Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg P M L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Let
Speaker 1: us turn our attentions to really damage that the hurricane
Speaker 1: could cause. Brian Sullivan covers energy and commodities for Bloomberg
Speaker 1: and all things weather related. Jack Caskey, Chemical Companies reporter
Speaker 1: for US based in Houston. Let's start with with you. Brian.
Speaker 1: I'm watching a minute by minute the latest forecasts for
Speaker 1: the hurricane, and much will depend on exactly when it
Speaker 1: turns north. The low pressure over the Mississippi Valley may
Speaker 1: will pull it north, but the current forecast track is
Speaker 1: about as bad a scenario as you could come up with. Yeah,
Speaker 1: one analyst this morning told me it was the nightmare
Speaker 1: scenario for insurance companies. UM. So, the current thinking is
Speaker 1: it's going to go straight up the Florida Peninsula, whether
Speaker 1: it goes up a little to the west or a
Speaker 1: little to the East. I think at this point doesn't
Speaker 1: matter just simply because um Irma is getting large. I mean,
Speaker 1: it underwent what they call it eyewall replacement UM this
Speaker 1: morning and that actually makes the physical size of the
Speaker 1: storm get larger than the physical windfield of the most
Speaker 1: damaging winds get larger. And this is this is where
Speaker 1: the damage is going to happen UM, and it's going
Speaker 1: to be different from Harvey. With Harvey, you had a
Speaker 1: lot of flooding, which insurance companies aren't necessarily on the
Speaker 1: hook for. But with um IRMA, you may see every
Speaker 1: county in Florida having some kind of damage and these
Speaker 1: are gonna this is gonna be roof damage and trees
Speaker 1: through windows and houses and on cars, and UM the
Speaker 1: insurance companies around the hook for this. So this UM
Speaker 1: you're talking about a price tag maybe in a hundred
Speaker 1: and thirty billion dollar range, and then with secondary economic
Speaker 1: impact spreading that out to about two and of course
Speaker 1: that's the worst case scenario. The latest forecast also suggesting
Speaker 1: that the eyewall replacement cycle nearly complete, which means it
Speaker 1: could go back up to a five uh as as
Speaker 1: its strengthens. Jack Caskey, one of the stories that caught
Speaker 1: everybody's attention obviously was uh the chemical plants in Houston
Speaker 1: and the toxic stew that went into the floodwaters, and
Speaker 1: of course the one plant that had the chemicals explode.
Speaker 1: And the bad news from you is that this could
Speaker 1: it could be worse in Florida. UM. Well, I mean
Speaker 1: there's potentially, Yeah, there's Um there's not the heavy uh
Speaker 1: petrochemical industry in Florida that there isn't in Texas and Louisiana.
Speaker 1: But there is a nuclear plant that's from the seventh
Speaker 1: early seven and the use that's right in the path
Speaker 1: um at the tip of Florida. Um. Uh. Now there
Speaker 1: the plant is, you know, twenty ft above sea level.
Speaker 1: They tell me, so storms it should be stayed safe
Speaker 1: from storm surge. Um. There's facilities. Um, there's a large
Speaker 1: fast state mining facilities with slightly radioactive waste piles that
Speaker 1: need to be protected from wind and and water uh
Speaker 1: owned by the company mosaic Um that that polluted water
Speaker 1: and killed marine mammals in the past. Um. And there's
Speaker 1: you know, there's a whole in every state has got
Speaker 1: its uh chemical uh distribution Uh facilities that need to
Speaker 1: be protected from storm search. I mean one of the
Speaker 1: lessons from UH UH from a party was that uh
Speaker 1: some chemical operators just didn't expect the amount of water
Speaker 1: that they were deluged with. So the case of Crosby
Speaker 1: text is the company Arkhama out of France UH had
Speaker 1: its generators fail, causing UM a fire of of the
Speaker 1: organic peroxides that were stored there. Um. There was no
Speaker 1: serious injuries, although actually the first responders are now suing
Speaker 1: the company over their exposure to the smoke at the fire.
Speaker 1: Let me, um, let let me ask you something here, UM,
Speaker 1: nuclear plants shut down as the storm approaches. We're going
Speaker 1: to have, according to all the meteorologists, storm search, big
Speaker 1: storm search from this hurricane. And that's what happened hurts
Speaker 1: the nuclear plants in Japan after the earthquake. So how
Speaker 1: much danger is there from that? They say, it's not
Speaker 1: a fair comparison that they that the that Fukushima. Um,
Speaker 1: you know that meltdown was caused by a tsunami which
Speaker 1: hit the plant rather quickly. They have a lot more
Speaker 1: warning here to shut down this plant. Um, they've learned
Speaker 1: from Fukushima. They have more flooding anti flooding mechanisms in place.
Speaker 1: They've got backup systems upon backup systems to keep The
Speaker 1: issue is keeping the cooling waters around the nuclear rods
Speaker 1: UH from from getting too hot and molding down. They
Speaker 1: say that's not going to happen. That plant is elevated
Speaker 1: well above sea level, so you know we'll see the
Speaker 1: Like I said, the lesson from from UH the Arkhama
Speaker 1: plant explosion is that they just didn't expect that much
Speaker 1: water and that's why the plant burned up. Brian Sullivan,
Speaker 1: I got thirty seconds left. What's the best damage estimate
Speaker 1: you're hearing right now from the companies you talked to
Speaker 1: in the thirty five billion dollar range um, and that
Speaker 1: isn't counting what happened in the Caribbean. There's already some
Speaker 1: early estimates coming out of the Caribbean that you have
Speaker 1: five billion dollars damage there, and that's certainly going to
Speaker 1: go up, all right. Brian Sullivan coming to us from
Speaker 1: our Boston bureau. He is the weather guy for US
Speaker 1: and covers energy and commodities. Jack Caskey in Houston Chemical
Speaker 1: Companies reporter, Obviously, this is UH a potentially catastrophic storm.
Speaker 1: We don't have a lot of good information about uh,
Speaker 1: exactly what's gonna happen. But we have some guesses and
Speaker 1: they are not good. So stay tuned to Bluemberg RADI
Speaker 1: all weekend. We'll keep you on top of the latest
Speaker 1: from Hurricane Ran. Here's an idea. Uh. You want to
Speaker 1: get a car, but you don't want to have a car.
Speaker 1: You just want to use it when you want it, Uh,
Speaker 1: for as long as you want, but and drive the
Speaker 1: car you want. Uh. Scott Painter is the former CEO
Speaker 1: and founder of True Car. He's got a new startup
Speaker 1: car as a service. Uh. It's called Fair. Uh tell
Speaker 1: us about how this works. I mean, I'm a guy
Speaker 1: who lives in New York City. I don't own a car,
Speaker 1: but I go skiing in the winter, or I go
Speaker 1: out to the beach in the summer, and so maybe
Speaker 1: for a while I want a car. Well. Fair is
Speaker 1: a pretty simple concept. It really is an app that
Speaker 1: represents a totally new way to get a car. So
Speaker 1: you simply download the app, scan your driver's license, it
Speaker 1: shows you all the cars you can afford, and then
Speaker 1: and it gives you a single all in, low cost
Speaker 1: of ownership that's designed to be sort of an iTunes
Speaker 1: account for your car. But this isn't like renting, though
Speaker 1: you know, it's all the benefits of renting. So one
Speaker 1: of the great parts about renting a car is that
Speaker 1: you can turn it in and be done with it
Speaker 1: anytime you want. The problem is it's quite expensive. So
Speaker 1: this is about half the cost of a rental, which
Speaker 1: is important. But at the savings of a lease. We
Speaker 1: are actually the owner of the car and we actually
Speaker 1: leased the vehicle to you, all simultaneously inside the app.
Speaker 1: But more importantly, you're not picking a car all of
Speaker 1: a rental lot. You're picking the car you want that's
Speaker 1: for sale at any dealer. What's the minimum and maximum
Speaker 1: times for your what do you call? You? Don do
Speaker 1: you call it at least what? It's effectively a used
Speaker 1: vehicle lease, but we're not calling it at lease. Um. Actually,
Speaker 1: the fair contract has no term in it, which is
Speaker 1: really one of the things we found that young buyers, millennials,
Speaker 1: the modern sort of car buyer really doesn't want a
Speaker 1: long contract or a long commitment. A car represents a
Speaker 1: big commitment. So the fair contract gives you the ability
Speaker 1: to walk away or turn in the car at any
Speaker 1: time without penalty. You can keep it for six days,
Speaker 1: six months, six years. Where do you get the cars?
Speaker 1: So you pick the car using the app, But those
Speaker 1: cars are at at local dealers all around you, and
Speaker 1: those are the cars that are traditionally for sales. Fair
Speaker 1: is simply a different way to get that car. So
Speaker 1: you look at their inventory and you can say I
Speaker 1: want a Ford X whatever. Um, you go to a
Speaker 1: local Ford dealer and what they have an inventory is
Speaker 1: what you can get that's correct. And instead of the
Speaker 1: prices of the car being what you're shopping on, you're
Speaker 1: looking at monthly payments. So everything in the inventory that
Speaker 1: you see is giving to you with a monthly payment
Speaker 1: that includes maintenance, warranty and roadside assistance standard. That that
Speaker 1: brings up the question. You said you could get it
Speaker 1: as long as six days. You know six days? Do
Speaker 1: you pro rent the monthly payment debt? We don't, So
Speaker 1: it is a month to month pay as you go.
Speaker 1: So if I have it for six days, I'm still
Speaker 1: gonna pay for a month. You are, Okay, that sounds
Speaker 1: sound too bad though, Um, and uh, who you I
Speaker 1: assume with this you've got to carry your own insurance
Speaker 1: for the car in order to drive a car on
Speaker 1: the road, you do need to have insurance, but Fair
Speaker 1: also offers a month to month insurance for collision and liability,
Speaker 1: and you can also buy excess wear and tear insurance
Speaker 1: if you feel you need it. Um, and what do
Speaker 1: you do with cars when you When I give it
Speaker 1: back to you, those cars go back to the dealership.
Speaker 1: So the lifeblood of the modern car dealership is a
Speaker 1: late model used car. So that car coming back into
Speaker 1: their inventory and being sold to another customer is really
Speaker 1: the goal. Now I've been reading that, Um, there is
Speaker 1: a glut of late model used cars coming out of
Speaker 1: the markets these days, but we've been at peak production
Speaker 1: in terms of manufacturing. We're approaching eighteen million cars being
Speaker 1: produced in this country, which creates an over supply of
Speaker 1: used cars to three years down the road. And we've
Speaker 1: been at peak production for a couple of years now.
Speaker 1: So you've got five or six million late model used
Speaker 1: cars that are one, two and three years old coming
Speaker 1: back to the market in the next year to eighteen months.
Speaker 1: That represents a huge opportunity for the consumer to not
Speaker 1: only save money, but get a great value in a
Speaker 1: great vehicle. So you're are you are you selling renting
Speaker 1: to me UH used cars or new cars. These are
Speaker 1: pre owned cars. And all of the vehicles that you're
Speaker 1: going to see on fair represent a vehicle that has
Speaker 1: gone through our inspection process, that has a warranty, roadside
Speaker 1: assistance and standard maintenance, so you can actually get the
Speaker 1: car with peace of mind. So these are going to
Speaker 1: be UH. This is gonna be useful for the dealer
Speaker 1: who can make some money off a vehicle rather than
Speaker 1: have it just sitting inventory. That's correct for the dealer.
Speaker 1: This is a transaction. They're selling the car, you're buying it,
Speaker 1: so they don't care who's buying right fair Fair operates
Speaker 1: under all the necessary licenses and depending on the jurisdiction,
Speaker 1: we are a dealer and we actually buy the car,
Speaker 1: put it on our balance sheet, and simultaneously give you
Speaker 1: a contract to use that vehicle. What's the difference between
Speaker 1: you and and Tesla in in your sales model? In
Speaker 1: that UH dealers have gone to court saying if you
Speaker 1: don't have a lot and you don't have cars on
Speaker 1: that lot, you're not a dealer and you can't be
Speaker 1: selling this stuff. We're not actually selling the car, We're
Speaker 1: just giving you access to the vehicle to use it
Speaker 1: as you want, when you want, but we take all
Speaker 1: of the risk around depreciation and managing and owning that vehicle.
Speaker 1: So it's our capital that's being used to buy the car.
Speaker 1: You're not borrowing money when you get a car from Fair,
Speaker 1: You're paying for access to that vehicle. And so this
Speaker 1: notion that the car is becoming a service is really
Speaker 1: a subscription. That you have the car you want at
Speaker 1: any dealership as long as you want it, when you
Speaker 1: want it, and then you can leave it and be
Speaker 1: done with it. So I don't take title to it.
Speaker 1: You don't. Uh. If I have an app and I
Speaker 1: decide I want to get a ferrari Um, how do
Speaker 1: you know I am? I am credit worthy for a
Speaker 1: car like that? How do you how do you know
Speaker 1: whether you can trust somebody to make their payments? The
Speaker 1: goal of the app is to really understand what you
Speaker 1: can afford. The average American today spends about four of
Speaker 1: their gross income on mobility, which breaks down to the car, insurance, maintenance, repair, fuel,
Speaker 1: and in many cases accessories. We're actually beginning there, and
Speaker 1: the first thing that the app does by scanning your
Speaker 1: driver's license, we're looking for your income and your disposable income,
Speaker 1: so we can understand what you can genuinely afford. But
Speaker 1: the two things we need the driver's license and a
Speaker 1: form of digital payment, and in most cases that's the
Speaker 1: bank account or a credit card. So, uh, do you
Speaker 1: care about whether my credit is good? I mean, do
Speaker 1: you run a credit check on me through say an Equifax?
Speaker 1: Maybe you don't want to do that, right right, Well,
Speaker 1: we do do a soft credit bull but it does
Speaker 1: not affect your credit, and we're not underwriting you in
Speaker 1: the same way that a bank would have for a
Speaker 1: car loan. So you can have actually bad credit. You can,
Speaker 1: in fit many cases, have no credit. What we're we're
Speaker 1: looking really looking for is ability to pay. However, if
Speaker 1: for whatever reason, you go through a change in work
Speaker 1: where you don't have a consistent source of income, you
Speaker 1: simply return the car. Where does this? Uh? When do
Speaker 1: we see this? When? When can I start downloading the
Speaker 1: app and getting the car? So the app is live
Speaker 1: today in the app Store if you go to fair
Speaker 1: and type in either auto or financial financial. So Fair
Speaker 1: is an app that you can download today. But it
Speaker 1: is currently live and working in southern California. We've got
Speaker 1: seventy three franchise dealers over a thousand cars in inventory
Speaker 1: because nobody drives in southern California. It's the car capital. Well,
Speaker 1: I mean yeah, but I'm kidding. But people they're like
Speaker 1: to have cars. What about in a place when does
Speaker 1: it come to New York City or Boston, places where
Speaker 1: people don't necessarily want a to wear house a car,
Speaker 1: but you know, want cars on a regular basis. Sure,
Speaker 1: So it's going to be throughout the state of California
Speaker 1: before the end of the year, and we'll roll out
Speaker 1: nationally in about a dozen cities in two thousand and eighteen.
Speaker 1: But from an ownership point of view, the benefits of
Speaker 1: ownership are really focused on security. Well, we'll talk about that,
Speaker 1: but fair is the is the app. Thank you very
Speaker 1: much for joining us. We're time, unfortunately, but it sounds
Speaker 1: like a great idea Scott paid fair Well. News out
Speaker 1: of Dada today Canadian marijuana producers shares are rising. Reports
Speaker 1: Ontario is going to open government controlled storefronts for legalized
Speaker 1: recreational sales. Uh. That should make it a lot easier
Speaker 1: for people once Canada legalizes marijuana next year to purchase
Speaker 1: the product. Because the Canadian government probably recognizing it needs
Speaker 1: a way to safely handle the financial transactions. Created may
Speaker 1: make it easier for people in Canada to um use
Speaker 1: banks and the banking system to pay for their pot.
Speaker 1: That is not the case in the United States, especially
Speaker 1: in the states where we have seen legalization, like in Colorado,
Speaker 1: banks don't really want to deal with people who do business,
Speaker 1: even though those businesses can take in an awful lot
Speaker 1: of cash. Banks worry about money laundering bills, UH, legislation rather,
Speaker 1: and they also it sounds silly, but it's true. UM,
Speaker 1: they don't want a lot of cash coming into the
Speaker 1: bank that smells like marijuana. Company that has been founded
Speaker 1: to try to deal with that is called Token and
Speaker 1: the CEO and founder is Lea means Aarad and he
Speaker 1: joins us now from Denver. Uh. Basically, what you're doing
Speaker 1: is using the concept of a cryptocurrency to become the
Speaker 1: middleman between the cash and the pot shop. Correct. Well,
Speaker 1: thanks for having me, Mike. UM. To clarify, we use
Speaker 1: the blockchain that's divorced from its cryptocurrency. The blockchain the
Speaker 1: way we employ it is a secondary redundancy ledger for us,
Speaker 1: and it ensures indelibility of all data in our system
Speaker 1: and as a consequence, makes far financial institution partners and
Speaker 1: by extension, the regulators feel comfortable with extending services to
Speaker 1: the industry. How does it work? Yeah? Absolutely. Before I
Speaker 1: tell you how it works, uh, I think it's important
Speaker 1: for me to explain the context and UH in kind
Speaker 1: of my own personal background in the genesis of Token,
Speaker 1: I'm an immigrant came to the United States from former
Speaker 1: USS are and where my family spent uh potentially approximately
Speaker 1: six years as refugees, which impacted my view on banking
Speaker 1: and unbanked. So that's very personal to me. Expending services
Speaker 1: to what to those who who deserve it? Uh. I
Speaker 1: later spend time in the military and intelligence community in
Speaker 1: the United States, and then Wall Street will Mary Will
Speaker 1: Mary Lynch, and later with US Treasuries off to the
Speaker 1: control occurrency as a bank regulator. So I I you know,
Speaker 1: Token is an amalgam of all those experiences, and what
Speaker 1: Token is essentially is as an intelligence platform. It creates
Speaker 1: accountability transparency. Uh. The way it works, consumers download the
Speaker 1: application to create an account. Under a second we identify
Speaker 1: who they are, so if it's John Smith, we know
Speaker 1: that it's John Smith before they tie a payment. Source
Speaker 1: to that application, the mobile app, but the experience is
Speaker 1: somewhats your Apple Pay for instance, they're walking a participating retailer,
Speaker 1: press pay and walk away with the product. It's as simple.
Speaker 1: On the other hand, retailers have access to their portal
Speaker 1: that looks just like an online banking portal. They can
Speaker 1: see a transaction as it happens. They can also move
Speaker 1: the funds now they can move the funds token to
Speaker 1: token thinks PayPal, or they can move the funds using
Speaker 1: a cate or traditional payments rails that sort of provided
Speaker 1: to them through our partner institutions. So that solves both
Speaker 1: the banking problem and the payments problem on both ends.
Speaker 1: And then of course there are regulators and law enforcement
Speaker 1: UH and UH and as you mentioned, in the United States,
Speaker 1: we have a very interesting, if not convoluted system where
Speaker 1: cannabis is illegal federally and legal and certain jurisdictions. So
Speaker 1: as a consequence of federal government took a unique stance
Speaker 1: that took an agnostic stance through issuing several guidances. There
Speaker 1: are three memorandums from Department of Justice. There's a guidance
Speaker 1: from a Financial Crimes Enforcement network part of yours Treasury
Speaker 1: and and essentially there's a legal framework called the Bank
Speaker 1: Secrecy Act and the federal governments. If you took a
Speaker 1: position by stating that we are agnostic as long as
Speaker 1: you follow the rules and comply with these items and
Speaker 1: these regulatory guidance, UH, there was there was issue. And
Speaker 1: what what happens that it creates uh an incredible burden
Speaker 1: on small financial institutions. They're willing to provide services to
Speaker 1: cannabis industry, and that's what we help them with. We
Speaker 1: help them with creating transparency, tracking every transaction and and
Speaker 1: ensuring that everything that happens in that system is indelible.
Speaker 1: And that's where blockchain FETs and blockchain is the first
Speaker 1: ledger UH known to UH humanity so to speak. But
Speaker 1: it's cryptographically and mathematically indelible. What's your kind of this?
Speaker 1: How do you make money? Right now? It's very simple.
Speaker 1: We charge per transaction fees to merchants the same way
Speaker 1: UH say First Data would or Navisa master cards. And
Speaker 1: how has it been accepted so far? What's what's your
Speaker 1: growth rate? Yeah? So we we had a control pilot
Speaker 1: in Denver and it was done on purpose with with
Speaker 1: cannabis and non cannabis relationships, to to establish a control
Speaker 1: group and to really observe behaviors and the industry. Uh.
Speaker 1: In that pilot, Uh, surprisingly, our wallet had incredible adoption.
Speaker 1: Thirty five percent of old transactions at each locations were
Speaker 1: converted without any marketing. That's uh, that's some precedented because
Speaker 1: Apple failed and Google failed with their wallets. But I
Speaker 1: think it's demonstrative to the need in the industry and
Speaker 1: to the fact that consumers don't want to pay in cash. Uh.
Speaker 1: There's some really interesting statistics. For instance, over over six
Speaker 1: of our users in our system made three or more purchases,
Speaker 1: So it's sticky and pun intended here and uh, and
Speaker 1: we've increased average ticket sized by eighteen percent. I mean,
Speaker 1: it's it's incredible value add to a business. What do
Speaker 1: you think the growth possibilities for you are? You know,
Speaker 1: you've got states that are doing medical marijuana, but the
Speaker 1: states have just totally legalized it. Uh, there aren't that many,
Speaker 1: Um do you have? Do you do you need to
Speaker 1: grow or can you maintain a successful business with just
Speaker 1: a smaller operation that focuses on those states. Now, we
Speaker 1: absolutely not only want to grow, but need to grow.
Speaker 1: And the reason is the bigger our ecosystem. More visibility
Speaker 1: we have into the familio of the transaction world. Right,
Speaker 1: so we know, for instance, if you engage in what's
Speaker 1: called dispensary hopping. If you're a consumer and you want
Speaker 1: to make a purchase and multiple dispensaries that an exceeding
Speaker 1: your daily amounts, that's a lot of to you. By
Speaker 1: stay called out a law. For us to have that visibility,
Speaker 1: we need to have a multiple dispensaries, a multiple retail locations.
Speaker 1: We also need to have access to the entire vertical
Speaker 1: to streamline and experience. So if you are a retail
Speaker 1: facility and you want to purchase from a cultivator or
Speaker 1: a manufacturer, if there are on a system, then onboarded.
Speaker 1: Not only do they have access to banking at this point,
Speaker 1: but they're also you can also transact and incredibly low
Speaker 1: rates in our system token to token so to speak.
Speaker 1: So yes, we are growing. We're going to be growing nationally,
Speaker 1: so you know, keep an eye on it out. That
Speaker 1: means thank you very much to see you know of
Speaker 1: token an interesting new business, uh combining the marijuana industry
Speaker 1: and technology. Well, a big story in financial world that
Speaker 1: is getting a lot of attention, even with the hurricane coming.
Speaker 1: Is this security breach at Equifax? A lot of people
Speaker 1: wondering how the heck this could have happened. Am and
Speaker 1: Barlav is the president of Checkpoints Software. He's based in
Speaker 1: Tel Aviv. Michael Riley is Bloomberg News cybersecurity reporter in Washington,
Speaker 1: d C. They're joining us now and uh, Michael, Uh,
Speaker 1: is there anything new that we that hasn't been reported yet?
Speaker 1: And I asked that question sort of not and it's
Speaker 1: not really tongue in cheek, But they sat on this
Speaker 1: information as many companies do for a while, and there's
Speaker 1: this story about the executive selling stock in between and everything.
Speaker 1: But um, do we know everything we need to know
Speaker 1: about this at this point? Uh? No. In fact, this
Speaker 1: is going to be the start of a very long process.
Speaker 1: If you take other examples like this, say Target, for example,
Speaker 1: where consumers got really angry because of a set of
Speaker 1: of uh circumstances. In this case, you have a consumer
Speaker 1: credit agency, which consumers don't tend to like to begin with,
Speaker 1: because they're the ones who tell them whether or not
Speaker 1: their credit it's good, and whether or not to get
Speaker 1: a credit card or mortgage and then you add to
Speaker 1: that what looks like a loss of massive amounts of
Speaker 1: of consumer data for a company that's supposed to know
Speaker 1: how to protect our data. And then you add to
Speaker 1: that this uh, you know, potential branding problem where three
Speaker 1: executives sell sell offs shares in an unscheduled way just
Speaker 1: a few days after the breach is discovered. You're gonna
Speaker 1: get a lot of anger. And with a lot of
Speaker 1: consumer anger usually comes soil lawsuits. Those lawsuits will demand
Speaker 1: a lot more in form nation that we have now,
Speaker 1: including an exact timeline. Who was informed about the breach? When,
Speaker 1: what did how? They definitely defining when they discovered the breach,
Speaker 1: for example, is it when they discovered malware on their systems?
Speaker 1: Is it when they discovered data left the network? Or
Speaker 1: is it when the US government came to them and
Speaker 1: told them about the bridge, which happens a lot. We
Speaker 1: don't know exactly how the discovery worked in this case
Speaker 1: because we don't know a lot and how, how does this?
Speaker 1: How does something like this happened? A company that their
Speaker 1: whole goal should be to protect the most sensitive data
Speaker 1: that they have, and yet this can happen. So I
Speaker 1: was in Bloomer gradual like a week ago. And what
Speaker 1: I said that there is that every system, every system
Speaker 1: and the work can be hacked. I just didn't have
Speaker 1: a lot of code inside, and system can be hacked,
Speaker 1: you know, and a saving hacked like a year ago,
Speaker 1: and other very confidential system can be happy to complex environment.
Speaker 1: So that's the bad news. I think the good news
Speaker 1: is that to do a couple of very basic things,
Speaker 1: if you use existing technology correctly, you can prevent most
Speaker 1: of the other attacks if you do it correctly. Did
Speaker 1: they do it correctly in this case? So I really
Speaker 1: don't know, as it's just stated before, we don't We
Speaker 1: don't have all this knowledge right now. We don't know
Speaker 1: the exact system that was breacher and stardents a website
Speaker 1: that contain confidential data. We don't know if it was segmented,
Speaker 1: We don't know if it was protected correctly or not.
Speaker 1: So we don't have specific information for that systems. But
Speaker 1: as you as as you know, many other systems that
Speaker 1: contain private information for consumer like targets and other been
Speaker 1: hacked before. What is the danger to people whose data
Speaker 1: may have been taken and what at this point can
Speaker 1: you do about it? So it's it's most about identity tests.
Speaker 1: People actually can pretend to be you and and the
Speaker 1: transaction on your behalf from credit cards and other things.
Speaker 1: Think UM, and it is complex to know, and it
Speaker 1: is complex to identify, but you need to be It's
Speaker 1: a bit cautious to look at your bank records and
Speaker 1: any other records gets to you. We tend not to
Speaker 1: look at our credit card line by line, but maybe
Speaker 1: it's a good time to do so, Brian, I mean bright, Michael. Uh,
Speaker 1: this is obviously not going to go down well with
Speaker 1: people who have been critics of the credit reporting agencies,
Speaker 1: like an Elizabeth Warren on the Banking Committee and Capitol Hill.
Speaker 1: What happens, Uh, what's the reaction going to be in
Speaker 1: Washington to all this? Well? Almost certainly this is gonna
Speaker 1: get the UM lawmakers involved more directly in this debate
Speaker 1: because it raises a fundamental question about whether the system
Speaker 1: as it exists now is the right one, which goes
Speaker 1: to the fundamental business model of these companies. They store
Speaker 1: a huge amount of consumer data, and very important consumer data.
Speaker 1: They have divisions that do lots of different things, and
Speaker 1: equifaxes case, for example, they have a service that that
Speaker 1: stores the kind of security questions and answers that people
Speaker 1: give to validate their identity to credit card companies, into
Speaker 1: others online, and so they have Basically they are storehouse
Speaker 1: that kind of fort knocks of all the sorts of
Speaker 1: digital data that a cyber thief would want to get
Speaker 1: their hands on. That means that they ought to have
Speaker 1: um uh that's the strongest protections possible so that they
Speaker 1: don't lose that data. Equifaxes this is not the first
Speaker 1: problem they've had recently. They've they've uh this is in
Speaker 1: fact the third problem they've had in the last year,
Speaker 1: but by far the largest. But it does suggest that
Speaker 1: as much money as they're making doing this, they're not
Speaker 1: um doing enough to secure that data. And I think
Speaker 1: that there will be questions about their uh particular UH
Speaker 1: appropriate their safeguards and whether they're appropriate, But there'll be
Speaker 1: a set of larger questions that the lawmakers will get
Speaker 1: to ask about whether the model is the right one
Speaker 1: in the first place. And that's going to be a
Speaker 1: major problem if UH Congress begins to think that there
Speaker 1: needs to be either regulation in this sector or a
Speaker 1: different model, or if companies who provide their data to
Speaker 1: Aquifax and the other company, the other credit rating agencies,
Speaker 1: if they decide to to to stop giving them as
Speaker 1: much data or access to the broad range of data
Speaker 1: that they have now, all right, thank you very much.
Speaker 1: Michael Riley, cybersecurity reporter for Bloomberg News and and On
Speaker 1: bar lev the president of Checkpoints Software, thanks for joining
Speaker 1: us today. Thanks for listening to the Bloomberg P and
Speaker 1: L podcast. You can subscribe and listen to interviews at
Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on
Speaker 1: Twitter at Lisa Abramo wits one. Before the podcast, you
Speaker 1: can always catch us worldwide on Bloomberg Radio