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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is Wall Street Week. I'm David Weston, bringing you

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Speaker 2: stories of capitalism this time, not for just a week,

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Speaker 2: not for just a year, but stories of the arc

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Speaker 2: of capitalism over the first quarter of the twenty first century.

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Speaker 2: It's been an especially eventful twenty five years, from Y

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Speaker 2: to K to the Great Financial Crisis to the pandemic,

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Speaker 2: giving us a lot to adjust to and learn from.

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Speaker 2: Starting with profound changes in the economy, our colleague Michael

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Speaker 2: McKee starts us with an economic overview.

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Speaker 3: We are fortunate to be alive at this moment in history.

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Speaker 4: Unemployment was low, the economy is booming.

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Speaker 5: Never before has our nation enjoyed at once so much

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Speaker 5: prosperity and social progress with so little internal crisis.

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Speaker 4: Trees don't grow to the sky, and at some point

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Speaker 4: there would have to be a reckoning.

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Speaker 6: We're in the midst of a serious financial crisis.

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Speaker 4: Everybody's house was probably overvalued. Anybody who had a mortgage

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Speaker 4: might have a mortgage problem.

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Speaker 2: Coming up today does mark the beginning of the end.

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Speaker 4: By the time we got to the American Recovery Act,

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Speaker 4: it was a question of what would it take to

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Speaker 4: get people spending again and businesses investing again. The economic

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Speaker 4: recovery appears to be proceeding at a moderate pace, though

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Speaker 4: somewhat more slowly than the Committee had expected. We got

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Speaker 4: to twenty fifteen and you still had problems because we

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Speaker 4: had a manufacturer recession then brought about by the collapse

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Speaker 4: in oil prices.

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Speaker 7: The wealth of our middle class has been ripped from

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Speaker 7: their homes and then redistributed all across the world.

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Speaker 4: A lot of Americans suffered because the factories went away,

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Speaker 4: the businesses went away, and that gave rise to the

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Speaker 4: MAGA movement.

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Speaker 8: Make America Great Again.

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Speaker 4: In twenty nineteen, things had started to look better. The

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Speaker 4: unemployment weight was very low. Growth was picking up, which

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Speaker 4: is the irony of the pandemic.

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Speaker 7: Today, I am officially declaring a national emergency.

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Speaker 4: COVID did shut down the economy, and it shut it

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Speaker 4: down very fast, and we saw that in the largest

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Speaker 4: unemployment rate since the Great Depression. First is providing checks

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Speaker 4: and pockets and shots and arms. Inflation started to take hold,

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Speaker 4: and then an inflation psychology started to take hold.

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Speaker 9: We're very strongly committed to using our tools to get

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Speaker 9: inflation to come down.

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Speaker 4: It is a situation now where everything seems to combine

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Speaker 4: to make people feel more nervous and more unhappy about

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Speaker 4: their situations.

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Speaker 2: When it comes to the economy, we always start with

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Speaker 2: the numbers, and for the numbers, we often turn to

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Speaker 2: Torsten Slock, chief economists at Apollo, with the help of

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Speaker 2: people like Harvard's Jason Furman, to interpret those numbers for us.

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Speaker 2: The first twenty five years in the twenty first century

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Speaker 2: have been eventful for a lot of us, but particularly

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Speaker 2: for economists. Looking back at you two thousand now and

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Speaker 2: where we are today, what's the biggest change or surprise

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Speaker 2: you've seen?

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Speaker 6: See?

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Speaker 10: The thing I'm most surprised about is that the interest

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Speaker 10: rates are so low despite the budget deficit and the

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Speaker 10: debt being what to my two thousand eyes would have

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Speaker 10: been unimaginably high.

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Speaker 2: So what accounts for that? Do you think? What do

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Speaker 2: you think we got wrong in what we would have anticipated.

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Speaker 10: Look in two thousand, I was working in the Clinton administration.

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Speaker 10: We balanced the budget three years in a row. We

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Speaker 10: were on track to fully pay off all the debt.

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Speaker 10: At the time, I believed in that and thought that

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Speaker 10: was good and important. Turns out, I think we had

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Speaker 10: a lot more room for borrowing than we ever appreciated

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Speaker 10: at that time.

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Speaker 2: We're certainly spending when we need to spend it. Are

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Speaker 2: we saving them when we need to say it?

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Speaker 11: Yeah?

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Speaker 10: Look, I think we spent too little on the financial crisis.

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Speaker 10: I think we spent too much in COVID. Those were

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Speaker 10: both hard calls to make. In real time. It's a

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Speaker 10: much easier call that we shouldn't be running two trillion

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Speaker 10: dollar deficits in a year when the economy's growing perfectly fine.

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Speaker 2: We have seen a growth in income and wealth inequality.

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Speaker 2: To what extent is that attributable to some of the

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Speaker 2: things we felt we needed to do to stimulate the economy.

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Speaker 2: It tended to go, I think, to the people who

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Speaker 2: had capital, and not to people who did not have capital.

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Speaker 10: I put the last quarter century in context of the

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Speaker 10: last three quarter centuries, and if I had to rank them,

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Speaker 10: the best one in terms of inclusive growth, strong economic

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Speaker 10: growth broadly shared was nineteen fifty to nineteen seventy five.

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Speaker 10: The worst was actually nineteen seventy five to two thousand,

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Speaker 10: where we had much slower economic growth and an enormous

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Speaker 10: widening of just about every way to measure inequality. The

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Speaker 10: story from twenty to twenty twenty five is a little

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Speaker 10: bit more complicated and nuanced. There were some facets of inequality,

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Speaker 10: like wealth inequality have risen, other things like wage inequality

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Speaker 10: has actually been falling for more than a decade now.

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Speaker 10: There's been stronger wage growth for the median household than

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Speaker 10: there was in the twenty five years before, and so

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Speaker 10: the story is actually a little bit more positive for

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Speaker 10: the last quarter century than it was in the quarter

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Speaker 10: century before, just not as positive as it should and

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Speaker 10: could have been with the right policies.

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Speaker 2: Twurston, looking back over the first twenty five years of

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Speaker 2: the New Century, let's talk about some major themes, one

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Speaker 2: of which is inflation. We thought it was all gone

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Speaker 2: away and then it came back well for a.

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Speaker 7: Very long period. The whole research agenda, and also the

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Speaker 7: statements from the Federal serve was that inflation was not

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Speaker 7: quite at two percent. It was one point eight one

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Speaker 7: point seven, and so much time were spent in financial

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Speaker 7: markets thinking about how can we get inflation up by

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Speaker 7: that zero point one zero point two percent more? And

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Speaker 7: all reason that changed dramatically when we found out that

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Speaker 7: inflation was not dead in twenty twenty. So what is

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Speaker 7: a very important feature of what has happened in the

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Speaker 7: last twenty five years is that inflation can come back

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Speaker 7: under certain circumstances, and this becomes very important when we

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Speaker 7: look into twenty twenty six, nay, other circumstances still here

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Speaker 7: for inflation potentially to begin to move higher next year.

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Speaker 2: Which leads us to what were the larger forces that

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Speaker 2: kept inflation down and have they gone away?

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Speaker 7: Well, A very important force that was keeping inflation down

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Speaker 7: was globalization. It was the case after China entered the

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Speaker 7: WTO twenty five years ago that goods were coming out

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Speaker 7: of China and was holding goods prices down. At the

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Speaker 7: same time, immigration globally also went up. That also meant

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Speaker 7: that the cost of labor and wage inflation was also

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Speaker 7: held down. So those forces were weighing on inflation for

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Speaker 7: literally two decades after two thousand, because we saw inflation

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Speaker 7: therefore simply not move much away from two percent. COVID

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Speaker 7: again has of course been moving upward pressure on goods prices,

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Speaker 7: and now more recently when we've had restrictions on immigration,

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Speaker 7: we've also begin to see more upward pressure on wage inflation.

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Speaker 7: So that's also therefore beginning to become an issue looking

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Speaker 7: into next year.

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Speaker 2: Degalization and restriction immigration could drive wages up. On the

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Speaker 2: other hand, artificial intelligence seems to be on the brink

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Speaker 2: of really making a difference the other way.

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Speaker 7: That's true, so AI is of course also a very

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Speaker 7: important development. Over the last that twenty five years. We

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Speaker 7: have certainly seen some very significant technological advances. We've not

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Speaker 7: quite yet seen that show up in wage inflation or

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Speaker 7: even in the unemployment rate. So therefore there's a lot

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Speaker 7: of discussion about data centers, AI lars, language models, voice recognition, etc.

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Speaker 7: Part At day of the day, we're not quite yet

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Speaker 7: seeing the productivity gains in the dramatic way that is

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Speaker 7: holding inflation down.

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Speaker 2: One of the big developments in the last twenty five

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Speaker 2: years has been ways that the US and European economies

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Speaker 2: have diverged. Stephanie Flanders, Bloomberg's head of Economics and Government,

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Speaker 2: explains just how differently they've developed.

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Speaker 12: At the beginning of the century, you would have said

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Speaker 12: the big project that the European countries were embarking on

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Speaker 12: was the single currency and a much broader single currency,

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Speaker 12: a much broader collection of countries joining the Euro than

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Speaker 12: had previously been anticipated, and there were lots of risks

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Speaker 12: in that, and we can talk about how they manage that,

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Speaker 12: but I think it's fair to say that ended up

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Speaker 12: being a lot of other things on their plate. And

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Speaker 12: we saw a financial crisis, we saw COVID, and these

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Speaker 12: were crises that in different ways. I would say the

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Speaker 12: European governments did not always respond too well, but they did.

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Speaker 12: You know, as one senior policy maker said, you know,

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Speaker 12: European governments do the right thing when they're all on

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Speaker 12: the window ledge looking down.

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Speaker 2: The Euro was a very big move. It came under

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Speaker 2: a lot of siege over the last twenty five years.

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Speaker 2: I mean, certainly great financial crisis put everything under stress,

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Speaker 2: but then we also had i'll call it the Greek crisis,

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Speaker 2: when there were people literally speculating the Euro might not survive.

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Speaker 12: I would say in the first few years of the

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Speaker 12: Euro there was a kind of false calm and a

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Speaker 12: sense of great achievement on the part of European leaders

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Speaker 12: that turned out to be also complacency. They were all

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Speaker 12: borrowing at the same rate, almost not taking into account

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Speaker 12: those differences, and ultimately the imbalances that were caused by

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Speaker 12: that was why you had not just a christ in Greece,

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Speaker 12: but actually a broader Eurozone crisis. But I would say

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Speaker 12: it's a game of two hearts because the second half

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Speaker 12: the years since the global financial crisis or the Eurozone

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Speaker 12: crisis have been Although they were very painful for countries

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Speaker 12: like Portugal, Greece, Spain, Ireland, they've also that period of

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Speaker 12: crisis and adjustment has produced some convergence.

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Speaker 2: Are you moving toward something beyond convergence into really coordination

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Speaker 2: on the fiscal side?

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Speaker 12: Very slowly? David, I would say we are moving in

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Speaker 12: that direction, and we've seen a little bit more flexibility

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Speaker 12: on that front from German governments in the last few years.

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Speaker 12: But boy, that has been a very slow process, and

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Speaker 12: I think it is still an area where the politics

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Speaker 12: has yet to really catch up with the economics.

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Speaker 2: The history of the EU has been getting bigger for

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Speaker 2: the most part for a good long time. With one

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Speaker 2: notable exception, it got smaller in the first twenty five

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Speaker 2: years with Brexit. What is that done to the economy

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Speaker 2: of the UK and of Europe.

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Speaker 12: The deal the UK actually negotiated with the EU turned

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Speaker 12: out to be actually a lot worse than I think

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Speaker 12: any of us would have reasonably expected. We wouldn't have

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Speaker 12: expected such an extreme version of hard Brexit as they

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Speaker 12: call it, that has ended up. I mean, the estimates

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Speaker 12: range from five to seven percent of GDP hit at

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Speaker 12: a time when, as you know, all European countries and

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Speaker 12: certainly the UK, have struggled to have very much growth.

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Speaker 12: I would also say it's affected the capacity of the

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Speaker 12: UK to respond and move forward in other areas because

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Speaker 12: so much effort and political energy was absorbed by that

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Speaker 12: long period after twenty sixteen, after the referendum, trying to

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Speaker 12: negotiate and then trying to pass a deal with the EU.

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Speaker 2: Looking forward to the next five, ten, twenty five years,

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Speaker 2: what's the best case for Europe if not entirely catching

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Speaker 2: up getting headed in the right direction in terms of

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Speaker 2: closing the gap with the United States and goodness knows China.

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Speaker 12: So I mean, obviously, in recent weeks we've had talk of,

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Speaker 12: you know, civilization erasure I think was in the Trump

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Speaker 12: administration's national security strategy. I think we could probably dodge that,

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Speaker 12: but I do think there's a serious kind of question

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Speaker 12: of governability in some of the core economies in terms

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Speaker 12: of growth rates. I think your best case is sort

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Speaker 12: of you know, certainly no more than one percent, probably

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Speaker 12: more in the kind of half of percent a year

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Speaker 12: range coming up.

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Speaker 2: We turned from the first quarter of the century in

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Speaker 2: economics to the ways in which China has transformed itself

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Speaker 2: and surprised some of us along the way. As we

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Speaker 2: continue our review of the first quarter of the twenty

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Speaker 2: first century, we turned to one country that has been

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Speaker 2: a story, well really many stories in and of itself.

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Speaker 2: Our colleague Endocurrent takes us through China's remarkable transformation.

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Speaker 13: China joining the WTO in two thousand and one was

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Speaker 13: probably one of the most consequential decisions, not just for

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Speaker 13: China's economy, but for the world economy.

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Speaker 4: WTO agreement will move China in the right direction, so.

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Speaker 13: Companies could shift there and both tap into the Chinese

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Speaker 13: market and of course export from China to the rest

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Speaker 13: of the world.

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Speaker 14: The slowdown is not only in the developed countries. It

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Speaker 14: will also become a sharp slowdown in the developing countries.

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Speaker 13: The globment flancial crisis reverberated all around the world.

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Speaker 11: China is going forward with a half trillion dollars stimulus package.

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Speaker 7: It will build schools and subways, power plants, and hospitals.

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Speaker 13: China played a crucial role stepping up, spending that money,

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Speaker 13: generating all of that demand and activity, and in that

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Speaker 13: period China did become the world's second biggest economy.

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Speaker 5: China will spend forty billion dollars to establish the Silk

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Speaker 5: Road Fine.

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Speaker 13: The Belton Road positioned China as someone who was willing

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Speaker 13: to invest and a source of new capital at a

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Speaker 13: time when capital was becoming scarcer. They invested into ports,

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Speaker 13: they invested into rail networks, they invested into motorways. Well,

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Speaker 13: China has been a victim of its own economic success

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Speaker 13: in so many ways. As China moved up the value chain,

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Speaker 13: then it became a threat to some of those Western

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Speaker 13: economies that had been doing business with China in the

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Speaker 13: first place.

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Speaker 7: We had been ripped off by China.

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Speaker 13: No longer or the doors just opened for free two

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Speaker 13: way trade. China had the virus under control, so they

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Speaker 13: took opportunity and I really took a leap in terms

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Speaker 13: of electric vehicles and in Lithian batteries in particular. Clearly

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Speaker 13: that window was when the rest of the world was

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Speaker 13: cut napping. China was doing just fine. It wasn't until

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Speaker 13: later when China started to impose restrictions on its real

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Speaker 13: estate sector. Three estate sector started to slow down. That

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Speaker 13: you began to see some of the breaks being hit

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Speaker 13: on China's economy.

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Speaker 15: The problem being that home buyers are afraid to buy homes,

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Speaker 15: worried about distress, developers not being able.

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Speaker 9: To deliver on the homes a year later.

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Speaker 13: The slope has been going on for several years now,

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Speaker 13: and I think a house taken some of the gloss

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Speaker 13: off of China's economy for the rest of the world.

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Speaker 2: I'msani besch Loss of Rock Creek and Elizabeth Economy of

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Speaker 2: the Hoover Institution have spent a good part of the

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Speaker 2: last twenty five years traveling to the Middle Kingdom and

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Speaker 2: coming back to try to make sense of it for us.

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Speaker 2: They looked back at some of the country's biggest changes

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Speaker 2: and challenges. Elizabeth, you've been going to China for quite

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Speaker 2: a few years now. As we look back over the

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Speaker 2: first twenty five years of this century, how has China changed?

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Speaker 3: The transformation has been extraordinary, of course. I think if

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Speaker 3: you look back to two thousand, for example, China was

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Speaker 3: an economy of one point two trillion dollars GP per

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Speaker 3: capital is around one thousand dollars, and it was making

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Speaker 3: more bicycles than cars. It was very much trying to

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Speaker 3: adapt its domestic politics and economics to the demands of

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Speaker 3: the international community. What we see today is pretty radically

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Speaker 3: different from what we saw in two thousand. It's GDP

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Speaker 3: per capita now is thirteen thousand dollars. Of course, it's

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Speaker 3: not making bicycles so much anymore. As you know, the

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Speaker 3: most EVS electric vehicles in the world and cutting edge

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Speaker 3: electric vehicles, largest manufacturer, consumer and export. Today you have

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Speaker 3: China saying, you know, we're front and center and we'd

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Speaker 3: like the international community to adapt to us. So what

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Speaker 3: you have is China no longer being a rule taker

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Speaker 3: but a rule maker.

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Speaker 2: I know you've just recently been in China. How does

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Speaker 2: it feel on the ground as it were over there?

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Speaker 3: It is a tale of two China's in many respects

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Speaker 3: thriving around in Beijing, there's no traffic. There's a kind

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Speaker 3: of gray pall that seems to have settled over the city.

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Speaker 3: The economic activity is not what you might expect. You

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Speaker 3: don't see cranes dotting, you know, the lands escape a

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Speaker 3: lot of new building and enthusiasm. You don't have the

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Speaker 3: sense of a dynamic economy. But when you meet with

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Speaker 3: Chinese officials and you meet with you know, Chinese tech leaders,

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Speaker 3: you definitely have a sense of confidence. And you know,

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Speaker 3: the Chinese officials believe that they have a model that works,

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Speaker 3: and that model is investing in technology. I visited an

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Speaker 3: EV factory where they're producing three hundred thousand evs in

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Speaker 3: a year and they only have twenty one hundred people

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Speaker 3: on their factory floors, and the factory is spotless. You

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Speaker 3: could eat off the floor. It's extraordinary, and they are

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Speaker 3: very confident. They're confident about their ability to compete with

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Speaker 3: the United States. They're confident that they're on the right trajectory. Again, though,

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Speaker 3: I think for the broader, you know swath of Chinese people,

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Speaker 3: you know, consumption is not rebounded, They're not feeling it.

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Speaker 3: This is very much an economy of haves and have nots,

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Speaker 3: and the haves are moving ahead very aggressively.

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Speaker 2: One of the things we've seen over the last twenty

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Speaker 2: five years is a migration, first of all, into the

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Speaker 2: middle class from the rural into the urbanet is that.

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Speaker 3: Continuing think it's one of the interesting things that we

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Speaker 3: haven't seen the middle class continue to expand, and the

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Speaker 3: Chinese are just beginning to wake up to the fact

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Speaker 3: that artificial intelligence and their move toward robotics. You know,

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Speaker 3: they already have two hundred and fifty thousand robots. I

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Speaker 3: think we have about ten thousand, you know, in their

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Speaker 3: factories operating. They're going to put people out of work.

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Speaker 3: And so one of the factories that we visited was

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Speaker 3: an autonomous vehicle factory, and person who was you know,

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Speaker 3: taking us on the sort of tour of the factory

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Speaker 3: said that they are now being told by the local

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Speaker 3: government that they're going to need to help find jobs

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Speaker 3: for the people that their autonomous vehicles supplant. At the

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Speaker 3: same time, the local government's not allowing them to charge

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Speaker 3: any more than regular taxi drivers or d D drivers

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Speaker 3: because they don't want those people to go out of work.

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Speaker 3: So I think they have not figured out how they're

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Speaker 3: going to manage the technological change and the demands for employment.

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Speaker 2: How much success is China already had in reshaping the

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Speaker 2: international community.

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Speaker 3: I would say much less than we might anticipate. It

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Speaker 3: doesn't seem as though much of the rest of the

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Speaker 3: world is interested in trading the current international system for

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Speaker 3: a China led international system. That being said, if you're

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Speaker 3: looking for Chinese technological influence or economic influence globally, certainly

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Speaker 3: the Belton Road and the Digital Silk Road have been transformative.

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Speaker 3: You look at Huawei, which has seventy percent of the

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Speaker 3: four G in Africa. Their satellite system now rivals GPS,

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Speaker 3: so I think they can look at any number of

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Speaker 3: metrics and say we've had a success. At the same time,

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Speaker 3: of course, there have been protests in virtually every Belton

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Speaker 3: Road country about how China's done business. Interest and the desire,

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Speaker 3: the willingness to have Chinese investment stems from the fact

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Speaker 3: that they can't get that kind of investment from any

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Speaker 3: other country. So I think, you know, if we were

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Speaker 3: to go in and really be competitive, for example in Africa,

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Speaker 3: in this idea that we're going to promote our tech

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Speaker 3: stack globally, I think we'd be welcomed.

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Speaker 2: Do we understand in the West just how far ahead

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Speaker 2: China is getting in some respects in technology and manufacturing.

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Speaker 15: I think most people think of China as producing consumer goods.

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Speaker 15: They're toys, you know, basic goods, and that is the

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Speaker 15: way they started. But today it's a whole other world.

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Speaker 15: So what is happening is most of us are are

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Speaker 15: reliant on not just their basic ingredients being made, but

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Speaker 15: the new molecules being developed in China.

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Speaker 16: Ev Cars.

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Speaker 15: Let's say, the batteries that they are producing are so

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Speaker 15: far ahead than the ones we're producing. So they are

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Speaker 15: jumping ahead in ways that we did not expect. They

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Speaker 15: might have less power constraints. The way they're building nuclear plants,

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Speaker 15: and the way they're using clean energy and renewable energy

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Speaker 15: the opposite of what we're doing.

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Speaker 16: In the US.

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Speaker 15: And that's because the government in China is putting so

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Speaker 15: much capital to work alongside the private sector, something that

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Speaker 15: in the most recent past we're not doing.

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Speaker 2: What is that enormous move forward for China as an economy,

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Speaker 2: as a government, for the people of China.

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Speaker 15: So if we look at the people of China when

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Speaker 15: this whole process started twenty twenty five years ago, there

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Speaker 15: was hope that were growing fast, double digit growth, a

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Speaker 15: lot of opportunities for people to get new jobs, move

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Speaker 15: from agriculture to industry into cities and get out of

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Speaker 15: that extreme poverty. And right now, what's happening because of

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Speaker 15: their overcapacity. Let's say if you're producing ev cars, you

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Speaker 15: might be getting paid less because they have the over capacity.

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Speaker 15: You're lucky to have a job. So the situation for

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Speaker 15: the individual may not have got better, but China as

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Speaker 15: a whole continues to do well. I think one thing

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Speaker 15: that I found very interesting is we in the US

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Speaker 15: always say China should start consuming more, and if they

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Speaker 15: consume more, they will export less. We will have less

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Speaker 15: of a problem and they will deal with their growth

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Speaker 15: with domestic consumption. What is very clear with President g

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Speaker 15: but also really maybe people who came before him, they're

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Speaker 15: not interested in domestic consumption. They're interested in world supremacy,

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Speaker 15: as has become evident. So you need to do the quantum,

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Speaker 15: you need to do the AI, you need to be

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Speaker 15: ahead on robotics, you need to be ahead on producing

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Speaker 15: things so that you control your own destiny, but potentially

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Speaker 15: you control other people's destiny. And I think that's what

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Speaker 15: we've missed really realizing ourselves here.

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Speaker 2: How have Chinese relations with the United States and with

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Speaker 2: the West changed over these twenty five years.

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Speaker 15: Obviously, when we had the Nixon and the Kissinger period

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Speaker 15: and the opening up and wto it was the West

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Speaker 15: hoping that China would open up to US goods and

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Speaker 15: to a more liberal democratic system. And as one went

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Speaker 15: to China and you would talk to your Chinese counterparts,

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Speaker 15: it was always a very open dialogue. What has been

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Speaker 15: very different the last few years is that China has

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Speaker 15: become more closed. If there's one thing that is changing

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Speaker 15: with the Chinese, because they've always been very careful in

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Speaker 15: how they show their hands to the rest of the world,

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Speaker 15: they are showing more overconfidence than before. The other thing

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Speaker 15: is that if you sit in China today, who would

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Speaker 15: expect that the US would be recapping its own universities.

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Speaker 15: It's on research, it's on biotech, is investing less in

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Speaker 15: technology at scale, is not investing in nuclear power, and

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Speaker 15: is not working with its allies. So in a way

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Speaker 15: that you know, if you're sitting in President G's seat today,

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Speaker 15: you see a lot of potential for China.

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Speaker 2: Up next. In the year two thousand, we were caught

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Speaker 2: up in a tech bubble. Now there's talk of a

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Speaker 2: different bubble altogether, but in some ways bubbles were the

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Speaker 2: least of what the markets had to contend with in

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Speaker 2: the last twenty five years. The first quarter of the

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Speaker 2: New century brought us a Great financial Crisis, a global pandemic,

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Speaker 2: and several revolutions in the ways markets coped with it all.

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Speaker 2: Our colleague Romaine Bostik gives us highlights and low lights.

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Speaker 11: How do we know when irrational exuberance has unduly escalated

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Speaker 11: asset values?

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Speaker 8: You had a market that hit a peak in early

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Speaker 8: two thousand. It proceeded to drop by about thirty percent

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Speaker 8: in the span of just a few months.

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Speaker 13: The big question is hard versus soft landing.

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Speaker 14: At this point, my expectation is fundamentals will probably get

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Speaker 14: worse before they get better.

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Speaker 8: The bursting of the housing bubble was a little bit

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00:24:54,760 --> 00:24:57,040
Speaker 8: less of a panic and more of an orderly exit.

443
00:24:58,440 --> 00:25:02,000
Speaker 6: We've seen triple digit swings in the stock market. Major

444
00:25:02,040 --> 00:25:05,679
Speaker 6: financial institutions have teetered on the edge of collapse, and

445
00:25:05,720 --> 00:25:06,520
Speaker 6: some have failed.

446
00:25:06,760 --> 00:25:09,600
Speaker 8: Most people began to sell stocks that were directly tied

447
00:25:09,680 --> 00:25:12,680
Speaker 8: to the housing market, but eventually that began to spread

448
00:25:12,800 --> 00:25:14,600
Speaker 8: to other areas of the market that had nothing to

449
00:25:14,640 --> 00:25:15,959
Speaker 8: do with housing or credit.

450
00:25:16,160 --> 00:25:19,080
Speaker 11: By far, the most important thing is their program be successful,

451
00:25:19,080 --> 00:25:21,560
Speaker 11: because if it's not, those that are going to pay

452
00:25:21,640 --> 00:25:24,120
Speaker 11: the biggest price are some of the ones we all

453
00:25:24,200 --> 00:25:24,680
Speaker 11: care about.

454
00:25:24,680 --> 00:25:28,000
Speaker 8: The most quantitative easing was the effort by the FED

455
00:25:28,440 --> 00:25:31,600
Speaker 8: to stabilize the markets. In fact, it was so ambitious

456
00:25:31,640 --> 00:25:34,040
Speaker 8: they actually did it three times. Once they ended QE

457
00:25:34,119 --> 00:25:36,440
Speaker 8: three back in twenty fourteen, they had to restart it

458
00:25:36,520 --> 00:25:38,560
Speaker 8: a little bit less than a decade later when the

459
00:25:38,600 --> 00:25:39,679
Speaker 8: COVID pandemic hit.

460
00:25:44,320 --> 00:25:47,119
Speaker 2: If the epidemic become pandemic.

461
00:25:46,680 --> 00:25:49,040
Speaker 13: Pandemic, global pandemic, I think there's a panic.

462
00:25:48,840 --> 00:25:49,600
Speaker 7: A whole lot of panic.

463
00:25:49,680 --> 00:25:53,359
Speaker 8: The COVID pandemic was undoubtedly one of the biggest exogenous

464
00:25:53,359 --> 00:25:56,879
Speaker 8: shocks for financial markets in modern history. The market in

465
00:25:56,880 --> 00:25:59,119
Speaker 8: the span of really about five and a half weeks,

466
00:25:59,119 --> 00:26:00,600
Speaker 8: plunged twenty to three percent.

467
00:26:00,880 --> 00:26:04,680
Speaker 7: This will deliver urgently needed relief to our nations, families,

468
00:26:04,760 --> 00:26:05,879
Speaker 7: workers and businesses.

469
00:26:06,040 --> 00:26:09,600
Speaker 8: We saw inflation headline inflation rates top nine percent, the

470
00:26:09,680 --> 00:26:11,200
Speaker 8: highest for the modern era.

471
00:26:13,040 --> 00:26:15,400
Speaker 3: Game stuff is one of the most compelling asymmetric opportunities

472
00:26:15,440 --> 00:26:17,560
Speaker 3: in the market today. Really, I understand hey can disagree

473
00:26:17,600 --> 00:26:17,840
Speaker 3: with that.

474
00:26:18,000 --> 00:26:18,680
Speaker 13: Mean stocks.

475
00:26:20,760 --> 00:26:24,560
Speaker 8: The best way to describe the mean stock boom can

476
00:26:24,600 --> 00:26:27,920
Speaker 8: probably be summed up in one word boredom. All eyes

477
00:26:27,920 --> 00:26:30,000
Speaker 8: seem to be on game stock, game stuff to the

478
00:26:30,040 --> 00:26:32,240
Speaker 8: moon and back gains and game stop. This has now

479
00:26:32,240 --> 00:26:33,840
Speaker 8: reached levels of insanity here.

480
00:26:33,840 --> 00:26:36,960
Speaker 3: If you're witnessing the French Revolution of finance.

481
00:26:36,520 --> 00:26:38,880
Speaker 4: There is a rebellion aspect to it, there's an anti

482
00:26:39,040 --> 00:26:40,439
Speaker 4: establishment aspect to it.

483
00:26:40,600 --> 00:26:43,680
Speaker 8: At this point in twenty twenty five, the vast majority

484
00:26:43,720 --> 00:26:47,440
Speaker 8: of activity that we see in US public equity markets

485
00:26:47,560 --> 00:26:52,240
Speaker 8: are actually driven by individual investors rather than institutional investors.

486
00:26:52,400 --> 00:26:54,480
Speaker 8: That has a big impact on prices. It has a

487
00:26:54,480 --> 00:26:56,000
Speaker 8: big impact on valuations.

488
00:26:58,359 --> 00:27:01,200
Speaker 2: As we begin the second quarter of the twenty first century,

489
00:27:01,320 --> 00:27:04,439
Speaker 2: we're returning to talk of bubbles. In two thousand it

490
00:27:04,520 --> 00:27:07,159
Speaker 2: was the tech bubble. Now people are wondering if we

491
00:27:07,200 --> 00:27:10,879
Speaker 2: could be building an AI bubble. Bridgewater founder Ray Dalio

492
00:27:10,960 --> 00:27:14,119
Speaker 2: has studied the mechanics of bubbles through the years.

493
00:27:16,440 --> 00:27:19,760
Speaker 11: I think you have to relate the markets to the

494
00:27:19,880 --> 00:27:24,240
Speaker 11: geopolitics the politics. We have a bubble in two thousand

495
00:27:25,000 --> 00:27:28,960
Speaker 11: and then two thousand and one, you have the international

496
00:27:29,119 --> 00:27:33,440
Speaker 11: geopolitical problem in terms of nine to eleven, and then

497
00:27:33,480 --> 00:27:39,520
Speaker 11: the war on terrorism, and so we spend about eight

498
00:27:39,600 --> 00:27:44,480
Speaker 11: trillion dollars in our wars on terrorism, and we run

499
00:27:44,720 --> 00:27:49,720
Speaker 11: big budget deficits, and then we come into the period

500
00:27:49,800 --> 00:27:52,760
Speaker 11: where we get down in two thousand and eight we

501
00:27:52,840 --> 00:27:56,400
Speaker 11: have the Great Global Financial crisis. And the Great Global

502
00:27:56,480 --> 00:28:01,800
Speaker 11: Financial crisis is not just a financial crisis. It brings

503
00:28:01,840 --> 00:28:04,920
Speaker 11: over the wealth gap issue, in other words, to occupy

504
00:28:05,040 --> 00:28:09,560
Speaker 11: Wall Street. And it also was a shock to the

505
00:28:09,560 --> 00:28:12,040
Speaker 11: rest of the world. And in two thousand and eight,

506
00:28:12,440 --> 00:28:16,800
Speaker 11: very important, that was the first time interest rates hit

507
00:28:17,560 --> 00:28:22,760
Speaker 11: zero since nineteen thirty three. And so what happened for

508
00:28:22,840 --> 00:28:26,240
Speaker 11: the first time since nineteen thirty three is we did

509
00:28:26,480 --> 00:28:31,800
Speaker 11: quantitative easing. We printed money and we bought bonds. That's

510
00:28:31,800 --> 00:28:35,560
Speaker 11: a marker, and we start to learn that large budget

511
00:28:35,600 --> 00:28:41,479
Speaker 11: deficits can be monetized. So we learned about monetization and

512
00:28:41,560 --> 00:28:45,720
Speaker 11: from that then we drive it down to negative interest rates.

513
00:28:46,640 --> 00:28:50,640
Speaker 11: And of course through this all period is the digital technology,

514
00:28:51,560 --> 00:28:56,480
Speaker 11: the development of all the digital technologies, you know, devices

515
00:28:56,560 --> 00:28:59,880
Speaker 11: like this, think about this, this is the everything object

516
00:29:00,640 --> 00:29:04,640
Speaker 11: and the communications and so on. Very unexpected in many

517
00:29:04,680 --> 00:29:07,680
Speaker 11: cases in terms of what the effects would be. And

518
00:29:07,720 --> 00:29:13,840
Speaker 11: then twenty sixteen the change, the big change in the

519
00:29:13,840 --> 00:29:18,480
Speaker 11: world order and the big change domestically, the beginning of

520
00:29:18,640 --> 00:29:24,240
Speaker 11: populism and Donald Trump being elected president and so we

521
00:29:24,360 --> 00:29:29,360
Speaker 11: have this greater polarity left and right that reflects the

522
00:29:29,360 --> 00:29:33,640
Speaker 11: wealth gap differences, and then that meant a big change

523
00:29:33,680 --> 00:29:38,160
Speaker 11: in the relationship with China, in other words, recognizing that

524
00:29:38,200 --> 00:29:42,680
Speaker 11: there's a great power conflict, and that great power conflict

525
00:29:43,400 --> 00:29:50,360
Speaker 11: goes from globalization to nationalism and the change in that

526
00:29:50,440 --> 00:29:53,840
Speaker 11: world order. And of course at the time, in order

527
00:29:53,880 --> 00:29:58,680
Speaker 11: to be stimulative, there's the printing of money and buying

528
00:29:58,720 --> 00:30:02,960
Speaker 11: a lot of debt, which drives interest rates down to

529
00:30:03,040 --> 00:30:07,160
Speaker 11: be negative in some places and certainly real interest rates

530
00:30:07,520 --> 00:30:10,840
Speaker 11: to be negative. And now what that does is it

531
00:30:10,920 --> 00:30:16,280
Speaker 11: causes the leveraging up of assets, in other words, private equity,

532
00:30:16,360 --> 00:30:22,360
Speaker 11: the emergence of private markets, venture capital, private equity, all

533
00:30:22,400 --> 00:30:26,040
Speaker 11: being leveraged up. At that point we begin to have

534
00:30:26,120 --> 00:30:31,520
Speaker 11: the tightening. We're beginning to feel that effects, the deterioration

535
00:30:31,680 --> 00:30:34,719
Speaker 11: of the venture capital market and the private equity market,

536
00:30:35,040 --> 00:30:39,240
Speaker 11: and the fragility associated with that. So now we have

537
00:30:39,600 --> 00:30:45,240
Speaker 11: an economy where so much of it since really twenty twenty,

538
00:30:45,840 --> 00:30:52,400
Speaker 11: large budget deficits and necessarily demonetization of that, large gaps

539
00:30:52,400 --> 00:30:58,120
Speaker 11: in wealth and values, and in populism, a great power conflict.

540
00:30:58,960 --> 00:31:02,320
Speaker 11: Acts of nature, droughts, floods, and pandemics have been a

541
00:31:02,440 --> 00:31:06,680
Speaker 11: major force in history, and that certainly was the factor

542
00:31:06,760 --> 00:31:11,160
Speaker 11: in terms of seeing not only the pandemic but also

543
00:31:11,280 --> 00:31:13,240
Speaker 11: climate change and its effects.

544
00:31:13,600 --> 00:31:15,280
Speaker 2: Right, some of the major developments of the last twenty

545
00:31:15,280 --> 00:31:17,000
Speaker 2: five years, you're real, he referred to, like the Great

546
00:31:17,000 --> 00:31:19,680
Speaker 2: Financial Crisis two thousand and eight and the pandemic of

547
00:31:19,720 --> 00:31:22,720
Speaker 2: twenty twenty have caused the government the United States but

548
00:31:22,800 --> 00:31:26,480
Speaker 2: also other governments to play more active role in the markets.

549
00:31:26,640 --> 00:31:29,080
Speaker 2: Some people have said they've gone from being a referee

550
00:31:29,080 --> 00:31:31,239
Speaker 2: to actually being a player in the game. What are

551
00:31:31,240 --> 00:31:33,920
Speaker 2: the consequences of that for financial markets?

552
00:31:34,360 --> 00:31:37,520
Speaker 11: That's always been the case in times of great conflict.

553
00:31:38,240 --> 00:31:42,440
Speaker 11: If you look at when there's great geopolitical conflict, there

554
00:31:42,480 --> 00:31:47,120
Speaker 11: becomes the necessity to go from a consumer based economy

555
00:31:47,480 --> 00:31:50,600
Speaker 11: to a more directed economy of how do you use

556
00:31:50,640 --> 00:31:55,000
Speaker 11: the resources. If people just get rich and buy expensive

557
00:31:55,080 --> 00:31:59,040
Speaker 11: things like expanse of handbags and so on, and it's

558
00:31:59,080 --> 00:32:03,360
Speaker 11: not directed, you're not going to have the country be competitive.

559
00:32:03,480 --> 00:32:07,760
Speaker 11: In the AI world, you have to build infrastructure, you

560
00:32:07,840 --> 00:32:12,240
Speaker 11: have to build sources of energy. So there has always

561
00:32:12,280 --> 00:32:16,800
Speaker 11: been at similar times the bringing in industrial policies as

562
00:32:16,840 --> 00:32:20,640
Speaker 11: we call them, in order to create that direction. And so,

563
00:32:20,840 --> 00:32:25,560
Speaker 11: for example, in AI and related technologies, quantum computing and

564
00:32:25,600 --> 00:32:30,320
Speaker 11: the like. It's quite typical in history to see what's

565
00:32:30,360 --> 00:32:35,240
Speaker 11: now happening in terms of the competition, or let's call

566
00:32:35,320 --> 00:32:38,880
Speaker 11: it the tech war between the United States and China,

567
00:32:39,360 --> 00:32:43,280
Speaker 11: because the tech war is also related to the military war.

568
00:32:43,800 --> 00:32:47,360
Speaker 11: Whoever wins is going to win everything, right.

569
00:32:47,440 --> 00:32:50,280
Speaker 2: What about geography over the last twenty five years in

570
00:32:50,360 --> 00:32:53,720
Speaker 2: terms of financial markets, where have there been surprises in

571
00:32:53,760 --> 00:32:57,760
Speaker 2: some regions growing a lot, maybe unexpectedly, or others diminishing.

572
00:32:57,920 --> 00:33:00,280
Speaker 2: I think, for example, of the contrast between the Middle

573
00:33:00,280 --> 00:33:02,200
Speaker 2: East on the one hand, where you've been very active.

574
00:33:02,400 --> 00:33:06,640
Speaker 11: In Europe, it has to do with immigration and migration.

575
00:33:08,280 --> 00:33:12,160
Speaker 11: There's been a dramatic change in the population and the

576
00:33:12,320 --> 00:33:16,520
Speaker 11: politics of what it means that it's become even cultural.

577
00:33:17,440 --> 00:33:20,640
Speaker 11: So I would say, you know, the movements of people,

578
00:33:21,320 --> 00:33:25,520
Speaker 11: or even the changes in the numbers that demographics. In

579
00:33:25,520 --> 00:33:30,440
Speaker 11: other words, Europe, the United States, China, A number of

580
00:33:30,440 --> 00:33:34,240
Speaker 11: these countries, which generally speaking, what we would think of

581
00:33:34,320 --> 00:33:37,720
Speaker 11: as the developed world for the most part, although it

582
00:33:37,760 --> 00:33:43,880
Speaker 11: includes China, have declining populations and in the emerging world,

583
00:33:43,920 --> 00:33:47,800
Speaker 11: the Global South as we come, they have growing populations

584
00:33:48,160 --> 00:33:52,280
Speaker 11: that want to migrate, and that's connected to climate change,

585
00:33:52,840 --> 00:33:58,000
Speaker 11: because as climate change creates greater heat and so on

586
00:33:58,080 --> 00:34:01,920
Speaker 11: in these areas, it drives migraine. And so as we're

587
00:34:01,960 --> 00:34:07,200
Speaker 11: looking at the migration and the immigration issues, they become

588
00:34:07,400 --> 00:34:10,360
Speaker 11: greater issues. I think if you just look at the

589
00:34:10,400 --> 00:34:16,239
Speaker 11: administration's new report on its strategic objectives and the way

590
00:34:16,280 --> 00:34:19,160
Speaker 11: it views the world, you can see that there are

591
00:34:19,239 --> 00:34:23,200
Speaker 11: even cultural issues. In other words, which are the areas

592
00:34:23,680 --> 00:34:27,680
Speaker 11: that maintain their culture or do they have migration issues?

593
00:34:28,120 --> 00:34:32,000
Speaker 11: So these are geopolitical issues that are all connected.

594
00:34:32,520 --> 00:34:34,440
Speaker 2: I suspect if we talked to you twenty five years ago,

595
00:34:34,480 --> 00:34:36,920
Speaker 2: you would have predicted China would be a major force.

596
00:34:37,320 --> 00:34:40,759
Speaker 2: Would you predicted that the Gulf, the Saudi Arabia and

597
00:34:40,760 --> 00:34:43,239
Speaker 2: the surrounding countries would become as prominent as they have.

598
00:34:43,640 --> 00:34:47,799
Speaker 11: Basically, all you need is three things to happen to

599
00:34:47,800 --> 00:34:52,920
Speaker 11: have a successful country. First, educate your children well so

600
00:34:52,960 --> 00:34:56,160
Speaker 11: that they can be productive and earn incomes and that

601
00:34:56,200 --> 00:34:59,840
Speaker 11: they're civil with each other. And then second, if they

602
00:35:00,120 --> 00:35:03,439
Speaker 11: come out to a country where people could work well

603
00:35:03,480 --> 00:35:07,960
Speaker 11: to be productive and that there are financial resources like

604
00:35:08,000 --> 00:35:12,080
Speaker 11: the capital markets to be able to be productive and

605
00:35:12,600 --> 00:35:16,879
Speaker 11: everybody earn and in other words, the basics earn more

606
00:35:16,920 --> 00:35:20,759
Speaker 11: than you spend, and have more assets than liabilities. If

607
00:35:20,800 --> 00:35:24,520
Speaker 11: you're financially sound and productive and civil with each other,

608
00:35:24,560 --> 00:35:28,319
Speaker 11: that's key. And then stay out of wars, stay out

609
00:35:28,360 --> 00:35:32,520
Speaker 11: of internal conflicts. That when you have that internal conflict

610
00:35:32,840 --> 00:35:35,960
Speaker 11: or an internal war of sorts or an international war,

611
00:35:36,120 --> 00:35:40,759
Speaker 11: that's a problem. So some of these places I can

612
00:35:40,840 --> 00:35:44,680
Speaker 11: see that over. Maybe now I see it better then

613
00:35:44,719 --> 00:35:47,040
Speaker 11: I saw maybe twenty five years ago.

614
00:35:48,520 --> 00:35:50,200
Speaker 2: Coming up as we draw it to the end of

615
00:35:50,239 --> 00:35:52,879
Speaker 2: the first quarter of the century. In some ways it's

616
00:35:53,000 --> 00:35:56,480
Speaker 2: all been about tech one way or the other, from

617
00:35:56,640 --> 00:36:01,080
Speaker 2: Y two K to dot com to AI. What did

618
00:36:01,120 --> 00:36:15,480
Speaker 2: we learn from the innovation and the turbulence The last

619
00:36:15,600 --> 00:36:18,800
Speaker 2: twenty five years have brought us the smartphone, streaming video

620
00:36:19,000 --> 00:36:22,880
Speaker 2: and elon musk, not to mention that AI and whatever

621
00:36:22,920 --> 00:36:26,440
Speaker 2: it has in store. Our colleague Caroline Hide guides us

622
00:36:26,520 --> 00:36:28,200
Speaker 2: on our journey in tech.

623
00:36:31,480 --> 00:36:35,000
Speaker 16: Y two K, the Millennium Bug, the accident that never happened.

624
00:36:35,160 --> 00:36:38,120
Speaker 16: We suddenly had this fear that as the celebration moved

625
00:36:38,120 --> 00:36:42,239
Speaker 16: from ninety nine to zero zero, computer systems wouldn't work.

626
00:36:42,280 --> 00:36:45,440
Speaker 16: But hundreds of millions of dollars were spent putting plans

627
00:36:45,440 --> 00:36:46,240
Speaker 16: in places there.

628
00:36:46,120 --> 00:36:48,360
Speaker 14: Will be some y two K glitches somewhere.

629
00:36:51,200 --> 00:36:55,839
Speaker 16: We went from wired to wireless in many shapes and

630
00:36:55,920 --> 00:36:56,360
Speaker 16: forms of.

631
00:36:56,400 --> 00:36:59,919
Speaker 4: The MARC, the iPod, and now the iPhone.

632
00:37:00,120 --> 00:37:03,160
Speaker 16: We're able to be connected. We're able to be understanding

633
00:37:03,480 --> 00:37:07,240
Speaker 16: indeed how to communicate, but also we could then interact

634
00:37:07,280 --> 00:37:12,600
Speaker 16: with the Internet at the same time. Two thousand and seven,

635
00:37:13,080 --> 00:37:16,319
Speaker 16: streaming who hits the big time with Netflix offering not

636
00:37:16,400 --> 00:37:19,359
Speaker 16: just DVDs through the post, but a streaming bundle too.

637
00:37:19,600 --> 00:37:22,320
Speaker 5: We could improve our service offer the best of DVD

638
00:37:22,920 --> 00:37:24,520
Speaker 5: and the best of online.

639
00:37:24,960 --> 00:37:27,279
Speaker 7: Combine those and then it's a huge opportunity.

640
00:37:27,360 --> 00:37:30,560
Speaker 16: We're seeing an evolution in social media that really dovetailed

641
00:37:30,560 --> 00:37:32,000
Speaker 16: with the turning of the millennium.

642
00:37:32,040 --> 00:37:35,960
Speaker 9: Facebook was born a specific time in place a college

643
00:37:36,000 --> 00:37:37,200
Speaker 9: campus the web.

644
00:37:37,400 --> 00:37:41,560
Speaker 16: Facebook made a significant pivot in twenty twenty one.

645
00:37:41,800 --> 00:37:45,440
Speaker 9: I am proud to announce that starting today, our company

646
00:37:45,600 --> 00:37:49,920
Speaker 9: is now Meta three two one.

647
00:37:50,239 --> 00:37:53,640
Speaker 16: L Muss, who came in with SpaceX born in two

648
00:37:53,719 --> 00:37:57,680
Speaker 16: thousand and two and so swiftly within six years he

649
00:37:57,719 --> 00:38:03,359
Speaker 16: had already got a privately owned, privately built spacecraft into orbit.

650
00:38:03,960 --> 00:38:07,200
Speaker 16: People are now talking about putting data centers into space.

651
00:38:07,760 --> 00:38:11,440
Speaker 10: AI AI, AI AI AI AI.

652
00:38:11,920 --> 00:38:15,560
Speaker 16: Everyone now remembers the end of twenty twenty two when

653
00:38:16,040 --> 00:38:21,600
Speaker 16: just very quietly, a not for profit OpenAI introduced chatchipt

654
00:38:22,360 --> 00:38:24,600
Speaker 16: and the crowd went wild.

655
00:38:25,080 --> 00:38:28,160
Speaker 9: I think it takes like unique human arrogance to believe

656
00:38:28,200 --> 00:38:30,960
Speaker 9: that AI cannot supersede humans.

657
00:38:31,000 --> 00:38:34,000
Speaker 16: And it's now that we're seeing IBMSA. By twenty twenty nine,

658
00:38:34,040 --> 00:38:37,920
Speaker 16: we will have in the hands of corporates a really

659
00:38:38,120 --> 00:38:41,880
Speaker 16: useful quantum computer that will solve real world problems.

660
00:38:42,880 --> 00:38:45,640
Speaker 2: For more on the evolution of technology over the first

661
00:38:45,760 --> 00:38:48,360
Speaker 2: quarter of the twenty first century, I spoke to former

662
00:38:48,400 --> 00:38:52,719
Speaker 2: IBM President and CEO Sam Palmasano and Moffatt, Nathan's and

663
00:38:52,800 --> 00:38:58,160
Speaker 2: partner and senior analyst, Craig Moffatt. Take us back to

664
00:38:58,360 --> 00:39:01,520
Speaker 2: two thousand. How the world looked in two thousand and

665
00:39:01,560 --> 00:39:03,640
Speaker 2: how differently it looks today in technology?

666
00:39:03,920 --> 00:39:06,560
Speaker 5: Well, it's incredible. In two thousand, at that point in time,

667
00:39:07,400 --> 00:39:11,920
Speaker 5: I wasn't CEO yet, okay, and I was running the

668
00:39:11,960 --> 00:39:14,880
Speaker 5: hardware business that BEM and that was so A semiconductors.

669
00:39:14,920 --> 00:39:19,520
Speaker 5: It was storage, mainframes, PC and all those sorts of things.

670
00:39:20,040 --> 00:39:25,920
Speaker 5: And basically the dominant architecture for development, for research and

671
00:39:25,960 --> 00:39:31,800
Speaker 5: development was we called it the Wintel doopoly. Windows plus Intel.

672
00:39:32,040 --> 00:39:35,680
Speaker 5: They were the dominant for client server, and client server

673
00:39:35,760 --> 00:39:38,520
Speaker 5: had become the alternative to the mainframe because you could

674
00:39:38,520 --> 00:39:40,839
Speaker 5: do a lot of the applications in the client server

675
00:39:40,960 --> 00:39:43,000
Speaker 5: environment that you didn't have to run this big centralized

676
00:39:43,000 --> 00:39:46,360
Speaker 5: computing environment. So that was what we That's the world

677
00:39:46,360 --> 00:39:46,920
Speaker 5: we lived in.

678
00:39:47,080 --> 00:39:48,640
Speaker 2: The Internet was just getting started.

679
00:39:48,680 --> 00:39:53,240
Speaker 5: Actually, the Internet started in the late seventies and people

680
00:39:53,320 --> 00:39:56,000
Speaker 5: again didn't realize what was happening. Is because it was

681
00:39:56,080 --> 00:40:00,239
Speaker 5: basically the research laboratories passing technical journals to each they're

682
00:40:00,239 --> 00:40:03,160
Speaker 5: in the standard format. That's how it began. But all

683
00:40:03,239 --> 00:40:05,319
Speaker 5: the things that made it the Internet as it is

684
00:40:05,360 --> 00:40:07,080
Speaker 5: today had to be built up.

685
00:40:07,239 --> 00:40:10,839
Speaker 2: What do you see converging right now in tech for

686
00:40:10,880 --> 00:40:14,760
Speaker 2: example AI? What it could make possible in various areas

687
00:40:15,160 --> 00:40:16,439
Speaker 2: over the next twenty five years.

688
00:40:16,760 --> 00:40:18,719
Speaker 5: I don't think we have any idea, but I can

689
00:40:18,760 --> 00:40:20,400
Speaker 5: tell you some of the stuff we're working on. I

690
00:40:20,400 --> 00:40:23,359
Speaker 5: don't think anyone has. It's just like the early days

691
00:40:23,360 --> 00:40:25,759
Speaker 5: of the Internet. Did anybody think that this would get

692
00:40:25,800 --> 00:40:30,800
Speaker 5: to where you can't live without your smartphone? I was

693
00:40:30,880 --> 00:40:33,440
Speaker 5: part of the industry. Nobody saw that. I mean, we

694
00:40:33,520 --> 00:40:37,319
Speaker 5: did see opportunities, but we never thought of uber or

695
00:40:37,360 --> 00:40:40,600
Speaker 5: GPS or those kinds of things operating on your phone,

696
00:40:41,600 --> 00:40:43,680
Speaker 5: And I think, what's going to happen here? There are

697
00:40:43,719 --> 00:40:48,640
Speaker 5: people I know today that are building they call companies

698
00:40:48,680 --> 00:40:51,759
Speaker 5: without any people we're invested in when it's building an

699
00:40:51,800 --> 00:40:56,000
Speaker 5: AI bank bank without people. I think in other areas,

700
00:40:56,040 --> 00:40:58,320
Speaker 5: which we've done a lot of work on drug discovery,

701
00:40:58,360 --> 00:41:00,319
Speaker 5: you're just seeing the beginning of that. I think if

702
00:41:00,320 --> 00:41:03,760
Speaker 5: you can take very complex cases of disease or drugs

703
00:41:04,400 --> 00:41:07,840
Speaker 5: and forget these big data centers, connect that with a

704
00:41:07,920 --> 00:41:12,320
Speaker 5: quantum computer, with the knowledge within the AI systems and

705
00:41:12,360 --> 00:41:14,400
Speaker 5: the data structures and the volume of that data and

706
00:41:14,400 --> 00:41:17,680
Speaker 5: all those case histories and things that could be significant,

707
00:41:17,680 --> 00:41:19,160
Speaker 5: that could be a significant breakthrough.

708
00:41:19,360 --> 00:41:21,520
Speaker 2: When are we going to see quantum computers really be

709
00:41:21,640 --> 00:41:24,399
Speaker 2: usable and how transformational could they be?

710
00:41:24,880 --> 00:41:29,200
Speaker 5: Where it's a defined space that it's not a general

711
00:41:29,239 --> 00:41:32,640
Speaker 5: purpose computer. And I think that's where that when people

712
00:41:32,640 --> 00:41:35,160
Speaker 5: are talking about it being ready by twenty twenty nine,

713
00:41:35,719 --> 00:41:38,120
Speaker 5: I believe that'll be the use cases at that point

714
00:41:38,120 --> 00:41:39,680
Speaker 5: in time. It won't be what you can do in

715
00:41:39,719 --> 00:41:42,280
Speaker 5: a cloud today, or which you could run and historically

716
00:41:42,320 --> 00:41:45,279
Speaker 5: in the mainframe, which is large general purpose systems to

717
00:41:45,360 --> 00:41:48,120
Speaker 5: do all kinds of work, manage all kinds of variables,

718
00:41:48,120 --> 00:41:50,319
Speaker 5: and those sorts of things. It will be very defined. Now,

719
00:41:50,640 --> 00:41:52,720
Speaker 5: the benefit of that is you'll have the general purpose

720
00:41:52,760 --> 00:41:56,520
Speaker 5: systems feed the quantum machine. The quantum machine will do

721
00:41:56,560 --> 00:41:58,960
Speaker 5: it stuff that can do very very well, and then

722
00:41:59,000 --> 00:41:59,800
Speaker 5: pass it back.

723
00:42:00,719 --> 00:42:02,600
Speaker 2: A lot of changes in a lot of places, but

724
00:42:02,920 --> 00:42:06,280
Speaker 2: certainly in the telecommunications area. Give us your perspective about

725
00:42:06,280 --> 00:42:08,120
Speaker 2: that twenty five years. What did it look like year

726
00:42:08,160 --> 00:42:08,800
Speaker 2: two thousand.

727
00:42:09,000 --> 00:42:11,640
Speaker 14: It's quite interesting if you think back to that period

728
00:42:11,719 --> 00:42:15,520
Speaker 14: for a number of reasons. One is, people talk about

729
00:42:15,520 --> 00:42:18,640
Speaker 14: it as the bursting of the dot com bubble, But

730
00:42:18,719 --> 00:42:21,240
Speaker 14: the bursting of the dot com bubble in reality wasn't

731
00:42:21,320 --> 00:42:24,440
Speaker 14: terribly consequential. There wasn't a lot of market cap involved.

732
00:42:24,440 --> 00:42:27,440
Speaker 14: There weren't all that many jobs involved. The bursting of

733
00:42:27,440 --> 00:42:31,479
Speaker 14: the telecom bubble was much more significant, and it set

734
00:42:31,520 --> 00:42:35,440
Speaker 14: in motion things that have lasted and echoed for twenty

735
00:42:35,480 --> 00:42:38,799
Speaker 14: five years. I think you can make a case that

736
00:42:39,200 --> 00:42:43,680
Speaker 14: the jobs lost and the potential for a really serious

737
00:42:43,760 --> 00:42:46,800
Speaker 14: recession coming out of the bursting of the telecom bubble

738
00:42:47,440 --> 00:42:50,960
Speaker 14: was why Alan Greenspan and the FED cut rates aggressively

739
00:42:51,480 --> 00:42:56,520
Speaker 14: to forestall a recession that ultimately inflated real estate prices

740
00:42:56,560 --> 00:43:00,399
Speaker 14: and arguably was one of the main precipitates of the

741
00:43:00,520 --> 00:43:03,440
Speaker 14: bursting of the housing bubble that created the Great Recession

742
00:43:03,440 --> 00:43:06,600
Speaker 14: of twenty ten. On the other hand, it created a

743
00:43:06,640 --> 00:43:11,960
Speaker 14: tremendous amount of telecom capacity that continues to benefit us

744
00:43:12,040 --> 00:43:15,640
Speaker 14: to this day, and the connectivity and the cost of

745
00:43:15,680 --> 00:43:19,600
Speaker 14: connectivity that fell so precipitously because of the overbuilding of

746
00:43:19,680 --> 00:43:23,839
Speaker 14: the late nineteen nineties had really really salutary effects for

747
00:43:24,040 --> 00:43:28,560
Speaker 14: the tech economy for another two decades. The obvious question

748
00:43:28,600 --> 00:43:32,320
Speaker 14: that everybody struggling with today is what are the echoes

749
00:43:32,440 --> 00:43:37,399
Speaker 14: between that period and today's potential bubble in AI? And

750
00:43:38,440 --> 00:43:41,920
Speaker 14: if the bubble bursts, the most important question is, really

751
00:43:42,320 --> 00:43:46,120
Speaker 14: will the capacity that's being built all these data centers,

752
00:43:46,160 --> 00:43:48,640
Speaker 14: for example, but also the power that supports them and

753
00:43:48,680 --> 00:43:53,439
Speaker 14: the facilities themselves. Will those facilities actually have a long

754
00:43:53,560 --> 00:43:56,239
Speaker 14: useful life, a long enough useful life to have a

755
00:43:56,280 --> 00:44:00,319
Speaker 14: benefit even if the bubble bursts, or are are they

756
00:44:00,400 --> 00:44:05,680
Speaker 14: such short lived assets that unfortunately it simply brings all

757
00:44:05,680 --> 00:44:07,600
Speaker 14: the pain of the bursting of a bubble without any

758
00:44:07,600 --> 00:44:08,360
Speaker 14: of the benefits.

759
00:44:08,680 --> 00:44:10,759
Speaker 2: When we think about the so called bubble in the

760
00:44:10,840 --> 00:44:13,160
Speaker 2: year two thousand, often people thinking of things like pets

761
00:44:13,200 --> 00:44:16,000
Speaker 2: dot com. Yeah, but there was also fiber optic which

762
00:44:16,120 --> 00:44:20,800
Speaker 2: got really overbuilt access capacity. But without that fiber optic

763
00:44:20,880 --> 00:44:22,960
Speaker 2: cable would we have many of the services we have.

764
00:44:23,160 --> 00:44:26,640
Speaker 14: No, you're exactly right. It really turned out to be

765
00:44:27,000 --> 00:44:30,719
Speaker 14: tremendously beneficial to the tech economy. There was a genuine

766
00:44:30,840 --> 00:44:35,000
Speaker 14: capacity shortage going into the late nineteen nineties, and what

767
00:44:35,160 --> 00:44:38,000
Speaker 14: happened was Wall Street, in the way that it does,

768
00:44:38,360 --> 00:44:40,840
Speaker 14: figured the way to solve this problem is to fund

769
00:44:41,000 --> 00:44:46,840
Speaker 14: new companies and new innovation. New entrants created this extraordinary

770
00:44:47,880 --> 00:44:52,000
Speaker 14: overhang of capacity. So there was this massive excess capacity.

771
00:44:52,320 --> 00:44:55,720
Speaker 14: The marginal costs of any telecom business are essentially zero,

772
00:44:56,160 --> 00:44:58,120
Speaker 14: and so it didn't take a genius to figure out

773
00:44:58,200 --> 00:45:00,920
Speaker 14: the debt service from all these new entrance was going

774
00:45:00,960 --> 00:45:03,480
Speaker 14: to be impossible to satisfy. You were going to have

775
00:45:03,520 --> 00:45:08,160
Speaker 14: a wave of bankruptcies that would create this enormous crash.

776
00:45:08,280 --> 00:45:12,160
Speaker 14: We never would have had Netflix without the enormous capacity

777
00:45:12,200 --> 00:45:17,400
Speaker 14: that had been created in the telecom bubble, and Netflix

778
00:45:17,520 --> 00:45:22,000
Speaker 14: was able to take advantage of essentially free transport to

779
00:45:22,239 --> 00:45:25,360
Speaker 14: build a business that today is sort of dominant in

780
00:45:25,440 --> 00:45:26,800
Speaker 14: the entertainments well.

781
00:45:26,600 --> 00:45:28,959
Speaker 2: And streaming is all the rage right now, given even

782
00:45:29,000 --> 00:45:31,479
Speaker 2: some of the deals we're seeing going on or trying

783
00:45:31,520 --> 00:45:33,799
Speaker 2: to go on. I remember back in the day going

784
00:45:33,800 --> 00:45:36,480
Speaker 2: from twisted pair to cable seemed like a really big

785
00:45:36,520 --> 00:45:37,160
Speaker 2: step forward.

786
00:45:37,200 --> 00:45:40,440
Speaker 14: Coaxial cable, as you said, really took off as the

787
00:45:40,480 --> 00:45:45,600
Speaker 14: transmission medium to the home. That lasted for another really

788
00:45:45,600 --> 00:45:48,080
Speaker 14: two decades, and it's only been in the last five

789
00:45:48,200 --> 00:45:52,279
Speaker 14: years that you've seen real pressure on that because and

790
00:45:52,320 --> 00:45:54,200
Speaker 14: by the way, I would argue, we're all we're back

791
00:45:54,239 --> 00:45:59,239
Speaker 14: into telecom fiber bubble this time in FTTH as it's called,

792
00:45:59,280 --> 00:46:02,840
Speaker 14: or fiber to the home. Home overbuilding by not just

793
00:46:02,960 --> 00:46:07,160
Speaker 14: AT and T and Front Tier and Verizon and the

794
00:46:07,160 --> 00:46:10,920
Speaker 14: big companies, but by a host of privately funded private

795
00:46:10,920 --> 00:46:14,960
Speaker 14: equity companies are building in markets where the density simply

796
00:46:15,000 --> 00:46:18,200
Speaker 14: isn't high enough anymore to support the returns. And it

797
00:46:18,239 --> 00:46:20,200
Speaker 14: looks to us like you're going to have yet another

798
00:46:20,560 --> 00:46:24,000
Speaker 14: bubble bursting, not anywhere near the size of nineteen ninety nine,

799
00:46:24,160 --> 00:46:25,920
Speaker 14: but we suspect that bubble will burst.

800
00:46:26,040 --> 00:46:28,360
Speaker 2: Looking back, you know what we thought we saw in

801
00:46:28,360 --> 00:46:32,319
Speaker 2: technology in two thousand, twenty twenty five, looking out, what

802
00:46:32,400 --> 00:46:33,040
Speaker 2: do you see?

803
00:46:33,200 --> 00:46:33,520
Speaker 1: AI?

804
00:46:33,880 --> 00:46:39,240
Speaker 14: Is by far the most important and dramatic technology innovation

805
00:46:39,760 --> 00:46:44,920
Speaker 14: of our lifetimes. It's not even close, And we're really

806
00:46:45,000 --> 00:46:49,320
Speaker 14: struggling to figure out what it's going to do to societies.

807
00:46:49,360 --> 00:46:49,759
Speaker 2: You know that.

808
00:46:50,200 --> 00:46:52,359
Speaker 14: I hear people say, well, of course, you know, the

809
00:46:52,360 --> 00:46:59,400
Speaker 14: Industrial Revolution was tremendously beneficial to human productivity and humankind,

810
00:47:00,239 --> 00:47:03,000
Speaker 14: But we had two hundred years to adjust to the

811
00:47:03,040 --> 00:47:06,400
Speaker 14: Industrial Revolution, to figure out what are the right things

812
00:47:06,400 --> 00:47:10,520
Speaker 14: to teach in colleges or schools of at the time,

813
00:47:11,040 --> 00:47:14,600
Speaker 14: and for society to adjust. This is a revolution that's

814
00:47:14,640 --> 00:47:19,080
Speaker 14: happening in a decade. We've never seen anything like that,

815
00:47:19,600 --> 00:47:23,239
Speaker 14: and I think the next ten years are therefore the

816
00:47:23,280 --> 00:47:26,560
Speaker 14: hardest to predict of anything I've ever seen in my lifetime.

817
00:47:27,440 --> 00:47:32,480
Speaker 14: Just how is society going to respond to what is

818
00:47:32,520 --> 00:47:36,000
Speaker 14: certainly the case that huge numbers of jobs are going

819
00:47:36,040 --> 00:47:40,240
Speaker 14: to be replaceable by AI. To try to figure out

820
00:47:40,320 --> 00:47:45,239
Speaker 14: how will society try to adjust to something this profound

821
00:47:45,320 --> 00:47:49,840
Speaker 14: that comes this quickly, It is an incredibly difficult question

822
00:47:49,960 --> 00:47:51,320
Speaker 14: or set of questions to answer.

823
00:47:52,960 --> 00:47:54,719
Speaker 2: That does it for us? Here at Wall Street Week,

824
00:47:54,880 --> 00:47:58,160
Speaker 2: I'm David Weston. See you next week for more stories

825
00:47:58,200 --> 00:48:07,920
Speaker 2: of capitalism.