WEBVTT - YouTube Battles With Blurry Lines of Extremist Speech 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 0:00:07.280 --> 0:00:09.840 you the latest news from the worlds of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all purtnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:20.000 analyst in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.239 Bloomberg Business Week at iTunes, SoundCloud, or Bloomberg dot com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.880 --> 0:00:31.760 YouTube search Bloomberg Global News. Well, when we talk about 0:00:31.800 --> 0:00:35.320 content moderation, we often think about companies like Facebook and 0:00:35.479 --> 0:00:38.680 Facebook's Instagram app, and Twitter increasingly. I guess you could 0:00:38.680 --> 0:00:41.960 say TikTok falls into that conversation as well. But what 0:00:42.040 --> 0:00:45.080 about YouTube, the video juggernaut that Google bought for a 0:00:45.159 --> 0:00:48.559 paltry one point six five billion dollars back in two 0:00:48.600 --> 0:00:52.760 thousand six. Well, a new book details YouTube's ongoing struggles 0:00:52.760 --> 0:00:56.240 with the blurry lines of extremist speech. That book written 0:00:56.240 --> 0:00:58.760 by Mark Berg in our colleague here at Bloomberg News. 0:00:58.760 --> 0:01:01.680 He's technology reporter for or Bloomberg News. He joins us 0:01:01.720 --> 0:01:05.160 on the phone from San Francisco. His story is featured 0:01:05.160 --> 0:01:07.480 in the upcoming issue of Business Week magazine. It's an 0:01:07.480 --> 0:01:09.399 excerpt from that book. You can read it now though 0:01:09.400 --> 0:01:13.160 on the Bloomberg terminal and of course online at Bloomberg 0:01:13.200 --> 0:01:15.640 dot com slash business Week. The book coming out, by 0:01:15.640 --> 0:01:18.600 the way on September six. Also joining us this afternoon, 0:01:18.680 --> 0:01:21.800 Joel Webber, the editor of Bloomberg Business Week. He joins 0:01:21.920 --> 0:01:26.320 us from the Bloomberg Interactive Broker studio. Joel, when you 0:01:26.319 --> 0:01:29.080 think about excerpting a book the way you did with 0:01:29.080 --> 0:01:31.640 with Mark's book, how do you choose which part and 0:01:31.680 --> 0:01:35.560 to focus to focus on to actually excerpt in the magazine. Well, 0:01:35.880 --> 0:01:39.960 we read every single page months in advance of the book, 0:01:40.000 --> 0:01:42.520 and then we basically grilled him on, you know, the 0:01:42.560 --> 0:01:47.199 best thing that we could possibly extract. So pretty collaborative. Uh. 0:01:47.319 --> 0:01:49.560 And in this case, I think Mark was the one 0:01:49.560 --> 0:01:54.760 who initially highlighted this and this this particular um excerpt, 0:01:55.160 --> 0:01:58.920 and we we agree with them because boy, there's like 0:01:59.000 --> 0:02:03.200 the central tension that I think this article, which again 0:02:03.360 --> 0:02:06.480 let's hear it up for Mark's forthcoming book, like comment 0:02:06.640 --> 0:02:12.320 subscribe inside YouTube's chaotic rise to world domination. Um. You 0:02:12.320 --> 0:02:16.120 know you tak YouTube is this massive juggernaut. Um. They 0:02:16.360 --> 0:02:20.839 were successful in fighting off terrorism not so long ago, 0:02:20.960 --> 0:02:24.840 but as Mark points out in this excerpt, white nationalism 0:02:24.919 --> 0:02:28.600 has proven to be a different kind of struggle. And 0:02:29.040 --> 0:02:30.600 you know, Mark, I'm just gonna turn it over to you. 0:02:30.760 --> 0:02:36.760 Why why could they attack or combat the terrorism that 0:02:37.320 --> 0:02:42.560 was well, you know, on the platform, Uh, versus what 0:02:42.600 --> 0:02:45.120 we're seeing now with white nationalism? Why can why can 0:02:45.120 --> 0:02:48.399 they do one thing but not necessarily the other? Yeah, 0:02:48.480 --> 0:02:50.440 I mean, you know, thanks for having me. I think 0:02:50.480 --> 0:02:52.440 that this is I thought it was a great story 0:02:52.480 --> 0:02:56.160 because it's it does get at this like very fascinating dilemma. 0:02:56.200 --> 0:02:59.239 But it's not just um YouTube, it's always it, I 0:02:59.240 --> 0:03:01.920 think more than any need a company, just given its size. 0:03:02.760 --> 0:03:06.400 But it's something that it's affected all all major Internet platforms. UM. 0:03:06.480 --> 0:03:09.160 And partly I think there's there's a couple different reasons. 0:03:09.200 --> 0:03:12.720 One is just the nature of the way the government's 0:03:12.720 --> 0:03:15.280 work that there there's been a lot more in Western 0:03:15.280 --> 0:03:21.560 government's pressure and willingness to sort of tackle Island Islamness extremism. Uh. 0:03:21.560 --> 0:03:24.600 And we saw like there are sort of tech collaborations 0:03:24.600 --> 0:03:27.040 that in mind. There are repositories, there are sorry, there 0:03:27.040 --> 0:03:30.239 are lists of like known terrorists that that YouTube uses, 0:03:30.720 --> 0:03:34.320 and they can ban these certain figures. Um, there's YouTube 0:03:34.360 --> 0:03:37.480 is a is a gigantic digital advertising is very responsive 0:03:37.520 --> 0:03:41.360 to its advertisers. The part of the book's opening scene 0:03:41.480 --> 0:03:44.960 is is this is June and when they're in middle 0:03:45.000 --> 0:03:48.760 of this major boycott UM over videos some of which 0:03:48.800 --> 0:03:52.760 were like isis allies that you know, household brands were sponsoring, 0:03:53.240 --> 0:03:55.800 and these advertisers put pressure on YouTube and kind of 0:03:55.800 --> 0:03:58.400 force them to act in a way that they hadn't before. UM. 0:03:58.480 --> 0:04:00.440 And then once they were able to come clean up 0:04:00.480 --> 0:04:03.720 the system to make it a metabal the the these 0:04:03.760 --> 0:04:08.040 ads when like weren't sponsoring videos that UH marketers wanted, 0:04:08.120 --> 0:04:11.000 there was less pressure for them. UM. So I think 0:04:11.000 --> 0:04:15.440 there's a combination where it was very easy politically addressing 0:04:15.480 --> 0:04:19.040 white nationalism is a more complicated, especially in the US 0:04:19.080 --> 0:04:24.680 contemporary politics UM problem in the thread, and there was 0:04:24.839 --> 0:04:29.920 less pressure from regulators and and advertisers at the time. Hey, Mark, 0:04:30.120 --> 0:04:33.640 how do people and machines do this? There's a passage 0:04:33.760 --> 0:04:37.040 from your book, and indeed from this excerpt in the magazine. 0:04:37.560 --> 0:04:41.960 UM that includes the phrase use your judgment when talking 0:04:41.960 --> 0:04:49.080 content moderation. I mean that's not a necessarily prescript rule, right, yeah, 0:04:49.120 --> 0:04:51.160 I thought that was. So this was YouTube was really 0:04:51.839 --> 0:04:54.160 uh it's hard for us to appreciate, but this was 0:04:54.200 --> 0:04:57.000 in This was in two dozen six starting towards and 0:04:57.080 --> 0:04:59.200 five does and sixes. And I think when that this 0:04:59.320 --> 0:05:01.640 as they ran like, um, some of their first sort 0:05:01.640 --> 0:05:05.400 of policy frameworks. And this was really before content moderation 0:05:05.880 --> 0:05:08.320 existed at the size and the internet. Uh and and 0:05:08.440 --> 0:05:11.680 YouTube had a problem that that you know, Facebook and 0:05:11.720 --> 0:05:14.960 other sort of text based didn't have, which is they 0:05:15.000 --> 0:05:16.880 have video, and they have moving images, and they have 0:05:16.960 --> 0:05:20.320 like complications and and all that brings and so I 0:05:20.600 --> 0:05:23.960 you know, this was a team that was pretty scrappy 0:05:24.160 --> 0:05:26.640 and sort of inventing this on the fly. UM. Like 0:05:26.680 --> 0:05:28.280 a lot of them were pretty well versed in the 0:05:28.440 --> 0:05:31.839 like weird dark recesses of the internet. UM. And so 0:05:32.040 --> 0:05:35.760 use your judgment, uh was there were at the time 0:05:35.800 --> 0:05:38.240 a lot more of a like human sort of you 0:05:38.240 --> 0:05:42.880 can call it editorial um, perspective and judgment about where 0:05:42.880 --> 0:05:45.960 the lines withdrawal. And this was they sort of viewed 0:05:46.000 --> 0:05:51.000 YouTube as this was a community of users and video 0:05:51.040 --> 0:05:55.240 broadcasters and they sort of wanted videos that within the 0:05:55.240 --> 0:05:57.360 boundaries of that community. You know, fast forward a few 0:05:57.440 --> 0:06:01.120 years that they become this global platform and moderation is 0:06:01.200 --> 0:06:05.080 this very complicated process, and that goes down from like 0:06:05.160 --> 0:06:08.360 decisions and a rule book through you know, teams at 0:06:08.400 --> 0:06:12.560 YouTube and across the globe to these they largely sort 0:06:12.600 --> 0:06:17.160 of outsource to contract employees that will screen footage um 0:06:17.720 --> 0:06:20.880 and you know in the Philippines and India, in Dublin, 0:06:21.360 --> 0:06:25.360 in California. Uh. And so it's a complicated process where 0:06:25.360 --> 0:06:29.120 the company increasingly wants to rely on machine learning systems 0:06:29.120 --> 0:06:32.640 as much as possible, in part because machine learning systems 0:06:32.680 --> 0:06:37.039 can just process so much video better faster than humans. Uh. 0:06:37.080 --> 0:06:40.760 And they're sort of less, They're they're impartial, and they're less. 0:06:40.800 --> 0:06:44.120 You know that Google cannot be accused of by us 0:06:44.560 --> 0:06:46.520 more as if they can point and say, like, listen, 0:06:46.560 --> 0:06:48.440 we have a we have a policy, rule book, and 0:06:48.520 --> 0:06:50.680 we have machine systems. We don't have humans with with 0:06:50.720 --> 0:06:55.040 biases making new sysion decisions. You know that bias uh. 0:06:55.560 --> 0:06:59.120 Part there is a huge element of where this extra 0:06:59.320 --> 0:07:02.880 kind of uh culminates, right because there you know, one 0:07:02.920 --> 0:07:05.279 of one of the things that YouTube Offton says is 0:07:05.320 --> 0:07:11.240 that dealing with the threat of like Islamist extremism on 0:07:11.280 --> 0:07:16.440 the platform proved easier because you know, multiple governments agree 0:07:16.480 --> 0:07:20.840 on those standards, right, whereas with white nationalism there there 0:07:20.960 --> 0:07:24.840 isn't that same unanimity. So I'm I'm wondering where does 0:07:24.880 --> 0:07:27.000 that Where does that leave things? Because it means that 0:07:27.080 --> 0:07:30.560 there's more reliance on AI and the code. You know, 0:07:30.640 --> 0:07:34.360 ultimately the code is what what runs everything here? Uh 0:07:34.680 --> 0:07:36.800 where does that really leave things? As as you know, 0:07:36.840 --> 0:07:39.400 society continues to have these massive flare ups and with 0:07:39.400 --> 0:07:42.480 about thirty seconds, Mark, Yeah, I think, I mean, I 0:07:42.520 --> 0:07:45.440 think that they've made some significant changes and partially because 0:07:45.480 --> 0:07:48.600 of some tragedies that they witnessed. Christi shooting. We talked 0:07:48.600 --> 0:07:51.720 about the story even the most recently Buffalo shooting. Like 0:07:51.720 --> 0:07:54.560 every time there is an incident like this, um that 0:07:54.720 --> 0:07:58.240 is like often sometimes these events are like live stifmen 0:07:58.360 --> 0:08:00.600 live stream on on YouTube. So they have taken action 0:08:00.920 --> 0:08:03.720 because of like pressure from their employee base and from 0:08:03.720 --> 0:08:06.880 politicians and from some of these big moments. Well, it's 0:08:06.920 --> 0:08:10.280 a great read, Mark, It's an important excerpt, and congratulations 0:08:10.280 --> 0:08:12.640 on the book. The book is called Like Comments, Subscribe 0:08:12.680 --> 0:08:15.760 Inside YouTube's Chaotic Rise to World Domination. It comes out 0:08:15.760 --> 0:08:18.800 September six, but read this excerpt now. It's featured in 0:08:18.840 --> 0:08:21.360 the upcoming issue of Bloomberg Business Week magazine. You can 0:08:21.400 --> 0:08:23.840 also read it now on the Bloomberg terminal and at 0:08:23.840 --> 0:08:26.800 Bloomberg dot com Slash business Week. Mark Bergen, technology reporter 0:08:26.800 --> 0:08:28.800 for Bloomberg News, along with Joe Weber, the editor of 0:08:28.800 --> 0:08:34.079 Bloomberg Business Week. You're listening to Bloomberg Business Week with 0:08:34.160 --> 0:08:39.000 Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. 0:08:39.480 --> 0:08:42.120 Twitter shares are lower by more than one point nine 0:08:42.280 --> 0:08:45.800 percent today, this after Elon Musk is asking a Delaware 0:08:45.840 --> 0:08:49.280 judge to let him amend his counterclaims against Twitter, after 0:08:49.320 --> 0:08:52.800 saying earlier that new whistleblower revelations add to his argument 0:08:52.840 --> 0:08:56.240 to walk away from his forty four billion dollar purchase 0:08:56.360 --> 0:08:58.199 of the company. Katie, I don't know about you, but 0:08:58.360 --> 0:09:00.800 my head's kind of spinning thinking of about the ongoing 0:09:00.800 --> 0:09:04.280 saga between Elon Musk and Twitter. We have months of 0:09:04.320 --> 0:09:07.439 content here. Well, I know somebody who's very busy is 0:09:07.440 --> 0:09:09.439 out in the West Coast. We're talking about Kurt Wagner. 0:09:09.440 --> 0:09:12.520 He's technology reporter for Bloomberg News. He joins us this 0:09:12.559 --> 0:09:15.320 afternoon on the phone from San Francisco. Kurt, I don't 0:09:15.320 --> 0:09:17.520 know how you're thinking about this in terms of content, 0:09:17.600 --> 0:09:20.120 but certainly good I think for job security because Elon 0:09:20.200 --> 0:09:23.559 Musk has got you his he's keeping you busy. Um, 0:09:23.600 --> 0:09:25.679 what do we need to know? What does our audience 0:09:25.720 --> 0:09:30.760 need to know? In the latest between Elon Musk and Twitter? Um, 0:09:30.800 --> 0:09:34.480 there were kind of two things that happened today and 0:09:34.760 --> 0:09:37.680 they were both versions of things that have already happened, 0:09:37.720 --> 0:09:40.720 but with new information. The first is that Elon Musk 0:09:40.800 --> 0:09:44.840 asked the judge if he could revise his counterclaims against Twitter. 0:09:44.880 --> 0:09:48.120 So when Twitter sued him, Musk basically sued them back. 0:09:48.520 --> 0:09:51.040 And now he's saying, I want to update and revise 0:09:51.160 --> 0:09:53.320 that lawsuit now that I have more information from this 0:09:53.320 --> 0:09:55.839 whistleblower that I didn't have a month ago, right when 0:09:55.840 --> 0:09:58.800 I when I sent my original counterclaims. So he's asking 0:09:58.840 --> 0:10:01.520 the judge for permission to do that. Secondly, he sent 0:10:01.559 --> 0:10:04.880 a letter to Twitter confirming that he's trying to walk 0:10:04.920 --> 0:10:07.000 away from the deal again. He did that already to 0:10:07.120 --> 0:10:09.520 He did that on July eighth. But this new letter 0:10:09.559 --> 0:10:11.959 he sent, which is again saying I'm walking away from 0:10:11.960 --> 0:10:14.959 this deal, now includes more information from the whistleblower, which 0:10:15.000 --> 0:10:17.920 again he didn't have on July eight. So essentially he's 0:10:18.000 --> 0:10:21.959 trying to bring all the whistle blower information and incorporate 0:10:22.040 --> 0:10:25.000 it into his defense. Um, and he's bringing the whistle 0:10:25.000 --> 0:10:26.680 blower kind of front and center in this whole thing. 0:10:27.040 --> 0:10:32.000 And how good is this for Elon Musk? Because actually, 0:10:32.040 --> 0:10:33.800 Kurt you and I were talking about this on Bloomberg 0:10:33.800 --> 0:10:37.720 Technology yesterday. A few people have made the argument that 0:10:37.880 --> 0:10:41.240 this really bolsters Musk's claims when it comes to those 0:10:41.240 --> 0:10:45.600 bots and those spam accounts. But does that hold water? See, 0:10:45.600 --> 0:10:48.400 I'm less convinced that it actually helps him on the 0:10:48.480 --> 0:10:52.199 bot and spam argument, but I am you know, I 0:10:52.280 --> 0:10:55.079 think I do think that there might be another argument here, 0:10:55.080 --> 0:10:57.880 which is that he's essentially saying, this is a company 0:10:57.920 --> 0:11:02.040 that's you know, hasn't been regular Corry has been compliant 0:11:02.080 --> 0:11:05.480 with regulatory demands, right, they have a constent degree with 0:11:05.520 --> 0:11:08.960 the FTC around privacy related stuff, and the whistle blowers 0:11:08.960 --> 0:11:10.760 saying the company is not following that and they're not 0:11:10.840 --> 0:11:14.640 adhering to that. And so where I think the whistle 0:11:14.640 --> 0:11:17.240 blower's argument doesn't really hold when it comes to the 0:11:17.240 --> 0:11:19.880 box stuff. You know, if he is telling the truth, 0:11:19.880 --> 0:11:22.240 and if and if it's proved out that the claims 0:11:22.240 --> 0:11:24.880 he's making are legit, well then the company could be 0:11:24.920 --> 0:11:27.920 in other types of financial issues, right, that could be 0:11:27.960 --> 0:11:31.240 facing fines, that could be facing regulation. And that's the 0:11:31.360 --> 0:11:33.480 kind of thing that you know, Ellen might say, Hey, 0:11:33.520 --> 0:11:35.880 I'm you know now buying a company. I didn't realize 0:11:35.920 --> 0:11:38.520 there was all this red tape around it. Um, you know, 0:11:38.640 --> 0:11:40.560 this is this is new information that I didn't know, 0:11:40.679 --> 0:11:44.079 and therefore it should let me get out of this deal. Well, Curtis, 0:11:44.160 --> 0:11:46.880 I mean, we can't see the future, but we're gonna 0:11:46.880 --> 0:11:49.440 ask you to look into your crystal ball and you know, 0:11:49.520 --> 0:11:52.720 look a few weeks down the line into what the 0:11:52.880 --> 0:11:56.559 Delawe Delaware Chance to Record is thinking. I mean, I mean, 0:11:56.600 --> 0:12:03.559 how does this end? I'm mean Twitter continues to um 0:12:03.679 --> 0:12:07.360 use quite strong language about their intention, right, which is 0:12:07.440 --> 0:12:11.960 that they have every intention to enforce the original murder agreement. 0:12:12.280 --> 0:12:15.320 And to me, I don't think you use that language 0:12:15.600 --> 0:12:18.080 unless you really do feel that you have a good 0:12:18.080 --> 0:12:20.480 case here, and so I think from the Twitter side, 0:12:20.800 --> 0:12:22.719 you know, they want to take this to trial. They 0:12:22.720 --> 0:12:25.040 want to they think they have a winning hand, and 0:12:25.280 --> 0:12:28.240 they want to go and prove that out. Um, I 0:12:28.320 --> 0:12:31.320 do think there's a realistic chance that these sides settle. 0:12:32.080 --> 0:12:33.960 I don't have reporting to back that up. I don't 0:12:33.960 --> 0:12:36.720 even know if those types of conversations are happening, But 0:12:36.800 --> 0:12:41.400 I just think about the unknowns of going into a trial, right, 0:12:41.400 --> 0:12:44.480 you're really saying, you're you're putting all of this at 0:12:44.520 --> 0:12:48.720 the decision of one person, And I kind of feel like, 0:12:48.720 --> 0:12:51.319 if you're Twitter or Elon, there's just a lot of 0:12:51.360 --> 0:12:54.679 incentive to kind of hammer out in agreement before you 0:12:54.760 --> 0:12:57.320 get there, so that you're not necessarily going for either 0:12:57.400 --> 0:13:00.960 a forty four billion dollar deal or a zero dollar deal. 0:13:01.080 --> 0:13:03.679 You could, you know, maybe make peace somewhere in the middle. 0:13:03.720 --> 0:13:06.120 And that does seem like a reasonable thing that still 0:13:06.120 --> 0:13:09.920 could happen. It still could happen, But I mean, what 0:13:10.120 --> 0:13:12.440 kind of odds would you place on that. I know 0:13:12.520 --> 0:13:14.760 it's a bit impossible and you don't want to speculate 0:13:14.800 --> 0:13:16.960 too much, but and by the way, Twitter's market cap 0:13:17.000 --> 0:13:20.600 is about thirty billion dollars right now, sorry to jump in, Katie. Yeah, 0:13:20.720 --> 0:13:24.640 and that's probably inflated some right because people are still 0:13:24.960 --> 0:13:26.920 you know, holding the stock thinking that this deal in 0:13:26.960 --> 0:13:30.160 my clothes presumably, so you know, if the full deal 0:13:30.200 --> 0:13:33.400 walked away, maybe Twitter would be worth uh twenty billion. 0:13:33.440 --> 0:13:35.040 I don't know, you know, again, I'm kind of I'm 0:13:35.080 --> 0:13:39.040 kind of guessing here. Um, I'm a little hesitant to 0:13:39.040 --> 0:13:41.360 to put a number on what the settlement might be 0:13:41.360 --> 0:13:45.840 because again I'm just totally totally guessing. But it does 0:13:45.960 --> 0:13:48.920 feel like something that could happen. I don't know, let's 0:13:49.040 --> 0:13:53.960 let's put it at a chance. Again, who knows, But 0:13:54.040 --> 0:13:58.520 it doesn't feel like it's off the table. I guess, k. 0:13:58.800 --> 0:14:00.559 Just in the last thirty seconds that have with you, 0:14:00.880 --> 0:14:02.840 what do we need to be watching for? As the 0:14:02.880 --> 0:14:06.640 drama continues to unfold ahead of the Chancer record hearing, sure, 0:14:06.840 --> 0:14:09.320 I mean, the next um kind of milesome that we 0:14:09.360 --> 0:14:12.960 are aware of is a shareholder vote from Twitter shareholders, 0:14:12.960 --> 0:14:15.599 and that's going to happen on September I believe, the thirteenth. 0:14:16.200 --> 0:14:19.720 And that's essentially you know, Twitter putting forward the initial 0:14:19.960 --> 0:14:23.360 original deal agreement and saying, hey, shareholders should we do this, 0:14:23.640 --> 0:14:26.280 it's expected that it will be approved, and if it is, 0:14:26.320 --> 0:14:28.040 then Twitter can kind of say, hey, we've done everything 0:14:28.080 --> 0:14:30.040 in our power to get this deal done, and that 0:14:30.120 --> 0:14:32.520 kind of paved the way for the trial. In October, 0:14:32.840 --> 0:14:36.960 Kurt Wagner, technology reporter for Bloomberg News, keeping us up 0:14:37.040 --> 0:14:40.120 to date on the latest from San Francisco in the 0:14:40.160 --> 0:14:43.680 Twitter elon musk Saga. You can follow Kurt at Kurt 0:14:43.720 --> 0:14:48.760 Wagner eight on Twitter. This is Bloomberg, This is Bloomberg 0:14:48.800 --> 0:14:52.440 Business Week with Carol Messer and Bloomberg Quick Takes Tim 0:14:52.520 --> 0:14:56.760 Stenovic on Bloomberg Radio. Well as energy costs sore around 0:14:56.760 --> 0:15:00.320 the world, something curious is happening with increasing free quincy 0:15:00.400 --> 0:15:03.760 in power grids in certain corners of the US, prices 0:15:03.800 --> 0:15:08.560 are plunging to zero and below. We're talking about bottlenecks 0:15:08.560 --> 0:15:10.840 that are preventing cheap wind and solar energy from reaching 0:15:10.920 --> 0:15:14.560 high demand areas. Norien Malick writes all about it. She's 0:15:14.640 --> 0:15:18.000 natural gas and power markets reporter for a Bloomberg News. 0:15:18.040 --> 0:15:21.280 She joins us this afternoon on the phone from Brooklyn. Noreen. 0:15:21.360 --> 0:15:23.760 I was talking with Katie about this. It's a little 0:15:23.800 --> 0:15:26.160 hard to wrap our heads around at a time when 0:15:26.280 --> 0:15:32.040 energy prices are so high, how power prices can actually 0:15:32.080 --> 0:15:35.240 be plunging below zero? How does this work? It was 0:15:35.280 --> 0:15:38.040 a surprise for me too to see how frequent it is. Okay, 0:15:38.040 --> 0:15:39.760 that makes me feel better because your natural gas and 0:15:39.760 --> 0:15:42.440 power markets reporter Sole Fee a little bit better about 0:15:42.440 --> 0:15:45.760 my confusion here. Um, So, you know, negative prices have 0:15:45.840 --> 0:15:48.600 been around for a while. You know, when California first started, 0:15:48.600 --> 0:15:51.120 it's big renewable build out, like about a decade ago. 0:15:51.240 --> 0:15:53.800 In Texas, you know, you would you would have like 0:15:54.200 --> 0:15:56.880 solar and wind come on faster than you can build 0:15:56.880 --> 0:16:00.280 transmission lines, like in West Texas or like sub Droll 0:16:00.360 --> 0:16:03.920 part of California. So in those areas, when you'd have 0:16:04.040 --> 0:16:06.640 like a really you know, bright and sunny day or 0:16:06.680 --> 0:16:10.280 a windy day, you'd see like those like wind turbines 0:16:10.480 --> 0:16:13.800 like turning at mac speed and like solar panels producing 0:16:13.840 --> 0:16:17.360 at max quantity more than the transmission lines can take away. 0:16:17.400 --> 0:16:20.600 So you'd have an excess of supply. So anytime you 0:16:20.640 --> 0:16:23.120 have stranded power that can't get where it needs to 0:16:23.280 --> 0:16:26.240 or can't get out of it's like little community. It 0:16:26.400 --> 0:16:29.920 sends prices to negative levels and it's meant to be 0:16:30.000 --> 0:16:32.920 a signal like from the grid to these you know 0:16:33.000 --> 0:16:36.400 power suppliers, Hey, back off, we have too much supply. 0:16:37.120 --> 0:16:40.360 And you know, renewables can keep running at like minus 0:16:40.440 --> 0:16:43.720 thirty or minus forty five dollars because they get these 0:16:43.760 --> 0:16:48.080 tax credits and so. But what's remarkable now is that 0:16:48.560 --> 0:16:51.800 you are seeing such a gloot of supply and these 0:16:51.840 --> 0:16:56.280 gluts can last five minutes or sometimes they can last hours. Um, 0:16:56.320 --> 0:16:59.800 but these gluts can send prices to minus five dollars, 0:16:59.840 --> 0:17:04.240 my a thousand dollars or you know, sixteen thous dollars, 0:17:04.240 --> 0:17:06.840 as there was a case in California, um for a 0:17:06.880 --> 0:17:10.600 moment earlier this year. So is anyone trading this? I 0:17:10.640 --> 0:17:12.879 mean I hear this and coming from you know, the 0:17:12.920 --> 0:17:16.840 traditional stock and bond market, sounds like a great sort 0:17:16.840 --> 0:17:20.720 of arbitrage trade. But does the power market not work 0:17:20.800 --> 0:17:23.200 that way? No, it does exactly. You hit it on 0:17:23.280 --> 0:17:25.960 the nail. It's just that, um, the nail on the head. 0:17:26.000 --> 0:17:29.280 But like just that the group of people that know 0:17:29.680 --> 0:17:33.440 the nuances of the power market, like you know, across 0:17:33.520 --> 0:17:38.199 the US, there's more than like basically ramped in and 0:17:38.240 --> 0:17:41.440 off the grid. These are like places where like wind 0:17:41.480 --> 0:17:44.080 farms are supplying the grid or gas plants, and people 0:17:44.080 --> 0:17:46.199 are taking it off. So you kind of have to 0:17:46.400 --> 0:17:50.400 like know like how to play those like local markets. 0:17:50.480 --> 0:17:52.800 You have to like look at things like weather and everything. 0:17:53.160 --> 0:17:56.520 But but you're exactly right, like people have noticed this 0:17:56.560 --> 0:18:01.520 trend and you are seeing um like mattery like developers 0:18:01.800 --> 0:18:04.880 trying to find those spots where prices are really negative 0:18:05.359 --> 0:18:08.240 and they would get paid when prices are negative, they 0:18:08.240 --> 0:18:10.800 would get paid to fill their storage and then they 0:18:10.800 --> 0:18:13.040 could resell that power in the middle of the day 0:18:13.119 --> 0:18:16.439 for like hundreds or thousands of dollars. So that's the 0:18:16.560 --> 0:18:19.800 ultimate ARB right now, and that is super beneficial to 0:18:19.840 --> 0:18:23.200 the grid. Like that could help, you know, make sure 0:18:23.240 --> 0:18:25.320 that we can have a way to store all this 0:18:25.440 --> 0:18:29.360 excess solar and wind and get it to consumers typically 0:18:29.359 --> 0:18:31.480 when prices are high, so that in the long run 0:18:31.520 --> 0:18:35.520 will help them. So should we be thinking about the 0:18:35.520 --> 0:18:39.080 grid in a different way based on this, because I mean, look, 0:18:39.080 --> 0:18:42.320 we look at what happened in Texas last year and 0:18:42.320 --> 0:18:46.000 then even this summer when the state asked bitcoin miners 0:18:46.040 --> 0:18:49.639 to stop mining bitcoin because they were concerned about this 0:18:49.680 --> 0:18:51.760 heat wave and the grid being able to withstand that, 0:18:52.160 --> 0:18:54.159 what does the story tell us about the resilience of 0:18:54.200 --> 0:18:56.880 the grid and updates needed to the grid across the US. 0:18:57.560 --> 0:19:00.560 I mean, this is definitely a sign of dress that 0:19:00.680 --> 0:19:05.119 the grid is um needs to be upgraded or changed 0:19:05.160 --> 0:19:08.880 because for basically a hundred plus years, the grid has 0:19:08.920 --> 0:19:11.800 been set up to take power from these large power 0:19:11.840 --> 0:19:16.000 plants like whole nuclear gas and just ship them one 0:19:16.040 --> 0:19:20.600 way to consumers. But with with renewables, you have thousands 0:19:20.640 --> 0:19:23.800 and thousands of more sites, so there's more like like 0:19:24.880 --> 0:19:29.520 the generation is dispersed, it's spread out over bigger geographic regions. 0:19:29.720 --> 0:19:32.720 And on top of that, you're having like homeowners and 0:19:32.800 --> 0:19:37.320 businesses becoming like suppliers themselves, like they're producing their own 0:19:37.320 --> 0:19:41.080 power by putting rooftop solar and battery, and you're gonna 0:19:41.119 --> 0:19:43.400 have e v s and so every so you're gonna 0:19:43.440 --> 0:19:47.080 have power moving from homes onto grids. So everything is 0:19:47.119 --> 0:19:50.600 becoming more dynamic. And when you have these negative prices, 0:19:50.840 --> 0:19:54.320 it shows you the real like limitation of like power 0:19:54.359 --> 0:19:57.240 getting stranded. And and you know, this is the big 0:19:57.280 --> 0:19:59.760 debate right now is how do you solve those negative 0:19:59.800 --> 0:20:03.040 p races? Do we spend billions and billions of dollars 0:20:03.119 --> 0:20:08.359 on you transmission or like local microgrids. Right. Hey, this 0:20:08.440 --> 0:20:10.000 is a great story and it also speaks to what 0:20:10.040 --> 0:20:12.640 we're speaking about in just about an hour's time, when 0:20:12.720 --> 0:20:16.359 Catherine Blunt, the Wall Street Journal reporter, has her new 0:20:16.400 --> 0:20:18.720 book out today, California Burning, The Fall of p G 0:20:18.840 --> 0:20:20.959 and E and what it means for America's power grids. 0:20:20.960 --> 0:20:23.600 So have this power theme this afternoon. A big thank 0:20:23.600 --> 0:20:26.040 you to Noreen Malick, natural gas and power markets reporter 0:20:26.080 --> 0:20:28.119 for Bloomberg News. She joins us on the phone this 0:20:28.200 --> 0:20:39.920 afternoon from Brooklyn. Follow her on Twitter at Notorious Journal. Yeah, 0:20:40.000 --> 0:20:42.000 but you let me drive? Oh no, no, no, no, 0:20:42.040 --> 0:20:48.359 W's all right? Please revels I don't want to drive. 0:20:48.400 --> 0:20:57.119 It's a good question. Drive this Drive to the Cloth 0:21:00.040 --> 0:21:03.159 on Blutberg Radio. Well, we are already there. We got 0:21:03.240 --> 0:21:05.240 less than ten minutes to go until the close of 0:21:05.320 --> 0:21:08.439 trading on this Tuesday, August. Let's drive to the clothes 0:21:08.480 --> 0:21:11.720 with Amanda Gotti, chief investment officer at p n C 0:21:11.880 --> 0:21:14.560 Asset Management Group. Amanda joins us once again on the 0:21:14.560 --> 0:21:17.119 phone from Philadelphia. Amanda, good to have you back with us. 0:21:17.119 --> 0:21:19.720 How are you. I'm doing great? Thanks so much. For 0:21:19.760 --> 0:21:21.840 having me. I'm delighted to be here. Well, it's great 0:21:21.880 --> 0:21:23.879 to have you with us this afternoon. Help us make 0:21:23.960 --> 0:21:26.440 sense of what's going on here, because Katie and I've 0:21:26.440 --> 0:21:28.800 been talking about it for the past few days. We 0:21:28.880 --> 0:21:31.960 talked about it ahead of Jackson Hole. But it certainly 0:21:32.000 --> 0:21:35.920 seems like equity markets and bon bond market as well 0:21:36.040 --> 0:21:39.439 got kind of the wrong idea of what FED your 0:21:39.520 --> 0:21:44.119 Powell was going to do after that latest FED meeting. Yeah, 0:21:44.160 --> 0:21:46.840 it's it's been sort of a progression in terms of 0:21:46.880 --> 0:21:48.960 markets like you here in the last few weeks and 0:21:49.320 --> 0:21:52.800 leading up to and following the jackson Hole meeting. I 0:21:52.840 --> 0:21:56.520 have joked on a couple of calls with clients recently 0:21:56.600 --> 0:22:00.760 that we went from a nothing burger to some burger 0:22:00.880 --> 0:22:04.760 too seriously, an impossible burger. There's definitely a pun or 0:22:04.800 --> 0:22:08.640 a metaphor in there, and I thought a bison burger, well, 0:22:08.760 --> 0:22:11.280 not quite that would even that would that would make 0:22:11.359 --> 0:22:13.159 sense too, I think. But I think it speaks to 0:22:13.280 --> 0:22:16.919 the challenge the chair Powell finds themselves in as it 0:22:16.960 --> 0:22:20.680 relates to messaging and forward guidance and how to keep 0:22:20.800 --> 0:22:24.840