356 00:21:59,080 --> 00:22:02,639 Speaker 1: have dug. Um, that sends a signal to our bigger 357 00:22:02,680 --> 00:22:05,200 Speaker 1: allies that the US you know, doesn't have our back. 358 00:22:05,240 --> 00:22:07,840 Speaker 1: And that's you know, that plays right into the rhetoric 359 00:22:08,040 --> 00:22:10,840 Speaker 1: that Trump has been using with our NATO allies and 360 00:22:11,280 --> 00:22:15,239 Speaker 1: our allies in in the Far East, um using, you know, 361 00:22:15,400 --> 00:22:19,680 Speaker 1: threatening to to pull away the security blanket unless they 362 00:22:19,840 --> 00:22:22,960 Speaker 1: change their trade policies. Um. It's a it's a whole 363 00:22:23,000 --> 00:22:27,199 Speaker 1: new level of Uh, it's an entirely different foreign policy. 364 00:22:27,240 --> 00:22:29,760 Speaker 1: I think that's very, very scary to the allies. And 365 00:22:29,800 --> 00:22:32,080 Speaker 1: that's one reason that the French are talking about starting 366 00:22:32,080 --> 00:22:35,200 Speaker 1: a European army. What has been the reaction, if any, 367 00:22:35,320 --> 00:22:39,399 Speaker 1: so far from the Saudi Arabian government. Um, there hasn't 368 00:22:39,440 --> 00:22:42,720 Speaker 1: really been one. UM. The Audies are being very quiet, 369 00:22:43,200 --> 00:22:47,080 Speaker 1: uh for obvious reasons. UM. The Saudis have have helped 370 00:22:47,080 --> 00:22:51,400 Speaker 1: in the coalition against ISIS UM, but not dramatically. In fact, 371 00:22:51,480 --> 00:22:55,080 Speaker 1: the u A either very close ally and neighbor UM 372 00:22:55,119 --> 00:22:58,000 Speaker 1: has been a far bigger part of it. Could some 373 00:22:58,040 --> 00:23:01,800 Speaker 1: people say that that the pulse that President Trump just 374 00:23:01,840 --> 00:23:05,119 Speaker 1: sort of demonstrated is actually absolutely the right one. That 375 00:23:05,200 --> 00:23:07,360 Speaker 1: we're not going to win. This is a messy kind 376 00:23:07,359 --> 00:23:11,080 Speaker 1: of situation. It's unclear what our role there is. Why 377 00:23:11,119 --> 00:23:15,359 Speaker 1: are we there? Um? Well, the mission was to defeat 378 00:23:15,400 --> 00:23:19,840 Speaker 1: ISIS UM. Defeating ISIS isn't something you can do entirely. UM. 379 00:23:19,880 --> 00:23:22,520 Speaker 1: But it's not true that that they've been entirely defeated. 380 00:23:22,520 --> 00:23:25,400 Speaker 1: They no longer hold any territory. They were forced out 381 00:23:25,440 --> 00:23:28,600 Speaker 1: of Hygiene, the last city that they held. UM. But 382 00:23:28,640 --> 00:23:32,840 Speaker 1: there's about two thousand fighters probably who slipped away. They're 383 00:23:33,000 --> 00:23:36,080 Speaker 1: they're fighting in the little villages UM. They're probably gonna 384 00:23:36,080 --> 00:23:38,439 Speaker 1: slip across the border into a rock where there are 385 00:23:38,480 --> 00:23:41,240 Speaker 1: a lot of sleeper cells um that have been carrying 386 00:23:41,280 --> 00:23:46,000 Speaker 1: out you know, attacks and bombing, attacks and kidnappings and 387 00:23:46,040 --> 00:23:50,960 Speaker 1: things like that. Based on your reading of the situation 388 00:23:51,320 --> 00:23:55,159 Speaker 1: and the relationship between the United States and Turkey and 389 00:23:55,240 --> 00:23:58,120 Speaker 1: NATO ally, do you think this will have any effect 390 00:23:58,600 --> 00:24:05,400 Speaker 1: on Turkeys per just of of Russian made anti aircraft missiles. Yeah, um, 391 00:24:05,840 --> 00:24:08,800 Speaker 1: the Turks. Right as this was happening, the Turks agreed 392 00:24:08,920 --> 00:24:11,120 Speaker 1: on a three point five billion dollar package to buy 393 00:24:11,119 --> 00:24:14,680 Speaker 1: Patriot missiles from US. UM. The big problems with the 394 00:24:14,840 --> 00:24:17,160 Speaker 1: S four hundred were a that it was giving money 395 00:24:17,160 --> 00:24:19,880 Speaker 1: to the Russians um, and be that they are not 396 00:24:20,000 --> 00:24:25,639 Speaker 1: combatible with with NATO's hardware UM and couldn't have been 397 00:24:25,680 --> 00:24:28,440 Speaker 1: a part of that common defense. The Patriot missiles, which 398 00:24:28,440 --> 00:24:31,879 Speaker 1: are American obviously are. The difference is is that Patriots 399 00:24:31,880 --> 00:24:34,119 Speaker 1: are very short range and the S four hundred, the 400 00:24:34,200 --> 00:24:37,600 Speaker 1: Russian system, has much greater range. Uh So the fear 401 00:24:37,680 --> 00:24:39,720 Speaker 1: is that the Turks are gonna go ahead and buy both. 402 00:24:40,359 --> 00:24:43,760 Speaker 1: Thanks very much. Toby Harshaw as always expert when it 403 00:24:43,800 --> 00:24:46,640 Speaker 1: comes to the world's national security, particularly the United States. 404 00:24:46,680 --> 00:24:50,359 Speaker 1: Are national security writer for Bloomberg opinion. I encourage you 405 00:24:50,440 --> 00:24:54,280 Speaker 1: to read his most recent column. Trump's Syria pull out 406 00:24:54,359 --> 00:24:57,800 Speaker 1: is another grave mistake. Thank you very much for being 407 00:24:57,840 --> 00:25:15,679 Speaker 1: with us. SpaceX is eighth and final Iridium Next launch 408 00:25:15,800 --> 00:25:19,600 Speaker 1: has been delayed until January seventh, and here to tell 409 00:25:19,680 --> 00:25:22,600 Speaker 1: us all about the satellites that are circling the globe 410 00:25:23,280 --> 00:25:25,600 Speaker 1: is none other than Matt desh. He is the chief 411 00:25:25,600 --> 00:25:31,560 Speaker 1: executive of Iridium Communications based in Washington, d C. Matt Dench, 412 00:25:31,680 --> 00:25:34,480 Speaker 1: thanks very much for being with us. Tell people about 413 00:25:34,520 --> 00:25:38,159 Speaker 1: these Iridium Next satellites. You've already got sixty five of 414 00:25:38,240 --> 00:25:41,560 Speaker 1: them in orbit, and tell us how this is going 415 00:25:41,600 --> 00:25:45,119 Speaker 1: to connect the world in a way that maybe people 416 00:25:45,160 --> 00:25:49,920 Speaker 1: don't expect, for example, Internet of Things. Yeah, thanks Tim 417 00:25:50,080 --> 00:25:53,199 Speaker 1: to talking to you again. Um. We have spent the 418 00:25:53,280 --> 00:25:57,479 Speaker 1: last two years getting our three billion dollar network in orbit, 419 00:25:57,640 --> 00:26:00,440 Speaker 1: and we're within two and a half weeks now pleading that, 420 00:26:00,520 --> 00:26:04,800 Speaker 1: which is pretty exciting because it really will be a 421 00:26:04,880 --> 00:26:08,760 Speaker 1: complete new network that's much more powerful than the original 422 00:26:08,800 --> 00:26:12,720 Speaker 1: network that we launched about twenty years ago. Uh. You know, 423 00:26:12,800 --> 00:26:17,199 Speaker 1: the probably the most exciting new service that we've that 424 00:26:17,320 --> 00:26:19,640 Speaker 1: really has driven our growth over the last few years 425 00:26:19,720 --> 00:26:22,600 Speaker 1: has been the Internet of things. Um. A lot of 426 00:26:22,600 --> 00:26:25,119 Speaker 1: people remember us as a satellite phone company, and we 427 00:26:25,160 --> 00:26:29,080 Speaker 1: still sell those. That's a that's a great business for 428 00:26:30,000 --> 00:26:35,280 Speaker 1: emergencies and first responders and adventures and and that sort 429 00:26:35,280 --> 00:26:39,080 Speaker 1: of thing. But the primary growth really on the network 430 00:26:39,200 --> 00:26:43,560 Speaker 1: or the number of subscribers, is in connecting things, connecting 431 00:26:43,560 --> 00:26:47,520 Speaker 1: trucks and trains and ships and buoy's and oil and 432 00:26:47,560 --> 00:26:51,560 Speaker 1: gas pipelines and all the things outside of cell phone coverage, 433 00:26:51,600 --> 00:26:54,240 Speaker 1: which you know only only is about ten to fifteen 434 00:26:54,280 --> 00:26:57,520 Speaker 1: percent of the world. Given that we cover one of 435 00:26:57,560 --> 00:27:00,320 Speaker 1: the world, we're really the way to connect any of 436 00:27:00,320 --> 00:27:03,680 Speaker 1: these things when they're outside cellphone coverage. Yeah, Matt, one 437 00:27:03,680 --> 00:27:06,199 Speaker 1: thing that I find really compelling about your business is 438 00:27:06,240 --> 00:27:10,240 Speaker 1: you take this sort of theoretical and sci fi aspect 439 00:27:10,440 --> 00:27:15,199 Speaker 1: of space exploration to a very concrete and earthly place. 440 00:27:15,440 --> 00:27:21,119 Speaker 1: I mean, the whole SpaceX SpaceX launches, you've benefited from them, right, Well, 441 00:27:21,240 --> 00:27:22,720 Speaker 1: you know, we kind of grew up at the same 442 00:27:22,760 --> 00:27:25,840 Speaker 1: time if you will. They they're about, I don't know, 443 00:27:25,880 --> 00:27:28,760 Speaker 1: fifteen years old, and when we were looking eleven twelve 444 00:27:28,880 --> 00:27:34,560 Speaker 1: years ago for a launcher, UM, we couldn't really afford frankly, 445 00:27:34,640 --> 00:27:38,960 Speaker 1: the the traditional launch vehicles that were out there. They 446 00:27:39,000 --> 00:27:41,800 Speaker 1: had not changed much in thirty or forty years, and 447 00:27:42,640 --> 00:27:45,919 Speaker 1: I think the cheapest deal we got was over a 448 00:27:45,920 --> 00:27:48,480 Speaker 1: billion dollars, which made it very difficult for us to 449 00:27:48,520 --> 00:27:52,879 Speaker 1: consider replacing our network. And along come space X with 450 00:27:53,760 --> 00:27:56,359 Speaker 1: a lot of innovation and says we can offer it 451 00:27:56,400 --> 00:27:58,239 Speaker 1: to you for almost half the cost or less than 452 00:27:58,280 --> 00:28:00,080 Speaker 1: half the cost of what you're getting before. And we 453 00:28:00,119 --> 00:28:02,680 Speaker 1: took them up on it. And it took us a 454 00:28:02,680 --> 00:28:04,800 Speaker 1: few years to get our satellites ready, but took them 455 00:28:04,800 --> 00:28:06,680 Speaker 1: a few years to get ready as well. And now 456 00:28:06,880 --> 00:28:10,840 Speaker 1: we've had seven successful launches together and we're gonna have 457 00:28:11,280 --> 00:28:14,360 Speaker 1: our eight there in a few weeks now. These satellites 458 00:28:14,359 --> 00:28:18,560 Speaker 1: are in low Earth orbit and they provide data services 459 00:28:18,800 --> 00:28:23,119 Speaker 1: as well as voice service on the L band. Is 460 00:28:23,280 --> 00:28:27,040 Speaker 1: there a financial change that has happened? In other words, 461 00:28:27,040 --> 00:28:29,600 Speaker 1: how do you make money now versus in the past, 462 00:28:29,720 --> 00:28:33,879 Speaker 1: because you also host payloads for other companies, like you said, 463 00:28:33,960 --> 00:28:39,960 Speaker 1: flight tracking services and maritime ship tracking businesses. Yeah. Are 464 00:28:40,360 --> 00:28:42,760 Speaker 1: these new satellites are much more powerful than our old 465 00:28:42,760 --> 00:28:46,640 Speaker 1: satellites and they can do many more things than than 466 00:28:46,680 --> 00:28:49,760 Speaker 1: we've been doing over the last twenty years. Uh, we've 467 00:28:49,880 --> 00:28:53,400 Speaker 1: we've been growing rapidly really more on the data side, 468 00:28:53,640 --> 00:28:58,320 Speaker 1: as we've connected many things using using the Internet data 469 00:28:58,960 --> 00:29:01,600 Speaker 1: things technology. But with these new satellites, we're going to 470 00:29:01,720 --> 00:29:05,880 Speaker 1: move into the broadband realm, being able to provide higher 471 00:29:05,880 --> 00:29:09,160 Speaker 1: speed services on airplanes and ships and trains and that 472 00:29:09,280 --> 00:29:13,400 Speaker 1: sort of thing. Um, faster really than anything in our 473 00:29:13,440 --> 00:29:15,760 Speaker 1: frequency band has ever been able to do it before, 474 00:29:15,880 --> 00:29:18,720 Speaker 1: and much more global. Uh. The other new thing with 475 00:29:18,800 --> 00:29:22,320 Speaker 1: these satellites is this what we call a hosted taiload. 476 00:29:22,360 --> 00:29:25,560 Speaker 1: So we basically created a whole new business that's not 477 00:29:25,640 --> 00:29:30,160 Speaker 1: communication based but take some space on our satellites. Uh, 478 00:29:30,200 --> 00:29:34,680 Speaker 1: and in in our case, helps track airplanes everywhere in 479 00:29:34,720 --> 00:29:37,200 Speaker 1: the world. So we created a new business called Aaron, 480 00:29:38,360 --> 00:29:43,080 Speaker 1: got some partners in the air traffic control world. Um, 481 00:29:43,120 --> 00:29:45,720 Speaker 1: that's all been put together and now for the first 482 00:29:45,760 --> 00:29:48,600 Speaker 1: time with these new satellites, we're going to be able 483 00:29:48,680 --> 00:29:51,560 Speaker 1: to see where every airplane is in the world in 484 00:29:51,600 --> 00:29:54,880 Speaker 1: real time and relay that information to an air traffic 485 00:29:54,920 --> 00:29:56,800 Speaker 1: controller so they can put it on a scope. And 486 00:29:56,840 --> 00:30:01,360 Speaker 1: that's really really powerful. Matt. How do you make money? Well, Um, 487 00:30:01,400 --> 00:30:05,480 Speaker 1: in a case of you know, our communication business, every 488 00:30:05,520 --> 00:30:08,520 Speaker 1: subscriber which we have over one point one billion or 489 00:30:08,760 --> 00:30:11,560 Speaker 1: one point one million of them. Uh, you know, provides 490 00:30:11,640 --> 00:30:15,800 Speaker 1: a uh you know, get service and provides money for 491 00:30:15,800 --> 00:30:18,440 Speaker 1: the service each month, whether it's based upon the packets 492 00:30:18,480 --> 00:30:21,200 Speaker 1: they use or the voice calls that they make. In 493 00:30:21,240 --> 00:30:25,680 Speaker 1: the case of that new Arean facility, new are in service, UH, 494 00:30:25,720 --> 00:30:28,320 Speaker 1: they actually pay us sort of a rental fee to 495 00:30:28,440 --> 00:30:31,880 Speaker 1: use our satellite network. They pay us to bring back 496 00:30:32,000 --> 00:30:37,040 Speaker 1: the positions of airplanes in real time to those controllers, 497 00:30:37,200 --> 00:30:39,480 Speaker 1: and and we own a piece of that business which 498 00:30:39,520 --> 00:30:42,600 Speaker 1: is going to be quite valuable. So UM, you know, 499 00:30:42,600 --> 00:30:45,240 Speaker 1: we're we're really kind of an innovation engine, you know, 500 00:30:45,280 --> 00:30:48,840 Speaker 1: because nobody else has sixty six satellites and lowers or 501 00:30:48,920 --> 00:30:51,959 Speaker 1: but all connected to each other, and it's really not 502 00:30:52,040 --> 00:30:55,080 Speaker 1: like any other satellite system. UM. And that's that's one 503 00:30:55,080 --> 00:30:58,120 Speaker 1: of the reasons a lot of innovation and partners. We 504 00:30:58,160 --> 00:31:02,080 Speaker 1: now have something like four hundred atty partners today who 505 00:31:02,080 --> 00:31:06,920 Speaker 1: are technology companies, UM that have built us into their 506 00:31:06,960 --> 00:31:10,880 Speaker 1: solutions for their customers, and they're the ones out selling us. 507 00:31:11,000 --> 00:31:13,600 Speaker 1: It's nice because we sort of have a fixed cost basis. 508 00:31:14,120 --> 00:31:17,200 Speaker 1: Each new customer they bring to our network really falls 509 00:31:17,200 --> 00:31:19,280 Speaker 1: to the bottom line. And that's why we've been growing 510 00:31:19,800 --> 00:31:22,200 Speaker 1: and become so profitable over the last couple of years. 511 00:31:22,320 --> 00:31:24,040 Speaker 1: Matt Desh, thank you so much for being with us. 512 00:31:24,080 --> 00:31:27,680 Speaker 1: Matt Desh, chief executive officer of a Ridium Communications based 513 00:31:27,720 --> 00:31:32,240 Speaker 1: in Washington, d c UH. They use the space x rockets, 514 00:31:32,440 --> 00:31:35,800 Speaker 1: the re usable rockets to get their satellites into space 515 00:31:35,920 --> 00:31:39,440 Speaker 1: at lower costs, and they track all of our flights 516 00:31:39,440 --> 00:31:41,479 Speaker 1: in real time and give us access to the Internet 517 00:31:41,520 --> 00:31:48,400 Speaker 1: all sorts of things. Thanks for listening to the Bloomberg 518 00:31:48,440 --> 00:31:51,080 Speaker 1: P and L podcast. You can subscribe and listen to 519 00:31:51,120 --> 00:31:55,640 Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. 520 00:31:56,080 --> 00:31:59,600 Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm 521 00:31:59,640 --> 00:32:02,960 Speaker 1: on Twitter or at Lisa abramoids one. Before the podcast, 522 00:32:03,000 --> 00:32:05,600 Speaker 1: you can always catch us worldwide on Bloomberg Radio.