1 00:00:14,960 --> 00:00:18,400 Speaker 1: This is Waltree Week. I'm David Weston bringing you stories 2 00:00:18,440 --> 00:00:22,160 Speaker 1: of capitalism. The data center frenzy is in full bloom, 3 00:00:22,560 --> 00:00:25,400 Speaker 1: but the neighbors are restless. Is there a way for 4 00:00:25,480 --> 00:00:27,520 Speaker 1: the rest of us to get the benefits from AI 5 00:00:27,760 --> 00:00:30,280 Speaker 1: without compromising the interests of those who will be living 6 00:00:30,520 --> 00:00:34,199 Speaker 1: next door? Plus Earlier we brought you the story of 7 00:00:34,240 --> 00:00:37,199 Speaker 1: the brain drain from New Zealand. People and talent are 8 00:00:37,200 --> 00:00:39,960 Speaker 1: flowing the other way. For Poland, it's one of the 9 00:00:40,000 --> 00:00:43,640 Speaker 1: fastest growing economies around, driven in part by the best 10 00:00:43,640 --> 00:00:47,960 Speaker 1: and brightest returning home, and we use it for everything 11 00:00:48,000 --> 00:00:52,599 Speaker 1: from military equipment to package goods. Aluminum is ubiquitous, and 12 00:00:52,640 --> 00:00:55,640 Speaker 1: now it's caught in between Trump tariffs and a war 13 00:00:55,720 --> 00:00:59,880 Speaker 1: in Iran. But we start with the drama that is 14 00:01:00,080 --> 00:01:03,000 Speaker 1: politics in the United Kingdom, as the fifth Prime minister 15 00:01:03,080 --> 00:01:06,000 Speaker 1: in eight years is finding to avoid yet another turnover 16 00:01:06,240 --> 00:01:09,800 Speaker 1: at number ten and the markets are keeping score. How 17 00:01:09,920 --> 00:01:12,280 Speaker 1: much say does the guilt market have in who gets 18 00:01:12,319 --> 00:01:15,800 Speaker 1: to run the country? John Authurs is Bloomberg's senior editor 19 00:01:15,920 --> 00:01:20,920 Speaker 1: for Markets. So John, there's a lot of political upheaval 20 00:01:21,000 --> 00:01:23,880 Speaker 1: drama playing out in the United Kingdom right now. At 21 00:01:23,880 --> 00:01:27,480 Speaker 1: the same time bonds are selling off guilts. Yes, the 22 00:01:27,520 --> 00:01:30,280 Speaker 1: yields have gone up. Is there a connection between the two, 23 00:01:30,319 --> 00:01:30,600 Speaker 1: and if. 24 00:01:30,520 --> 00:01:34,040 Speaker 2: So, what Yes, there's certainly a connection, which is that 25 00:01:35,000 --> 00:01:37,840 Speaker 2: Britain has even more than where we are here in 26 00:01:37,840 --> 00:01:39,839 Speaker 2: the US the rest of the Western world, it has 27 00:01:39,880 --> 00:01:44,080 Speaker 2: a fiscal problem. We don't have much headroom left to 28 00:01:44,160 --> 00:01:49,680 Speaker 2: spend money in the UK. Any sign of concern about 29 00:01:49,680 --> 00:01:54,000 Speaker 2: political instability will in its own right worry bond markets, 30 00:01:54,520 --> 00:01:57,360 Speaker 2: and specifically at the moment, because Kirstama is in a 31 00:01:57,360 --> 00:02:00,720 Speaker 2: lot of political trouble. Any challenger, even those who you 32 00:02:00,760 --> 00:02:04,680 Speaker 2: could argue are to his political right, will want to 33 00:02:04,760 --> 00:02:07,840 Speaker 2: do something to show they've made a difference once they 34 00:02:07,880 --> 00:02:10,120 Speaker 2: take over from him, and that's going to involve spending 35 00:02:10,160 --> 00:02:12,600 Speaker 2: some more money on something that's going to involve being 36 00:02:12,639 --> 00:02:16,799 Speaker 2: more lenient on fiscal policy than labor has been so far. 37 00:02:17,440 --> 00:02:23,120 Speaker 2: So plainly the risks are towards more fiscal spending. That's 38 00:02:23,200 --> 00:02:27,959 Speaker 2: plainly something the guilt market dislikes. There's a long history 39 00:02:28,240 --> 00:02:35,959 Speaker 2: of friction between a labor government that has its origins 40 00:02:35,720 --> 00:02:39,680 Speaker 2: in socialism and the unions and bond markets. 41 00:02:39,919 --> 00:02:42,840 Speaker 1: Naturally, there is also a more recent history between the 42 00:02:42,880 --> 00:02:46,720 Speaker 1: Conservative government the Bard market. Yes read Ritler's Trust. We 43 00:02:46,840 --> 00:02:48,480 Speaker 1: remember that. But one of the things you pointed out 44 00:02:48,480 --> 00:02:51,120 Speaker 1: one of your columns is actually the yields and guilt 45 00:02:51,200 --> 00:02:54,640 Speaker 1: right now are above where they got to unders Trust exactly. 46 00:02:54,680 --> 00:02:57,160 Speaker 2: I mean that there are to be fair to the 47 00:02:57,160 --> 00:02:59,480 Speaker 2: current labor government. There are reasons for that in the 48 00:02:59,520 --> 00:03:03,239 Speaker 2: interests have risen across the world since then. And what 49 00:03:03,360 --> 00:03:07,480 Speaker 2: really can endanger a financial extent is when yields rise 50 00:03:07,960 --> 00:03:12,120 Speaker 2: very fast, which is absolutely what happened under Liz Trust. 51 00:03:11,919 --> 00:03:16,680 Speaker 2: She took the market by surprise and thereby slipped on 52 00:03:16,680 --> 00:03:18,560 Speaker 2: a banana skin, whereas what we've got at the moment 53 00:03:18,680 --> 00:03:22,359 Speaker 2: is more of a slow motion car wreck with labor. 54 00:03:22,520 --> 00:03:27,600 Speaker 2: But yes, the ultimate fact is true. The higher the 55 00:03:27,680 --> 00:03:31,240 Speaker 2: yields go, and they are now even higher than when 56 00:03:31,360 --> 00:03:36,360 Speaker 2: they toppled Liz trusts, the less room for maneuver any 57 00:03:36,440 --> 00:03:41,200 Speaker 2: government has. And to some extent this is a systemic 58 00:03:41,280 --> 00:03:43,720 Speaker 2: problem for the UK because as we've just said that 59 00:03:44,320 --> 00:03:48,920 Speaker 2: Liz Trust was and is conservative. This is universal across 60 00:03:48,920 --> 00:03:53,680 Speaker 2: the party is a certain lack of trust and the 61 00:03:53,680 --> 00:03:57,480 Speaker 2: British two party system is breaking down at present, and 62 00:03:57,560 --> 00:04:01,280 Speaker 2: both Greens, who are basically a British Woman of the 63 00:04:01,280 --> 00:04:05,120 Speaker 2: the AOC Bernie Sanders left and the Reform Party of 64 00:04:05,160 --> 00:04:08,200 Speaker 2: the Nigel Farash were obviously very similar to the Donald 65 00:04:08,240 --> 00:04:12,280 Speaker 2: Trump margat Wright. Both of those are on the face 66 00:04:12,320 --> 00:04:14,960 Speaker 2: of it, more inclined to splash money around and do 67 00:04:15,080 --> 00:04:18,120 Speaker 2: things that the bond market really dislikes than the incumbents. 68 00:04:18,160 --> 00:04:23,840 Speaker 2: There's a very worrying dynamic about the entire British political situation, 69 00:04:24,440 --> 00:04:27,480 Speaker 2: or at least it's very worrying if you're a guilt investor. 70 00:04:28,360 --> 00:04:32,120 Speaker 1: We know from your calm that you are a student 71 00:04:32,200 --> 00:04:35,239 Speaker 1: of popular music. And I don't remember the Ritha Franklin 72 00:04:35,279 --> 00:04:36,360 Speaker 1: song Who's Zoom and Who? 73 00:04:36,560 --> 00:04:36,760 Speaker 3: Yes? 74 00:04:36,960 --> 00:04:40,080 Speaker 2: So that the nineteen eighty five I remember that that 75 00:04:40,120 --> 00:04:42,240 Speaker 2: was actually my first time in America. But anyway, carry on. 76 00:04:42,480 --> 00:04:44,560 Speaker 1: But if you take the bond market the guilt market 77 00:04:44,560 --> 00:04:46,680 Speaker 1: the one hand, and the political system on the other, 78 00:04:46,760 --> 00:04:49,400 Speaker 1: Who's zoom and Who? I mean you've explained how that 79 00:04:49,400 --> 00:04:51,919 Speaker 1: the political turmol can affect the guilt market. Is the 80 00:04:51,920 --> 00:04:54,640 Speaker 1: guilt market affecting what's going on in politics as well. 81 00:04:55,000 --> 00:04:55,719 Speaker 4: At the moment? 82 00:04:55,839 --> 00:04:58,800 Speaker 2: I mean, certainly in the Liszt trust incident, Yes, that 83 00:04:58,960 --> 00:05:01,680 Speaker 2: was very much case that it was the bond market 84 00:05:01,720 --> 00:05:04,960 Speaker 2: that basically said no, you can't do this, and force 85 00:05:05,080 --> 00:05:07,680 Speaker 2: the expulsion of first the Chancellor and then the Prime 86 00:05:07,680 --> 00:05:13,839 Speaker 2: Minister itself. This time around, that's less clear. You could 87 00:05:13,839 --> 00:05:16,480 Speaker 2: certainly say that at this point the bond market has 88 00:05:16,560 --> 00:05:20,520 Speaker 2: become a kind of a sheet anchor or a straight 89 00:05:20,720 --> 00:05:23,800 Speaker 2: jacket for whoever is in charge. But it will be 90 00:05:23,839 --> 00:05:27,000 Speaker 2: more uncomfortable for, you know, a party of the left 91 00:05:27,040 --> 00:05:30,680 Speaker 2: that actually has fewer hang ups about spending taxpayers money. 92 00:05:31,880 --> 00:05:37,160 Speaker 2: But you know, the overall position is difficult either way. 93 00:05:38,080 --> 00:05:40,599 Speaker 2: And the other thing that's quite interesting compared to history 94 00:05:40,640 --> 00:05:45,440 Speaker 2: is that it used to be the currency market. So 95 00:05:46,040 --> 00:05:49,960 Speaker 2: Harold Wilson have being forced to devalue in the pound 96 00:05:50,000 --> 00:05:52,839 Speaker 2: and then going on television to say that the pound 97 00:05:52,880 --> 00:05:56,200 Speaker 2: in your pocket, of course isn't worth any less, which 98 00:05:56,400 --> 00:05:59,920 Speaker 2: absolutely wasn't true, and then Labor government of the seventies 99 00:06:00,080 --> 00:06:02,960 Speaker 2: being forced by a run on the pounds to go 100 00:06:03,040 --> 00:06:07,359 Speaker 2: to borrow from the IMF, and John Major's government basically 101 00:06:07,360 --> 00:06:10,840 Speaker 2: never recovered from the Black Wednesday attack on sterling by 102 00:06:10,960 --> 00:06:14,520 Speaker 2: George Soros and others. So it used to be the 103 00:06:14,600 --> 00:06:20,280 Speaker 2: currency market that's really inflicted pain. And now that currencies 104 00:06:20,400 --> 00:06:26,360 Speaker 2: do tends to float more gradually, more easily, and now 105 00:06:26,400 --> 00:06:29,560 Speaker 2: that we've had many years of being used to extremely 106 00:06:29,600 --> 00:06:33,680 Speaker 2: low bond yields, that cheap money is being treated as 107 00:06:33,720 --> 00:06:36,599 Speaker 2: a fact of light for a birthright. Almost it's the 108 00:06:36,600 --> 00:06:39,080 Speaker 2: bond market that has now taken over as the anchor 109 00:06:39,120 --> 00:06:40,039 Speaker 2: the great limitation. 110 00:06:40,640 --> 00:06:44,159 Speaker 1: The UNI Kingdom has a historically high ratio of debt 111 00:06:44,160 --> 00:06:46,880 Speaker 1: to g gyps, but they're not alone in that. There 112 00:06:46,880 --> 00:06:48,040 Speaker 1: may be a little bit more than some of the 113 00:06:48,040 --> 00:06:49,800 Speaker 1: rest of us, maybe a little less than some as well. 114 00:06:50,960 --> 00:06:53,960 Speaker 1: Is what we're seeing in the UK simply what's going 115 00:06:54,000 --> 00:06:55,680 Speaker 1: to happen in other parts of the world, including the 116 00:06:55,760 --> 00:06:57,039 Speaker 1: United States, just sooner. 117 00:06:57,480 --> 00:06:59,839 Speaker 2: Yes, there's a reason that the UK has more of 118 00:06:59,839 --> 00:07:03,320 Speaker 2: a problem, or more of an instant problem, which you 119 00:07:03,360 --> 00:07:07,040 Speaker 2: can explain easily enough from geography and history. The UK 120 00:07:07,480 --> 00:07:10,280 Speaker 2: is an island which got rich by trading with other people. 121 00:07:10,480 --> 00:07:13,360 Speaker 2: The US is basically a continent that got rich by 122 00:07:13,400 --> 00:07:17,360 Speaker 2: trading with itself. So exports have always been a much 123 00:07:17,480 --> 00:07:21,760 Speaker 2: more important part of the UK equation. When you have 124 00:07:22,200 --> 00:07:26,040 Speaker 2: pressure on the currency, when you have inflation elsewhere, it 125 00:07:26,080 --> 00:07:30,040 Speaker 2: will affect the UK much more swiftly, much more dramatically. 126 00:07:30,320 --> 00:07:34,640 Speaker 2: It is much more dependent on the generosity of others 127 00:07:35,160 --> 00:07:42,800 Speaker 2: than the states. That said, America's share of GDP public 128 00:07:42,840 --> 00:07:45,800 Speaker 2: debt as a share of GDP was in around numbers 129 00:07:46,120 --> 00:07:49,480 Speaker 2: twenty years ago, before the global financial crisis sixty percent. 130 00:07:51,800 --> 00:07:55,240 Speaker 2: Cause are occasioning great alarm. The Simpson bowls if you 131 00:07:55,280 --> 00:07:57,200 Speaker 2: remember that attempts to cut the deficit. 132 00:07:57,480 --> 00:07:58,720 Speaker 4: It's now one hundred and twenty. 133 00:08:00,640 --> 00:08:05,560 Speaker 2: And whatever you think of the relative merits of Joe 134 00:08:05,560 --> 00:08:10,679 Speaker 2: Biden and Donald Trump, both of them spent money, whether 135 00:08:10,760 --> 00:08:16,800 Speaker 2: through tax cuts or fiscal larges or both, in a 136 00:08:16,840 --> 00:08:20,360 Speaker 2: way that suggested that this just wasn't an issue. It 137 00:08:20,400 --> 00:08:23,480 Speaker 2: will become an issue at a time. The US is 138 00:08:23,560 --> 00:08:28,239 Speaker 2: a bigger, more closed economy than the UK. It can, 139 00:08:28,840 --> 00:08:32,280 Speaker 2: and it has the exorbitant privilege of the dollar. It 140 00:08:32,320 --> 00:08:37,280 Speaker 2: doesn't it's not it's not disciplined by potential runs on 141 00:08:37,320 --> 00:08:41,439 Speaker 2: the currency like the UK is. But ultimately, if you're 142 00:08:41,960 --> 00:08:48,840 Speaker 2: borrowing more than you have and can't generate the money 143 00:08:48,880 --> 00:08:51,400 Speaker 2: to repay it, you're either going to get very bad 144 00:08:51,480 --> 00:08:53,560 Speaker 2: inflation or you're going to go bust. You're not going 145 00:08:53,600 --> 00:08:55,320 Speaker 2: to go bust. You're going to get very bad inflation 146 00:08:55,840 --> 00:08:59,720 Speaker 2: and that that is ultimately the risk that afflicts this country. 147 00:08:59,760 --> 00:09:04,319 Speaker 1: To you were a young lad, a young boy during 148 00:09:04,320 --> 00:09:07,960 Speaker 1: the Wilson time and the crisis when there was really 149 00:09:08,040 --> 00:09:10,760 Speaker 1: high inflation in the UK, and as you say, the 150 00:09:10,760 --> 00:09:14,920 Speaker 1: power was devaluing, and I think some would say that 151 00:09:15,040 --> 00:09:18,680 Speaker 1: was a predicate for what happened with Margaret Thatcher and 152 00:09:18,720 --> 00:09:21,880 Speaker 1: a fundamental revision of the economy. Is there any prospect 153 00:09:21,920 --> 00:09:24,960 Speaker 1: that could happen again in the UK. Could we have 154 00:09:25,000 --> 00:09:25,680 Speaker 1: a new Thatcherer? 155 00:09:27,240 --> 00:09:29,920 Speaker 2: We certainly can't see her yet. Although that being said, 156 00:09:30,480 --> 00:09:33,160 Speaker 2: if you think back to seventy five seventy six, Margaret 157 00:09:33,200 --> 00:09:36,320 Speaker 2: Thatcher wins the leadership of the Conservative Party in seventy five, 158 00:09:36,800 --> 00:09:40,360 Speaker 2: doesn't actually get the general election which becomes prime minister 159 00:09:40,480 --> 00:09:45,439 Speaker 2: until seventy nine. She certainly didn't seem to be quite 160 00:09:45,640 --> 00:09:48,040 Speaker 2: the radical departure that she would turn out to be 161 00:09:48,840 --> 00:09:51,439 Speaker 2: in seventy five. So maybe there is somebody out there 162 00:09:52,120 --> 00:09:55,280 Speaker 2: who is hiding in plain sight already. I think the 163 00:09:55,320 --> 00:09:59,760 Speaker 2: points I would make about the Thatcher regime I was 164 00:10:00,200 --> 00:10:02,560 Speaker 2: when she got in twenty four, when she left, my 165 00:10:02,679 --> 00:10:05,760 Speaker 2: generation of Brits still basically think she's running the world. 166 00:10:06,000 --> 00:10:08,360 Speaker 2: And you could also argue there's an analogue to that 167 00:10:08,520 --> 00:10:10,839 Speaker 2: in the States, which didn't get into anything like as 168 00:10:10,880 --> 00:10:13,560 Speaker 2: much trouble in the seventies as Britain did, but did 169 00:10:13,559 --> 00:10:16,000 Speaker 2: get into a lot of trouble. Paul Volka is the 170 00:10:16,080 --> 00:10:19,840 Speaker 2: key figure who changes America around. He is appointed by 171 00:10:19,880 --> 00:10:20,720 Speaker 2: Jimmy Carter. 172 00:10:21,160 --> 00:10:23,440 Speaker 1: As was Alfred Kahan as deregulation. 173 00:10:24,200 --> 00:10:29,400 Speaker 2: Yes, and would the American economy have boom the way 174 00:10:29,440 --> 00:10:31,320 Speaker 2: it did in the eighties if you hadn't then had 175 00:10:31,480 --> 00:10:33,840 Speaker 2: Ronald Reagan, who really believed this stuff, who was a 176 00:10:33,880 --> 00:10:38,680 Speaker 2: really enthusiastic advocate for almost certainly not. But it was 177 00:10:38,800 --> 00:10:41,320 Speaker 2: much easier for him to do what he did because 178 00:10:41,320 --> 00:10:44,240 Speaker 2: he actually had the building blocks in place. Again, the 179 00:10:45,240 --> 00:10:49,120 Speaker 2: ancien regime had accepted that the game was up and 180 00:10:49,240 --> 00:10:56,160 Speaker 2: shifted before you then had the really exciting free market 181 00:10:56,600 --> 00:11:01,080 Speaker 2: politician factor o Reagan to take things for So, I 182 00:11:01,120 --> 00:11:04,880 Speaker 2: think the key moment is when is the game up? 183 00:11:05,120 --> 00:11:10,480 Speaker 2: When does the market that the economy force a change. 184 00:11:10,600 --> 00:11:16,760 Speaker 2: It's conceivable it could happen here that Donald Trump grasps 185 00:11:16,880 --> 00:11:21,520 Speaker 2: that you just need to actually start cutting entitlements and 186 00:11:21,600 --> 00:11:25,760 Speaker 2: cutting back on defense budgets or whatever. But I think 187 00:11:25,960 --> 00:11:30,840 Speaker 2: it's more likely that circumstances force a change from the 188 00:11:30,920 --> 00:11:35,079 Speaker 2: ancien regime and that's the critical change, rather than that 189 00:11:35,400 --> 00:11:38,360 Speaker 2: voters elect in the person who will make the. 190 00:11:38,360 --> 00:11:43,600 Speaker 1: Change coming up. The money is pouring in, the construction 191 00:11:43,720 --> 00:11:46,800 Speaker 1: is underway. Data centers are paving the way for our 192 00:11:46,880 --> 00:11:50,079 Speaker 1: AI future. But some communities want to know why they 193 00:11:50,160 --> 00:12:05,720 Speaker 1: have to be in their backyard. This is a story 194 00:12:05,760 --> 00:12:10,080 Speaker 1: about good fences making good neighbors. The promise of artificial 195 00:12:10,120 --> 00:12:13,200 Speaker 1: intelligence has brought a wave of data center building across 196 00:12:13,280 --> 00:12:16,520 Speaker 1: the country, and in success, we hope that AI will 197 00:12:16,559 --> 00:12:20,720 Speaker 1: benefit the economy, investors, and the vast majority of Americans. 198 00:12:21,760 --> 00:12:25,520 Speaker 5: A trillion dollars is an enormous amount of infrastructure. You 199 00:12:25,720 --> 00:12:28,720 Speaker 5: have to have complete confidence that the trillion dollars you're 200 00:12:28,760 --> 00:12:31,719 Speaker 5: putting down would be performant for as long as you 201 00:12:31,720 --> 00:12:32,360 Speaker 5: could see. 202 00:12:32,440 --> 00:12:35,079 Speaker 6: If you're building a multi billion dollar data center in 203 00:12:35,120 --> 00:12:37,360 Speaker 6: the US or around the world, and you have a 204 00:12:37,440 --> 00:12:40,680 Speaker 6: fifteen plus year contract with a company with a three 205 00:12:40,760 --> 00:12:43,439 Speaker 6: trillion dollar market cap, that feels pretty good. 206 00:12:43,520 --> 00:12:45,199 Speaker 4: If we knew how to get a trillion dollars right now. 207 00:12:45,240 --> 00:12:48,360 Speaker 7: If we don't, would we be able to deploy that 208 00:12:48,360 --> 00:12:51,920 Speaker 7: profitably in the next few years and I'm not sure 209 00:12:52,000 --> 00:12:53,120 Speaker 7: about that, but I feel. 210 00:12:52,880 --> 00:12:55,280 Speaker 4: Confident we can make five hundred billion of value back. 211 00:12:56,080 --> 00:12:58,559 Speaker 1: But while we all wait for the full benefits of 212 00:12:58,600 --> 00:13:01,800 Speaker 1: AI to be realized, what does construction of these massive 213 00:13:01,880 --> 00:13:04,840 Speaker 1: AI data centers mean for the people living around them? 214 00:13:05,280 --> 00:13:07,400 Speaker 1: And how much of us, say, do residents have and 215 00:13:07,440 --> 00:13:10,640 Speaker 1: the type of fences keeping things in or out? 216 00:13:13,679 --> 00:13:19,160 Speaker 8: Pushback today to a proposed AI data center. Amazon comes 217 00:13:19,200 --> 00:13:24,480 Speaker 8: to town, starts emailing our town manager and wants to 218 00:13:24,520 --> 00:13:27,960 Speaker 8: build an enormous data center and the citizens did not 219 00:13:28,400 --> 00:13:30,760 Speaker 8: know about this, even though it was going to be 220 00:13:30,800 --> 00:13:32,880 Speaker 8: a five hundred million dollar investment. 221 00:13:34,040 --> 00:13:36,960 Speaker 1: That sort of massive capital investment brings with it the 222 00:13:36,960 --> 00:13:39,920 Speaker 1: prospect that the data centers being built today will be 223 00:13:40,000 --> 00:13:41,640 Speaker 1: with us for a long time to. 224 00:13:41,640 --> 00:13:45,520 Speaker 9: Come, ultimately to be paid for the risk that we're taking. 225 00:13:46,120 --> 00:13:47,959 Speaker 9: We're looking to get a lease that's somewhere in the 226 00:13:47,960 --> 00:13:50,880 Speaker 9: neighborhood David between thirteen years and seventeen years. 227 00:13:51,440 --> 00:13:55,120 Speaker 1: Mark Genzi is the CEO of Digital Bridge, an alternative 228 00:13:55,120 --> 00:13:59,560 Speaker 1: asset investment firm specializing in data infrastructure. He's among the 229 00:13:59,559 --> 00:14:03,640 Speaker 1: major players making long term bets for AI, massive bets 230 00:14:03,720 --> 00:14:07,080 Speaker 1: that are being distributed across a wide array of investors. 231 00:14:07,559 --> 00:14:10,520 Speaker 9: So on the equity side, you're seeing the traditional players, 232 00:14:10,559 --> 00:14:13,080 Speaker 9: the big infrastructure players, and so we're seeing today as 233 00:14:13,080 --> 00:14:16,880 Speaker 9: we're seeing the large megafunds, these big, big infrastructure players 234 00:14:17,040 --> 00:14:20,600 Speaker 9: really lean into the AI thematic, and as a part 235 00:14:20,600 --> 00:14:23,200 Speaker 9: of that thematic, when they think about infrastructure, they think 236 00:14:23,200 --> 00:14:26,520 Speaker 9: about putting billions of dollars of equity to work behind 237 00:14:26,560 --> 00:14:30,120 Speaker 9: these large data center platforms and projects. On the debt side, 238 00:14:30,400 --> 00:14:33,760 Speaker 9: it's actually really interesting today. Of course, we see bank syndicates, 239 00:14:33,760 --> 00:14:37,320 Speaker 9: we see construction financing club deals on the bank side, 240 00:14:37,480 --> 00:14:39,600 Speaker 9: and now, David, you're beginning to see the emergence of 241 00:14:39,640 --> 00:14:43,800 Speaker 9: private debt capital. So private debt capital financing projects that 242 00:14:43,800 --> 00:14:47,360 Speaker 9: are a little tougher, perhaps less investment, great exposure, or 243 00:14:47,440 --> 00:14:48,440 Speaker 9: perhaps even more risk. 244 00:14:48,480 --> 00:14:51,600 Speaker 1: On the power side, projected investments in data centers have 245 00:14:51,720 --> 00:14:55,640 Speaker 1: climbed past three trillion dollars. That's a three trillion dollar 246 00:14:55,880 --> 00:14:58,840 Speaker 1: long term bet on the future, which requires a business 247 00:14:58,880 --> 00:15:01,320 Speaker 1: plan with some pretty attractive returns. 248 00:15:02,000 --> 00:15:05,200 Speaker 9: That is the long term nature of the cashlows, so 249 00:15:05,240 --> 00:15:07,640 Speaker 9: that we go to build that facility, we're getting an 250 00:15:07,640 --> 00:15:11,440 Speaker 9: imputed yield, and today most data center yields are somewhere 251 00:15:11,480 --> 00:15:14,600 Speaker 9: between David on a cash on cash return basis somewhere 252 00:15:14,600 --> 00:15:16,320 Speaker 9: between eight and twelve percent. 253 00:15:16,880 --> 00:15:18,520 Speaker 4: It just depends on who the credit is. 254 00:15:18,560 --> 00:15:21,560 Speaker 9: So if you're dealing with an investment grade tenant like Amazon. 255 00:15:21,400 --> 00:15:23,040 Speaker 4: You're going to be at the low end of that guidance. 256 00:15:23,480 --> 00:15:26,000 Speaker 9: If you're dealing with a brand new startup, or perhaps 257 00:15:26,040 --> 00:15:28,960 Speaker 9: you're dealing with a quantum compute player that's non investment grade, 258 00:15:29,200 --> 00:15:31,160 Speaker 9: you're looking at something more like an eleven to twelve 259 00:15:31,240 --> 00:15:33,560 Speaker 9: cap rate. But you do need to be paid for 260 00:15:33,600 --> 00:15:36,120 Speaker 9: the risk that you're taking, and that risk is measured 261 00:15:36,160 --> 00:15:39,520 Speaker 9: in long durrated cashlows with some form of an escalator. 262 00:15:40,120 --> 00:15:43,800 Speaker 1: But while investors anticipate that future payout over fifteen or 263 00:15:43,840 --> 00:15:46,960 Speaker 1: twenty years, in the communities where data centers are going 264 00:15:47,040 --> 00:15:50,480 Speaker 1: up right now, there are immediate potential effects on the 265 00:15:50,520 --> 00:15:52,080 Speaker 1: people who live near them. 266 00:15:52,800 --> 00:15:55,520 Speaker 10: To say that I have significant concerns is sort of 267 00:15:55,560 --> 00:15:56,640 Speaker 10: an understatement. 268 00:15:57,280 --> 00:16:00,960 Speaker 1: Dana Nessel is the Michigan Attorney General, who's job includes 269 00:16:01,040 --> 00:16:04,280 Speaker 1: looking out for the interests of Michigan taxpayers, rate payers, 270 00:16:04,280 --> 00:16:08,280 Speaker 1: and citizens. She is appealing the state's expedited approval of 271 00:16:08,320 --> 00:16:10,840 Speaker 1: a very large data center set to be built in 272 00:16:10,880 --> 00:16:13,480 Speaker 1: Saline Township, just south of ann Arbor. 273 00:16:13,960 --> 00:16:14,360 Speaker 2: Well. 274 00:16:14,440 --> 00:16:18,200 Speaker 10: It appears as though the project is underway. The first 275 00:16:18,240 --> 00:16:23,080 Speaker 10: that I learned about it was really on Halloween of 276 00:16:23,640 --> 00:16:26,960 Speaker 10: last year, that this was going to be an enormous project, 277 00:16:26,960 --> 00:16:29,320 Speaker 10: a project bigger than any of its kind we've seen. 278 00:16:30,400 --> 00:16:33,640 Speaker 1: It's not that Attorney General Nessel denies the potential upside 279 00:16:33,640 --> 00:16:36,200 Speaker 1: of data centers in Michigan, but she wants to test 280 00:16:36,240 --> 00:16:40,000 Speaker 1: the projections and promises, weighing both the benefits and the 281 00:16:40,040 --> 00:16:43,960 Speaker 1: burdens of things like changing electricity rates, land values, and 282 00:16:44,040 --> 00:16:46,840 Speaker 1: water needs, that her citizens will face the sorts of 283 00:16:46,880 --> 00:16:49,520 Speaker 1: things that may require some pretty good fences. 284 00:16:50,040 --> 00:16:53,360 Speaker 10: If you talk to Michigan residents, they don't want these 285 00:16:53,400 --> 00:16:56,960 Speaker 10: in their backyard. Nobody knows yet what it's going to 286 00:16:57,000 --> 00:16:59,080 Speaker 10: mean for that community. They don't know what it's going 287 00:16:59,120 --> 00:17:01,880 Speaker 10: to mean for their water. They don't know what it's 288 00:17:01,880 --> 00:17:05,600 Speaker 10: going to mean in regard to noise pollution or other 289 00:17:05,680 --> 00:17:08,960 Speaker 10: types of pollutants. Until we have some of those questions 290 00:17:08,960 --> 00:17:12,160 Speaker 10: that can be more fully answered and better policies put 291 00:17:12,160 --> 00:17:15,440 Speaker 10: in place at the state level. Most people don't want 292 00:17:15,480 --> 00:17:21,200 Speaker 10: to see these massive data centers continue to be erected. 293 00:17:21,680 --> 00:17:25,359 Speaker 1: Michigan residents aren't the only ones with concerns. Pew Research 294 00:17:25,400 --> 00:17:28,520 Speaker 1: Center found that an overwhelming share of Americans think data 295 00:17:28,520 --> 00:17:32,399 Speaker 1: centers are mostly bad for the environment, home energy costs, 296 00:17:32,440 --> 00:17:35,960 Speaker 1: and their overall quality of life. But Ganzhi says he's 297 00:17:36,000 --> 00:17:38,760 Speaker 1: seen a version of this play before and that it 298 00:17:38,800 --> 00:17:41,040 Speaker 1: can be handled in a way that satisfies the need 299 00:17:41,080 --> 00:17:44,680 Speaker 1: for growth and the concerns of citizens. Do you need 300 00:17:44,720 --> 00:17:47,120 Speaker 1: to take into account the reaction of the community. 301 00:17:46,840 --> 00:17:48,159 Speaker 4: One hundred percent as a factor. 302 00:17:48,359 --> 00:17:51,560 Speaker 9: I've been doing this for thirty two years, building digital infrastructure, 303 00:17:52,040 --> 00:17:54,199 Speaker 9: and where I got my sort of humble start with 304 00:17:54,200 --> 00:17:58,800 Speaker 9: building cell towers David in nineteen ninety four. And at 305 00:17:58,800 --> 00:18:00,879 Speaker 9: that point in time, nobody wanted a cell tower in 306 00:18:00,920 --> 00:18:03,679 Speaker 9: their backyard, and that was the rise of nimbiism, not 307 00:18:03,760 --> 00:18:07,320 Speaker 9: in my backyard. Well, the sector got organized, we navigated 308 00:18:07,320 --> 00:18:11,960 Speaker 9: through it, we explained the benefits of mobile communications, emergency services, 309 00:18:12,520 --> 00:18:16,880 Speaker 9: and ultimately the fact that most Americans wanted ubiquitous mobile coverage. 310 00:18:17,480 --> 00:18:19,800 Speaker 9: And so that carried through the early two thousands into 311 00:18:19,800 --> 00:18:22,960 Speaker 9: twenty ten, twenty twenty, and today you don't hear a 312 00:18:23,000 --> 00:18:26,040 Speaker 9: lot of skirmishes around cell towers because largely the industry 313 00:18:26,560 --> 00:18:28,320 Speaker 9: has made peace with the local community. 314 00:18:28,880 --> 00:18:31,800 Speaker 1: State leaders like Nessel don't deny that things might work 315 00:18:31,840 --> 00:18:34,439 Speaker 1: out for all concerned, but for that to happen, she 316 00:18:34,560 --> 00:18:37,399 Speaker 1: believes we all need to know in advance the scope 317 00:18:37,400 --> 00:18:40,560 Speaker 1: of data center construction, the effects it's likely to have 318 00:18:40,640 --> 00:18:44,119 Speaker 1: on the community, and what commitments the developers and owners 319 00:18:44,119 --> 00:18:47,280 Speaker 1: are making to address the possible local downsides. 320 00:18:48,000 --> 00:18:53,520 Speaker 10: The request was made before our utility regulator, the Michigan 321 00:18:53,560 --> 00:18:59,000 Speaker 10: Public Service Commission, for this contract that was filed for 322 00:18:59,119 --> 00:19:04,400 Speaker 10: an ex party hearing, meaning a hearing that would take 323 00:19:04,480 --> 00:19:07,199 Speaker 10: place behind closed doors that we wouldn't be allowed to 324 00:19:07,200 --> 00:19:11,080 Speaker 10: be part of. So the contract that was posted publicly 325 00:19:11,280 --> 00:19:16,560 Speaker 10: was heavily redacted, and that included reactions to some incredibly 326 00:19:17,200 --> 00:19:22,320 Speaker 10: important information, you know, evolving things like exit fees, what 327 00:19:22,359 --> 00:19:26,679 Speaker 10: would happen upon the termination of the contract, Even you know, 328 00:19:26,720 --> 00:19:32,400 Speaker 10: basic terms and definitions had been redacted, Customer credits, even 329 00:19:32,760 --> 00:19:37,639 Speaker 10: the signatories to the contract had been redacted, so that 330 00:19:37,720 --> 00:19:41,040 Speaker 10: we can't even know who signed this contract or what 331 00:19:41,200 --> 00:19:45,119 Speaker 10: company they're affiliated with, which is pretty insane when you 332 00:19:45,119 --> 00:19:47,960 Speaker 10: think about it. How are we supposed to know whether 333 00:19:48,320 --> 00:19:51,240 Speaker 10: or not rate payers are getting a fair deal if 334 00:19:51,280 --> 00:19:53,359 Speaker 10: we're not even allowed to see the contract itself. 335 00:19:54,359 --> 00:19:56,840 Speaker 1: All of this comes against the backdrop of a rapidly 336 00:19:56,880 --> 00:19:59,800 Speaker 1: evolving technology that is growing at a rate we've never 337 00:20:00,119 --> 00:20:04,160 Speaker 1: seen before, raising questions about what happens if things evolve 338 00:20:04,240 --> 00:20:07,199 Speaker 1: in ways that fall short of the best case. As 339 00:20:07,240 --> 00:20:11,240 Speaker 1: an infrastructure investor, Ganzhi says, they're ready for that. How 340 00:20:11,240 --> 00:20:15,080 Speaker 1: do you anticipate the further growth as well as the 341 00:20:15,280 --> 00:20:17,400 Speaker 1: obsolescence of some of the technology you're putting in. 342 00:20:18,760 --> 00:20:20,760 Speaker 9: Well, I think the great part about being the owner 343 00:20:20,760 --> 00:20:24,159 Speaker 9: of the railroad is you don't known the actual cars 344 00:20:24,160 --> 00:20:25,440 Speaker 9: that run on the tracks. 345 00:20:25,720 --> 00:20:28,040 Speaker 4: We own the land. We build the power plant. 346 00:20:28,160 --> 00:20:31,280 Speaker 9: Sometimes actually we're building power adjacent to the data center. 347 00:20:31,840 --> 00:20:34,720 Speaker 9: We build the physical real estate structure inside the four walls. 348 00:20:35,240 --> 00:20:37,439 Speaker 9: We bring the fiber connectivity, we bring the cooling, we 349 00:20:37,480 --> 00:20:40,200 Speaker 9: bring the back of power. We create the data hall 350 00:20:40,280 --> 00:20:43,639 Speaker 9: conditions where the UPC units are in and the cooling 351 00:20:43,720 --> 00:20:46,680 Speaker 9: is in and the cable trays. But eventually, David, our 352 00:20:46,720 --> 00:20:50,320 Speaker 9: customers put in the technology. So what makes our business 353 00:20:50,359 --> 00:20:55,040 Speaker 9: great is we are candily we're GPU and TPU agnostic, 354 00:20:55,119 --> 00:20:57,280 Speaker 9: And what I mean by that is we're not involved 355 00:20:57,320 --> 00:20:59,720 Speaker 9: in the active compute. That is a bet that we 356 00:20:59,720 --> 00:21:02,000 Speaker 9: don't make it digital bridge. What we are in the 357 00:21:02,000 --> 00:21:04,520 Speaker 9: business of doing is providing that mission critical real estate 358 00:21:04,600 --> 00:21:08,040 Speaker 9: and infrastructure to the top technology providers in the world, 359 00:21:08,560 --> 00:21:10,440 Speaker 9: and we let them make the decision what kind of 360 00:21:10,440 --> 00:21:11,320 Speaker 9: server they're going to buy. 361 00:21:11,800 --> 00:21:14,280 Speaker 1: That may take care of the investor risk, but what 362 00:21:14,400 --> 00:21:19,040 Speaker 1: about community risk. In Michigan, abandoned auto plants still dot 363 00:21:19,080 --> 00:21:22,560 Speaker 1: the landscape, a constant reminder of an earlier era of 364 00:21:22,640 --> 00:21:26,600 Speaker 1: technological promise and the costs that followed. Who will bear 365 00:21:26,640 --> 00:21:29,160 Speaker 1: the cost this time remains uncertain. 366 00:21:30,320 --> 00:21:33,640 Speaker 10: In the event that the bubble bursts and something happens 367 00:21:33,680 --> 00:21:38,479 Speaker 10: and this hyperscale center in Saline Township is no longer needed, 368 00:21:38,880 --> 00:21:42,119 Speaker 10: somebody is going to have to pay all of the 369 00:21:42,520 --> 00:21:47,600 Speaker 10: extra costs of this new infrastructure. And who's going to 370 00:21:47,680 --> 00:21:50,560 Speaker 10: pay it, Well, it's either going to be borne by 371 00:21:50,640 --> 00:21:53,880 Speaker 10: the rate payers in this state, and we already are 372 00:21:54,000 --> 00:21:56,639 Speaker 10: subject to some of the highest rates and the worst 373 00:21:56,680 --> 00:22:01,440 Speaker 10: reliability anywhere in the country, or it'll be the taxpayers 374 00:22:01,480 --> 00:22:04,480 Speaker 10: they'll have to bail out the utility companies who are 375 00:22:04,480 --> 00:22:07,639 Speaker 10: making these in some instances, is you know, terrible bets 376 00:22:08,119 --> 00:22:10,359 Speaker 10: that AI is going to be around for a long time. 377 00:22:10,440 --> 00:22:14,760 Speaker 10: If you look at these contracts, it's clear that the 378 00:22:14,840 --> 00:22:17,199 Speaker 10: cost is supposed to be born out not over the 379 00:22:17,800 --> 00:22:20,320 Speaker 10: course of a few years, but over the course of 380 00:22:21,200 --> 00:22:23,359 Speaker 10: really a few decades, you know, up to something like 381 00:22:23,400 --> 00:22:28,119 Speaker 10: eighteen years. But we can't even see the exit fees 382 00:22:28,160 --> 00:22:31,520 Speaker 10: in the next few years. Those that have encouraged these 383 00:22:31,600 --> 00:22:36,120 Speaker 10: data centers to come here without any sort of guardrails 384 00:22:36,240 --> 00:22:40,199 Speaker 10: at all, I think they've set us up for a 385 00:22:40,359 --> 00:22:41,840 Speaker 10: very difficult future here. 386 00:22:42,600 --> 00:22:46,359 Speaker 1: Which brings us back to those fences neighbors need. Ganzy 387 00:22:46,440 --> 00:22:48,320 Speaker 1: sees a way to build what's needed in a way 388 00:22:48,320 --> 00:22:52,480 Speaker 1: that accommodates everyone and doesn't stand in the way of progress. 389 00:22:53,280 --> 00:22:55,679 Speaker 9: You're seeing Red states and blue states both look at 390 00:22:55,720 --> 00:22:58,640 Speaker 9: the data center opportunity and quandary in the same way, 391 00:22:59,080 --> 00:23:02,879 Speaker 9: which is, can't hurt consumers. So the industry has to 392 00:23:02,880 --> 00:23:06,280 Speaker 9: get organized and has to explain ultimately the benefits of 393 00:23:06,400 --> 00:23:10,199 Speaker 9: why these data centers exist, Why are they creating jobs 394 00:23:10,280 --> 00:23:12,760 Speaker 9: not losing jobs, Why is it going to be good 395 00:23:12,800 --> 00:23:15,560 Speaker 9: for them long term from a property value perspective, and 396 00:23:15,600 --> 00:23:18,320 Speaker 9: why it ultimately isn't going to rise their utility bill 397 00:23:18,600 --> 00:23:21,080 Speaker 9: and take away all their water. We got a pretty big, 398 00:23:21,160 --> 00:23:22,080 Speaker 9: uphill challenge. 399 00:23:22,600 --> 00:23:25,720 Speaker 1: We need data centers to build the technology of tomorrow. 400 00:23:25,840 --> 00:23:29,000 Speaker 1: The long term promises are big, but so are short 401 00:23:29,080 --> 00:23:32,280 Speaker 1: term costs that may fall on the shoulders of local communities. 402 00:23:33,160 --> 00:23:36,439 Speaker 1: That's why we need to construct some fences carefully to 403 00:23:36,480 --> 00:23:39,480 Speaker 1: protect our neighbors. And to do that, we need to 404 00:23:39,520 --> 00:23:45,240 Speaker 1: bring everyone to the table up next. Poland has gone 405 00:23:45,240 --> 00:23:48,960 Speaker 1: from a laggard to a European economic leader, in large 406 00:23:48,960 --> 00:23:53,480 Speaker 1: part by attracting back all those talented polls working abroad. 407 00:24:01,119 --> 00:24:04,520 Speaker 1: This is a story about going home again. The narrative 408 00:24:04,560 --> 00:24:07,040 Speaker 1: of Europe in recent years has too often been about 409 00:24:07,119 --> 00:24:10,440 Speaker 1: lack of growth, but there are exceptions. It turns out 410 00:24:10,440 --> 00:24:13,640 Speaker 1: that Poland is one of the world's fastest growing economies, 411 00:24:13,920 --> 00:24:16,240 Speaker 1: and although it's now attracting its best and brightest to 412 00:24:16,280 --> 00:24:20,640 Speaker 1: come home to build their businesses, tough challenges still lie ahead. 413 00:24:26,720 --> 00:24:30,760 Speaker 1: Born and raised in Warsaw, Alexandra Pedroshevska followed a well 414 00:24:30,800 --> 00:24:34,840 Speaker 1: trodden path for young, ambitious Poles and went abroad. 415 00:24:35,119 --> 00:24:37,760 Speaker 11: I wanted to study abroad, and I started looking around, 416 00:24:37,800 --> 00:24:41,159 Speaker 11: and my objective was getting the best education that I 417 00:24:41,200 --> 00:24:45,520 Speaker 11: can get. So I left in twenty thirteen to study 418 00:24:45,520 --> 00:24:48,159 Speaker 11: at Cambridge. I didn't really make a choice after his 419 00:24:48,240 --> 00:24:51,760 Speaker 11: studies about which country I want to live in. It 420 00:24:51,880 --> 00:24:56,480 Speaker 11: was very much driven by the opportunities what kudat are 421 00:24:56,520 --> 00:24:59,119 Speaker 11: in different countries, and for me it was natural to 422 00:24:59,119 --> 00:24:59,760 Speaker 11: stay in the UK. 423 00:25:02,760 --> 00:25:05,960 Speaker 1: But that was then. Now the well trodden path is 424 00:25:06,000 --> 00:25:09,880 Speaker 1: heading in the other direction. Poland is booming. It's economy 425 00:25:09,920 --> 00:25:13,080 Speaker 1: top one trillion dollars last year and this year it 426 00:25:13,119 --> 00:25:15,800 Speaker 1: will be invited to the G twenty summit, and it's 427 00:25:15,880 --> 00:25:19,400 Speaker 1: kind of citizens living abroad, a figure that was steadily 428 00:25:19,400 --> 00:25:21,680 Speaker 1: climbing after I joined the EU in two thousand and four, 429 00:25:22,359 --> 00:25:25,520 Speaker 1: peaked in twenty seventeen and has been dropping ever since, 430 00:25:25,720 --> 00:25:30,320 Speaker 1: although Poland's National Statistics Agency adjusted its methodology in twenty 431 00:25:30,359 --> 00:25:33,720 Speaker 1: twenty two. Among those returning is Pedroshevska. 432 00:25:34,119 --> 00:25:37,120 Speaker 11: I think a lot has changed, and especially for people 433 00:25:37,760 --> 00:25:40,840 Speaker 11: like me with the backgrounds like I had. I wanted 434 00:25:40,840 --> 00:25:45,680 Speaker 11: to work on the edge of new technologies. I really 435 00:25:45,720 --> 00:25:47,960 Speaker 11: wanted to be exposed to the best R and D, 436 00:25:48,560 --> 00:25:52,119 Speaker 11: the best teams that are building effectively the future of 437 00:25:52,200 --> 00:25:54,880 Speaker 11: what the technology sector is. I don't think that these 438 00:25:54,920 --> 00:25:59,240 Speaker 11: opportunities were as obvious ten years ago and as available 439 00:25:59,480 --> 00:26:00,400 Speaker 11: as they are now. 440 00:26:00,920 --> 00:26:05,680 Speaker 7: Actually, our performance started in nineteen eighty nine. 441 00:26:05,880 --> 00:26:10,280 Speaker 1: Andre Domanski is Poland's Minister of Finance and Economy. 442 00:26:10,000 --> 00:26:15,080 Speaker 7: And nineteen eighty nine we had GDP of sixty seven 443 00:26:16,160 --> 00:26:23,400 Speaker 7: billion US dollars. Last year GDP of Poland reached one trillion. 444 00:26:23,800 --> 00:26:27,920 Speaker 7: There was only one country in that period that had 445 00:26:28,359 --> 00:26:32,200 Speaker 7: a higher pace of growth, and it was China. 446 00:26:32,359 --> 00:26:35,160 Speaker 1: What were the things that drove that performance over that 447 00:26:35,200 --> 00:26:36,119 Speaker 1: long period of time. 448 00:26:36,400 --> 00:26:40,600 Speaker 7: Well, first of all the reforms of the early nineties, 449 00:26:41,280 --> 00:26:48,040 Speaker 7: strong institutions that were established here at the time. Of course, 450 00:26:48,480 --> 00:26:55,199 Speaker 7: the entrepreneurship spirit of Polish people who helped in this process, 451 00:26:55,359 --> 00:26:59,119 Speaker 7: and of course, with no doubt, joining European Union in 452 00:26:59,160 --> 00:27:03,159 Speaker 7: two thousand and four. And frankly, we are often asked 453 00:27:03,880 --> 00:27:08,040 Speaker 7: what is the most important sector or most important company 454 00:27:08,080 --> 00:27:11,280 Speaker 7: of Polish economy And it's very difficult to say, and 455 00:27:12,280 --> 00:27:16,040 Speaker 7: I perceive it as a strength of Poland because we 456 00:27:16,080 --> 00:27:21,439 Speaker 7: are really well diversified. Polish economy is well integrated with 457 00:27:22,359 --> 00:27:28,280 Speaker 7: other European Union economies, we are well integrated with global 458 00:27:28,560 --> 00:27:32,760 Speaker 7: value chains. At the same time, we are quite important 459 00:27:32,880 --> 00:27:36,119 Speaker 7: market of thirty seven million people, so we have strong 460 00:27:36,160 --> 00:27:41,720 Speaker 7: domestic markets. So there are many engines of Polish GDP growth. 461 00:27:43,880 --> 00:27:47,320 Speaker 1: Drivers of Poland's economic growth include a range of services 462 00:27:47,359 --> 00:27:50,960 Speaker 1: as well as manufacturing. More recently, the Russian invasion of 463 00:27:51,080 --> 00:27:54,000 Speaker 1: Ukraine has led to a sharp uptick in defense spending, 464 00:27:54,359 --> 00:27:57,199 Speaker 1: projected to account for almost five percent of GDP and 465 00:27:57,240 --> 00:28:01,080 Speaker 1: twenty twenty five, the highest in the EU. Its digital 466 00:28:01,080 --> 00:28:04,960 Speaker 1: industry is also growing fast. McKinsey estimates the current forty 467 00:28:04,960 --> 00:28:07,960 Speaker 1: four billion dollar sector will grow to one hundred twenty 468 00:28:07,960 --> 00:28:12,040 Speaker 1: three billion dollars in twenty thirty, accounting for nine percent 469 00:28:12,200 --> 00:28:16,760 Speaker 1: of GDP. That's Petroshevska's domain. She co founded vivid Q, 470 00:28:17,119 --> 00:28:21,080 Speaker 1: a British company developing holographic display technology, in twenty seventeen, 471 00:28:21,760 --> 00:28:24,440 Speaker 1: but on her return to Poland she started vast Point, 472 00:28:24,920 --> 00:28:28,440 Speaker 1: a venture capital firm focused on tech startups in Central 473 00:28:28,520 --> 00:28:29,480 Speaker 1: and Eastern Europe. 474 00:28:29,600 --> 00:28:32,600 Speaker 11: The startup seeing is very vibrant. And I think about 475 00:28:32,600 --> 00:28:35,399 Speaker 11: this word, I think it really represents what's currently going on. 476 00:28:35,560 --> 00:28:40,840 Speaker 11: I think that this ambition and this certainty that whatever 477 00:28:40,960 --> 00:28:44,320 Speaker 11: is being built from here or by Polish teams has 478 00:28:44,360 --> 00:28:46,480 Speaker 11: this potential of becoming a global solution. 479 00:28:46,920 --> 00:28:49,880 Speaker 1: Yet for all the optimism around Poland, there are some 480 00:28:50,040 --> 00:28:53,840 Speaker 1: warning signs ahead. Machi Albanovski is an economist at the 481 00:28:53,840 --> 00:28:56,240 Speaker 1: Institute for Structural Research in Warsaw. 482 00:28:56,440 --> 00:29:00,959 Speaker 12: The short term challenge for POMP is to consolidate public finances. 483 00:29:01,440 --> 00:29:05,560 Speaker 12: Although public debt is still at moderate level of around 484 00:29:05,640 --> 00:29:09,280 Speaker 12: sixty percent of GDP and public debt is safe in 485 00:29:09,360 --> 00:29:14,280 Speaker 12: Polant we are running large deficits. Last year it was 486 00:29:15,280 --> 00:29:19,160 Speaker 12: around seven percent of GDP, so it is clearly not 487 00:29:19,280 --> 00:29:22,640 Speaker 12: sustainable over the longer term, and we need to come 488 00:29:22,720 --> 00:29:28,080 Speaker 12: up with a way to rationalize public spending, probably raise 489 00:29:28,120 --> 00:29:33,360 Speaker 12: some taxes, and probably we need to face the fact 490 00:29:33,520 --> 00:29:39,000 Speaker 12: that elevated military spending requires some tax hikes. We don't 491 00:29:39,160 --> 00:29:43,960 Speaker 12: want to start consolidating our public finances when we are 492 00:29:44,080 --> 00:29:47,720 Speaker 12: under external pressure, because then it's more painful. 493 00:29:47,960 --> 00:29:52,960 Speaker 7: We spend close to five percent of our GDP on defense. 494 00:29:53,400 --> 00:29:58,000 Speaker 7: This is close to fifty billion euro per year, so 495 00:29:58,160 --> 00:30:04,320 Speaker 7: of course we run high deficit. We take some steps 496 00:30:04,480 --> 00:30:08,760 Speaker 7: to lower it gradually, we believe that we are not 497 00:30:08,880 --> 00:30:13,680 Speaker 7: in a position to cut spendings on defense. 498 00:30:14,560 --> 00:30:18,360 Speaker 1: Another challenge lies in demographics. For Poland, as in much 499 00:30:18,440 --> 00:30:19,840 Speaker 1: of the Western world. 500 00:30:19,720 --> 00:30:24,640 Speaker 12: By fifty our labor force will shrink by about twenty percent, 501 00:30:25,240 --> 00:30:30,240 Speaker 12: so this is one large factor. Secondly, the average age 502 00:30:30,240 --> 00:30:34,320 Speaker 12: of an employee is increasing and it also matters for 503 00:30:34,400 --> 00:30:40,280 Speaker 12: the productivity. While older workers can certainly work with modern technologies, 504 00:30:40,880 --> 00:30:44,680 Speaker 12: they may need some more support than younger workers. So 505 00:30:44,720 --> 00:30:50,160 Speaker 12: we need to invest more in policies that allow up skilling, 506 00:30:50,240 --> 00:30:56,440 Speaker 12: cre skilling, adjusting skills to these new technologies. And currently 507 00:30:56,640 --> 00:30:59,960 Speaker 12: we are not doing much in this direction. 508 00:31:00,920 --> 00:31:02,720 Speaker 1: How do you address that economically? 509 00:31:03,040 --> 00:31:07,040 Speaker 7: So we are running many programs that are supporting Polish 510 00:31:07,520 --> 00:31:12,200 Speaker 7: families with some additional income. We have also started in 511 00:31:12,320 --> 00:31:19,440 Speaker 7: Vitro program. Already thirteen thousand children were born thanks to 512 00:31:19,520 --> 00:31:24,600 Speaker 7: this program in Poland, and I want to say personally 513 00:31:24,680 --> 00:31:29,240 Speaker 7: that we are really proud that after eight years of 514 00:31:29,440 --> 00:31:34,080 Speaker 7: very right wing government that stopped this program, our government 515 00:31:34,160 --> 00:31:38,160 Speaker 7: reintroduced it and we already have, as I said, thirteen 516 00:31:38,200 --> 00:31:44,120 Speaker 7: thousand young Polish people because of that. But it's not enough. 517 00:31:44,520 --> 00:31:48,960 Speaker 7: We need to create new incentives for people to be 518 00:31:49,000 --> 00:31:52,360 Speaker 7: more willing to work, and our government is doing that. 519 00:31:52,960 --> 00:31:56,520 Speaker 1: Foreign investment is both an opportunity and a challenge for Poland. 520 00:31:57,080 --> 00:32:00,640 Speaker 1: Many foreign investors have become more confident in this sstainability 521 00:32:00,680 --> 00:32:03,640 Speaker 1: of the Poland story. But Damonsky says the war in 522 00:32:03,760 --> 00:32:05,680 Speaker 1: Ukraine has made some wearing. 523 00:32:06,240 --> 00:32:11,080 Speaker 7: We see that some investors, especially from non European investors, 524 00:32:11,120 --> 00:32:15,400 Speaker 7: are a little more reluctant to invest in especially eastern 525 00:32:15,440 --> 00:32:20,320 Speaker 7: parts of Poland recently. That being said, Poland will be 526 00:32:20,840 --> 00:32:24,200 Speaker 7: the biggest, of course, apart from the Ukraine, beneficiary of 527 00:32:24,560 --> 00:32:29,959 Speaker 7: peace in Ukraine. So we want just and lasting peace 528 00:32:30,120 --> 00:32:34,840 Speaker 7: for Ukraine first of all. Of course too we need 529 00:32:34,840 --> 00:32:40,360 Speaker 7: to end this brutal Russian aggression. It would be also 530 00:32:40,560 --> 00:32:46,000 Speaker 7: very good for Polish economy. Foregdirect investments were absolutely crucial 531 00:32:46,680 --> 00:32:50,200 Speaker 7: in building strength of Polish economy. And this is not 532 00:32:50,720 --> 00:32:53,560 Speaker 7: it's a matter of facts, it's not an opinion. Because 533 00:32:53,880 --> 00:33:02,000 Speaker 7: of the investments from other European countries of US investors, 534 00:33:02,440 --> 00:33:05,560 Speaker 7: right now we see more and more interests from Asian 535 00:33:05,600 --> 00:33:08,880 Speaker 7: investors investing in Poland. 536 00:33:09,040 --> 00:33:13,200 Speaker 12: We certainly need to invest more in research and development. 537 00:33:13,320 --> 00:33:16,960 Speaker 12: We need to invest in our academic sector. We also 538 00:33:17,120 --> 00:33:22,960 Speaker 12: need to refining our educational policies, both aimed at children 539 00:33:23,120 --> 00:33:27,960 Speaker 12: and at adults, because this is what more successful Western 540 00:33:28,000 --> 00:33:33,640 Speaker 12: economies are doing. And in Poland so far we relate 541 00:33:34,240 --> 00:33:39,720 Speaker 12: much on competitive labor supply, on cheap labor costs, but 542 00:33:40,200 --> 00:33:43,800 Speaker 12: if we want to reach higher level of wages, if 543 00:33:43,840 --> 00:33:48,000 Speaker 12: you want to converge to not to fifty percent of 544 00:33:48,160 --> 00:33:52,080 Speaker 12: German wages, but to eighty or ninety percent, we certainly 545 00:33:52,120 --> 00:33:57,600 Speaker 12: need to invest more in education, in research and development 546 00:33:58,440 --> 00:34:02,959 Speaker 12: and in other programs policies. We are quite satisfied with 547 00:34:03,240 --> 00:34:07,840 Speaker 12: our present growth trajectory, so we may not be well 548 00:34:07,880 --> 00:34:12,560 Speaker 12: motivated to invest in research and development, to invest in 549 00:34:13,400 --> 00:34:18,120 Speaker 12: new educational policies, because so far is good, but in 550 00:34:18,239 --> 00:34:22,680 Speaker 12: future current growth model of Polish economy may not be sufficient. 551 00:34:23,360 --> 00:34:25,759 Speaker 1: As they say, getting to the tap is one thing, 552 00:34:26,200 --> 00:34:29,840 Speaker 1: staying there is another. Poland's growth is a success story, 553 00:34:30,280 --> 00:34:32,520 Speaker 1: but its next test will be sustaining it. 554 00:34:32,680 --> 00:34:35,960 Speaker 11: A lot of the success of Poland's so far has 555 00:34:36,040 --> 00:34:40,120 Speaker 11: been unfortunately playing catch up. I think once you join 556 00:34:40,960 --> 00:34:45,680 Speaker 11: twenty biggest economies in the world, or twenty economies with 557 00:34:46,440 --> 00:34:52,319 Speaker 11: the biggest GDP per capita, it really becomes about what 558 00:34:52,719 --> 00:34:56,880 Speaker 11: is the limits of your growth and where do you 559 00:34:56,960 --> 00:34:59,399 Speaker 11: need to seek it if playing catchup is not going 560 00:34:59,440 --> 00:35:01,520 Speaker 11: to work out that well anymore. 561 00:35:01,840 --> 00:35:04,640 Speaker 1: But in the end, for Poland, as it is for 562 00:35:04,800 --> 00:35:07,720 Speaker 1: many countries, the key is making sure that the best, 563 00:35:07,800 --> 00:35:11,160 Speaker 1: the brightest can go home. Again and stay there. 564 00:35:11,239 --> 00:35:13,680 Speaker 11: I could have stayed in London, raise a fund there, 565 00:35:13,960 --> 00:35:16,760 Speaker 11: I could have thought about maybe moving to the US 566 00:35:16,800 --> 00:35:21,400 Speaker 11: and effectively starting over. But I decided to take a 567 00:35:21,480 --> 00:35:23,960 Speaker 11: step which I don't think is a step back, but 568 00:35:24,480 --> 00:35:27,200 Speaker 11: step into something entirely new, but just in the place 569 00:35:27,239 --> 00:35:29,360 Speaker 11: which I used to call home as a child. So 570 00:35:29,440 --> 00:35:31,279 Speaker 11: it feels really special to be able to do that. 571 00:35:31,640 --> 00:35:33,920 Speaker 11: It feels also really special because I don't feel like 572 00:35:33,920 --> 00:35:35,600 Speaker 11: I have to give up on anything. 573 00:35:37,320 --> 00:35:41,200 Speaker 1: Coming up. It's not just oil and fertilizer. Aluminum is 574 00:35:41,239 --> 00:35:44,360 Speaker 1: another victim of the around war, which is making President 575 00:35:44,400 --> 00:35:47,920 Speaker 1: Trump's plans to strengthen the US industry that much harder. 576 00:35:57,840 --> 00:35:59,960 Speaker 1: This is a story about trying to have it both way. 577 00:36:00,920 --> 00:36:03,759 Speaker 1: Since he first became president, Donald Trump has sought to 578 00:36:03,760 --> 00:36:07,200 Speaker 1: protect the US aluminum industry through tariffs, but the war 579 00:36:07,239 --> 00:36:10,280 Speaker 1: in Iran may be taking us in a very different direction. 580 00:36:10,800 --> 00:36:13,480 Speaker 1: Our colleague Christian Friedland tells us a story of a 581 00:36:13,600 --> 00:36:15,640 Speaker 1: key metal that is caught in the middle. 582 00:36:17,840 --> 00:36:22,280 Speaker 10: Aluminum foil keeps foods from drying out while ceiling in 583 00:36:22,480 --> 00:36:24,200 Speaker 10: all their natural flavor. 584 00:36:26,040 --> 00:36:28,480 Speaker 13: When you think about aluminum, the first thing that comes 585 00:36:28,480 --> 00:36:31,719 Speaker 13: to mind might be tinfoil. Or soda cants, but it's 586 00:36:31,760 --> 00:36:36,000 Speaker 13: also an essential component of cars, planes and machinery. It's 587 00:36:36,000 --> 00:36:39,359 Speaker 13: the world's most abundant metal. But even that hasn't kept 588 00:36:39,400 --> 00:36:41,719 Speaker 13: aluminum safe from the fallow of war. 589 00:36:42,320 --> 00:36:46,960 Speaker 14: The supply is now depleted by about half of the 590 00:36:47,000 --> 00:36:49,840 Speaker 14: metal that used to be shipped from the Middle East 591 00:36:49,880 --> 00:36:53,360 Speaker 14: because there's been some damage and there's been some curtailments 592 00:36:53,480 --> 00:36:55,279 Speaker 14: to avoid further damage. 593 00:36:55,800 --> 00:36:58,560 Speaker 13: Jean si mart is the President and CEO of the 594 00:36:58,560 --> 00:37:00,520 Speaker 13: Aluminum Association of Canada. 595 00:37:01,040 --> 00:37:06,040 Speaker 14: It's a very significant situation for the aluminum sector worldwide 596 00:37:06,080 --> 00:37:09,680 Speaker 14: because the Middle East produces twenty percent of all the 597 00:37:09,719 --> 00:37:14,440 Speaker 14: aluminum outside China, and it ships to Asia, but mostly 598 00:37:14,760 --> 00:37:16,560 Speaker 14: to the US and to Europe. 599 00:37:17,480 --> 00:37:20,560 Speaker 13: Of the top aluminum producing countries in the world, two 600 00:37:20,680 --> 00:37:23,640 Speaker 13: or in the Middle East, and Sima says the impact 601 00:37:23,719 --> 00:37:26,400 Speaker 13: of the war in Iran could be long lasting. 602 00:37:27,280 --> 00:37:31,160 Speaker 14: Starting at the beginning of the crisis, the first curtailment 603 00:37:31,280 --> 00:37:35,560 Speaker 14: happened in Qatar because of an energy supply situation, and 604 00:37:35,600 --> 00:37:40,160 Speaker 14: then damage was done in Baryn and then to the 605 00:37:40,200 --> 00:37:46,200 Speaker 14: alta wheela smelters in the Emerits. This is very significant 606 00:37:46,280 --> 00:37:50,239 Speaker 14: because it will take a long time to bring it 607 00:37:50,320 --> 00:37:58,120 Speaker 14: back smelters are very highly impacted by energy, and to 608 00:37:58,280 --> 00:38:01,480 Speaker 14: restart a smelter have to do like if there is 609 00:38:01,520 --> 00:38:05,440 Speaker 14: a supply problem with electricity for your house, you have 610 00:38:05,520 --> 00:38:08,640 Speaker 14: to unplug everything and then replug one at a time, 611 00:38:09,239 --> 00:38:11,879 Speaker 14: so they can only start back two cells a day 612 00:38:12,000 --> 00:38:14,319 Speaker 14: out of hundreds and hundreds of cells. 613 00:38:14,840 --> 00:38:17,719 Speaker 13: Production is just one part of the aluminum supply chain, 614 00:38:17,800 --> 00:38:21,719 Speaker 13: facing disruption distribution is another. Like so many of the 615 00:38:21,760 --> 00:38:25,640 Speaker 13: world's exports, aluminum needs to be shipped, often a long way, 616 00:38:25,800 --> 00:38:28,600 Speaker 13: and shipments are snarled by the blockade of the Strait 617 00:38:28,600 --> 00:38:29,200 Speaker 13: of Hormonies. 618 00:38:29,880 --> 00:38:33,640 Speaker 14: The problem is what's in front of us. The last 619 00:38:33,680 --> 00:38:37,720 Speaker 14: ship to leave the Middle East just before the beginning 620 00:38:37,760 --> 00:38:40,919 Speaker 14: of the crisis has made it to the US. There's 621 00:38:40,920 --> 00:38:43,400 Speaker 14: no other ship on its way. It took sixty days 622 00:38:43,440 --> 00:38:46,799 Speaker 14: to get there, so the full shock is ahead of us. 623 00:38:47,360 --> 00:38:51,960 Speaker 14: I'm not too sure that all downstream transformers, processors, mom 624 00:38:51,960 --> 00:38:55,520 Speaker 14: and pop shops that use aluminium are fully aware of 625 00:38:55,760 --> 00:38:56,719 Speaker 14: what's ahead of them. 626 00:38:57,200 --> 00:38:59,000 Speaker 13: In the first two weeks of the war, the price 627 00:38:59,040 --> 00:39:01,840 Speaker 13: of aluminum on them life London Metal Exchange saw double 628 00:39:01,880 --> 00:39:05,640 Speaker 13: digit gains, shooting to record highs. But while the war 629 00:39:05,760 --> 00:39:08,560 Speaker 13: added to rising prices around the world. Some of the 630 00:39:08,600 --> 00:39:12,480 Speaker 13: fallout in the US is self inflicted. Last year, President 631 00:39:12,520 --> 00:39:16,200 Speaker 13: Trump hiked tariffs on imports of aluminum to fifty percent 632 00:39:16,760 --> 00:39:20,120 Speaker 13: with the intention of stimulating domestic production. As of twenty 633 00:39:20,160 --> 00:39:23,200 Speaker 13: twenty five, the US was dependent on imports to meet 634 00:39:23,360 --> 00:39:27,640 Speaker 13: some sixty percent of internal aluminum consumption, and that was 635 00:39:27,640 --> 00:39:30,080 Speaker 13: something that the Trump administration didn't like. 636 00:39:30,719 --> 00:39:33,920 Speaker 15: The US is a short market on primary aluminium, so 637 00:39:34,000 --> 00:39:36,759 Speaker 15: the US need to import a lot of primary aluminium 638 00:39:37,080 --> 00:39:43,839 Speaker 15: to fill demand. So to attract that metal, then US 639 00:39:44,080 --> 00:39:48,880 Speaker 15: consumers or manufacturing using aluminum, in effect, how to pay 640 00:39:49,320 --> 00:39:51,440 Speaker 15: the duthday on aluminum into the US market. 641 00:39:51,960 --> 00:39:55,440 Speaker 13: Tront Olaf Christofferson is the CFO of Norris Kiedro, a 642 00:39:55,480 --> 00:39:58,880 Speaker 13: publicly traded aluminum producer based in Norway. The company is 643 00:39:58,880 --> 00:40:01,440 Speaker 13: also in the unique position of having a production facility 644 00:40:01,520 --> 00:40:02,160 Speaker 13: in couver. 645 00:40:02,920 --> 00:40:07,759 Speaker 15: Our joint venture in Katar Catalom has been impacted by 646 00:40:07,800 --> 00:40:11,800 Speaker 15: the war and is currently operating around sixty percent production 647 00:40:12,040 --> 00:40:17,680 Speaker 15: capacity because of the situation, and we continue to operate 648 00:40:17,719 --> 00:40:21,560 Speaker 15: around that level. It is a challenging situation with the 649 00:40:21,640 --> 00:40:25,439 Speaker 15: raw material access and also to get metal out from 650 00:40:25,480 --> 00:40:29,080 Speaker 15: the region, but we are continuing to operate at that. 651 00:40:29,040 --> 00:40:33,400 Speaker 13: Production level, and so is the US now facing more 652 00:40:33,640 --> 00:40:36,360 Speaker 13: of an aluminum crisis than other parts of the world. 653 00:40:36,760 --> 00:40:40,120 Speaker 15: Well, the supply situation, I think is of the situation 654 00:40:40,160 --> 00:40:46,960 Speaker 15: in midleast impacts the supply situation in all markets physically. 655 00:40:46,960 --> 00:40:49,400 Speaker 15: When it comes to supply, I think the Asian market 656 00:40:49,960 --> 00:40:53,440 Speaker 15: is worse impacted because quite a lot of the metal 657 00:40:53,480 --> 00:40:56,120 Speaker 15: from the Middle East is normally sold in Asia around 658 00:40:56,160 --> 00:40:59,480 Speaker 15: two and a half million tons, But the price impact 659 00:40:59,640 --> 00:41:00,440 Speaker 15: is global. 660 00:41:01,160 --> 00:41:03,880 Speaker 13: This isn't the first time the United States has imposed 661 00:41:03,880 --> 00:41:07,279 Speaker 13: tariffs on Canadian aluminum. In twenty eighteen, when I was 662 00:41:07,320 --> 00:41:10,880 Speaker 13: Foreign Minister, the trade spat between our two countries ended 663 00:41:11,000 --> 00:41:14,239 Speaker 13: with the US backing down. And although the US is 664 00:41:14,320 --> 00:41:18,319 Speaker 13: facing higher aluminum prices today, SamArt says that's not a 665 00:41:18,440 --> 00:41:22,280 Speaker 13: direct effect of the warrant around. That's because the vast 666 00:41:22,320 --> 00:41:25,960 Speaker 13: majority of aluminum the United States imports comes from Canada. 667 00:41:26,280 --> 00:41:31,400 Speaker 14: When the tariffs, the fifty percent tariff were implemented, it 668 00:41:31,520 --> 00:41:36,560 Speaker 14: created a price shock in the market for exporters into 669 00:41:36,600 --> 00:41:40,480 Speaker 14: the US, as Canada is one of them, and basically 670 00:41:40,560 --> 00:41:45,240 Speaker 14: the reaction was to divert shipments to another market, which 671 00:41:45,960 --> 00:41:50,560 Speaker 14: covered the full logistical costs and the whole netback that 672 00:41:50,640 --> 00:41:54,640 Speaker 14: would differentiate this destination from the US. One thing is sure, 673 00:41:54,719 --> 00:41:57,920 Speaker 14: if you want to get all the available supply from Canada, 674 00:41:59,000 --> 00:42:02,920 Speaker 14: you have as a polymaker in the US to do 675 00:42:03,000 --> 00:42:07,200 Speaker 14: a carve out for Canada within the global tariff situation 676 00:42:07,360 --> 00:42:12,759 Speaker 14: right now. If that doesn't happen, Canada will go where 677 00:42:12,840 --> 00:42:13,799 Speaker 14: the market is. 678 00:42:14,680 --> 00:42:17,600 Speaker 13: Among the industries that are most affected by higher aluminum 679 00:42:17,640 --> 00:42:22,000 Speaker 13: prices are packaging and transportation from trains and trucks to 680 00:42:22,120 --> 00:42:25,360 Speaker 13: mopeds and bikes, and that's where Brenton Moore comes in. 681 00:42:25,800 --> 00:42:28,880 Speaker 16: Fundamentally, aluminum is one of the primary materials used on 682 00:42:28,880 --> 00:42:33,160 Speaker 16: a bicycle. The reason is it's very light, very strong, 683 00:42:34,719 --> 00:42:37,400 Speaker 16: reasonably priced. You know, it's not a super exotic metal. 684 00:42:38,160 --> 00:42:41,640 Speaker 13: Or's company, Wolf Tooth Components, makes premium bike parts that 685 00:42:41,680 --> 00:42:45,160 Speaker 13: are shipped all over the world. His manufacturing plant in 686 00:42:45,160 --> 00:42:48,279 Speaker 13: the suburbs of Minneapolis is about seven thousand miles from 687 00:42:48,280 --> 00:42:51,480 Speaker 13: the Strait of Hormies. But he's still feeling the consequences 688 00:42:51,640 --> 00:42:52,480 Speaker 13: of the war in Iran. 689 00:42:53,040 --> 00:42:54,399 Speaker 3: We're a small company like us. 690 00:42:54,560 --> 00:42:56,920 Speaker 16: We're not Boeing, so we don't get to say, Kaiser 691 00:42:56,960 --> 00:43:00,360 Speaker 16: send us ten truckloads of aluminum. We buy our luminum 692 00:43:00,400 --> 00:43:05,480 Speaker 16: through suppliers locally, and those suppliers will source that from 693 00:43:05,640 --> 00:43:07,400 Speaker 16: various suppliers around the world. 694 00:43:07,680 --> 00:43:08,680 Speaker 3: We don't get a lot. 695 00:43:08,520 --> 00:43:10,680 Speaker 16: Of choice and where our aluminum comes from, but I 696 00:43:10,719 --> 00:43:13,080 Speaker 16: can tell you that it's shifted and we do have 697 00:43:13,120 --> 00:43:15,399 Speaker 16: a preference for US aluminum. 698 00:43:15,480 --> 00:43:19,000 Speaker 13: Eventually, the only solution for a manufacturer like More might 699 00:43:19,000 --> 00:43:21,799 Speaker 13: be to raise prices, but he says it's not so. 700 00:43:21,840 --> 00:43:23,760 Speaker 3: Simple in consumer goods. 701 00:43:24,000 --> 00:43:25,560 Speaker 16: I would say, it's not like when you go to 702 00:43:25,600 --> 00:43:28,560 Speaker 16: the restaurant and there's like lobster pricing and it's like 703 00:43:28,600 --> 00:43:29,160 Speaker 16: market rate. 704 00:43:29,560 --> 00:43:31,120 Speaker 3: That's not how consumer goods work. 705 00:43:32,200 --> 00:43:35,400 Speaker 16: And when prices of aluminum raw material go in, we 706 00:43:35,480 --> 00:43:40,680 Speaker 16: can't necessarily just like raise our prices right away. Raising prices, remember, 707 00:43:40,719 --> 00:43:45,479 Speaker 16: does three really bad things. One it upsets your customers, Two, 708 00:43:46,400 --> 00:43:50,600 Speaker 16: it puts you at a disadvantage to your competition, and 709 00:43:50,680 --> 00:43:53,799 Speaker 16: three it's actually a lot of work. And so when 710 00:43:53,840 --> 00:43:57,799 Speaker 16: aluminum goes up, effectively initially we just eat. It just 711 00:43:57,800 --> 00:43:59,360 Speaker 16: comes right out of our bottom line. 712 00:44:00,120 --> 00:44:03,280 Speaker 13: Has seen peaks and valleys in the price of aluminum before, 713 00:44:03,640 --> 00:44:06,000 Speaker 13: but he says this time is different. 714 00:44:06,160 --> 00:44:09,640 Speaker 16: If you look, there was COVID, which aluminum prices started 715 00:44:09,680 --> 00:44:12,279 Speaker 16: going up, but then actually the biggest peak was right 716 00:44:12,320 --> 00:44:16,600 Speaker 16: when the Russian War started, just went crazy high, and 717 00:44:16,640 --> 00:44:20,160 Speaker 16: then tariffs came in and then the. 718 00:44:20,160 --> 00:44:21,640 Speaker 3: Straight of horror moves was closed. 719 00:44:21,920 --> 00:44:23,960 Speaker 16: But the biggest thing people aren't talking about, and you're 720 00:44:23,960 --> 00:44:27,080 Speaker 16: seeing this broadly across commodities, is the AI buildout is 721 00:44:27,120 --> 00:44:30,600 Speaker 16: actually one of the big impacts for aluminum prices going up. 722 00:44:30,680 --> 00:44:32,719 Speaker 16: Right now, those data centers that we all hear so 723 00:44:32,800 --> 00:44:35,319 Speaker 16: much about, they use a ton of raw material and 724 00:44:35,440 --> 00:44:38,560 Speaker 16: a lot of it's aluminum, and so kind of we're 725 00:44:38,560 --> 00:44:39,720 Speaker 16: seeing like a triple whammy. 726 00:44:39,800 --> 00:44:43,839 Speaker 13: Now, if you will, smaller manufacturers like wolf Tooth components 727 00:44:44,000 --> 00:44:46,600 Speaker 13: not only have to contend with higher prices for the 728 00:44:46,640 --> 00:44:49,880 Speaker 13: metal they need, but also have to compete against bigger, 729 00:44:50,120 --> 00:44:53,640 Speaker 13: more powerful players that also use illuminum. The squeeze could 730 00:44:53,640 --> 00:44:58,080 Speaker 13: eventually raise prices across the board for consumers, triggering another 731 00:44:58,440 --> 00:44:59,040 Speaker 13: of inflation. 732 00:44:59,480 --> 00:45:03,720 Speaker 16: There's really no viable alternative to aluminum in our case, 733 00:45:05,000 --> 00:45:06,600 Speaker 16: and you'd hear the same thing if you ask blowing 734 00:45:06,719 --> 00:45:09,840 Speaker 16: like they're still going to use tons of aluminum airplanes 735 00:45:09,880 --> 00:45:12,239 Speaker 16: no matter what the price is, and the price of 736 00:45:12,239 --> 00:45:14,680 Speaker 16: those airplanes will just go up same with our bicycle parts. 737 00:45:15,280 --> 00:45:17,719 Speaker 13: As the war drags on, so did the timeline for 738 00:45:17,800 --> 00:45:22,080 Speaker 13: prices to stabilize. Back in Norway. Christofferson says, the outlook 739 00:45:22,239 --> 00:45:23,480 Speaker 13: is far from certain. 740 00:45:23,960 --> 00:45:25,880 Speaker 15: So in the aluminum market, I think we see a 741 00:45:25,920 --> 00:45:29,360 Speaker 15: bit the same situation as you see in the energy markets, 742 00:45:29,360 --> 00:45:32,600 Speaker 15: where you have quite high prices in the front ten 743 00:45:33,000 --> 00:45:36,799 Speaker 15: meaning metals to be delivered in the coming month, but 744 00:45:36,880 --> 00:45:40,000 Speaker 15: then you have a declining price of backguardation situation in 745 00:45:40,040 --> 00:45:44,880 Speaker 15: the market with lower prices folding down to three thousand dollars. 746 00:45:44,880 --> 00:45:47,480 Speaker 3: But on a couple of years out in time. 747 00:45:47,680 --> 00:45:51,880 Speaker 14: So it will take anywhere between twelve to eighteen months 748 00:45:52,000 --> 00:45:55,560 Speaker 14: for the Middle East supply that's been affected to come 749 00:45:55,600 --> 00:45:59,320 Speaker 14: back into the market, and then you need sixty days 750 00:45:59,680 --> 00:46:02,480 Speaker 14: to sip to North America that you add to this. 751 00:46:03,080 --> 00:46:07,799 Speaker 14: So we're heading for a supply shock as we move 752 00:46:07,920 --> 00:46:11,840 Speaker 14: through the summer period, and this will last most likely 753 00:46:11,920 --> 00:46:14,960 Speaker 14: for about a year a year and a half until 754 00:46:15,000 --> 00:46:19,360 Speaker 14: this supply starts to make its way back into the market. 755 00:46:20,000 --> 00:46:23,280 Speaker 13: For business owners like Brendan Moore, the effects of domestic 756 00:46:23,320 --> 00:46:27,160 Speaker 13: and foreign policy have become an unavoidable hazard of the job. 757 00:46:27,480 --> 00:46:30,320 Speaker 16: We control, the processing, we control our efficiency, We control 758 00:46:30,360 --> 00:46:32,839 Speaker 16: our yields, so we have to just focus on those. 759 00:46:32,960 --> 00:46:34,840 Speaker 16: I think near term we're going to be able to 760 00:46:34,920 --> 00:46:37,560 Speaker 16: mitigate most of the aluminum prices. Longer term, if it 761 00:46:37,640 --> 00:46:41,720 Speaker 16: stays this high, there has to be some sort of increase. 762 00:46:41,920 --> 00:46:45,359 Speaker 16: But a consumer, if aluminum goes up twenty percent again 763 00:46:45,400 --> 00:46:47,880 Speaker 16: this year, our prices of our products aren't going to 764 00:46:47,880 --> 00:46:48,520 Speaker 16: go twenty percent. 765 00:46:48,560 --> 00:46:51,200 Speaker 3: They're going to go up like three or five percent. 766 00:46:51,680 --> 00:46:52,480 Speaker 3: And I like boeing do. 767 00:46:52,680 --> 00:46:54,200 Speaker 16: I mean, I'm trying to poopoo with them at all, 768 00:46:54,239 --> 00:46:56,439 Speaker 16: But like, we don't have the negotiating power that say 769 00:46:56,440 --> 00:47:00,600 Speaker 16: they have or automaker has, And when these prices change 770 00:47:00,840 --> 00:47:04,680 Speaker 16: or tariffs change, I see that almost the same day. 771 00:47:04,760 --> 00:47:05,560 Speaker 3: I mean not joking. 772 00:47:05,640 --> 00:47:09,080 Speaker 16: Sometimes, Well, I didn't start this small business because I 773 00:47:09,080 --> 00:47:12,320 Speaker 16: wanted to learn about tariffs or deal with massive supply 774 00:47:12,440 --> 00:47:17,919 Speaker 16: chain issues, or deal with geopolitics. Those are, in fact 775 00:47:17,920 --> 00:47:20,560 Speaker 16: some of my least favorite things. Bicycles are way more 776 00:47:20,560 --> 00:47:21,480 Speaker 16: fun than that stuff. 777 00:47:22,000 --> 00:47:24,080 Speaker 13: With all the back and forth of tariffs and wars, 778 00:47:24,440 --> 00:47:27,480 Speaker 13: it's hard to see how US policy at the moment 779 00:47:27,880 --> 00:47:32,520 Speaker 13: is helping American manufacturers or American consumers. And this is 780 00:47:32,640 --> 00:47:35,799 Speaker 13: one problem that the marketplace can't fix on its own