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Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast
Speaker 3: twenty twenty six. Definitely often running. It's about one week
Speaker 3: since we found out that one of the pillars of
Speaker 3: US economic governance was again under attack after fedchair J
Speaker 3: Powell announced that the Central Bank was served with a
Speaker 3: grand jury subpoena from the Department of Justice. It's not
Speaker 3: the only time the US Central Bank was caught in
Speaker 3: the crosshairs of a president or investors for that matter.
Speaker 3: And on that and what we can learn from our
Speaker 3: financial past. Returned to the New York Times best selling
Speaker 3: author of Too Big to Fail in nineteen twenty nine,
Speaker 3: Inside the greatest crash in Wall Street History and how
Speaker 3: it shattered a nation, Andrew Ross Sorkin will join us.
Speaker 4: All that to come. We begin, though with the real
Speaker 4: world impact of tariffs. Nearly a year after they were
Speaker 4: imposed by the Trump administration.
Speaker 3: The Supreme Court did not rule on challenges to President
Speaker 3: Donald Trump's AJIPA tariffs this past week for a second time,
Speaker 3: leaving the world to wait until at least this coming week,
Speaker 3: possibly to learn the fate of his signature economic policy.
Speaker 5: Again.
Speaker 3: Possibly it could be even longer before we get some
Speaker 3: kind of ruling from the Supreme Court on this.
Speaker 4: Someone paying really close attention apart from us to that
Speaker 4: decision is Rick Woldenberg. Rick is CEO of Learning Resources
Speaker 4: in Hand to Mind. They're two educational toy businesses based
Speaker 4: near Chicago. Rick, back in April of last year, sued
Speaker 4: the Trump administration to invalidate the tariffs as exceeding the
Speaker 4: president's authority. Rick joined us alongside Bloomberg New Supreme Court
Speaker 4: reporter Greg store Well.
Speaker 6: Taris have had a dramatic effect on our business. The
Speaker 6: imposition of these taxes on our company, with no advanced
Speaker 6: warning and with seemingly no limit through our supply chain
Speaker 6: administration completely out the window. We had to rebuild our
Speaker 6: supply chain on the fly. It was a significant disruption
Speaker 6: in how we manufactured our product. And so we had
Speaker 6: an enormous diversion of labor in our office, maybe up
Speaker 6: to thirty percent of our man hours were shifted towards surviving.
Speaker 6: That change also obviously created a huge cost, well in
Speaker 6: excess of ten million dollars in twenty twenty five, up
Speaker 6: from zero in the prior year, and so it affected
Speaker 6: our cash flow. It affected our costs. We had to
Speaker 6: raise our prices, and it's an economic depressant, a massive
Speaker 6: tax like that. It's like wearing ankle weights in a sprint.
Speaker 6: You slow down. And so we're a little smaller as
Speaker 6: a result of this huge tax.
Speaker 3: So, Greg Store, I want to bring you in. This
Speaker 3: is a great story as you do so well, and
Speaker 3: it's I feel like a Bloomberg does it like reminds
Speaker 3: us that there are big stories. There are headlines, but
Speaker 3: there are people and companies being impacted, and in this
Speaker 3: case a lot of small and mid sized companies. I
Speaker 3: think it's safe to say that Rick's story not unique.
Speaker 7: It's not unique, and in fact, it is the smaller
Speaker 7: companies that have launched this challenge. There are two different
Speaker 7: cases there before the Supreme Court, and the other ones
Speaker 7: also small businesses, actually smaller than Rix the bigger companies.
Speaker 7: While they have subsequently filed some lawsuits to try to
Speaker 7: get refunds in case the Supreme Court strikes down the tariffs,
Speaker 7: they didn't want to be out front in challenging these.
Speaker 4: So, Rick, why did you choose to speak out? Why
Speaker 4: are you speaking publicly about this? Why did you file
Speaker 4: this lawsuit? Doesn't Yes, they're certainly upside, but there's also
Speaker 4: a lot for you to lose. Like we've seen the
Speaker 4: way that this administration has been punitive in some cases.
Speaker 6: Well, I think that the things that I was afraid
Speaker 6: of losing were the relationship I have with our customers,
Speaker 6: the dependents that our employees and their families have on
Speaker 6: our company. Ours is a family business. I'm third generation,
Speaker 6: my kids are fourth generation. You have a very strong
Speaker 6: sense of how the health of your business affects the
Speaker 6: community that you live in. And so we just couldn't
Speaker 6: walk away from those folks. And I'm I'm very American
Speaker 6: in my outlook. I want to take control of what's
Speaker 6: happening to us, and I wasn't going to let a
Speaker 6: politician ruin what we've built up over one hundred years.
Speaker 6: We're also mission driven business, there's lots of families like
Speaker 6: yours who use our products and depend on them to
Speaker 6: help educate their children. That means a whole lot to us.
Speaker 6: So we felt like we had a lot of reasons
Speaker 6: to stand up, and I was more concerned about not
Speaker 6: doing something than doing something.
Speaker 4: You know, the President Rick and Detroit said quote to
Speaker 4: be anti tariff is to be pro Chinese, and the
Speaker 4: tariff challengers at the Supreme Court are China centric, and
Speaker 4: he alluded to the idea of people who are challenging
Speaker 4: tariffs as anti American. How do you respond to that?
Speaker 6: You know. One of the things I've done in this
Speaker 6: lawsuit is I've tried not to go tit for tat
Speaker 6: and to point fingers in saying that mister Trump points
Speaker 6: fingers at me. But I'm not sure that I make
Speaker 6: my point more strongly by engaging in finger pointing back.
Speaker 6: I would just simply say that mister Trump has no
Speaker 6: legal right to have impoosed this tax on us. It's
Speaker 6: hurt our business, and we've asked the court to adjudicate
Speaker 6: that he has has no right to do this, and
Speaker 6: no American wants to or feels exposed to the risk
Speaker 6: of paying attacks that's not legal. There are means for
Speaker 6: him to put taxes on us. He has to go
Speaker 6: through the House. That's what James Madison wants and that's
Speaker 6: what we need to do, so he can't do it.
Speaker 6: He has no idea if we're China centric or not.
Speaker 6: I would tell you we're child centric and we're trying
Speaker 6: to help children get a great start in life. That's
Speaker 6: our orientation.
Speaker 3: Yeah, what a story, A stark story. And Greg, you know,
Speaker 3: I look at your story on this and you you know,
Speaker 3: you say, and you remind us that the president has
Speaker 3: wielded tariffs to try to get Canada and Mexico to
Speaker 3: crack down on illegal immigration, Brazil to stop to drop
Speaker 3: the prosecution of ex President Bolsonaro, and India to stop
Speaker 3: buying Russian oil. He has used this tool a lot
Speaker 3: in this administration in his first year. Come Onian on
Speaker 3: the conversation, and you know you brought Rick to us.
Speaker 3: I'd love for you to ask Rick a question as well.
Speaker 6: Well.
Speaker 4: Carol.
Speaker 7: One thing you're putting out there is that the terriffs
Speaker 7: that he has imposed under the laws that's at issue
Speaker 7: at the Supreme Court known as IEPA. There are other
Speaker 7: teriff authorities that he's used that are not before the
Speaker 7: Supreme Court. And so actually my question for Rick is,
Speaker 7: you know, the President has said that even if he
Speaker 7: loses the Supreme Court case, he's going to turn to
Speaker 7: these other authorities and try to replicate the tariffs. And
Speaker 7: I'm actually really interested in terms of your business. Are
Speaker 7: how concerned are you that even if you win at
Speaker 7: the Supreme Court, you're just going to see a whole
Speaker 7: different variety of teriffts, maybe ones that force you to
Speaker 7: kind of shift your business plans again and shift where
Speaker 7: you're manufacturing some of your products.
Speaker 6: Of course, that's the risk, and mister Trump has a
Speaker 6: track record of changing the rules on a very rapid cadence,
Speaker 6: which makes it hard for us to run our business.
Speaker 6: It's a little difficult to respond to like what he
Speaker 6: might do or what he might not do. All the
Speaker 6: other provisions in the law that give him the rights
Speaker 6: in post tariffs come with a lot of strings attached,
Speaker 6: so it requires a lot of fact finding hearings. It's
Speaker 6: a slow process. He can't do it by fiat, he
Speaker 6: can't do it by true social tweet. So I think
Speaker 6: it's better to wait and see what he actually does.
Speaker 6: I'm not aware of a legal mechanism where mister Trump
Speaker 6: can be a taxing body. He's not allowed to do that.
Speaker 6: The Constitution is quite clear on that. So as much
Speaker 6: as he wants to do it without going through Congress,
Speaker 6: he can't. The law says he cannot. And so I
Speaker 6: don't want to overreact to threats made on TV. I
Speaker 6: think the Constitution provides the answer to that. Ultimately, at
Speaker 6: the end of the day, it's going to be a
Speaker 6: lot harder for him to build a tariff structure going
Speaker 6: around Congress. The law doesn't provide for it. And so
Speaker 6: we'll see what he does, and when he does it
Speaker 6: will figure out how to respond.
Speaker 4: Rick. The story that Greg wrote back in November talks
Speaker 4: a little bit about in the beginning of this kind
Speaker 4: of game of whack a mole, moving production from one
Speaker 4: country to another, only to find the tariffs have been
Speaker 4: imposed in this country. Also that was China to India
Speaker 4: and the like. At the end of the day, the
Speaker 4: president wants teriffs because he wants this stuff made in
Speaker 4: the US. So is there a way that you foresee
Speaker 4: in the future you could ever just make all the
Speaker 4: products or a good portion of the products that are
Speaker 4: made overseas right now, you could make them in the US.
Speaker 6: Certainly, no, And I've answered the questions many times. The
Speaker 6: answer is still no. And there's no evidence in the
Speaker 6: marketplace that anyone really disagrees with me. I think, unfortunately
Speaker 6: the way this is being dealt with is that our
Speaker 6: industry and companies like ours are considered a sacrificeable rounding error.
Speaker 6: They don't really have any idea what we do or
Speaker 6: how we do it. They want cars made here, they
Speaker 6: want cell phones made here, they want chips made here,
Speaker 6: and so they've come up with one own rule. That's
Speaker 6: what their intent is. I want to bring back pharmaceuticals,
Speaker 6: and like, if something bad happens to us, it's not
Speaker 6: believe their problem. We don't move the needle economically, and
Speaker 6: so they don't care. And I don't think they care
Speaker 6: about our employees. And I don't think they care about
Speaker 6: your families who use our products. We're rounding error. And
Speaker 6: I just can't look at the people who work here,
Speaker 6: the people who use our products and say, I think
Speaker 6: you're a rounding error.
Speaker 1: I don't, yeah, And I.
Speaker 6: Think that we create great jobs. Greg has been through
Speaker 6: our facilities. He can tell you that, like We're a
Speaker 6: massive consumer and user of technology of technology. I think
Speaker 6: that our business season, the way we run our business
Speaker 6: is an exemplar to other companies. We are what you
Speaker 6: want here, we just don't make a high tech product.
Speaker 3: Yeah, you know, Greg should apologize.
Speaker 1: Greg.
Speaker 3: I think Rick makes a really good point. We talk
Speaker 3: so much about small and mid sized businesses being the
Speaker 3: backbone of the US economy and putting American workers to work,
Speaker 3: and he is certainly an example of that.
Speaker 8: Greg.
Speaker 3: We're now focusing on next week. Third times, maybe the
Speaker 3: charm in terms of whether we get the Supreme Court
Speaker 3: to rule. What should we be watching out for and
Speaker 3: are we likely to get it?
Speaker 7: And just quickly, well, we don't know even though that
Speaker 7: we're having opinions at all next Kay, we'll probably find
Speaker 7: that out on Friday. If we don't get the tariff
Speaker 7: opinion next week, the Court's not goes on a four
Speaker 7: week recess. They're not scheduled to take the bench again
Speaker 7: until February the twentieth, and normally that's how they release
Speaker 7: their opinions. So if we don't get it next week,
Speaker 7: we could be in for our fairly long week.
Speaker 3: Are you surprised it's taking so long, just ten more seconds.
Speaker 7: You know, I'm not sure I've been saying. I still
Speaker 7: stand with this. I'm not surprised either way. Court has
Speaker 7: tried to expedite it. But this is a big case.
Speaker 7: It's going to take a while, all.
Speaker 3: Right, so appreciate it. Great story as always, Greg Store,
Speaker 3: Bloomberg News Supreme Court reporter and Rick Woldenberg. He is
Speaker 3: CEO of Learning Resources and hand to Mind, a favorite
Speaker 3: of Tim's kids. It turns out.
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Speaker 9: There's no chance that you're gonna have that kind of problem,
Speaker 9: but there are chances to have a problem somewhere, somehow,
Speaker 9: you know. The biggest unknown is geopolitics.
Speaker 4: JP Morgan Chase CEO Jamie Diamond this past week with
Speaker 4: Bloomberg host and Carlisle co founder and co chair David
Speaker 4: Rubinstein at the US Chamber of Commerce in Washington.
Speaker 1: D C.
Speaker 3: JP Morgan, by the way, featured very prominently in a
Speaker 3: new book out on the nineteen twenty nine market crash,
Speaker 3: and this feels like kind of the right conversation to
Speaker 3: be having at this moment in time when certain investing
Speaker 3: narratives dominate US financial markets, AI, private credit, transparency concerns,
Speaker 3: crypto prediction markets, and more questions about whether these narratives
Speaker 3: are the right ones that lead to longer term gains
Speaker 3: and prosperity for investors and for the country. There's a
Speaker 3: lot of questions out.
Speaker 4: There, yeah, stuff about exuberance as well. Could it lead
Speaker 4: to a crisis or to a crash? It does lead
Speaker 4: us to nineteen twenty nine, a book that takes us
Speaker 4: inside the greatest crash in Wall Street history and how
Speaker 4: it shattered a nation. The book by New York Times
Speaker 4: bestselling author of Too Big to Fail, who also happens
Speaker 4: to be an award winning journalist for The New York Times.
Speaker 4: He's the founder and editor at large of Deal Book.
Speaker 4: He's co anchor of Squawk Box on CNBC. Andrew Ross
Speaker 4: Sorkin joins us now, welcome.
Speaker 1: Thanks for having me, guys.
Speaker 4: Yeah, thanks for joining me here. You know, it's funny.
Speaker 4: Jamie Diamond was asked about just now by David Rubin
Speaker 4: Sigin about the financial crisis and about whether or not
Speaker 4: we could have another big financial crisis. Our question for
Speaker 4: you is, in this day and age, could we have
Speaker 4: another nineteen twenty nine like stock market crash? Or is
Speaker 4: the structure just completely different? Are the protections now in place?
Speaker 4: Could it happen again?
Speaker 10: So yes and no, I can explain I know, and
Speaker 10: then if you'd like, I can get you there if
Speaker 10: you want to get if you want to go there. Look,
Speaker 10: the good news is the world is very different today
Speaker 10: from a technology perspective. One of the reasons that nineteen
Speaker 10: twenty nine ever even happened was literally the stock exchange
Speaker 10: was oftentimes off, meaning the numbers that you saw on
Speaker 10: the big board were three four five hours behind the
Speaker 10: actual the actual numbers, and as a result, people were
Speaker 10: just selling indiscriminately because they just thought the whole thing
Speaker 10: didn't even work. I mean, one of the reasons youo'y
Speaker 10: see the famous pictures of people down the New York
Speaker 10: Stock Exchange, and actually the reason they're there, the reason
Speaker 10: they're all in the street, is these are people who
Speaker 10: come from all over New York and the rest of
Speaker 10: the country to try to find out, like, what's happened
Speaker 10: to their money, so that piece of it you take
Speaker 10: off the table because you can get the numbers right
Speaker 10: here and off of your terminal and everything else. There's
Speaker 10: an SEC Insider trading is not legal. It was legal then,
Speaker 10: so all the manipulation that was taking place, there was
Speaker 10: no FDIC, so you had bank runs that took place
Speaker 10: in the aftermath of this crisis. You know, we could
Speaker 10: talk about Glass Stiegel and what that either representator didn't
Speaker 10: or whether you think it's come back or not. But
Speaker 10: here's a bigger one. Capital requirements for banks there were
Speaker 10: none zero back then. So there's a lot of reasons
Speaker 10: you'd like to believe that we can't have another crisis
Speaker 10: of the magnitude we did. And by the way, it's
Speaker 10: also worth noting the crash in nineteen twenty nine wasn't
Speaker 10: preordained that when that happened that we had to have
Speaker 10: a great depression. That was really the first domino of
Speaker 10: a series of dominoes, and then a series of frankly
Speaker 10: terrible policy choices, the Federal Reserve basically doing nothing, the
Speaker 10: implementation of tariffs. We can discuss what that means today.
Speaker 10: You know, there was a gold standard, so there was
Speaker 10: a question about how much money you could throw into
Speaker 10: the system, austerity, all of that that worked against things
Speaker 10: that led to twenty five percent unemployment didn't have to happen,
Speaker 10: if you will.
Speaker 3: I have to say that was one of the things
Speaker 3: in reading your book that I was like, wait, I
Speaker 3: think there was just an assumption that it was the
Speaker 3: market crash that caused the Great Depression.
Speaker 10: Oh yeah, everybody thinks using like there's one bad day
Speaker 10: and then somehow there's a great depression.
Speaker 1: But there's so much in between.
Speaker 3: You know, listen, so many people on your book tours
Speaker 3: like everybody's like this nineteen twenty nine happen again. And
Speaker 3: I do wonder, is there a better, smarter question that
Speaker 3: we should be asking you, having done all this research
Speaker 3: and taken us back there making us feel like we
Speaker 3: were in the room when it happened, You know that
Speaker 3: we should.
Speaker 1: Be asking you, well, look, it didn't happen, and.
Speaker 3: Then can nineteen twenty nine.
Speaker 10: I'll tell you, I'll give you actually how you could
Speaker 10: get to nineteen thirty two today, and that that sort
Speaker 10: of maybe speaks to this. So one of the lessons
Speaker 10: that came out of nineteen twenty nine, it was actually
Speaker 10: the lesson that Ben Bernanke learned when he was doing
Speaker 10: his Great His thesis on the Great Depression at Princeton
Speaker 10: is when there's a crash or a crisis or a panic,
Speaker 10: the playbook is to throw money at the problem. Maybe
Speaker 10: politically unpopular, but that is the lesson. And he did
Speaker 10: it in two thousand and eight, and by the way,
Speaker 10: we did it again during the pandemic. And I think
Speaker 10: we now think that there is a playbook. And by
Speaker 10: the way, there's also therefore a put on the market
Speaker 10: because we now we have the playbook. The one thing
Speaker 10: that's different this time is if you genuinely believe every
Speaker 10: financial crisis to some degree is a function of debt.
Speaker 10: Too much debt in the system. So far we're all
Speaker 10: talking about corporate debt. Really back then, there was in
Speaker 10: nineteen twenty nine there was a budget surplus in America.
Speaker 10: Now we have thirty eight trillion dollars. The question is,
Speaker 10: let's say we have a crash and the government says,
Speaker 10: you know, we're gonna write check for five trillion dollars.
Speaker 10: That's the put. And whether you believe that there is
Speaker 10: some kind of invisible line that turns into a red
Speaker 10: line for the bond market where they say, you know what,
Speaker 10: we like you guys in America. We'll happy to lend
Speaker 10: you money at three or four times the rate that
Speaker 10: we do today. And that's the interest that you're going
Speaker 10: to pay. And then all of a sudden you actually
Speaker 10: do get into some kind of austerity spiral and then
Speaker 10: you're living at a twenty five percent unemployment rate in
Speaker 10: the country. That's I mean, when you really started trying
Speaker 10: to get through the permutations, how do you get there
Speaker 10: in this day and age.
Speaker 1: That's one way.
Speaker 10: One other thing that's interesting today is the technology, as
Speaker 10: bad as it was then, in some.
Speaker 1: Cases, could even be too good today.
Speaker 10: And I think we learned that with the Silicon Valley
Speaker 10: Bank of Failure, where someone goes on Twitter and says,
Speaker 10: I'm pulling my account now that information's accurate. Everybody does
Speaker 10: it over the weekend on their Everybody does it. I
Speaker 10: used to think, oh, this device is so great because
Speaker 10: if there was a bad piece of information, it could
Speaker 10: be corrected very quickly. But if there's an accurate piece
Speaker 10: of information that's not good.
Speaker 3: Right, people act on it quickly.
Speaker 4: Well, So let's talk more about the technology today and
Speaker 4: sort of parallels and the idea of maybe irrational exuberance
Speaker 4: and signs of irrational exuberance right now. In reading the book.
Speaker 4: In the nineteen twenties, there were certainly a lot of that,
Speaker 4: but it seemed like it was, you know, more on
Speaker 4: credit and people buying on margin. Nowadays there's the idea
Speaker 4: of crypto Some of that has been kind of pulled back,
Speaker 4: and in just a couple of months actually since you
Speaker 4: published the book, we've seen some there is.
Speaker 10: A lot of debt in the crypto market, I mean
Speaker 10: shocking amount of leverage.
Speaker 4: So there's there's that side of things. There's prediction markets
Speaker 4: and sort of the money that's going into those, the
Speaker 4: excitement around those. The private credit and concerns about private
Speaker 4: credit that we've seen in the last couple of months,
Speaker 4: any signs of anything there.
Speaker 10: Look, the private credit business has always concerned me because
Speaker 10: of the transparency of it, or frankly, lack of transparence.
Speaker 1: I think if you were to talk to J.
Speaker 10: Powell, he would tell you that, you know, even the
Speaker 10: Federal Reserve doesn't have a full grasp of how inter
Speaker 10: linked all of the debt and credit is in the
Speaker 10: private credit market. Having said that, depending on what numbers
Speaker 10: you're looking at. You could argue, it's only two trillion dollars,
Speaker 10: two trillion dollars a lot of money, but it's not.
Speaker 10: It's not the entire market, its stem So I don't
Speaker 10: know if it's I don't know if it's systemic. By
Speaker 10: the way, I might worry more today about short term treasuries.
Speaker 10: I mean, by the way we the United States have
Speaker 10: been trying to sell short term treasuries like crazy because
Speaker 10: we think that we can get a cheaper rate that way.
Speaker 10: That's also a much more complicated place to be if
Speaker 10: in fact you actually have to pay it back more quickly.
Speaker 3: One of the questions we were kicking around when we're
Speaker 3: thinking about having our discussion with you, is is Wall
Speaker 3: Street greedier today?
Speaker 10: I don't know if it's greedier today. Frankly, I always argue, agreed, Look,
Speaker 10: I think.
Speaker 3: There's greed bad necessarily.
Speaker 10: I think the lesson for me of writing this book
Speaker 10: in some ways was that they didn't use the phrase
Speaker 10: back then. But this idea of fomo, which by the way,
Speaker 10: is driven in part by this phone and TikTok and
Speaker 10: people seeing all sorts of things, by the way, I
Speaker 10: think makes inequality. Actually, I don't know if it makes
Speaker 10: it worse, but the perception of it and just the
Speaker 10: visibility of it. But I do think the sort of
Speaker 10: fomo greed envy, I think that's what's driven. That is
Speaker 10: what's driven people for you know, the test of time,
Speaker 10: and that's.
Speaker 1: What it is.
Speaker 10: Is it Is it worse today than it was before?
Speaker 10: I don't know, except and maybe this gets to the
Speaker 10: inequality piece. I think there are more people who think
Speaker 10: that they're effectively unable to actually make it, and therefore
Speaker 10: more willing to take risk and more willing to sort
Speaker 10: of try to grab this lottery ticket as opposed to
Speaker 10: sort of make it over time slowly.
Speaker 4: So so on that the ultra wealthy today versus the
Speaker 4: ultra wealthy back then, And reading the book, there's a
Speaker 4: lot of you know, people have their yachts and in
Speaker 4: some in some cases actually sailing to work in Lower
Speaker 4: Manhattan on the yacht. Absolutely today, the wealthiest people today,
Speaker 4: how much different are their lives versus the ultra wealthy
Speaker 4: back then, and not with the technology, but I mean
Speaker 4: what they were able to do versus what the normal
Speaker 4: person is able to do. I mean, you have you know, billionaires,
Speaker 4: going to space.
Speaker 10: Now, I think there's a there is a distinction. But look,
Speaker 10: I think you go back and I think of JP
Speaker 10: Morgan's son. He was building the biggest, the biggest yacht
Speaker 10: at the time people would have thought that's like, you know,
Speaker 10: the Gates or Bezos, Yeah, whatever yacht you're thinking of.
Speaker 10: I think that there was a distinction. But I remember
Speaker 10: having an interesting conversation I've enough to drop a name
Speaker 10: with President Obama, interesting on maybe two thousand and fifteen
Speaker 10: about the idea that and I think this is true
Speaker 10: in the twenties, but really true even just twenty.
Speaker 1: Five years ago. I think CEOs people.
Speaker 10: Of means were oftentimes living in the same neighborhoods with
Speaker 10: the people who worked on the factory floor of their companies,
Speaker 10: and as a result, their kids went to the same schools,
Speaker 10: and they went to the same temples and churches, and
Speaker 10: ran into each other at the same restaurants and markets.
Speaker 10: And I think that there's a cohesion there that's important
Speaker 10: for our culture. And I think that increasingly that has
Speaker 10: come apart.
Speaker 3: We were talking with Andrew Ross sork In. The book
Speaker 3: is nineteen twenty nine Inside the Greatest Crash in Wall
Speaker 3: Street history and how it shattered in nation. You know,
Speaker 3: politics got in the way of regulating banks and markets
Speaker 3: back then, and I think it was kind of fascinating
Speaker 3: to see some of that. Is there a parallel to
Speaker 3: that today when you look at the activities Andrew coming
Speaker 3: out of the White House on things like cryptocurrencies, regulatory oversight, Like,
Speaker 3: I just wonder how you see that.
Speaker 10: I'll give you actually a parallel that may seem like
Speaker 10: not like a parallel, but to me is which is
Speaker 10: we're all talking about right now, the politicization potentially and
Speaker 10: independence of the Federal Reserve. I actually remember, as I
Speaker 10: was working on this book, looking at the diaries of
Speaker 10: a lot of the people who worked on the the
Speaker 10: Federal Reserve on the board, and it was still such
Speaker 10: a new institution born in nineteen thirteen that they were
Speaker 10: concerned about the political implications of either raising or lowering
Speaker 10: interest rates at any given moment.
Speaker 1: They actually cared about the politics.
Speaker 9: Now.
Speaker 10: It wasn't that Hoover was telling them exactly what to do,
Speaker 10: but they were so scared not that they were just
Speaker 10: going to get hauled up in front of Congress from
Speaker 10: making the wrong choice, but that the entire thing which
Speaker 10: people still called back then the experiment at that point
Speaker 10: that Congress could effectively disband this very idea, And so
Speaker 10: I raised that only because it's clear to me that
Speaker 10: actually the independence of the FED matters. In fact, one
Speaker 10: of the reasons I think that they didn't act more
Speaker 10: forcefully in nineteen twenty nine and in nineteen thirty and
Speaker 10: after that was in part because there was their own
Speaker 10: concern about the politics, putting aside whether the White House
Speaker 10: was telling them one thing.
Speaker 1: To do or the other.
Speaker 10: Do we have that today, I think less so, or
Speaker 10: at least up until recently less so. I think that
Speaker 10: maybe in the same way that clearly those governors of
Speaker 10: the FED back then were cognizant and nervous about the politics.
Speaker 10: I mean, I don't think this FED things are going
Speaker 10: to be disbanded, but I think that they're cognizant. They
Speaker 10: are very aware, very aware of what the President's saying,
Speaker 10: what their reputations are going to be like as a result,
Speaker 10: what people are saying about them, whether they have to
Speaker 10: do certain things to demonstrate their independence.
Speaker 1: I mean, that's the thing.
Speaker 10: The idea of demonstrating your independence effectively means you might
Speaker 10: even make a decision that might not be the decision
Speaker 10: you'd otherwise make, but you're doing it for your own reputation.
Speaker 10: So yes, I think that all that is not healthy.
Speaker 4: Does the FED keep that in a few months when
Speaker 4: Jay Powell is no longer that chair, And look, we
Speaker 4: can't see the future. We don't know who will be nominated.
Speaker 10: I have a view that is maybe a contrarian this
Speaker 10: in this space, which is there's a board and there's
Speaker 10: a number of people on that board. I've never believed
Speaker 10: that the entire FED is controlled by one human being.
Speaker 1: It just isn't.
Speaker 10: And so I think it's very important who is running it.
Speaker 10: I'm not telling you it isn't. But I do think
Speaker 10: there will be people on that board, those who care
Speaker 10: also about their own independence, right, who will By the way,
Speaker 10: another reason I think Jay Powell may ultimately stay on.
Speaker 3: That board for that reason that you went there.
Speaker 4: Because we're hearing that a lot, right, Because we keep.
Speaker 3: Waiting, we're going to expect to hear an announcement. It
Speaker 3: just keeps getting pushed off, and I just think there's.
Speaker 1: A lot no.
Speaker 10: No, by the way, it's not that I think that
Speaker 10: Japa is going to be in this role for forever.
Speaker 1: They're going to let him stay.
Speaker 10: No, but just that you know, he can stay for
Speaker 10: another two years after this on the board, and I
Speaker 10: think it is more likely that he will stay. And
Speaker 10: in fact, to the extent that the President would somehow
Speaker 10: like to use that spot for somebody that he'd like
Speaker 10: to nominate, I would argue this whole thing has backfired.
Speaker 10: In fact, you know, I was talking to Harvey Schwartz
Speaker 10: at at the New York Economic Club yesterday from Carlisle,
Speaker 10: and he made the point most people, most taxi drivers,
Speaker 10: people in the street didn't care about the the idea
Speaker 10: of FED independence at all. A week ago, they didn't
Speaker 10: even know. I mean, this has been an academic conversation
Speaker 10: for the most part. Now it's like a thing, and
Speaker 10: people constituents across the country all of a sudden care
Speaker 10: about this issue. They may start to call their Congress.
Speaker 10: I mean, it's very interesting. What's happening.
Speaker 4: Yeah, I was actually I've shared this story before, but
Speaker 4: I was with a friend's Sunday night who he follows
Speaker 4: the news, but he's not in financial news or anything,
Speaker 4: and he picks up his phone. He's like, have you
Speaker 4: seen this video from Jay Powell? I was like, why
Speaker 4: why do you care about Jay Powell? And that's how
Speaker 4: big of a deal it was over the weekend.
Speaker 10: And so to me, that's why in some way I
Speaker 10: think Harvey Schwartz is probably right. The idea of fetting
Speaker 10: dependence may may have actually become more important and potentially
Speaker 10: even stronger, at least in the short term.
Speaker 3: Hey, I want to ask you about the process. I
Speaker 3: remember reading Too Big. Default loved it, and you know,
Speaker 3: reported through it and was able to I think, like
Speaker 3: you talk to some of the people who were in
Speaker 3: the room when it all happened. I remember dring to
Speaker 3: John mack on a panel of course, formerly a Morgan
Speaker 3: Stanley and getting that actual physical tech from Mitsubishi. It
Speaker 3: felt like it felt like, excuse me, you were in
Speaker 3: the room like the way I read it, So tell
Speaker 3: me how you did that. What was the box of
Speaker 3: things that you got? You're like, oh my gosh.
Speaker 1: So unfortunately all of these people were not alloted.
Speaker 3: No, and you really.
Speaker 10: I spent about eight years, really, you know, just combing
Speaker 10: through boxes and boxes and materials, some at libraries, some
Speaker 10: from families that were involved in this universities. I was
Speaker 10: able to convince after a lot of knocking on doors
Speaker 10: the Federal Reserve in New York to give me access
Speaker 10: to the Board minutes. That was something that they haven't
Speaker 10: given out over the past one hundred years. They, by
Speaker 10: the way, interesting on their website today you can get
Speaker 10: you know, last month's board minutes. You still can't get
Speaker 10: the nineteen twenty nine of board minutes. But that sort
Speaker 10: of became a treasure map for me. But a lot
Speaker 10: you know, when you see two people talking to each
Speaker 10: other in a room, what's oftentimes happening is I'm finding.
Speaker 1: A series of depositions.
Speaker 10: For example, where Charlie Mitchell, who's the main character of
Speaker 10: the book, ran National City, which becomes a city group.
Speaker 10: You know, he would be interviewed in the deposition or
Speaker 10: in a civil case. There were also criminal cases where
Speaker 10: they would ask him, you know, where were you when
Speaker 10: X happy and said, well, I was walking down the
Speaker 10: street and I got to sixty fifth Street and what
Speaker 10: did you say to so and so? And I said
Speaker 10: such and such. And then they would interview his colleague
Speaker 10: and they'd say, well, you were standing on the corner,
Speaker 10: what did you say to it? And he would say,
Speaker 10: this is what I said. And then they'd interview his wife,
Speaker 10: and so when.
Speaker 1: Though all of those quotes are real.
Speaker 10: And then oftentimes I would go and try to find
Speaker 10: the architecture plans or a photograph of the room so
Speaker 10: I could really try to put you in it, and
Speaker 10: I try to understand what the weather was that day
Speaker 10: and what you know, whether it was light out or not,
Speaker 10: all these sort of little things so that again, if
Speaker 10: you're trying to as a narrator narrator, you can sort
Speaker 10: of feel like you're there.
Speaker 4: Was there a time when you were, you know, in
Speaker 4: some sort of archive over the last ten years doing
Speaker 4: this where you got this sort of treasure trove of
Speaker 4: correspondence between two people and you were like, Okay, this
Speaker 4: is what I needed, This is the ticket, this is
Speaker 4: going to illuminate.
Speaker 10: You know what it was? One of it was like
Speaker 10: or is it just so peaceful? No, it was like
Speaker 10: it would either be raining, like you're in the rainforest
Speaker 10: and it was fabulous, or just like the desert for months,
Speaker 10: and you'd know because you'd go to these places looking
Speaker 10: for stuff and then you'd go through all these boxes
Speaker 10: and there'd be nothing, and then you'd be so depressed
Speaker 10: and then magically something would happen. I mean, I will
Speaker 10: say there was one moment for me still that I
Speaker 10: think was just like a true aha, which is one
Speaker 10: of the main characters the book is Carter Glass, of
Speaker 10: course Stiegel. He was a senator in Virginia, and I
Speaker 10: think I had an impression going in you know today,
Speaker 10: it's off of that that bill is often held up
Speaker 10: by Elizabeth Warren other people. Is this sort of pure
Speaker 10: effort to really break up the banks for all the
Speaker 10: right reasons. And I found a trove of correspondence that showed,
Speaker 10: I think, maybe for the first time, that in fact,
Speaker 10: parts of that bill were actually written by another banker
Speaker 10: trying frankly to screw over JP Morgan. And you think
Speaker 10: to yourself about, you know, money in Washington and lobbying,
Speaker 10: and I thought, oh, the good old days, they didn't
Speaker 10: do things like that. And it's no different.
Speaker 3: Yeah, exactly what I want to.
Speaker 4: Talk about Evangeline Adams. Evangeline the character that everybody wants
Speaker 4: to talk about. Well, we should explain who she has
Speaker 4: for people.
Speaker 10: Ev Angeline Adams is an astrologer. She had an office
Speaker 10: up at Carnegie Hall on fifty seventh Street, and every
Speaker 10: banker in town would go visit with her. She had
Speaker 10: a newsletter. I mean, I like to think deal Book
Speaker 10: is successful. She had a newsletter with one hundred thousand prescribers.
Speaker 10: Back then, people would go visit with her. They'd pay
Speaker 10: fifty dollars an hour to sit with her, and they
Speaker 10: she would ask her what's going up to the stock
Speaker 10: market and she would tell them. They would go off
Speaker 10: and make their trades. And it was just She's just
Speaker 10: an unbelievable character even believe that something like that existed
Speaker 10: and that serious people were really engaged with what she
Speaker 10: was saying and doing.
Speaker 4: It was almost like she was a confidant for some
Speaker 4: of these people, which was pretty surprising to me.
Speaker 10: I almost think of her as a psychiatrist, like a
Speaker 10: therapist for people back then.
Speaker 3: Yeah, yeah, I mean just the similarities, Like I think
Speaker 3: about kind of the Wall Street South that existed right
Speaker 3: with folks in Florida and we have that today.
Speaker 10: Well, Tom Springs, I mean, when I learned that mar
Speaker 10: A Lago happened to be owned by who If Hutton,
Speaker 10: which was just such an indication of what was going
Speaker 10: on in America at that time. And by the way,
Speaker 10: ef Hutton had also moved in I don't know if
Speaker 10: you saw it to the Plaza Hotel. The famous Oakroom,
Speaker 10: which is a bar during progression, has become a brokerage house.
Speaker 3: So do you feel like you have a better understanding
Speaker 3: of what would cause? Like Jamie Diamond said, we may
Speaker 3: not get another great financial crisis, but there will be
Speaker 3: a problem. Like, do you feel like you know? I
Speaker 3: think because everybody keeps saying could we get this again?
Speaker 3: Is it likely? Or do you get a better indication
Speaker 3: of like what we should be watching out for in
Speaker 3: terms of what marks? Is it leveraging?
Speaker 1: Is it's always leveraged.
Speaker 10: It's just it's just it's like a one word answer.
Speaker 10: It's probably boring. Leverage is the match that lights the
Speaker 10: fire every single time. You could have all the bad
Speaker 10: actors you want on stage doing all the bad, greedy
Speaker 10: things you could possibly imagine, but there isn't the leverage piece.
Speaker 10: It's very hard to have a true systemic problem, you know.
Speaker 10: I was shocked to know that at the end of
Speaker 10: nineteen twenty nine the stock market was only down steven
Speaker 10: venteen percent, and I actually think that was a headfake
Speaker 10: for a lot of politicians who were looking at the
Speaker 10: market and saying oh, looks like things are better, But
Speaker 10: most people didn't appreciate that during the fifty percent downdraft
Speaker 10: that had happened prior to that, it wasn't just that
Speaker 10: equities had fallen fifty percent, is that people had taken
Speaker 10: out loans, oftentimes ten to one. So they didn't just ow, oh,
Speaker 10: what the equity was that had fallen. They were getting
Speaker 10: margin calls saying you've got to sell your house, and
Speaker 10: so it's that. And I think we saw that again
Speaker 10: in two thousand and eight with the subprime crisis, and
Speaker 10: I mean, you can it repeats.
Speaker 3: Well, it's funny, you know the Joe Kennedy thing about
Speaker 3: like when is it your shoe shine guy?
Speaker 6: Right?
Speaker 3: And I always think about before the GFC, being on
Speaker 3: a yoga retreat in Mexico and everyone was talking about
Speaker 3: buying real estate, and I thought, this is, like, this
Speaker 3: is just weird, like those little snippets of things as
Speaker 3: an indicator that things are just exuberant irrationally. Perhaps is
Speaker 3: that fair?
Speaker 4: I think it's fair.
Speaker 1: I think Look, I think all of.
Speaker 3: These are with all the d that we have right
Speaker 3: to look at all these are.
Speaker 10: Red flags being thrown on the field, but just because
Speaker 10: maybe I should say yellow flags being thrown on the field,
Speaker 10: and the question is when do they turn red? And
Speaker 10: I think that's the hard part to know you Famously,
Speaker 10: here we are started the segment coming out of Jamie
Speaker 10: Diamond's interview in two thousand and eight. His daughter had
Speaker 10: come to him, as this is all happening and said, Dad,
Speaker 10: what's a financial crisis? And he said it's something that
Speaker 10: happens every seven or eight years. And so I think
Speaker 10: the truth is, well, check your calendar.
Speaker 1: We might be due.
Speaker 4: We're speaking with Andrew Ross sork And, author of nineteen
Speaker 4: twenty nine Inside The Greatest Crash in Wall Street History
Speaker 4: and how it shattered a nation? Does Herbert Hoover get
Speaker 4: a bad rap?
Speaker 1: So?
Speaker 10: I have maybe more empathy for Herbert Hoover than others.
Speaker 10: It's not that I think he made the right decisions.
Speaker 10: In fact, he made a series of very poor decisions.
Speaker 10: It's just that I think, at least historically, the narrative
Speaker 10: that's been disc i him is that he didn't even
Speaker 10: understand what was happening. I think he understood very well.
Speaker 1: What was happening.
Speaker 10: I think he had some of the wrong people in
Speaker 10: his ear, including Andrew Mellon, who was his treasure secretary,
Speaker 10: who had a terrible, unfortunately relationship with early on. I
Speaker 10: think his decision on tariffs was completely misplaced. Why did
Speaker 10: he do that. He did that, by the way, for
Speaker 10: political reasons, because in nineteen twenty eight is he's running
Speaker 10: around the country desperate to get farmers to vote for him.
Speaker 10: He's pledging to them vote for me, I'll help you.
Speaker 3: Wait, wait, wait, are you talking about two thousand and
Speaker 3: twenty years and so?
Speaker 10: But when he hits you know, and by the way,
Speaker 10: nineteen thirty rolls around every economist in America, all the
Speaker 10: bankers are saying, please, don't do this, mister president, and
Speaker 10: he says, well, I have to do it because I
Speaker 10: pledge these folks that I would. So you see these
Speaker 10: sort of repeat things. And it's not that he didn't
Speaker 10: know what he was doing. I think he just didn't understand.
Speaker 10: He was also, unfortunately for him, a terrible, terrible communicator.
Speaker 10: And I will say maybe this is true of all presidents.
Speaker 10: He had this view that he could jawbone people into
Speaker 10: believing that things were better than they really were. And
Speaker 10: I think we're seeing that now, by the way, with
Speaker 10: the last illustration that is a bipartisan tactic by the
Speaker 10: White House.
Speaker 3: What's your biggest takeaway from doing this? My understanding is
Speaker 3: you wanted to do this because people used to ask you,
Speaker 3: you know, nineteen twenty nine versus two thousand and eight.
Speaker 5: Tell me.
Speaker 3: I wanted doing this.
Speaker 10: I mean selfishly, I felt like I now understood what
Speaker 10: actually happened, just as a student of history. I actually
Speaker 10: just genuinely wanted to really get it. I want to
Speaker 10: know who the people were. Wouldn't understand their incentives or
Speaker 10: their motives were, why they were doing what they did.
Speaker 10: And I think ultimately the truth is that we are
Speaker 10: all human beings. Maybe it's fomo, maybe it's envy. Maybe
Speaker 10: we all want more, and that's for better or worse.
Speaker 10: What seems to drive people? And then the question is
Speaker 10: when people get a little too confident, you know, can
Speaker 10: you have the humility effectively to step back and realize
Speaker 10: eyes that maybe that confidence could be misplaced?
Speaker 4: You right, that the anadote to irrational exuberance is not
Speaker 4: regulation by itself, nor skepticism, but humility, the humility to
Speaker 4: know that no system is full proof, no market fully rational,
Speaker 4: and no generation exempt. Do you see that humility out
Speaker 4: there today.
Speaker 1: I said it better than the book said.
Speaker 10: We have the full screen for it. I see there's
Speaker 10: humility today. I see that humility among some Look. I think,
Speaker 10: you know, we're also talked about Warren Buffett. Jamie Diamond
Speaker 10: and David Rum said, we're talking about Warren Buffett.
Speaker 1: I think.
Speaker 10: I think Warren Buffett has a remarkable humility, and when
Speaker 10: it comes to sort of even his own confidence, he
Speaker 10: has humility about then. I think there are a number
Speaker 10: of business leaders and investors who absolutely do. And then
Speaker 10: there's a number of business leaders and operators and investors
Speaker 10: who clearly don't. And I think anybody who walks in
Speaker 10: the door and sits down at this table and can
Speaker 10: tell you exactly what or it thinks they can tell
Speaker 10: you exactly what's going to happen.
Speaker 1: Probably do.
Speaker 3: I think they believe it that.
Speaker 1: Thank you so much, Thank you so much for having me.
Speaker 3: Yeah, we really appreciate Andrew Ross Sorkin. The book is
Speaker 3: nineteen twenty nine, Inside the greatest Crash in Wall Street
Speaker 3: History and how it shattered a nation. I've learned a lot.
Speaker 4: Yeah, Andrew, thanks so much for Johnny, Thank you appreciate it.
Speaker 2: You're listening to the Bloomberg Business Weekdaily podcast. Catch us
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Speaker 3: Plenty ahead in our second hour of the weekend edition
Speaker 3: of Bloomberg Business Week, including skiing outdoors and indoors with
Speaker 3: the CEO of Snow Partners. You've done both, have you?
Speaker 7: I have?
Speaker 4: Yeah. I've been to Big Snow at the American Dream
Speaker 4: Mall once.
Speaker 3: Did you actually ski down the slope?
Speaker 4: I did? Yeah, But it's a great place to bring kids.
Speaker 5: Yeah.
Speaker 4: Not super steep and very short, of course, but guess what, it's.
Speaker 1: Open in the summer, and it was fun.
Speaker 4: It was fun. It's never not fun. Plus from Japanese
Speaker 4: Prime Beef Star chefs working the Counter and large format Martiniz,
Speaker 4: We've got the most exciting US restaurants to check out
Speaker 4: this year.
Speaker 3: Also, while some top chefs are turning your leftovers into
Speaker 3: tasting menu gold, first up this hour prediction markets. They
Speaker 3: are being fueled by platforms such as Kelshi and Polymarket,
Speaker 3: where users make predictions tied to real world outcomes, but
Speaker 3: you can kind of bet on just about everything.
Speaker 4: The idea is simple, Prices move based on collective relief,
Speaker 4: turning crowd sentiment in a real time forecast, and sometimes
Speaker 4: big money on the line.
Speaker 3: A recent Bloomberg Big Take highlighted how prediction platforms are
Speaker 3: pitching themselves as tools for insight, but I catching bets
Speaker 3: on real world events are raising questions about access, integrity,
Speaker 3: and regulation.
Speaker 4: Bloomberg spoke with economists, US politicians, and heads of trading
Speaker 4: firms and hedge funds to understand really what's at stake
Speaker 4: in the prediction market's boom. Tanisa Sikova and Lydia Bayoud
Speaker 4: are part of the team behind the story. Danitza is
Speaker 4: Bloomberg News Cross Asset reporter. Lydia is Bloomberg News Financial
Speaker 4: Regulations reporter. Denisa Here in our Bloomberg Interactive Broker studio,
Speaker 4: Lydia joins us from Bloomberg's Washington DC bureau. H Lydia,
Speaker 4: I want to start with you in Washington because you
Speaker 4: cover financial regulations prediction markets. Is it fair to call
Speaker 4: it gambling?
Speaker 11: I think these days people increasingly are seeing a blurredline
Speaker 11: there to your point about marketing speak, the companies are
Speaker 11: very keen to describe themselves one way. But certainly within Washington,
Speaker 11: I don't think a lot of people are seeing much
Speaker 11: of a difference. And for sure in the sports gaming world,
Speaker 11: they see them as direct competitors.
Speaker 3: Yeah, it's interesting gaming gambling. What exactly is this denis
Speaker 3: to come on in for those who maybe have been
Speaker 3: living under a rock, which is kind of fine. I
Speaker 3: like to kind of hibernate every once in a while.
Speaker 3: Remind us what these prediction markets are all about. Who
Speaker 3: are the big players?
Speaker 12: Yeah, twenty twenty five was a year of prediction markets.
Speaker 12: We had two big firms kind of dominate the space
Speaker 12: of cos Kaushi and Polley Market. Their valuation went through
Speaker 12: the roof. They started from like one to two billions
Speaker 12: and both end of the year in the double digits
Speaker 12: off billions, So.
Speaker 8: Really really rapid growth.
Speaker 12: And we're not only those tech city convoling names. We're
Speaker 12: seeing a lot of traditional finance names. We're seeing CEMI,
Speaker 12: We're seeing a lot of those traditional finance players getting
Speaker 12: involved in the space. So clearly this is interest more
Speaker 12: beyond city convuli.
Speaker 8: The volumes are crazy, So.
Speaker 3: But tell us how it works, Like can tim or
Speaker 3: I can we go out and place the bet like
Speaker 3: how who determines who can do what on the platform?
Speaker 8: Super simple, super easy. So obviously sports betting you have
Speaker 8: to be twenty one for this.
Speaker 12: Eighteen is enough. It's very accessible. You go the bet
Speaker 12: is like as cheap as like a few cents or
Speaker 12: a door and you just go and create it.
Speaker 8: Just very shrimple.
Speaker 1: Yeah you can.
Speaker 3: Create the beat.
Speaker 8: No, you cannot create the bat. You can place that,
Speaker 8: you can ask it.
Speaker 12: Oh yeah, there is a way to claim a market,
Speaker 12: but of course it's up to the platform to create.
Speaker 12: But as we have seen in recent months, there is
Speaker 12: a lot of variety of bets on things that you know,
Speaker 12: anywhere else you cannot bet from the bet on Nicolas
Speaker 12: Maduro being outed to any time of pop culture thing and.
Speaker 4: Any top artists on Spotify this year is on culture.
Speaker 12: Now of course that's very popular any type of mentioned market.
Speaker 12: People are watching like politicians stole on TV and betting
Speaker 12: on every word they say, every twist like people are
Speaker 12: even making fun of this. We famously had the coin
Speaker 12: based CEO knowing that people are watching what he says
Speaker 12: on the earning code, so he was he was crashing
Speaker 12: the market.
Speaker 4: So that's where I want to bring in Lydia, because
Speaker 4: when you're in a world Lydia Bayud, where there is
Speaker 4: one person in control, like a CEO of a company
Speaker 4: like Elon Musk, if the number of tweets that he
Speaker 4: sends between a certain period of time, that's a bet
Speaker 4: on poly market right now, or prediction on poly market
Speaker 4: that one can make. What is the slippery slope that
Speaker 4: opens when one person is in control of the outcome here.
Speaker 11: So that's something that I think regulators and policymakers are
Speaker 11: really grappling with. Particularly, I think the Maduro example that
Speaker 11: we highlight on the story has really made that so
Speaker 11: salient for everyone right now. Generally, federal rules prohibit UH
Speaker 11: federal employees from trading on non public information for their
Speaker 11: own financial game. I think Representative Richie Torres is planning
Speaker 11: to introduce legislation if he hasn't already this week, that
Speaker 11: would like very clearly prohibit that type of trading UH
Speaker 11: on prediction markets. But really we're kind of facing like
Speaker 11: a different regime compared to how I think a lot
Speaker 11: of people think about insider trading that is regulated in
Speaker 11: equities markets or markets overseen by the securities in exchange composition,
Speaker 11: cause you know, if you're in the derivative space and
Speaker 11: you are an energy producer, an agriculture producer, you're expected
Speaker 11: to trade on knowing you know, my crop's really great
Speaker 11: this year, or we're pumping so much uh oil and
Speaker 11: gas out of out of the ground. You know, I'm
Speaker 11: I'm able to hedge my position and sort of let
Speaker 11: my knowledge that I have inform both me and then
Speaker 11: the market. You know, there's kind of a market utility
Speaker 11: argument that is made in those traditional markets, and we're
Speaker 11: seeing that again sort of these blurred lines shift into
Speaker 11: prediction markets, and people sort of grappling like okay, well,
Speaker 11: what's okay insider information? Like what benefits everyone to have
Speaker 11: insiders trading and kind of you know, as they like
Speaker 11: to say, drawing on the wisdom of the crowd and
Speaker 11: doing price improvement, but.
Speaker 3: So not exactly your machines.
Speaker 11: Right, Well, that is the big debate about how are
Speaker 11: you gonna draw that line about you know, if you
Speaker 11: are Elon Musk in your there are mention markets, and
Speaker 11: what you might say to your you know, not to
Speaker 11: pick on Elon anyone, any executive, right and you're gonna
Speaker 11: you know, there are mention markets and what you might
Speaker 11: say in your quarterly call. Do you swing a market
Speaker 11: just for funzies? Do you swing it knowing that you
Speaker 11: know your buddy's buddy's buddy might have some money writing
Speaker 11: on the line, And then how does anyone catch that?
Speaker 8: Should they be catching it?
Speaker 11: There's so many open policy questions that are being asked,
Speaker 11: I think around Washington right now because of these markets.
Speaker 4: Yeah, there's an interesting you know, I'm just going through
Speaker 4: call sit you could spend I know both of you
Speaker 4: did this, Like you get some hours going through this,
Speaker 4: but like, does it really serve the market to need
Speaker 4: to ask if will Taylor Swift and Travis Kelcey be
Speaker 4: married before January?
Speaker 5: First?
Speaker 4: That's important stuff.
Speaker 12: It is important stuff. We had a lot of Bloomberg
Speaker 12: headlines on this as well.
Speaker 8: But indeed did we We did?
Speaker 5: We did?
Speaker 8: But it is important.
Speaker 12: So what a lot of those prediction micro believers says,
Speaker 12: We're going to bring a lot of people through sports.
Speaker 12: So for example, Kuchi has ninety percent of their volumes
Speaker 12: very often coming from sports. So it's pretty hard to
Speaker 12: make the argument that this is a truth machine at
Speaker 12: the moment. But what some people hope and believe is
Speaker 12: that eventually some of those casino elements and of those
Speaker 12: betting elements, we will bring people who want to bet on
Speaker 12: things like economic data, things like maybe people want to hedge,
Speaker 12: Like the hedging scenario is something that has come up
Speaker 12: a lot talking to people. It seems like it's not
Speaker 12: coming anytime soon, but people are saying, Oh, maybe I want.
Speaker 8: To hedge the weather in Florida. Maybe I have a
Speaker 8: house and I can't buy insurance.
Speaker 3: Well, I don't understand that.
Speaker 4: I keep going on topic and I'm trying to take
Speaker 4: them off topic, Like here's another one. For example, what
Speaker 4: will Rachel Maddow say during Jimmy Kimmel Live, Right, Okay,
Speaker 4: Epstein corrupt slash corruption, Ice, Russia, Ukraine, affordable affordability healthcare?
Speaker 3: All right, but there's serious stuff like the FED decision
Speaker 3: in January.
Speaker 4: Helpful what we do?
Speaker 3: And we talked about this doing elections in different things.
Speaker 8: For sure. Elections have proven to be one pretty good time.
Speaker 3: Help me understand though, and well you know, Lydia come
Speaker 3: on back in here. One of the things I'm curious
Speaker 3: about is like who is checking who is making these trades?
Speaker 3: Is KLSHI or is polymarket? Are they actually checking, especially
Speaker 3: when it could be potentially insider trading. Do they know
Speaker 3: exactly who's making these trades? Are they doing due diligence?
Speaker 11: So these exchanges are structured as self regulatory organizations, so
Speaker 11: they're supposed to kind of self monitor, monitor trades and
Speaker 11: root out any potential for market manipulation. Again, the sort
Speaker 11: of where you draw the line between what's okay what's
Speaker 11: not okay on insider trading, that's a judgment call, I think,
Speaker 11: except in all but the most clear cut instances. But
Speaker 11: you know, exchanges can self report information.
Speaker 8: To the CFTC.
Speaker 11: The CFTC can look into it. Again, it operates differently
Speaker 11: than the Securities Exchange Commission.
Speaker 3: But what's the bandwidth for regulators to want to take
Speaker 3: this on.
Speaker 11: The CFTC is chronically underfunded. They have I think roughly
Speaker 11: five hundred staff.
Speaker 2: The sec has for four or five.
Speaker 11: Times maybe ten times that number are not quite but
Speaker 11: they they they are understaffed for the task at hand,
Speaker 11: and there are more applicants. I mean, I think we
Speaker 11: mentioned in the story that there are there's a lot
Speaker 11: of interest driven heavily by sports trading, but also in
Speaker 11: the economics, also in other spaces. And so they're kind
Speaker 11: of underwater in terms of all that there is to
Speaker 11: do for market demand for this space. So I think
Speaker 11: a lot of people are wondering what the CFTC will do.
Speaker 11: But if we look at the new chairman, Michael Sellig,
Speaker 11: when he was an attorney in private practice, he wrote
Speaker 11: a comment letter that was pushing back during the Biden
Speaker 11: administration on any effort to reign in sports prediction markets,
Speaker 11: for example, or really most prediction markets. So I think
Speaker 11: you've got someone who's very you know, he said he's
Speaker 11: going to defer to the courts on how the courts
Speaker 11: might eventually rule on this topic. But at least when
Speaker 11: he was an attorney representing clients, he was very much
Speaker 11: in favor of.
Speaker 4: Them before we let you guys go, Taniza. If we
Speaker 4: think about the universe of prediction markets, Robin Hood's getting
Speaker 4: into it, Calsh and Polymarket are the big ones, and
Speaker 4: they count I think a Trump as advisors to both
Speaker 4: of those. Are these all regulated the same way or
Speaker 4: is one regulated differently than the others.
Speaker 12: So also obviously they have the Trump as advisor, and
Speaker 12: Trump Media is looking into launching a Prediction American and
Speaker 12: a lot of the sports baking companies are looking to
Speaker 12: also get into prediction market the way so Cawhi so
Speaker 12: far is obviously under the CFTC. Polly Market is just
Speaker 12: entering the US. They have this beta test so they're
Speaker 12: only onboarding some users. So currently most of the beds
Speaker 12: on poly Market are actually in this weird regulatory space
Speaker 12: where a lot of them are coming from abroad and
Speaker 12: isn't necessarily regulated under the CFTC.
Speaker 8: We've seen very different decisions.
Speaker 12: For example, there was a market connected with the United
Speaker 12: Care CEO killing, and CFTC asked how shei to remove
Speaker 12: that market, but poly Market, who is not under that jurisdiction,
Speaker 12: actually kept the market. So you can see there are
Speaker 12: very different outcomes depending on the regulation.
Speaker 3: Well, a human land on Mars before California starts a
Speaker 3: high speed rail nineteen percent chance costs twenty cents for
Speaker 3: yest eighty five cents for now.
Speaker 4: Well, what counts as the high speed rail.
Speaker 5: Is like I'm just reading.
Speaker 2: This is the Bloomberg Business Weekdaily Pod. Listen live each
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Speaker 2: and Android Auto with the Bloomberg Business app. You can
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Speaker 2: York station. Just say Alexa played Bloomberg eleven thirty.
Speaker 3: Yes, ski season is underway this winter. Snow story, though,
Speaker 3: has been all over the map, and as you keep
Speaker 3: reminding me, Tim not so great.
Speaker 4: Yeah, the Rockies they've been off to a slow, dry start,
Speaker 4: snowpacks near historic lows before recent storms helped open a
Speaker 4: little more terrain. The Northeast has seen more mixed conditions.
Speaker 4: Parts of Canada and Vermona reporting solid powder days. But
Speaker 4: for those folks who went out west over the holidays,
Speaker 4: they were so disappointed.
Speaker 3: That's a bummer. That's a big bummer. But I feel
Speaker 3: like we've been repeatedly or often more often the last
Speaker 3: few years hearing that story. All Right, That's where Snow
Speaker 3: Partners comes in. With an indoor ski resort. The company
Speaker 3: is keeping the slopes open year round, no matter what
Speaker 3: the weather does outside. Joe Heshan is founder and CEO
Speaker 3: of Snow Partners. He joined us from the company's indoor
Speaker 3: ski slope, the Big Snow American Dream in New Jersey.
Speaker 13: Yeah, we're having an amazing start to the season. The
Speaker 13: whole Northeast really is really having one of the best
Speaker 13: seasons in a few years. We have Ale Nina type
Speaker 13: of weather pattern, which typically you know means cold early.
Speaker 13: So the Holy East Coast is good, Mountain Creek is
Speaker 13: doing fantastic. We're gonna have full connection of all of
Speaker 13: four of our peaks by holiday week, which that's how
Speaker 13: we measure a great season. So it's early, but it's
Speaker 13: looking really good and we're really excited about it.
Speaker 3: How many people are showing up. I'm just curious about
Speaker 3: the kind of demand. You know, we are watching the
Speaker 3: consumers so closely, and I'm just curious, what are you seeing.
Speaker 5: Yeah, that's a great question.
Speaker 13: You know, we're seeing great visits because of a great
Speaker 13: snow and the great conditions. And I'll be honest, we
Speaker 13: talked a lot about what's the economic impact of skiing.
Speaker 13: You know, many people, you know sometimes it's a higher
Speaker 13: expensive sport. And I'll tell you in my experience and
Speaker 13: industry in twenty five thirty years, weather is the biggest indicator.
Speaker 13: If you have good weather, you have great visits. If
Speaker 13: you have bad weather, I've lived through with a pandem,
Speaker 13: I've lived through the Great Recession, and when you have
Speaker 13: great weather, you have great visits. And we're seeing that
Speaker 13: on the East coast overall.
Speaker 4: Right, now, that's good. I mean that's here.
Speaker 3: So your bottom line saying it's weather related it has
Speaker 3: nothing to do with the economy.
Speaker 13: Yeah, I spend more time in the fall thinking about,
Speaker 13: you know, how the squirrel's acting and the farmers all
Speaker 13: the act and things like that. I'm more worried about
Speaker 13: that than the economic situation in the country.
Speaker 4: Okay. So, Joe, You've got an interesting business because you
Speaker 4: operate these two resorts, one of them outdoor, one of
Speaker 4: them indoor. I mean the one that you're in right now.
Speaker 4: I've been to this one and it's a great place
Speaker 4: with little kids to like introduce them to skiing and
Speaker 4: to teach them. Talk a little bit about what's going
Speaker 4: on in the American Dream Mall and and just the
Speaker 4: stability there, because there are a lot of questions about
Speaker 4: the mall and the financial health of the mall. But
Speaker 4: are you guys okay, even if the mall as a
Speaker 4: whole is having a challenge.
Speaker 13: Yeah, that's also a great question. We've been here since
Speaker 13: December fifth, twenty nineteen. We were one of the first
Speaker 13: tenants to work with Triple five. I've the people who
Speaker 13: operate the mall, and we've been successful every year since
Speaker 13: twenty nineteen. We've had constant growth from our revenue side.
Speaker 13: Our first year of opening, obviously within six months was
Speaker 13: COVID and the pandemic, so we're a little slow on
Speaker 13: getting groups up, but now we have great group visitation.
Speaker 13: I'm very happy with the performance at Big Snow, and
Speaker 13: this is going into our busiest time of year.
Speaker 5: Where we're going to see really great visits the mall. Overall.
Speaker 13: It's funny back in twenty nineteen, I got asked that
Speaker 13: question all the time, and you might have been the
Speaker 13: first person to ask me that question in the last
Speaker 13: two years, because as you go through the mall, especially
Speaker 13: this time Yere's, it's really there's a lot going on here,
Speaker 13: a lot of entertainment, a lot of new tenants have
Speaker 13: opened up. We're really happy here and we're really happy
Speaker 13: about the business we have here as well.
Speaker 4: Okay, cool, So where are the people and that's three
Speaker 4: sixty five? You're there. You guys are open every day
Speaker 4: every day?
Speaker 5: Well we three sixty four. We close on Thanksgiving?
Speaker 4: Okay, that's the one day you're not open. How's demand
Speaker 4: they're looking because it doesn't matter in terms of snow
Speaker 4: because it's all man made, it's indoor. What does demand
Speaker 4: look like in terms of is it cyclical, is it
Speaker 4: stronger now than it was, because that could give us
Speaker 4: a good barometer of the economy.
Speaker 5: Yeah.
Speaker 13: The most interesting thing about operating a snow dome that's
Speaker 13: open year round is everyone thinks that it's going to
Speaker 13: be busy in the summertime because that's when other resorts
Speaker 13: are closed. But we're busier in the winter when they
Speaker 13: could go to other places. So when winter is on
Speaker 13: people's mind, when snow's in the market. You know, right now,
Speaker 13: we've had snow in Central Park already this year, so
Speaker 13: that drives tons of visitation because when it's cold outside,
Speaker 13: people just think winter, they think skiing, and that's where
Speaker 13: most of it becomes. Springtimes, our slow is time year,
Speaker 13: Summer slightly busier than spring, and then fall starts to
Speaker 13: ramp up with people from all over the country coming
Speaker 13: to get their first terms on.
Speaker 3: Snowe Hey, Joe, I'm curious, you know what your cost
Speaker 3: equation is. You know, we're in an environment where people
Speaker 3: still talk about everything costing a lot. We were talking
Speaker 3: with folks representative of the restaurant industry how they're dealing
Speaker 3: with labor and food and lack of immigration and that
Speaker 3: is certainly impacting them. What are your what's your cost
Speaker 3: structure look like right now?
Speaker 13: Yeah, I think for us, definitely things when utilities get
Speaker 13: more expensive here Big Snow, that's definitely a consideration for us.
Speaker 5: As far as labor, you know, we've we've always.
Speaker 13: Since we opened, we've strived to be one of the
Speaker 13: top workplaces, so we've always paid a very competitive hourly
Speaker 13: wage to our team here and then for as far
Speaker 13: as guests and what it costs at Big Snow specifically,
Speaker 13: we've tried really hard to take the barriers of why
Speaker 13: people don't try skiing in the first place, and we
Speaker 13: tried to take those barriers out of equation and those
Speaker 13: barriers are distant, so we're really close to the population
Speaker 13: here at Big Snow.
Speaker 5: But it's also the price of entry.
Speaker 13: So so you can come and have a package for
Speaker 13: you know, well under one hundred dollars and that gets
Speaker 13: you a lesson, gets you rentals, all the equipment, outerwear, jacket,
Speaker 13: and your access on snow.
Speaker 5: So but cost is definitely over.
Speaker 13: The years, and that's something that We're always tracking to
Speaker 13: figure out how to become more efficient.
Speaker 5: For sure, there's been.
Speaker 4: So much consolidation in the ski industry. You have Alterra
Speaker 4: Mountain Company with the Icon Pass. You have Veil Resorts
Speaker 4: with the Epic Pass, which kind of invented that in
Speaker 4: the early two thousands. Rob Katz and Veil doing that.
Speaker 4: You guys are independent, though, is it How tough is
Speaker 4: it to be an independent operator in twenty twenty five
Speaker 4: twenty twenty six?
Speaker 13: I think it depends on the geography and where you're located.
Speaker 13: We're very lucky that both of our businesses are are
Speaker 13: directly related to population. We do a lot of new visits.
Speaker 13: We have a lot of core local customers in Mountain Creek.
Speaker 13: Up here in New Jersey. We have is our sixtieth
Speaker 13: year of operation, so we have really good communities. People
Speaker 13: that learn to ski there and the sixties are now
Speaker 13: taking their grandkids to learn to ski.
Speaker 5: So for us, it hasn't impacted us.
Speaker 13: But you know, people aren't deciding which way to go,
Speaker 13: and that actually brings up a really interesting point of
Speaker 13: you know, Veil a huge fan with Veil has done
Speaker 13: a huge fan of what all Terra has done. We've
Speaker 13: also seen a lot of independenceries words come together with
Speaker 13: things like the Indie Pass. We actually released a new
Speaker 13: product this year with a bunch of partners called the
Speaker 13: Snow Triple Play because what we found out that we
Speaker 13: are really introducing a lot of people to this sport
Speaker 13: and we can kind of give those people a warm
Speaker 13: handoff to other.
Speaker 5: Resorts all across the Northeast. So we've seen a lot
Speaker 5: of success in that.
Speaker 3: It's really fascinating kind of going through all your business
Speaker 3: you've got, I guess it looks like an app manager
Speaker 3: resort from an iPhone. I mean, talk to us about
Speaker 3: like what the business strategy is and where's the real
Speaker 3: growth is it, you know, creating more of what's behind
Speaker 3: you in other places around the country or even around
Speaker 3: the world. I mean, where's the growth or how do
Speaker 3: you create either organic growth or acquisition growth for your business.
Speaker 13: Yeah, that's so when you look at Big Snow, we
Speaker 13: certainly want to expand and build more Big Snows, And
Speaker 13: I think the reason that is such a great opportunity
Speaker 13: is because you can design them to expect you can
Speaker 13: roll them out, and you can operate them really efficiently,
Speaker 13: kind of like the Jack Welsh, variation is evil situation.
Speaker 13: Without the variation, we can really figure out how to
Speaker 13: operate an efficiency. So big snow is really important in
Speaker 13: our future plan. But we are most excited about Snowcloud,
Speaker 13: which you mentioned in the Technology and you also mentioned
Speaker 13: earlier things like.
Speaker 5: The epic Pass and icon Pass.
Speaker 13: Over the last decade, we've seen massive innovations with those
Speaker 13: past products. But I think the next ten years the
Speaker 13: disruption in the ski space is going to be driven
Speaker 13: by technology.
Speaker 5: I always going to be able with.
Speaker 13: I think it's going to be the way resorts operate
Speaker 13: their business, the platforms they use to relate with customers.
Speaker 13: And I think the biggest change is about to happen
Speaker 13: which we've been excited about is the AI piece, which
Speaker 13: I know a lot of people talk about AI and
Speaker 13: they don't see what that's going to look like and
Speaker 13: how that's going to feel, And the way we see
Speaker 13: it and what we've been building our platform to do
Speaker 13: is you should be worth dealing with your own families, agent,
Speaker 13: booking anything. I think that's the way this is going
Speaker 13: is everyone will have their own agent yea, And if
Speaker 13: you want to go skiing, you're going to say to
Speaker 13: your agent, I want to go skiing, where should I go?
Speaker 13: That agent will then broker with agents at different resorts,
Speaker 13: and I think it's going to completely change change the
Speaker 13: way people plan trips, the way they buy passes. So
Speaker 13: I think in many ways, what we've seen with the
Speaker 13: Epic Pass and Icon Pass and other passes, we're going
Speaker 13: to see a complete change in the relationship of how
Speaker 13: people buy products, plan experiences, and it's all going to
Speaker 13: be hyper personalized. Like, yeah, I have this thing I
Speaker 13: would say is like, have my people call your people.
Speaker 13: That's like the joke that they've always said on cartoons,
Speaker 13: and that's the way I think people are going to
Speaker 13: plan their trips.
Speaker 3: You're talking about agentic AI.
Speaker 13: Right, absolutely, Yeah, yeah, agentic ai where everyone has their agent,
Speaker 13: each business has their own agent. Different Like I see
Speaker 13: a world in the next few years where it's not
Speaker 13: just Epic and Icon as the leaders. I think there's
Speaker 13: probably twenty thirty forty flavors. The technology we're building allows
Speaker 13: any resorts to team up together have different segmentations.
Speaker 5: It's really exciting.
Speaker 3: Totally get it. Heyess. One thing I want to ask
Speaker 3: you climate change, is that creating opportunities for you, especially
Speaker 3: when it comes to inside kind of ski experiences.
Speaker 5: You know.
Speaker 13: I think it's it's definitely easier to operate a business
Speaker 13: when you don't have to worry about the weather. You know,
Speaker 13: we have our outdoor resort and our indoor resort, and
Speaker 13: it's really easy to You know, what's interesting about operating
Speaker 13: Big Snow is it's kind of like retail where I
Speaker 13: can literally predict what we're going to do almost every
Speaker 13: day because of it's so consistent. When you have you
Speaker 13: know the changes in the climate and you have different variables,
Speaker 13: you need to be ready for what if we have
Speaker 13: a slow start like we're seeing out in the West
Speaker 13: right now. And I always remind people that you have
Speaker 13: to have a good pre soul strategy. So Vale has
Speaker 13: done great with the Epic Pass. They've sold them, same
Speaker 13: thing with al Terra with Icon Pass. Resorts know how
Speaker 13: to make sure they protect themselves early. And I always
Speaker 13: tell the skiers who have I have a bunch of
Speaker 13: trips planned out West this year, don't judge the early
Speaker 13: start for the whole season. This could still be an
Speaker 13: amazing season out West. I was a Jackson Hole on Monday.
Speaker 13: They're getting a massive storm this weekend, so you know,
Speaker 13: I wouldn't give up on the season on the West.
Speaker 13: I think we have good, good ski days ahead of us.
Speaker 4: Hey, Joe. To Carol's point about other parts of the business,
Speaker 4: if we think about snow partners and the Umbrella organization,
Speaker 4: how much revenue comes from actual operations of a big
Speaker 4: snow and Mountain Creek versus SoundCloud snow operating business and
Speaker 4: snow Go the bikes that you manufacture and sell.
Speaker 13: Yeah, so revenue wise, we're probably so high level.
Speaker 5: Think of like one hundred million in revenue. We're doing
Speaker 5: sixteen operations at this point.
Speaker 13: The rest of it is primarily focused in Snowcloud or
Speaker 13: software technology.
Speaker 5: As far as where the growth opportunity.
Speaker 13: We think we have, we think Snowcloud is going to
Speaker 13: be the Shopify experiences. We work with Stripe on our
Speaker 13: platform where we're really lucky to be one of their
Speaker 13: category leaders in the space that we're in, and I
Speaker 13: think we can see growth with Snowcloud that's not just
Speaker 13: in the ski business, but water parks and amusement parks.
Speaker 13: I feel a way that Shopify has opened up the
Speaker 13: doors for people who want to be in retail at
Speaker 13: all sizes and levels. I think that's what we're truly
Speaker 13: trying to build with Snowcloud.
Speaker 5: So that right now.
Speaker 13: Is not our largest business, but I always tell people
Speaker 13: is by far our largest opportunity.
Speaker 3: Just gonna say, I love the Mountain Creek water Park.
Speaker 3: Did that with my daughter.
Speaker 2: It's pretty wild.
Speaker 3: It's pretty wild. I actually had the wind kicked out
Speaker 3: of me out of one of the riots, but it
Speaker 3: was a lot of fun.
Speaker 5: No water pike like like that in the world, one
Speaker 5: of us kind of crazy.
Speaker 4: Joe, appreciate you joining us. Joe heshan founder and CEO
Speaker 4: of snow Partners. I'm going to see him on the slopes.
Speaker 1: Yeah, you should join the latter park. It's wide.
Speaker 4: Cool. All right, We'll see you later. Joe Heshian, founder
Speaker 4: and CEO at snow Partners.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 3: A new year, and get ready to step up to
Speaker 3: the counter for some of the year's most anticipated cooking.
Speaker 3: We're diving into the US dining scene and things are
Speaker 3: geting deliciously creative, from some of the.
Speaker 4: Most exciting new restaurants opening this year to turning waste
Speaker 4: into tasting menu experiences with Morris Bloomberg Pursuits Food editor Kate,
Speaker 4: creator Kate. When I was reading the story about the counters,
Speaker 4: I brought myself back to this fall late summer. Sebastian,
Speaker 4: who's in the control room right now, Carol, who's right
Speaker 4: across from me, next to you. We were in southern California.
Speaker 4: We were in Orange County, and my sister found out
Speaker 4: we were there. She said, you have to go to
Speaker 4: this one restaurant. So I was so excited because whenever
Speaker 4: we travel together, we tried to do like one really
Speaker 4: nice meal together. It's like a highlight. We go to
Speaker 4: the restaurant, we walk in, it's counter service, and we
Speaker 4: all look at each other and we say, this is
Speaker 4: not the experience we want tonight. Did we make a
Speaker 4: horrible mistake?
Speaker 14: So that was twenty twenty five, and maybe your reaction
Speaker 14: will be a little bit different if that scene is
Speaker 14: recreated in twenty twenty six, because it is going to
Speaker 14: be a big trend. There's so many fun restaurants coming
Speaker 14: opening around the country this year. One of the big
Speaker 14: trends that we're seeing is counter service, where you do
Speaker 14: have to do some of the work yourself. You walk up,
Speaker 14: you order, you should be sitting at a table. If
Speaker 14: they had you standing up, then that's not ideal.
Speaker 4: But oh, we just walked in and walked out, walked out.
Speaker 3: We just felt like it was not going to be
Speaker 3: as nice.
Speaker 14: Well it's it's not. There's definitely some there's definitely something
Speaker 14: missing from it. But the reality is I mean, you
Speaker 14: guys go out to eat, you know what a good
Speaker 14: restaurant is eating ass gotten so expensive it's crazy. I
Speaker 14: mean it's been coming and coming for a while, but
Speaker 14: especially here in New York. You know what, you can't,
Speaker 14: like walk into a restaurant and order a burger and
Speaker 14: a drink and not get a check that's like one
Speaker 14: hundred dollars, you know, and it's crazy.
Speaker 3: It's crazy.
Speaker 14: I mean it's based on reality because, as you know,
Speaker 14: food prices are going up, labor prices are going up.
Speaker 14: Real estate isn't free in New York City, so there's
Speaker 14: a lot of factors.
Speaker 8: Going into it.
Speaker 14: But nonetheless, I think people, I think the sticker shock
Speaker 14: of it is starting to set in and certainly, you know,
Speaker 14: at the margins for restaurants urs are slimmer than ever,
Speaker 14: so they are like, huh, how do we make this?
Speaker 14: How can we cut costs? And so what they are
Speaker 14: doing now is they're increasingly looking at counter options because
Speaker 14: it also fits like the comfort food mentality, so it
Speaker 14: allows you to cut back on labor a little bit.
Speaker 14: It can streamline a restaurant design because you don't need
Speaker 14: like a lot of places to set up to have
Speaker 14: like servers putting things down. So yes, I predict that
Speaker 14: in twenty twenty six you'll walk up to a counter
Speaker 14: because they're also going.
Speaker 1: To be really cool.
Speaker 14: In Chicago. This guy who's like a barbecue champion is
Speaker 14: opening Fat Back. In New Orleans alone Shia, who's a
Speaker 14: really celebrated Israeli chef, is opening Safta's Table and he's
Speaker 14: going to serve food all day long. And then it's
Speaker 14: also happening in DC a place called Brie Bunny. It
Speaker 14: used to be a restaurant called Tail Up Goat that
Speaker 14: was fantastic, it opened a decade ago. And these are
Speaker 14: some very talented restauranteurs and now they're saying, you know what,
Speaker 14: let's go to a different model that's sort of like
Speaker 14: modern American cooking seasonal menus, and and it's going to
Speaker 14: allow us to keep our prices a little bit stable
Speaker 14: instead of ramping up.
Speaker 3: I love feeding the decor of this one, rag rugs,
Speaker 3: patchwork tile floors and string lights, like it's just like
Speaker 3: it just sounds charming to me.
Speaker 14: Carol, You're going to walk in there and not walk out,
Speaker 14: I predict I that's my prediction for twenty twenty six.
Speaker 3: The one thing I also thought was kind of interesting
Speaker 3: is it Maize and Denver. It's eighteen course menu and
Speaker 3: you moved through a series of spaces. I thought that
Speaker 3: was also kind of interesting.
Speaker 8: Isn't that cool?
Speaker 14: Yeah? I mean that isn't don't think like tasting menus
Speaker 14: are dead and gone and that nobody's you're only going
Speaker 14: to be able to eat an account. There will be
Speaker 14: there will be opportunities for you to sit down and
Speaker 14: have some really elite kind of food. And that's happening
Speaker 14: in Denver. This couple, Johnny Kirel, I think, and his
Speaker 14: wife have really spotlighted Mexican food and authentic ingredients, and
Speaker 14: so they're obsessed with maize and corn and so they
Speaker 14: have started of an experiential dining experience, and I think
Speaker 14: that's really fun. That makes me want to go to
Speaker 14: Denver to eat.
Speaker 4: I want to talk about everything on I feel like
Speaker 4: you're listening Matdaily podcast afternoons from.
Speaker 8: I think it does a lot.
Speaker 14: There's still like there's still a sort of faucet of
Speaker 14: high end Japanese sushi masters and wagu chefs who see
Speaker 14: a lot of opportunity in New York and Miami too,
Speaker 14: and who are opening restaurants here, so you will continue
Speaker 14: to see omakasi. I will say, I'm I'm really eyes on.
Speaker 14: I think people are just have are cutting back on
Speaker 14: going out and and or will cut back on going out.
Speaker 14: And so whereas like a year or two ago, we
Speaker 14: would see some of these amakasis priced at like four
Speaker 14: ninety five or five ninety five, and that means you're
Speaker 14: spending like eight hundred dollars, right, Tim, if you take
Speaker 14: me and Carol out, you like get ready to know.
Speaker 4: I to tell you, guys, I was in San Francisco
Speaker 4: last year for a week and one of the things
Speaker 4: I wanted to do was just go to some good restaurants.
Speaker 4: So I texted a friend in San Francisco. I said,
Speaker 4: I just want really good sushi. Where do I go tonight?
Speaker 4: And he texted me a list of like five places.
Speaker 4: I looked up every single one of them. They were
Speaker 4: all Oma case only, and let's just say, my managers
Speaker 4: would not have been happy had I expense to me
Speaker 4: out at those places.
Speaker 14: No, I think so, I think now. I mean, it's
Speaker 14: still obviously you're going to spend three figures on these menus,
Speaker 14: but I'm seeing more a little bit more like two
Speaker 14: ninety five and low three hundreds, which is still so
Speaker 14: much money, but it's like, at least it's like two
Speaker 14: thirds of white.
Speaker 4: I think you're going to be taking us there.
Speaker 3: Let's go well, you know, gosh, I feel like, Kate,
Speaker 3: we've talked to you. I just want to just go big,
Speaker 3: broad if I can for a moment, because I feel
Speaker 3: like we've talked with you through so many different cycles,
Speaker 3: and we've had good cycles, and then we had the
Speaker 3: pandemic and everybody had a shift, like what was last
Speaker 3: year like? And where is the restaurant industry some of
Speaker 3: these major cities.
Speaker 8: It's such a good question, Carol.
Speaker 14: I think if I look especially at New York City
Speaker 14: because that's my home, and it's the most exciting food
Speaker 14: seat in the world. I will say that I think
Speaker 14: everything was on the front burner. There was so much.
Speaker 14: There was so much happening with like go here, do this,
Speaker 14: go to the corner store, go to trees. You know,
Speaker 14: it was like it was seemed like a constant highlight reel.
Speaker 14: And there's still like so much of that Yolo mentality
Speaker 14: where you really feel like I'm going to do this,
Speaker 14: like I've got to have like a corn experience tasting menu.
Speaker 14: And I think this year is the year that we
Speaker 14: step back a little bit and things dial down a
Speaker 14: little bit. In New York City feels a little bit
Speaker 14: more lived in, and you go, like you keep supporting.
Speaker 14: Something that happened right after the pandemic is that people
Speaker 14: really supported their neighborhood restaurants and then there was all
Speaker 14: this pent up energy though, and so it went from
Speaker 14: maybe it's burning your local restaurants, but really going big
Speaker 14: to the places that you saw over social media. And
Speaker 14: I think that calms down now. I think that places
Speaker 14: the biggest restaurant opening and it's not on our list
Speaker 14: because it opened at the end of last year, but
Speaker 14: it's called stars. It's a little wine bar. It's on
Speaker 14: East twelfth Street. It's like a horseshoe counter. It was
Speaker 14: apparently inspired by Grand Central oyster bar, except that it
Speaker 14: only seats like twenty, like you only like twenty people
Speaker 14: can fit in it. But it's a wine bar with
Speaker 14: a fantastic array of snacks. They have these deviled eggs
Speaker 14: that have been getting a lot of attention with these
Speaker 14: little pastry stars on them. They have a shrimp sandwich
Speaker 14: that's bananas with like a really good crusty, you know,
Speaker 14: crusty buttered, griddled bread on it, surrounding these like plump shrimp.
Speaker 14: And you can walk out of there for like maybe
Speaker 14: one hundred dollars, Like maybe you'll spend one hundred dollars
Speaker 14: if you're drinking some really good glasses of wine. But
Speaker 14: you can also go out of there for like sixty
Speaker 14: bucks and then go have dinner somewhere else, or go
Speaker 14: home and cook your dinner. And I think we've written
Speaker 14: about that but before. But wine bars are like here
Speaker 14: to meet your economic moment, and New York City hasn't
Speaker 14: done wine bar so well, and now it starts.
Speaker 4: Now can we talk some trash?
Speaker 3: Yes, I love this story. They love talking track love
Speaker 3: this story.
Speaker 4: So this is this. I was reading this, this story
Speaker 4: by Emma Court Kay creator edited it, and I was
Speaker 4: reading and I was thinking, this is so up Carol's alley.
Speaker 4: Because Carol's not somebody to waste anything.
Speaker 1: We try not, but we.
Speaker 4: Talk a lot about just personally, how much food goes
Speaker 4: to waste, Like you know, spoiled salad in the fridge
Speaker 4: ends up we end up throwing it away. This is
Speaker 4: a huge issue for larger establishments like hotels and large
Speaker 4: restaurants too.
Speaker 14: Food waste is I'm so with you, Carol. It makes
Speaker 14: me nuts, and it gets wasted on every level. It
Speaker 14: gets wasted in your home, but it especially gets wasted
Speaker 14: in kitchens and you know, commercial operations, and it happens
Speaker 14: on every It happens in every stage. It happens when
Speaker 14: you're preparing food and you throw out trimmings. There's plate
Speaker 14: waste that also has a lot to do with it.
Speaker 14: I'm interested to see how that evolves with as more
Speaker 14: and more people are on like GLP one drugs, and
Speaker 14: because portions I think are becoming like a little bit
Speaker 14: more reasonable because here, at least here in the US,
Speaker 14: and so hopefully that play waste is going to decrease
Speaker 14: a bit. But there's the restaurant in the East Village
Speaker 14: called Hags that you can pay up to one hundred
Speaker 14: and sixty dollars for your food. But the chef specializes
Speaker 14: in maximizing her trimmings, Like she grows mushrooms, Like she
Speaker 14: uses the compost in her kitchen to grow mushrooms that
Speaker 14: feature in like a beautiful like risotto. And she's using
Speaker 14: like squash trimmings to make like the soup and every
Speaker 14: single thing that you can think about that you and
Speaker 14: I might throw in the garbage. She's like, nope, Like
Speaker 14: I see other opportunities.
Speaker 3: I think it's really it's brilliant because if you think
Speaker 3: about right sometimes to create something, especially at a really
Speaker 3: nice restaurant, like how much food either they're cutting away
Speaker 3: or so on. But it's also like this whole area
Speaker 3: of companies that have come up if you will, to
Speaker 3: help these restaurants like monitor their foods on and so forth.
Speaker 3: So there's this whole other industry, cottage industry or whatever
Speaker 3: you want to call it that has popped up.
Speaker 14: Well it's so smart. Yeah, there's a company called Winnow
Speaker 14: that analyzes you. This is some proprietary technology to analyze
Speaker 14: the trash and see what you might be able to use.
Speaker 14: And I think they've been working with some big hotel
Speaker 14: groups like the Four Seasons and now the Four Seasons Houston.
Speaker 14: I think was making like a case of da or
Speaker 14: something that ended up being seventy percent waste. That isn't
Speaker 14: that fantastic, Like it saves them money, it's better for
Speaker 14: the environment, all of it.
Speaker 4: It's not just customer plates though, that where the waste
Speaker 4: comes from. That's about a third of the waste according
Speaker 4: to this story. This is the Waste and Resources Action
Speaker 4: Program data, but forty five percent of it comes from
Speaker 4: food prep. Twenty one percent comes from spoilage and the
Speaker 4: food prep side of things. It kind of makes sense
Speaker 4: and fine dining because it's like they want to present
Speaker 4: like the most ideal part of whatever they're cutting, whether
Speaker 4: that's a piece of meat, whether it's a filet, or
Speaker 4: whether it's a fruit or vegetable.
Speaker 14: Right, no, exactly, but I think that the onus of
Speaker 14: that that certainly was the case like a decade ago,
Speaker 14: and now especially it find dining, because the margins are
Speaker 14: so thin, they really have to figure out something else
Speaker 14: to do with like that, with a less attractive piece
Speaker 14: of duck, it's not going on the customer's play.
Speaker 4: Well, are we going to start accepting that as customers?
Speaker 9: Like?
Speaker 4: What do you do with that piece of duck? If
Speaker 4: the person who walks into that fine dining establishment doesn't
Speaker 4: want that.
Speaker 14: I mean it depends. There's different categories of diners. And
Speaker 14: you know there's some people who are like, oh no,
Speaker 14: like how could you? But I think now there's so much.
Speaker 14: You know, people love something imperfect because it generally tells
Speaker 14: a story. And I say, man chefs and restaurants, yeah,
Speaker 14: me and you, Carol. But I think people, most diners,
Speaker 14: especially if they're like gen Z, are not necessarily looking
Speaker 14: for the exact perfect siceve Wago.
Speaker 3: Love love, love this story. Actually, there's a bunch of
Speaker 3: people in the story. I want to get on our
Speaker 3: talk about kind.
Speaker 4: They bring some food. I don't need the mushrooms.
Speaker 1: The deal, you know, Tim eats, I don't. I don't
Speaker 1: during our show.
Speaker 4: The mushroom powder. I don't need the mushroom powder. But
Speaker 4: anything you.
Speaker 14: Can let them know that it can be part of
Speaker 14: your rider.
Speaker 1: Countertable.
Speaker 8: Tim's always eating.
Speaker 3: Yeah, yummy, Kate, Thank you so much. Great to have
Speaker 3: you in town too.
Speaker 4: That's Kate, Creator, Bloomberg Pursuits Food Editor.
Speaker 3: And that wraps up our weekend edition of Bloomberg Business
Speaker 3: Week on Bloomberg Radio. Thank you so much for joining us.
Speaker 4: I'm Tim Stenefeck and he's hungry.
Speaker 3: And I'm Carol Master. I might be hungry to have
Speaker 3: a great and safe weekend everyone.
Speaker 2: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
Speaker 2: and anywhere else you get your podcasts. Listen live weekday
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