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

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

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Speaker 2: stories of capitalism. The European Union is moving toward new

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Speaker 2: merger guidelines to help it develop the sort of tech

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Speaker 2: champions that drive much of US growth. Will they do

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Speaker 2: the trick? Plus, Johnson and Johnson finally got approval for

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Speaker 2: its new approach to robotic surgery. Now it needs to

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Speaker 2: do some catching up in a rapidly growing field. And

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Speaker 2: the US leads the world in think tanks. We take

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Speaker 2: a hard look at what they are and what they

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Speaker 2: really accomplish. But we start with the Federal Reserve decision

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Speaker 2: this week, addressing persistent inflation, rising barring costs, and a

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Speaker 2: whole lot of uncertainty. Jason Furman is professor of economics

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Speaker 2: at Harvard and served as the chair of President Obama's

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Speaker 2: Council of Economic Advisors. So, Jason, we got three things

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Speaker 2: out of the Federal Reserves this week. We got a

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Speaker 2: decision not to do anything at rates, We got a

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Speaker 2: statement that didn't change a whole lot from what it

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Speaker 2: had before. And then we got a news conference from

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Speaker 2: Chair worsh of the three, which was the most important.

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Speaker 3: The descents were the most important. It's very clear where

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Speaker 3: a lot of members of this committee want rates to

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Speaker 3: go going forward.

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Speaker 2: And in the news conference, certainly, Chair Worsh was asked

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Speaker 2: about those descents, why they descended, why he disagreed with him.

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Speaker 2: I'm not sure we got a clear answer to that question.

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Speaker 2: Do we have a sense from him from the way

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Speaker 2: he thinks about it, why he did not join with

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Speaker 2: the descents.

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Speaker 3: I don't think we got a clear sense from him.

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Speaker 3: I think he has two share Worsh has two points

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Speaker 3: which I agree with him on. One is, you want

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Speaker 3: to look at financial conditions, and there's been a lot

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Speaker 3: of tightening on the long end of the curve. Now

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Speaker 3: you need to be a little bit careful. Some of

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Speaker 3: that is in anticipation of what the Fed is going

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Speaker 3: to do, and the Fed ends up not doing that,

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Speaker 3: some of that would end up unwinding. But so far

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Speaker 3: financial conditions, at least on the rate side, have tightened.

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Speaker 3: And second, this really is a different type of inflation

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Speaker 3: than what we had a couple of years ago. It's

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Speaker 3: not the same type of labor market tightness, high wage growth,

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Speaker 3: high price growth, high inflation expectations that we saw in

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Speaker 3: the past.

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Speaker 2: Before we get into exactly what you think is causing

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Speaker 2: the inflation, let's talk about the level of inflation itself.

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Speaker 2: We're often taught the core PCEE is what the Fed

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Speaker 2: really pays a lot of attention to that has been

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Speaker 2: rising fairly steadiling. So it does give rise to the

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Speaker 2: question which was asked, what are you waiting for?

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Speaker 3: Yeah, I think that's a totally reasonable question. Inflation is

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Speaker 3: intolerably high. It's been into tolerably high for five straight

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Speaker 3: years now. The argument on the other side, in terms

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Speaker 3: of what you would be waiting for, the two best

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Speaker 3: arguments are one that rates may be set above neutral already,

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Speaker 3: so there may be a little bit of a foot

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Speaker 3: on the brake pedal. And yes, you could debate whether

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Speaker 3: you should be pushing harder on the brake pedal, but maybe,

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Speaker 3: and I think arguably and plausibly you are on the

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Speaker 3: brake pedal already. And then the second argument is the

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Speaker 3: transitory one. And I don't think we're going to hear

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Speaker 3: that word from any government official ever again, probably for

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Speaker 3: another fifty years before they get over what happened last

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Speaker 3: time they use that word. But implicitly, that is what

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Speaker 3: the dove case is at least at the moment.

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Speaker 2: When it comes to the T word, whether we use

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Speaker 2: the word transitory or not, how long is transitory? I mean,

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Speaker 2: it's been five years now that we've been over two percent,

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Speaker 2: and there may be different reasons for the over two percent,

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Speaker 2: but as I say, it doesn't look to be going

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Speaker 2: back to two percent ay time soon.

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Speaker 3: Yeah, the different reasons is important. I mean, it looked

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Speaker 3: at the end of twenty twenty four as if we

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Speaker 3: were headed back to two percent. It was almost within

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Speaker 3: spitting distance, and then it took off again. Why did

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Speaker 3: it take off again? I think in part that was tariffs,

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Speaker 3: which probably have added half a point to a percentage

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Speaker 3: point to the inflation rate, and then subsequently the Iran conflict,

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Speaker 3: which has added maybe a few tenths more to core PCE,

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Speaker 3: a lot more to headline inflation, and so in some

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Speaker 3: sense things were lined up nicely. Now, the story in

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Speaker 3: the nineteen seventies was one excuse after another. Each time

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Speaker 3: you had high inflation, it might have been different than

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Speaker 3: the year before. So you want to be a little

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Speaker 3: bit careful if you find yourself making excuse after excuse

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Speaker 3: after excuse. But you know, tariffs in Iran. They really

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Speaker 3: are pretty big things, and they raise the price level.

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Speaker 3: They don't permanently raise the inflation rate, or at least

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Speaker 3: they shouldn't as long as the FED is credible.

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Speaker 2: It raises the question, I think, whether the cause of

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Speaker 2: inflation can be limited to the specific clause, whether it's

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Speaker 2: tariffs or whether it's Iran and energy when you start there,

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Speaker 2: can it spread into other sectors of the economy.

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Speaker 3: Yeah, that's the most important question, and that's what the

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Speaker 3: FED is trying to figure out right now. And there's

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Speaker 3: a few mechanisms for that. Some of it is direct,

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Speaker 3: you know, just the cost of jet fuel goes up,

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Speaker 3: so airplane tickets go up. That's not the biggest concern.

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Speaker 3: The big concern is if it gets built into expectations.

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Speaker 3: And the way that manifests itself is economy wide wage

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Speaker 3: setting and economy wide price setting. So if you see

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Speaker 3: prices go up faster, and that leads to wages going

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Speaker 3: up faster, and wages going up faster leads to prices

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Speaker 3: going up faster, and you end up with a sort

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Speaker 3: of persistent cycle. That is so far where I am

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Speaker 3: cautiously optimistic, We're not seeing the wage growth commensurate with

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Speaker 3: this type of inflationary economy, again in the way that

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Speaker 3: we saw it a couple of years ago. But that

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Speaker 3: is where we would see the broadening out if it

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Speaker 3: really starts to show up, not just in specific prices

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Speaker 3: but across the board prices and especially in wages.

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Speaker 2: Do the numbers coming out of the labor market cut

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Speaker 2: both ways? There was a time not too long ago,

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Speaker 2: there was a lot of concern on the FED that,

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Speaker 2: in fact, there was a loosening as a labor market,

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Speaker 2: we needed to really keep rates low for that reason.

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Speaker 2: That does not appear to be true now. It's more

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Speaker 2: stable now than it was six nine months ago. Does

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Speaker 2: that give the FED actually some license to increase to

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Speaker 2: address the inflation question?

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Speaker 3: Yeah, it absolutely does. You know, the FED has two mandates.

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Speaker 3: The employment mandate right now is in better shape than

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Speaker 3: I can almost ever remember. Normally the unemployment rate is

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Speaker 3: either too high and it's coming down, or you know,

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Speaker 3: maybe it's too low and it's rising quickly, or something

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Speaker 3: like that. It's just been amazingly stable. It peaked in

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Speaker 3: November of last year, it's fallen a bit since then.

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Speaker 3: It's basically the same place for the last two and

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Speaker 3: a half years, and it's not clear what would dislodge

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Speaker 3: that unless there was some big exogenous shock to the economy,

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Speaker 3: say the AI bubble burst, and I don't think there's

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Speaker 3: any reason to expect that to happen anytime soon. So yeah,

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Speaker 3: the FED really just needs to worry about the one

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Speaker 3: side of its mandate right now, which is inflation.

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Speaker 2: The FED certainly does not say it moves off of

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Speaker 2: the markets, but the markets are a data point. And

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Speaker 2: one thing that happened in the wake of the news

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Speaker 2: conference was particularly the yield on the thirty year going

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Speaker 2: up to the highest level in nineteen years since before

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Speaker 2: the Great Financial Crisis. Is that some information that Kevin

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Speaker 2: Warsh and the members of the FED need to take

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Speaker 2: into account. What does that tell them?

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Speaker 3: What that tells them is that, you know, markets to

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Speaker 3: some degree are expecting them to keep their word. A

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Speaker 3: lot of that movement was in the real rate, not

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Speaker 3: in expected inflation. It says they expect the FED to

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Speaker 3: deliver rate hikes as needed to keep inflation under control.

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Speaker 3: In some ways, I saw that as a sign of

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Speaker 3: credibility that the FED would be there to deal with

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Speaker 3: this problem. You know. That being said, I'm not entirely

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Speaker 3: sure of the strategy that you try to keep the

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Speaker 3: markets calm by not speaking, and then you deliver some

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Speaker 3: big surprises. In some sense, the meeting itself was a surprise.

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Speaker 3: We didn't know, you know, I expected them to hold,

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Speaker 3: but it was much less certain than it often has

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Speaker 3: been in the past. The descents were a surprise, some

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Speaker 3: of the communication was a surprise, and so some of

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Speaker 3: this volatility to me seems unnecessary and I hope it's

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Speaker 3: a growing pain, not something that's here to stay.

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Speaker 2: Well, we'll talk about that munication issue, because chaerworsh from

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Speaker 2: the beginning has made no secret effect. He does not

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Speaker 2: believe in a lot of forward guidance. He thought it

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Speaker 2: might have been necessary when we're coming out with a

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Speaker 2: great financial crisis. Don't need anymore, and so he's moved

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Speaker 2: away from that. But at what point does that really

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Speaker 2: undermine some of the stability in the market, because as

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Speaker 2: you say, then you wait and you get a big surprise.

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Speaker 2: Is this really giving rise to some doubt about his

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Speaker 2: new policy of really cutting back on forward guidance.

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Speaker 3: Yeah, I think forward guidance was overdone, but we don't

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Speaker 3: want to go too far in the other direction. First

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Speaker 3: of all, a lot of members of the committee are

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Speaker 3: going to be communicating, So if you don't hear more

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Speaker 3: authoritative communications, you'll end up with more noise and confusion.

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Speaker 3: Every time the fair that the Chair does communicate, you

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Speaker 3: can end up with a bigger reaction. And finally, I

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Speaker 3: think most important what the FED really needs to grapple with,

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Speaker 3: which is if it wants to talk less, it probably

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Speaker 3: needs to act more. Chairworsh was really lying on the

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Speaker 3: moves in the long end to justify not moving rates. Well,

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Speaker 3: part of why the long end is moving is an

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Speaker 3: expectation about what the FED is going to do in

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Speaker 3: the future. Where does that expectation come from. If the

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Speaker 3: FED doesn't communicate in a world where the FED wants

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Speaker 3: to say less, you know, maybe it's going to actually

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Speaker 3: need to move rates more aggressively and so it lets

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Speaker 3: its action speak rather than its words. And I haven't

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Speaker 3: seen any willingness to do that.

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Speaker 2: And it's all about that critical word you raised, which

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Speaker 2: is credibility of the FED, which we all need, the

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Speaker 2: markets needed, the economy. It's credibility of the FED. And

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Speaker 2: some people today are questioning whether they've lost a bit

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Speaker 2: of credibility. What is the danger here, particularly as I

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Speaker 2: as not an economist, look at this five years, over

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Speaker 2: five years or two percent and you say, oh, no,

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Speaker 2: we're going to get to it. We're going to get

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Speaker 2: to it. You know, if your child said that to

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Speaker 2: you over five years and never did it, you'd have

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Speaker 2: some doubts.

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Speaker 3: The FED is starting with an enormous amount of credibility.

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Speaker 3: Now it doesn't want to be reckless and spend that

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Speaker 3: credibility willy nilly. That would be a real mistake. But

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Speaker 3: to me it's amazing. Five years of promising inflation will

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Speaker 3: come down, having inflation not come down, and yet having

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Speaker 3: the market expectation of inflation still be really tame is

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Speaker 3: a testament to the way in which people believe in

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Speaker 3: the FED. So far, Chair worsh has said all of

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Speaker 3: the right things. He may need to actually start putting

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Speaker 3: his money where his mouth is if he doesn't want

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Speaker 3: to start going into deficit on the credibility bank that

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Speaker 3: the FED has built up over the years.

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Speaker 4: Coming up Girls has been slowing down for a long

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Speaker 4: time in Europe, but we've ignored it. But now we

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Speaker 4: cannot ignore it any longer. Now conditions have changed.

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Speaker 2: Mario Dragi urged the European Union to figure out how

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Speaker 2: to get the tech race. Now, the European Commission is

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Speaker 2: trying to move in that direction with new merger guidelines,

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Speaker 2: but are they enough. This is a story about keeping

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Speaker 2: up with the Joneses. The United States has led the

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Speaker 2: world in building huge technology companies and attracting enormous capital.

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Speaker 2: Now it's riding the crest of that wave into the

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Speaker 2: revolution that is artificial intelligence, while Europe looks on with envy,

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Speaker 2: or at least with a strong desire to try to

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Speaker 2: catch up. Now at the highest levels it's trying to

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Speaker 2: do something about it.

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Speaker 4: Growth has been slowing down for a long time in Europe,

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Speaker 4: but we've ignored it and now we cannot ignore it

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Speaker 4: any longer. Now conditions have changed.

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Speaker 5: We need new tech champions in Europe.

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Speaker 6: The fact of the matter is forty three the largest

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Speaker 6: fifty companies in AI are US based.

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Speaker 1: Europe has won.

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Speaker 2: The quest for Europe to get into the mega tech

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Speaker 2: game is one of the reasons it's now undertaking the

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Speaker 2: biggest revision to its merger rules in over twenty years,

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Speaker 2: and few people know more about the potential impacts for

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Speaker 2: businesses and consumers than Fiona Scott Morton, a professor at

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Speaker 2: the Yale School of Management and a former chief economist

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Speaker 2: at the Anti Trust Division of the US Department of Justice.

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Speaker 1: There's been a lot of angst in Europe over growth

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Speaker 1: and the ability of Europe to stay at the technological frontier.

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Speaker 1: And we've had a couple of reports, the Latter Report

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Speaker 1: and most recently the Drugy Report that have really hammered

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Speaker 1: on that and pointed out all the issues in Europe

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Speaker 1: that are holding back Europe from more growth.

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Speaker 2: Scott Morton says the new guidelines, which were published in

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Speaker 2: April and are now under review, aimed to change that.

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Speaker 1: I think the complaint has been among some parts is

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Speaker 1: in Europe that the Commission is not favorable enough toward

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Speaker 1: the mergers they would like to do. So this is

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Speaker 1: explicitly laying out how do you come to us with

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Speaker 1: a story for why your merger is really good, why

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Speaker 1: your merger is going to increase innovations, something like that,

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Speaker 1: and explicitly laying out what those factors would be and

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Speaker 1: how you might go about showing them.

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Speaker 5: It's a big deal. It's a big deal because it's

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Speaker 5: been twenty years since there was a vision of the

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Speaker 5: guidelines and it's a good exercise in showing the direction

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Speaker 5: of where competition law is heading.

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Speaker 2: Ingrid Vandenborah is the head of scaten arp's European competition

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Speaker 2: practice in Brussels. It's firms like hers that are navigating

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Speaker 2: the changes on the front lines.

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Speaker 5: What the guidelines do is they set out also for

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Speaker 5: the difficult deals, also for those that may not be

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Speaker 5: so easily to get through. There's a couple of factors

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Speaker 5: that are more developed. A The Commission's going to look

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Speaker 5: at efficiencies in a much more robust way. They call

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Speaker 5: it the theory of benefit in the guidelines, so they're

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Speaker 5: not only looking at what will the harm be to

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Speaker 5: the economy of a transact potentially, but also what will

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Speaker 5: the benefits be. The second element is that they're going

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Speaker 5: to look at markets on a dynamic way. The key

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Speaker 5: term in the guidelines is dynamic competitive potential of a

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Speaker 5: transaction and so it's going to be forward looking. One

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Speaker 5: of the examples set out in the guidelines is to

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Speaker 5: say we're going to look at non European companies and

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Speaker 5: how they may bring product into your in the future,

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Speaker 5: even if they're not doing that today, we're going to

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Speaker 5: look to constraints that may happen in the future.

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Speaker 2: Beyond giving companies explicit leway to argue for efficiencies or

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Speaker 2: changes in the market to justify their mergers. The new

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Speaker 2: guidelines specifically address the question of startups provide ways for

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Speaker 2: early investors to reap rewards for taking chances.

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Speaker 5: We all know that that's what startup companies need. When

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Speaker 5: you invest, you need to know you have an exit

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Speaker 5: route as well, and that's really what the guidelines are

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Speaker 5: trying to do. So those are a couple areas where

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Speaker 5: very concretely the guidelines set out some more robust frameworks

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Speaker 5: for companies. Also on the Drug Report that indicated investment

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Speaker 5: needs confidence, right, and confidence needs to come with the

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Speaker 5: knowledge that there is an exit strategy and an exit

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Speaker 5: route that's possible.

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Speaker 1: So if I invent a drug and I want to

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Speaker 1: sell it to a big farmer company, what are going

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Speaker 1: to be the rules about which firm can purchase my startup?

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Speaker 1: And there's various cutoffs according to what market share the

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Speaker 1: startup has or the acquirer has, and how big they

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Speaker 1: are and so on. So that's very helpful for investors

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Speaker 1: and founders of small companies that want to plot out

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Speaker 1: their exit strategy for example, YEA. And for innovation, same thing.

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Speaker 1: If I'm going to merge with another firm and I'm

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Speaker 1: going to bring forward an innovation story of benefit that

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Speaker 1: because we're together, we're going to have more innovation, I

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Speaker 1: need to understand what the Commission wants to hear to

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Speaker 1: explain that that's going to be the reason why our

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Speaker 1: merger is going to be great. So I think those

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Speaker 1: are perfectly useful things should help with growth.

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Speaker 2: The new guidelines may make some deals easier or at

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Speaker 2: least more certain, but some think they could fall short

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Speaker 2: in the specifics. For one thing, in giving more play

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Speaker 2: in the joints, they may require additional work for companies

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Speaker 2: and their lawyers. In any set of regulations, and particularly

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Speaker 2: in competition, there's a balance between certainty and discretion with

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Speaker 2: the regulator. Right Where do these proposed regulations come out

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Speaker 2: on that sort of barometer. Does it give you more

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Speaker 2: certainty and more clarity or does it increased discretion, because

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Speaker 2: in reading through them there's a lot of discretion. There

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Speaker 2: are a lot of factors put into the hopper.

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Speaker 5: Yes, yes, that's a very important point. We've been assessing

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Speaker 5: with our clients as well. There's a large efficiencies framework.

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Speaker 5: It's pages and pages. I mean, this is a piece

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Speaker 5: of prose. It's almost one hundred pages long. Efficiencies as

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Speaker 5: a core part of that. So it goes on for

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Speaker 5: some while in this document. I think what is important

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Speaker 5: is to we'll have to see how the Commission will

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Speaker 5: assess it in the first decisions to come under these guidelines,

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Speaker 5: and to see how they will set out this frame

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Speaker 5: I can implement it in practice because I would think

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Speaker 5: initially it may lend itself to a bit of discretion.

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Speaker 2: And although the new guidelines would recognize the need for

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Speaker 2: scale in some sectors to achieve the sort of innovation

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Speaker 2: that Europe seeks, with that scale may also come greater scrutiny.

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Speaker 1: The thing that really does come through in the enforcement

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Speaker 1: of mergers is when you need to be that big

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Speaker 1: to participate in an industry successfully. We know there will

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Speaker 1: not be hundreds of competitors. We know right up front

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Speaker 1: there's going to be one, two, three, four, not that many.

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Speaker 1: So we regulate with that in mind, with this oligopoly

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Speaker 1: as it's called, kind of theory in mind, and you

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Speaker 1: wouldn't want, for example, Coke to merge with PEPSI there,

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Speaker 1: that would that would leave us with too few drinks choices.

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Speaker 1: It's going to be. It's going to have the same

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Speaker 1: kind of impact on mergers that have similarly few competitors.

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Speaker 1: So if we only have three big clouds, then both

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Speaker 1: conduct and mergers become scrutinized in a way that they

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Speaker 1: would not if it was restaurants.

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Speaker 2: The guidelines we've seen so far are only a proposed version,

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Speaker 2: with the Commission now pouring over a raft of comments.

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Speaker 2: But those who know suspect that the finished product won't

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Speaker 2: be all that different from what we've seen, and then

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Speaker 2: it will be out before the year is over.

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Speaker 5: So the consultation period ended end of last month. You

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Speaker 5: know summers tend to be a quiet period. I don't

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Speaker 5: know if we'll be much more ahead of Q four.

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Speaker 5: What we've been told is Q four of this year,

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Speaker 5: so we may have to wait until then.

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Speaker 2: As you advise clients considering possible deals, does the proposal

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Speaker 2: of these new guidelines affect timing? I mean, do you

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Speaker 2: have companies saying we better get it done now because

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Speaker 2: we know what the old guidelines were, We're not sure

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Speaker 2: where it's going to be, or On the other side,

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Speaker 2: they say, you know what, maybe we could wait a

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Speaker 2: little while because it may be a little bit easier

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Speaker 2: to get it through.

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Speaker 5: Yeah, we've had questions like that, or sometimes companies say, well,

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Speaker 5: we'll just not look at these drafts yet because we

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Speaker 5: only want to be dealing with the final product once

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Speaker 5: it's there, and then will assays. It's kind of similar,

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Speaker 5: We've said repeatedly, but this is already how the Commission

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Speaker 5: is analyzing mergers today. We don't think it's going to

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Speaker 5: materially change whether you notify a transaction, say next week

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Speaker 5: versus in November. There may be one or two decisions

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Speaker 5: that will come out that will flect efficiency assessments. That

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Speaker 5: would be something to wait for. I think the private

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Speaker 5: bar among practitioners, no one wants to be the guinea

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Speaker 5: pig and of first efficiencies full out assessment because it's

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Speaker 5: more discretionary how that will come out and how exactly

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Speaker 5: the Commission will now be applying this very robust framework.

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Speaker 2: Whatever the strengths or weaknesses in the new proposed guidelines,

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Speaker 2: it will take some time to see how much they

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Speaker 2: truly change what mergers make it through the European process.

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Speaker 1: I don't think these guidelines will be a sea change.

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Speaker 1: I think they'll be a clarification. I think they're going

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Speaker 1: to cause firms to think more carefully in a good

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Speaker 1: way about is their merger going to enhance something like resilience, innovation,

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Speaker 1: help the environment. It is one of the ways that's

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Speaker 1: credited in the in the guidelines. Do something useful and

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Speaker 1: be able to come with an affirmative story of that usefulness.

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Speaker 1: That would be, of course great, and that might encourage

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Speaker 1: some beneficial mergers. But I don't think we're going to

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Speaker 1: see a big a big change.

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Speaker 2: If we go back through history, I think it's fair

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Speaker 2: to say there's been something of a dialogue back and

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Speaker 2: forth between europe regulators and US regulators when it comes

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Speaker 2: to competition slash and a trust. One learns from the other,

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Speaker 2: one gets ahead of the other. Sometimes one is proud

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Speaker 2: of being any of the other. Will these regulations as

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Speaker 2: drafted have much influence in other parts of the world,

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Speaker 2: including the United States.

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Speaker 1: Well, they definitely will have influence in other parts of

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Speaker 1: the world because most of the world follows Europe on

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Speaker 1: competition law, not the United States. We're not that good

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Speaker 1: at it, it turns out. But the thing about the

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Speaker 1: United States is we redid our merger guidelines in twenty

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Speaker 1: twenty three. So really there's some learning from those twenty

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Speaker 1: twenty three guidelines that you can see in the European revision,

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Speaker 1: and then some things that they're doing that go beyond

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Speaker 1: what the United States did in twenty twenty three. I

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Speaker 1: would say there's more on innovation, there's more on these

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Speaker 1: little small firms being acquired. There's more on the theory

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Speaker 1: of benefit. There's a bit less on labor and monopsony,

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Speaker 1: because in Europe labor regulations are so strong you don't

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Speaker 1: have as big a monopsony problem.

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Speaker 2: When the dust settles, the most important question will be

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Speaker 2: whether the new guidelines are fit for purpose, the purpose

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Speaker 2: of keeping up with or at least not falling further behind,

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Speaker 2: the US, or whether the thing holding the development of

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Speaker 2: European tech champions back has had little to do with

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Speaker 2: competition policy, but turns much more on deeper integration of

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Speaker 2: the European Union itself.

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Speaker 1: The argument that they're putting full is that that merger

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Speaker 1: will make a bigger firm and therefore make some kind

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Speaker 1: of European champion. That's actually not typically how we've seen

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Speaker 1: the champions in other parts of the world emerge. If

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Speaker 1: you think about Google or Microsoft or IBM back in

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Speaker 1: the day, they didn't come from a merger. They came

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Speaker 1: from very fast growth of an innovative firm. And so

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Speaker 1: a lot of what the Jogy report talks about is

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Speaker 1: not in fact mergers, but is about the barriers to

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Speaker 1: the single market being really effective. If you start up

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Speaker 1: a company in the Netherlands, how quickly can you sell

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Speaker 1: across all twenty seven member states five hundred million people.

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Speaker 1: If you could do that as fast as can happen

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Speaker 1: in the United States because we have free commerce between

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Speaker 1: our states, you could grow really fast.

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Speaker 2: Up next, Robotic surgery is a rapidly growing segment of healthcare.

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Speaker 2: Johnson and Johnson got its start helping surgeons one hundred

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Speaker 2: and forty years ago. Now it has its own approach

439
00:23:55,800 --> 00:23:58,800
Speaker 2: to using robots in the operating room. Can it catch

440
00:23:58,880 --> 00:24:15,879
Speaker 2: up with the leaders in the field. This is a

441
00:24:15,880 --> 00:24:18,880
Speaker 2: story about losing the race, at least at the beginning.

442
00:24:19,400 --> 00:24:22,320
Speaker 2: Inventors become household names when they do something for the

443
00:24:22,359 --> 00:24:25,760
Speaker 2: first time. Thomas Edison and the light bulb, the Wright

444
00:24:25,840 --> 00:24:29,200
Speaker 2: brothers in the first manned flight with time, their names

445
00:24:29,200 --> 00:24:32,480
Speaker 2: have become synonymous with their innovations because of the leaps

446
00:24:32,480 --> 00:24:36,600
Speaker 2: and technology that made their products viable. Everyone always wants

447
00:24:36,640 --> 00:24:39,600
Speaker 2: to be first, but can it sometimes pay off to

448
00:24:39,640 --> 00:24:42,760
Speaker 2: be slower out of the gate? Johnson and Johnson hope so,

449
00:24:43,119 --> 00:24:46,240
Speaker 2: at least in the fast growing field of robotic surgery.

450
00:24:50,960 --> 00:24:52,600
Speaker 6: I want to introduce you to Ottava.

451
00:24:53,080 --> 00:24:55,960
Speaker 2: Last week, Johnson and Johnson got the green light from

452
00:24:55,960 --> 00:24:59,679
Speaker 2: the FDA to take its robotic surgery device Otava to

453
00:24:59,760 --> 00:25:02,960
Speaker 2: mark it. It's the latest move by a company whose

454
00:25:03,040 --> 00:25:07,560
Speaker 2: legacy traces back to the nineteenth century. Johnson and Johnson

455
00:25:07,680 --> 00:25:11,360
Speaker 2: was founded by three brothers in eighteen eighty six when

456
00:25:11,400 --> 00:25:15,720
Speaker 2: they created ready to use sterile surgical dressings, But the

457
00:25:15,760 --> 00:25:19,560
Speaker 2: original Johnson brothers could not have anticipated how far surgery

458
00:25:19,640 --> 00:25:22,399
Speaker 2: would come over the next one hundred and forty years.

459
00:25:23,440 --> 00:25:27,080
Speaker 2: Otava is Roco de Barnardis's baby. He has been with

460
00:25:27,160 --> 00:25:30,399
Speaker 2: the medtech division of Jay and JA for fourteen years.

461
00:25:31,200 --> 00:25:33,760
Speaker 2: De Bernardists gave us a first hand look at what

462
00:25:33,840 --> 00:25:36,320
Speaker 2: the new platform can do at J and Jay's campus

463
00:25:36,600 --> 00:25:37,439
Speaker 2: in Santa Clara.

464
00:25:38,160 --> 00:25:41,800
Speaker 6: You ergonomics was an important element, you know, definitely there's

465
00:25:41,800 --> 00:25:44,879
Speaker 6: an improvement where you move as a surgeon from that

466
00:25:45,119 --> 00:25:48,359
Speaker 6: side to behind the console meet Otava.

467
00:25:48,600 --> 00:25:51,320
Speaker 2: Jay and Jay has traveled a long road to get

468
00:25:51,320 --> 00:25:55,240
Speaker 2: to the newly approved version of Otava. Although it has

469
00:25:55,320 --> 00:25:59,280
Speaker 2: sold robotic systems for other procedures, it started its pursuit

470
00:25:59,320 --> 00:26:02,879
Speaker 2: of soft issue robotic surgery eleven years ago when it

471
00:26:02,920 --> 00:26:06,800
Speaker 2: teamed up with Alphabet to create VERB Surgical, which it

472
00:26:06,880 --> 00:26:11,040
Speaker 2: ultimately took over. In twenty nineteen, the company bought robotics

473
00:26:11,119 --> 00:26:14,919
Speaker 2: surgery startup rs Health for three point four billion dollars

474
00:26:15,240 --> 00:26:18,640
Speaker 2: and subsequently invested billions more in the effort. Then came

475
00:26:18,720 --> 00:26:22,280
Speaker 2: its first version of OTAWA with six arms, but suffered

476
00:26:22,320 --> 00:26:25,439
Speaker 2: a nine hundred million dollar delay before getting approved in

477
00:26:25,480 --> 00:26:27,400
Speaker 2: a simpler form by the FDA.

478
00:26:27,760 --> 00:26:32,080
Speaker 6: It's not being a linear journey, you know, for us

479
00:26:32,440 --> 00:26:37,960
Speaker 6: that you know, I'm really proud of what we have accomplished,

480
00:26:38,400 --> 00:26:42,040
Speaker 6: particularly over the last five years, how the technologies evolved,

481
00:26:42,080 --> 00:26:44,920
Speaker 6: and what we're going to be bringing to market anytime soon.

482
00:26:45,119 --> 00:26:48,960
Speaker 6: We acknowledged that there were some technical challenges at that time,

483
00:26:49,200 --> 00:26:51,679
Speaker 6: and we went back to the surgeons that was talking

484
00:26:51,680 --> 00:26:55,359
Speaker 6: about and that we we are very happy with the

485
00:26:55,359 --> 00:26:56,640
Speaker 6: decision we made at that time.

486
00:26:57,880 --> 00:27:00,720
Speaker 2: While Johnson and Johnson has been developing its version of

487
00:27:00,920 --> 00:27:05,280
Speaker 2: soft tissue robotic surgery. Others have forged ahead. The leader

488
00:27:05,320 --> 00:27:08,320
Speaker 2: in the field is Intuitive, whose Da Vinci system was

489
00:27:08,359 --> 00:27:13,119
Speaker 2: first approved in two thousand for Eurologic surgical procedures. Global

490
00:27:13,200 --> 00:27:16,239
Speaker 2: Data estimated that Intuitive held around eighty percent of the

491
00:27:16,240 --> 00:27:19,480
Speaker 2: market in twenty twenty four, with the rest shared by

492
00:27:19,480 --> 00:27:23,880
Speaker 2: firms like Medtronic and CMR Surgical. Jay and J knows

493
00:27:23,960 --> 00:27:27,080
Speaker 2: it's starting from behind in the race, but it believes

494
00:27:27,080 --> 00:27:30,560
Speaker 2: Otava is a very different kind of competitor, one that

495
00:27:30,600 --> 00:27:33,760
Speaker 2: will help it move up the leader board. As you know, well,

496
00:27:33,760 --> 00:27:36,000
Speaker 2: you're not first into this space. There are other people

497
00:27:36,040 --> 00:27:38,920
Speaker 2: who are fairly well entrenched. Are you happy with your

498
00:27:38,920 --> 00:27:41,359
Speaker 2: position of being second, or third or fourth?

499
00:27:42,000 --> 00:27:45,879
Speaker 7: Well, first, we're very happy that we're bringing a new

500
00:27:45,920 --> 00:27:48,640
Speaker 7: categority defining innovation to the market.

501
00:27:48,920 --> 00:27:52,680
Speaker 2: Honey Abuhalke is in charge of the company's surgical technologies,

502
00:27:52,680 --> 00:27:57,080
Speaker 2: including Ottava. That group falls under its Medtech division, which

503
00:27:57,119 --> 00:28:00,000
Speaker 2: made up a third of Johnson and Johnson's overall revenue

504
00:28:00,119 --> 00:28:01,200
Speaker 2: in twenty twenty five.

505
00:28:01,400 --> 00:28:05,320
Speaker 7: If you look at globally, there's maybe forty companies with robots,

506
00:28:05,800 --> 00:28:10,359
Speaker 7: but all of them are either stuck in two different architectures,

507
00:28:10,359 --> 00:28:14,440
Speaker 7: either modular or boom. And the biggest difference here is

508
00:28:14,560 --> 00:28:19,040
Speaker 7: our robot is the table. The arms are integrated. You

509
00:28:19,080 --> 00:28:21,760
Speaker 7: walk into the R if they're not deployed, you don't

510
00:28:21,760 --> 00:28:24,479
Speaker 7: see it. And when it's needed, it comes on and

511
00:28:24,520 --> 00:28:26,359
Speaker 7: you'll tell me is that a big deal? I can

512
00:28:26,400 --> 00:28:28,560
Speaker 7: tell you when I started my career, Jane Jay, I

513
00:28:28,640 --> 00:28:31,119
Speaker 7: remember the first day I was in R and I

514
00:28:31,200 --> 00:28:34,720
Speaker 7: felt it's without even noticing it. There is tension and

515
00:28:34,760 --> 00:28:38,160
Speaker 7: friction between the surgical team and the machines. And I've

516
00:28:38,160 --> 00:28:40,400
Speaker 7: always had this idea that we can do better and

517
00:28:40,400 --> 00:28:42,520
Speaker 7: we should do better, and I believe we did.

518
00:28:42,880 --> 00:28:45,640
Speaker 2: Johnson and Johnson believes it has a better way to

519
00:28:45,720 --> 00:28:49,800
Speaker 2: address robotic soft tissue surgery, one that will appeal, particularly

520
00:28:49,880 --> 00:28:52,640
Speaker 2: where space in the operating room is at a premium.

521
00:28:53,080 --> 00:28:56,320
Speaker 2: But it also sees the overall robotic surgery market as

522
00:28:56,360 --> 00:29:00,000
Speaker 2: being in its early stages, providing an opportunity for its

523
00:29:00,040 --> 00:29:02,320
Speaker 2: product to grow as the market does.

524
00:29:02,600 --> 00:29:06,200
Speaker 6: Robotic surgery. If you look at the total addressable market

525
00:29:06,240 --> 00:29:09,360
Speaker 6: the way we look at it has eight percent penetration

526
00:29:09,600 --> 00:29:14,080
Speaker 6: around the world. It's a fast growing segment of the

527
00:29:14,120 --> 00:29:17,960
Speaker 6: market definitely one that we see more and more adoption

528
00:29:18,160 --> 00:29:22,200
Speaker 6: for and that there is more and more company like

529
00:29:22,400 --> 00:29:27,240
Speaker 6: us willing to contribute and bring meaningful solutions to market.

530
00:29:27,440 --> 00:29:31,160
Speaker 8: One of the big benefits of the robot is that

531
00:29:31,720 --> 00:29:34,320
Speaker 8: it is collecting a lot of the surgeon information.

532
00:29:34,840 --> 00:29:38,000
Speaker 2: Doctor Christy Hawley is an assistant professor of surgery at

533
00:29:38,000 --> 00:29:41,560
Speaker 2: the University of Colorado and just recently led the department's

534
00:29:41,560 --> 00:29:44,480
Speaker 2: annual Robotic Acute Care Surgery course.

535
00:29:44,880 --> 00:29:50,840
Speaker 8: Robotic surgery definitely adds another element of complexity to general

536
00:29:50,840 --> 00:29:55,160
Speaker 8: surgery training. The resident physicians are being asked to not

537
00:29:55,280 --> 00:30:00,560
Speaker 8: only learn open operations and laparoscopic operations with street sticks,

538
00:30:00,920 --> 00:30:03,360
Speaker 8: but now they are also being asked to learn how

539
00:30:03,360 --> 00:30:07,920
Speaker 8: to operate on a robotic console. At my institution, I'm

540
00:30:07,920 --> 00:30:12,479
Speaker 8: the director of robotic surgery education for about eighty general

541
00:30:12,480 --> 00:30:16,920
Speaker 8: surgery residents, and so really thinking about how to train

542
00:30:16,960 --> 00:30:19,440
Speaker 8: them on the platform is challenging.

543
00:30:19,840 --> 00:30:23,160
Speaker 2: Another challenge for robotic surgery is the misnomer of the

544
00:30:23,240 --> 00:30:26,920
Speaker 2: role of the robots. Doctor Hawley says they don't perform

545
00:30:27,000 --> 00:30:29,680
Speaker 2: surgeries on their own. They are meant to be used

546
00:30:29,720 --> 00:30:31,200
Speaker 2: by human surgeons.

547
00:30:31,520 --> 00:30:36,000
Speaker 8: I often get asked whether robots are going to take

548
00:30:36,040 --> 00:30:38,840
Speaker 8: over our jobs as surgeons, and I believe that would

549
00:30:38,840 --> 00:30:44,880
Speaker 8: be very difficult to accomplish. Being a surgeon involves patient selection,

550
00:30:45,520 --> 00:30:50,360
Speaker 8: diagnosing a patient, and ensuring that you've built that trust

551
00:30:50,480 --> 00:30:52,760
Speaker 8: with a patient to go to the operating room. But

552
00:30:52,800 --> 00:30:57,080
Speaker 8: I also think that there's the possibility of these robots

553
00:30:57,160 --> 00:31:00,960
Speaker 8: performing components of the operation. I'll give you one example,

554
00:31:01,320 --> 00:31:05,480
Speaker 8: a simple task like suturing. If a program was able

555
00:31:05,520 --> 00:31:08,680
Speaker 8: to actually see different pieces of tissue and you, as

556
00:31:08,720 --> 00:31:11,320
Speaker 8: the surgeon sitting at the console, say I'd like to

557
00:31:11,360 --> 00:31:14,120
Speaker 8: suture this to this and point to the robot show it,

558
00:31:14,560 --> 00:31:18,000
Speaker 8: then maybe it's possible that that component of the operation

559
00:31:18,400 --> 00:31:20,760
Speaker 8: could be done by a robot. But that's certainly not

560
00:31:20,880 --> 00:31:23,560
Speaker 8: something that's going on today. So I wouldn't say that

561
00:31:23,680 --> 00:31:27,720
Speaker 8: every surgery necessarily should be robotic. I think it takes

562
00:31:27,760 --> 00:31:32,640
Speaker 8: a very well trained surgeon in both robotic surgery, laparoscopy

563
00:31:32,640 --> 00:31:38,240
Speaker 8: and open operations to decide patient selection, So which patient

564
00:31:38,320 --> 00:31:42,400
Speaker 8: is going to benefit from the robotic platform for what

565
00:31:42,560 --> 00:31:43,480
Speaker 8: type of surgery.

566
00:31:44,320 --> 00:31:47,800
Speaker 2: Robotic surgery may not be right for every procedure, but

567
00:31:47,960 --> 00:31:50,720
Speaker 2: where it is used, doctor Hawley says it fills a

568
00:31:50,720 --> 00:31:53,840
Speaker 2: gap for both patients and the hospitals that use the

569
00:31:53,880 --> 00:31:54,680
Speaker 2: new technology.

570
00:31:54,840 --> 00:31:58,520
Speaker 8: There have been multiple studies showing that laparoscopic and minimally

571
00:31:58,560 --> 00:32:03,000
Speaker 8: invasive surgery do have many benefits to patients. One of

572
00:32:03,040 --> 00:32:08,280
Speaker 8: the biggest benefits is decreased pain. As you can imagine,

573
00:32:08,360 --> 00:32:12,640
Speaker 8: and open operation requires a large incision and can be

574
00:32:12,760 --> 00:32:16,200
Speaker 8: very painful. So if you have less pain, you can

575
00:32:16,320 --> 00:32:19,800
Speaker 8: recover more quickly, go back to work more quickly, and

576
00:32:19,840 --> 00:32:23,480
Speaker 8: get out of the hospital faster. And so one piece

577
00:32:23,600 --> 00:32:27,640
Speaker 8: is that minimally invasive surgery can actually decrease your hospital

578
00:32:27,680 --> 00:32:30,960
Speaker 8: length of stay, which is very important to both patients

579
00:32:31,000 --> 00:32:37,080
Speaker 8: and hospital administrators overall. When choosing robotic surgery specifically, it

580
00:32:37,120 --> 00:32:43,240
Speaker 8: really depends on patient selection, the operative team you have available,

581
00:32:44,120 --> 00:32:48,000
Speaker 8: if the platform is available in your center, and of

582
00:32:48,040 --> 00:32:52,040
Speaker 8: course how well the surgeon is trained on the robotic platform.

583
00:32:52,160 --> 00:32:55,120
Speaker 8: If I do not have a resident, I'm in an

584
00:32:55,120 --> 00:32:58,840
Speaker 8: academic surgeon, and so we have residents in our operating

585
00:32:58,920 --> 00:33:02,840
Speaker 8: room to help us operate as the attending surgeon. And

586
00:33:03,080 --> 00:33:06,719
Speaker 8: it's very beneficial that if a resident's not available on

587
00:33:06,760 --> 00:33:12,480
Speaker 8: the robotic platform, there are less needs for assistance. It's

588
00:33:12,520 --> 00:33:14,720
Speaker 8: a lot easier to just place the ports on your

589
00:33:14,760 --> 00:33:18,320
Speaker 8: own and then operate robotically. I have spoke to many

590
00:33:18,360 --> 00:33:21,600
Speaker 8: surgeons in the community or in rural settings who don't

591
00:33:21,640 --> 00:33:26,560
Speaker 8: have surgical trainees or can't their systems really can't afford

592
00:33:26,640 --> 00:33:30,600
Speaker 8: surgical assists, and so the robotic platform can be another

593
00:33:30,640 --> 00:33:32,880
Speaker 8: way to make us more autonomous and be able to

594
00:33:32,920 --> 00:33:37,000
Speaker 8: rely on ourselves to perform operations in totality.

595
00:33:37,400 --> 00:33:40,040
Speaker 2: Johnson and Johnson is hopeful not just that it can

596
00:33:40,080 --> 00:33:42,920
Speaker 2: catch up in robotic soft tissue surgery, but that it

597
00:33:42,960 --> 00:33:45,760
Speaker 2: can make a large and successful business of it. That

598
00:33:45,800 --> 00:33:50,200
Speaker 2: will require further FDA approvals for specific procedures down the road,

599
00:33:50,640 --> 00:33:53,560
Speaker 2: but Johnson and Johnson is confident that those will be forthcoming.

600
00:33:54,200 --> 00:33:56,840
Speaker 7: If they have been incredible partners on this journey, they

601
00:33:57,200 --> 00:33:59,240
Speaker 7: we've been back on forth with them. The people at

602
00:33:59,280 --> 00:34:02,760
Speaker 7: the FDA have been incredible professionals from day one. They're

603
00:34:02,760 --> 00:34:05,160
Speaker 7: trying to do us best for patients and for healthcare,

604
00:34:05,720 --> 00:34:08,920
Speaker 7: and from our perspective is we're trying to move with

605
00:34:09,000 --> 00:34:11,640
Speaker 7: precision and with speed. Our intention is to be leader

606
00:34:11,680 --> 00:34:14,840
Speaker 7: in sergical robotics, and to do that we need incredible

607
00:34:14,880 --> 00:34:18,080
Speaker 7: technology genervation, which we have. Then our next submission we

608
00:34:18,120 --> 00:34:22,200
Speaker 7: announced was in England and Hernia, and subsequently after that

609
00:34:22,239 --> 00:34:24,840
Speaker 7: we're going to have multiple submissions to be able to

610
00:34:24,880 --> 00:34:28,239
Speaker 7: bring again multiple geographies and multiple specialties. And that's what

611
00:34:28,280 --> 00:34:30,400
Speaker 7: we're planning to do. If you just take one step

612
00:34:30,400 --> 00:34:32,520
Speaker 7: back and understand that we chose to come to the

613
00:34:32,640 --> 00:34:35,480
Speaker 7: US first for a couple of reasons. One it's the

614
00:34:35,560 --> 00:34:39,840
Speaker 7: largest robotic market. Two, it's a sign of confidence of

615
00:34:40,080 --> 00:34:43,160
Speaker 7: our program and how differentiated it is that it can

616
00:34:43,200 --> 00:34:45,920
Speaker 7: take something that's been there for a while. As you know,

617
00:34:45,960 --> 00:34:50,880
Speaker 7: sergical robotics is not new atava Is, and that's why

618
00:34:50,960 --> 00:34:54,440
Speaker 7: we're coming here first, and all three will expand quickly

619
00:34:54,520 --> 00:34:57,000
Speaker 7: after that to key markets like Japan and Europe.

620
00:34:57,440 --> 00:35:00,319
Speaker 2: So give me a sense again in success, how this

621
00:35:00,400 --> 00:35:02,560
Speaker 2: could be for Johnson and Johnson. How do you measure that?

622
00:35:02,719 --> 00:35:04,760
Speaker 2: First of all, start with your starting the United States.

623
00:35:05,080 --> 00:35:06,920
Speaker 2: What is the potential in the United States as opposed

624
00:35:06,960 --> 00:35:08,120
Speaker 2: to outside the United States.

625
00:35:08,680 --> 00:35:11,800
Speaker 7: I mean, as I said, it's incredibly exciting for us,

626
00:35:11,840 --> 00:35:15,200
Speaker 7: for Jane Jay in terms of from a financial perspective,

627
00:35:15,600 --> 00:35:17,920
Speaker 7: we expect this to be material towards the end of

628
00:35:17,960 --> 00:35:18,480
Speaker 7: the decade.

629
00:35:18,640 --> 00:35:21,799
Speaker 2: As the saying goes, the pioneer takes the arrows, but

630
00:35:21,880 --> 00:35:23,320
Speaker 2: the settler takes the land.

631
00:35:23,560 --> 00:35:26,960
Speaker 7: Sometimes we're not first, but when it said undone, we

632
00:35:27,000 --> 00:35:29,600
Speaker 7: were best. We brought the innovation that no one can

633
00:35:29,680 --> 00:35:33,319
Speaker 7: really match. And what excites me here is that this

634
00:35:33,400 --> 00:35:36,560
Speaker 7: is still early and we're bringing something that's complete, differentiated,

635
00:35:36,960 --> 00:35:38,920
Speaker 7: and it's going to help us take robotic surgeries to

636
00:35:38,960 --> 00:35:39,440
Speaker 7: the future.

637
00:35:41,320 --> 00:35:44,440
Speaker 2: Up next. The US leads the world in think tanks,

638
00:35:44,719 --> 00:35:48,440
Speaker 2: those non profit idea generators. But what do they really

639
00:35:48,520 --> 00:36:02,120
Speaker 2: do and do they make a true difference? This is

640
00:36:02,120 --> 00:36:05,160
Speaker 2: a story about return on a different kind of investment,

641
00:36:05,360 --> 00:36:08,680
Speaker 2: an investment not in plants and equipment, but in ideas.

642
00:36:09,200 --> 00:36:11,319
Speaker 2: We hardly go through a day without getting a new

643
00:36:11,360 --> 00:36:14,799
Speaker 2: report or policy proposal from a think tank, from the

644
00:36:14,840 --> 00:36:18,880
Speaker 2: Council and form Relations or RAND or Heritage or Brookings,

645
00:36:18,920 --> 00:36:22,960
Speaker 2: all supported by wealthy individuals and corporations. But do they

646
00:36:23,000 --> 00:36:25,640
Speaker 2: make a real difference? And how do we tell? For

647
00:36:25,719 --> 00:36:27,560
Speaker 2: that matter, how do they tell.

648
00:36:29,800 --> 00:36:32,040
Speaker 9: I've been intensely interested in this question what I call

649
00:36:32,080 --> 00:36:33,319
Speaker 9: the business of ideas.

650
00:36:33,719 --> 00:36:36,920
Speaker 2: Carolyn Elkins studies think tanks at Harvard Business School.

651
00:36:37,440 --> 00:36:39,880
Speaker 9: How do ideas get formulated? How do they make it

652
00:36:39,920 --> 00:36:43,280
Speaker 9: in the marketplace? How do we value them, and more importantly,

653
00:36:43,560 --> 00:36:45,960
Speaker 9: what influence and impact do they have on the society

654
00:36:45,960 --> 00:36:46,560
Speaker 9: in which we live.

655
00:36:47,280 --> 00:36:49,839
Speaker 2: Elkins says that there are between eight thousand and ten

656
00:36:49,920 --> 00:36:54,160
Speaker 2: thousand nonprofit organizations worldwide that deal in the business of ideas,

657
00:36:54,560 --> 00:36:57,400
Speaker 2: and the US has twenty percent of them. The five

658
00:36:57,480 --> 00:37:00,279
Speaker 2: biggest think tanks in the US brought in roughly one

659
00:37:00,360 --> 00:37:03,680
Speaker 2: point three billion dollars in their latest reported fiscal years.

660
00:37:04,120 --> 00:37:07,240
Speaker 2: But their rise has been a long time in the making.

661
00:37:08,200 --> 00:37:10,200
Speaker 9: They go back, you know, really all the way into

662
00:37:10,360 --> 00:37:13,320
Speaker 9: at least in the United States, into the Second Industrial Revolution,

663
00:37:13,440 --> 00:37:16,720
Speaker 9: and they really take off after World War One. Brookings

664
00:37:16,880 --> 00:37:18,600
Speaker 9: is among the first, and then we have the Council

665
00:37:18,680 --> 00:37:21,320
Speaker 9: on Foreign Relations, and then we see another uptick again

666
00:37:21,360 --> 00:37:24,400
Speaker 9: in these think tanks in the post Second World War period,

667
00:37:24,440 --> 00:37:27,320
Speaker 9: and that's when we have institutes like the Aspen Institute

668
00:37:27,320 --> 00:37:30,680
Speaker 9: coming into fruition, a lot of them focusing on you know,

669
00:37:30,719 --> 00:37:33,400
Speaker 9: sort of big sort of geopolitical problems like the Randa

670
00:37:33,800 --> 00:37:37,040
Speaker 9: Corporation and others. And these think tanks were really meant

671
00:37:37,200 --> 00:37:40,719
Speaker 9: to bridge this kind of research for research sake, which

672
00:37:40,760 --> 00:37:45,560
Speaker 9: is really what universities were doing with practical implementation decision makers.

673
00:37:45,880 --> 00:37:49,279
Speaker 2: One of The most prominent of these nonprofit idea generators

674
00:37:49,360 --> 00:37:53,120
Speaker 2: is the Aspen Institute. Dan Porterfield took over leadership of

675
00:37:53,160 --> 00:37:56,279
Speaker 2: the Institute in twenty eighteen and has just stepped down

676
00:37:56,440 --> 00:37:59,400
Speaker 2: to become CEO of the Jack Kent Cook Foundation.

677
00:38:00,040 --> 00:38:02,399
Speaker 10: There's a lot of different models for being a so

678
00:38:02,440 --> 00:38:05,480
Speaker 10: called think tank. Many think tanks that are well known,

679
00:38:05,560 --> 00:38:08,840
Speaker 10: like the Brookings Institute or the American Enterprise Institute, assemble

680
00:38:08,880 --> 00:38:12,480
Speaker 10: scholars who then write reports that are meant to be

681
00:38:12,600 --> 00:38:16,000
Speaker 10: very relevant about issues facing our country or the world.

682
00:38:16,480 --> 00:38:19,120
Speaker 10: In the case of the ASP Institute, we're less of

683
00:38:19,120 --> 00:38:22,319
Speaker 10: a think tank than a do tank. We don't sit

684
00:38:22,360 --> 00:38:24,239
Speaker 10: around and go up to Capitol Hill. We don't have

685
00:38:24,239 --> 00:38:26,279
Speaker 10: any lobbing at the ASP Insitute. We don't tell the

686
00:38:26,320 --> 00:38:29,200
Speaker 10: government what it should do. We're more likely to build

687
00:38:29,239 --> 00:38:32,280
Speaker 10: the table around which many players sit so they together

688
00:38:32,440 --> 00:38:34,840
Speaker 10: can sort out how to frame and address a problem.

689
00:38:35,200 --> 00:38:38,319
Speaker 2: When you went to lead the Aspen Institute, what did

690
00:38:38,400 --> 00:38:40,720
Speaker 2: you feel you needed to accomplish? What were your goals?

691
00:38:41,239 --> 00:38:43,880
Speaker 10: Probably two big things to start. The first was that

692
00:38:43,920 --> 00:38:46,879
Speaker 10: the ASP Institute, led by Walter Isaacson, had taken off

693
00:38:46,920 --> 00:38:51,719
Speaker 10: as an organization, had seated many fantastic programs in leadership

694
00:38:51,840 --> 00:38:55,879
Speaker 10: or in collective problem solving around the country, and part

695
00:38:55,920 --> 00:39:00,000
Speaker 10: of my responsibility as CEO was to develop an enterprise

696
00:39:00,400 --> 00:39:04,960
Speaker 10: strategy so that the collection of programs would fit well

697
00:39:05,000 --> 00:39:07,840
Speaker 10: together and so that they all would benefit from a

698
00:39:07,920 --> 00:39:12,240
Speaker 10: robust and sustainable enterprise. The second part of my work

699
00:39:12,480 --> 00:39:14,640
Speaker 10: when I started was to figure out ways that we

700
00:39:14,719 --> 00:39:18,200
Speaker 10: could get younger as an organization to be more relevant

701
00:39:18,480 --> 00:39:19,640
Speaker 10: to a changing world.

702
00:39:19,760 --> 00:39:21,480
Speaker 2: Looking back at it now, what do you feel like

703
00:39:21,520 --> 00:39:22,480
Speaker 2: you did accomplish.

704
00:39:22,680 --> 00:39:25,560
Speaker 10: We have a stronger understanding of our identity, we have

705
00:39:25,640 --> 00:39:29,400
Speaker 10: more cooperation and collaboration across the organization. We're able to

706
00:39:29,440 --> 00:39:34,000
Speaker 10: propose bigger concepts, for bigger donations, for bigger impact because

707
00:39:34,040 --> 00:39:36,839
Speaker 10: we're using all of our enterprise muscles. That's one thing.

708
00:39:37,200 --> 00:39:39,760
Speaker 10: The second thing is I think we developed a logic

709
00:39:40,000 --> 00:39:44,840
Speaker 10: in the institution to compete confidently, to go make a difference.

710
00:39:45,160 --> 00:39:49,040
Speaker 10: And of course these are challenging times because there's so

711
00:39:49,120 --> 00:39:51,640
Speaker 10: many events that have happened even in the eight years

712
00:39:51,640 --> 00:39:54,560
Speaker 10: i've been CEO that you wouldn't have predicted in our society,

713
00:39:54,600 --> 00:39:57,760
Speaker 10: from a pandemic to the killing of George Floyd to more.

714
00:39:58,239 --> 00:40:02,080
Speaker 10: And so I think that competing confiendly means taking all

715
00:40:02,120 --> 00:40:06,799
Speaker 10: of those moments of societal anxiety and difficulty and disagreement

716
00:40:07,239 --> 00:40:11,719
Speaker 10: and saying, Okay, this is our moment to contribute and

717
00:40:11,760 --> 00:40:15,880
Speaker 10: to lead by bringing people together, by using our strength

718
00:40:16,200 --> 00:40:18,120
Speaker 10: in the service of what society needs.

719
00:40:18,880 --> 00:40:22,560
Speaker 2: All worthy goals for Aspen and for others, but can

720
00:40:22,600 --> 00:40:26,520
Speaker 2: one measure progress toward them? Elkins says her study of

721
00:40:26,600 --> 00:40:29,880
Speaker 2: organizations like the Aspen Institute has convinced her that there

722
00:40:29,920 --> 00:40:33,920
Speaker 2: are ways to measure success even in the generation of ideas.

723
00:40:34,560 --> 00:40:37,280
Speaker 9: You can optimize in the way in which we we measure.

724
00:40:37,320 --> 00:40:38,960
Speaker 9: That is, we have all kinds of ways that we

725
00:40:39,040 --> 00:40:43,720
Speaker 9: can count. The very basis of Aspen, the Pepgez vision

726
00:40:44,040 --> 00:40:48,200
Speaker 9: was to create a good society, to cultivate human flourishing.

727
00:40:48,880 --> 00:40:50,439
Speaker 9: I think it's one of the things that we're looking

728
00:40:50,520 --> 00:40:54,440
Speaker 9: at in society today. How do we cultivate empathy, how

729
00:40:54,440 --> 00:40:58,160
Speaker 9: do we cultivate judgment, how do we cultivate ethics? How

730
00:40:58,160 --> 00:41:01,080
Speaker 9: do we cultivate leadership? And by the way, I should say,

731
00:41:01,080 --> 00:41:03,920
Speaker 9: these are precisely the things that folks like Sam Altman

732
00:41:03,960 --> 00:41:06,360
Speaker 9: will tell us a I won't do for us. So

733
00:41:06,800 --> 00:41:09,839
Speaker 9: it's very difficult in some ways to measure it other

734
00:41:09,920 --> 00:41:12,000
Speaker 9: than to say they're very good at it, and I

735
00:41:12,040 --> 00:41:15,320
Speaker 9: would measure it perhaps in One way that does actually

736
00:41:15,360 --> 00:41:17,480
Speaker 9: come to mind is what are the kinds of people

737
00:41:17,840 --> 00:41:20,120
Speaker 9: who can they bring around the table. I know of

738
00:41:20,360 --> 00:41:24,319
Speaker 9: no one that has the kind of convening power that

739
00:41:24,360 --> 00:41:28,160
Speaker 9: Aspen has. People trust the Institute to have closed doors

740
00:41:28,280 --> 00:41:32,080
Speaker 9: Chathamhouse rules to discuss not just thorny issues, but issues

741
00:41:32,120 --> 00:41:36,399
Speaker 9: that really are impacting society everywhere. From Vivian Schiller's work

742
00:41:36,520 --> 00:41:39,640
Speaker 9: in media and I love the way she approaches problem solving,

743
00:41:39,640 --> 00:41:43,000
Speaker 9: which is precisely how Aspen in general does, which is

744
00:41:43,000 --> 00:41:45,240
Speaker 9: is this an important problem or question that we should

745
00:41:45,239 --> 00:41:45,720
Speaker 9: be answering.

746
00:41:46,600 --> 00:41:49,160
Speaker 2: Another way to measure success is by what others in

747
00:41:49,200 --> 00:41:52,000
Speaker 2: the field say about the work and whether they step

748
00:41:52,080 --> 00:41:55,239
Speaker 2: up to share the burden. Romy Drucker is director of

749
00:41:55,280 --> 00:41:58,600
Speaker 2: the Education Program at the Walton Family Foundation, which is

750
00:41:58,640 --> 00:42:01,920
Speaker 2: given millions of dollars to the Aspen Institute.

751
00:42:02,000 --> 00:42:05,960
Speaker 11: The Walton Family Foundation recently conducted a study in partnership

752
00:42:05,960 --> 00:42:10,160
Speaker 11: with Gallup about opportunity and what's going to help opportunity

753
00:42:10,160 --> 00:42:13,719
Speaker 11: flourish in America, and there were some really interesting findings,

754
00:42:13,800 --> 00:42:18,480
Speaker 11: including that most Americans are really excited to invest in

755
00:42:18,520 --> 00:42:22,279
Speaker 11: their communities to give back, but the number one obstacle

756
00:42:22,320 --> 00:42:26,640
Speaker 11: they cited was who's going to listen to them? No

757
00:42:26,680 --> 00:42:30,560
Speaker 11: one is there to really receive their ideas to help

758
00:42:30,680 --> 00:42:34,120
Speaker 11: uplift them. I think when we think about think tanks

759
00:42:34,400 --> 00:42:40,080
Speaker 11: and forums that are convening people and ideas and resources

760
00:42:40,120 --> 00:42:44,200
Speaker 11: around new ideas and innovation, it's about overcoming that barrier.

761
00:42:44,880 --> 00:42:48,719
Speaker 11: I think what's been really powerful about Aspen is their

762
00:42:49,000 --> 00:42:54,760
Speaker 11: unwavering commitment to fostering a dialogue across lines of difference

763
00:42:55,000 --> 00:42:59,680
Speaker 11: as well as intergenerational change. You will find in every

764
00:42:59,760 --> 00:43:03,920
Speaker 11: com conversation at ASPEN differing perspectives. You will find an

765
00:43:04,000 --> 00:43:09,240
Speaker 11: openness to disagreement. We are a foundation that believes in evaluation,

766
00:43:09,920 --> 00:43:14,200
Speaker 11: and we have our own way of measuring ROI, and

767
00:43:14,280 --> 00:43:18,799
Speaker 11: so we want to see not just powerful convening but

768
00:43:19,239 --> 00:43:23,680
Speaker 11: ideas that make their way into the zeitgeist, and we

769
00:43:24,000 --> 00:43:26,520
Speaker 11: have tools to measure that. So we work with our

770
00:43:26,560 --> 00:43:31,239
Speaker 11: partners to develop those outcome measures. If we're going to

771
00:43:31,239 --> 00:43:34,799
Speaker 11: push for systems change and bowls ideas, we have to

772
00:43:34,840 --> 00:43:37,040
Speaker 11: have clear goals. This is one of the things about

773
00:43:37,040 --> 00:43:41,120
Speaker 11: philanthropy where sometimes you know we are working in a

774
00:43:41,160 --> 00:43:44,120
Speaker 11: gray area in terms of social impact.

775
00:43:44,320 --> 00:43:48,320
Speaker 2: And financial support from wealthy individuals and foundations in itself

776
00:43:48,400 --> 00:43:52,000
Speaker 2: can be an indicator of success. Recently, the Bezos Family

777
00:43:52,000 --> 00:43:56,280
Speaker 2: Foundation created a Center for Rising Generations at Aspen, contrbuting

778
00:43:56,400 --> 00:43:59,440
Speaker 2: one hundred and eighty six million dollars and leading others

779
00:43:59,600 --> 00:44:02,080
Speaker 2: like the World Alton Family Foundation to join in.

780
00:44:02,760 --> 00:44:08,520
Speaker 11: This is a critical step in Aspen elevating its commitment

781
00:44:08,640 --> 00:44:14,600
Speaker 11: to young people, believing in them as future shapers, investing

782
00:44:14,600 --> 00:44:18,839
Speaker 11: in their leadership skills. We think that bringing together all

783
00:44:18,880 --> 00:44:22,160
Speaker 11: of Aspen's youth work under one umbrella is going to

784
00:44:22,160 --> 00:44:25,799
Speaker 11: be a really powerful signal about what it's going to

785
00:44:25,880 --> 00:44:30,160
Speaker 11: take for both Aspen as an institution itself to evolve,

786
00:44:30,239 --> 00:44:33,640
Speaker 11: but also for it to evolve its influence in the world.

787
00:44:34,200 --> 00:44:37,040
Speaker 2: Will think tanks like the Aspen Institute focus on goals

788
00:44:37,040 --> 00:44:39,640
Speaker 2: that may be hard to put numbers to, like the

789
00:44:39,640 --> 00:44:43,440
Speaker 2: free exchange of ideas. Others are driven by more specific,

790
00:44:43,680 --> 00:44:47,880
Speaker 2: measurable results. The last fifty years have seen the rise

791
00:44:47,920 --> 00:44:51,480
Speaker 2: of the explicitly partisan think tank devoted to getting things

792
00:44:51,560 --> 00:44:52,840
Speaker 2: done in Washington.

793
00:44:53,880 --> 00:44:56,760
Speaker 9: Since the sixties and seventies, what we've really seen is

794
00:44:56,400 --> 00:44:59,799
Speaker 9: a shift in them becoming much more political. And then

795
00:44:59,840 --> 00:45:03,000
Speaker 9: we i'vet Fohner in the basement of Congress. He was

796
00:45:03,040 --> 00:45:05,359
Speaker 9: just a young sort of staffer, I believe at the time,

797
00:45:05,440 --> 00:45:08,760
Speaker 9: and frustrated by the fact that the American Enterprise Institute

798
00:45:08,840 --> 00:45:11,000
Speaker 9: refused to release its report on I think it was

799
00:45:11,040 --> 00:45:13,680
Speaker 9: supersonic jets to the Senate because it didn't want to

800
00:45:13,760 --> 00:45:16,799
Speaker 9: influence policy. And at that point we see a real turn,

801
00:45:16,880 --> 00:45:19,719
Speaker 9: certainly with the Heritage Foundation and others saying, actually, what

802
00:45:19,760 --> 00:45:22,120
Speaker 9: we want to do is to really influence policy in

803
00:45:22,120 --> 00:45:25,320
Speaker 9: a particular political direction, and we see that coming to fruition.

804
00:45:25,440 --> 00:45:28,120
Speaker 9: As we know in the eighties, when the Reagan administration

805
00:45:28,160 --> 00:45:32,040
Speaker 9: adopts the Heritage Report as the bible of the Reagan Administration,

806
00:45:32,080 --> 00:45:35,239
Speaker 9: adopting two thirds of its two thousand recommendations, it was

807
00:45:35,320 --> 00:45:38,520
Speaker 9: extraordinary and they really have played a very large role

808
00:45:38,560 --> 00:45:40,200
Speaker 9: in shaping American society.

809
00:45:40,800 --> 00:45:43,560
Speaker 2: Recently, the Heritage Foundation has made a name for itself

810
00:45:43,600 --> 00:45:46,600
Speaker 2: with its Project twenty twenty five Blueprint for the second

811
00:45:46,600 --> 00:45:51,040
Speaker 2: Trump Administration, something mister Trump disavowed during his campaign, but

812
00:45:51,200 --> 00:45:54,000
Speaker 2: much of which has since come to fruition. There's no

813
00:45:54,120 --> 00:45:57,799
Speaker 2: denying the impact of the Heritage Foundation's approach and its

814
00:45:57,800 --> 00:46:02,040
Speaker 2: demonstrable successes, and says there remains an important role for

815
00:46:02,160 --> 00:46:04,560
Speaker 2: organizations like the Aspen Institute.

816
00:46:04,800 --> 00:46:07,400
Speaker 9: I felt very strongly that that institute has the potential

817
00:46:07,480 --> 00:46:10,880
Speaker 9: playing an outside role in society. I've sort of borne

818
00:46:10,920 --> 00:46:13,680
Speaker 9: witness to the fact that we have moved away from

819
00:46:13,760 --> 00:46:17,560
Speaker 9: sort of exploring ideas just for the sake of exploring

820
00:46:17,600 --> 00:46:21,560
Speaker 9: ideas to being really quantified metrics being asked all the time,

821
00:46:21,640 --> 00:46:23,360
Speaker 9: sort of what we call sort of the audit culture,

822
00:46:23,400 --> 00:46:25,880
Speaker 9: which is in some ways reflective of this kind of

823
00:46:25,880 --> 00:46:29,080
Speaker 9: cultural of efficiency that we all live in. And in

824
00:46:29,120 --> 00:46:32,040
Speaker 9: many ways, the Aspen and Suit their direction isn't necessarily

825
00:46:32,440 --> 00:46:35,000
Speaker 9: headed that way. What they're asking is, I said, is

826
00:46:35,000 --> 00:46:38,160
Speaker 9: the question what makes for great human flourishing? And so

827
00:46:38,200 --> 00:46:40,160
Speaker 9: what that means is they're not looking to sort of

828
00:46:40,200 --> 00:46:45,520
Speaker 9: necessarily change policy directly or being prescriptive about policy. What

829
00:46:45,560 --> 00:46:48,960
Speaker 9: they're looking to do is to cultivate a good society.

830
00:46:49,840 --> 00:46:54,200
Speaker 2: But accomplishing even the most important goals requires resources and

831
00:46:54,320 --> 00:46:58,880
Speaker 2: difficult decisions about where to direct those resources. Perhaps the

832
00:46:58,920 --> 00:47:01,880
Speaker 2: most important job of a CEO of a for profit

833
00:47:01,960 --> 00:47:06,240
Speaker 2: company is allocating capital. That strikes me, you're allocating capital

834
00:47:06,239 --> 00:47:08,760
Speaker 2: as well. If you're running the Aspen Institute, it's money,

835
00:47:08,800 --> 00:47:12,160
Speaker 2: but it's also time and talent. When you decide, yes,

836
00:47:12,200 --> 00:47:14,719
Speaker 2: we're going to do something like the Basis initiative, or

837
00:47:14,760 --> 00:47:16,279
Speaker 2: we're going to cut back perhaps in the other place.

838
00:47:16,320 --> 00:47:18,440
Speaker 2: So how do you decide how to allocate that capital?

839
00:47:18,520 --> 00:47:21,040
Speaker 10: A big deal. Make sure you have a clear purpose

840
00:47:21,080 --> 00:47:23,719
Speaker 10: statement so people know what it is you do and

841
00:47:23,800 --> 00:47:26,600
Speaker 10: what you don't do. We worked with a consulting company,

842
00:47:26,680 --> 00:47:29,439
Speaker 10: sy Partners from here in New York to really drill

843
00:47:29,560 --> 00:47:32,879
Speaker 10: down over the course of six months, why are we here?

844
00:47:33,480 --> 00:47:36,840
Speaker 10: What is the reason this institute even exists? But that

845
00:47:37,239 --> 00:47:43,040
Speaker 10: allocation of capital, of time, talent, and resources is critical

846
00:47:43,080 --> 00:47:46,120
Speaker 10: because an organization can't do everything and it shouldn't try.

847
00:47:48,360 --> 00:47:50,160
Speaker 2: That does it for us here at Wall Street Week,

848
00:47:50,360 --> 00:47:53,480
Speaker 2: I'm David Weston. See you next week for more stories

849
00:47:53,520 --> 00:48:03,879
Speaker 2: of capitalism.