WEBVTT - Microsoft Plans Data Center Push to Triple Its Computing Power

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<v Speaker 1>Bloomberg Audio Studios. Podcasts.

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<v Speaker 3>News.

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<v Speaker 4>You're listening to the Bloomberg Intelligence Podcast. Catch us live

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<v Speaker 4>weekdays at 10 a.m. Eastern on Apple CarPlay and Android

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<v Speaker 4>Auto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 5>Let's get to some of those tech earnings, Oracle and Adobe.

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<v Speaker 5>We got an analyst who follows those companies, so that

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<v Speaker 5>makes it very easy.

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<v Speaker 1>Anurag Rana.

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<v Speaker 5>He is a senior technology analyst for Bloomberg Intelligence. He's

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<v Speaker 5>out there in Chicago. Anurag, let's start with Oracle here because, man,

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<v Speaker 5>I saw their cloud business had a great number, and

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<v Speaker 5>that's what I thought people were focusing on. The stock

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<v Speaker 5>traded up 9% at the open, but it's kind of

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<v Speaker 5>giving it back. What's going on there?

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<v Speaker 6>Yeah, to be honest, it's a bit confusing because we

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<v Speaker 6>really like the numbers.

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<v Speaker 7>I mean, I think the.

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<v Speaker 6>Cloud business was improving even more than what– the street

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<v Speaker 6>was expecting and that's what had happened. I think the

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<v Speaker 6>guidance for next quarter is also conservative. They should be

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<v Speaker 6>able to beat that cloud numbers as well. I think

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<v Speaker 6>what's happening over here is there is a little bit

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<v Speaker 6>of uncertainty about data center expansion. you know, it's probably

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<v Speaker 6>that's more macro, not related just to Oracle. And I

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<v Speaker 6>think that could be one factor. The one thing that

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<v Speaker 6>I liked about the earnings was that they actually said

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<v Speaker 6>they're not going to have to raise CapEx because that

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<v Speaker 6>has been my biggest worry when it relates to Oracle

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<v Speaker 6>is that do.

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<v Speaker 7>They have to keep on increasing CapEx?

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<v Speaker 6>One of the things they're doing is they are asking

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<v Speaker 6>customers to think about it, bring your own chips or

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<v Speaker 6>bring your own hardware.

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<v Speaker 7>This way, they don't have to foot the bill ahead

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<v Speaker 7>of time.

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<v Speaker 6>So It's really doing these arrangements are helping them out,

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<v Speaker 6>but I think it's more the macro related about data

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<v Speaker 6>center expansion in general.

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<v Speaker 2>So our Bloomberg News story written by Brody Ford points

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<v Speaker 2>out as well that gross margin shrank to 61%. And sequentially,

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<v Speaker 2>that's a big drop because it was 66.3% in the

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<v Speaker 2>previous quarter. Does that worry you, Anurag?

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<v Speaker 7>Well, we have been modeling that for a while.

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<v Speaker 6>I mean, it is normally a natural, whenever you have

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<v Speaker 6>a brand new business starting in the infancy, it will

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<v Speaker 6>have very low gross margins. But imagine this, they missed

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<v Speaker 6>out massively on gross margins. I mean, compared to last year,

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<v Speaker 6>I shouldn't say miss, but the gross margins dropped, but

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<v Speaker 6>their operating margins improved. They have been cutting costs so

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<v Speaker 6>well that they are actually showing, you know, very decent

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<v Speaker 6>operating margin. So I personally would not worry about it

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<v Speaker 6>because you're adding a lot of gross profit dollars to

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<v Speaker 6>the company, which we would not get otherwise.

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<v Speaker 5>All right, Anurag, we got to get the story of

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<v Speaker 5>the day here. Microsoft here, Bloomberg's got a green B,

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<v Speaker 5>which means they got exclusive reporting. Brody Ford, Matthew Day,

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<v Speaker 5>Microsoft plans to more than triple It's data center capacity

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<v Speaker 5>going from 38 gigawatts.

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<v Speaker 1>I have no idea what a gigawatt is, but it

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<v Speaker 1>sounds big.

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<v Speaker 5>Up to, you know, I mean, it's going to be

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<v Speaker 5>up from like 12 gigawatts now.

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<v Speaker 1>What is going on there? Who's paying for that?

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<v Speaker 7>I mean, they are paying for that.

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<v Speaker 6>I mean, they're spending over close to $ 200 billion a

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<v Speaker 6>year trying to do that. And in fact, you know,

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<v Speaker 6>the gentleman they mentioned in the report, we had him

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<v Speaker 6>on our podcast six months ago. And these guys really

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<v Speaker 6>are changing the infrastructure of all of Microsoft data centers

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<v Speaker 6>because the way you do GPU kind of computing or

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<v Speaker 6>AI computing is very different than what you would do

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<v Speaker 6>on a CPU-based or the older cloud-based. I mean, they

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<v Speaker 6>have some really impressive data centers that are going on live.

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<v Speaker 7>There is one in Texas.

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<v Speaker 6>There is one in um wisconsin so they've done a

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<v Speaker 6>very good job of managing it and right now whatever

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<v Speaker 6>they actually can't do it in-house they are outsourcing it

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<v Speaker 6>to neo clouds at this point so uh you know

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<v Speaker 6>frankly speaking microsoft is in the middle of this is

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<v Speaker 6>one of the biggest beneficiaries of ai um so you

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<v Speaker 6>you know and and on top of that you know

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<v Speaker 6>they will still be free cash flow positive.

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<v Speaker 7>This year Okay.

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<v Speaker 2>I mean, those are ambitious plans, but will they actually

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<v Speaker 2>be able to do that given there's a lot of

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<v Speaker 2>public opposition to data centers in local communities? I mean,

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<v Speaker 2>it's one thing to say that this is what they

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<v Speaker 2>want to do. Can it get done in the timeframe

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<v Speaker 2>they want?

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<v Speaker 6>I think that is the single biggest, you could say,

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<v Speaker 6>obstacle right now, or the overhang, and not just Microsoft,

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<v Speaker 6>but you can extend that to everybody, whether it's AWS, Google, Oracle,

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<v Speaker 6>or the Neoclouds, is do they get the permits to

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<v Speaker 6>be able to do it? Will they have the power?

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<v Speaker 6>And so far, we have not seen any major, I

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<v Speaker 6>would say, there have been delays, but not any massive delays.

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<v Speaker 6>But frankly speaking, the opposition we are seeing right now,

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<v Speaker 6>I would say across the board, not just with the Democrats,

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<v Speaker 6>but Republicans as well, I think this is going to

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<v Speaker 6>be a bigger.

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<v Speaker 7>Issue that plays out over the next six to 12 months.

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<v Speaker 6>And that is one thing I could, I think that

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<v Speaker 6>is one thing that could, you know, soften the growth

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<v Speaker 6>rate of some of these AI labs, as well as,

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<v Speaker 6>you know, I would say just the entire AI trade

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<v Speaker 6>in general.

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<v Speaker 1>So is this in the numbers?

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<v Speaker 5>I'm looking at the, I see CapEx ramping up on

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<v Speaker 5>the Bloomberg terminal for Microsoft, but is.

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<v Speaker 1>This kind of gigawatt expenditures? Is that in the numbers?

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<v Speaker 6>I mean, right now, I think you have because you're

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<v Speaker 6>looking at this year and next year. Almost everybody is

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<v Speaker 6>increasing CapEx next year. In our own BI's projected data

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<v Speaker 6>center model, we have CapEx going over the next few years.

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<v Speaker 6>We are not tapering it down at this point because

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<v Speaker 6>you have more backlog revenue on the balance sheets than

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<v Speaker 6>they have the capacity.

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<v Speaker 7>To fulfill it.

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<v Speaker 6>And the math is, you know, one gigawatt costs somewhere around,

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<v Speaker 6>depending on what kind of data center you're building, $ 40

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<v Speaker 6>to $ 60 billion right now of an NVIDIA data center.

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<v Speaker 7>Are you kidding?

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<v Speaker 1>I don't know what these guys are doing. Big numbers

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<v Speaker 1>either way.

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<v Speaker 7>Big numbers. By the way, half of that goes to NVIDIA.

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<v Speaker 7>Just think about it this way.

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<v Speaker 6>Stay with us.

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<v Speaker 2>More from Bloomberg Intelligence coming up after this.

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<v Speaker 4>You're listening to the Bloomberg Intelligence Podcast. Catch us live

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<v Speaker 4>weekdays at 10 a.m. Eastern on Apple CarPlay and Android

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<v Speaker 4>Auto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 4>you get your podcasts or watch us live on YouTube.

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<v Speaker 5>I'll tell you, when I first worked down in lower

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<v Speaker 5>Manhattan in the mid-' 80s, it was a ghost town. Man,

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<v Speaker 5>at 5 o'clock, everybody just kind of bailed.

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<v Speaker 1>Maybe you had the South Street Seaport, but that was

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<v Speaker 1>about it if you.

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<v Speaker 7>Wanted some action.

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<v Speaker 1>That was on the fringes of downtown, yeah.

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<v Speaker 3>Yes, exactly.

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<v Speaker 1>Now, that was good.

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<v Speaker 5>We did some good stuff down there at South Street

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<v Speaker 5>Seaport after work.

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<v Speaker 1>But now it's just ripping down there.

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<v Speaker 5>They did a phenomenal job renovating and rejuvenating the entire town.

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<v Speaker 5>southern tip of manhattan post 9-11 and we write about

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<v Speaker 5>it on bloomberg news had a great great story amanda

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<v Speaker 5>gordon joins us here she's a reporter for the wealth

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<v Speaker 5>team at the bloomberg news joining us here in our

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<v Speaker 5>studio amanda talk to us about what's going on in

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<v Speaker 5>lower manhattan because boy post 9-11 it's not just that

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<v Speaker 5>the world trade center site it's just kind of lower

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<v Speaker 5>manhattan in general has kind of been rejuvenated what's going

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<v Speaker 5>on down.

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<v Speaker 3>Exactly As this morning, as those names are being read,

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<v Speaker 3>we think of a void that was created. And it

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<v Speaker 3>really was one, to your point, that already existed. People

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<v Speaker 3>already felt that the uses of this downtown area were

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<v Speaker 3>not vital before 9-11. And so that void that was

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<v Speaker 3>created that day sort of spurred so many New Yorkers

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<v Speaker 3>to get on board to think about how to reinvent.

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<v Speaker 3>And I just think it's so important reporting the story

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<v Speaker 3>to note that those who played a part in conversions

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<v Speaker 3>of those office buildings where you worked into residential, of

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<v Speaker 3>opening restaurants when it was a leap of faith, of

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<v Speaker 3>reopening businesses after 9-11, when people were scared to be

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<v Speaker 3>down there, All of that, there's just a sense of

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<v Speaker 3>pride now in what it has become, but also very

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<v Speaker 3>much indicative of a New York spirit of resilience and reinvention.

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<v Speaker 3>This was the land that George Washington and Alexander Hamilton

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<v Speaker 3>also tread. And now the young people, the tech companies, Spotify, Uber, Amazon,

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<v Speaker 3>that are down there and making things happen in the

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<v Speaker 3>New York way is a sign that we always reinvent ourselves.

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<v Speaker 1>That was so elegantly put, Amanda.

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<v Speaker 2>And I heard you about Spotify and some of the

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<v Speaker 2>other companies that have really sprouted up and opened offices there.

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<v Speaker 2>That gets to the point that Paul said basically it

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<v Speaker 2>was the home of Wall Street and it was the

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<v Speaker 2>financial district, but it's so much more than that now.

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<v Speaker 1>I mean, finance is not even the.

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<v Speaker 2>It's still a big part of downtown Manhattan and lower Manhattan,

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<v Speaker 2>but it's not dominant the way it once was.

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<v Speaker 7>That's exactly true.

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<v Speaker 3>About a quarter of the office tenants in lower Manhattan

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<v Speaker 3>are finance-related. Tech, AI, design, a lot of creative industries

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<v Speaker 3>have come in. And it's a place that is not

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<v Speaker 3>just to go to the office. It's a place where

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<v Speaker 3>people live and work. I talked to one 28-year-old who

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<v Speaker 3>said that he chose the building that he did because

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<v Speaker 3>the gym was open 24-7. And that was the critical thing.

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<v Speaker 3>So what happened is that pre-9-11 and then afterward... when

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<v Speaker 3>the responsibility was to make sure that we could remember

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<v Speaker 3>and honor those lives that were lost, there was just

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<v Speaker 3>a lot of energy and diversification that took place.

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<v Speaker 5>My 30-year-old daughter, she tells me, I'm going to go

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<v Speaker 5>meet some friends in Phi Di.

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<v Speaker 1>I'm like, what? Phi Di? What is the financial district?

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<v Speaker 5>You mean Wall Street? Is that what you're trying to

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<v Speaker 5>tell me? Apparently, it's a place young folks are going

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<v Speaker 5>to kind of meet for drinks and dinner. And I'm like, Dude,

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<v Speaker 5>you don't know what you're talking about, but all right.

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<v Speaker 7>That's the future.

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<v Speaker 1>That's what's going on down there.

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<v Speaker 3>Let's not forget the bones were there. Charm, gargoyles on

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<v Speaker 3>the buildings, old buildings that were not all torn down,

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<v Speaker 3>not a grid. So people who live down there, you know,

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<v Speaker 3>cite these elements of character and authenticity that they feel

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<v Speaker 3>that they don't see anymore in the rest of New York.

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<v Speaker 3>And then the transit.

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<v Speaker 7>Being able to get to Brooklyn. I'll tell you, the Oculus.

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<v Speaker 3>Anywhere.

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<v Speaker 5>That thing, that Oculus Center down there. I mean, if

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<v Speaker 5>you haven't been to that, that alone is a reason

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<v Speaker 5>to go to Lower Manhattan. The Oculus, it is a

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<v Speaker 5>transportation hub.

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<v Speaker 1>I mean, you can get anywhere. I think like anywhere

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<v Speaker 1>in the world from there. I think that's a really

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<v Speaker 1>good point.

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<v Speaker 2>The fact that you can get anywhere and the transportation options,

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<v Speaker 2>the public transportation options there are just phenomenal.

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<v Speaker 1>And that was always the case, wasn't it?

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<v Speaker 3>It was, but the Oculus, as you mentioned, the remaking

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<v Speaker 3>of the Fulton Street Station, everything was remade and made

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<v Speaker 3>much easier to use, much brighter. And that's an amenity

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<v Speaker 3>that cannot be beat for New Yorkers. Some get to

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<v Speaker 3>walk to work and some zip up to Midtown to

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<v Speaker 3>their office.

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<v Speaker 2>You spoke with Bill Rudin, who's co-executive chairman of a

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<v Speaker 2>real estate.

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<v Speaker 7>Company, Rudin?

0:10:50.150 --> 0:10:52.189
<v Speaker 1>Yeah.

0:10:52.870 --> 0:10:55.010
<v Speaker 2>And he was one of the key players who helped

0:10:55.250 --> 0:10:57.059
<v Speaker 2>diversify the area before 9-11.

0:10:57.100 --> 0:10:57.740
<v Speaker 1>What did he tell you?

0:10:58.990 --> 0:11:01.790
<v Speaker 3>Well, you know, the family has played such a role

0:11:02.110 --> 0:11:05.830
<v Speaker 3>at these critical times in my lifetime. In the 70s,

0:11:06.330 --> 0:11:08.989
<v Speaker 3>his father helped New York through fiscal crisis. And then

0:11:09.010 --> 0:11:13.010
<v Speaker 3>in this moment, in 1990, it was a Valentine's Day massacre,

0:11:13.050 --> 0:11:17.500
<v Speaker 3>he told me, when Drexel Burnham went bankrupt. And they

0:11:17.620 --> 0:11:20.880
<v Speaker 3>occupied most of the building that he had built initially

0:11:21.280 --> 0:11:26.690
<v Speaker 3>for Goldman Sachs. And he talked about mothballing it until

0:11:26.750 --> 0:11:29.010
<v Speaker 3>the market turned around. And I think that shows you

0:11:29.050 --> 0:11:32.880
<v Speaker 3>how bleak the outlook was. But what happened is that,

0:11:33.240 --> 0:11:36.840
<v Speaker 3>as in the 70s, business leaders got together and really

0:11:36.880 --> 0:11:40.240
<v Speaker 3>decided to put their brains to this idea of diversification.

0:11:41.179 --> 0:11:45.030
<v Speaker 3>And in that building, 55 Broad Street, they wired it.

0:11:45.080 --> 0:11:47.230
<v Speaker 1>They put in broadband, fiber optics.

0:11:47.990 --> 0:11:51.990
<v Speaker 3>The New York New Media Association opened their first office there,

0:11:52.010 --> 0:11:56.410
<v Speaker 3>and it became sort of the initial hub and promotion

0:11:56.510 --> 0:12:00.150
<v Speaker 3>of New York as a Silicon Alley, sort of the

0:12:00.270 --> 0:12:05.580
<v Speaker 3>downtown anchor of that new corridor, which we've seen flourish

0:12:05.620 --> 0:12:08.780
<v Speaker 3>so much. And so... He laid down those roots, and

0:12:08.800 --> 0:12:11.440
<v Speaker 3>I think it's very moving in the story that he said,

0:12:11.460 --> 0:12:15.110
<v Speaker 3>you know, it's taken these 25 years to get recognized

0:12:15.150 --> 0:12:15.990
<v Speaker 3>for that early work.

0:12:16.480 --> 0:12:18.860
<v Speaker 5>Very good stuff. 25 Broad Street was one of my

0:12:18.880 --> 0:12:21.679
<v Speaker 5>first offices at Payne Webber. And that was just when

0:12:21.720 --> 0:12:24.220
<v Speaker 5>computers were coming in. We didn't have enough outlets to

0:12:24.260 --> 0:12:26.319
<v Speaker 5>plug in the computers because the building was built in

0:12:26.360 --> 0:12:26.650
<v Speaker 5>like the 1800s.

0:12:26.760 --> 0:12:28.920
<v Speaker 1>They weren't really thinking about computers anymore.

0:12:29.000 --> 0:12:31.200
<v Speaker 3>I worked as a journalist a few blocks north. Our

0:12:31.300 --> 0:12:34.960
<v Speaker 3>offices opened in 2002. And there were days when the

0:12:35.020 --> 0:12:38.380
<v Speaker 3>phones didn't work because things were being rebuilt and it

0:12:38.420 --> 0:12:39.200
<v Speaker 3>was chaos.

0:12:39.300 --> 0:12:40.540
<v Speaker 8>And you just had to go with it.

0:12:40.900 --> 0:12:41.440
<v Speaker 7>Stay with us.

0:12:41.580 --> 0:12:48.480
<v Speaker 4>More from Bloomberg Intelligence coming up after this. You're listening

0:12:48.500 --> 0:12:52.380
<v Speaker 4>to the Bloomberg Intelligence Podcast. Catch us live weekdays at

0:12:52.380 --> 0:12:55.240
<v Speaker 4>10 a.m. Eastern on Apple CarPlay and Android Auto with

0:12:55.260 --> 0:12:58.360
<v Speaker 4>the Bloomberg Business App. Listen on demand wherever you get

0:12:58.380 --> 0:13:01.160
<v Speaker 4>your podcasts or watch us live on YouTube.

0:13:02.040 --> 0:13:05.740
<v Speaker 5>Jonathan Schanzer, he's an executive director at the Foundation for

0:13:05.780 --> 0:13:08.780
<v Speaker 5>Defense of Democracies based down there in Washington, D.C.

0:13:09.429 --> 0:13:09.859
<v Speaker 7>D.C.

0:13:09.900 --> 0:13:14.680
<v Speaker 5>Jonathan, thanks so much for joining us here. As we remember, 9-11,

0:13:14.679 --> 0:13:18.000
<v Speaker 5>25 years on. What are some of the key lessons

0:13:18.140 --> 0:13:23.329
<v Speaker 5>from just a geopolitical sense, an anti-terrorism sense? What are

0:13:23.350 --> 0:13:25.970
<v Speaker 5>some of the lessons that you think this country has taken?

0:13:26.030 --> 0:13:27.050
<v Speaker 1>Maybe what we still need to do.

0:13:28.840 --> 0:13:30.580
<v Speaker 8>Yeah, first of all, thank you for having me. And

0:13:31.100 --> 0:13:34.610
<v Speaker 8>it's obviously meaningful for me today to be on this program.

0:13:35.809 --> 0:13:39.689
<v Speaker 8>This is an event that obviously shaped American history over

0:13:39.710 --> 0:13:42.309
<v Speaker 8>the last 25 years and I think continues to. I

0:13:44.100 --> 0:13:47.079
<v Speaker 8>think the first takeaway here is that we needed to

0:13:47.140 --> 0:13:50.599
<v Speaker 8>take these threats seriously when they first began to materialize.

0:13:51.520 --> 0:13:54.850
<v Speaker 8>We saw the 1993 World Trade Center bombing. We saw

0:13:54.890 --> 0:13:59.030
<v Speaker 8>the 1998 Twin Embassy bombings, the 2000 attack on the

0:13:59.110 --> 0:14:02.750
<v Speaker 8>USS Cullen. We did not put the pieces together that

0:14:03.309 --> 0:14:06.450
<v Speaker 8>an enemy had waged or has declared war on us.

0:14:07.290 --> 0:14:09.640
<v Speaker 8>And we just kept waiting for the attacks to get

0:14:09.720 --> 0:14:12.640
<v Speaker 8>worse over time. I think that when you start to

0:14:12.679 --> 0:14:15.540
<v Speaker 8>see an enemy declare war and to follow up on it,

0:14:16.100 --> 0:14:18.660
<v Speaker 8>that you need to take action. And I would argue

0:14:18.700 --> 0:14:21.020
<v Speaker 8>that there were two presidents in a row that didn't

0:14:21.060 --> 0:14:23.800
<v Speaker 8>take the threat seriously enough. The first was Bill Clinton.

0:14:23.840 --> 0:14:25.330
<v Speaker 1>Then, of course, George W.

0:14:25.360 --> 0:14:28.490
<v Speaker 8>Bush didn't move quickly enough and then had to move

0:14:28.550 --> 0:14:30.670
<v Speaker 8>more quickly than he ever thought he would need to.

0:14:30.750 --> 0:14:34.290
<v Speaker 8>So taking those threats seriously as they emerge, I'd argue

0:14:34.310 --> 0:14:37.310
<v Speaker 8>we didn't even learn that when ISIS emerged. We were

0:14:37.350 --> 0:14:39.930
<v Speaker 8>still thinking that it was a minor threat This is

0:14:39.970 --> 0:14:45.090
<v Speaker 8>a consistent theme in American history. But I think the

0:14:45.130 --> 0:14:47.590
<v Speaker 8>other thing that we still struggle with to this day

0:14:47.690 --> 0:14:51.580
<v Speaker 8>is just getting our heads wrapped around the ideology of

0:14:51.720 --> 0:14:56.400
<v Speaker 8>jihadism or militant Islam. It's a minority interpretation of the faith.

0:14:56.740 --> 0:15:00.520
<v Speaker 8>There's no question. But it is still, after all these years,

0:15:00.580 --> 0:15:02.480
<v Speaker 8>something that we are having a hard time getting our

0:15:02.500 --> 0:15:05.040
<v Speaker 8>heads wrapped around. It is playing a role right now

0:15:05.440 --> 0:15:07.840
<v Speaker 8>in the Middle East conflicts that we're grappling with, all

0:15:07.880 --> 0:15:11.050
<v Speaker 8>the different Iranian proxy groups, not to mention Iran itself.

0:15:11.070 --> 0:15:13.430
<v Speaker 8>I'm looking at the Houthis right now as they look

0:15:13.450 --> 0:15:16.550
<v Speaker 8>to expand their war in the Middle East. We still

0:15:16.690 --> 0:15:20.790
<v Speaker 8>don't seem to understand how to defeat these groups. Admittedly,

0:15:21.090 --> 0:15:24.120
<v Speaker 8>they don't want to surrender, but that's part of the problem.

0:15:24.240 --> 0:15:26.840
<v Speaker 8>This is a martyrdom complex, a sense that they need

0:15:26.860 --> 0:15:29.380
<v Speaker 8>to continue to fight to the finish. And we have

0:15:29.420 --> 0:15:32.340
<v Speaker 8>not adjusted our way of war to figuring out how

0:15:32.360 --> 0:15:35.430
<v Speaker 8>to defeat this problem long term. And my sense is

0:15:35.450 --> 0:15:37.850
<v Speaker 8>we're going to have to continue to grapple with this,

0:15:38.030 --> 0:15:41.390
<v Speaker 8>even as we pivot into great power competition with China

0:15:41.430 --> 0:15:44.520
<v Speaker 8>and Russia. I don't think that these smaller conflicts are

0:15:44.540 --> 0:15:47.200
<v Speaker 8>going to go away. They're going to become potentially even

0:15:47.220 --> 0:15:47.940
<v Speaker 8>more of an irritant.

0:15:48.670 --> 0:15:51.940
<v Speaker 2>Jonathan, you previously worked as a terrorism finance analyst at

0:15:51.980 --> 0:15:54.560
<v Speaker 2>the Department of Treasury, where you followed and froze the

0:15:54.600 --> 0:15:57.620
<v Speaker 2>funding of Hamas and al-Qaeda. We now have different forms

0:15:57.680 --> 0:16:01.940
<v Speaker 2>of funding that is less traceable. Crypto, for instance. You

0:16:02.000 --> 0:16:04.960
<v Speaker 2>have a gray market, a black market. How does that

0:16:05.040 --> 0:16:08.730
<v Speaker 2>complicate our efforts to follow the money, so to speak?

0:16:09.830 --> 0:16:13.510
<v Speaker 8>Oh, it is absolutely more complicated than it was when

0:16:13.590 --> 0:16:16.100
<v Speaker 8>I was doing this, you know, some 20 years ago.

0:16:17.000 --> 0:16:19.100
<v Speaker 8>Back then, it was much more simple, right? I mean,

0:16:19.440 --> 0:16:21.600
<v Speaker 8>you know, people were still dealing in cash, which is,

0:16:21.880 --> 0:16:24.770
<v Speaker 8>I think, still the preferred way of terrorists to move money.

0:16:25.410 --> 0:16:28.430
<v Speaker 8>But yes, now we have various means of crypto trading.

0:16:29.350 --> 0:16:31.610
<v Speaker 8>And it's a lot easier in many ways to create

0:16:31.690 --> 0:16:34.490
<v Speaker 8>cutouts and front companies than it was even back then,

0:16:34.970 --> 0:16:37.950
<v Speaker 8>even though we've got greater tools to be able to

0:16:38.110 --> 0:16:41.650
<v Speaker 8>track some of this stuff. But yes, I would argue

0:16:41.700 --> 0:16:44.860
<v Speaker 8>that terrorists are getting more creative here. It's also important

0:16:44.880 --> 0:16:48.560
<v Speaker 8>to understand that, you know, there are state sponsors that

0:16:48.640 --> 0:16:52.880
<v Speaker 8>continue to front these terror organizations and move money on

0:16:52.900 --> 0:16:56.960
<v Speaker 8>their behalf. You know, I look at China. That's one example.

0:16:57.360 --> 0:17:02.080
<v Speaker 8>Russia is another. North Korea has been a perennial problem. Iran, obviously,

0:17:02.360 --> 0:17:08.000
<v Speaker 8>although I think that Operation Economic Outcast is certainly constraining

0:17:08.320 --> 0:17:10.660
<v Speaker 8>their ability to move money in this way. But yes,

0:17:10.790 --> 0:17:15.990
<v Speaker 8>crypto is a growing problem. Crowdfunding platforms are a big problem.

0:17:16.570 --> 0:17:18.350
<v Speaker 8>One of the things that I look at right now is,

0:17:18.670 --> 0:17:21.470
<v Speaker 8>have we done a good enough job of purging the

0:17:21.490 --> 0:17:25.810
<v Speaker 8>bad apples from just the American nonprofit sector, the 501c3s

0:17:25.869 --> 0:17:29.760
<v Speaker 8>that have a license to operate here? My sense is

0:17:29.780 --> 0:17:32.480
<v Speaker 8>that we've not done enough to purge. We were so

0:17:32.580 --> 0:17:35.859
<v Speaker 8>good looking abroad, but I think we've kind of taken

0:17:35.900 --> 0:17:38.960
<v Speaker 8>our eye off the ball on the terror finance problem

0:17:39.300 --> 0:17:41.800
<v Speaker 8>here at home. That is going to be one of

0:17:41.820 --> 0:17:44.119
<v Speaker 8>the things we have to address in the months and

0:17:44.140 --> 0:17:44.620
<v Speaker 8>years to come.

0:17:45.320 --> 0:17:47.729
<v Speaker 1>Jonathan, do economic sanctions work.

0:17:49.609 --> 0:17:52.530
<v Speaker 8>They do, but they only work as much as you're

0:17:52.550 --> 0:17:56.410
<v Speaker 8>willing to ensure that they are adhered to by all.

0:17:57.270 --> 0:18:00.030
<v Speaker 8>One of the things that I've been marveling at is

0:18:00.540 --> 0:18:04.640
<v Speaker 8>the success, at least so far, of this new sanctions

0:18:04.700 --> 0:18:08.100
<v Speaker 8>regime that we've put in place against the Islamic Republic

0:18:08.140 --> 0:18:11.240
<v Speaker 8>of Iran. It's actually not new at all. There's nothing

0:18:11.320 --> 0:18:14.540
<v Speaker 8>new or innovative about what we're doing. We're just simply

0:18:14.600 --> 0:18:18.670
<v Speaker 8>making sure that these sanctions are adhered to in jurisdictions

0:18:18.710 --> 0:18:24.290
<v Speaker 8>that were ignoring our sanctions guidance. So I think right

0:18:24.310 --> 0:18:26.850
<v Speaker 8>now about the UAE, a friend of the United States

0:18:26.910 --> 0:18:31.340
<v Speaker 8>that continued to allow for Iranian assets to move through

0:18:31.380 --> 0:18:35.379
<v Speaker 8>their banks and through their businesses, the Turks, NATO allies,

0:18:35.820 --> 0:18:39.100
<v Speaker 8>that had banks that were openly operating on behalf of

0:18:39.140 --> 0:18:43.310
<v Speaker 8>the Islamic Republic. In fact, one bank moved $ 20 billion

0:18:43.480 --> 0:18:46.389
<v Speaker 8>in cash and gold during the height of our effort

0:18:46.510 --> 0:18:50.550
<v Speaker 8>to sanction the nuclear program of Iran back in 2012

0:18:50.550 --> 0:18:54.800
<v Speaker 8>to 2015. Iraq is another jurisdiction that we need to

0:18:54.840 --> 0:18:59.600
<v Speaker 8>be aware of. Malaysia, Indonesia. These are all areas and

0:18:59.660 --> 0:19:03.280
<v Speaker 8>countries where we have alliances. And we have an understanding

0:19:03.320 --> 0:19:07.379
<v Speaker 8>with these governments, but they have not been enforcing our sanctions.

0:19:07.760 --> 0:19:12.000
<v Speaker 8>So now we're really starting to button all of this down.

0:19:12.460 --> 0:19:14.800
<v Speaker 8>And we've made it serious that nobody gets a free pass.

0:19:15.119 --> 0:19:18.980
<v Speaker 8>That's great. But why did it take so long? Why

0:19:19.060 --> 0:19:22.370
<v Speaker 8>can't we make these sanctions work the first time, bankrupt

0:19:22.400 --> 0:19:24.669
<v Speaker 8>our enemies, force them to come to the table and

0:19:24.690 --> 0:19:26.610
<v Speaker 8>get the capitulation that we were looking for?

0:19:27.250 --> 0:19:32.050
<v Speaker 4>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

0:19:32.210 --> 0:19:36.110
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0:19:36.109 --> 0:19:41.420
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0:19:41.560 --> 0:19:44.720
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