Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is Wall Street Week. I'm David Western, bringing you
Speaker 2: stories of capitalism, the wine industry, brace us for another
Speaker 2: round of tariffs on imports to the United States, Why
Speaker 2: being a domestic producer won't necessarily help, and artificial intelligence
Speaker 2: could change the fundamentals of our economy and give central
Speaker 2: banks new tools to monitor and manage it. Plus the
Speaker 2: growing business of wellness wearables and whether they really can
Speaker 2: help us live longer, healthier lives. But we start with
Speaker 2: the profound changes President Trump is bringing or promising to
Speaker 2: bring to us all from the one big, beautiful bill
Speaker 2: to more tariffs. He says, our only day, we welcome
Speaker 2: back our special contributor Larry Summers to tell us what
Speaker 2: is likely to have long lasting effects.
Speaker 3: David, it has to be recognized that it's a big
Speaker 3: legislative accomplishment. It's a larger bill passed sooner than other
Speaker 3: presidents have achieved. But I don't think it's going to
Speaker 3: take the country in the right direction. I think it's
Speaker 3: going to grow our budget deficits in the future very substantially.
Speaker 3: And you're already seeing some market reaction to that. And
Speaker 3: I think that what it does to our social safety
Speaker 3: net is really going to be devastating relative to the
Speaker 3: path the country would have been on if you look
Speaker 3: at cutbacks.
Speaker 4: In the social safety net.
Speaker 3: There were cutbacks in the welfare reform bill that was
Speaker 3: passed during Bill Clinton's presidency. There were cutbacks made by
Speaker 3: President Reagan and his original tax and budget legislation. This
Speaker 3: is the largest cutback in the social safety net that
Speaker 3: anybody has been able to find, and it's coming at
Speaker 3: a time when we appear to be on our trajectory
Speaker 3: to massive cutbacks in spending on scientific research, massive cutbacks
Speaker 3: in support for the arts and humanities, maximum cutbacks in
Speaker 3: support for foreign assistance programs, including ones on which large
Speaker 3: numbers of Aige patients in Africa are dependent for their
Speaker 3: life saving medicines. So this is legislation that, to my mind,
Speaker 3: both compromises our capacity to defend ourselves as a country
Speaker 3: because of all of the debt, and frankly compromises what
Speaker 3: makes our country worth defending in terms of being a
Speaker 3: humane force in terms of the world, in terms of
Speaker 3: our sense of national community and protecting everybody, in terms
Speaker 3: of some of our greatest contributions to humanity in both
Speaker 3: the sciences and the arts, and so I think this
Speaker 3: is a very troubling piece of legislation in ways that
Speaker 3: go beyond the problematic immediate economics.
Speaker 2: This one big, beautiful bill is one part of a
Speaker 2: more sweeping plan that President Trump has for I think
Speaker 2: it's fair to say really redoing the American economy. And
Speaker 2: yet we don't see much reaction yet from the economy
Speaker 2: in the numbers. And I'll give you an example in
Speaker 2: the tariffs. A lot of talk about tariffs, a lot
Speaker 2: of fear about tariffs, and yet if you look at
Speaker 2: the CPI numbers, the PPI numbers are coming out, they
Speaker 2: don't indicate the inflation that most economists predicted.
Speaker 4: I think it's early days.
Speaker 3: It may be that there are a set of other
Speaker 3: developments going on through artificial intelligence, through technology that are
Speaker 3: exerting a deflationary force. It may be that people, given
Speaker 3: all the huge uncertainties about tariffs, are waiting to see
Speaker 3: how it shakes out before they establish their new price structures.
Speaker 3: It may be that for a time it's possible for
Speaker 3: the people in the middle to eat the tariff increases
Speaker 3: in order to try to get market share. I agree,
Speaker 3: I agree with you, David, I would have expected more inflation,
Speaker 3: and what you have always have to do as an
Speaker 3: economist is watch the data and be prepared to change
Speaker 3: your mind. But for now, I think that I wouldn't
Speaker 3: want to rush to a judgment that these tariffs are
Speaker 3: innocuous for inflation. I think the more likely thing is
Speaker 3: that they're going to be somewhat more delayed.
Speaker 4: In their impact.
Speaker 3: Certainly, there have been many careful studies that compared the
Speaker 3: sectors that were tarifted and the sectors that were not
Speaker 3: tariffed during the president's first term and found the tariffs
Speaker 3: did translate into higher prices. So I would rather wait
Speaker 3: and see on this. I think that's the approach that
Speaker 3: the Felleral Reserve is taking, and I think, frankly that
Speaker 3: is the right approach.
Speaker 2: I mean, we've really seen a move up in the
Speaker 2: thirty year yield. We're above five percent relatively constantly. Now
Speaker 2: there are some who are concerned about exactly what that's
Speaker 2: telling us about inflation expectations and term premium.
Speaker 4: David. You know, I look at the.
Speaker 3: Ten year market relative to the twenty year or thirty
Speaker 3: year market as a sign of where the markets see
Speaker 3: very long term rates going over the very long term
Speaker 3: what market participants call the forward rate, and we now
Speaker 3: have forward rates on regular bonds that are well above
Speaker 3: five percent, and forward rates on tips on bonds linked
Speaker 3: to inflation that are well above three percent. And those
Speaker 3: are ominous indicators about our nation's credibility over the medium term.
Speaker 3: They're ominous indicators with respect to the government's ability.
Speaker 4: To issue long term debt.
Speaker 3: They're ominous indicators with respect to the deficit because if
Speaker 3: you look at the projections people quote from the Congressional
Speaker 3: Budget Office from other places, they're building in much lower
Speaker 3: interest rate assumptions. So I think if you look at
Speaker 3: what's happened to bond markets, if you look at what's
Speaker 3: happened to the dollar, you have to view our nation's
Speaker 3: fiscal situation with considerable trepidation and concern.
Speaker 2: While the government grapples with all that debt it's taking on,
Speaker 2: consumers and small businesses have their own responses to Trump
Speaker 2: administration policies, as Bank of America Chairman and CEO Brian
Speaker 2: moynihan explained.
Speaker 5: So if you look on the consumer side, and our
Speaker 5: seventy million consumers who engage with the economy every day
Speaker 5: and through their accounts and in their it's spend the
Speaker 5: cash and everything about four trillion, five trillion dollars a year.
Speaker 5: That grew up four percent plus the second quarter twenty
Speaker 5: five or the second course of twenty four. So they
Speaker 5: because they're employed and because wage growth, and that's not
Speaker 5: every single consumer, it's but in the large, in the main,
Speaker 5: they are continuing to grow and spend more and that
Speaker 5: helps the economy. And so you're seeing in some of
Speaker 5: the moderate income households there's a little bit of cheff
Speaker 5: moving around to different things. You're seeing people trade from
Speaker 5: wanting another less planes, more cruises earlier, that's leveling out now,
Speaker 5: a lot more going to movies because the movies are good.
Speaker 5: But the end of the day, they're spending discretion necessary
Speaker 5: about the same percentage they traditionally spent. They've got money
Speaker 5: in the accounts, they're employed, and the wage growth has
Speaker 5: been relatively strong, and you know, so they're pretty good shape.
Speaker 5: The credit quality is good. They have equity in their homes,
Speaker 5: they're rate financing the mortgage, so consert is pretty good.
Speaker 5: When you go to small businesses, that's more of the
Speaker 5: question small medium sized businesses, because is the interest rate
Speaker 5: environment hits them harder because they borrow on lines of
Speaker 5: credit short term for a lot of their activities, and
Speaker 5: that rate went up substantially. And anythink about the if
Speaker 5: I'm one hundred million dollar company, a fifty million dollar
Speaker 5: company here in North Carolina, and I'm engaging in the
Speaker 5: world finance, I'm importing goods and manufacturing them, further manufacturing,
Speaker 5: I'm selling them. You know, it got pretty interesting here
Speaker 5: trying to figure out all the trade and terriffs. So
Speaker 5: I think the certainly on the tax rate helps them,
Speaker 5: meaning the big beautiful bill passing and the tax rate,
Speaker 5: that's a very good thing. The alternative would have not
Speaker 5: been good if their tax rates would change. A satisfactory
Speaker 5: resolution to the trade so that they could learn the
Speaker 5: rules of the road over the next thirty sixty ninety
Speaker 5: days and get their plans for next year put together.
Speaker 5: And I think ultimately they're going We've got the satisfactory
Speaker 5: resolution on immigration and population growth. Because the end the day,
Speaker 5: when I'm hearing more from the construction companies, farming companies,
Speaker 5: and travel entertainment type companies, is I'm starting to worry
Speaker 5: about I'm starting to struggle with labor availability and that's
Speaker 5: that we got to make sure they have the workers
Speaker 5: because they will supply great service economy continue to grow up.
Speaker 2: Next, we've been hearing about those tariffs coming our way
Speaker 2: since President Trump returned to office, But where will it
Speaker 2: really affect us in our daily lives? It turns out
Speaker 2: that those of us who drink wine could be on
Speaker 2: the front lines.
Speaker 6: Where you going to find champagne? Where are you going
Speaker 6: to find shout enough to pop? Where you're going to
Speaker 6: find kyanti? You're not going to find it in Oregon
Speaker 6: or California.
Speaker 2: This is a story about bottled poetry. That's what Robert
Speaker 2: Lewis Stevenson called wine, and it's something that many of
Speaker 2: us enjoy regularly, but also something that may be a
Speaker 2: good deal harder to get a hold of if President
Speaker 2: Trump follows through with the tariff threats he's made against
Speaker 2: the European Union.
Speaker 7: We've been taking advantage for many, many years by god.
Speaker 8: Be's vote quote friend in voe, and frankly, the friends
Speaker 8: have been worse than the bos in renegages.
Speaker 2: A new deadline and a new threat. The US could
Speaker 2: impose a thirty percent tariff on imported wine from the
Speaker 2: European Union if no deal is struck by August first,
Speaker 2: we have worked.
Speaker 9: And now are ready to respond with countermeasures.
Speaker 4: It's been a mess.
Speaker 2: In New York, importer Victor Schwartz has spent nearly forty
Speaker 2: years supplying restaurants and wine shops with hand picked bottles
Speaker 2: from small European vineyards. Now tariffs threaten to upend the business.
Speaker 6: That was ten percent, and they threatened fifty percent.
Speaker 2: How different is the effect on your business of a
Speaker 2: twenty versus a ten.
Speaker 6: I mean, in our industry, end of the day, we
Speaker 6: might make five percent as a net profit, five to
Speaker 6: ten percent, So obviously we can't afford ten percent. We
Speaker 6: can't afford twenty percent. But twenty percent is really egregious.
Speaker 6: Twenty percent, I mean, think about what that does. God,
Speaker 6: you know it makes a twenty dollars wine, you know,
Speaker 6: twenty five dollars basically, because you know, there's kind of
Speaker 6: a multiplier effect as it goes through the system. You know,
Speaker 6: it's it's a much bigger impact. And don't forget when
Speaker 6: when we raise a price, it's not as if the
Speaker 6: consumer just accepts it.
Speaker 2: Where do American customers for wine go if they decide
Speaker 2: the price is too high. I'm not going to buy that.
Speaker 6: Where you're going to find champagne, where you're going to
Speaker 6: find shot enough to pop, where you're gonna find Kyanti,
Speaker 6: You're not going to find it in Oregon or California.
Speaker 6: A Finger Lakes wine, let's just be clear, is nothing
Speaker 6: like a Napa Valley wine, nothing like a wine from
Speaker 6: southern Italy or northern Italy or the center of Spain,
Speaker 6: et cetera. My gist is is that these products are
Speaker 6: so connected to their place, and that's what's wonderful and
Speaker 6: interesting about wine. Otherwise, to be the wine company of
Speaker 6: the world and it will come out of a spigot,
Speaker 6: red white rose and sparkling done right. But that's not
Speaker 6: why we love wine.
Speaker 2: And Americans do love their wine. In twenty twenty three,
Speaker 2: we consumed just under nine hundred million gallons of it,
Speaker 2: more than any other country in the world, with a
Speaker 2: value of over one hundred and seven billion dollars. More
Speaker 2: than a third of that is shipped in from abroad,
Speaker 2: making tariffs a real issue for importers, but those in
Speaker 2: the business say it's not just the imports that will
Speaker 2: be hit, it's the entire wine ecosystem. Quartan Ben Anif
Speaker 2: is president of the US Wine Trade Alliance. He has
Speaker 2: a shop in Tribeca that sells fine wine, which typically
Speaker 2: goes for over twenty dollars per bottle.
Speaker 10: Distributors and importers, even those by the way, that represent
Speaker 10: US domestic wines about seventy five percent of their revenue
Speaker 10: comes from wine. So that's one of the really interesting
Speaker 10: things about this on the tariffront, all of the major
Speaker 10: domestic wine producing organizations, from Wine Institute to NAPA Valley
Speaker 10: mint Ners to Wine America, they're all against tariffs on
Speaker 10: imported wine because they understand their domestic growers. Their producers
Speaker 10: rely on healthy wine distributors for access to market.
Speaker 2: Put another way, because state laws prevent domestic vineyards from
Speaker 2: supplying restaurants and wine shops, they need distributors, and the
Speaker 2: distributors rely critically on selling imports alongside their domestic wines.
Speaker 2: That's why those who import fine wines like Victor Schwartz,
Speaker 2: and those who sell it to US like Ben Anniff,
Speaker 2: have no doubt that tariffs will cripple their business selling
Speaker 2: both foreign and domestic wines. But there's another part of
Speaker 2: the business, the value wine business, where a bottle or
Speaker 2: its equivalent typically costs less than a LIE, and producers
Speaker 2: for this segment, like Stuart Spencer in California's Central Valley,
Speaker 2: say they need protection from multinational companies bringing in cheap,
Speaker 2: subsidized imports that force American growers out of business.
Speaker 7: There is a lot of what we call bulk wine
Speaker 7: coming in in these big twenty foot bladder containers, and
Speaker 7: it is this bulk wine that is really undercut in
Speaker 7: California grapegrowers.
Speaker 2: There's a lot of talk about the difference between free
Speaker 2: trade and fair trade. From your experience as a grower,
Speaker 2: but also from your dealing with Lodi, there are unfairnesses
Speaker 2: in some of the exports to the United States.
Speaker 7: I mean it's a completely unfair market. I mean we
Speaker 7: are competing in a global marketplace. The European Union spends
Speaker 7: you know, over two billion year between EU money and
Speaker 7: member state money propping up their wine sector. They are
Speaker 7: not only paying growers to inventnors to distill access wine
Speaker 7: and buy it up, but they're also paying them to
Speaker 7: plant new vineyards. And they spend hundreds of millions of
Speaker 7: dollars in market promotion all around the world. And the
Speaker 7: US is the number one target market. They also have
Speaker 7: trade barriers, so it gets really complex when you get
Speaker 7: in the weeds. But we are not playing on a
Speaker 7: level field.
Speaker 2: Last year, California wineries, which make nearly ninety percent of
Speaker 2: US wine, we're stuck with more than five hundred thousand
Speaker 2: excess tons of grapes. Now seventy seven million gallons of
Speaker 2: wine are sitting in storage tanks.
Speaker 7: And you can still see some of the grapes on
Speaker 7: the vines. We have thousands of acres of grapes that
Speaker 7: are being torn out right now, and we have small
Speaker 7: farms and family businesses that are up for sale because
Speaker 7: there's just not a prospect for them moving forward. My
Speaker 7: family's been in this for fifty years, and I talked
Speaker 7: to old timers that been in it for multi generations,
Speaker 7: and they've never seen it as challenging as we are.
Speaker 8: Now.
Speaker 7: Seventy percent of all wine sales in this country is
Speaker 7: controlled by about a handful of five to six large
Speaker 7: multinational companies. They're bringing wine in bulk, blending it in
Speaker 7: with California wine up to twenty five percent and calling
Speaker 7: American appellation it's a federal loophole. We have, you know,
Speaker 7: millions of gallons filled up in tanks right now in
Speaker 7: California that don't have a home. But simultaneously, twenty four
Speaker 7: million gallons of bulk wine is poured into California, coming
Speaker 7: in at super low prices and undercutting the California grapegrower.
Speaker 2: Are you in favor of the tariffs the President Trump
Speaker 2: is talking about.
Speaker 7: Well, I think if I was to speak to our
Speaker 7: seven hundred grape growers that I represent, I think many
Speaker 7: of them would support the tariffs to help level the
Speaker 7: playing field. And I think what we would really hope
Speaker 7: is that would bring these other trading partners to the
Speaker 7: table to negotiate fair trade. The challenge we see with
Speaker 7: what's going on with a lot of the trade negotiations
Speaker 7: now is wine is just upon in a larger story
Speaker 7: and the issues are about bigger issues. But I think
Speaker 7: none of us, you know, want to see tariffs in
Speaker 7: place permanently. I think what we really want to see
Speaker 7: is really free and fair trade.
Speaker 2: Some domestic producers kicking californ or complain about unfairness from
Speaker 2: Europe because there are subsidies given to vineyards over in Europe.
Speaker 2: Are tariff's an effective way to deal with that problem?
Speaker 10: I feel really, really really bad for those guys. But
Speaker 10: a tariff is not going to solve their problem. Farmers
Speaker 10: that grow grapes to sell until, for instance, grocery store
Speaker 10: boxed wine, and that's terrific for them. It's a great
Speaker 10: product for certain customers. The demand for those products is collapsing.
Speaker 10: You know, people aren't buying bulk wine the way they
Speaker 10: used to.
Speaker 2: Whether tariffs could give some relief to bulk wine producers
Speaker 2: or not, they certainly would have unintended effects on the
Speaker 2: American economy overall. You have spent some of your time
Speaker 2: down in Washington trying to explain to lawmakers policymakers exactly
Speaker 2: what this would mean for the wine business. What would
Speaker 2: you want them to understand that maybe they don't understand
Speaker 2: right now about the business and the effects of tariffs.
Speaker 10: The United States has been talking about their concerns with
Speaker 10: respect to a trade deficit. We import more European wines
Speaker 10: than we sell American wines Europe. But the reality is
Speaker 10: we have a huge economic surplus on the sale of
Speaker 10: European wines in the United States. You know, we import
Speaker 10: about five point three billion dollars worth of wine from
Speaker 10: the European Union into the United States. But American businesses
Speaker 10: make almost twenty three billion dollars from the sale of
Speaker 10: those products, making a big margin on wine. For a restaurant,
Speaker 10: it is not a luxury, it is an absolute necessity
Speaker 10: for their very survival.
Speaker 2: If in fact, tariff's do get imposed, what are the
Speaker 2: likely long term effects in the wine business?
Speaker 10: Contraction? And then you know what that means. Contraction means
Speaker 10: American businesses closing and firing all their employees.
Speaker 2: What about the uncertainty itself quite apart from the tariffs.
Speaker 10: I mean, I'll tell you I had phone calls from
Speaker 10: you know, wine distributors who said, you know, my grandfather
Speaker 10: started this business. We were in terrific shape and growing
Speaker 10: and hiring in January, and now I might have to
Speaker 10: decide if I'm going to close the doors in two weeks.
Speaker 10: You know, when they're they're put into this position when
Speaker 10: their choice is either to pay a tariff that they
Speaker 10: cannot afford because these these are small businesses, or don't
Speaker 10: bring in wine. Don't bring in the wine that represents
Speaker 10: seventy five percent of the revenue for your next three
Speaker 10: or six months. You know, we had restaurants from South
Speaker 10: Florida say, in the summertime, we need sancer and rose.
Speaker 10: That's what keeps our businesses alive. And there really is
Speaker 10: no substitute for these products.
Speaker 6: And one of our favorite.
Speaker 2: So in your wine store you have Bordeaux. If you
Speaker 2: can't get the Bordeaux, will the customer say that's okay,
Speaker 2: I'll take the cab.
Speaker 10: The answer, flat lay is.
Speaker 6: Now we talk about terror.
Speaker 4: War.
Speaker 6: It's a word that gets bandied about. It sounds fan
Speaker 6: and see it's forign, but it really well, it means
Speaker 6: terrowar land terror and it just means the place, right,
Speaker 6: it's just geography. Part of terrawar is the human element,
Speaker 6: the culture, the civilization, the people, the people who've been
Speaker 6: on this piece of land in southern Italy for multiple generations.
Speaker 6: They cook certain kinds of food, they make certain kinds
Speaker 6: of wine that go with those foods. And it's very specific, right,
Speaker 6: I mean, don't you love to drink an Italian wine
Speaker 6: when you're having your spaghetti and meat sauce.
Speaker 2: Schwartz is trying to hold off the administration as the
Speaker 2: lead plaintiff in a lawsuit challenging the tariffs. The US
Speaker 2: Court of International Trade ruled in his favor, but the
Speaker 2: appeals Court stayed the injunction to give itself time to
Speaker 2: hear the case. If the tariff's going to effect four
Speaker 2: European wines August one, how long will it take before
Speaker 2: we see it in our lives.
Speaker 10: I think you'll start to see it pretty quickly. You know,
Speaker 10: the first tariffed wines only have only now started to
Speaker 10: come in, so distributors have still been selling through some
Speaker 10: wines that didn't have tariffs on them. You're gonna start
Speaker 10: seeing those prices come now. You're gonna start seeing a
Speaker 10: lot less choice. You know, there are importers and distributors
Speaker 10: that have halted all of their shipments because they're not
Speaker 10: sure they can afford to bring them in now. At
Speaker 10: the same time, they have no substitutes for them. They're
Speaker 10: not buying more domestic wine, for instance, they can't afford
Speaker 10: to they need to sell these European wines in order
Speaker 10: to buy more American wine. In a nutshell, American businesses
Speaker 10: are incredibly good at selling European wine and they support
Speaker 10: huge numbers of jobs in the United States. So some
Speaker 10: of the most famous importers actually got into the business
Speaker 10: because they were in France or Italy during World War two,
Speaker 10: said oh my god, I love this. This is what
Speaker 10: I do want to do with my life, and their
Speaker 10: classic American entrepreneurial success stories. As a matter of fact,
Speaker 10: many of the most famous European wines in the world.
Speaker 10: They're famous today because they were discovered by American wine
Speaker 10: and they were brought back. They tasted ten thousand wines,
Speaker 10: said these three are the best, and they were right.
Speaker 10: Funny story. One of the first guys to do that,
Speaker 10: by the way, was Thomas Jefferson. You know, he went
Speaker 10: to Burgundy. He bought Mohersche and Mahrsokudor for he and
Speaker 10: George Washington. He bought Chateau de Kem for he and
Speaker 10: George Washington, and today those are still some of the
Speaker 10: greatest wines on the planet. He had a pretty good paltte,
Speaker 10: I think.
Speaker 2: And now, ironically American's affinity for European wines, nurtured by
Speaker 2: the likes of George Washington and Thomas Jefferson, may be
Speaker 2: challenged by the most recent occupant of their high office
Speaker 2: and perhaps make it more difficult for us to enjoy
Speaker 2: that bottled poetry they discovered two hundred and fifty years
Speaker 2: ago in Fine French wines up next. From our wrists
Speaker 2: to our fingers, everyone seems to be wearing some device
Speaker 2: to monitor how healthy our habits are. We visit the
Speaker 2: wonderful world of Whoop to see what's really possible. This
Speaker 2: is a story about the Fountain of Youth. Since long
Speaker 2: before Ponce de Leon supposedly got lost looking for it
Speaker 2: in the swamps of Florida in fifteen thirteen, humans have
Speaker 2: been on a quest for a longer and healthier life,
Speaker 2: leading to everything from exercise regimens to diet crazes to
Speaker 2: weight loss drugs. Now, as in everything else, big tech
Speaker 2: is in the game. But our elaborate wellness device is
Speaker 2: really worth it? Or does the path longevity boil down
Speaker 2: to just a few fundamental principles.
Speaker 8: Wearable technology and the sensors that we have today will
Speaker 8: continue to unlock new capabilities.
Speaker 11: Eventually we will write a point where we can really
Speaker 11: monitor our processes and intervene early on before a disease
Speaker 11: could develop.
Speaker 9: Something on your body. It starts to say a lot
Speaker 9: about who you are.
Speaker 1: We think that wearables are a key to the MAHA
Speaker 1: agenda making America healthy again, and we are going to
Speaker 1: My vision is at every American and is wearing a
Speaker 1: wearable within four years.
Speaker 2: Health and Human Services Secretary Robert F. Kennedy Junior's goal
Speaker 2: might seem ambitious, but the market for global wellness wearables
Speaker 2: is on the rise. Data firm IDC expects global revenues
Speaker 2: to grow from sixty three billion dollars last year to
Speaker 2: nearly seventy eight billion dollars by twenty twenty nine.
Speaker 12: With wearable technology, you need to build something that's either
Speaker 12: cool or invisible.
Speaker 9: We like to say.
Speaker 2: Will Ahmed is the founder and CEO of Whoop, one
Speaker 2: of the major players in the wellness wearable field. As
Speaker 2: of its last funding round in twenty twenty one, it
Speaker 2: was valued at three point six billion dollars. Will first
Speaker 2: came up with the idea during his time as captain
Speaker 2: of Harvard's squash team.
Speaker 12: Who builds wearable technology that's really designed to improve performance
Speaker 12: and health. The company was founded out of the Harvard
Speaker 12: Innovation Lab twelve years ago. We started with the world's
Speaker 12: best athletes, where we were really designing high performance technology
Speaker 12: to replace what at the time was a lot of
Speaker 12: medical technology. An electrocardiogram, a PSG machine, the gold standard
Speaker 12: for sleep, a chest strap, which measures heart rate during exercise.
Speaker 12: This is the original prototype that was built in twenty twelve.
Speaker 12: Now it looks ridiculous in a million ways, but it
Speaker 12: could measure this thing called heart rate variability from the wrist,
Speaker 12: which was a breakthrough. We wanted to take these sophisticated
Speaker 12: but antiquated pieces of technology and put them in a
Speaker 12: much smaller form factor, and the business has really evolved
Speaker 12: quite beautifully from being a very high performance athletic product
Speaker 12: to now being a tool that many people are using
Speaker 12: to live longer.
Speaker 2: While wellness wearables today are heavily focused on new technology
Speaker 2: that can measure heart health, it was more than one
Speaker 2: hundred years ago when the idea for the pedometer was
Speaker 2: first patented. Poehler raised the stakes in the eighties with
Speaker 2: the first wireless heart rate monitor, but it was fitbit
Speaker 2: in the early two thousands it took the industry mainstream. Today,
Speaker 2: the wellness wearables arena is crowded, attracting billions in investment
Speaker 2: and spawning new startups regularly.
Speaker 8: Wearables today are nearly ubiquitous. I think, certainly when I
Speaker 8: go out and about, I do see people with an
Speaker 8: Apple watch, a whoop, an aura. We do see people
Speaker 8: wearing with various devices out in the world today.
Speaker 2: Alex Morgan is a partner in Cosla Ventures, where he
Speaker 2: focuses on investment in emerging biotech, healthcare, and data science.
Speaker 8: For many wearables, the competitive landscape is a challenge. We
Speaker 8: certainly saw in some of the first generation of activity
Speaker 8: based wearables that were many companies that were all measuring
Speaker 8: activity and heart rate and it was very hard to
Speaker 8: compete with a product that really didn't provide unique information
Speaker 8: and it was much more about brand and packaging and
Speaker 8: perhaps influencer And there are ways that you can win
Speaker 8: in a competitive landscape with better branding, better marketing, better
Speaker 8: access to influencers. We tend to look for technology that
Speaker 8: is unique, often protectable with IP that offers unique benefit,
Speaker 8: and that is something that we particularly look for.
Speaker 2: Samsung recently released the Galaxy Watch eight, offering new health
Speaker 2: tracking capabilities. In late twenty twenty four, Apple announced its
Speaker 2: latest smartwatch with advanced features like a sleep apnea detector.
Speaker 2: But not every company is successful. Amazon discontinued its Halo
Speaker 2: fitness band in twenty twenty three, underscoring the challenge of
Speaker 2: entering this market without a clear edge. With multiple devices
Speaker 2: to choose from. How does one brand set itself apart
Speaker 2: from the pack? Wearables have become popular in various ways.
Speaker 2: How do you compare what's your market niche?
Speaker 12: So we've designed the product to be worn very easily
Speaker 12: in whatever location you want. And what does that ultimately achieve, Well,
Speaker 12: it achieves a solution where you can be collecting this
Speaker 12: health data twenty four to seven and continuous data is
Speaker 12: ultimately what makes.
Speaker 9: Our tool so successful.
Speaker 12: You know, A real challenge I think with other products
Speaker 12: that came before Whoop is they would give you these
Speaker 12: sort of snapshots along the way. We collect an enormous
Speaker 12: amount of data on the human body, physiological data. It's
Speaker 12: really accurate. We've tuned the sensors to be really accurate.
Speaker 12: But what that also.
Speaker 9: Means is we're not going to do a thousand other things.
Speaker 12: Right, We're not a smart watch, we're not doing phone calls.
Speaker 12: You know, you're not going to call an uber with
Speaker 12: your Whoop. But at the end of the day, we
Speaker 12: don't spend that much time thinking about competition. Were just
Speaker 12: incredibly focused on how do we drive health outcomes?
Speaker 2: So, how does a wearable company help drive health outcomes?
Speaker 2: For Whoop it's about differentiating itself through technology, using sophisticated
Speaker 2: biometric monitoring and data collection for more actionable health insights.
Speaker 2: Its most recent models are the Whoop five point zero
Speaker 2: and Whoop MG.
Speaker 12: It's got a fourteen day battery life, it's got more
Speaker 12: accurate sensing. The Whoop MG has medical clearances, so it's
Speaker 12: able to do ECG monitoring, AFIB detection, blood pressure insights.
Speaker 12: So these are all really powerful innovations that frankly just
Speaker 12: didn't exist.
Speaker 8: Whatever wearable technology is doing to measure or interact with
Speaker 8: an individual, the accelerating ability of a machine learning to
Speaker 8: improve the capability of that measurement or that intervention is
Speaker 8: only accelerating. We are translating to face where there are
Speaker 8: wearable technologies that aren't just providing insights but actually provide interventions.
Speaker 8: They're actually therapeutic in some way, And I think that
Speaker 8: is going to accelerate the current adoption even more because
Speaker 8: I do think that most people, most customers, don't necessarily
Speaker 8: want insights. Most people want solutions to problems that they have,
Speaker 8: whether it's problems sleeping, problems with depression, concerns about wait wellness.
Speaker 2: Wearables have certainly become popular, but are they a good business?
Speaker 2: And what takes a wearable from being nice to have
Speaker 2: to being a half to have.
Speaker 8: When we evaluate a company, there's no single way we
Speaker 8: evaluate it. So sometimes we invest in unique technology. And
Speaker 8: that's actually the majority of my time trying to identify
Speaker 8: unique technology that is crossing over into being productizable and
Speaker 8: translatable into products that we believe will provide real value
Speaker 8: to customers in patients. And that's I think one of
Speaker 8: the first things we want to do, is this product
Speaker 8: or technology really able to help people in a potentially
Speaker 8: powerful way. Another technology that I'm really excited about that's
Speaker 8: being used is a company called Flow Neuroscience.
Speaker 4: So this is on.
Speaker 8: The market in the UK and Europe. Over ten thousand
Speaker 8: people a month use it and it also uses a
Speaker 8: gentle electric stimulation to treat mild to modern depression and
Speaker 8: general anxiety disorder.
Speaker 4: Numerous clinical trials.
Speaker 8: Have shown benefit, so in some of the more recent
Speaker 8: clinical trials about sixteen percent improvement and remission and depressive
Speaker 8: symptoms compared to twenty percent in placebo. So the ideal
Speaker 8: startup for US is a technology that provides unique, powerful,
Speaker 8: patient and customer benefit in some way. They're able to say,
Speaker 8: here's an innovation in technology that is crossing over from
Speaker 8: basic science and research and moving into an opportunity to
Speaker 8: go out and help many people that have a particular
Speaker 8: problem and able through that in a unique and special way. Certainly,
Speaker 8: there are are people using things like continuous glucose monitoring
Speaker 8: that you may not know that they're using, but if
Speaker 8: you ask someone with diabetes, that is probably how they
Speaker 8: may be managing it today if you're intolindependent diabetic. So
Speaker 8: I would say that it has crossed the chasm into
Speaker 8: being something that's speculative into being a product that's just
Speaker 8: part of the everyday lives for many Americans.
Speaker 12: We're now in fifty markets. I think one of the
Speaker 12: biggest changes for Whoop in the last two years is
Speaker 12: going from being almost entirely a US business to being
Speaker 12: in global business that obviously introduces new challenges, but also
Speaker 12: enormous growth. And so we've seen the business growing considerably
Speaker 12: in the last twelve months, seventy percent year over year growth,
Speaker 12: which is really exciting.
Speaker 2: We don't have the data yet to show that wearables
Speaker 2: like whoop will actually make us healthier, much less, live longer,
Speaker 2: and some believe the path to the fountain of youth
Speaker 2: ultimately means doing the things our mothers have taught us
Speaker 2: through the generations.
Speaker 11: The secret of healthy life is very simple and it
Speaker 11: doesn't require an industry to maintain it. Ignore all that
Speaker 11: noise and focus on these five fundamental components from diet
Speaker 11: to exercise, stress, sleep, and so on.
Speaker 2: Albert Laslo Barabasi is a network science physicist. He believes
Speaker 2: wearables may help users stay healthy, but there's no secret
Speaker 2: about the keys to success.
Speaker 11: As long as you focus on these basics and you
Speaker 11: make sure that these are guaranteed, you are actually setting
Speaker 11: yourself up for a healthy lifestyle. Everything else is more
Speaker 11: or less an intervention that is trying to correct the
Speaker 11: problem because these have not been probably observed. Certainly, having
Speaker 11: access to all the data points about us does give
Speaker 11: us a sense of control, and I think that sense
Speaker 11: of control fails when we realize that we don't know
Speaker 11: how to correct that. And we're all going to encounter
Speaker 11: that moment in our lives where the numbers are flashing
Speaker 11: and showing that something is out of balance.
Speaker 2: Where do wearables need to go from here? If they're
Speaker 2: to become proactive health companions? Not surprisingly artificial intelligence may
Speaker 2: be part of the answer.
Speaker 12: We've used artificial intelligence for a decade to really improve
Speaker 12: our algorithms for sensing, and the result I think is
Speaker 12: being able to demonstrate in the market we're the most
Speaker 12: performance product. We still have the world's best athletes that
Speaker 12: were whoop, we have medically approved features, and we have
Speaker 12: consumers that swear by our accuracy. You don't really get
Speaker 12: those combination of things if the underlying data isn't really good.
Speaker 11: Eventually we will write to a point where we can really
Speaker 11: monitor our processes and intervene early on before a disease
Speaker 11: could develop. One way to think about it is that
Speaker 11: every single disease that I will have throughout my lifetime
Speaker 11: is already bit in me developing because I already born
Speaker 11: with all the mutations and all the defects that will
Speaker 11: eventually just develop themselves and manifest themselves with age. Is
Speaker 11: how can we capture that early and how can correct
Speaker 11: that before it's too late? And in that respect, wearable
Speaker 11: technologies as well as the many monitoring devices that the
Speaker 11: technology is making possible eventually will be the answer. Are
Speaker 11: they the answer right now? Not necessarily.
Speaker 8: We are translating to face where there are wearable technologies
Speaker 8: that aren't just providing insights but actually providing interventions. They're
Speaker 8: actually therapeutic in some way.
Speaker 12: If we look at the next few years, right, health
Speaker 12: monitoring will start by enabling individuals and being kind of
Speaker 12: a continuation of that doctor's office, and I think in
Speaker 12: the long run it'll ultimately replace the doctor's office.
Speaker 2: At the point where wearables can replace our visits to
Speaker 2: the doctor, or even make those visits a bit less frequent,
Speaker 2: they will truly move from the nice to the necessary
Speaker 2: for us all, and that could lead to a sort
Speaker 2: of technological fountain of youth found not in the swamps
Speaker 2: of Florida, but right on your wrist coming up. Some
Speaker 2: of us may be worried about artificial intelligence coming for
Speaker 2: our jobs, but does that include all those economists at
Speaker 2: the Federal Reserve that's next on Wall Street Week. This
Speaker 2: is a story about an invisible hand guiding the economy. No,
Speaker 2: not the invisible hand of self interest that Adam Smith
Speaker 2: wrote about in the Wealth of Nations. This invisible hand
Speaker 2: is much more modern. It's that artificial intelligence we keep
Speaker 2: hearing so much about. Our special contributor. Larry Summers is
Speaker 2: a macroeconomist who also sits on the board of Open AI.
Speaker 2: Who better to ask what AI could mean for Adam
Speaker 2: Smith's economy.
Speaker 3: My guess is that this is going to raise the
Speaker 3: neutral rate of interest over time, both because of the
Speaker 3: massive investment that's going to need to take place in
Speaker 3: data centers and because of the acceleration.
Speaker 4: In the rate of growth.
Speaker 3: So I think the so called our star is likely
Speaker 3: to be higher, perhaps even considerably higher, because of AI.
Speaker 3: I think it's possible that it's going to be a
Speaker 3: disinflationary force because of acceleration of productivity growth, as the
Speaker 3: Internet was during the nineteen nineties.
Speaker 2: The economic potential of AI varies widely, with some saying
Speaker 2: that it can disrupt jobs, whole industries, and even pose
Speaker 2: existential challenges.
Speaker 11: It's not yet like replacing jobs in the way to
Speaker 11: the degree that people thought it was going to.
Speaker 9: Of course jobs will change, and of course some jobs
Speaker 9: will totally go away.
Speaker 13: It really is an existential threat. Some people say this
Speaker 13: is just science fiction, and until fairly recently I believed
Speaker 13: it was a long way off. Now I think it's
Speaker 13: quite likely that sometime in the next twenty years these
Speaker 13: things will get smarter than us and we really need
Speaker 13: to worry about what happens.
Speaker 2: Then, So let me ask you about one particular perhaps
Speaker 2: rule of thumb or rule, and that is the relationship
Speaker 2: between inflation on the one hand and unemployment on the other,
Speaker 2: which has been an important issue for the Federal Reserve,
Speaker 2: for example, with its dual mandate to address both of those.
Speaker 2: Do you think it could change that relationship?
Speaker 3: It certainly could, and you can make arguments in both directions.
Speaker 3: Perhaps the more flexible economy means that rates of inflation
Speaker 3: or prices will be more sensitive to demand and unemployment
Speaker 3: than they were before. Perhaps the more rapid underlying productivity
Speaker 3: growth will mean that there's less sensitivity because when there's
Speaker 3: an increase in demand, the economy will be able to
Speaker 3: accommodate it more easily because there's more capacity fundamentally in
Speaker 3: the economy. I think it's difficult to know, and if
Speaker 3: I had to guess, the effects that I described on
Speaker 3: the neutral interest rate and so forth are probably going
Speaker 3: to be more salient than any change in the slope
Speaker 3: of the Phillips curve of that relationship you referred to
Speaker 3: between inflation and unemployment. But nobody can be confident in
Speaker 3: their judgments about this kind of thing.
Speaker 2: There's the uncertainty about what AI could mean for the economy,
Speaker 2: but there are also questions about what it could mean
Speaker 2: for central banks trying to set monetary policy and how
Speaker 2: it could change the way they gather and analyze data
Speaker 2: about the economy. Sasha Stefan of the Frankfort School of
Speaker 2: Finance has studied the ways AI might change monetary policy
Speaker 2: transmission specifically.
Speaker 14: And this is all the most common or most natural
Speaker 14: thing people are thinking about here is it will improve forecasting.
Speaker 14: And I think this is sort of where everybody's interested.
Speaker 14: How our interest rates going how does the economy develop
Speaker 14: going forward? How is inflation going forward? So here we're
Speaker 14: going to see a lot already happening in terms of
Speaker 14: I and I think here there's also a lot to
Speaker 14: learn going forward.
Speaker 2: Is it likely to make forecasting more accurate? Do you think?
Speaker 14: I think definitely.
Speaker 8: So.
Speaker 14: I think one dimension of AI is basically increasing the
Speaker 14: toolbox and the methodologies, improving on the methodologies thereby also
Speaker 14: making forecasting much more precise. Also basically using models to
Speaker 14: use existing data and use them in completely novel ways. Right, So,
Speaker 14: how can we use bond market data? How can we
Speaker 14: use loan market data. So we can employ these models
Speaker 14: to look at things that we haven't been able to
Speaker 14: do before. We can look at websites, we can use
Speaker 14: images from satellites, we can use social media. Right, So,
Speaker 14: actually I have a study, a recent one in which
Speaker 14: we try to use AI and Twitter or x in
Speaker 14: order to generate an index about what do individuals like
Speaker 14: households have an idea about how inflation is going to
Speaker 14: develop going forward? Right, So, this is what we call
Speaker 14: inflation expectations, and this is something where central banks, the
Speaker 14: Federal Reserve but also the European Central Banks are looking
Speaker 14: much more closely at compared to what we call like
Speaker 14: realize inflation what we have. So, what do actually people
Speaker 14: households expect in terms of inflation going forward? Because this
Speaker 14: is going to affect how they're going to behave, what
Speaker 14: kinds of products are they going to buy, what kinds
Speaker 14: of sort of how are they going to save going forward?
Speaker 14: And also firms are going to be affected by that
Speaker 14: because they see if customers don't buy, the shelves are
Speaker 14: going to remain full and they basically report a completely
Speaker 14: different bottom or top line going forward.
Speaker 2: What are the risks of expanding out the data that way,
Speaker 2: I mean a large language models and larger based on
Speaker 2: what human beings have generated, and human beings are not perfect,
Speaker 2: and you can get hallucinations that way. What are the risks,
Speaker 2: particularly as you go to things like social media for example.
Speaker 14: X information sensitivity is always run right, which means that
Speaker 14: if new information arises that can cause maybe a complete
Speaker 14: meltdown of the market. Stocks are going to be sold,
Speaker 14: And of course AI makes it even more likely that
Speaker 14: these risks are actually or these new information is actually
Speaker 14: going to emerge, right. But also another risk is, for example, interconnectedness,
Speaker 14: and AI also will connect institutions more going forward, there
Speaker 14: might be shared data, there might be shared platforms that
Speaker 14: might increase interconnectedness. So if one domino drops, the others
Speaker 14: might actually drop as well. So amplification of existing risks
Speaker 14: is definitely one problem. Another problem that's very frequently mentioned
Speaker 14: if you talk to practitioners in this field is also
Speaker 14: a kind of what we call a model bias. Right,
Speaker 14: So what happens if we use data that has been
Speaker 14: generated by a model that has all better been falls
Speaker 14: to begin with, and then we continue to use their
Speaker 14: data going forward, there will be so colled perpetuation of
Speaker 14: these biases going forward, and like garbage in garbage out.
Speaker 2: We hear from some experts in AI that we're getting
Speaker 2: to a point, maybe past a point where we don't
Speaker 2: actually know how it works. It's a black box in
Speaker 2: that sense. If that's true, how can a center back
Speaker 2: rely on it? How can it verify it or certify
Speaker 2: it to make sure that it's making correct inferences.
Speaker 14: That's an absolute important point. This is on the one end,
Speaker 14: this is definitely a risk, right because if things go wrong,
Speaker 14: the question, the trust that might be there quickly goes away,
Speaker 14: and then the things might even be worth going forward.
Speaker 14: One of the potential powerful applications of AI for central
Speaker 14: banks is to not replace necessarily, but to complement the
Speaker 14: professional forecasting that the central banks usually rely on. They
Speaker 14: usually do on a quarterly basis. Ask a lot of
Speaker 14: professionals and investm banks and other institutions as to what
Speaker 14: do they expect the economy to develop going forward, specifically
Speaker 14: when it comes to inflation, and now it might be
Speaker 14: actually possible to set up an AI model that exactly
Speaker 14: does that. So it basically it is trained on the individual,
Speaker 14: it's trained on the cvs of the professional forecasters, how
Speaker 14: they have actually voted, or what they have done in
Speaker 14: previous forecasts, that they did, what is their job, what
Speaker 14: they learned, and then asked the model instead of the forecaster,
Speaker 14: And the existing research already tells us that there is
Speaker 14: a high degree of overlap in terms of what the
Speaker 14: professional forecast actually would tell him or herself and what
Speaker 14: the model actually sells. Right, But then the one risk,
Speaker 14: and now coming back to your question, is that how
Speaker 14: can we actually make sure that the model actually uses
Speaker 14: only the information that is available at the time of
Speaker 14: a forecast itself is a train basically on information that
Speaker 14: it should not know because it actually happened afterwards.
Speaker 2: Well, I wonder about the systemic risk because not being
Speaker 2: a conputer science, it's possible that AI could spot relationships
Speaker 2: that otherwise humans might miss. I mean, so you have
Speaker 2: something like Silicon Valley Bank in the United States. Is
Speaker 2: it possible AI would have spotted imbalances earlier that humans.
Speaker 14: Missed, specifically with a Silicon value bank, it would have
Speaker 14: recognized this because it's also interesting that people did not
Speaker 14: realize this because it was obvious to be to be clear,
Speaker 14: because actually all the publicly available data was pointing exactly
Speaker 14: at that, but no, you're absolutely right. So these kind
Speaker 14: of systemically important banks, also other banks risks emerging based
Speaker 14: on for example, liquidity consideration might be detected much much
Speaker 14: earlier compared to what the regulator or supervisor might actually
Speaker 14: might actually see.
Speaker 2: And what we need human beings economists presumably to check
Speaker 2: what's going on to make corrections, because you can have
Speaker 2: hallucination in any model, and if you don't correct them,
Speaker 2: as I understand, they just compound.
Speaker 14: I think this is exactly one danger that people might
Speaker 14: actually try to rely on AI and these models too
Speaker 14: much and think, Okay, these models actually know what's going
Speaker 14: to happen.
Speaker 4: But the idea how to assess these.
Speaker 14: Outcomes or these outputs, that's a crucial one. And this
Speaker 14: means I think also for us as not only as economists,
Speaker 14: but also as educators, we need to make sure that
Speaker 14: people understand the underlying theory and economics actually in order
Speaker 14: to evaluate is that what the model actually tells me,
Speaker 14: is this something that's actually plausible or something that's not right?
Speaker 14: So I think that puts a lot of pressure on
Speaker 14: on us also as educators, but then also on the
Speaker 14: different institutions, do they actually train the people right going forward.
Speaker 2: That does it for us Here at Wall Street Week,
Speaker 2: I'm David Weston. See you next week for more stories
Speaker 2: of capitalism.