Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. A
Speaker 1: big question, especially as the big tech giants sell off
Speaker 1: today and exert an incredible amount of control over markets,
Speaker 1: is how much control should they have over the tech space?
Speaker 1: How big should they be allowed to get? And weighing
Speaker 1: in on that as Tim Woo, Professor Law of Law
Speaker 1: at Columbia Law School, also a contributing opinion writer at
Speaker 1: The New York Times, author of a new book, The
Speaker 1: Curse of bigness Antitrust in the New Gilded Age, And
Speaker 1: just if people don't know who you are, your background
Speaker 1: is tremendous. You've worked in the White House, You've worked
Speaker 1: at the Federal Trade Commission, You've been a law clerk
Speaker 1: for Judge Postner and Justice Brier. So can we just
Speaker 1: start with why did you write this book? Now? I
Speaker 1: think the time has come to start really engaging with
Speaker 1: these questions again, age old questions about how the US
Speaker 1: economy is structured and how much monopoly and oligopoly we allow.
Speaker 1: We face these questions before hundred years ago. I think
Speaker 1: it's time to face them once again. Is there a
Speaker 1: difference between a consumer and a citizen? Uh? Well, they're
Speaker 1: you know, technically the same people. But I think that
Speaker 1: we have more interests than just our identities as as
Speaker 1: as consumers. In other words, I think some of the
Speaker 1: reasons you might want anti trust enforcement our citizen interests.
Speaker 1: That the political stakes of too much private control over
Speaker 1: political outcomes. Well, yeah, that was one thing. You sort
Speaker 1: of drew a parallel between monopolies and fascism and that
Speaker 1: basically democracy depends on a certain sort of equality of businesses.
Speaker 1: Can you explain. Yeah, sure, Now, I mean this is
Speaker 1: a historic and they every monopolies a fascist enterprise. But
Speaker 1: there there is this there's this dark history I think
Speaker 1: where countries allow too much domination of the economy by monopolies,
Speaker 1: too much power centralized in private companies, have shown themselves
Speaker 1: vulnerable to to to to dictatorship. Um. You know, the
Speaker 1: most strong examples were Italy in Germany in the nineteen thirties,
Speaker 1: and I think when people could really angry, if if,
Speaker 1: if their needs aren't meant, they feel that the economic
Speaker 1: system is completely unaccountable, they start turning to stronger, uh
Speaker 1: and more radical leaders. And I'm very worried about the
Speaker 1: politics of our time going in the same direction that
Speaker 1: we saw in the twenty century. Do you see a
Speaker 1: time when there will be government action to break up
Speaker 1: companies such as Google and Facebook? I think we're do um.
Speaker 1: There hasn't been a major case in more than twenty years.
Speaker 1: And it was once an American tradition that when you
Speaker 1: have a dominant monopolist of company that dominates an industry
Speaker 1: like Microsoft, off A T and T al Cola standard oil,
Speaker 1: you go back that the adjustice Department would take a
Speaker 1: run at them. Uh. They didn't always win, but they
Speaker 1: broke up a lot. So I would imagine we are
Speaker 1: do So I just want to push back a little
Speaker 1: bit because you talked about how big corporations can kind
Speaker 1: of exert their power over the political scenario in a
Speaker 1: disproportionate way. Someone could argue that actually they could also
Speaker 1: exert their power, uh, you know, in ways that go
Speaker 1: against the political establishment and have a lot of power,
Speaker 1: whether it's uh, you know, reducing greenhouse emissions, which is
Speaker 1: what we're seeing, or whether it's increasing diversity among staff.
Speaker 1: So I mean there's a flip side of that too. No, yeah, no,
Speaker 1: I hear you. It just depends on what kind of
Speaker 1: government you believe in, you know, whether you think that
Speaker 1: the decisions should mainly be made by private industry, which
Speaker 1: even if they make good decisions, you still have to
Speaker 1: wonder why is that their decision? Or if you essentially
Speaker 1: believe in democracy, which is more to do with with
Speaker 1: obviously with representatives making those decisions. So how do we
Speaker 1: get here? And how do of a regulator or a
Speaker 1: judge determine when a business has gotten too big? Yeah?
Speaker 1: So I think we're in a There's been a forty
Speaker 1: year campaign to weaken and feeble that the antitrust laws.
Speaker 1: Um it has more success with the Republican Party, but
Speaker 1: has sort of spread to some degree to both parties.
Speaker 1: And you know, it was on the road the back.
Speaker 1: It's associated with Robert Borke, the famous almost justice of
Speaker 1: the Supreme Court. Yes, it was borked, but his actually
Speaker 1: his effect was stronger than many actual justices because so
Speaker 1: he said he kind of rode the coattails of a
Speaker 1: movement that said the judiciary is out of control, and
Speaker 1: you know, VI Opposition Roe v. Wade, a lot of
Speaker 1: other things, and said, we need to uh. And I
Speaker 1: think what we've done is destroy something that was once
Speaker 1: very important to the U. S. Economy, which is a
Speaker 1: supervision of excessively sized companies and and and breakups were necessary.
Speaker 1: As part of the theme of your book, The Curse
Speaker 1: of bigness Antitrust in the New Gilded Age. You right
Speaker 1: in a way about Louis Lewis Brandeis, former Justice on
Speaker 1: the Supreme Court. I'm wondering if you could just tell
Speaker 1: people who he was briefly and why you brought him
Speaker 1: into this discussion. Yes, so, Lewis Brandeis is probably most
Speaker 1: famous as Justice Supreme Court. He was also a key
Speaker 1: advisor to Woodrow Wilson the nineteen twelve campaign. And I
Speaker 1: think he is important for his vision of what the
Speaker 1: economy could or should be. Uh. He saw the economy
Speaker 1: in in deeper terms. He thought the point of a
Speaker 1: democracy was flourishing of its citizens and human flourishing more generally.
Speaker 1: And so he said, you know, we really have to
Speaker 1: realize the economy is the biggest factor in most people's lives,
Speaker 1: and they need the economic liberties economic securities before this
Speaker 1: will be a place that people really want to live.
Speaker 1: And sometimes I think we've lost sight of that. We're
Speaker 1: sort of upset with numbers and you know, did the
Speaker 1: Dow go up today or down? And you know what
Speaker 1: about what the economy does for what it means to
Speaker 1: be a citizen of this country. So which mega mergers
Speaker 1: do you see as being the most dangerous currently? That's
Speaker 1: a great question. I think there's a lot of mergers
Speaker 1: we shouldn't have let happen. I take the airline industry
Speaker 1: as a good example. I don't think other than shareholders
Speaker 1: of airlines that that that's particularly good for passengers. Just
Speaker 1: have three major airlines. A huge number of hospital and
Speaker 1: pharmaceutical mergers I think have led to higher prices, worst
Speaker 1: care UM. In the tech sector, I don't think we
Speaker 1: should have let Facebook buy all its competitors. I think
Speaker 1: we've seen the fallout from that politically, security wise, from
Speaker 1: having one company with so much domination over social networking. UM.
Speaker 1: You know, every day there's a new scandal. So I
Speaker 1: think we see the curse of business across the economy.
Speaker 1: And you know, I'm not saying something radical. I want
Speaker 1: to return to sort of the American tradition of of
Speaker 1: competition being our guiding light and decentralized power being how
Speaker 1: we run the country. Just to stick to a couple
Speaker 1: of luminaries, perhaps just so that we get a little
Speaker 1: bit of detail about how you kind of frame the book. Um,
Speaker 1: John Perry Barlow, Yes, people may not remember him, but
Speaker 1: I've got the gray hair to prove it. Um. He
Speaker 1: really described a lot of these situations back in the
Speaker 1: nineteen nineties. Well, John Perry Barlow was a figure embellic
Speaker 1: of you know, sort of symbolized the nine nineties where
Speaker 1: everyone assumed that since tech was so different that we
Speaker 1: didn't need the old rules. You could never really have
Speaker 1: a tech monopoly. Everything was kind of in cyberspace, and
Speaker 1: you know, we need to throw everything out the window.
Speaker 1: And I think that approach led us to ignore some
Speaker 1: of the more obvious anti competitive harms that we're starting
Speaker 1: to appear allow allowed. We basically let the tech companies
Speaker 1: have something of an immunity to the antitrust laws for
Speaker 1: uh for a decade. And I think now we're reaching
Speaker 1: a time of reckoning. So I have to wonder, you know,
Speaker 1: at what point is bigness? Okay, right, so how do
Speaker 1: you determine whether something is uh not too big or
Speaker 1: too I mean, it's sort of it is it is.
Speaker 1: It's an important point, especially in a global world, albeit
Speaker 1: perhaps less so uh now than it was a year ago. Uh.
Speaker 1: And and they're big companies globally that are going to
Speaker 1: potentially knock others out of the out of the water
Speaker 1: if they're not big enough and have economies of scale. Yeah. No,
Speaker 1: I think that is definitely one of the hardest question.
Speaker 1: And I don't think it's right to just say, well,
Speaker 1: this company got big, so we better break them up
Speaker 1: because they're they're big, even though I called the even
Speaker 1: though I called the book the Curse of Bigness. On
Speaker 1: the other hand, I think with the benefit of retrospect,
Speaker 1: of retrospect, if you can see how important it is
Speaker 1: to challenge companies that are no longer able even though
Speaker 1: they're big, to compete on the merits, but have resorted
Speaker 1: to increasing numbers of abusive anti competitive measures. Um. You know,
Speaker 1: take IBM in the seventies, A T and T in
Speaker 1: the eighties, there were huge companies, and thank goodness, I
Speaker 1: think we challenged them and broke up a T and
Speaker 1: T because they had become almost like a parasite on
Speaker 1: the you know, they had started to block and control
Speaker 1: so many lines of conduct that no entrepreneur could get started.
Speaker 1: So when you have a part of the economy you
Speaker 1: know that just has started to stagnate because of you
Speaker 1: suspect a company that is immune to competition and has
Speaker 1: began to suppress all its competitors. That's when it's time
Speaker 1: for antitrust take action. How close do you think we
Speaker 1: are to a dangerous tipping point with respect to how
Speaker 1: big the biggest companies have gotten. I think we're there.
Speaker 1: I think that we are in an unprecedented level of
Speaker 1: concentration in the U. S. Economy. I think we've had
Speaker 1: a decline in entrepreneurship and innovation, and I think we're
Speaker 1: gonna begin to suffer seriously um from all kinds of
Speaker 1: sectors becoming places that new companies just can't get started,
Speaker 1: not to mention the effects on employees and suppressed wages.
Speaker 1: So I think we're there. That's why I think there.
Speaker 1: I think some of the populist political movements are actually
Speaker 1: reflecting the concentration of the economy, reflecting a sense of
Speaker 1: powerlessness among the middle classes, and um. The historic trends
Speaker 1: all suggest that the moment has come to question whether
Speaker 1: we've let the private sector become too concentrated and too unaccountable.
Speaker 1: Thank you very much for being with us. Tim Wu
Speaker 1: was professor of Law, Columbia Law School. He is also
Speaker 1: the author of the new book entitled The Curse of
Speaker 1: bigness Antitrust in the New guilded Age, And whatever your perspective,
Speaker 1: it is worth reading because it enjoins the debate that
Speaker 1: affects everybody's life and business. Tim will thank you very
Speaker 1: much for being here Long Island City as one of
Speaker 1: two new headquarters. And the big question has been how
Speaker 1: much will this impact the commercial real estate market in
Speaker 1: New York? Joining us now Leslie Wallman Himmel Co, Managing
Speaker 1: partner of Himmel and marrying off properties focused on New
Speaker 1: York realists eight. Thank you so much for being with us.
Speaker 1: So let's just start there. I mean, do you think
Speaker 1: that this is going to have a material positive impact
Speaker 1: on commercial real estate prices both in Long Island City
Speaker 1: as well as elsewhere in this in New York. First, well,
Speaker 1: thank you for having me here. UM him all americoth
Speaker 1: properties that we buy office buildings in Manhattan and the boroughs,
Speaker 1: and we've had a partnership for thirty four years. We
Speaker 1: purchased a full square block in and with the theory
Speaker 1: being buying in emerging neighborhoods. People in this last week
Speaker 1: have been saying, you were so smart. That's a long
Speaker 1: time ago. Thirty Yes, it's it's a building at thirty
Speaker 1: four two Queens Boulevard. And UM, I can't tell you
Speaker 1: how many phone calls we've gotten saying you're just such
Speaker 1: a you know how to buy an emerging neighborhood. Well, Amazon,
Speaker 1: the Amazon effect is going to be a multiplier effect.
Speaker 1: It's fantastic that they're gonna add jobs. And they picked
Speaker 1: Long Island City. We've been thinking for the last three
Speaker 1: decades as we've watched the area emerge but very slowly
Speaker 1: compared to Jersey City, Hoboken, Brooklyn, that it should be developed.
Speaker 1: Is so close to Manhattan. You go right across the
Speaker 1: fifty Night Street Bridge, you go right through the tunnel. Um.
Speaker 1: The big story here as you watch tech stocks are
Speaker 1: going down, but the tech companies are expanding in New York.
Speaker 1: New York is the greatest city in the world to
Speaker 1: help build careers. Amazon, Google, Facebook, they're all growing in
Speaker 1: New York. And it's definitely going to increase values in
Speaker 1: Long Island City. But that's it should have happened a
Speaker 1: long time ago. Now you have been part of I
Speaker 1: don't know how it maybe fifty a hundred transactions at
Speaker 1: least in New York, and I mean value over two
Speaker 1: billion dollars. What are the rents gonna do in Long
Speaker 1: Island City? Because I was looking at a report having
Speaker 1: to do with rents in Seattle right to kind of
Speaker 1: measure another city that is obviously went through the Amazon transformation. Uh,
Speaker 1: last year, rents in downtown Sea, Seattle, we're about forty
Speaker 1: two dollars per square foot. Now, if you go back
Speaker 1: to two thousand and nine, I understand there's regular inflation
Speaker 1: and so on, they were thirty one. So we've got about,
Speaker 1: you know, a ten dollar increase per square foot. Do
Speaker 1: you see that same magnitude of change coming to Long
Speaker 1: Island City and indeed even to Crystal City in Washington
Speaker 1: across the Potomac from Washington, where they're gonna put their
Speaker 1: Northern Virginia headquarters. The simple answer is yes. This is
Speaker 1: a simple supply and demand UH equation. When you have
Speaker 1: an expansion of twenty five thousand workers and many residents
Speaker 1: that are gonna be living there, you have the multiplier
Speaker 1: effect that you're gonna have more people living there, more
Speaker 1: people working there. UM we needed that. If you look
Speaker 1: at the buildings I d C and Y Factory Felci
Speaker 1: UH related has to properties Paragon Blanchard. It's been a
Speaker 1: little quiet in the office market in the last eighteen months.
Speaker 1: People bought an anticipation of being able to attract the
Speaker 1: tammy tenants UM paying mid to high forties. That hasn't
Speaker 1: really happened. Amazon coming to Long Island City is going
Speaker 1: to help attract many other offices. UM. We bought a
Speaker 1: property just to be granular a year ago in Long
Speaker 1: Island City on the right over the bridge, thinking we
Speaker 1: were going to make it into again a tammy you know,
Speaker 1: tech advertising, media and internet building, and we decided it
Speaker 1: was better to keep it as a hybrid between industrial
Speaker 1: and office. UM. Reality is that's another emerging area that
Speaker 1: last mild distribution. Many companies that no longer are retailing
Speaker 1: or actually selling online, So that's going to be expansion
Speaker 1: in the boroughs are going to be for sure fraught
Speaker 1: with expansion in that narrow market as well. So when
Speaker 1: I take the seven train out to Queens and I
Speaker 1: go past this area, one thing that I see is
Speaker 1: just cranes everywhere and lots of buildings going up. And
Speaker 1: you know a lot of people have said that there
Speaker 1: has been an overbuilding. Uh to a certain degree. Does
Speaker 1: this even it out? Oh? For sure? Um, I think
Speaker 1: you know, not only on the residential You saw the
Speaker 1: building is going up like mushrooms that we're just expanding,
Speaker 1: and I think a lot of people got awful, awfully lucky. Um.
Speaker 1: Although I do think that T. F. Cornerstone, who's going
Speaker 1: to be developing a lot of the Amazon, they were
Speaker 1: pioneers in buying all along the waterfront like fifteen years
Speaker 1: ago and worked with the city to um develop it. Okay,
Speaker 1: one other thing, infrastructure, right, I mean, how important is
Speaker 1: it to improve the infrastructure, whether it's the subways, whether
Speaker 1: their parks. I mean there really aren't that many parks
Speaker 1: in Long Island City. There's the waterfront that's it. I mean,
Speaker 1: how important are sort of these aspects that perhaps the
Speaker 1: city won't have that much more money to pay for
Speaker 1: because Amazon isn't paying them that because they're gonna a
Speaker 1: tax break. Well, there's always the ferries. That would be
Speaker 1: a great right across the right, but it hasn't necessarily
Speaker 1: evolved yet to the point where it's as easy as
Speaker 1: a subway. So what so how? I mean, how much
Speaker 1: do they have to develop that and who's gonna pay?
Speaker 1: For sure? The infrastructure needs to be improved. Um, I
Speaker 1: think though with all the residential buildings that are there,
Speaker 1: you may have a lot of people who prefer to
Speaker 1: walk to work. Um, those who are going to come
Speaker 1: from Manhattan. You do have great subway access, and um,
Speaker 1: you know, there's always uber. You bring up an interesting
Speaker 1: point because there are going to be so many other
Speaker 1: businesses that profit from having such a huge anchor in
Speaker 1: the neighborhood. Right. We used to think of anchors as
Speaker 1: being big department stores in malls, But now you're gonna
Speaker 1: have all the ancillary services and products and companies that
Speaker 1: are going to be supplying not only Amazon but the
Speaker 1: people that work at Amazon. Does that mean that this
Speaker 1: is going to be a much longer kind of increase
Speaker 1: in real estate value? Well, clearly, if you walk around
Speaker 1: Long Island City, there's very little retail, very little street retail. Um.
Speaker 1: I've spent a lot of time actually on weekends walking neighborhoods.
Speaker 1: Surprisingly few restaurants, surprisingly few venues there. They're starting to
Speaker 1: be that um more retails stores and you're gonna have
Speaker 1: for sure restaurants, coffee shops, etcetera, all growing. It's like
Speaker 1: you have in Brooklyn. So how much will the trickle
Speaker 1: out effect be away from Long Island City to other
Speaker 1: parts of the boroughs in Manhattan really wants to know
Speaker 1: what's next, what's the next area that no one's discussed.
Speaker 1: That's great, what's next, but also, you know, does this
Speaker 1: sort of boost the whole market? I think the Bronx
Speaker 1: is next sat An Island for last mile industrial, a
Speaker 1: lot of companies that need online if you will, distribution centers.
Speaker 1: That's going to be a huge expansion. And I think
Speaker 1: I said the last time you guys interviewed me that
Speaker 1: I think Midtown East is next. It's so out it's
Speaker 1: got to come back in happen disclosure, So we're out.
Speaker 1: It's just about the perspective. Anything you want to offer
Speaker 1: us in terms of Amazon anything. We should that real
Speaker 1: estate investors should not get ahead of themselves when they
Speaker 1: hear Amazon's going there. I think it's all good news
Speaker 1: for New York. Um. And you know, we we all
Speaker 1: have to be mindful though, not to get to euphoric
Speaker 1: on news like this, because reality of numbers are numbers. Um.
Speaker 1: You know New York City's interest rates are going up
Speaker 1: and vacancy is around tem per cent here, So let's
Speaker 1: not get ahead of ourselves. Um. The interest rates, I
Speaker 1: know you did a story and that before, have a
Speaker 1: huge impact on pricing. And uh, we're lucky. We we
Speaker 1: financed all of our properties in the last few yearsentary
Speaker 1: and a half percent rates and now we're looking at
Speaker 1: five percent rates. So well wait until the check clearance.
Speaker 1: I guess is a good A good motto. Leslie Wollman Himmel,
Speaker 1: thank you very much, co managing partner Himmel and Marong
Speaker 1: Golf Properties. Talking about Amazon dot Com they're coming to
Speaker 1: New York. Well, we want to learn more about the
Speaker 1: decline in value of cryptocurrencies, and here to help us
Speaker 1: do so is Leonel Laurent. He is our Bloomberg opinion columnist,
Speaker 1: and he could knows everything about the world of bitcoin
Speaker 1: and cryptocurrencies. Are joining us from our London bureau, and
Speaker 1: of course you can follow Leonel on Twitter at Leonel R. A.
Speaker 1: Laurent Alright, why is bitcoin below five thousand dollars right now?
Speaker 1: It's down about three And this decline in cryptocurrency started
Speaker 1: last week and it's continuing. It's like a thirteen month low. Why, well, hello,
Speaker 1: and thank you for the intro. We said I knew
Speaker 1: everything about bitcoin. I actually don't know it's it's it's value,
Speaker 1: it's price. No one does. And you say the set
Speaker 1: off began last week, maybe the most recent one did,
Speaker 1: But the bigger picture is it began this whole set
Speaker 1: off at the end of last year. This whole year
Speaker 1: has just been one long, massive decline. And to an
Speaker 1: understand why, we have to understand why it blew up
Speaker 1: in the first place. And it blew up because essentially
Speaker 1: it was sold as a new, great utopian, disruptive investment
Speaker 1: that would take over the world of payments. It would
Speaker 1: become the new gold. It would essentially you know, make
Speaker 1: everybody rich, uh, and it would be you know, there
Speaker 1: for the taking for a retail crowd. While all the
Speaker 1: sort of fiddy duddy bankers would sit back and not
Speaker 1: get it. And like most dreams, you know, myths, you know,
Speaker 1: sales pitches, it hasn't come true, and it stopped coming true.
Speaker 1: And that's what we're seeing right now. I'm happy to
Speaker 1: go into all the various things that have happened recently,
Speaker 1: all the news, the hard fork, the regulation, but for me,
Speaker 1: the bigger picture is it was it was a loser,
Speaker 1: a losing strategy to begin with. Well, let's dig in
Speaker 1: a little bit to the regulatory or i should say,
Speaker 1: the Justice Department probe into bitcoin in a number of
Speaker 1: the cryptocurrencies. There was a story today talking about how
Speaker 1: prosecutors are homing in on a clutch of crypto currencies
Speaker 1: that potentially they may be alleging work together to manipulate prices.
Speaker 1: Last year a bit the incredible rally. How much is
Speaker 1: that contributing to what we're seeing today. Well, honestly, I'm
Speaker 1: not sure it should be, because this was again obvious
Speaker 1: to us a year ago. It was obvious to us
Speaker 1: earlier this year when cryptocurrencies like Ripple would be you know,
Speaker 1: suddenly up you know, an incredible amount one day and
Speaker 1: then quickly sold off the next when we saw there
Speaker 1: were chat rooms where people would pump and dump small
Speaker 1: and new tokens um. You know, the news is that
Speaker 1: the regulators are actually waking up to this and getting involved, right,
Speaker 1: So the news is they're actually going to spend resources
Speaker 1: trying to work out what's happened. I think, you know
Speaker 1: the fact that I'm looking at Tether, this kind of um,
Speaker 1: you know, coin that was supposedly redeemable for one real
Speaker 1: dollar um and was therefore used as a dollar proxy
Speaker 1: on markets to buy bitcoin. I mean, Tether still exist today, right,
Speaker 1: so perhaps what comes out of this has yet more
Speaker 1: impact on today's market. But you know, as as a picture,
Speaker 1: I mean again, you know, don't don't want to keep
Speaker 1: on playing the same music. But you know, we we
Speaker 1: who sort of were skeptical year ago that these were
Speaker 1: real markets with real price discovery and with you know
Speaker 1: how kind of put itself regulation being proven right, Well,
Speaker 1: you can play the same music, just use a different instrumentally.
Speaker 1: And all the question I have is that whenever I
Speaker 1: asked someone to describe to me in detail, okay, what
Speaker 1: is bitcoin and show me how it works somehow or other.
Speaker 1: And within the first let's say thirty seconds of an answer,
Speaker 1: the conversation pivots to blockchain, as if somehow, because they're
Speaker 1: in favor of blockchain, they can kind of downplay the
Speaker 1: connection to bitcoin. Have you found that as well, So
Speaker 1: again we have to think about this in terms of marketing. Um,
Speaker 1: you know, when when bitcoin was going through, because bitcoin
Speaker 1: has been around for a while, we we forget it's
Speaker 1: been around for basically ten years. Um, you know, bitcoin
Speaker 1: has had these booms and bus before, and when corporations
Speaker 1: realized that it was not going to be possible to
Speaker 1: you know, get banks and regulated entities to deal with it,
Speaker 1: they began to sell the idea of blockchain without bitcoin,
Speaker 1: this idea that underneath it all there is a totally
Speaker 1: useful use case which is um, you know, I'm not
Speaker 1: going to boy with the details, but essentially lots of
Speaker 1: interconnected databases that would you know, work in concerts and
Speaker 1: be Tampa proof, which again sounds like a great idea
Speaker 1: in theory until companies sat down and tried to actually
Speaker 1: implement it. And if it sounds messy enough to have
Speaker 1: you know, a dozen databases trying to work in concert
Speaker 1: at a company that is just trying to you know,
Speaker 1: sell a car from from A to B. Then you know, yeah,
Speaker 1: the reality was it was super complicated. So, you know,
Speaker 1: Bitcoin is the original blockchain, and it is one vision
Speaker 1: of a blockchain. But you know, we have seen many,
Speaker 1: many reasons why this particular blockchain is not at all
Speaker 1: what it pitched itself to be, which was a kind
Speaker 1: of perfect decentralized, you know, Tampa proof kind of utopian
Speaker 1: mechanism for essentially handling payments. Well, it definitely doesn't seem
Speaker 1: utopian today as it continues it's plunge Leonell Laurent Bloomberg
Speaker 1: opinion calumnists, thank you so much for being with us.
Speaker 1: Definitely been quite a swoon. It'll be interesting to see
Speaker 1: with some of those bitcoin hedge fund returns, will be
Speaker 1: considering that maybe what if they were leveraged. One concern
Speaker 1: that has been weighing down on these big tech shares
Speaker 1: has been the trade tensions with China, right, I mean,
Speaker 1: that's been one of the big issues, and that sort
Speaker 1: of brings us to the next topic, which is mergers
Speaker 1: and acquisitions. Cross boarder US companies looking to acquire Chinese
Speaker 1: companies or uh or vice versa. David Willard joins is
Speaker 1: now founder and chief executive and managing partner of fifty
Speaker 1: two Capital Partners based in San Francisco and New York. David,
Speaker 1: you have a lot of experience both the mergeras and
Speaker 1: acquisitions and com Sacks and Cravat Swaine, but also uh
Speaker 1: with advising with China relations. And what do you see
Speaker 1: right now? How many calls are you getting from clients
Speaker 1: concerned that they will never be able to do another
Speaker 1: cross border transaction? Again, those calls happen with greater frequency
Speaker 1: in this market at LISTA. It is a tense environment
Speaker 1: right now, the tariffs, the economic sanctions between the United
Speaker 1: States and China, It's unprecedented. We are in a new normal.
Speaker 1: I tell our clients the appetite for our services is
Speaker 1: interestingly increasing in this tense environment. Clients have a great
Speaker 1: amount of uncertainty about the market in China. The domestic
Speaker 1: regulations in China are more onerous for US multinationals and
Speaker 1: private investment firms that are looking to deploy capital into China,
Speaker 1: and with that there's greater uncertainty. But that being said,
Speaker 1: we're seeing a lot of clients, a lot of US
Speaker 1: businesses building a ground game right now. There is optimism
Speaker 1: that there will be a good probability of a rebound
Speaker 1: in M and A in t SO, M and A
Speaker 1: clients now are building a ground game in anticipation that
Speaker 1: the regulatory environment will improve. That's a really interesting development
Speaker 1: we're seeing. What does that mean when you say they're
Speaker 1: building a ground game, Does that mean they're hiring lots
Speaker 1: of lawyers among that? Uh pam. It's a great point
Speaker 1: among that a lot of American businesses now in building
Speaker 1: a ground game or conducting massive amounts of what I
Speaker 1: call front end due diligence. Front End due diligence consists
Speaker 1: of conducting major reviews of the regulatory situation. In China,
Speaker 1: deals that haven't been you know, fully commenced are basically
Speaker 1: necessitating a lot of front end review and diligence by lawyers,
Speaker 1: M and A advisors and corporates. That's a major change
Speaker 1: in the market from three or four years ago, when
Speaker 1: regulations in China were far less ownerous um. As a result,
Speaker 1: it goes without saying M and A deals now are
Speaker 1: more expensive. There's a longer lead time to putting deals
Speaker 1: in place, and with that, the costs of doing business
Speaker 1: in China and doing M and A have gone up. Okay,
Speaker 1: So can you just give us a state of play
Speaker 1: as far as how much M and A you're expecting
Speaker 1: cross border between with the US companies buying Chinese companies
Speaker 1: and how that compares to the past many are we
Speaker 1: seeing a material slowdown and do you expect that to continue.
Speaker 1: It's a great point, and the data is really interesting, Lisa,
Speaker 1: and I want to mention one point, which is this
Speaker 1: there is a massive reduction across border M and A
Speaker 1: which with China this year. The data bears that out
Speaker 1: interesting however, today there's been about eighty billion US in
Speaker 1: M and A with China. That is a massive reduction
Speaker 1: from twenty sixteen. But interestingly, the amount of M and
Speaker 1: A eighteen surpasses the M and A levels and volumes
Speaker 1: of fifteen in preceding years. So while there's been a
Speaker 1: massive reduction prior to the two preceding years, on a
Speaker 1: long term historical basis, eighteen has actually been quite robust.
Speaker 1: And so notwithstanding the tariffs, the economic sanctions, the rhetoric,
Speaker 1: there's still is good appetite to find good deals and
Speaker 1: to get them across the finish line. And that's a
Speaker 1: really interesting point. I want to mention if someone came
Speaker 1: to you and said, I'm looking to do a technology deal,
Speaker 1: particularly in either artificial intelligence or some kind of cyber
Speaker 1: security industry in China, would you say take a number,
Speaker 1: come back in six months and then we'll talk, or
Speaker 1: we'll just start doing something now. I would start doing
Speaker 1: something now. It's a great point. We we deal with
Speaker 1: this situation all the time in my firm, and it
Speaker 1: goes to the point about building a ground game. We
Speaker 1: don't know when the regulatory environment and China will change.
Speaker 1: There is a decent probability will see in t a
Speaker 1: software environment, but that's a question mark. It's important for
Speaker 1: businesses in America who are sizing up the m and
Speaker 1: A landscape in China to conduct due diligence now to
Speaker 1: understand what the risk is that mofcom or major regulatory
Speaker 1: agencies in China will step into block major deals. That's
Speaker 1: a really important component for dealmaking today in China, and
Speaker 1: it's important to start that ground game now. So where
Speaker 1: which industries are you seeing the most interest in terms
Speaker 1: of u as companies looking to acquire Chinese ones. It's
Speaker 1: a great point. Software technology still remain robust. Verticals notwithstanding
Speaker 1: the concerns around intellectual property, theft, data privacy, force, technology transfers.
Speaker 1: We see the headlines, that is still a concern UM,
Speaker 1: so that remains a robust part of M and A.
Speaker 1: In addition to that, we're seeing a lot of activity
Speaker 1: in non technology verticals, industrials, sustainability related verticals. Those are
Speaker 1: getting a lot of attention in China. UM. Those have
Speaker 1: less of a sort of regulatory burden in China for
Speaker 1: the most part, and as a result, US businesses see
Speaker 1: those non technology verticals, particularly in industrials, is really attractive
Speaker 1: from evaluation standpoint to those industrials. Businesses in China are
Speaker 1: comparatively more attractive in this environment. And with that, private
Speaker 1: equity firms in the U s are dialed into identifying
Speaker 1: opportunities in those areas. Just quickly, give you twenty seconds.
Speaker 1: Do you still have to know someone in the Chinese
Speaker 1: government in order to get a deal done? It's a
Speaker 1: great question. The short answer is no. UM. I believe
Speaker 1: it's important to have sound advisors in both the US
Speaker 1: and China in identifying ways to get great deals across
Speaker 1: the finish line in China. UM. Clearly, the regulatory situation
Speaker 1: in China is fascinating, but uh, not necessary from my standpoint.
Speaker 1: But great question, Pim, Well done, Thanks very much for
Speaker 1: being with us and sharing this information. David Willard is
Speaker 1: the founder and the chief executive and the managing partner
Speaker 1: of fifty two Capital Partners. They're based in Silicon Valley
Speaker 1: and they also have operations in New York. Thanks for
Speaker 1: being here and thanks for listening. I'm Pim Fox along
Speaker 1: with Lisa Abramowitz. This is Bloomberg. Thanks for listening to
Speaker 1: the Bloomberg P and L podcast. You can subscribe and
Speaker 1: listen to interviews at Apple Podcasts, sound Out, or whatever
Speaker 1: podcast platform you prefer. I'm Pim Fox. I'm on Twitter
Speaker 1: at Pim Fox. I'm on Twitter at Lisa Abramo wits one.
Speaker 1: Before the podcast, you can always catch us worldwide on
Speaker 1: Bloomberg Radio.