1 00:00:02,520 --> 00:00:07,640 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:19,840 --> 00:00:22,799 Speaker 2: This is Wall Street Week. I'm David Weston bringing you 3 00:00:22,920 --> 00:00:27,240 Speaker 2: stories of capitalism. Apple earnings last week were better than expected, 4 00:00:27,560 --> 00:00:31,400 Speaker 2: but it is still falling behind its biggest rivals. Patrick McGee, 5 00:00:31,440 --> 00:00:33,960 Speaker 2: author of Apple in China, tells us why it has 6 00:00:34,000 --> 00:00:37,519 Speaker 2: a long way to go. Plus, lawyers worry about the 7 00:00:37,560 --> 00:00:39,839 Speaker 2: rule of law in the US. The head of the 8 00:00:39,880 --> 00:00:43,560 Speaker 2: American College of Trial Lawyers explains why Wall Street should 9 00:00:43,600 --> 00:00:46,760 Speaker 2: be just as concerned as members of the bar. And 10 00:00:46,960 --> 00:00:50,600 Speaker 2: everything old is new again. Small investors are back in 11 00:00:50,640 --> 00:00:53,800 Speaker 2: the game of buying homes to rent and ultimately flip. 12 00:00:54,360 --> 00:00:57,720 Speaker 2: Why that doesn't necessarily mean we're headed back into another 13 00:00:57,800 --> 00:01:02,440 Speaker 2: great financial crisis. But we start with the future of 14 00:01:02,520 --> 00:01:06,000 Speaker 2: monetary policy in the US as central bankers head back 15 00:01:06,040 --> 00:01:09,560 Speaker 2: to Jackson Hall, Wyoming with a new framework on the agenda. 16 00:01:10,080 --> 00:01:13,240 Speaker 2: Our special contributor Larry Summers takes us through what he'd 17 00:01:13,319 --> 00:01:14,160 Speaker 2: like to see. 18 00:01:15,000 --> 00:01:17,640 Speaker 1: I'm not sure that it's the right time for a 19 00:01:17,680 --> 00:01:22,160 Speaker 1: big new framework when you have an outgoing chairman. I 20 00:01:22,160 --> 00:01:24,920 Speaker 1: would have thought that a new chairman should be providing 21 00:01:24,959 --> 00:01:28,800 Speaker 1: a new framework when the new chairman arrives. After the 22 00:01:28,840 --> 00:01:33,600 Speaker 1: new Chairman has consulted, so this seems rather odd timing 23 00:01:34,160 --> 00:01:38,280 Speaker 1: for a major new of framework announcement. It seems to 24 00:01:38,319 --> 00:01:42,720 Speaker 1: me that, if anything, the errors have been on the 25 00:01:42,880 --> 00:01:51,200 Speaker 1: side of excessive transparency, excessive forecasting, excessive what we used 26 00:01:51,240 --> 00:01:56,440 Speaker 1: to call when I was in government, eatrogenic volatility. Eatrogenic 27 00:01:56,560 --> 00:01:59,800 Speaker 1: illness is when you get sick from being in a hospital. 28 00:02:00,240 --> 00:02:08,000 Speaker 1: Eatrogenic volatility is when officials' comments end up adding instability 29 00:02:08,160 --> 00:02:12,880 Speaker 1: to markets. So I think at the moment we have 30 00:02:13,040 --> 00:02:17,680 Speaker 1: too many dot plots, too many forecasts, too much cacophony, 31 00:02:18,480 --> 00:02:23,040 Speaker 1: and some of the ideas for more information from the FED. 32 00:02:23,760 --> 00:02:29,080 Speaker 1: I think we'll end up pushing markets around without any 33 00:02:29,160 --> 00:02:33,040 Speaker 1: great benefit. My own view is that Paul Volker and 34 00:02:33,240 --> 00:02:38,520 Speaker 1: Alan Greenspan had this right. They saw the FED Chairman 35 00:02:38,639 --> 00:02:42,760 Speaker 1: as like the Delphi Oracles were thousands of years ago. 36 00:02:43,760 --> 00:02:47,320 Speaker 1: They were imperfect and couldn't really know the future, but 37 00:02:47,480 --> 00:02:51,240 Speaker 1: people thought they were omniscient and omnipotent, and it was 38 00:02:51,280 --> 00:02:58,640 Speaker 1: therefore better to keep any statements vague and oracular. Certainly, 39 00:02:58,840 --> 00:03:02,800 Speaker 1: the dominant theme the last time the FED had a 40 00:03:02,800 --> 00:03:08,080 Speaker 1: new Framework review was the difficulty of getting inflation up 41 00:03:09,000 --> 00:03:14,640 Speaker 1: to target. That's not our problem anymore. Our problem now 42 00:03:14,800 --> 00:03:21,880 Speaker 1: is making sure that high inflation expectations don't become embedded. 43 00:03:22,480 --> 00:03:29,240 Speaker 1: So corrections back towards symmetry with respect to inflation seemed 44 00:03:29,240 --> 00:03:32,919 Speaker 1: to me to be appropriate. And I think one should 45 00:03:33,040 --> 00:03:37,080 Speaker 1: learn from the fact that, with the best of intentions, 46 00:03:37,200 --> 00:03:42,800 Speaker 1: the framework adopted before, right ahead of the pandemic wasn't 47 00:03:42,840 --> 00:03:48,280 Speaker 1: really the right of framework as things turned out, and 48 00:03:48,360 --> 00:03:51,920 Speaker 1: that could happen again. So I think the FED would 49 00:03:51,920 --> 00:03:59,880 Speaker 1: do well to avoid being overly prescriptive at this juncture. Finally, 50 00:04:00,120 --> 00:04:05,400 Speaker 1: I think that the whole question of the management of 51 00:04:05,440 --> 00:04:11,280 Speaker 1: the maturity structure of the federal debt needs careful consideration. 52 00:04:11,960 --> 00:04:16,200 Speaker 1: What matters to markets is the debt that they have 53 00:04:16,320 --> 00:04:20,440 Speaker 1: to absorb and the spectacle. We've seen that a number 54 00:04:20,520 --> 00:04:25,279 Speaker 1: of times in recent junctures where the Treasury was trying 55 00:04:25,279 --> 00:04:27,800 Speaker 1: to push the maturity structure of the debt in one 56 00:04:27,880 --> 00:04:31,000 Speaker 1: direction and the FED was trying to push the maturity 57 00:04:31,000 --> 00:04:35,559 Speaker 1: structure of the debt in the other direction. Seems odd, Larry. 58 00:04:35,560 --> 00:04:39,200 Speaker 2: This week we got CPI numbers in which basically I 59 00:04:39,240 --> 00:04:42,000 Speaker 2: took two messages away from one is we are persistently 60 00:04:42,000 --> 00:04:45,479 Speaker 2: above that two percent mark on inflation, and it seems 61 00:04:45,480 --> 00:04:48,280 Speaker 2: to be really stubbornly so, and yet the markets took 62 00:04:48,279 --> 00:04:50,279 Speaker 2: it as boy, it's sure the Fed's going to cut 63 00:04:50,400 --> 00:04:52,880 Speaker 2: in September. The likelihood went to almost one hundred percent. 64 00:04:53,080 --> 00:04:54,560 Speaker 2: Can you square those two things. 65 00:04:55,720 --> 00:05:01,440 Speaker 1: I think that there's also evidence of we in the economy, 66 00:05:01,560 --> 00:05:04,880 Speaker 1: and it's that weakening that I think is behind the 67 00:05:04,960 --> 00:05:12,080 Speaker 1: market's view that the Fed will likely ease rates. I 68 00:05:12,120 --> 00:05:16,080 Speaker 1: think that wall inflation was elevated, it was not as 69 00:05:16,120 --> 00:05:24,279 Speaker 1: elevated as many feared that it would be, so I 70 00:05:24,279 --> 00:05:31,200 Speaker 1: wouldn't want to fight hard against the market's judgment with 71 00:05:31,360 --> 00:05:35,960 Speaker 1: respect to September. I think it's also probably worth remembering, David, 72 00:05:36,000 --> 00:05:41,800 Speaker 1: that what you described as a certainty of a twenty 73 00:05:41,800 --> 00:05:47,080 Speaker 1: five basis point cut in September is probably better understood 74 00:05:47,960 --> 00:05:52,000 Speaker 1: as a likelihood of a twenty five basis point cut, 75 00:05:52,600 --> 00:05:57,800 Speaker 1: with fifty basis points and zero being about equally likely. 76 00:05:58,360 --> 00:06:02,680 Speaker 1: So the whole thing averaged out to a twenty five 77 00:06:02,800 --> 00:06:06,200 Speaker 1: basis point cut. And there's more data to come in, 78 00:06:06,839 --> 00:06:09,279 Speaker 1: and so I think it would be a mistake to 79 00:06:09,400 --> 00:06:13,440 Speaker 1: be certain for anybody about what would happen. We could 80 00:06:13,520 --> 00:06:16,720 Speaker 1: get very very weak data that pushed towards a fifty 81 00:06:16,760 --> 00:06:21,760 Speaker 1: basis point cut, we could get information on inflation and 82 00:06:21,800 --> 00:06:26,279 Speaker 1: the strength of the economy that pushed towards delaying cuts 83 00:06:26,760 --> 00:06:30,240 Speaker 1: even further. So it's a mistake to be certain about 84 00:06:30,240 --> 00:06:31,159 Speaker 1: what's going to happen. 85 00:06:32,200 --> 00:06:34,880 Speaker 2: One of the sources weighing on a fifty basis point 86 00:06:34,880 --> 00:06:37,520 Speaker 2: cut side has been the Second of Treasury, Scott Bessen, 87 00:06:37,800 --> 00:06:40,040 Speaker 2: who said that might make sense in September. 88 00:06:39,960 --> 00:06:42,440 Speaker 3: We should probably be one hundred and fifty one hundred 89 00:06:42,440 --> 00:06:46,839 Speaker 3: and seventy five basis points lower. So I think the 90 00:06:46,880 --> 00:06:52,360 Speaker 3: committee needs to step back. I think probably one of 91 00:06:52,440 --> 00:06:56,200 Speaker 3: the most politicized governors just went off the board. 92 00:06:57,240 --> 00:07:00,680 Speaker 1: I was surprised to see the Secretary, any secretary of 93 00:07:00,720 --> 00:07:08,520 Speaker 1: the Treasury, be that prescriptive. Usually that kind of judgment 94 00:07:08,760 --> 00:07:15,760 Speaker 1: is not made by administration officials, and I'm not sure 95 00:07:15,800 --> 00:07:21,000 Speaker 1: it's helpful for the administration to be publicly prescribed on 96 00:07:22,240 --> 00:07:28,680 Speaker 1: monetary policy. Beyond that, I don't think the statement is 97 00:07:29,520 --> 00:07:33,720 Speaker 1: in line with what I would say. I would have 98 00:07:33,960 --> 00:07:39,960 Speaker 1: said that any model of monetary policy has to be 99 00:07:40,040 --> 00:07:43,920 Speaker 1: based on a judgment about what the neutral interest rate is, 100 00:07:44,520 --> 00:07:47,760 Speaker 1: and has to be based on a judgment about inflation. 101 00:07:47,960 --> 00:07:48,920 Speaker 4: Expectations. 102 00:07:49,880 --> 00:07:56,200 Speaker 1: If one has the view that substantially elevated deficit spending 103 00:07:56,920 --> 00:08:03,520 Speaker 1: plus substantially elevated data center spending is greatly plus reduced 104 00:08:03,840 --> 00:08:09,960 Speaker 1: trade deficits in the United States plus higher asset prices 105 00:08:10,080 --> 00:08:15,040 Speaker 1: which reduce the flow of funds for saving, if one 106 00:08:15,080 --> 00:08:17,760 Speaker 1: has the view that all of that is raising the 107 00:08:17,800 --> 00:08:21,800 Speaker 1: net demand for funds, then I think one might think 108 00:08:21,880 --> 00:08:26,800 Speaker 1: that neutral interest rates have risen quite substantially, in which 109 00:08:26,920 --> 00:08:31,680 Speaker 1: case you wouldn't be prescribing one hundred and seventy five 110 00:08:31,720 --> 00:08:37,960 Speaker 1: basis point cutting rates unless we see a recession. I 111 00:08:37,960 --> 00:08:44,000 Speaker 1: think the possibility and the risk of inflation expectations starting 112 00:08:44,080 --> 00:08:51,480 Speaker 1: to pick up, given big budget deficits, given tariff pressures, 113 00:08:51,960 --> 00:08:57,760 Speaker 1: given political uncertainties surrounding the FED, is also a reason 114 00:08:58,000 --> 00:09:02,480 Speaker 1: why one wouldn't want to feel that we were committed 115 00:09:03,040 --> 00:09:09,040 Speaker 1: to major rate reduction going forward. So I'm not here 116 00:09:09,080 --> 00:09:12,600 Speaker 1: to tell you that that's not going to happen. I'm 117 00:09:12,640 --> 00:09:17,960 Speaker 1: not here to tell you that it shouldn't happen. I 118 00:09:18,000 --> 00:09:22,320 Speaker 1: can certainly imagine circumstances in which the economy could play 119 00:09:22,360 --> 00:09:28,319 Speaker 1: out in which those kinds of cuts would be appropriate, 120 00:09:28,920 --> 00:09:32,920 Speaker 1: But it seems to me to be confidently prescribing them 121 00:09:33,200 --> 00:09:39,800 Speaker 1: at this juncture is beyond what I would see as 122 00:09:39,880 --> 00:09:44,960 Speaker 1: a prudent judgment, all the more when the judgment is 123 00:09:45,040 --> 00:09:50,240 Speaker 1: being made by a senior official with responsibility for policy. 124 00:09:51,360 --> 00:09:53,800 Speaker 2: We end the week with President Trump meeting with President 125 00:09:53,880 --> 00:09:57,160 Speaker 2: Putin in Alaska to talk about Ukraine, with Ukraine not 126 00:09:57,280 --> 00:10:00,760 Speaker 2: being present. I wonder what your thoughts are, what effects 127 00:10:00,800 --> 00:10:03,480 Speaker 2: that have economically, And let me ask you specifically about 128 00:10:03,480 --> 00:10:06,000 Speaker 2: those Russian assets that you've talked about on this program 129 00:10:06,120 --> 00:10:06,839 Speaker 2: more than once. 130 00:10:07,800 --> 00:10:08,160 Speaker 5: David. 131 00:10:09,960 --> 00:10:16,679 Speaker 1: President Trump, like him or not like him, support what 132 00:10:16,720 --> 00:10:19,760 Speaker 1: he does, or be more skeptical of some of the 133 00:10:19,800 --> 00:10:25,040 Speaker 1: things he does, is the most transactional of all presidents. 134 00:10:26,320 --> 00:10:30,360 Speaker 1: I would have fought and hoped that a president who 135 00:10:30,440 --> 00:10:36,200 Speaker 1: was so transactional, with the tremendous leverage over Russia that's 136 00:10:36,320 --> 00:10:41,080 Speaker 1: represented by the fact that we have currently frozen their reserves, 137 00:10:41,800 --> 00:10:46,680 Speaker 1: would use our claim on those reserves as leverage to 138 00:10:46,880 --> 00:10:54,120 Speaker 1: drive them to a just piece with Ukraine. I know 139 00:10:54,200 --> 00:10:58,880 Speaker 1: there's some reluctance about that in Europe. There's concern that 140 00:10:59,000 --> 00:11:05,320 Speaker 1: it might inhibit some country's ability to sell debt. President 141 00:11:05,360 --> 00:11:09,359 Speaker 1: Trump's errors in the past have not been over solicitude 142 00:11:10,040 --> 00:11:16,520 Speaker 1: for European views. So I have been surprised and a 143 00:11:16,559 --> 00:11:21,800 Speaker 1: bit disappointed that President Trump has not been prepared to 144 00:11:21,920 --> 00:11:27,120 Speaker 1: bring the reserves issue more into the foreground, because I 145 00:11:27,160 --> 00:11:30,880 Speaker 1: think it would be helpful to him in achieving his 146 00:11:31,000 --> 00:11:35,360 Speaker 1: objectives of putting the Russia Ukraine conflict in the rear 147 00:11:35,480 --> 00:11:36,040 Speaker 1: view mirror. 148 00:11:38,200 --> 00:11:41,320 Speaker 2: Up next, the saga of the three trillion dollar company 149 00:11:41,360 --> 00:11:44,920 Speaker 2: falling behind in its race with other megatech firms what 150 00:11:45,000 --> 00:11:58,559 Speaker 2: Apple needs to do to get back on track. This 151 00:11:58,720 --> 00:12:01,600 Speaker 2: is a story about race a bear, where it's not 152 00:12:01,640 --> 00:12:03,880 Speaker 2: so much that you beat the bear as it is 153 00:12:03,880 --> 00:12:05,800 Speaker 2: that you beat the others in the race so that 154 00:12:05,880 --> 00:12:09,040 Speaker 2: you don't get eaten. Apple is worth more than three 155 00:12:09,280 --> 00:12:13,240 Speaker 2: trillion dollars, but it's no longer the world's most valuable company, 156 00:12:13,480 --> 00:12:16,600 Speaker 2: and it's not racing as fast as its largest competitors. 157 00:12:17,000 --> 00:12:19,960 Speaker 2: Patrick McGee, author of the best selling book Apple in China, 158 00:12:20,080 --> 00:12:22,760 Speaker 2: says there's plenty for Apple to be worried about. 159 00:12:24,559 --> 00:12:27,800 Speaker 6: In twenty seventeen, the former head of software under Steve Jobs, 160 00:12:27,840 --> 00:12:31,280 Speaker 6: Avi Tavanium basically used the analogy that if you and 161 00:12:31,280 --> 00:12:33,480 Speaker 6: a friend are being chased by a bear, you don't 162 00:12:33,480 --> 00:12:35,720 Speaker 6: need to outrun the bear. You just need to outrun 163 00:12:35,800 --> 00:12:38,920 Speaker 6: your friend. He meant to say that in the world 164 00:12:38,960 --> 00:12:43,600 Speaker 6: of Tim Cook Samsung, the Google Android operating system wasn't 165 00:12:43,640 --> 00:12:46,200 Speaker 6: doing anything in particular in twenty eighteen. So while he 166 00:12:46,240 --> 00:12:50,359 Speaker 6: could acknowledge that Tim Cook's Apple had sort of stagnated 167 00:12:50,400 --> 00:12:53,360 Speaker 6: a little bit, it didn't matter in twenty seventeen. Well, 168 00:12:53,360 --> 00:12:55,400 Speaker 6: eight years later, I think it really does matter. And 169 00:12:55,400 --> 00:12:58,280 Speaker 6: that's why you have Nvideo being worth a trillion dollars more, 170 00:12:58,720 --> 00:13:01,839 Speaker 6: Microsoft being worth eight hundred dollars, eight hundred billion dollars more. 171 00:13:02,280 --> 00:13:05,640 Speaker 6: Companies that really didn't even exist at the time, anthropic perplexity, 172 00:13:05,679 --> 00:13:08,360 Speaker 6: open AI are really defining a new era of computing. 173 00:13:08,720 --> 00:13:12,440 Speaker 6: And it's you know, somewhere between embarrassing and tragic that Apple, 174 00:13:12,679 --> 00:13:15,840 Speaker 6: sort of the most iconic company, really isn't even in 175 00:13:15,880 --> 00:13:19,640 Speaker 6: that conversation, and something like the design position, you know, 176 00:13:19,720 --> 00:13:22,680 Speaker 6: chief design officer has been vacant since Johnny I have 177 00:13:22,760 --> 00:13:25,800 Speaker 6: left in twenty nineteen. I don't think there's any excuse 178 00:13:25,840 --> 00:13:26,120 Speaker 6: for that. 179 00:13:26,520 --> 00:13:28,319 Speaker 2: What's slowing Apple down. 180 00:13:28,200 --> 00:13:30,400 Speaker 6: Well, what made Apple so iconic in the early two 181 00:13:30,440 --> 00:13:34,160 Speaker 6: thousands was really product design and then Tim Cook's ability 182 00:13:34,200 --> 00:13:37,920 Speaker 6: to operate those products at enormous scale. They're still playing 183 00:13:38,000 --> 00:13:40,040 Speaker 6: the scale game. I mean, they build and sell two 184 00:13:40,120 --> 00:13:43,200 Speaker 6: hundred and thirty million iPhones a year, and probably double 185 00:13:43,280 --> 00:13:45,320 Speaker 6: that number of products if you were to include everything 186 00:13:45,320 --> 00:13:47,959 Speaker 6: from air tags and air pods to iPads and MacBooks. 187 00:13:48,280 --> 00:13:51,520 Speaker 6: So their operation game is is, you know, second to none. 188 00:13:51,760 --> 00:13:54,960 Speaker 6: They run the world's most sophisticated supply chain, but they're 189 00:13:54,960 --> 00:13:58,920 Speaker 6: no longer redesigning products in super interesting ways. The Macbinnie 190 00:13:58,960 --> 00:14:00,800 Speaker 6: is about as boring as you can get in terms 191 00:14:00,840 --> 00:14:02,840 Speaker 6: of a product. In terms of how it looks, it's 192 00:14:02,960 --> 00:14:05,880 Speaker 6: almost HARKing back to the nineteen nineties when computers were 193 00:14:05,880 --> 00:14:08,920 Speaker 6: all beaige. The iPhone really hasn't been redesigned in any 194 00:14:08,960 --> 00:14:12,559 Speaker 6: meaningful tangible way since twenty nineteen, and I don't think 195 00:14:12,600 --> 00:14:14,640 Speaker 6: the other products have been either, So they've sort of 196 00:14:14,679 --> 00:14:17,360 Speaker 6: lost their cool in a certain sense, right. Apple no 197 00:14:17,400 --> 00:14:20,240 Speaker 6: longer sort of defines how a computer or a smartphone 198 00:14:20,280 --> 00:14:22,920 Speaker 6: is going to look and feel, and I think, unfortunately, 199 00:14:23,000 --> 00:14:25,800 Speaker 6: sort of the most sexy smartphones in the world these 200 00:14:25,840 --> 00:14:28,480 Speaker 6: days are from a bunch of Chinese companies who largely 201 00:14:28,520 --> 00:14:32,280 Speaker 6: can't sell in America, like the Huawei mate Xt, which 202 00:14:32,320 --> 00:14:35,280 Speaker 6: in Apple terms is an iPhone and an iPad in one. 203 00:14:35,520 --> 00:14:37,720 Speaker 6: So really, the story of my book is that Apple 204 00:14:37,800 --> 00:14:40,880 Speaker 6: trained up its own competitors. They didn't just give birth 205 00:14:40,920 --> 00:14:43,360 Speaker 6: to a smartphone industry in terms of the supply chain. 206 00:14:43,880 --> 00:14:46,960 Speaker 6: The supply chain took those skills and they sort of 207 00:14:46,960 --> 00:14:51,760 Speaker 6: offered what Apple taught them to Huawei, Apo, Vivo, and 208 00:14:51,800 --> 00:14:54,800 Speaker 6: shall Me, and those are the Chinese companies that collectively 209 00:14:54,840 --> 00:14:57,840 Speaker 6: have a global market share in smartphones, the most iconic 210 00:14:57,880 --> 00:15:01,160 Speaker 6: device of the twenty first century, of more than five percent. 211 00:15:01,760 --> 00:15:05,760 Speaker 6: So I really think Apple risks being overtaken by Chinese 212 00:15:05,800 --> 00:15:08,560 Speaker 6: competition in the next three years within China. And the 213 00:15:08,560 --> 00:15:11,240 Speaker 6: only reason that's not a global story is because you 214 00:15:11,280 --> 00:15:14,600 Speaker 6: can't go to an AT and T store here a 215 00:15:14,720 --> 00:15:17,040 Speaker 6: little let alone down to the local mall and buy 216 00:15:18,200 --> 00:15:21,560 Speaker 6: Huawei phone. So there's all sorts of protections, you know, 217 00:15:21,600 --> 00:15:23,800 Speaker 6: basically the same sort of thing that Donald Trump complains 218 00:15:23,800 --> 00:15:26,960 Speaker 6: about overseas, right, non tariff protections we have in the 219 00:15:27,000 --> 00:15:31,680 Speaker 6: telecom industry ourselves, but in places like Russia and Indonesia. 220 00:15:31,720 --> 00:15:34,400 Speaker 6: I mean, the Chinese smartphone manufacturers have an eighty percent 221 00:15:34,480 --> 00:15:37,720 Speaker 6: market share, if not higher, and I suspect that's going 222 00:15:37,760 --> 00:15:39,360 Speaker 6: to be a real problem for Apple in the next 223 00:15:39,360 --> 00:15:40,400 Speaker 6: five to ten years. 224 00:15:40,920 --> 00:15:43,840 Speaker 2: One route Apple is pursuing to avoid the trade conflicts 225 00:15:43,880 --> 00:15:47,720 Speaker 2: between the US and China is to manufacture in India, 226 00:15:47,800 --> 00:15:50,880 Speaker 2: which has its own tariff problems with President Trump. But 227 00:15:51,080 --> 00:15:54,520 Speaker 2: even putting that to one side, McGee says India may 228 00:15:54,560 --> 00:15:56,120 Speaker 2: not be the success story. 229 00:15:56,240 --> 00:15:59,800 Speaker 6: It appears there's more hype than reality in terms of 230 00:15:59,800 --> 00:16:03,080 Speaker 6: manufacturing in India. Really, they haven't moved the depth and 231 00:16:03,160 --> 00:16:06,160 Speaker 6: breadth of the supply chain. What they've moved is assembly. 232 00:16:06,560 --> 00:16:09,600 Speaker 6: And because people largely don't know just how gargantuan Apples 233 00:16:09,680 --> 00:16:12,760 Speaker 6: operations in China are, their investments in India can look 234 00:16:12,800 --> 00:16:14,640 Speaker 6: like a big deal. So just a few months ago, 235 00:16:14,680 --> 00:16:18,520 Speaker 6: for instance, Apple's Taiwanese partner was investing into India and 236 00:16:18,560 --> 00:16:21,760 Speaker 6: they were making dormitories to house thirty thousand workers. Well, 237 00:16:21,800 --> 00:16:24,280 Speaker 6: to any American listener or reader, that sounds like a 238 00:16:24,360 --> 00:16:27,520 Speaker 6: huge investment until you remember that Tim Cook's own estimate 239 00:16:27,560 --> 00:16:29,800 Speaker 6: of how many Chinese people are in the supply chain 240 00:16:30,040 --> 00:16:32,240 Speaker 6: is three million, right, So what's thirty thousand out of 241 00:16:32,280 --> 00:16:35,600 Speaker 6: three million? That's one percent. The investments in India need 242 00:16:35,640 --> 00:16:38,520 Speaker 6: to be on a staggeringly different scale for the country 243 00:16:38,560 --> 00:16:41,200 Speaker 6: to really replicate the depth and breadth of the supply chain. 244 00:16:41,600 --> 00:16:44,720 Speaker 6: I would say on a superficial basis, India absolutely has 245 00:16:44,720 --> 00:16:47,920 Speaker 6: what it takes one point five billion people, obviously a 246 00:16:47,920 --> 00:16:50,920 Speaker 6: massive land mass and wages comparable to what you had 247 00:16:50,920 --> 00:16:54,600 Speaker 6: in China twenty twenty five years ago. Unfortunately, the differences 248 00:16:54,600 --> 00:16:58,120 Speaker 6: between China and India are more profound the more serious 249 00:16:58,200 --> 00:17:00,600 Speaker 6: you seriously you look at this issue. So you know, 250 00:17:00,640 --> 00:17:03,840 Speaker 6: the missing topography of Apple that my book really contributes 251 00:17:03,880 --> 00:17:06,520 Speaker 6: to is and understanding that Apple didn't move to China 252 00:17:06,600 --> 00:17:11,600 Speaker 6: because China offered competence. Apple moved there because Apple was 253 00:17:11,640 --> 00:17:15,760 Speaker 6: able to build the competence right by training millions of people, 254 00:17:16,000 --> 00:17:19,800 Speaker 6: by investing billions of dollars, by installing machinery on production 255 00:17:19,880 --> 00:17:22,680 Speaker 6: lines that otherwise wouldn't be able to afford to do it. Now, 256 00:17:22,720 --> 00:17:25,800 Speaker 6: Apple can do the same playbook in India. However, who's 257 00:17:25,840 --> 00:17:28,200 Speaker 6: going to build the eight lane highways from the factories 258 00:17:28,240 --> 00:17:30,680 Speaker 6: to the ports. Who's going to build the high speed rail? 259 00:17:30,960 --> 00:17:33,320 Speaker 6: That's not something Apple can do. So I think there's 260 00:17:33,320 --> 00:17:36,840 Speaker 6: great potential for India to be an enormous and successful 261 00:17:36,880 --> 00:17:39,680 Speaker 6: partner to Apple, but it's going to take a lot 262 00:17:39,720 --> 00:17:43,719 Speaker 6: from New Delhi or the governors of Tamil Nadu or Karnataka. 263 00:17:44,040 --> 00:17:47,240 Speaker 6: In order for that to make sense, Apple can't just 264 00:17:47,280 --> 00:17:50,320 Speaker 6: write a blank check. They need government support and negotiations 265 00:17:50,320 --> 00:17:52,280 Speaker 6: for this probably have to happen at the level of 266 00:17:52,320 --> 00:17:55,879 Speaker 6: New Delhi, Beijing, Washington, etc. Because you can't really expect 267 00:17:55,880 --> 00:17:58,199 Speaker 6: a company to make these moves and just risk the 268 00:17:58,240 --> 00:18:01,119 Speaker 6: backlash from Chinese consumers where Apple has this seventy billion 269 00:18:01,119 --> 00:18:03,800 Speaker 6: dollar business, and from Beijing. So you're going to have 270 00:18:03,840 --> 00:18:06,560 Speaker 6: to have everybody at a table striking some grand bargain 271 00:18:06,800 --> 00:18:09,960 Speaker 6: for China and sense to allow the manufacturing to leave 272 00:18:09,960 --> 00:18:12,679 Speaker 6: its country, because Beijing knows better than anybody else what 273 00:18:12,720 --> 00:18:14,960 Speaker 6: it means to have Apple as a partner in your 274 00:18:15,000 --> 00:18:19,600 Speaker 6: country building up major industrial clusters, and Beijing wants technology 275 00:18:19,640 --> 00:18:22,080 Speaker 6: transferred to be a one way gate the information comes 276 00:18:22,119 --> 00:18:23,160 Speaker 6: in it does not leave. 277 00:18:24,520 --> 00:18:27,160 Speaker 2: Apple's ties to China have turned out to be both 278 00:18:27,160 --> 00:18:30,200 Speaker 2: a strength and a weakness, but it's not the only 279 00:18:30,320 --> 00:18:34,000 Speaker 2: challenge it faces. It's also fallen behind its competitors in 280 00:18:34,040 --> 00:18:37,320 Speaker 2: the race to artificial intelligence. Man Deep Singh is the 281 00:18:37,359 --> 00:18:40,920 Speaker 2: global head of Technology research at Bloomberg Intelligence. 282 00:18:41,320 --> 00:18:45,800 Speaker 7: They have a history of creating new products. Obviously, iPhone 283 00:18:45,840 --> 00:18:49,320 Speaker 7: is the big cash cow and they have monetized it 284 00:18:49,400 --> 00:18:53,520 Speaker 7: extremely well in terms of the newer versions. But AI 285 00:18:53,840 --> 00:18:57,479 Speaker 7: is something that wasn't in their DNA in terms of 286 00:18:57,640 --> 00:19:04,400 Speaker 7: you know, investing upfront the hyperscalers like Microsoft, Google, Meta, 287 00:19:04,960 --> 00:19:09,600 Speaker 7: these companies were quite aggressive in terms of believing that 288 00:19:09,720 --> 00:19:14,320 Speaker 7: AI was a secular team that will change the products. Apple, 289 00:19:14,400 --> 00:19:17,199 Speaker 7: on the other hand, has always thought about, you know, 290 00:19:17,640 --> 00:19:22,320 Speaker 7: hardware design. That has been their strength and till date, 291 00:19:22,440 --> 00:19:25,080 Speaker 7: I don't think there is a competitor when it comes 292 00:19:25,119 --> 00:19:28,240 Speaker 7: to the quality of the hardware that Apple has versus 293 00:19:28,280 --> 00:19:32,200 Speaker 7: you know, anyone else. But what they really missed out 294 00:19:32,240 --> 00:19:36,960 Speaker 7: on is the profound impact AI may have in terms 295 00:19:37,000 --> 00:19:40,640 Speaker 7: of the functionality whether you are browsing on your phone 296 00:19:40,920 --> 00:19:44,640 Speaker 7: or how you interact with an assistant the app store. 297 00:19:45,760 --> 00:19:49,479 Speaker 7: So now they are really realizing, Okay, what is it 298 00:19:49,560 --> 00:19:53,000 Speaker 7: that we could do given everyone else has a two 299 00:19:53,000 --> 00:19:57,040 Speaker 7: to three year headstart and they haven't invested in infrastructure 300 00:19:57,080 --> 00:20:01,600 Speaker 7: or data centers. But now partnership MNA seems to be 301 00:20:01,760 --> 00:20:05,879 Speaker 7: the most viable option because they still control the distribution. 302 00:20:06,280 --> 00:20:08,960 Speaker 2: How big a problem when it comes to does Apple 303 00:20:09,000 --> 00:20:11,200 Speaker 2: have and does Apple know it has a problem. 304 00:20:11,280 --> 00:20:15,040 Speaker 7: I think the acknowledgment is coming more now than it 305 00:20:15,240 --> 00:20:17,880 Speaker 7: was six months back. And part of the reason is 306 00:20:18,080 --> 00:20:21,600 Speaker 7: how big AI has become. So Google right now is 307 00:20:21,680 --> 00:20:27,240 Speaker 7: processing nine hundred eighty trillion tokens a month. Now, that's 308 00:20:27,280 --> 00:20:30,280 Speaker 7: one hundred x in the past one year. So that 309 00:20:30,440 --> 00:20:33,440 Speaker 7: just goes to show what is the level of consumption 310 00:20:33,600 --> 00:20:36,400 Speaker 7: in AI now versus where it was twelve months back. 311 00:20:36,880 --> 00:20:40,119 Speaker 7: Open ai is close to one billion monthly active users 312 00:20:40,119 --> 00:20:43,600 Speaker 7: a day, and so with those kind of numbers, you 313 00:20:43,720 --> 00:20:48,719 Speaker 7: have to acknowledge that AI is getting more pervasive in 314 00:20:48,760 --> 00:20:51,080 Speaker 7: our lives and on our devices. 315 00:20:51,520 --> 00:20:51,720 Speaker 1: Now. 316 00:20:51,760 --> 00:20:55,960 Speaker 7: The question is it enough for Apple to just keep 317 00:20:56,080 --> 00:20:59,200 Speaker 7: offering AI through their app store or do they need 318 00:20:59,320 --> 00:21:02,560 Speaker 7: natively on the device. And the answer is what OpenAI 319 00:21:02,680 --> 00:21:06,320 Speaker 7: has showed us with GPT five is you can use 320 00:21:06,480 --> 00:21:10,439 Speaker 7: llms for scheduling your diary, you can use llms for 321 00:21:10,520 --> 00:21:13,920 Speaker 7: summarizing your emails, and you know, acting as an assistant, 322 00:21:13,960 --> 00:21:17,600 Speaker 7: which is what Siri was supposed to do. Apple talked 323 00:21:17,600 --> 00:21:20,920 Speaker 7: about revamping sery, but we know it has gotten delayed, 324 00:21:21,320 --> 00:21:24,280 Speaker 7: and so those are the type of things Apple has 325 00:21:24,320 --> 00:21:27,840 Speaker 7: to do something about it. Otherwise it can turn people off, 326 00:21:28,200 --> 00:21:31,320 Speaker 7: and once they move out of the Apple ecosystem, it's 327 00:21:31,600 --> 00:21:35,200 Speaker 7: very hard to bring people back. The catch I think 328 00:21:35,359 --> 00:21:38,760 Speaker 7: as long as you control the distribution, which is why. 329 00:21:38,840 --> 00:21:42,040 Speaker 7: You know, companies like Google, which has made a lot 330 00:21:42,080 --> 00:21:45,920 Speaker 7: of advancements in their lms, they controlled the browser, they 331 00:21:45,920 --> 00:21:51,640 Speaker 7: control the Android ecosystem, and for me, Apple is similar. 332 00:21:51,800 --> 00:21:56,399 Speaker 7: They have their Safari browser, they have the iOS operating system, 333 00:21:56,640 --> 00:22:00,880 Speaker 7: they control the devices, so they have a lock in 334 00:22:00,920 --> 00:22:04,879 Speaker 7: with their users. The only trouble they've had is developing 335 00:22:04,920 --> 00:22:09,240 Speaker 7: this LLLM functionality. And so to my mind and Opening 336 00:22:09,320 --> 00:22:12,479 Speaker 7: Eye or Nthropic also have to catch up. If they 337 00:22:12,480 --> 00:22:15,760 Speaker 7: want to compete with Apple and take share, they have 338 00:22:16,119 --> 00:22:18,960 Speaker 7: to come up with devices, you know, And so it's 339 00:22:19,040 --> 00:22:22,600 Speaker 7: not easy what Apple has done over the past twenty 340 00:22:22,680 --> 00:22:25,800 Speaker 7: years in terms of the ecosystem they've created. And that's 341 00:22:25,800 --> 00:22:31,240 Speaker 7: why unless there is a disruption to smartphone or you know, tablets, 342 00:22:31,720 --> 00:22:34,080 Speaker 7: and there is a new form factor altogether, which as 343 00:22:34,119 --> 00:22:36,359 Speaker 7: I mentioned, Apple has come up with Vision Pro. So 344 00:22:36,359 --> 00:22:38,760 Speaker 7: it's not as if Ivar is going to challenge Apple. 345 00:22:39,800 --> 00:22:43,480 Speaker 7: I just don't see any hardware disruption on the horizon 346 00:22:43,880 --> 00:22:46,200 Speaker 7: to make me feel Apple is at risk. That three 347 00:22:46,240 --> 00:22:48,960 Speaker 7: trillion market cap is at risk. But if I see 348 00:22:49,000 --> 00:22:52,080 Speaker 7: a new form factor where people just do their work 349 00:22:52,119 --> 00:22:56,320 Speaker 7: completely differently, it's a substitute for a phone, That's when 350 00:22:56,359 --> 00:22:57,679 Speaker 7: I'll get worried about Apple. 351 00:22:57,760 --> 00:22:59,760 Speaker 6: I think Tim Cook has done a tremendous job in 352 00:22:59,840 --> 00:23:02,119 Speaker 6: terms of following in the footsteps of Steve Jobs. That's 353 00:23:02,160 --> 00:23:06,320 Speaker 6: something basically nobody thought was really possible. And Apple's market cap, 354 00:23:06,359 --> 00:23:08,399 Speaker 6: I believe, has gone from around three hundred billion in 355 00:23:08,400 --> 00:23:11,640 Speaker 6: twenty eleven when Steve Jobs died, to three trillion dollars. 356 00:23:11,960 --> 00:23:14,480 Speaker 6: That's a massive accomplishment on the part of Tim Cook. 357 00:23:14,800 --> 00:23:16,600 Speaker 6: But I think if you look at what's happening in 358 00:23:16,640 --> 00:23:20,240 Speaker 6: Apple since twenty twenty two, it's not a whole lot, 359 00:23:20,280 --> 00:23:22,119 Speaker 6: and there's not a whole lot to cheer for. That 360 00:23:22,320 --> 00:23:24,560 Speaker 6: was the year that they first hit three trillion dollars. 361 00:23:24,800 --> 00:23:27,760 Speaker 6: The share price has barely moved since then. I would 362 00:23:27,760 --> 00:23:30,760 Speaker 6: look at twenty twenty two Apple and say mission accomplished. 363 00:23:30,760 --> 00:23:33,280 Speaker 6: Tim Cook was brought in to scale and distribute at 364 00:23:33,320 --> 00:23:36,520 Speaker 6: scale the products that Steve Jobs had already created. At 365 00:23:36,520 --> 00:23:39,800 Speaker 6: this point, the pendulum has swung back to an area 366 00:23:39,800 --> 00:23:43,360 Speaker 6: where you need a product design leader, a product visionary, 367 00:23:43,440 --> 00:23:46,199 Speaker 6: someone who's adept in ai and whatever the qualities of 368 00:23:46,200 --> 00:23:48,240 Speaker 6: Tim Cook are, it's none of those three things. 369 00:23:50,160 --> 00:23:53,159 Speaker 2: Coming up from a small town in South Georgia in 370 00:23:53,240 --> 00:23:56,159 Speaker 2: the time of Jim Crow Laws comes the story of 371 00:23:56,240 --> 00:23:59,399 Speaker 2: why the rule of law matters so much, not just 372 00:23:59,440 --> 00:24:02,600 Speaker 2: a lawyer's judges, but to business and markets and the 373 00:24:02,640 --> 00:24:16,200 Speaker 2: economy overall. This is a story about playing by the rules, 374 00:24:16,400 --> 00:24:19,560 Speaker 2: or really playing by one really big rule. 375 00:24:19,600 --> 00:24:20,520 Speaker 1: The rule of law. 376 00:24:21,880 --> 00:24:25,200 Speaker 5: I think some of what we're seeing are basically pushing 377 00:24:25,359 --> 00:24:29,600 Speaker 5: power and pushing authority in directions that we haven't gone before. 378 00:24:29,880 --> 00:24:33,160 Speaker 8: We're at a moment now where we have a president 379 00:24:33,200 --> 00:24:36,320 Speaker 8: who feels unusually unconstrained. 380 00:24:36,560 --> 00:24:39,360 Speaker 4: I think we have to be concerned because this administration 381 00:24:40,280 --> 00:24:42,040 Speaker 4: is pressing boundaries every. 382 00:24:41,880 --> 00:24:45,159 Speaker 2: Day, and some of what President Trump has had to 383 00:24:45,200 --> 00:24:48,360 Speaker 2: say about the courts and their rulings has not always 384 00:24:48,400 --> 00:24:49,440 Speaker 2: been reassuring. 385 00:24:50,200 --> 00:24:54,159 Speaker 1: Judges are trying to take away the power given to 386 00:24:54,240 --> 00:24:57,800 Speaker 1: the president to keep our country safe, and it's not 387 00:24:57,880 --> 00:24:58,400 Speaker 1: a good thing. 388 00:24:59,600 --> 00:25:02,240 Speaker 2: As in important as we're told the rule of law is, 389 00:25:02,640 --> 00:25:07,879 Speaker 2: it can sometimes feel pretty abstract something yes, legalistic, but 390 00:25:07,960 --> 00:25:10,320 Speaker 2: for the rest of us, it's a matter of predictability 391 00:25:10,720 --> 00:25:15,280 Speaker 2: and fairness, something that runs silently in the background until 392 00:25:15,359 --> 00:25:16,720 Speaker 2: it really matters. 393 00:25:17,440 --> 00:25:23,680 Speaker 8: My parents came from South Korea, and Korea was subjected 394 00:25:23,680 --> 00:25:27,159 Speaker 8: to a military dictatorship. And when I was in high school, 395 00:25:27,720 --> 00:25:31,040 Speaker 8: I went to Korea and there was an assassination attempt 396 00:25:31,080 --> 00:25:34,760 Speaker 8: on the president who had installed himself as a dictator. 397 00:25:35,160 --> 00:25:38,480 Speaker 8: Suddenly they declared martial law and I couldn't go home. 398 00:25:39,359 --> 00:25:41,520 Speaker 2: Harold Coe went on to be dean of the a 399 00:25:41,680 --> 00:25:45,160 Speaker 2: Law School and the chief legal officer in the State Department. 400 00:25:45,720 --> 00:25:48,639 Speaker 2: But he got his first direct exposure to the importance 401 00:25:48,680 --> 00:25:51,879 Speaker 2: of following predictable rules when he was a young Korean 402 00:25:51,920 --> 00:25:54,960 Speaker 2: American visiting his extended family in the country of his 403 00:25:55,040 --> 00:25:57,480 Speaker 2: heritage in the early nineteen seventies. 404 00:25:57,640 --> 00:26:00,119 Speaker 8: And I called my father and he told me, you 405 00:26:00,119 --> 00:26:03,480 Speaker 8: know what happened here in America. Richard Nixon just resigned 406 00:26:03,880 --> 00:26:07,000 Speaker 8: and Gerald Ford is the president. And there are no 407 00:26:07,080 --> 00:26:09,760 Speaker 8: tanks in the street, there are no guns. And I said, 408 00:26:09,800 --> 00:26:12,240 Speaker 8: what does this mean? And he said, this is the 409 00:26:12,240 --> 00:26:15,280 Speaker 8: difference between the rule of law and the rule of individuals. 410 00:26:15,960 --> 00:26:20,280 Speaker 8: He said, in America, if you're president, the troops obey you. 411 00:26:20,920 --> 00:26:24,359 Speaker 8: In Korea, if the troops obey you, they'll call you president. 412 00:26:25,359 --> 00:26:28,560 Speaker 2: Protecting the foundations of our system historically is the job 413 00:26:28,600 --> 00:26:31,760 Speaker 2: of US judges and the lawyers who appear before them 414 00:26:31,800 --> 00:26:35,639 Speaker 2: in litigation. Lawyers like the fellows of the American College 415 00:26:35,640 --> 00:26:40,119 Speaker 2: of Trial Lawyers, currently led by its president, Rick Dean, and. 416 00:26:40,160 --> 00:26:44,359 Speaker 5: So it's a invitation only group of trial lawyers. And 417 00:26:44,400 --> 00:26:47,600 Speaker 5: you actually have to be a trial lawyer in order 418 00:26:47,640 --> 00:26:52,080 Speaker 5: to be considered for induction. There's a fairly lengthy process 419 00:26:52,200 --> 00:26:54,840 Speaker 5: by which you are considered. You have to have been 420 00:26:54,880 --> 00:26:57,919 Speaker 5: a member of the trial bar for at least fifteen years. 421 00:26:58,480 --> 00:27:00,600 Speaker 2: Is there a political tilt one way or the other, 422 00:27:00,760 --> 00:27:02,880 Speaker 2: left or right of the American College Trialers. 423 00:27:03,000 --> 00:27:07,480 Speaker 5: We are an organization that across the political spectrum. You're 424 00:27:07,480 --> 00:27:10,760 Speaker 5: going to find fellows with all kinds of political ideas, 425 00:27:10,840 --> 00:27:15,119 Speaker 5: and that's not important to us. We are committed to 426 00:27:15,600 --> 00:27:19,000 Speaker 5: certain core concepts. One of those is to the advancement 427 00:27:19,040 --> 00:27:23,520 Speaker 5: of the rule of law, protecting judicial independence, and frankly 428 00:27:24,000 --> 00:27:28,159 Speaker 5: supporting the access to justice, the concept of access to justice. 429 00:27:28,359 --> 00:27:31,719 Speaker 5: So those are our key tenants and politics is not 430 00:27:31,760 --> 00:27:35,800 Speaker 5: one of those. We're talking about that set of sort 431 00:27:35,840 --> 00:27:41,640 Speaker 5: of governing principles that bring stability and predictability to our liberty. 432 00:27:42,119 --> 00:27:46,040 Speaker 5: It's a concept of ordered liberty, and these are the 433 00:27:46,080 --> 00:27:47,520 Speaker 5: guardrails the rules. 434 00:27:47,960 --> 00:27:51,919 Speaker 2: Are you more active in supporting defending the rule of 435 00:27:51,960 --> 00:27:54,160 Speaker 2: law today than you have been in recent years? 436 00:27:54,760 --> 00:27:58,639 Speaker 5: I think a fair response is yes, And in part 437 00:27:58,720 --> 00:28:02,440 Speaker 5: that's because I think we're coming to see things that 438 00:28:02,520 --> 00:28:04,520 Speaker 5: concern us. And when I say we, I mean the 439 00:28:04,560 --> 00:28:09,560 Speaker 5: College itself, but primarily operating through its executive committee and 440 00:28:09,600 --> 00:28:14,040 Speaker 5: its leadership. We're coming to see things that concern us. 441 00:28:14,119 --> 00:28:17,640 Speaker 5: As I've gone around and spoken to fellows in both 442 00:28:17,680 --> 00:28:21,600 Speaker 5: the US and candidate, they're expressing to me concerns that 443 00:28:21,640 --> 00:28:22,600 Speaker 5: they have as well. 444 00:28:23,040 --> 00:28:26,800 Speaker 2: So yes, Professor co is even more emphatic about his 445 00:28:26,920 --> 00:28:29,359 Speaker 2: concerns over recent government actions. 446 00:28:29,760 --> 00:28:33,480 Speaker 8: I think it's the worst crisis of my lifetime, and 447 00:28:33,560 --> 00:28:37,040 Speaker 8: I'm not a young man. I was sad to say 448 00:28:37,440 --> 00:28:41,480 Speaker 8: the ultimate Supreme Court test may be coming, but frankly, 449 00:28:41,600 --> 00:28:46,480 Speaker 8: this Supreme Court has given Trump way more rope than 450 00:28:46,520 --> 00:28:48,800 Speaker 8: he should have been given. There have been more than 451 00:28:48,840 --> 00:28:52,240 Speaker 8: seventy rulings at the district and circuit courts against Trump. 452 00:28:52,880 --> 00:28:57,600 Speaker 8: I speak as someone who is a birthright citizen. It's 453 00:28:57,640 --> 00:29:02,320 Speaker 8: protected by the express word of the fourteenth Amendment. It 454 00:29:02,320 --> 00:29:06,120 Speaker 8: has been held explicitly by US versus Wong Kim arc, 455 00:29:06,200 --> 00:29:09,680 Speaker 8: which is a Supreme Court decision from the eighteen thirties, 456 00:29:10,200 --> 00:29:13,800 Speaker 8: and it has been consistently sustained, and there's a statute 457 00:29:13,840 --> 00:29:17,240 Speaker 8: which states it as well. You'll find out a few 458 00:29:17,280 --> 00:29:20,320 Speaker 8: minutes after taking an oath in which the President said 459 00:29:20,400 --> 00:29:24,280 Speaker 8: he would obey the Constitution, he signed an executive order 460 00:29:24,520 --> 00:29:27,840 Speaker 8: violating the Constitution, namely saying that he would not respect 461 00:29:27,840 --> 00:29:28,960 Speaker 8: birthright citizenship. 462 00:29:29,200 --> 00:29:31,080 Speaker 9: They are coming right. 463 00:29:31,840 --> 00:29:34,640 Speaker 2: Often we talk about things like the rule of law 464 00:29:35,080 --> 00:29:39,640 Speaker 2: when we're concerned about personal liberties like birthright citizenship. But 465 00:29:39,800 --> 00:29:42,360 Speaker 2: for Dean, we need to make every bit is sure 466 00:29:42,360 --> 00:29:44,800 Speaker 2: that everyone plays by the rules when it comes to 467 00:29:44,880 --> 00:29:46,600 Speaker 2: markets and to business. 468 00:29:46,840 --> 00:29:50,040 Speaker 5: The rule of law is important to personal liberty, but 469 00:29:50,080 --> 00:29:54,560 Speaker 5: it's also fundamentally important to our economic well being. That 470 00:29:54,640 --> 00:29:58,280 Speaker 5: it's the rule of law that provides predictability, that provides 471 00:29:58,320 --> 00:30:03,640 Speaker 5: stability such that we actively participants in our own economy. 472 00:30:04,120 --> 00:30:07,080 Speaker 5: Why would Steve Jobs want to develop the iPhone and 473 00:30:07,160 --> 00:30:10,400 Speaker 5: all of the technology and the intellectual capital that went 474 00:30:10,400 --> 00:30:13,960 Speaker 5: into that technology. It's not just for the glory of 475 00:30:14,120 --> 00:30:19,880 Speaker 5: having done it. He's intending to capitalize on his intellectual capital, 476 00:30:20,000 --> 00:30:24,080 Speaker 5: his intellectual property. It's the rule of law that allows 477 00:30:24,200 --> 00:30:29,440 Speaker 5: that predictability. It assures him that his intellectual capital, his 478 00:30:29,600 --> 00:30:34,360 Speaker 5: intellectual property, can't simply be stolen and compromised by somebody else, 479 00:30:34,440 --> 00:30:37,000 Speaker 5: that he will get the benefit of it. And that 480 00:30:37,000 --> 00:30:44,160 Speaker 5: brings about innovation, that brings about development of greater intellectual capital. 481 00:30:44,600 --> 00:30:47,240 Speaker 5: And I think that's very important to understanding what the 482 00:30:47,280 --> 00:30:49,000 Speaker 5: rule of law brings to our society. 483 00:30:50,080 --> 00:30:53,360 Speaker 2: After practicing law in Washington at Wilmer, Cutler and Pickering, 484 00:30:53,720 --> 00:30:56,480 Speaker 2: he and I were partners there back in the nineteen eighties. 485 00:30:56,920 --> 00:30:59,400 Speaker 2: Doug Mellman went on to head the Anti Trust division 486 00:30:59,400 --> 00:31:02,440 Speaker 2: of the Justice Department and then to serve as general 487 00:31:02,480 --> 00:31:03,720 Speaker 2: counsel for Intel. 488 00:31:04,320 --> 00:31:07,200 Speaker 4: Shortly after I got to Intel, we were having the 489 00:31:07,360 --> 00:31:11,120 Speaker 4: annual gathering of the Worldwide Corporate Affairs folks, and I 490 00:31:11,240 --> 00:31:13,720 Speaker 4: was going to do an interview with one of the 491 00:31:13,720 --> 00:31:17,560 Speaker 4: most senior officers in the company, and I said to him, 492 00:31:17,800 --> 00:31:21,080 Speaker 4: give me a couple of ideas of times where the 493 00:31:21,080 --> 00:31:24,120 Speaker 4: government of affarious people have saved your bacon, and maybe 494 00:31:24,160 --> 00:31:26,480 Speaker 4: a couple of things you like from them going forward 495 00:31:26,520 --> 00:31:31,200 Speaker 4: in the near future. And his answer to me was Look, 496 00:31:32,200 --> 00:31:34,640 Speaker 4: as far as I'm concerned, it's your job, meaning the 497 00:31:34,640 --> 00:31:36,960 Speaker 4: general counsel, It's your job to tell me what the 498 00:31:37,040 --> 00:31:40,400 Speaker 4: rules are, and it's my job to optimize within them. 499 00:31:40,680 --> 00:31:43,960 Speaker 4: They want to know what the rules are. They need predictability, 500 00:31:44,080 --> 00:31:46,360 Speaker 4: They need a sense of fairness that the rules are 501 00:31:46,360 --> 00:31:48,800 Speaker 4: going to be applied in a predictable way to everybody 502 00:31:49,320 --> 00:31:51,280 Speaker 4: and then they can carry on their business. 503 00:31:51,600 --> 00:31:55,000 Speaker 2: How do we get to that level of sufficient predictability 504 00:31:55,680 --> 00:31:56,720 Speaker 2: through the rule of law? 505 00:31:56,840 --> 00:31:58,360 Speaker 4: You have a rule of law. The absence of the 506 00:31:58,400 --> 00:32:03,120 Speaker 4: rule of law, it's a continuum, and no society, i imagine, 507 00:32:03,240 --> 00:32:05,680 Speaker 4: is going to have a flawless rule of law that 508 00:32:05,720 --> 00:32:08,080 Speaker 4: sort of checks all the boxes all the time. There's 509 00:32:08,080 --> 00:32:10,640 Speaker 4: only one alternative to the rule of law. And this 510 00:32:10,800 --> 00:32:15,320 Speaker 4: might makes right because either you have rules to constrain 511 00:32:15,480 --> 00:32:19,280 Speaker 4: the exercise of power by the powerful, or the powerful 512 00:32:20,080 --> 00:32:21,480 Speaker 4: are going to make the rules and they're going to 513 00:32:21,560 --> 00:32:23,760 Speaker 4: run society. So the first element is that has to 514 00:32:23,800 --> 00:32:29,000 Speaker 4: be a body of rules that constrain the powerful, including 515 00:32:29,040 --> 00:32:32,160 Speaker 4: the government as well as others. And that means that 516 00:32:32,200 --> 00:32:36,400 Speaker 4: the rules have to be applied equally fairly to everybody. 517 00:32:37,280 --> 00:32:41,160 Speaker 4: They have to be predictable and knowable, predictable, so that 518 00:32:42,280 --> 00:32:44,920 Speaker 4: entities can know what they need to do to comply 519 00:32:45,040 --> 00:32:48,840 Speaker 4: with the law. Knowable for reasons of transparency and trust 520 00:32:48,840 --> 00:32:52,320 Speaker 4: in the legal process. You can't make anti competitive mergers, 521 00:32:52,400 --> 00:32:55,960 Speaker 4: you can't engage in fraud and securities fraud and set 522 00:32:56,000 --> 00:32:58,720 Speaker 4: up a Ponzi scheme, and so forth. Contracts are to 523 00:32:58,720 --> 00:33:01,920 Speaker 4: be enforced, property rights be respected, and so on. But 524 00:33:02,000 --> 00:33:05,560 Speaker 4: I think your question really illuminates the importance of the 525 00:33:05,680 --> 00:33:08,959 Speaker 4: value of the rule of law for a business entity, 526 00:33:09,560 --> 00:33:13,280 Speaker 4: because all of us feel constrained sometimes and you wish 527 00:33:13,440 --> 00:33:16,520 Speaker 4: were the speed limit, but we all benefit from the 528 00:33:16,520 --> 00:33:20,000 Speaker 4: fact that everyone else is constrained too. It's not just 529 00:33:20,040 --> 00:33:24,600 Speaker 4: a guardian against corruption and personal misdeeds, it is also 530 00:33:24,360 --> 00:33:29,959 Speaker 4: a guardian of an environment of robust business and economic sector. 531 00:33:30,760 --> 00:33:33,560 Speaker 2: As an expert in international law, one who served as 532 00:33:33,560 --> 00:33:36,640 Speaker 2: a legal advisor at the US State Department, Harold co 533 00:33:36,920 --> 00:33:39,960 Speaker 2: knows firsthand how important it is for the US to 534 00:33:40,000 --> 00:33:43,120 Speaker 2: play by the established rules so that others will. 535 00:33:43,920 --> 00:33:49,000 Speaker 8: International law rules set default patterns of compliance. That doesn't 536 00:33:49,040 --> 00:33:51,400 Speaker 8: mean that you can't break away from those, but there's 537 00:33:51,440 --> 00:33:55,240 Speaker 8: a cost in doing so, and there are two costs 538 00:33:55,280 --> 00:33:58,720 Speaker 8: in particular. One is that most of the other countries 539 00:33:58,760 --> 00:34:01,960 Speaker 8: are all continuing to followed the default, and so if 540 00:34:01,960 --> 00:34:05,760 Speaker 8: you break away, suddenly your intention with them, and then 541 00:34:05,800 --> 00:34:10,400 Speaker 8: you have to negotiate the differences. And the second difference 542 00:34:10,560 --> 00:34:13,520 Speaker 8: is that if you break away from the rules of 543 00:34:13,560 --> 00:34:17,680 Speaker 8: international law, you cannot enforce them against others when they 544 00:34:17,680 --> 00:34:20,920 Speaker 8: also break away. So, for example, it turned out that 545 00:34:20,960 --> 00:34:25,480 Speaker 8: before the World Trade Organization appellate panels, the United States 546 00:34:25,560 --> 00:34:29,319 Speaker 8: was winning most of its cases. Trump, in the last 547 00:34:29,360 --> 00:34:34,840 Speaker 8: administration that he led, decided that the World Trade Organization's 548 00:34:34,920 --> 00:34:38,160 Speaker 8: appellate process was disadvantageous to the United States. He did 549 00:34:38,200 --> 00:34:41,799 Speaker 8: it clearly, with no understanding of the track record, and 550 00:34:41,880 --> 00:34:45,120 Speaker 8: he broke it off. And now why should China obey 551 00:34:45,800 --> 00:34:47,800 Speaker 8: the rules? The United States is not going to obey 552 00:34:47,800 --> 00:34:52,480 Speaker 8: the rules. Lawlessness breeds lawlessness, and lawfulness breeds lawfulness. 553 00:34:53,800 --> 00:34:56,839 Speaker 2: None of us wants lawlessness when it comes to either 554 00:34:56,920 --> 00:35:01,920 Speaker 2: our liberties or our markets. But commitment to that abstract 555 00:35:02,080 --> 00:35:05,960 Speaker 2: rule of law, to order and fairness and equal treatment 556 00:35:06,600 --> 00:35:09,360 Speaker 2: is more than just business. It's personal. 557 00:35:09,760 --> 00:35:13,719 Speaker 5: I had a very simple prodding to go into law, 558 00:35:13,719 --> 00:35:16,640 Speaker 5: and it was largely through my grandmother. I grew up 559 00:35:16,640 --> 00:35:19,560 Speaker 5: in a small town in South Georgia, primarily raised by 560 00:35:19,560 --> 00:35:23,120 Speaker 5: my grandmother. I didn't know a lawyer. I had never 561 00:35:23,200 --> 00:35:25,960 Speaker 5: met a lawyer, and so most of what I knew 562 00:35:25,960 --> 00:35:28,480 Speaker 5: and thought I knew about being a lawyer I learned 563 00:35:29,600 --> 00:35:31,120 Speaker 5: from watching television. 564 00:35:31,880 --> 00:35:34,040 Speaker 2: What did your grandmother see in the law? 565 00:35:34,080 --> 00:35:38,520 Speaker 5: And you you know, I marvel at that even now 566 00:35:39,000 --> 00:35:41,880 Speaker 5: quite a lot, because I talk about my grandmother often 567 00:35:42,000 --> 00:35:44,600 Speaker 5: when I have occasion to speak to groups in the light, 568 00:35:45,120 --> 00:35:48,520 Speaker 5: because I want to honor her and acknowledge her. And 569 00:35:48,600 --> 00:35:53,080 Speaker 5: this was in the fifties, in the throes of segregation 570 00:35:53,320 --> 00:35:56,960 Speaker 5: and Jim Crow and so forth. She told me that 571 00:35:57,040 --> 00:36:01,520 Speaker 5: there wasn't anything I couldn't do, and you know, because 572 00:36:01,560 --> 00:36:04,520 Speaker 5: she said it, I believed it because I adored her, 573 00:36:04,560 --> 00:36:07,520 Speaker 5: and I hung on every word that she said. And 574 00:36:07,560 --> 00:36:10,799 Speaker 5: so what I saw in my grandmother is that she 575 00:36:10,960 --> 00:36:13,600 Speaker 5: didn't have some grand notion about the rule of law. 576 00:36:14,120 --> 00:36:17,360 Speaker 5: What she had was a simple understanding that she needed 577 00:36:17,440 --> 00:36:20,680 Speaker 5: to be and wanted to be free and treated fairly. 578 00:36:21,560 --> 00:36:25,840 Speaker 5: And while her world wasn't allowing that, she was telling 579 00:36:25,880 --> 00:36:28,719 Speaker 5: me that she saw a time in which it would 580 00:36:28,800 --> 00:36:31,440 Speaker 5: allow it for me, and that she wanted me to 581 00:36:31,480 --> 00:36:34,120 Speaker 5: be prepared to meet that moment and then to take 582 00:36:34,160 --> 00:36:35,000 Speaker 5: advantage of it. 583 00:36:37,000 --> 00:36:40,640 Speaker 2: Up next coming full circle and residential real estate investment, 584 00:36:41,040 --> 00:36:54,799 Speaker 2: this time we hope without the crash. This is a 585 00:36:54,800 --> 00:36:58,000 Speaker 2: story about the American dream and how you too can 586 00:36:58,040 --> 00:37:00,680 Speaker 2: own a piece of it. Home Ownership used to be 587 00:37:00,719 --> 00:37:03,400 Speaker 2: a natural next step for people in their late twenties 588 00:37:03,440 --> 00:37:06,359 Speaker 2: and early thirties, But as they stand in the sidelines, 589 00:37:06,440 --> 00:37:09,120 Speaker 2: a new kind of investor is stepping in, but not 590 00:37:09,280 --> 00:37:10,480 Speaker 2: the one you might think. 591 00:37:12,920 --> 00:37:16,640 Speaker 10: We're able to be nimble like a small investor, but 592 00:37:16,760 --> 00:37:19,600 Speaker 10: not be with the red tape of bureaucracy of a 593 00:37:19,680 --> 00:37:22,719 Speaker 10: large reed or a larger like for example, of Blackstone. 594 00:37:23,000 --> 00:37:26,040 Speaker 2: Ra John Bott is the co founder and president of 595 00:37:26,120 --> 00:37:29,680 Speaker 2: Strand Capital, a private equity firm, but he started out 596 00:37:29,840 --> 00:37:30,640 Speaker 2: as a physician. 597 00:37:31,040 --> 00:37:33,319 Speaker 10: I've always been more entrepreneur, you know, going back two 598 00:37:33,320 --> 00:37:37,120 Speaker 10: decades or more, building a company with my wife, Spectrumdromatology, 599 00:37:37,120 --> 00:37:40,640 Speaker 10: which I then sold in twenty twenty one, and building 600 00:37:40,680 --> 00:37:43,440 Speaker 10: all our medical office and owning a real estate at 601 00:37:43,480 --> 00:37:46,640 Speaker 10: that point, also having multi family and then fast forwarding 602 00:37:46,719 --> 00:37:50,239 Speaker 10: and getting involved industrial land development, and obviously being in 603 00:37:50,239 --> 00:37:52,560 Speaker 10: a single family. You know, it has been in the 604 00:37:52,600 --> 00:37:55,040 Speaker 10: heart of me always for twenty years. 605 00:37:55,400 --> 00:37:59,440 Speaker 2: Bot's fund specializes in renting at single family homes, a 606 00:37:59,520 --> 00:38:01,719 Speaker 2: trend that's been on the rise because buying the house 607 00:38:01,760 --> 00:38:05,800 Speaker 2: you live in has become increasingly difficult. About two thirds 608 00:38:05,800 --> 00:38:08,799 Speaker 2: of Americans own their own homes, up from the early 609 00:38:08,880 --> 00:38:12,120 Speaker 2: nineteen nineties, but well below the peak of over sixty 610 00:38:12,200 --> 00:38:15,280 Speaker 2: nine percent just before the Great Financial Crisis. 611 00:38:15,760 --> 00:38:19,799 Speaker 10: In an environment today where the affordability index is constrained, 612 00:38:20,120 --> 00:38:24,640 Speaker 10: you have interest rates that are high, you have economic uncertaincy, 613 00:38:24,719 --> 00:38:28,200 Speaker 10: you have the average American can't afford housing at these 614 00:38:28,280 --> 00:38:30,400 Speaker 10: levels in today's environment. 615 00:38:30,280 --> 00:38:32,719 Speaker 2: When there is a market imbalance, as there was in 616 00:38:32,719 --> 00:38:36,239 Speaker 2: two thousand and nine, investors typically step in to address it, 617 00:38:36,719 --> 00:38:40,320 Speaker 2: and back then it was the big institutions like Blackstone. 618 00:38:40,760 --> 00:38:44,520 Speaker 11: You would expect capital to flow into these markets. But 619 00:38:44,640 --> 00:38:48,799 Speaker 11: if the cost is prohibitive, nobody is going to expose 620 00:38:48,920 --> 00:38:53,359 Speaker 11: capital to higher than normal costs. And so I think 621 00:38:53,440 --> 00:38:56,440 Speaker 11: right now everyone is waiting to see what happens. 622 00:38:57,200 --> 00:39:00,560 Speaker 2: Nancy Wallace is a professor at the Berkeley High School 623 00:39:00,560 --> 00:39:03,200 Speaker 2: of Business and chairs the real estate group there. 624 00:39:03,760 --> 00:39:07,080 Speaker 11: You have to remember the origins of the single family 625 00:39:07,120 --> 00:39:12,200 Speaker 11: rental by large corporation or large fund purchases those were 626 00:39:12,239 --> 00:39:18,120 Speaker 11: heavily subsidized by Fanny and Freddie mortgages that went to 627 00:39:18,239 --> 00:39:24,040 Speaker 11: help these corporations buy the homes, so they actually financed that. 628 00:39:24,040 --> 00:39:26,640 Speaker 11: That was a one time thing. It was very helpful 629 00:39:26,719 --> 00:39:30,680 Speaker 11: for their initial growth. And then it was taking advantage 630 00:39:31,120 --> 00:39:35,320 Speaker 11: of the outmigration from the coastal states, especially during COVID 631 00:39:35,960 --> 00:39:40,960 Speaker 11: into these markets that were heavily single family for rent markets, 632 00:39:41,080 --> 00:39:47,960 Speaker 11: especially in Georgia, Atlanta, Charlotte, Tampa, Florida. But right now, 633 00:39:48,360 --> 00:39:52,480 Speaker 11: unless things change in terms of tariffs and the constant construction, 634 00:39:53,680 --> 00:39:57,680 Speaker 11: I wouldn't expect to see huge growth in single family 635 00:39:57,719 --> 00:40:00,239 Speaker 11: for rent by very large players. 636 00:40:00,840 --> 00:40:04,080 Speaker 2: The role of investors in home ownership is particularly pronounced 637 00:40:04,080 --> 00:40:07,880 Speaker 2: in the Sun Belt. In California, investors purchased nearly a 638 00:40:07,920 --> 00:40:10,480 Speaker 2: third of homes sold in Miami in the fourth quarter 639 00:40:10,520 --> 00:40:14,120 Speaker 2: of twenty twenty two, at about one quarter in Atlanta. 640 00:40:14,320 --> 00:40:18,040 Speaker 2: In California, investors own more than fifty percent of homes 641 00:40:18,080 --> 00:40:19,240 Speaker 2: in five counties. 642 00:40:19,760 --> 00:40:24,600 Speaker 11: It has to do with demographics and what preferences are 643 00:40:24,640 --> 00:40:27,960 Speaker 11: for a home ownership, and it does appear that there 644 00:40:28,000 --> 00:40:32,000 Speaker 11: are some shifts in terms of yes, people are interested 645 00:40:32,040 --> 00:40:36,839 Speaker 11: in having a single family home, but with two homeowner 646 00:40:37,320 --> 00:40:43,040 Speaker 11: working couples, which is largely the segment of the economy 647 00:40:43,080 --> 00:40:47,680 Speaker 11: that's interested in these homes. They're not interested in home maintenance. 648 00:40:48,160 --> 00:40:51,640 Speaker 11: They're not interested in the other things that break down 649 00:40:51,800 --> 00:40:54,399 Speaker 11: that they would prefer to call someone to have them 650 00:40:54,440 --> 00:40:55,359 Speaker 11: come and fix it. 651 00:40:55,880 --> 00:40:58,600 Speaker 2: Fifteen years ago, it was the big funds that stepped 652 00:40:58,600 --> 00:41:01,399 Speaker 2: in to buy single family houses and rent them out, 653 00:41:01,880 --> 00:41:05,239 Speaker 2: but recently they have pulled back as the smaller investors 654 00:41:05,360 --> 00:41:08,440 Speaker 2: step into that role. In the first half of this year, 655 00:41:08,680 --> 00:41:11,920 Speaker 2: small investors made up about twenty five percent of single 656 00:41:11,960 --> 00:41:16,920 Speaker 2: family home purchases. Large investors accounted for only about five percent. 657 00:41:17,400 --> 00:41:20,839 Speaker 10: Builders are in constraint. They are constrained, the interest rates 658 00:41:20,880 --> 00:41:25,000 Speaker 10: are high. The builders are negotiating with small investors will 659 00:41:25,120 --> 00:41:27,800 Speaker 10: be five, ten, or twenty homes. They are offering insteads 660 00:41:27,840 --> 00:41:29,960 Speaker 10: on financing, they're offering deals on homes. 661 00:41:30,640 --> 00:41:34,319 Speaker 2: The current investor owned housing trend began back during the 662 00:41:34,360 --> 00:41:36,200 Speaker 2: two thousand and seven housing. 663 00:41:35,880 --> 00:41:38,400 Speaker 9: Bubble in the Great Recession. 664 00:41:38,800 --> 00:41:41,200 Speaker 12: I had just came into office, right so, I had 665 00:41:41,239 --> 00:41:43,560 Speaker 12: graduated law school, been eight years. 666 00:41:43,880 --> 00:41:45,239 Speaker 9: I couldn't even afford a home. 667 00:41:45,600 --> 00:41:48,640 Speaker 2: Dina Neil is a state senator in Nevada who has 668 00:41:48,680 --> 00:41:52,560 Speaker 2: seen the housing market transform since the Great Financial Crisis. 669 00:41:53,080 --> 00:41:55,440 Speaker 12: In the Great Recession, homes were about three hundred and 670 00:41:55,520 --> 00:41:58,080 Speaker 12: fifty thousand, and it was a nineteen sixty five home 671 00:41:58,120 --> 00:41:59,120 Speaker 12: with no renovation. 672 00:42:00,400 --> 00:42:03,200 Speaker 9: Now you have a brand new home. 673 00:42:03,280 --> 00:42:06,160 Speaker 12: That's about four hundred and fifty thousand dollars that no 674 00:42:06,200 --> 00:42:10,000 Speaker 12: one can afford. And you have older homes that are 675 00:42:10,040 --> 00:42:13,360 Speaker 12: selling for about the same amount three hundred and fifty thousand, 676 00:42:13,400 --> 00:42:15,920 Speaker 12: and they were built in the sixties. The average income 677 00:42:16,000 --> 00:42:21,239 Speaker 12: of a Nevaden is around fifty thousand. Fifty thousand dollars 678 00:42:21,360 --> 00:42:24,480 Speaker 12: is not enough to afford a house in this market, 679 00:42:24,920 --> 00:42:29,279 Speaker 12: and so typically the housing market has jumped, so you 680 00:42:29,320 --> 00:42:32,359 Speaker 12: can't even find anything for two hundred and fifty thousand. 681 00:42:32,719 --> 00:42:36,800 Speaker 12: I know specifically there, you know, I know pharmacists that 682 00:42:36,880 --> 00:42:40,160 Speaker 12: are making one hundred and seventy k and they can't 683 00:42:40,200 --> 00:42:41,800 Speaker 12: afford a home in this market. 684 00:42:42,400 --> 00:42:46,360 Speaker 2: Nevada is one of the hotspots for investors. Institutional investors. 685 00:42:46,480 --> 00:42:49,560 Speaker 2: Market share in residential real estate is up eight percentage 686 00:42:49,600 --> 00:42:53,680 Speaker 2: points in three years. There In Senator Neil's constituency of 687 00:42:53,760 --> 00:42:56,720 Speaker 2: North Las Vegas, that number is even higher. 688 00:42:57,040 --> 00:43:01,840 Speaker 12: They're twenty seven percent of the Vegas market. It's significant, 689 00:43:01,960 --> 00:43:08,360 Speaker 12: and it's grown. They are now purchasing entire streets, they're 690 00:43:08,480 --> 00:43:13,760 Speaker 12: building entire neighborhoods for rent. And so this is going 691 00:43:13,760 --> 00:43:16,320 Speaker 12: on in Henderson, this is going on in North Las Vegas, 692 00:43:16,360 --> 00:43:20,000 Speaker 12: it's across the valley. And I think it's significant because 693 00:43:20,640 --> 00:43:25,840 Speaker 12: it's not creating home ownership, it's creating renters, which is different. 694 00:43:26,440 --> 00:43:29,920 Speaker 2: Senator Neil introduced legislation to cap the number of homes 695 00:43:29,960 --> 00:43:34,080 Speaker 2: owned by investors at one hundred, but the measure recently failed. 696 00:43:34,680 --> 00:43:39,040 Speaker 12: Literally when I left session, it was the national story 697 00:43:39,080 --> 00:43:43,160 Speaker 12: where a corporate investor purchased one hundred and fifteen homes 698 00:43:43,160 --> 00:43:43,799 Speaker 12: in one day. 699 00:43:43,960 --> 00:43:45,600 Speaker 9: And this was a question that came up to me 700 00:43:45,719 --> 00:43:46,480 Speaker 9: during the session. 701 00:43:46,719 --> 00:43:51,080 Speaker 12: As families or as individuals, we're also trying to expand 702 00:43:51,120 --> 00:43:54,759 Speaker 12: our own wealth, right, So fifteen or twenty houses to 703 00:43:54,800 --> 00:43:57,680 Speaker 12: me is still a mom and pop Right. There's still 704 00:43:58,760 --> 00:44:02,040 Speaker 12: a smaller investor that is saying, you know what, I'm 705 00:44:02,120 --> 00:44:05,880 Speaker 12: trying to expand my own generational wealth, but it's not 706 00:44:06,080 --> 00:44:09,239 Speaker 12: to the greatest extent of one hundred homes. And there 707 00:44:09,320 --> 00:44:12,560 Speaker 12: was a conversation around are you trying to lock me 708 00:44:12,880 --> 00:44:18,560 Speaker 12: out of my own ability to operate as a small capitalist, 709 00:44:19,040 --> 00:44:22,640 Speaker 12: and I had to say no. But there's a fine 710 00:44:22,719 --> 00:44:25,960 Speaker 12: line in gaining wealth and greed. 711 00:44:26,560 --> 00:44:29,040 Speaker 2: But Wallace thinks the size of investors in the housing 712 00:44:29,080 --> 00:44:32,799 Speaker 2: market is exactly what is different this time around. How 713 00:44:32,960 --> 00:44:35,160 Speaker 2: is this time different from what we saw in two 714 00:44:35,200 --> 00:44:37,120 Speaker 2: thousand and six, two thousand and seven, where we did 715 00:44:37,120 --> 00:44:39,680 Speaker 2: have some mom and pops coming in, I think often 716 00:44:39,760 --> 00:44:41,919 Speaker 2: to flip the homes rather than to hold them. 717 00:44:41,800 --> 00:44:42,400 Speaker 4: And rent them. 718 00:44:42,560 --> 00:44:46,319 Speaker 11: I think that's exactly what the difference is. Although there 719 00:44:46,360 --> 00:44:51,319 Speaker 11: are house processes are definitely rising in California, again, we're 720 00:44:51,360 --> 00:44:55,799 Speaker 11: not seeing the flipper, at least we think we're not. 721 00:44:56,080 --> 00:44:59,480 Speaker 11: But that is a hard phenomenon to measure. Fanny and 722 00:44:59,520 --> 00:45:02,520 Speaker 11: Freddie a as you know, are in twenty twenty three 723 00:45:03,560 --> 00:45:08,320 Speaker 11: change their policies in terms of qualifying for investor loans 724 00:45:09,280 --> 00:45:14,120 Speaker 11: and getting them and being eligible for Fanny and Freddie securitization, 725 00:45:14,440 --> 00:45:16,640 Speaker 11: so the kind of pricing that you'd get from a 726 00:45:16,680 --> 00:45:21,520 Speaker 11: Fanny and Freddie securitized loans, So now under their rules, 727 00:45:22,560 --> 00:45:25,560 Speaker 11: basically the loan to value ratios are identical. If you're 728 00:45:25,600 --> 00:45:29,040 Speaker 11: an investor or, you're buying it for ownership where you 729 00:45:29,080 --> 00:45:30,320 Speaker 11: will live in the property. 730 00:45:30,840 --> 00:45:33,880 Speaker 2: As if the story of single family home investment wasn't 731 00:45:33,880 --> 00:45:37,840 Speaker 2: complicated enough, there's now a new potential threat on the horizon. 732 00:45:38,440 --> 00:45:41,560 Speaker 2: Reports are that the Trump administration hopes to spin off 733 00:45:41,680 --> 00:45:45,600 Speaker 2: government sponsored enterprises Fannie May and Freddie Mac, which have 734 00:45:45,680 --> 00:45:48,880 Speaker 2: been under government control since the Great Financial Crisis. 735 00:45:49,480 --> 00:45:52,320 Speaker 11: So right now, if you buy a Fanny May mortgage 736 00:45:52,320 --> 00:45:57,000 Speaker 11: backed security or a Ginny May mortgage backed security, you 737 00:45:57,080 --> 00:46:02,240 Speaker 11: are guaranteed against a default risk. Who provides that guarantee? 738 00:46:02,600 --> 00:46:07,640 Speaker 11: The US government right now, through the conservatorship the protections 739 00:46:07,680 --> 00:46:12,560 Speaker 11: we have in place that Fanny, Freddy and Jenny cannot fail. 740 00:46:12,680 --> 00:46:16,880 Speaker 11: If we privatize Fanny and Freddie and make it semi private, 741 00:46:17,200 --> 00:46:20,880 Speaker 11: who is going to provide that guarantee? Where are we 742 00:46:21,000 --> 00:46:24,279 Speaker 11: going to find sufficient capital? We're talking about markets that 743 00:46:24,360 --> 00:46:27,920 Speaker 11: are fourteen trillion dollars large. Where are we going to 744 00:46:27,920 --> 00:46:33,680 Speaker 11: find the private capital to support those markets? Especially without 745 00:46:34,040 --> 00:46:38,640 Speaker 11: very careful analysis, and that has not happened by the 746 00:46:38,680 --> 00:46:43,000 Speaker 11: Federal Housing Finance Administration to try to figure out how 747 00:46:43,000 --> 00:46:46,120 Speaker 11: we're going to do this. So I think anything that's 748 00:46:47,080 --> 00:46:52,560 Speaker 11: poorly thought out happens very rapidly is a recipe for disaster. 749 00:46:52,880 --> 00:46:57,480 Speaker 11: On this very florny problem that we have struggled with 750 00:46:57,560 --> 00:47:04,080 Speaker 11: now for years and failed, and largely I think the 751 00:47:04,239 --> 00:47:11,480 Speaker 11: pressure on this is very active shareholders, especially Ackerman and Paulson, 752 00:47:11,640 --> 00:47:16,320 Speaker 11: two very large shareholders of Fanny and Freddie Paper, especially 753 00:47:16,400 --> 00:47:20,600 Speaker 11: Fanny Paper, that want to monetize this paper. And I 754 00:47:20,640 --> 00:47:25,640 Speaker 11: think making a decision to benefit two large shareholders is 755 00:47:25,760 --> 00:47:29,320 Speaker 11: ridiculous if it could bring down the US mortgage market. 756 00:47:29,680 --> 00:47:32,879 Speaker 2: The US housing market has been through the ringer, from 757 00:47:32,920 --> 00:47:36,960 Speaker 2: the Great Financial Crisis to inflation driving up construction costs 758 00:47:37,120 --> 00:47:41,160 Speaker 2: to rising mortgage rates. Privatization of Fanny and Freddie could 759 00:47:41,239 --> 00:47:45,080 Speaker 2: upset the apple cart once again, and whoever stands to 760 00:47:45,160 --> 00:47:49,200 Speaker 2: gain or lose Investors tend not to like that kind 761 00:47:49,320 --> 00:47:53,439 Speaker 2: of uncertainty. That does it for us. Here at Wall 762 00:47:53,440 --> 00:47:56,279 Speaker 2: Street Week, I'm David Weston. See you next week for 763 00:47:56,400 --> 00:48:07,640 Speaker 2: more stories of capitalism.