Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Let
Speaker 1: me bring in our our our first guest, John Farrell,
Speaker 1: who you know quite well. Robin nibolodies with Chatham House. Uh.
Speaker 1: They do wonderful work and thinking about international relations. Robin,
Speaker 1: let me give you an open question to start. What
Speaker 1: is the chadow House lead essay for this January? UM?
Speaker 1: The lead essay for US is Europe UM. I think
Speaker 1: it's not just about Brexit. It's about the Italian election.
Speaker 1: It's about whether Macran and Anglo Meracle can get it together,
Speaker 1: if Angler Mercle can get a government put together to
Speaker 1: lead a rejuvenation of European integration. This matters because the
Speaker 1: United States is self obsessed UM, and where Europe goes
Speaker 1: I think matters for big questions like the future of
Speaker 1: the global economy and global cooperation. So Europe is our
Speaker 1: main focus, well, my main folk. Eric Nelson of the
Speaker 1: UNI Credit was right out of it that Europe arguably
Speaker 1: is doing better than the United States. Do you buy
Speaker 1: that idea, not only economically but almost politically. Um, let's see,
Speaker 1: everything is relative. I think the United uh, Europe and
Speaker 1: the European Union are doing better in the sense that
Speaker 1: they waived off some of the big popular scares of
Speaker 1: twenty seventeen. They're seeing some I think, what looks like
Speaker 1: sustainable growth, which has picked out of the drug program,
Speaker 1: of fiscal easing of monetariesing um, And yeah, I do
Speaker 1: think there's some quite deep roots to it. You're seeing
Speaker 1: it as diverse economies as Portugal, Spain, Italy, some parts
Speaker 1: of Central Europe still keeping it up. And of course
Speaker 1: Germany is just remarkable with the surpluses it's achieving right
Speaker 1: now and it's on its budget. It actually gives a
Speaker 1: lot of room. You know, you think the country's in trouble,
Speaker 1: but here we are sitting, what with the twenty five
Speaker 1: billion euros surplus on its budget this year and maybe
Speaker 1: being up tote incredible. Robin. What's been remarkable about Germany
Speaker 1: is it doesn't have a government and it's taken Chancellor
Speaker 1: Merkell over three months, more than three months to get
Speaker 1: it together. Do you see signs that Chancellor Merkel is
Speaker 1: finally getting it together. And what are the main objectives
Speaker 1: of this government this time around? Well, I think it's
Speaker 1: uh to your first part of your question. It is
Speaker 1: getting it together in the sense at least the two
Speaker 1: party leaderships have come up with a program between the
Speaker 1: SPD and her cd U C s U coalition. I
Speaker 1: think there's a long way to go with the SPD
Speaker 1: UH and the rank and file. The coalition agreement has
Speaker 1: to be approved by them, so I don't think we're
Speaker 1: out of the woods yet actually, and her authority, of
Speaker 1: course is much much less strong than it was when
Speaker 1: she created the other governments. If they can achieve it. However,
Speaker 1: I think their priority is to invest in infrastructure, which
Speaker 1: is we've talked for some time now, is one of
Speaker 1: Germany's growing Achilles heels. There's quite a bit of a
Speaker 1: sense of how do you redistribute the the you know,
Speaker 1: the positive economic news, and this can be some easing off,
Speaker 1: as I understand it, of pension tightening up on pension contributions.
Speaker 1: Instead of that, they'll carry on being relatively generous and
Speaker 1: better healthcare provisions. So what you can see here as
Speaker 1: an effort to say to the German people there are
Speaker 1: benefits socially too strong economic growth over time, and it's
Speaker 1: not all about belt tightening, and that would be an
Speaker 1: important shift of message for Germany to be frank robin
Speaker 1: their domestic objectives. Emmanuel mccran, the President of France, will
Speaker 1: be hoping there will be some European objectives. Does she
Speaker 1: have the political capital at home to drive through the
Speaker 1: vision of Emmanuel Macron across Europe to a more integrated Eurozone.
Speaker 1: I I I try to put my cards on one
Speaker 1: side of the table. I'd say I don't think she does. Actually,
Speaker 1: her own party, the c d U c s U,
Speaker 1: remain very skeptical about deeper integration of the Azern without
Speaker 1: actually having seen at least real French structural reform in
Speaker 1: place and delivering results. The SPD her partners much more
Speaker 1: in favor, but remember they only polled about in the
Speaker 1: last election. Um and where the where the growth is
Speaker 1: on the margins that are skeptical about European integration, much
Speaker 1: like the Labor Party is skeptical in the United Kingdom
Speaker 1: about the EU as a whole. So I don't think so.
Speaker 1: The good news, of course, on the ANA for Germany's
Speaker 1: I don't think Macron personally is that committed in the
Speaker 1: near term to deeper Eurozone integration. What he wants is
Speaker 1: an ear that can protect him as he conducts really
Speaker 1: difficult domestic reforms. So I think he's more interested in
Speaker 1: immigration controls, more intersted in protections against foreign investment by
Speaker 1: state and companies like the Chinese. You know, he's I
Speaker 1: think the protection agenda of Europe, almost slightly old Fortress
Speaker 1: Europe two point oh is more his priority. I look
Speaker 1: where we are, Robin, and almost what the theory is
Speaker 1: of international relations. Now, to Ian Bremer's point, it does
Speaker 1: seem like every nation and almost every theory for itself, Um,
Speaker 1: there is. I think there is a theory of change
Speaker 1: in a theory of good government. I believe that remains
Speaker 1: in the future applicable for everyone, and I do think
Speaker 1: that is reflected in the economies of Europe, the United States,
Speaker 1: you know, Australia, let's call it the West. The reason
Speaker 1: I say that is, although there seems to be a
Speaker 1: lot of competition for these different approaches, um, not all
Speaker 1: countries at the same stage of economic development. So it's
Speaker 1: fine for China to run a centralized approach. But China
Speaker 1: is not yet a fully functioning consumer economy driven by
Speaker 1: innovation and technology. The demands of the people are not
Speaker 1: the same. So I still think there may be one theory.
Speaker 1: The problem is getting there is gonna take a lot
Speaker 1: longer than anyone expected before. Let me cut to the chase.
Speaker 1: How the president we greeted in Davos, freed Zakaria wrote
Speaker 1: about a post American world. You almost wonder what the
Speaker 1: post Trumpian world world will be like, whether it's one
Speaker 1: term or two terms. Um. And actually I had a
Speaker 1: piece that came out in the Berlin Policy Journal earlier
Speaker 1: this week where I think I picked up probably on
Speaker 1: some of that theme that you mentioned. Free Zakaria mentioned
Speaker 1: as well. I think we're moving to a stage of
Speaker 1: the world where America's traditional allies cannot count on America
Speaker 1: to have their back except on issues of existential threats
Speaker 1: to their security. We are not on a common agenda
Speaker 1: right now. America is fixing America first, but I think
Speaker 1: this is helping other parts of the world, if I
Speaker 1: may say so, to grow up. Europe needs to grow
Speaker 1: up and take more care of its own regional security.
Speaker 1: Japan is going to have to grow up and find
Speaker 1: ways to get on better with South Korea so that
Speaker 1: they can protect themselves against China's rise. Um in the
Speaker 1: Middle East, we've already seen it. The Saluadis have decided
Speaker 1: they better grow up and look after that. So, you know,
Speaker 1: even though they like Trump, I do think they trust America.
Speaker 1: That's a good place to go. John, It's a tough
Speaker 1: decision what we should do with Robin Nivlet next. Should
Speaker 1: we talk about Saudi Arabia and the massive changes in
Speaker 1: the Middle East? Or should we talk about the continued
Speaker 1: collapse of a Milan. I can't. Robert has got to
Speaker 1: say about that. It's got something to add some value
Speaker 1: wad for a c Meland. Then then I would love that.
Speaker 1: Robin Nivlet, I love American football. You know, do you
Speaker 1: want to do that? We can? We can do that then, Robert,
Speaker 1: Robin Nivolett, the Chatham House Director, We'll be sticking with
Speaker 1: us here on Bloomberg Surveillance. It's twenty eighteen, the year
Speaker 1: the reflation trade materializes. Brent crude had to push through
Speaker 1: seventy dollars for the first time in several years. The
Speaker 1: dollar has weakened to a multi year low, a three
Speaker 1: year low, unemployment in Germany at an all time low,
Speaker 1: and unemployment here in the United States, and a decade low.
Speaker 1: All the ingredients you would think for an inflation pick up.
Speaker 1: Let's get across the David Page Acts or investment Managements
Speaker 1: senior economists. David, is this the year that it actually materializes? Well, yes,
Speaker 1: we think it is, but I don't think it's going
Speaker 1: to be a dramatic story, and I think it's something
Speaker 1: that unfolds over over a couple of quarters. We do
Speaker 1: expect to see evidence of firm inflation, particularly in the
Speaker 1: economies that look like they've got tighter markets. We're thinking
Speaker 1: of the US, we're thinking the UK. I think in Eurozone,
Speaker 1: where there's more stair capacity, it's going to take more
Speaker 1: time to emerge. But as you say, I think the
Speaker 1: oil price is something that's going to provide a slight
Speaker 1: list at the start. We don't expect that to run
Speaker 1: too much more Dollar weakness exacerbates. But I think what
Speaker 1: really is pushing is likely to come through here is
Speaker 1: wage inflation. We've been looking for this for so long,
Speaker 1: but the tightness of the US labor market I think
Speaker 1: really does suggest that we start see more visible evidence
Speaker 1: of that cyclical pickup in inflation coming through and offsetting
Speaker 1: some of the headwinds that kept inflation so subdued last year. David,
Speaker 1: at the moment we witness what could be more evidence
Speaker 1: of a dysfunctional Washington d C over the last several months, though,
Speaker 1: what we got was the tax built for markets and
Speaker 1: for the investors that you speak with the fund managers
Speaker 1: at actor. Is it okay to have a dysfunctional d
Speaker 1: C again because we've got the tax bill and therefore
Speaker 1: investors have got what they wanted and nothing else matters. Well,
Speaker 1: I think markets have become used to dysfunction from Washington.
Speaker 1: Bear in mind, this is not something that's just come
Speaker 1: along with the Trump administration. We've seen this basically for
Speaker 1: the last six years of the Obama administration as well,
Speaker 1: So we now expect this sort of backdrop, I think,
Speaker 1: to some extent, as long as we see the implementation
Speaker 1: as the tax reform, which of course requires a budget
Speaker 1: to be enacted, rather than these continuing resolutions that we
Speaker 1: seem to be heading towards again at the end of
Speaker 1: this week. But by and Marge, as long as we
Speaker 1: get that tax reform come through, then we are going
Speaker 1: to see markets broadly satisfied. We don't expect to see
Speaker 1: too much more come from this administration, certainly not ahead
Speaker 1: of the midterms. David, I'm looking at my screen May
Speaker 1: Bloomberg screen equities, binds, currencies, commodities, and it's truly a
Speaker 1: too good to be true screen. What's There's always an
Speaker 1: exaginous shark at some point that gets in the way.
Speaker 1: What is it? Well, I think in the very short
Speaker 1: term we can look not only to the debate around
Speaker 1: fists or spending plans, but also to the possibility of
Speaker 1: trade or trade wars ramping up the agenda. Again, bear
Speaker 1: in mind that we've seen the Trumps administration bring forwards
Speaker 1: the reports it's going to get on steel production, to
Speaker 1: some expand on intellectual property. We do expect this to
Speaker 1: be included in the States of the Union. Could that
Speaker 1: provide the shock? Could we see a shock turning from China?
Speaker 1: It's very hard, as you know, to anticipate exactly what
Speaker 1: one of these shots could be coming for other forwards.
Speaker 1: But what we see from you know, the period of
Speaker 1: time that we haven't seen, for example, of correction in
Speaker 1: SMP over the last best part of a year. That's
Speaker 1: quite an unusual period. We would expect to see some
Speaker 1: correction comes through across the course of this year. They're
Speaker 1: not balanced. That's something that we think that will probably
Speaker 1: see the Federal Reserve have to pause at one point,
Speaker 1: even though generically it's looking to tighten conthropology across the board.
Speaker 1: I mean, an exager and shock Joan could be Milan
Speaker 1: went two games in a row. That would be a
Speaker 1: serious shock to my life. I can tell you that,
Speaker 1: David Page, Let's talk about trade and then we can
Speaker 1: talk about the Federal Reserve. On the trade issue, I
Speaker 1: can't think of a single subject over the last I
Speaker 1: don't know eighteen months that has consumed so much time
Speaker 1: and produced so little. Nothing has actually happened. Those fears
Speaker 1: have not materialized in any real way, shape or form.
Speaker 1: Will they well, to some extent they have. I mean
Speaker 1: we are in naptal negotiations. We are in a naptal
Speaker 1: negotiation that look continually and increasingly threatened to see the
Speaker 1: US pull out. Certainly, Nahal negotiations at this stage aren't
Speaker 1: making progress. We have seen the U s but let's
Speaker 1: be David, Eighteen months ago we were worried about a
Speaker 1: trade war between the United States and China. If I
Speaker 1: told you eighteen months ago that it's sitting here January eighteen,
Speaker 1: trade relations between China and the United States would be
Speaker 1: exactly the same, and for that matter, trade relations between
Speaker 1: the United States and pretty much the rest of the
Speaker 1: world would be very much unchanged. I think some people
Speaker 1: would have been surprised. Some may have been, but I
Speaker 1: don't think many. I mean, certainly we weren't. We suggested
Speaker 1: that the first outlook was going to be for the
Speaker 1: administration to deal with tax reform. They've done that. I
Speaker 1: think the trade issue is something that now comes into play,
Speaker 1: and more dramatically, could come into play if we see
Speaker 1: a significant deterioration in Republicans control of Congress at the midterms.
Speaker 1: Then you look to a president that still wants to
Speaker 1: talk to his base, and that looks to some of
Speaker 1: the remaining pools that he may have in the absence
Speaker 1: of control. I look at the Apple computer nine hundred
Speaker 1: and one billion dollar market cap, amazonic course over to
Speaker 1: standard deviations higher as well. David Page, you look at
Speaker 1: all this good feeling in America, do you believe within
Speaker 1: your economics? Do you believe in trickle down theory. Is
Speaker 1: all that I'm seeing on the Bloomberg screen as all
Speaker 1: that I'm witnessing here in London is a trickling down
Speaker 1: to the greater Republic. Yes, of it surely is. And
Speaker 1: what's been the remarkable thing as the last fifteen months
Speaker 1: has been the sharp pickup in sentiment and now that
Speaker 1: has delivered firm and growth. We were surprised to the
Speaker 1: upside to see two point three growth across the course
Speaker 1: of two thousand and seventeen. We forecast growth of two
Speaker 1: and a half percent in the US acceleration eight. The
Speaker 1: Bloomber consensus is for eason more than that, is at
Speaker 1: two point six. So yes, there is some growth coming
Speaker 1: through um and part of that, obviously is is the
Speaker 1: tax reform stimulus that we're seeing coming through. But I
Speaker 1: think the key question that we have is how sustainable
Speaker 1: is this? Do we see this seeing a pickup in
Speaker 1: business investment that raises sustainable growth in the States, And
Speaker 1: the answer to stay is no, we don't see that
Speaker 1: coming through. We still think that sustainable growth is somewhat
Speaker 1: more subdued. And I think this period of very welcome
Speaker 1: robust growth coming from the US is something that's like
Speaker 1: to fade over the coming couple of years. I mean,
Speaker 1: I'm looking Jannsfu, I did not realize that, David Page
Speaker 1: brilliant on this Bloomber consumer Comfort index is above where
Speaker 1: it was in the spring of two thousand and seven.
Speaker 1: I didn't know that. Should I put that chart out
Speaker 1: and do it? Radial sees it first, do it? We
Speaker 1: should do that. The soft data and the hard data
Speaker 1: really picking up in the United States. David, I think
Speaker 1: something that's a confused some not many, A lot of
Speaker 1: people in the markets kind of understand what's happening in
Speaker 1: the effects market. But for you, David, can you explain
Speaker 1: this dollar weakness? Well, I think there's a couple of things.
Speaker 1: I think in the short term, there are some risks
Speaker 1: and we're thinking again, trade, were thinking again, government shutdown.
Speaker 1: But I think it's much bigger than this. I think
Speaker 1: what we're seeing is a sickly call development come through.
Speaker 1: Here is a consistent scene that as we move towards
Speaker 1: the later stages of global economic growth, a point where
Speaker 1: we start to see commodities starting to pick up, that
Speaker 1: the dollar tends to underperform. Many of us and looked
Speaker 1: the sort of short term relationship between the dollar and
Speaker 1: interest rate differentials, and that of course leads us to
Speaker 1: suggest both the Federal Reserve is tightening monetary policy other
Speaker 1: jurisdictions are only considering this over the medium term, so
Speaker 1: surely the dollar should rise. But think back to two
Speaker 1: thousand and four two thousand six, the last time we
Speaker 1: went into a sort of to war to the end
Speaker 1: of a cycle. Here we saw the Federal is a
Speaker 1: consistently tightening monetary policy, and yet trade weighted dollar fell
Speaker 1: by about five and a quarter percent from the start
Speaker 1: of A four to the end of O six. This
Speaker 1: is a consistent theme. It reflects the fact that yes,
Speaker 1: the US is doing well, but to some extent that's
Speaker 1: in the price that dollars appreciated markably over the last
Speaker 1: four or five years um and looks relatively expensive. Now
Speaker 1: many investors are thinking that other regions of the globe
Speaker 1: may actually be doing better as well, and so it's
Speaker 1: a relative story coming through. David. Thank you so much,
Speaker 1: David Page access accent indefinitely. Managers really appreciate his attendance.
Speaker 1: John Farrell in New York, I'm champ Keen in London
Speaker 1: and with us and Lindsay Pieza joins us DR Pieza,
Speaker 1: where's your run rate and g d P. Can you
Speaker 1: get to a Trumpian three percent or are you more
Speaker 1: subdued for the fourth quarter. I think we're still looking
Speaker 1: for something below three percent, and we did see the
Speaker 1: consumers still on very solid footing, but there's several other
Speaker 1: pieces that just seemed to have lost momentum as we
Speaker 1: did a final quarter of the year. So I think
Speaker 1: three percent is very optimistic. I think a strong two
Speaker 1: ish percent is really what we're going to be seeing.
Speaker 1: Where are those momentum dampeners? I mean, it's Steve Nicholas,
Speaker 1: You've got a great pulse of a huge body of
Speaker 1: the nation away from the three zip codes on Global
Speaker 1: New York Wall Street. Where where have we slipped or stumbled? Well,
Speaker 1: I think a good lost momentum surround what we saw
Speaker 1: out of Washington. There was a lot of euphoria, a
Speaker 1: lot of excitement built into the marketplace. Consumers were actually
Speaker 1: going out and spending an anticipation of receiving larger refund checks.
Speaker 1: But I think there was some disappointment when we actually
Speaker 1: saw the numbers of the amount of additional after tax
Speaker 1: income that consumers can expect to receive uh come with
Speaker 1: those refunds, and so I think some of the realization
Speaker 1: that the tax reform will not be a silver bullet,
Speaker 1: will not be a flip the switch scenario to five
Speaker 1: or six percent, as the President I believe I promised
Speaker 1: at one point. I think that alone is starting to
Speaker 1: eat into some of this confidence, both on the consumer
Speaker 1: side as well as on the business side. Within that
Speaker 1: lindsay is I guess the consumer John and I are
Speaker 1: looking at the screen down thousand eleven on futures, SMP,
Speaker 1: it's a melt up. Why are we seeing the melt up?
Speaker 1: As you look through the prism of economics, Well, the
Speaker 1: equity market seems to benefit regardless of what the outcome
Speaker 1: of tax reform is. If we do in fact see
Speaker 1: organic growth companies taking that additional cash, putting that to work,
Speaker 1: growing their business, increase hiring, which eventually will lead to
Speaker 1: upward pressure on wages. And GDP does seem to see
Speaker 1: a sizeable increase maybe of one to two percentage points
Speaker 1: above this trend rate, Well, that's fantastic for the equity market.
Speaker 1: On the flip side, if we see inorganic activity with
Speaker 1: this increase in cash for corporations, meaning they keep the
Speaker 1: cash on the balance sheet, or corporation it is debt
Speaker 1: or buy back stock. Well, guess what. That's also fantastic
Speaker 1: for the equity market, at least in the near term.
Speaker 1: It does seem as if it's a win win for equities.
Speaker 1: But longer term, unless we see the underlying momentum of
Speaker 1: the economy pick up to justify where these levels are,
Speaker 1: we would expect at some point a correction back down
Speaker 1: to the more realistic two ish economy that we're seeing
Speaker 1: out in the marketplace. Lindsay, away from equities elsewhere on
Speaker 1: the screen, you've got all the ingredients a recipe for
Speaker 1: a pickup in inflation. You've got crude approaching seventy dollars
Speaker 1: a barrel a US dollar, that's the weakest has been
Speaker 1: in about three years. You've mentioned some of the economic
Speaker 1: indicator's unemployment, et cetera, pointing to a really tight labor market,
Speaker 1: not just here in the United States but elsewhere as Wow,
Speaker 1: how does J. Powell at the Federal Reserve guide the
Speaker 1: market through that? This year? Just three are protected? Three
Speaker 1: hikes moved to four. Well, actually, I think the risk
Speaker 1: is to the downside. I think we're going to see
Speaker 1: fewer rate hikes than the SET is promising, and it's
Speaker 1: because of that inflation conundrum and the idea that we've
Speaker 1: seen this this equation that that's perfectly which should be
Speaker 1: perfectly baking inflation into the cake, has not been and
Speaker 1: I don't see any evidence that that's going to change.
Speaker 1: Particularly from the labor market standpoint. We've seen the unemployment
Speaker 1: rate well within the sets target range of full employment
Speaker 1: for years now, and yet that hasn't translated into wage pressures.
Speaker 1: Why because the civilian unemployment rates, in our opinion, no
Speaker 1: longer captures the true health of the labor market. And
Speaker 1: when we look at all the structural changes that are occurring,
Speaker 1: it's actually more keen to eight or nine percent unemployment.
Speaker 1: And I don't see that evaporating and don't see corporations
Speaker 1: absorbing that pool of available labor anytime soon. Even if
Speaker 1: we use the investment pick up, it's mostly the structural
Speaker 1: or equipment side as opposed to the employee side. So
Speaker 1: I do think inflation is going to continue to invade
Speaker 1: us for making it very difficult for a power fed
Speaker 1: to push through three rate hypes. Lindsay px stay fold
Speaker 1: the chief Economists joining us to discuss the economic in
Speaker 1: the United States of America and what it means for J.
Speaker 1: Powe and the Federal Reserve. It is our pleasure now
Speaker 1: to introduce Neil Ferguson. He is a noted author, but
Speaker 1: his most recent book is entitled The Square and the Tower,
Speaker 1: Networks and Power from the Freemasons to Facebook, and he
Speaker 1: joins us here in our eleven three oh studio. Neil,
Speaker 1: thank you very much for being here and congratulations on
Speaker 1: the new book. Let's begin with a part of the
Speaker 1: sort of thought I think that runs through this, which
Speaker 1: is the lesson of history and this is your writing,
Speaker 1: is that trusting in networks to run the world is
Speaker 1: a recipe for anarchy. I wonder how you could connect
Speaker 1: that with your desire to actually write the book. Well,
Speaker 1: we live at a time when the people who run
Speaker 1: giant online social networks, people like say Mark Zuckerberg, have
Speaker 1: been arguing everything is going to be awesome if we're
Speaker 1: all connected. I mean, that has been the riff out
Speaker 1: of Silicon Valley for the better part of twenty years.
Speaker 1: And yet we saw in Sien that if you allowed
Speaker 1: giant online social networks to play a big part in politics.
Speaker 1: What you end up with is far from the global
Speaker 1: community that Zuckerberg has talked about, and you actually end
Speaker 1: up with polarization, extraordinary polarization between left and right. That's
Speaker 1: a characteristic feature of Facebook and Twitter. And you end
Speaker 1: up with crazy stuff going viral because the social networks
Speaker 1: that we've created don't really care if something is true
Speaker 1: or false. They just care if it's engaging two users.
Speaker 1: So I think simply looking at the recent history of
Speaker 1: very large online social networks, you can see how disruptive
Speaker 1: they can be. And if you imagine a world that
Speaker 1: is organized around network platforms, and some people have argued
Speaker 1: for this, there's a kind of utopian streak out there
Speaker 1: arguing that we should we should run the whole world
Speaker 1: this way, then I think you end up with something
Speaker 1: closer to anarchy. So the book is an attempt to
Speaker 1: teach some history to Silicon Valley and people who work
Speaker 1: in the tech industry, but it's also an attempt to
Speaker 1: teach some technology, some network science to people who are
Speaker 1: interested in history. Because actually that's a that's a ven
Speaker 1: diagram where the two circles basically scarcely Overllow speak if
Speaker 1: you can about the concept of hierarchy. I got that
Speaker 1: far into the book over the weekend, and I'm just
Speaker 1: wondering if you could explain the historical antisty eadments for
Speaker 1: hierarchy and how they fit into our modern understanding of it. Well,
Speaker 1: most of history isn't very networking. I mean most of history,
Speaker 1: these distributed social networks are quite weak compared with hierarchical
Speaker 1: structures like governments, states, armies, bureaucracies, churches. Most of history
Speaker 1: is quite hierarchically organized. There's in most human organizations somebody
Speaker 1: in charge. This may even be true of Bloomberg. I
Speaker 1: have heard of have heard tell of a very powerful
Speaker 1: man in this building. So most institutions are pretty hierarchical.
Speaker 1: It's unusual for distributed social networks to be more powerful,
Speaker 1: to be able to disrupt hierarchical order. That has happened
Speaker 1: really only a couple of times in history, and I
Speaker 1: talk about not only our own time, which is is familiar,
Speaker 1: but also about that time after the printing press spread
Speaker 1: across Europe, when a network created by the printing press
Speaker 1: was so powerful that it was able essentially to disrupt
Speaker 1: the power of the pope and a great many monarchs.
Speaker 1: So this is the kind of story. There are these
Speaker 1: periods where networks get empowered. It's usually because of a
Speaker 1: technolog technological change, and at those times the hierarchical structures
Speaker 1: can be weakened and even overthrown. Neil Ferguson with his
Speaker 1: folks on his wonderful, hugely thought provoking book The Square
Speaker 1: and the Tower. This is a book where all the
Speaker 1: sertitude of Silicon Valley goes right up the window. H Neil,
Speaker 1: you dovetail at nicely chapter forty five, Henry Kissinger's Network
Speaker 1: of Power. You've written a definitive one volume and the
Speaker 1: young Kissinger in his path. How do you dovetail dr
Speaker 1: Kissinger into the modern day certitude of Silicon Valley? Well, Tom,
Speaker 1: I think it was partly writing the Kissinger biography that
Speaker 1: made me start thinking about networks. I have a hypothesis
Speaker 1: about my second volume, which I still have to write,
Speaker 1: of his life, and I don't know your breath, it
Speaker 1: could be a few years. The hypothesis is that the
Speaker 1: reason Kissinger, who was clearly a powerful intellect by six
Speaker 1: and a very fluential public intellectual, became so politically powerful
Speaker 1: to the point that he really became the most powerful
Speaker 1: man after the president in two administrations had to do
Speaker 1: with his extraordinary skill as a networker. And despite his
Speaker 1: relatively academic background, Kistener proved extraordinarily adept at networking when
Speaker 1: he got to Washington, not only within the government, but
Speaker 1: more interesting outside the government. So I was thinking a
Speaker 1: lot about networks, and I decided, look, before I can
Speaker 1: write volume two, I have to get my head around
Speaker 1: networks as a general phenomenal of it. I mean, I've
Speaker 1: seen you Neil work, the Belvedere Hotel, the bar, there
Speaker 1: were the twenty six dollar barley soup and the meat loaf.
Speaker 1: Like nobody, I believe the President United States is gonna
Speaker 1: wander up Happy Valley. You talk about the triumph of
Speaker 1: Davos Man, Well, the president triumph in Davos, Well, I
Speaker 1: don't think they're going to pelt him with rotten eggs
Speaker 1: or even bread rolls. Because although Davos can't what Donald
Speaker 1: Trump stands for, certainly on policy. They can't bear the protectionism,
Speaker 1: they can't bear the nativism, they can't bear the lapses
Speaker 1: into racism. On the other hand, he's the most powerful
Speaker 1: man in the world. Sorry, he jan Ping You're not
Speaker 1: as powerful as the president of the United States just yet,
Speaker 1: whatever the economists may tell the world, and I think
Speaker 1: that's ultimately does love power. So I suspect he'll get
Speaker 1: a kind of frosty but polite hearing, and if he
Speaker 1: gives a speech like the one he gave in Wars
Speaker 1: or last year, it'll be hard for them to to
Speaker 1: boo and hiss uh. The other other points to notice
Speaker 1: is that you know, when Trump makes his anti globalization arguments,
Speaker 1: ordinary Swiss people are nodding their heads. So whatever they
Speaker 1: may be saying in the conference room, and you and
Speaker 1: I know the kind of people who end up there
Speaker 1: out there in German speaking Switzerland, I think most people
Speaker 1: basically agree with Trump's critique of globalization, and especially with
Speaker 1: his line on immigration. Neil, just to follow up, you
Speaker 1: mentioned China and j Ping. Let's begin by your thoughts
Speaker 1: on how networks have developed within China, both politically but
Speaker 1: also culturally. China's fascinating and I just got back from there,
Speaker 1: actually went on a on a trip to hang Jo
Speaker 1: to see Ali Baba jack Mars headquarters, and what's very
Speaker 1: striking is that the Chinese have evolved a completely different
Speaker 1: model of the relationship between giant technology companies and government.
Speaker 1: Here we basically have the separation of powers. Silicon Valley
Speaker 1: hates the Trump administration and the feelings pretty much mutual
Speaker 1: no matter how much the president uses the network platforms.
Speaker 1: There's really quite a tension, I think, and I think
Speaker 1: that tension will will grow. But in China, essentially the
Speaker 1: big companies by Do Ali, Baba, ten Cent, the so
Speaker 1: called b A t or Bat companies are subordinates to
Speaker 1: the government. And when you see Jack mal together with
Speaker 1: Shiji and Ping, there's no doubt who the senior outner is.
Speaker 1: So that's a completely different model and it's going to
Speaker 1: be fascinating to see how the two co exists. Neil Ferguson.
Speaker 1: He is the author of the latest book called The
Speaker 1: Square and the Tower. Networks and Power from the Freemasons
Speaker 1: to Facebook. Thanks for listening to the Bloomberg Surveillance podcast.
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Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
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Speaker 1: I'm Bloomberg Radio