WEBVTT - M&A Roars Back in $40 Billion Surge 0:00:01.320 --> 0:00:05.680 This is Bloomberg Business Week inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.440 --> 0:00:13.640 global business, finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Manser and Tim stinebec from Bloomberg Radio. 0:00:20.000 --> 0:00:21.920 As we promised, we wanted to get to a few 0:00:21.920 --> 0:00:24.639 of the most read stories on this Monday. This next 0:00:24.680 --> 0:00:28.840 one included. It's about how em and A bankers they're 0:00:28.960 --> 0:00:31.040 kind of busy again after the slowest start two year 0:00:31.080 --> 0:00:33.240 in two decades. I mean, Tim, there was a bunch 0:00:33.240 --> 0:00:35.800 of stuff going on over the weekend apparently, Yeah, more 0:00:35.840 --> 0:00:38.680 than forty billion dollars plus and potential transactions came to 0:00:38.800 --> 0:00:41.200 light over the weekend. And what does it say about 0:00:41.200 --> 0:00:43.560 deal activity in the broader market environment? Just a handful 0:00:43.600 --> 0:00:45.760 of the questions we want to get to with Bloomberg 0:00:45.760 --> 0:00:48.120 News Deal's reporter Crystal Ce, who's right here in the 0:00:48.120 --> 0:00:51.559 Bloomberg Interactive Broker's studio. Okay, So, so first up, um, 0:00:51.760 --> 0:00:55.560 just remind us how bad it was and where we 0:00:55.600 --> 0:01:00.240 are so far in so two was not great m 0:01:00.280 --> 0:01:04.240 and a volume for investment banks down thirty one percent 0:01:04.400 --> 0:01:08.560 last year, So bankers are getting smaller bonuses and January 0:01:08.840 --> 0:01:11.280 the last month there was a quite as like Harrow said, 0:01:11.600 --> 0:01:13.759 since two thousand and three for the beginning of the year. 0:01:13.840 --> 0:01:17.119 So it had lousy last year, right, it was bad. 0:01:17.200 --> 0:01:19.039 It was not good, and it was it was a 0:01:19.040 --> 0:01:22.080 couple of different reasons. People are not confident because of 0:01:22.160 --> 0:01:24.800 the financing market, and when you have a tough financing market, 0:01:24.840 --> 0:01:29.080 traditional lenders get very jittery about um, you know, giving 0:01:29.120 --> 0:01:33.280 out loans and a lot of banks actually incurred losses 0:01:33.720 --> 0:01:36.520 and these big LBO transactions and that made them even 0:01:36.600 --> 0:01:39.440 less confident later on in the year. So a lot 0:01:39.480 --> 0:01:42.800 of these reasons, combined with management not feeling like, you know, 0:01:42.880 --> 0:01:46.560 they could do a transaction easily, also made the mn 0:01:46.600 --> 0:01:51.040 A transaction volume go down. But this Monday we finally 0:01:51.080 --> 0:01:54.240 have a merger Monday, um in the second month of 0:01:54.240 --> 0:01:57.560 the year. So um, it's interesting. It's also across different sectors, 0:01:58.200 --> 0:02:00.240 so let's talk about it. Because mining see to be 0:02:00.280 --> 0:02:02.520 a big one. Mining is a big one. We don't 0:02:02.520 --> 0:02:04.640 really see many mining views, so when we do is 0:02:04.680 --> 0:02:08.440 gigantic and like this one. Um, there's the US and 0:02:08.520 --> 0:02:13.680 Australia angle here on New Amount and Australia's new Cast 0:02:13.800 --> 0:02:16.799 Mining announced the merger as the biggest deal this year, 0:02:16.800 --> 0:02:20.040 so for US seventeen billion. And we also see things 0:02:20.080 --> 0:02:25.000 across UM storage self storage. There is Financial Services with 0:02:25.160 --> 0:02:29.160 Rothschild family trying to take the company private. UM four 0:02:29.200 --> 0:02:31.600 billion US not the biggest deal but as a name 0:02:31.600 --> 0:02:34.320 that we all follow. Yeah, absolutely are there are there 0:02:34.320 --> 0:02:37.640 big pictures that it can paid for us about what 0:02:38.840 --> 0:02:40.359 is going to look like when it comes to the economy. 0:02:40.400 --> 0:02:43.799 Is there more certainty here? Finally, I think it all 0:02:43.800 --> 0:02:46.640 comes down to interest rate and the financing market. A 0:02:46.639 --> 0:02:51.800 lot of these steo's most LBOs hinge on leverage, leverage buyouts, right, 0:02:51.919 --> 0:02:55.359 So as long as the financing markets improves, we will 0:02:55.440 --> 0:02:57.919 see more deals come back, and we also see the 0:02:57.960 --> 0:03:01.440 comeback of UM private enders. A lot of these private 0:03:01.440 --> 0:03:04.919 equity firms now have credit um that they're willing to back, 0:03:05.000 --> 0:03:07.399 not their own but some of other people, so other 0:03:07.400 --> 0:03:10.720 start private credit market. Right. That really seems like everybody 0:03:10.760 --> 0:03:13.200 was talking about big time last year. That's right. So 0:03:13.280 --> 0:03:16.960 private credits an alternative resource the company can use to 0:03:17.040 --> 0:03:19.320 tap uh the m and a market. But also there's 0:03:19.360 --> 0:03:22.000 something called you know, seller's assistant. So if you're a 0:03:22.040 --> 0:03:25.880 friendly acquirer, you can negotiate with the seller and they 0:03:25.919 --> 0:03:28.359 can give you a little bit of a cushion, give 0:03:28.400 --> 0:03:30.079 you write a check, or you can pay them back 0:03:30.120 --> 0:03:32.560 later on. So there are many ways you can you 0:03:32.600 --> 0:03:33.880 can try to get a deal done, but you have 0:03:33.919 --> 0:03:35.880 to be creative in this market. We've certainly seen rates 0:03:35.920 --> 0:03:39.040 go down at least as a result of what you know, 0:03:39.120 --> 0:03:41.000 bond traders think is going to happen and what the 0:03:41.040 --> 0:03:42.600 feed is going to do. But at the same time 0:03:42.840 --> 0:03:45.600 j Powell has said, uh, you know, may not cut 0:03:45.680 --> 0:03:47.360 rates this year. We've got a lot of work to do. 0:03:47.800 --> 0:03:49.640 I've been kind of beating that drum for almost a 0:03:49.680 --> 0:03:54.760 week now. Has the has the credit market changed? Yeah, 0:03:54.880 --> 0:03:59.280 so financing market is still tough. It's not drastically improved 0:03:59.320 --> 0:04:01.880 compared to to last year. So I don't think immediately 0:04:02.240 --> 0:04:04.680 we will see a flurry of transactions and we will 0:04:04.720 --> 0:04:07.320 see many many murger mondays from now on. And you 0:04:07.320 --> 0:04:10.880 can also see that reflecting in Wall Street personnel changes. 0:04:11.000 --> 0:04:14.160 You see a lot of layoff across Wall Street and 0:04:14.520 --> 0:04:17.000 including in the deal space, including in the deal space 0:04:17.160 --> 0:04:19.320 M and A M and A bankers and not having 0:04:19.400 --> 0:04:23.040 us tough a time compared to the capital markets bankers. 0:04:23.080 --> 0:04:26.120 But you also see that, you know, banks are expecting 0:04:26.360 --> 0:04:29.719 less work in transactions and therefore they need less people. 0:04:30.080 --> 0:04:32.479 So just because we're seeing some activity doesn't necessarily mean 0:04:32.480 --> 0:04:34.840 we're going to see a bunch more this year. Not 0:04:34.880 --> 0:04:38.680 necessarily immediately, but um, a lot of dealmakers are saying 0:04:38.680 --> 0:04:41.800 that in the second half we could expect more. I 0:04:41.839 --> 0:04:44.400 am also curious that if we continue to see some rises. 0:04:44.440 --> 0:04:46.120 I know in equities were seeing a little bit of 0:04:46.120 --> 0:04:49.039 a different tone certainly today and I felt like you know, 0:04:49.120 --> 0:04:52.720 late last week. But if we continue to see markets 0:04:52.760 --> 0:04:54.920 go up, are we likely to see more kind of 0:04:54.960 --> 0:04:57.960 stock deals being done because they've just got a greater currency. 0:04:57.960 --> 0:05:00.760 I mean, obviously the targets, if they're public, potentially have 0:05:00.800 --> 0:05:03.799 gotten than more expensive as well, But does that often 0:05:03.880 --> 0:05:06.160 lead to more deals as well? Yeah, we're seeing some 0:05:06.200 --> 0:05:08.800 stock to It was actually just as sweet. Yesterday there 0:05:08.880 --> 0:05:12.280 was a hostel Um takeover. There was a bear hug 0:05:12.360 --> 0:05:15.680 letter where one storage company was trying to acquire the 0:05:15.720 --> 0:05:18.920 other one in an all stock merger. And not only 0:05:18.960 --> 0:05:21.479 are they giving stocks, they're also putting in an extra 0:05:21.560 --> 0:05:24.320 dividend as a sweetener. So there many ways you can 0:05:24.320 --> 0:05:28.880 structure deals and but equity, you know, it's not traditionally 0:05:28.880 --> 0:05:33.080 the most attractive, and when you have a shareholder on 0:05:33.200 --> 0:05:37.960 board members trying to evaluate these transactions, it's going to 0:05:38.040 --> 0:05:40.720 do less appealing than an all cash transaction. They talk 0:05:40.720 --> 0:05:42.800 a little bit more about private credit. Carroll alluded to 0:05:42.839 --> 0:05:44.320 that the fact that you know, I think you were 0:05:44.320 --> 0:05:46.960 referring probably to when we're at Milk and Carroll Private credit, 0:05:47.320 --> 0:05:50.719 Private market of last year. Yes, it was we talked 0:05:50.839 --> 0:05:54.680 so much about private credit. What does that look like? Yeah, 0:05:54.680 --> 0:05:58.240 private credit is a really really big topic. Every private 0:05:58.240 --> 0:06:01.360 equity firm that's well refirmed the start as a private 0:06:01.480 --> 0:06:06.880 refirm as pivoted well also diversified into private credit. And um, 0:06:06.920 --> 0:06:09.960 it's interesting because I mean, people talk about the potential 0:06:10.040 --> 0:06:13.320 conflict of interest here right when you're you're really pricing 0:06:13.360 --> 0:06:17.560 things properly. But it's obviously a huge pool of capital, 0:06:17.880 --> 0:06:20.040 and it adds on top of whatever private equity of 0:06:20.040 --> 0:06:23.360 already raised in their regular funds. So it's an interesting 0:06:23.440 --> 0:06:28.320 it's an interesting pool of resources. But obviously traditional investment 0:06:28.320 --> 0:06:31.080 banks lenders are still the bread and butter, or the 0:06:31.200 --> 0:06:35.200 still main source of capital in this M and A market, Chrystal, 0:06:35.240 --> 0:06:37.800 what are you hearing in terms of from bankers specifically? 0:06:37.839 --> 0:06:39.640 Are they saying, what, We've got a lot of things 0:06:39.680 --> 0:06:42.080 in the pipeline. People are just waiting to pull the trigger. 0:06:42.440 --> 0:06:43.920 We just want to kind of get a little bit 0:06:43.920 --> 0:06:46.560 more certainty about what the Fed is doing and what 0:06:46.600 --> 0:06:48.479 the economy is doing. Yeah, I think the joke is 0:06:48.520 --> 0:06:52.640 that you will never encounter banker that is not optimistic. 0:06:53.680 --> 0:06:56.559 So there are always something that they're working on. Um. 0:06:56.720 --> 0:06:59.200 I don't think anyone can very confidently say that there 0:06:59.240 --> 0:07:01.560 will be megat us in a for us half, but um, 0:07:01.600 --> 0:07:04.040 there's It's like what Neil Cashcari told the New York 0:07:04.040 --> 0:07:06.520 Times last month, right, and it's quoted in the cover 0:07:06.640 --> 0:07:09.800 of a business week. It's a notoriously optimistic crowd on 0:07:09.840 --> 0:07:13.360 Wall Street. It is true, right, right, there's optimism at there. 0:07:13.440 --> 0:07:15.440 So what are you keeping an eye on? Are there 0:07:15.520 --> 0:07:18.480 certain sectors that nonetheless you guys are reporting on stuff, 0:07:18.480 --> 0:07:20.600 you know, waiting for things to happen, But in the meantime, 0:07:21.000 --> 0:07:22.520 you know, you're also just kind of trying to read 0:07:22.560 --> 0:07:25.080 the tea leaves, So what what do you kind of follow? 0:07:25.480 --> 0:07:28.880 So there are a lot of activism going on right now. Um, 0:07:29.520 --> 0:07:32.080 we just came out of the salesforce Elliott that hasn't 0:07:32.120 --> 0:07:36.480 really entirely settled. Um this week there are some ip 0:07:36.600 --> 0:07:39.400 O coming back actually, um so green shoes of the 0:07:39.400 --> 0:07:41.640 markets coming back. There are three d O that supports 0:07:41.640 --> 0:07:46.160 Surprise just this week. So it's not really M and A. 0:07:46.400 --> 0:07:49.480 But people in the deals world are doing work. Are 0:07:49.480 --> 0:07:52.520 you watching Disney with the activism too as well? Yeah, 0:07:52.560 --> 0:07:55.280 Pels is getting really busy with that and with his 0:07:55.400 --> 0:07:59.120 consumer company. He's also in unit leaver um so destinitely 0:07:59.120 --> 0:08:01.080 it's a really interesting such what about when it comes 0:08:01.080 --> 0:08:03.320 to private equity firms that are going after targets that 0:08:03.360 --> 0:08:04.920 have been beat up in the public markets? Do you 0:08:04.960 --> 0:08:06.920 think we see more take privates. So a lot of 0:08:06.920 --> 0:08:09.960 the ip O that when the company that went public 0:08:09.960 --> 0:08:11.600 in the past two years, actually a lot of them 0:08:11.600 --> 0:08:15.640 are trading way below offer price and that means they 0:08:15.640 --> 0:08:18.640 could be prime target for private equity. And we have 0:08:18.720 --> 0:08:22.440 seen some of these studios pan out and even um 0:08:22.600 --> 0:08:25.120 the companies for instance like Webber, the Bobby Cue grow 0:08:25.160 --> 0:08:29.160 Company was taken private by the b DT, which was 0:08:29.200 --> 0:08:32.160 a private and they just went publicly just went public 0:08:32.200 --> 0:08:34.240 like they went public during the pandemic, right they did, 0:08:34.240 --> 0:08:37.880 went yes, And it was like the whole you know, Tragger, Webber, 0:08:38.240 --> 0:08:42.000 Solo Stove were all outside and carols outside grin grill 0:08:42.040 --> 0:08:44.880 and all are impossible and beyond burgers, that's a no, 0:08:45.240 --> 0:08:47.960 that's a no. Astud Well know, Um, I am curious. 0:08:48.040 --> 0:08:51.040 Are you hearing anything when it comes to deal activity 0:08:51.080 --> 0:08:55.800 interest in things AI related? Oh? Um, you could say no, 0:08:56.840 --> 0:08:59.320 although the stacks, I mean they're really on the move. 0:08:59.480 --> 0:09:02.000 Any kind a little player that's got an AI connection, 0:09:02.760 --> 0:09:04.719 Well we aren't, but I mean they can probably help 0:09:04.800 --> 0:09:08.440 us write some stories. And now I'm like, I don't 0:09:08.559 --> 0:09:11.480 say that. Don't say that. Um, Crystal, thank you so much. 0:09:11.520 --> 0:09:13.240 Gut check on what's going on with M and A. 0:09:13.320 --> 0:09:15.880 Crystal C. She's deals reporter here at Bloomberg News, here 0:09:15.880 --> 0:09:17.959 in our interactive broker studio. I mean, we're going to 0:09:18.040 --> 0:09:20.280 talk about this with our colleagues in a little bit. 0:09:20.280 --> 0:09:23.520 But those AI stocks are just it's like seen all 0:09:23.520 --> 0:09:25.280 over again when they put blockchain like what was that 0:09:25.360 --> 0:09:27.680 long island ice T blockchain company and then the stock 0:09:27.720 --> 0:09:30.319 shot up as a result of that. It's so remember 0:09:30.360 --> 0:09:33.640 that just be like blah blah blah blah blah AI. Yeah, 0:09:33.960 --> 0:09:36.800 and you're often running it's pretty incredible, um, some of 0:09:36.800 --> 0:09:38.440 these stocks. So if you take a look at the 0:09:38.480 --> 0:09:40.440 big picture, Carol, like back to the I p O days, 0:09:40.480 --> 0:09:43.000 like C three dot AI for example, Uh, it's not 0:09:43.040 --> 0:09:45.040 even close to where it was when I P NO. 0:09:45.120 --> 0:09:48.600 A little perspective right right exactly. And they're pretty small cap, 0:09:48.640 --> 0:09:51.800 microcap kind of companies. But nonetheless, all of a sudden 0:09:51.880 --> 0:09:54.120 investors are looking at the group in a big way. 0:09:55.440 --> 0:09:59.920 This is Bloomberg Business Wait inside from the reporters and 0:10:00.040 --> 0:10:03.520 editors who bring you America's most trusted business magazine, plus 0:10:03.600 --> 0:10:07.760 bloom Business Finance and tech news. The Bloomberg Business Week 0:10:07.800 --> 0:10:12.720 podcast with Carol Messer and Tim stinebec from Bloomberg Radio. 0:10:13.960 --> 0:10:16.160 It's safe to say we are all a bit obsessed 0:10:16.200 --> 0:10:20.439 with chat chpt right since Microsoft's tenderly in all our investment. 0:10:20.520 --> 0:10:22.839 We are hearing about it in earnings calls. Google did 0:10:22.840 --> 0:10:25.960 their own, albeit much smaller, a ideal. We talked about 0:10:26.000 --> 0:10:28.240 it with Kathy would last week. And then there is 0:10:28.240 --> 0:10:30.760 a Bloomberg Business Week story that you can find online 0:10:30.760 --> 0:10:33.560 that definitely takes it into account. Year Tim put Chat 0:10:33.559 --> 0:10:36.480 GPT to the test on a Warden exam with more 0:10:36.520 --> 0:10:39.559 We've got. Demetri casedis a senior editor at a Bloomberg 0:10:39.600 --> 0:10:41.120 News on the Phone in New York City, along with 0:10:41.120 --> 0:10:44.160 the editor of Bloomberg Business Week, Joel Webber in our 0:10:44.200 --> 0:10:48.120 Bloomberg Interactive Broker's studio. So, Joel, how did chat g 0:10:48.520 --> 0:10:51.559 GPT do on that Warden exam? Well, we're gonna find out. 0:10:52.520 --> 0:10:55.840 I do think just in general, um, it is causing 0:10:55.920 --> 0:10:59.320 existential crazies everywhere you look, right, speak for yourself, man, Yeah, 0:10:59.400 --> 0:11:03.160 it's all gonna be great. The and I think you 0:11:03.160 --> 0:11:05.839 know an NBA or tests in general, I've heard from 0:11:05.880 --> 0:11:08.200 some professors who are like, I've had to up end 0:11:08.280 --> 0:11:13.079 my entire curriculum to account for uh Chat GPT UM, 0:11:13.240 --> 0:11:16.440 so that you know, proving that you know, AI program 0:11:16.480 --> 0:11:20.400 didn't actually do the student's own work. Um, AI my homework. 0:11:20.440 --> 0:11:27.400 I think we'll get easy. Uh So take us to Wharton, um, 0:11:27.480 --> 0:11:31.640 and the professor who you based the story around. Yeah, 0:11:31.720 --> 0:11:34.199 I mean I think those are all good points. Christian 0:11:34.200 --> 0:11:37.800 Turwich teaches at Wharton. And you know, it started as 0:11:37.840 --> 0:11:40.440 kind of a fun conversation over the holidays with his sons, 0:11:40.480 --> 0:11:44.640 who both have dealt with other I programs. Um, you know, 0:11:44.679 --> 0:11:48.200 we're we're intrigued by our B schools. Coverage sometimes is 0:11:48.840 --> 0:11:51.320 about research that can seal very out of touch with 0:11:51.360 --> 0:11:53.880 what's going on in the real world. And Professor Tourach 0:11:54.040 --> 0:11:56.920 was very quick and nimble to say, hey, let me 0:11:56.960 --> 0:11:59.160 see what this this thing is about. All the hubbub, 0:11:59.240 --> 0:12:00.800 let me give it in an exam. But I've given 0:12:00.840 --> 0:12:02.960 to my students. Um. It did quite well, it did 0:12:02.960 --> 0:12:06.120 above average, it got to be minus UM. But it 0:12:06.200 --> 0:12:09.640 is not you know, the context of a business school course, 0:12:09.640 --> 0:12:12.480 in a business school exam is not the kind of 0:12:12.520 --> 0:12:15.960 context in which you know, students can realistically put the 0:12:16.040 --> 0:12:18.800 chatbot to take the exam for them. That's not to 0:12:18.840 --> 0:12:22.079 say that the concerns of educators across the country, as 0:12:22.120 --> 0:12:24.679 the professor noted to me, are not legitimate. I mean, 0:12:24.720 --> 0:12:27.840 there are many educators with far fewer resources than a 0:12:27.880 --> 0:12:30.880 warton professor who do have to contend with the reality 0:12:30.880 --> 0:12:33.080 of how students are going to use this. He used 0:12:33.080 --> 0:12:35.240 this as a way to see what it's all about, 0:12:35.320 --> 0:12:37.680 and then as a way to say, hey, this is 0:12:37.760 --> 0:12:41.320 very powerful, it's doing quite well. It's answering in ways 0:12:41.360 --> 0:12:45.480 that legitimately might pass as a student, how can we 0:12:45.600 --> 0:12:48.640 use something like this more creatively in our in our classroom. 0:12:49.000 --> 0:12:51.640 Our job as educators is to really think about how 0:12:51.679 --> 0:12:54.720 to bring education along and be more creative and really 0:12:54.800 --> 0:12:58.040 spark imagination. And so this is the first step of 0:12:58.400 --> 0:13:00.719 this one professor in trying to do that. Did the 0:13:00.760 --> 0:13:04.920 professor give you any idea how he would actually use 0:13:04.960 --> 0:13:07.760 it in a classroom? Well, I mean he gave me 0:13:07.800 --> 0:13:10.040 an idea off of something that we talked about in 0:13:10.080 --> 0:13:14.280 the conversation. Like let's say he was teaching philosophy for example, 0:13:14.360 --> 0:13:16.760 not business. But you can swap out people. And I 0:13:16.840 --> 0:13:19.160 mentioned this in the Q and A, and and he says, 0:13:19.240 --> 0:13:21.600 you know, I want you to go back to your 0:13:22.400 --> 0:13:26.120 libraries and to your apartments and research you know, the 0:13:26.160 --> 0:13:30.000 work we studied on Sarta or on you know CAMU 0:13:30.080 --> 0:13:32.680 and Sarta. Write me a five hundred word essay on 0:13:32.720 --> 0:13:36.280 the differences between these two. Um. You know, they might 0:13:36.320 --> 0:13:39.080 go home and decide to have chat GPT write the 0:13:39.080 --> 0:13:41.560 paper for them. But what he might do that would 0:13:41.559 --> 0:13:44.800 be even more effective is have chat GPT really engage 0:13:44.840 --> 0:13:49.559 in a conversation. That's what these chats do with students, um, 0:13:49.640 --> 0:13:53.360 and step in as the philosophers, the French philosophers, and 0:13:53.440 --> 0:13:56.079 do something that might spark some more creative ideas with 0:13:56.120 --> 0:13:58.760 the students. And so he, as the as the professor, 0:13:59.080 --> 0:14:01.880 could certainly be in position to introduce the use of 0:14:01.880 --> 0:14:05.040 the chatbot in that way. Um dmit I gotta jump 0:14:05.080 --> 0:14:06.679 in for a second, because how did it do when 0:14:06.720 --> 0:14:09.480 it came to which I bet the whole student body 0:14:09.760 --> 0:14:12.360 universe is saying, I hope we can do math? How 0:14:12.360 --> 0:14:14.320 did it do on math? Oh? It doesn't. They don't 0:14:14.320 --> 0:14:16.240 do well on math, at least in this instance. And 0:14:16.320 --> 0:14:18.400 he said that that's something that you know, I think 0:14:18.400 --> 0:14:20.440 we see that across the universe of stories that have 0:14:20.480 --> 0:14:22.760 been done by Bloomberg and many others. What you said 0:14:22.840 --> 0:14:24.720 is true. Everybody's kind of been a frenzy about this 0:14:24.800 --> 0:14:27.520 right now. Mathematics it did not do well. And I 0:14:27.560 --> 0:14:29.840 mean Professor Turvich was very funny about that. I mean, 0:14:29.880 --> 0:14:32.880 it's like your your computer, dude, like you can't actually 0:14:33.000 --> 0:14:35.960 like put some numbers together. Um. And in fact, numbers 0:14:36.000 --> 0:14:38.040 is where it was really tripped up. And it was 0:14:38.080 --> 0:14:40.720 more in language that it was far more impressive and 0:14:40.920 --> 0:14:44.760 in logic and application of logic UM. So it was 0:14:44.800 --> 0:14:48.480 all around super surprising to him. I think that he, 0:14:48.640 --> 0:14:51.000 as well as many others who are engaging with chat 0:14:51.040 --> 0:14:52.880 GPT right now, it's a little tough to do. You 0:14:52.920 --> 0:14:55.800 go to the website, it's so popular, there are so 0:14:55.840 --> 0:14:57.920 many users that generally what you're going to get as 0:14:57.920 --> 0:15:01.040 a message that says chat QPT is capacity right now. 0:15:01.240 --> 0:15:03.560 So you can't try it because the world is trying 0:15:03.640 --> 0:15:06.920 chat g bt UM. But he did it. He did 0:15:06.920 --> 0:15:09.240 it quickly. He wrote a paper and he said, I 0:15:09.280 --> 0:15:12.000 was really impressed, and I think I'm gonna try to 0:15:12.280 --> 0:15:14.640 think more creatively about how to use this. And I 0:15:14.680 --> 0:15:17.040 think that in that context, I mean, I want to 0:15:17.040 --> 0:15:19.280 be clear, we came at it with a very specific 0:15:19.320 --> 0:15:23.360 sort of context of B schools, you know, teaching business, teaching, 0:15:23.400 --> 0:15:26.360 taste management and so on. You know, there's probably going 0:15:26.400 --> 0:15:28.800 to be space for something like this. It will emerge 0:15:28.800 --> 0:15:30.880 in time. I don't think that we have the answers 0:15:30.960 --> 0:15:33.520 right now in terms of like this semester, how is 0:15:33.600 --> 0:15:36.360 CHATCHI going to um, you know, a stand in for 0:15:36.480 --> 0:15:39.080 something in the curriculum, like we're not we're not there yet, 0:15:39.080 --> 0:15:44.440 but take that take that computer not a d Yeah, 0:15:45.360 --> 0:15:48.280 but yeah, I mean everything's on a curve in business 0:15:48.280 --> 0:15:50.640 school anyway. Yeah, so you know, it kind of doesn't matter. 0:15:51.280 --> 0:15:54.120 So one of the things that stuck out to me 0:15:54.320 --> 0:15:59.680 Dmitro is him saying, we are not running out of work. Um, 0:15:59.720 --> 0:16:02.840 but it is shifting is the efficiency frontier? And I'm curious. 0:16:02.840 --> 0:16:05.240 You know, this would be an optimistic take, I think 0:16:05.240 --> 0:16:07.680 on chat GPT, but but what what is it? What 0:16:07.840 --> 0:16:11.960 is the potential here in a classroom? I mean again, 0:16:12.000 --> 0:16:14.360 I think that there are ways he thinks to use 0:16:14.400 --> 0:16:16.600 it and engage it to be added and I hate 0:16:16.600 --> 0:16:20.680 to use the word additive, but to engage brains and 0:16:20.760 --> 0:16:23.600 students in a way that that there isn't time enough 0:16:24.000 --> 0:16:27.360 in the classroom. But it's to extend the learning that's 0:16:27.400 --> 0:16:29.960 already happening. You're going to the internet, you're looking for 0:16:30.120 --> 0:16:33.320 videos of things as it is, you're looking up resources. 0:16:33.600 --> 0:16:35.960 So this might take it to another level in which 0:16:36.080 --> 0:16:39.360 is not as passive, though it might be more active. Um. 0:16:39.760 --> 0:16:42.560 He does have a far more or let's say, positive 0:16:42.560 --> 0:16:45.440 and optimistic view, which is that these things should be 0:16:45.680 --> 0:16:49.080 seen as tools that are very innovative and technologically advanced, 0:16:49.480 --> 0:16:52.280 that that we should not really be so fearful of 0:16:52.320 --> 0:16:55.520 them as replacements for actual people in many settings. I 0:16:55.520 --> 0:16:57.920 meant you wrote this Q and A, not chat GPT. 0:16:58.080 --> 0:17:01.240 Are you sure? Though I'm not sure? Did a robot 0:17:01.280 --> 0:17:05.600 do this interview? The Big secret Um? It's so funny. 0:17:05.600 --> 0:17:07.520 I mean, I was just reading an interview that a 0:17:07.640 --> 0:17:09.879 former colleague of mine from a time I worked at 0:17:09.920 --> 0:17:12.240 a company called The American Lawyer. He did a Q 0:17:12.400 --> 0:17:15.120 and A with chat GPT and just posted it on LinkedIn, 0:17:15.560 --> 0:17:18.800 and he's asking chat GPT like, if Mike wants to 0:17:18.800 --> 0:17:21.399 sponsor you, will you will you accept the sponsorship? And 0:17:21.480 --> 0:17:24.919 chat GPT is like, I am an open platform. I 0:17:25.000 --> 0:17:27.040 am not somebody who's going to give in to open 0:17:27.080 --> 0:17:30.440 spot to sponsorship by private interest. It's a very interesting 0:17:30.960 --> 0:17:33.800 it's a very interesting back and forth, and it's actually 0:17:33.840 --> 0:17:39.320 like a real engaged, like intelligent conversation that this individual has. 0:17:39.320 --> 0:17:41.720 Everyone sells for a price stroll right too. You know, 0:17:41.840 --> 0:17:46.320 it's not I can't wait for Google's bar, which you 0:17:46.359 --> 0:17:48.520 know is also in the headlines now to have a 0:17:48.520 --> 0:17:54.320 competition or a conversation that's ai optimistic name. We gotta run. 0:17:54.400 --> 0:17:58.520 Joel Dmitro, thank you you're listening to the Bloomberg Business 0:17:58.600 --> 0:18:01.600 Week podcast. Catch us live week days from two to 0:18:01.680 --> 0:18:05.680 five pm Eastern on Bloomberg Radio, the Bloomberg Business Band 0:18:05.760 --> 0:18:08.639 you Doo. You can also listen live to our flagship 0:18:08.680 --> 0:18:12.840 New York station, Just say Alexa, play Bloomberg even Dirty. 0:18:14.400 --> 0:18:16.280 All Right, I've got to say it's the thing we've 0:18:16.280 --> 0:18:18.560 talked a lot about. Is that captivated us for over 0:18:18.600 --> 0:18:20.560 a week. It was the opening skate for SNL this 0:18:20.680 --> 0:18:23.359 past weekend. What was that Chinese balloon really up to? 0:18:23.520 --> 0:18:26.480 What does it mean for the renewed tensions seemingly between 0:18:26.560 --> 0:18:28.800 Washington and Beijing after the U S shot down the 0:18:28.920 --> 0:18:31.240 vessel on Saturday. Very pleased to have back in our 0:18:31.240 --> 0:18:34.639 Bloomberg Interactive Broker's studio. Andy Brown, former editorial director at 0:18:34.640 --> 0:18:37.520 Bloomberg New Economy who spent three decades in Asia as 0:18:37.560 --> 0:18:40.080 both China editor and columnists for The Wall Street Journal. 0:18:40.400 --> 0:18:43.520 Andy leads the China Hub as a partner at Brunswick Group. 0:18:43.600 --> 0:18:47.320 It's a critical issues advisory firm. Uh Andy, good to 0:18:47.359 --> 0:18:49.040 have you with us. We've been so eager to talk 0:18:49.040 --> 0:18:50.440 to you about this. We spent a good portion of 0:18:50.480 --> 0:18:53.399 Friday afternoon talking about it what was going through your 0:18:53.440 --> 0:18:55.400 head as you looked up at images of the sky 0:18:55.520 --> 0:18:57.679 over the last week and saw this balloon floating over 0:18:57.720 --> 0:19:04.200 the United States. This is bizarre, This is really crazy. Um, 0:19:04.720 --> 0:19:09.400 nobody knows really what happened, and more importantly, it's hard 0:19:09.440 --> 0:19:12.399 to know what's going to happen next. I think we 0:19:12.520 --> 0:19:16.879 can say with some confidence that the image of this balloon, 0:19:17.080 --> 0:19:23.679 this crumpled Chinese airship shredded by a sidewinder missile collapsing 0:19:23.760 --> 0:19:27.119 into the Atlantic Ocean is a pretty apt metaphor for 0:19:27.200 --> 0:19:32.000 the state of US China relations and a wake up call. 0:19:32.160 --> 0:19:35.880 I think it's a real warning that we are one 0:19:37.119 --> 0:19:43.440 serious accident away from a major geopolitical crisis, and one 0:19:43.520 --> 0:19:46.159 that could spiral out of control. And I don't I 0:19:46.160 --> 0:19:48.359 don't want to make light of this balloon episode. I mean, 0:19:48.359 --> 0:19:50.560 it shouldn't have been in US space. It was obviously 0:19:50.600 --> 0:19:53.520 an invasion of US sovereignty. I mean, it was reckless, 0:19:53.560 --> 0:19:58.359 it was provocative, but you know, nobody died mercifully, nobody 0:19:58.480 --> 0:20:02.280 was injured. It didn't get much intelligence. The Pentagon even 0:20:02.320 --> 0:20:04.439 says this not much more than the Chinese gonna got 0:20:04.480 --> 0:20:07.840 from their own can already get from their own satellites, 0:20:08.119 --> 0:20:10.400 and in intelligence terms, there's gonna be a net plus 0:20:10.480 --> 0:20:12.440 for America. They're probably gonna scoop it all the bits 0:20:12.440 --> 0:20:14.320 and pieces off the bottom of the Atlantic and get 0:20:14.359 --> 0:20:17.280 a trove of information about Chinese spycraft. Not an accident 0:20:17.359 --> 0:20:22.040 by China, you know, And does that matter? I actually 0:20:22.680 --> 0:20:25.800 probably and more inclined to believe the cock up theory 0:20:26.119 --> 0:20:28.720 that you know. I mean, it's hard to imagine that 0:20:28.840 --> 0:20:33.800 the Chinese leadership deliberately went out to scuppa um a 0:20:33.920 --> 0:20:36.399 visit to Chin. They needed this visit, you know. I mean, 0:20:36.480 --> 0:20:39.960 they want to repair damage to with with their relations 0:20:40.040 --> 0:20:42.360 with with the West. You know. I think it's it's 0:20:42.680 --> 0:20:47.040 we know that China has a balloon program. They float 0:20:47.119 --> 0:20:50.879 these things off fairly regularly. It's quite possible that, you know, 0:20:51.000 --> 0:20:53.520