Speaker 1: This is Wall Street Week. I'm David Weston bringing you
Speaker 1: stories of capitalism this week, the new era of populism
Speaker 1: and what it means for global economics, plus failing into space,
Speaker 1: how competition shapes innovation. But first we begin with a
Speaker 1: story about tough love a local government, private sector leaders,
Speaker 1: and city residents making hard decisions to fight off a
Speaker 1: troubling trend.
Speaker 2: We can't have more people die of overdoses in our
Speaker 2: streets than were affected by COVID. I mean, this is crazy,
Speaker 2: and the numbers continue.
Speaker 1: Amik Mogadam is the CEO of Prologists, the largest logistics
Speaker 1: real estate company in the world. He founded his firm
Speaker 1: in nineteen eighty three in San Francisco and has seen
Speaker 1: the cities ups and downs as a businessman and as
Speaker 1: a resident.
Speaker 2: San Francisco was a very different place in nineteen eighty three,
Speaker 2: but it was not all great. We were just coming
Speaker 2: off of the assassination of Mayor Moscone Harvey Milk, and
Speaker 2: the eight epidemic was raging at that time. So we
Speaker 2: always remember the good old days, but there were certainly
Speaker 2: problems in those days as well. What was different was
Speaker 2: that the San Francisco business community was much more engaged
Speaker 2: and committed to the city. You had some large companies
Speaker 2: like Bank of America, Wells Fargo, Chevron, PG and E,
Speaker 2: and the list goes on. Levi of course, the San
Speaker 2: Francisco based company. And there were a couple of individuals
Speaker 2: who were really civic minded leaders in the community, people
Speaker 2: like Warren Hellman, Chuck Schwab, Walter Shorenstein, and Don Fisher
Speaker 2: that really had we're running significant businesses. And then really,
Speaker 2: because of the passage of time, those companies either moved
Speaker 2: to the suburbs or they moved out of town, and
Speaker 2: over time they were replaced with companies that were less
Speaker 2: committed to San Francisco, including a lot of tech companies
Speaker 2: in the last cycle, social media companies, etc. So I
Speaker 2: think that corporate core, if you will, hollow during this
Speaker 2: period of time, and the commitment declined as a result
Speaker 2: of that. So I think that's the big difference.
Speaker 1: For San Francisco, as for many other major cities. The
Speaker 1: trend that began years ago was made far worse in
Speaker 1: twenty twenty.
Speaker 3: I remember right up to the pandemic, I mean, downtown
Speaker 3: was so booming you literally couldn't walk on the streets
Speaker 3: so you know, the vacancy rates on the offices for
Speaker 3: high tech companies was you could barely find anything. So
Speaker 3: we were absolutely booming. Now that said, though, I think
Speaker 3: that boom it kind of covered up some glaring problems
Speaker 3: that we weren't facing.
Speaker 1: Chris Larsen is a lifelong San Francisco and has founded
Speaker 1: several Silicon Valley startups, among them the digital payments company Ripple.
Speaker 3: San Francisco really suffers from sort of being a representation
Speaker 3: of a certain way of life in America, so it
Speaker 3: gets it's a little bit of a pile on that
Speaker 3: goes on right, whether it's Trump or whether it's some
Speaker 3: of the local folks that are trying to run for
Speaker 3: mayor here, there's sort of some glee and sort of
Speaker 3: trashing the city.
Speaker 1: For many years, San Francisco was a magnet for people
Speaker 1: and businesses, growing from one point eight million residents in
Speaker 1: nineteen fifty to three point two million by two thousand.
Speaker 1: But then the growth leveled off and actually turned negative
Speaker 1: during the pandemic, driven by a range of factors that
Speaker 1: can lead to what economists call doom loop.
Speaker 4: The idea of an urban doom loop is that it's
Speaker 4: a force that feeds upon itself, that we have a
Speaker 4: decline in urban property values, that then perhaps leads to
Speaker 4: a decline in local tax revenues, which leads to a
Speaker 4: decline in the ability to pay for public safety or
Speaker 4: maintain other amenities, which then wraps around again and pushes
Speaker 4: prices down further, leading to lower tax revenues.
Speaker 1: Economist Ed Glazer of Harvard has made a study of
Speaker 1: urban doom loops and what leads to them.
Speaker 4: You can take it to be sort of a larger
Speaker 4: metaphor for the way in which things start to fall apart.
Speaker 4: When things start to fall apart, so by which I
Speaker 4: mean in general, people move out of an area, It
Speaker 4: becomes less attractive for other people to move in that area,
Speaker 4: it becomes it has higher vacancy rates. All of these
Speaker 4: things then continue to push people away. So again it's
Speaker 4: the idea of something that feeds upon itself and becomes
Speaker 4: almost an unstoppable wave.
Speaker 1: Public safety also looms large in the potential decline of
Speaker 1: any city, and it's been a major issue for San Francisco,
Speaker 1: which saw a jump in shoplifting and commercial burglary from
Speaker 1: twenty nineteen to twenty twenty two. Since the pandemic. Stopping
Speaker 1: criminals and punishing them has become a subject of rising tension.
Speaker 2: We have policy on the books that if you steal
Speaker 2: less than nine hundred and fifty dollars from a store,
Speaker 2: you basically get a parking ticket. It's a misdemeanor. I
Speaker 2: mean that has encouraged a lot of theft in the
Speaker 2: city and that needs to get changed. There was a
Speaker 2: gross receipt tax that was enacted that really is a
Speaker 2: burden on business. So the list goes on and on.
Speaker 1: In June of twenty twenty two, a Mogadam was mugged
Speaker 1: at gunpoint when two armed men stole his Patek Philip
Speaker 1: watch in broad daylight while he was outside of his
Speaker 1: San Francisco home. Afterward, he wrote a letter to San
Speaker 1: Francisco mayor London Breed, saying, quote, I recognize we live
Speaker 1: in an urban environment, but the level of crime, including
Speaker 1: violent behavior, has become absolutely unacceptable. But beyond endangering people,
Speaker 1: crime also has very real economic effect.
Speaker 5: I think there have been various estimates that something on
Speaker 5: the order of three or four trillion dollars a year
Speaker 5: if you add up all of the different direct costs
Speaker 5: to victims, as well as indirect costs in terms of
Speaker 5: just our sense of fear when we walk around a
Speaker 5: neighborhood and not wanting to go to certain neighborhoods after
Speaker 5: there's been there's been some crime incident.
Speaker 1: Jennifer Doliak is the executive vice president of Criminal Justice
Speaker 1: at Arnold Ventures, where she studies the economics of crime.
Speaker 5: I think, in general, mayors would be best served by
Speaker 5: thinking about this in a way that takes a more
Speaker 5: scientific approach. Perhaps I am a researcher, after all, that's
Speaker 5: going to be my advice, but focusing more on promising
Speaker 5: to find a solution rather than claiming to have a
Speaker 5: solution upfront. The reality is a lot of these problems
Speaker 5: are really hard to solve. Most of the things we
Speaker 5: were going to try, even when there's some evidence from
Speaker 5: somewhere else, aren't going to work, and so the goal
Speaker 5: often should be to fail fact rather than not fail
Speaker 5: at all, so that you can keep trying something else.
Speaker 5: And that's very different from the standard politicians approach was
Speaker 5: just to say I've got the answer and then not
Speaker 5: acknowledge when it doesn't go quite as planned. One big
Speaker 5: thing that we've learned from a lot of research over
Speaker 5: time is that increasing the probability that you get caught
Speaker 5: for crime is by far the best and most cost
Speaker 5: effective way to deter crime. And that's as opposed to
Speaker 5: the punishment. I think for a very long time the
Speaker 5: United States thought that, you know, just having really long
Speaker 5: prison sentences, what's a really good way to deter crime.
Speaker 5: Turns out most criminals are not that forward looking, so
Speaker 5: increasing the probability that you get caught has a really
Speaker 5: big bang for your buck.
Speaker 1: Increasing the odds of catching criminals necessarily means better policing,
Speaker 1: and for San Francisco that's become a key challenge in
Speaker 1: recent years.
Speaker 2: And I think we're today operating with sixteen hundred cops,
Speaker 2: which means that there's a lot of overtime, and lot
Speaker 2: of our officers are overworked and they're getting frustrated, and
Speaker 2: that's leading to more of them retiring early. And actually
Speaker 2: we have been bringing fewer cops into the system from
Speaker 2: the academy than they've been retiring. So the problem is
Speaker 2: going has been going in the right direction. And you know,
Speaker 2: it's not a matter of pay. I think we pay.
Speaker 2: We're one of the highest paying areas for police, but
Speaker 2: the police feel that they're not appreciated, they don't have
Speaker 2: the tools to do their job. We don't have license
Speaker 2: plate readers. We do for a short period of time,
Speaker 2: but we've really fought licensed plate readers the use of
Speaker 2: drones and other technologies. So the only way we can
Speaker 2: leverage a smaller police force is to apply technology and
Speaker 2: help them. But most importantly, it's a perception problem. Nobody
Speaker 2: wants to be a cop when everybody thinks that you're
Speaker 2: the enemy of the city or the enemy of the citizens.
Speaker 5: Technology can be a big help here. So a lot
Speaker 5: of city like London use surveillance cameras around the city
Speaker 5: and that that has a big impact on being able
Speaker 5: to catch offenders when when they do commit a crime.
Speaker 5: Other technologies like DNA databases help us match DNA from
Speaker 5: crime scenes to offenders that are in the database, and
Speaker 5: a whole lot of new technologies that are being invented
Speaker 5: every day now here. The trade off often winds up
Speaker 5: being between the big benefits, the big crime reduction benefits
Speaker 5: we see, and what we might perceive as privacy costs. Right,
Speaker 5: So if we're increasing the probability that people get caught,
Speaker 5: we're doing that by keeping better tabs on people, and
Speaker 5: that can be scary to people, that can trigger concerns
Speaker 5: about privacy, and those concerns are are totally valid and
Speaker 5: worth discussion. But I think it's also important to realize
Speaker 5: that our status quo practices the alternative to using technology,
Speaker 5: putting police on every street corner, for instance, that is
Speaker 5: not costless when it comes to privacy, right, and so
Speaker 5: standard investigative techniques without using technology can often be very
Speaker 5: invasive for victims private lives and other people's private lives,
Speaker 5: And so technology in that way can actually be a
Speaker 5: huge game changer and really beneficial.
Speaker 1: Crime gets a lot of the attention, but it's not
Speaker 1: just public safety that can make a city less attractive.
Speaker 1: It's also whether people are moving in or moving out,
Speaker 1: and the occupancy rates, particularly for commercial real estate.
Speaker 4: Our traditional measures of urban growth and decline are things
Speaker 4: like population growth, housing price changes, income changes, and I
Speaker 4: like to look at permits building permits as being a
Speaker 4: sign of how much people actually want to move into
Speaker 4: the city. I think all of those things are useful metrics.
Speaker 4: So in our list of fifty metropolitan areas, where we
Speaker 4: just form a sort of naive statistical index of those
Speaker 4: four measures. San Francisco was last out of fifty metro areas.
Speaker 2: I am less optimistic about the few of downtown San
Speaker 2: Francisco that will take some effort, some serious effort. San
Speaker 2: Francisco has a lot of fintech and a lot of
Speaker 2: technology companies. Those are the companies that actually lend themselves
Speaker 2: to the work from home phenomenon. And you know, this
Speaker 2: is a difficult downtown to commute into. You've got to
Speaker 2: basically cross a bridge, go through a tunnel, or come
Speaker 2: down a very busy freeway to get in here. Very
Speaker 2: few people actually that worked in San Francisco lived in
Speaker 2: San Francisco proper. So as a result, COVID really really
Speaker 2: affected the city more than other places.
Speaker 1: To thrive, cities also need to be attractive to business,
Speaker 1: and that means having economic policies that balance supporting the
Speaker 1: population without imposing too heavy a burden on employers, particularly
Speaker 1: through taxes.
Speaker 4: I think it's incredibly important. I think you've got you know,
Speaker 4: that's where the resources come from. The resources come from
Speaker 4: the businesses, the resources come from the taxpayers, right, and
Speaker 4: you need to make sure you keep the city to
Speaker 4: being an attractive place for them, just as you use
Speaker 4: them as a resource to take care of the poor.
Speaker 4: In some sense, there's a metaphor that I like sometimes
Speaker 4: with city governments, which it can be useful to think
Speaker 4: of a city government as being sort of a for
Speaker 4: profit real estate company that's owned by a not for
Speaker 4: profit poverty alleviation company, and so the not for profit
Speaker 4: poverty alleviation company is in the business of trying to
Speaker 4: figure out how to make the lives of the poor better.
Speaker 1: There's no doubt that San Francisco has had its share
Speaker 1: of challenges, but those who know it best are often
Speaker 1: the first to point out how much it still has
Speaker 1: going for it and how much its past strengths give
Speaker 1: it a strong foundation to build a brighter future. Up next,
Speaker 1: the rise of populism and measuring its economic impact. That's
Speaker 1: next on Wall Street Week.
Speaker 6: You're listening to Bloomberg Wall Straight Week with David Weston
Speaker 6: from Bloomberg Radio. This is Bloomberg Wall Street Week with
Speaker 6: David Weston from Bloomberg Radio.
Speaker 1: This is a story of populism, what the people want,
Speaker 1: what the global economy needs, and how the two can
Speaker 1: fit together the interests of the people. It's been the
Speaker 1: clarion call of populist leaders through history, and one we've
Speaker 1: been hearing more and more often in the United States,
Speaker 1: in Europe and elsewhere. But why did it happen and
Speaker 1: what does it mean?
Speaker 7: Populism to me is the alternative when an individual or
Speaker 7: political parties actually capitalize on individual situation where they don't
Speaker 7: really have a visible path for economic opportunity and growth.
Speaker 1: As the former US House Majority leader Eric Canter watched
Speaker 1: as populism grew among his constituents in Virginia and across
Speaker 1: the country during his thirteen years in Congress.
Speaker 7: You look around America today and it's an amazing country,
Speaker 7: very dynamic. There are pockets of extreme growth and innovation
Speaker 7: and prosperity, but it's not equally dispersed across the country.
Speaker 7: And I think in many ways populism serves as a
Speaker 7: substitute for individuals who aren't necessarily accessing that tremendous growth engine.
Speaker 1: Populist leaders might seize on major geopolitical events like pandemics
Speaker 1: and mass migration to justify their calls for dramatic change,
Speaker 1: but they come against the backdrop of longer term trends
Speaker 1: like large parts of the population getting left behind. While
Speaker 1: some of us recover from setbacks. For decades, inequality in
Speaker 1: the United States and parts of Europe has been on
Speaker 1: the rise as more money has become concentrated among fewer people.
Speaker 1: In the nineteen seventies, the top ten percent of earners
Speaker 1: took home about a third of America's income. Today it's
Speaker 1: close to the half of all income and wealth accumulation
Speaker 1: has also become more skewed in favor of the rich.
Speaker 1: That inequality has unsettled workers around the world. Over the
Speaker 1: past couple of years, auto workers, farmers, and dock workers
Speaker 1: have picketed to have their wages raised. In the US alone,
Speaker 1: more than five hundred thousand workers walked off the job
Speaker 1: in twenty twenty three. That's a one hundred and forty
Speaker 1: one percent increase from twenty twenty two.
Speaker 8: There comes a point in time where you've been abused enough.
Speaker 8: You have to stand up for yourself. And this is it.
Speaker 8: This is our our generations defining moment. Either we turn
Speaker 8: this around now or we're going to be in big
Speaker 8: trouble down the road.
Speaker 9: Our fight is with these foreign owned carriers that have
Speaker 9: made billions of dollars on the backs of longshore men
Speaker 9: and women for too long.
Speaker 1: There's nothing new about populism or it's appeal. In the
Speaker 1: United States, it's at least as old as Andrew Jackson,
Speaker 1: seventh President and champion of farmers, mechanics, and laborers, people
Speaker 1: who distrusted national institutions like the Central Bank because they
Speaker 1: felt left out of the progress being made by others.
Speaker 1: In the early nineteenth century, America saw populism rise again
Speaker 1: with William Jennings Bryan during his crusade against the gold
Speaker 1: standard and what it was doing to farmers, and then
Speaker 1: in the nineteen thirties when the US plunged into the
Speaker 1: Great Depression and President Franklin Delamore Roosevelt pursued a new
Speaker 1: deal on behalf of the people and against the entrenched
Speaker 1: elites of Washington and New York. Now, populism is seeing
Speaker 1: a resurgence in the United States under Donald Trump and
Speaker 1: in Europe under leaders like Marine Le Penn and Georgia Maloney.
Speaker 1: The Tony Blair Institute for Global Growth reports that the
Speaker 1: percentage of countries with populist leadership has gone from less
Speaker 1: than five percent in nineteen eighty two to nearly twenty
Speaker 1: percent today. Economists like Tito Boeri at the book Tony
Speaker 1: University in Milan evaluate the causes of populism and the
Speaker 1: long term effects of its policies on countries' economies.
Speaker 10: We have seen that the the roots of populi is,
Speaker 10: you know, the factor behind the better success, are very
Speaker 10: much related to the consequences of a number of shocks
Speaker 10: that they've been hitting our economies. So first of all
Speaker 10: the great recession of two thousand and eight, in two
Speaker 10: thousand and nine, and then also the pandemic.
Speaker 7: When I was in office, that the populism of the
Speaker 7: day was the so called Tea Party, and this was
Speaker 7: I think the initial surge and what we now have
Speaker 7: on my side of the Maga movement. And these were
Speaker 7: people who really had otherwise not really been involved in
Speaker 7: the political process, had come into it largely due to
Speaker 7: social media and the ability to gather together much more
Speaker 7: quickly and to identify each other's commonality.
Speaker 11: And back then.
Speaker 7: The Tea Party, if you remember, it was taxed enough already.
Speaker 7: We discerned that maybe that was due to the overarching
Speaker 7: reach of government, and that government had gotten too big
Speaker 7: and we were spending too much money in Washington, and
Speaker 7: so our prescription to respond to that was to try
Speaker 7: and really stick to a course of fiscal discipline, try
Speaker 7: and return the fiscal imbalances back.
Speaker 11: To some prudence in Washington.
Speaker 7: I think what I have seen since being off Capitol
Speaker 7: Hill is that notion that somehow there was a philosophical
Speaker 7: underpinning to the rise in populism really wasn't necessarily what
Speaker 7: was going on.
Speaker 11: It was just some real anger.
Speaker 1: In Europe, like in the United States, populism has deep
Speaker 1: roots going back in time. Agrarian groups have supported populist
Speaker 1: ideals for centuries, but modern day populism gain support in
Speaker 1: Europe after World War II. In France, the populist torch
Speaker 1: has been taken up by Marine Leapenn and her National
Speaker 1: Rally Party, campaigning against immigration and for greater security. Even
Speaker 1: without being elected, her party has changed the landscape of
Speaker 1: French politics.
Speaker 12: Back in two thousand and seven, Nicola Sarcuzi actually won
Speaker 12: the presidency by campaigning on Lupin's themes immigration and security,
Speaker 12: and this was probably the first time that politicians realized
Speaker 12: by really adopting and embracing their themes they could win.
Speaker 1: In the most recent elections, President Macron out maneuvered miss Lapin,
Speaker 1: depriving her of the ability to take over control of
Speaker 1: the parliament, but the populist wave swept the European Union's
Speaker 1: parliamentary election in June, giving her National Rally party a
Speaker 1: surprisingly good showing, while Germany's far right party Alternative for
Speaker 1: Germany entered parliament for the first time with fifteen seats. Historically,
Speaker 1: the economic track record of the most extreme populism has
Speaker 1: been clear. One doesn't have to go back to Juan
Speaker 1: Peron's Argentina in the nineteen fifties, when inflation raged and
Speaker 1: the Peso collapsed to see the failures of populist policies.
Speaker 1: President Trump's imposition of tariffs on goods from China, Europe,
Speaker 1: and even Canada did not lead to the resurgence of
Speaker 1: domestic manufacturing that he had predicted. An America's economic growth
Speaker 1: in recent years was made possible in part through increased
Speaker 1: workers coming from abroad. But whatever the consequences of populist policies,
Speaker 1: it can be a mistake to see populism as simply
Speaker 1: a question of economics. Whenever the movement regains traction, it's
Speaker 1: been about more than just the pocketbooks of voters.
Speaker 10: I think for a long time economists have not done
Speaker 10: this too, the cultural.
Speaker 11: Roots of populism.
Speaker 10: The fact that beyond their message and their popularity, there
Speaker 10: was a very much as claim to preserve the national identity,
Speaker 10: the national values. These are things that economists have started
Speaker 10: really looking at carefully. Only the last ten to fifteen years.
Speaker 10: We were clearly more looking at the economic performance broadly speaking,
Speaker 10: and clearly that doesn't give you an answer to the
Speaker 10: question why populists are there, why mainstream party are finding
Speaker 10: it hard to survive under the pressure of populist parties,
Speaker 10: Because if you look at the economic performance or country,
Speaker 10: but where populists have been in government, think about the
Speaker 10: Latin American experience, but also more recent episodes in which
Speaker 10: a populists have been in government in Europe, the outcomes
Speaker 10: are generally very bad for the country. You get recessions, depression,
Speaker 10: hardship evaluation, inflation, large fiscal deficits, so all be measured.
Speaker 10: We could possibly or unemployment, we could measure of disease
Speaker 10: of artship from the population. Are there, and yet this
Speaker 10: published party perhaps not the same person, but the same narrative,
Speaker 10: the same people survive over time and that actually are
Speaker 10: to still very very popular.
Speaker 1: If our experience with populism has taught us anything over
Speaker 1: the years, it's that it's not going away because it
Speaker 1: is based in part on legitimate concerns of large segments
Speaker 1: of the people who feel they have been left behind.
Speaker 1: The question is whether this question for greater equality of
Speaker 1: opportunity can be melded with other political forces to come
Speaker 1: up with some better answers.
Speaker 11: Look what's going on in Europe.
Speaker 7: I mean, there are political senstences of being torn apart
Speaker 7: by the rise of some of these parties on the right.
Speaker 11: And the left.
Speaker 7: And I think those who have been success or have
Speaker 7: been able to merge and tap into this anger that
Speaker 7: is fueling the populism. And we'll see whether they're able
Speaker 7: to merge that with the more traditional if you will,
Speaker 7: commitment on the right to physical conservatism or to national security,
Speaker 7: versus trying to say we're just going to focus on
Speaker 7: here and now and the fact that America is the
Speaker 7: global superpower that we are doesn't really matter, and we're
Speaker 7: just going to tend to the home front. We haven't
Speaker 7: yet seen where we can successfully merge the two, but
Speaker 7: I think that's the formula that ultimately could work and
Speaker 7: could enable our country.
Speaker 11: To arrive at a new consensus, going.
Speaker 1: Forward, still Ahead, creative destruction, and the decision that revolutionized
Speaker 1: the modern space race. Here on Wall Street Week.
Speaker 6: You're listening to Bloomberg Wall Street Week with David Weston
Speaker 6: from Bloomberg Radio. This is Bloomberg Wall Street Week with
Speaker 6: David Weston from Bloomberg Radio.
Speaker 1: This is a story about competition, competition between private companies,
Speaker 1: and competition between private companies and the government, all for
Speaker 1: the ultimate prize of space travel. At one.
Speaker 11: By a flint and about nine.
Speaker 13: Going into space is unbelievable. It was a yellow sun
Speaker 13: on a black sky, floating in zero G. He was
Speaker 13: just an extraordinary experience.
Speaker 1: And investor Victor Voskovo went to space on Blue Origin's
Speaker 1: New Shepherd twenty one mission, putting him in the Guinness
Speaker 1: Book of World Records as the first person to achieve
Speaker 1: what's been dubbed the explorer's extreme trifecta, a trip to space,
Speaker 1: to the top of Mount Everest, and to the bottom
Speaker 1: of the Marianas Trench.
Speaker 13: And I've just always been drawn to exploration and seeing
Speaker 13: what's on the other side of that hill. And when
Speaker 13: I was three years old, my father plopped me down
Speaker 13: in front of the black and white television, and I
Speaker 13: saw Neil Armstrong walk on the Moon, and I am
Speaker 13: convinced that had a pronounced impact on my desire to
Speaker 13: explore to eventually go into space.
Speaker 1: When it began, the space race was between governments, the
Speaker 1: United States and the Soviet Union, the only two entities
Speaker 1: in the sixties and seventies that could handle the cost
Speaker 1: and complexity of sending a human beyond Earth's atmosphere. That
Speaker 1: competition pushed them to innovate faster and to spend more.
Speaker 1: In the mid nineteen sixties, NASA alone accounted for more
Speaker 1: than four percent of the entire federal budget, But as
Speaker 1: that era came to an end, the agency's legacy became
Speaker 1: not one only of pride and achievement, but also of waste.
Speaker 13: When government does things, they can do very large projects,
Speaker 13: but they're not necessarily the most efficient. They can build
Speaker 13: the Panama Canal, they can build the Apollo program, but
Speaker 13: it won't necessarily be the most effective or the most efficient.
Speaker 13: I dealt in the and I still do in the
Speaker 13: aerospace and defense industry for many, many decades. I have
Speaker 13: companies that are still involved in defense acquisition. And when
Speaker 13: you involve the federal government. There are all sorts of
Speaker 13: rules and regulations to prevent fraud, waste, and abuse. That
Speaker 13: requires a lot of oversight, a lot of procedures, a
Speaker 13: hell of a lot of paperwork, and by its very nature,
Speaker 13: government contracts tend to be much larger, much slower, much
Speaker 13: more expension.
Speaker 1: Since its beginning, NASA has worked with businesses. Its relationships
Speaker 1: with Boeing, Lockheed Martin, and Northrop Grumman span decades, but
Speaker 1: until recently it oversaw every aspect of the design, construction,
Speaker 1: and operation of spacecraft, which by the twenty first century
Speaker 1: led to ballooning costs, missed targets, and ultimately relying on
Speaker 1: Russia to get US astronauts back into space. All that
Speaker 1: came to a head in twenty ten.
Speaker 14: We could go into why we're doing this, but you
Speaker 14: can read numbers as well as I can, and I
Speaker 14: don't think I need to dwell on that. You know,
Speaker 14: when you have a program that's just going to cost
Speaker 14: a fortune to resurrect and schedules are getting harder to
Speaker 14: make without much more money than wisdom says, you'd pick
Speaker 14: a new course. And so that's what we've done.
Speaker 1: All three engines up and burning after thirty years of service,
Speaker 1: NASA retired as Space Shuttle and launched the Commercial Crew Program,
Speaker 1: its goal to bring competition back to a system that
Speaker 1: had grown unwieldy and unsustainable. Boeing and the others would
Speaker 1: still be in the mix, but there would be newer,
Speaker 1: smaller upstarts. The gates were open, and no longer would
Speaker 1: NASA draw the map and give companies directions to follow.
Speaker 1: Now the agency would provide the destination and it was
Speaker 1: up to businesses to find out how to get there.
Speaker 1: The race was back.
Speaker 15: On a lot of late nights, a lot of early mornings,
Speaker 15: a lot of very stressful situations that we went through,
Speaker 15: but in the end it was all worth it.
Speaker 1: Laura Crabtree was part of the race at the ground level.
Speaker 1: She worked at SpaceX as a crew operations and resource
Speaker 1: engineer and was among those charged with answering NASA's call
Speaker 1: to take astronauts back to the International Space Station on
Speaker 1: board a US craft. Over a period of nine years,
Speaker 1: what began as a competition among more than half a
Speaker 1: dozen firms came down to just two, SpaceX and Boeing.
Speaker 15: I think healthy competition is extremely good to keep people
Speaker 15: pushing boundaries without the competition with Boeing. I don't know
Speaker 15: if we would have all been as invigorated to get
Speaker 15: to the space station in twenty twenty. As you know,
Speaker 15: a lot of things happened in twenty twenty, and there
Speaker 15: were a lot of hardships for each and every one
Speaker 15: of us during those times. And I personally put a
Speaker 15: lot of things on hold to get that mission to
Speaker 15: the space station that year, if not for the competition,
Speaker 15: because we we thought at the time that we were
Speaker 15: both probably launching in twenty twenty, and we just wanted
Speaker 15: to be first, and so we pushed really really hard
Speaker 15: to get there.
Speaker 1: Liftah the Falcon Line are Driver. In the end, of course,
Speaker 1: it paid off. In May of twenty twenty, astronauts flew
Speaker 1: to the ISS on a craft built company that hadn't
Speaker 1: even existed when the space station first launched.
Speaker 16: We have Bob bankin from SpaceX demo to mission entering
Speaker 16: the International Space Station.
Speaker 1: The moment was symbolized by the recovery of a small
Speaker 1: American flag that had been left behind in the space
Speaker 1: station by some of the very same astronauts. A modern
Speaker 1: day version of that old game we played as kids
Speaker 1: called Capture the Flag.
Speaker 16: This is the flag that we left here almost nine
Speaker 16: years ago, and at some point after the end of
Speaker 16: the Shuttle program, we decided we would have a little
Speaker 16: friendly competition to see who came up and got this flag.
Speaker 16: In congratulations, SpaceX, you got the flag.
Speaker 15: I mean, there was a lot of relief. There was
Speaker 15: a lot of joy. All of us were up there
Speaker 15: sitting on the floor surrounding a couple of monitors that
Speaker 15: was at one of our cubicles and just waiting until
Speaker 15: they opened the hatch to get the flag that had
Speaker 15: been left by the last Shuttle crew.
Speaker 1: As for Boeing, it would be four more years before
Speaker 1: it could get a crew to the space station. In fact,
Speaker 1: in the time it took for one crewed Boeing Starlinner
Speaker 1: mission to reach the ISS, SpaceX sent up no fewer
Speaker 1: than nine crewed missions, and they're doing it for far
Speaker 1: less money. The latest figures from NASA show the estimated
Speaker 1: average cost per astronaut for SpaceX was around fifty five
Speaker 1: million dollars for Boeing ninety million dollars, and that's assuming
Speaker 1: things go according to plan.
Speaker 11: But they haven't.
Speaker 17: NASA has decided that Butch and Sonny will return with
Speaker 17: Crew nine next February and that Starliner will return uncrewed.
Speaker 1: Boeing Starliner couldn't complete its first mission and in September
Speaker 1: it returned back to Earth without its crew. So to
Speaker 1: bring them back, NASA turned once again to SpaceX.
Speaker 13: What has been incredibly striking is just how much more
Speaker 13: rapid and more cost effective and even more capable the
Speaker 13: private sector rocket industry is compared to the legacy government
Speaker 13: contractors in government itself, like NASA and Boeing.
Speaker 11: Wow.
Speaker 1: So what has made SpaceX more successful than Boeing. There's
Speaker 1: no one answer, but at least part of it comes
Speaker 1: down to culture, to the way the company not only
Speaker 1: learns FA failure but cheers it on.
Speaker 18: Everyone here absolutely pumped to clear the pad and make
Speaker 18: it this far into the test flight, its first integrated
Speaker 18: light of the baser and the starstup vehicle.
Speaker 1: Starship just experienced what we call a rapid unscheduled disassembly
Speaker 1: or a RUDD during asset.
Speaker 11: But now this was the development tests.
Speaker 1: There's the first test flight a starship and the goal
Speaker 1: was to gather the data.
Speaker 13: And I think what's fascinating is how exemplified by SpaceX
Speaker 13: and El and Musk is that they're willing to have
Speaker 13: rocket's blow up in order to learn faster, and there's
Speaker 13: no question that it does. But I think that the
Speaker 13: culture of say a NASA or a large government contractor
Speaker 13: like Boeing would not exactly want to see their rockets
Speaker 13: blowing up on a pad to learn faster. And yet
Speaker 13: it seems to be the case that that absolutely is
Speaker 13: the way that you can learn faster, make things cheaper,
Speaker 13: and iterate your designs much more rapidly.
Speaker 19: And if you look with that SpaceX's relationship with NASA,
Speaker 19: it's been very different than the traditional contractor model.
Speaker 1: Ron Epstein was an engineer for Boeing in the nineteen
Speaker 1: nineties and today he's managing director at Bank of America
Speaker 1: covering aerospace and defense.
Speaker 19: The old model was, hey, we want this vehicle, here
Speaker 19: are all the specs, build it to this spec, will
Speaker 19: buy it. Where SpaceX has more of a launch it,
Speaker 19: build it, try it, fix it, build it, try it,
Speaker 19: fix it right. I mean you know on social media,
Speaker 19: their you know, their rocket launches when they fail, get
Speaker 19: a lot of airplay, but they learn a lot and
Speaker 19: they move forward.
Speaker 11: So what you see with the Falcon.
Speaker 19: Nine landing itself and who would imagine that that that
Speaker 19: could happen, and they do it now on a regular base.
Speaker 19: It's it's almost boring now, you know. I say that
Speaker 19: tongue in cheek. I mean, it's always fascinating to watch,
Speaker 19: But who would imagine you'd have rockets that can come
Speaker 19: back and land themselves very accurately. Well, SpaceX figure that out.
Speaker 19: Build it, launch it, try it, break it. Build it,
Speaker 19: launch it, try it, break it, and then you get there.
Speaker 19: And that's a very different mindset than the traditional here's.
Speaker 11: Our spec, build it, deliver it. Oh it doesn't work.
Speaker 19: Fix our spec, which turns out to be far more expensive,
Speaker 19: and I would argue probably doesn't.
Speaker 11: Get you there as quickly.
Speaker 1: For its part, Boeing has head its own share of problems,
Speaker 1: besides falling behind in space. After multiple Senate hearings surrounding
Speaker 1: the company's seven thirty seven Max crisis, CEO Dave Calhoun
Speaker 1: stepped down, Kelly Ortberg took the helm. In August, Bowing
Speaker 1: has a new CEO. If you were going to advise
Speaker 1: him about what to do with Boeing Space OP, what
Speaker 1: would you tell him?
Speaker 19: Yeah, it's a good question. Decide if he really wants
Speaker 19: it and if you really want to invest in it
Speaker 19: and attract that talent lift off.
Speaker 1: The United States has never known a space program without Boeing,
Speaker 1: and its absence could reshape the competition. But explore and
Speaker 1: investor of Victor Vescovo says today there is no shortage
Speaker 1: of companies fighting to find new and better ways to
Speaker 1: send humans back into space, whether it is with or
Speaker 1: without Boeing. Vescovo still believes that America's story and outer
Speaker 1: space is just beginning.
Speaker 13: We are explorers, we are human beings, and there is
Speaker 13: something about the connection of human beings walking on the
Speaker 13: Moon that touched us at an almost spiritual level in
Speaker 13: the way that the first lander on the Moon did not.
Speaker 13: The first person to walk on Mars will be a
Speaker 13: seminal event for humankind in a way that is probably
Speaker 13: orders of magnitude more profound and affecting to people in
Speaker 13: a positive way than the first Mars lander. And finally,
Speaker 13: I do believe that at some point in the future
Speaker 13: human beings will not be confined to planet Earth. We
Speaker 13: need to explore our Solar system. We need to make
Speaker 13: ourselves some multiplanetary species for our own survival, if nothing else.
Speaker 13: And therefore I think why not start now.
Speaker 1: Talk of becoming a multiplanetary species may sound far fetched,
Speaker 1: but maybe no more far fetched that when, as a
Speaker 1: nine year old boy, I heard President Kennedy say that
Speaker 1: the United States would go to the Moon before I
Speaker 1: graduated from high school.
Speaker 16: We choose to go to the moon, and this decay
Speaker 16: and do the other things not because they are easy,
Speaker 16: but because they are hard.
Speaker 1: Far fetched, which made it all the more surprising when
Speaker 1: only seven years later I watched the black and white
Speaker 1: images of Neil Armstrong taking that one giant leap for
Speaker 1: man kind. Beautiful view. That does it for us. Here
Speaker 1: on Wall Street Week, I'm David Weston. Join us again
Speaker 1: next week for more stories of capitalism.
Speaker 6: You're listening to Bloomberg Wall Street Week with David Weston
Speaker 6: from Bloomberg Radio.