1 00:00:02,600 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:31,680 Speaker 1: Bloomberg dot com, and of course on the Bloomberg, Deutsche 5 00:00:31,680 --> 00:00:34,800 Speaker 1: Bank and Commas Bank The talks. HOOVERA, I want to 6 00:00:34,800 --> 00:00:37,600 Speaker 1: bring in Bloomberg's Matt Miller to get up to speed 7 00:00:37,840 --> 00:00:41,800 Speaker 1: on the end of merchant talks. Matt, what broke in? Well, Uh, 8 00:00:42,120 --> 00:00:45,160 Speaker 1: Berlin has been against this really from from day one, 9 00:00:45,440 --> 00:00:48,519 Speaker 1: with the exception of the Finance Ministry all Off Schultz 10 00:00:48,520 --> 00:00:52,040 Speaker 1: and his deputy, York Cookies were really, uh, you know, 11 00:00:52,080 --> 00:00:55,400 Speaker 1: the driving force behind these talks to begin with. But 12 00:00:55,960 --> 00:00:58,680 Speaker 1: as soon as people started talking about thirty to forty 13 00:00:58,720 --> 00:01:03,160 Speaker 1: thousand job cuts as resolved, it just was uh, it 14 00:01:03,280 --> 00:01:06,400 Speaker 1: just was a bad look for everybody here, and Anglo 15 00:01:06,480 --> 00:01:09,760 Speaker 1: Miracle and the and the rest of the UM and 16 00:01:09,800 --> 00:01:12,399 Speaker 1: the rest of the powerful politicians in the capital fought 17 00:01:12,440 --> 00:01:15,600 Speaker 1: against it. So from a Deutsche Bank perspective, it was 18 00:01:15,720 --> 00:01:18,440 Speaker 1: just um at least what they said this morning, it 19 00:01:18,800 --> 00:01:21,240 Speaker 1: just proved to be too expensive and too complex to 20 00:01:21,280 --> 00:01:24,000 Speaker 1: pull off, but from a political perspective, it just wasn't 21 00:01:24,000 --> 00:01:27,039 Speaker 1: gonna fly. So commos Bank potentially have got other dance partners. 22 00:01:27,040 --> 00:01:29,160 Speaker 1: We've seen in the news, I g are interested. We've 23 00:01:29,160 --> 00:01:32,160 Speaker 1: seen in the news several reports that any Credit is 24 00:01:32,160 --> 00:01:34,479 Speaker 1: said to be interested as well. Where does it leave 25 00:01:34,520 --> 00:01:37,959 Speaker 1: Deutsche Bank Man, Yeah, I actually asked the CFO, James 26 00:01:38,040 --> 00:01:43,480 Speaker 1: von moltkea this today because obviously by stepping out of 27 00:01:43,800 --> 00:01:46,920 Speaker 1: the running to buy commerce Bank, they leave themselves open 28 00:01:46,959 --> 00:01:49,120 Speaker 1: to competition in the future. If someone else comes and 29 00:01:49,160 --> 00:01:52,480 Speaker 1: buys Commerce Bank, they can get big in Germany. Listen 30 00:01:52,560 --> 00:01:55,680 Speaker 1: to what von Mulka told me. Yes, we do envisage 31 00:01:56,120 --> 00:01:59,280 Speaker 1: over time that industry consolidation will take place in Europe 32 00:01:59,560 --> 00:02:02,360 Speaker 1: and the dark a Bunk wants to be part of that. Um. 33 00:02:02,400 --> 00:02:05,240 Speaker 1: The timing and the specific form of that obviously remains 34 00:02:05,280 --> 00:02:07,760 Speaker 1: to be seen. We've talked a lot about doing our 35 00:02:07,800 --> 00:02:12,240 Speaker 1: homework to continue executing on our plans, executing on the 36 00:02:12,240 --> 00:02:15,639 Speaker 1: restructuring of the company and the improvement in our shareholder returns. 37 00:02:16,440 --> 00:02:20,280 Speaker 1: So not only did they discuss um the fact that 38 00:02:20,520 --> 00:02:23,960 Speaker 1: Commerce Bank could become really serious competition if they get 39 00:02:23,960 --> 00:02:27,080 Speaker 1: taken over by a European competitor. They do want to 40 00:02:27,160 --> 00:02:31,680 Speaker 1: stay in the consolidation of European banks going forward, just 41 00:02:32,160 --> 00:02:34,480 Speaker 1: not right now and not with this target. Matt Miller, 42 00:02:34,560 --> 00:02:37,760 Speaker 1: thank you so much. Speaking from Germany as conversation moments 43 00:02:37,760 --> 00:02:40,519 Speaker 1: ago with their chief financial officer of d b K, 44 00:02:54,639 --> 00:02:57,400 Speaker 1: John Tys joins US right now. He has been just 45 00:02:57,600 --> 00:03:01,960 Speaker 1: brilliant on not only the America cand ramifications of what 46 00:03:02,040 --> 00:03:05,640 Speaker 1: we see with European banking, but the path forward of 47 00:03:05,760 --> 00:03:10,040 Speaker 1: cross border or intra nation mergers as well. John tice 48 00:03:10,120 --> 00:03:13,040 Speaker 1: I just looked at the Bloomberg and Deutsche banks employment 49 00:03:13,040 --> 00:03:15,919 Speaker 1: has gone from a hundred and thirty five thousand four 50 00:03:16,000 --> 00:03:19,919 Speaker 1: or five years ago down thirty two and ninety two thousand. 51 00:03:20,480 --> 00:03:24,040 Speaker 1: Where do they optimally want to take that number? How 52 00:03:24,120 --> 00:03:28,240 Speaker 1: much of a shrinkage is the shrinkage hi there? Um, Well, 53 00:03:28,440 --> 00:03:31,600 Speaker 1: the fall a lot of it has been shedding IB 54 00:03:31,800 --> 00:03:35,520 Speaker 1: jobs and also disposing of sort of some retail units. 55 00:03:35,960 --> 00:03:38,800 Speaker 1: The high cost base is associated with the investment banks, 56 00:03:38,880 --> 00:03:41,080 Speaker 1: most particularly in the US, so you're probably going to 57 00:03:41,120 --> 00:03:43,440 Speaker 1: see another five or ten thousand that will make a 58 00:03:43,560 --> 00:03:46,920 Speaker 1: very material difference to the cost income ratio, provided it's 59 00:03:46,960 --> 00:03:49,760 Speaker 1: coming from the investment banking franchise because I could lock 60 00:03:49,800 --> 00:03:52,320 Speaker 1: a third off that number, but not really move the 61 00:03:52,360 --> 00:03:54,960 Speaker 1: dial on cost income ratio because it's going to be 62 00:03:55,000 --> 00:03:58,480 Speaker 1: the very unprofitable domestic retail I'm not sure what to 63 00:03:58,480 --> 00:04:00,720 Speaker 1: read into the price section of the small on in John, because, 64 00:04:00,760 --> 00:04:02,720 Speaker 1: of course, as you've pointed out and others have as well, 65 00:04:03,040 --> 00:04:05,440 Speaker 1: it removes the prospect of a cash call for Deutsche Bank. 66 00:04:05,640 --> 00:04:08,520 Speaker 1: So we had a very brief, small relief rally for 67 00:04:08,520 --> 00:04:10,760 Speaker 1: Deutsche Bank. The stock was up almost five percent. It's 68 00:04:10,800 --> 00:04:13,520 Speaker 1: now positive about a tenth of one percent. Can we 69 00:04:13,560 --> 00:04:16,080 Speaker 1: take anything away from this morning's price action, both in 70 00:04:16,160 --> 00:04:20,559 Speaker 1: debt and inequity. Well, was back on the noughty step. 71 00:04:20,640 --> 00:04:22,839 Speaker 1: I mean, it's got the same problems. It doesn't have 72 00:04:22,880 --> 00:04:25,240 Speaker 1: a sort of a bit of misdirection. Here's two years 73 00:04:25,240 --> 00:04:29,520 Speaker 1: of further restructuring UM and whilst it's not expensive, is 74 00:04:29,520 --> 00:04:32,000 Speaker 1: there any way that I can see over the next 75 00:04:32,000 --> 00:04:34,800 Speaker 1: two or three years consensus going anything other than flat 76 00:04:34,839 --> 00:04:38,240 Speaker 1: to south. No. So if you wanted to fund I 77 00:04:38,240 --> 00:04:40,200 Speaker 1: don't know the other side of the Commons bank because 78 00:04:40,240 --> 00:04:43,120 Speaker 1: you thought that I MG was interested and that's I mean, 79 00:04:43,120 --> 00:04:46,240 Speaker 1: IMG does own UM something in Poland's which could make 80 00:04:46,400 --> 00:04:49,560 Speaker 1: comments banks and banks take interesting, or new credit was interested. 81 00:04:50,279 --> 00:04:52,640 Speaker 1: You can see a lot of reasons why commons banks 82 00:04:52,680 --> 00:04:54,520 Speaker 1: days in play, and if you wanted to fund that, 83 00:04:55,120 --> 00:04:56,560 Speaker 1: I guess some people are going to think, well, I 84 00:04:56,560 --> 00:04:58,520 Speaker 1: can put my doutsche Bank shorts back on Felly soon 85 00:04:58,560 --> 00:05:01,360 Speaker 1: because it has rallied for no reason and the loooks 86 00:05:01,360 --> 00:05:03,719 Speaker 1: still pretty grim. The issue myself and so many others 87 00:05:03,760 --> 00:05:06,120 Speaker 1: have had with this deal over the last few months, John, 88 00:05:06,120 --> 00:05:09,000 Speaker 1: it is hardly anyone thought it made sense. Hardly anybody 89 00:05:09,000 --> 00:05:10,960 Speaker 1: at all thought it made sense to have a big 90 00:05:11,080 --> 00:05:14,960 Speaker 1: national champion in Germany when everybody in Europe seemingly wanted 91 00:05:14,960 --> 00:05:19,200 Speaker 1: a big cross border deal between perhaps any credit and 92 00:05:19,279 --> 00:05:23,200 Speaker 1: commerce bank. So it leaves Deutsche Bank essentially wasting another 93 00:05:23,279 --> 00:05:25,400 Speaker 1: few months of what could have been spent on the 94 00:05:25,400 --> 00:05:27,960 Speaker 1: prospect of another turnaround plan. And now we need to 95 00:05:28,000 --> 00:05:29,880 Speaker 1: come up with a fifth one, and I'm wondering what 96 00:05:29,920 --> 00:05:32,440 Speaker 1: that is, John, Well, the fact is both of these 97 00:05:32,480 --> 00:05:35,000 Speaker 1: two are warrants on rising rates, and a year ago 98 00:05:35,040 --> 00:05:36,560 Speaker 1: we thought rates would be going high, and now we 99 00:05:36,600 --> 00:05:38,160 Speaker 1: know that we would be lucky if we get ten 100 00:05:38,200 --> 00:05:40,880 Speaker 1: bits more in Europe the next two years. So the 101 00:05:40,920 --> 00:05:43,039 Speaker 1: reason they were talking, was that they really are in 102 00:05:43,120 --> 00:05:46,359 Speaker 1: last chance saloon um. In terms of cross border M 103 00:05:46,360 --> 00:05:48,880 Speaker 1: and A, there aren't many combinations that make sense. But 104 00:05:48,920 --> 00:05:52,039 Speaker 1: we do have a few big Europeans. I could be 105 00:05:52,200 --> 00:05:54,960 Speaker 1: MP and they've had have been a Germany even think 106 00:05:55,040 --> 00:05:56,800 Speaker 1: I think Handle's banking. I mean, they're quite big in 107 00:05:57,480 --> 00:05:59,800 Speaker 1: the UK. They've got a big German business, so there's 108 00:06:00,040 --> 00:06:01,720 Speaker 1: there's a fair bit of overlap. But we're not going 109 00:06:01,760 --> 00:06:04,159 Speaker 1: to get the huge eminent for another year or two. 110 00:06:04,200 --> 00:06:07,800 Speaker 1: But small domestic consolidation does make sense because at least 111 00:06:07,800 --> 00:06:10,279 Speaker 1: then you've got a better excuse to close branches. What 112 00:06:10,360 --> 00:06:13,240 Speaker 1: are they doing in the skyscrapers of Wall Street this morning, 113 00:06:13,320 --> 00:06:16,599 Speaker 1: and of midtown Manhattan and of the construction side on 114 00:06:16,680 --> 00:06:21,000 Speaker 1: Park Avenue. How do the American banks take advantage of 115 00:06:21,080 --> 00:06:24,719 Speaker 1: all this turboil? Well, presumably they're just gonna cherry pick 116 00:06:24,760 --> 00:06:28,640 Speaker 1: anybody that's still at Deutsche. That's good, because I mean 117 00:06:28,800 --> 00:06:30,960 Speaker 1: that's all you need to do. That The writing has 118 00:06:31,000 --> 00:06:32,200 Speaker 1: to be on the wall for quite a few of 119 00:06:32,240 --> 00:06:34,360 Speaker 1: the exposures and on a three to five year of 120 00:06:34,400 --> 00:06:36,599 Speaker 1: you is Deutsche Bank going to be anywhere near the 121 00:06:36,600 --> 00:06:39,240 Speaker 1: size it is in the US? Has now no um 122 00:06:39,279 --> 00:06:41,480 Speaker 1: in terms of what the CFO was talking about wanting 123 00:06:41,520 --> 00:06:42,960 Speaker 1: to be a player in M and A. I don't 124 00:06:43,000 --> 00:06:45,520 Speaker 1: buy that on the banking side at all, but clearly 125 00:06:45,680 --> 00:06:48,040 Speaker 1: we know that the asset and wealth management space it's 126 00:06:48,040 --> 00:06:53,359 Speaker 1: gonna be interesting. And does a UBSDWS combination makes sense personally? 127 00:06:53,760 --> 00:06:57,640 Speaker 1: Perhaps not, But then think A Monday thinks Ceciato, General Credit, 128 00:06:57,680 --> 00:07:01,520 Speaker 1: Agricult think Pioneer thinking to A. There's a lot to 129 00:07:01,560 --> 00:07:03,760 Speaker 1: do for a lot of these universal banks across the 130 00:07:03,760 --> 00:07:06,920 Speaker 1: Europe in terms of their life insurance businesses, their asset 131 00:07:06,960 --> 00:07:09,560 Speaker 1: managers and the wealth management. So it's has still got 132 00:07:09,560 --> 00:07:11,880 Speaker 1: plenty to do um and it should be to get 133 00:07:11,880 --> 00:07:14,800 Speaker 1: its AWE from two to five over two years on 134 00:07:14,840 --> 00:07:17,960 Speaker 1: its own. Yes, granted that's pathetic, but that's why the 135 00:07:18,720 --> 00:07:21,320 Speaker 1: share prices training at north point three times tangible book 136 00:07:21,640 --> 00:07:26,040 Speaker 1: This is potentially the fifth turnaround. Then since the fifth 137 00:07:26,120 --> 00:07:30,280 Speaker 1: turnaround plan, potentially since the horizon. Are we sure that 138 00:07:30,320 --> 00:07:34,080 Speaker 1: the same management team will be leading this one? John Well, 139 00:07:34,120 --> 00:07:36,840 Speaker 1: I think what's the point of changing so saving because 140 00:07:37,000 --> 00:07:40,960 Speaker 1: he's ex retail. This isn't gonna be a giant investment bank. 141 00:07:41,000 --> 00:07:42,880 Speaker 1: This isn't a push to be last man standing. You 142 00:07:42,880 --> 00:07:45,000 Speaker 1: get about five years Deutsch and Barkeleys were having the 143 00:07:45,000 --> 00:07:47,000 Speaker 1: fight about who will be the last man standing. There's 144 00:07:47,040 --> 00:07:49,920 Speaker 1: only Jes Staley now still having that debate, and as 145 00:07:49,960 --> 00:07:54,040 Speaker 1: you can see him today, struggling. So I don't see 146 00:07:54,040 --> 00:07:57,800 Speaker 1: the point of changing. Just change his task, changes focus 147 00:07:57,800 --> 00:07:59,320 Speaker 1: and get him to put his hands up and say, look, 148 00:07:59,360 --> 00:08:01,000 Speaker 1: it's going to be of years and we're gonna get 149 00:08:01,000 --> 00:08:03,120 Speaker 1: six percent hourly. Sorry, chats, but that's the best we 150 00:08:03,120 --> 00:08:06,720 Speaker 1: can manage. Joan is always thanks to you, unvaluable for 151 00:08:07,000 --> 00:08:10,000 Speaker 1: audience of Global Wall Street and the rest of you listening. 152 00:08:10,360 --> 00:08:26,280 Speaker 1: He's with Bloomberg Intelligence to visually to Ripputure, joining us 153 00:08:26,280 --> 00:08:29,440 Speaker 1: Morgan Stanley's head of fixed income Research and director of 154 00:08:29,560 --> 00:08:32,160 Speaker 1: Quantitative Research. As while joins us here in New York, 155 00:08:32,240 --> 00:08:36,240 Speaker 1: VISI this has been so tough, so confusing for so 156 00:08:36,280 --> 00:08:38,360 Speaker 1: many people, including myself. I just don't know where to 157 00:08:38,400 --> 00:08:41,000 Speaker 1: look in effects anymore to make sense of what is happening. 158 00:08:41,200 --> 00:08:43,800 Speaker 1: What is happening right now? You can add me to 159 00:08:43,840 --> 00:08:48,040 Speaker 1: the confusing club. The confused club. I think this is 160 00:08:48,080 --> 00:08:51,560 Speaker 1: the meaning, really confounding thing to look at that we have. 161 00:08:51,720 --> 00:08:56,640 Speaker 1: We have really underestimated the strength of the dollar. I 162 00:08:56,679 --> 00:08:59,840 Speaker 1: think the what we have underestimated is the effect of 163 00:08:59,840 --> 00:09:04,640 Speaker 1: the the enormous amountab liquidity that seems to be a 164 00:09:04,679 --> 00:09:08,880 Speaker 1: flush in the system driving towards driving the dollar. Uh, 165 00:09:09,040 --> 00:09:12,000 Speaker 1: you know, higher than we had really expected. H And 166 00:09:12,040 --> 00:09:16,559 Speaker 1: it is. It's truly confounding and it's hard to now see. Uh, 167 00:09:17,280 --> 00:09:22,640 Speaker 1: the sustained um strengthen dollar along with all the anormal 168 00:09:22,640 --> 00:09:25,080 Speaker 1: inst that you're saying. You're seeing the anormalies of the 169 00:09:25,280 --> 00:09:29,640 Speaker 1: risk markets rallying at the same time, rates rallying at 170 00:09:29,640 --> 00:09:34,640 Speaker 1: the same time, crude rallying, and dollar strengthening. This combination, Uh, 171 00:09:34,679 --> 00:09:38,439 Speaker 1: it seems it's very confounding and seems very unsustainable to us. 172 00:09:38,640 --> 00:09:42,199 Speaker 1: Ray James change in for exchange. That can change quite quickly. 173 00:09:42,559 --> 00:09:44,640 Speaker 1: Just in terms of the house view from the team 174 00:09:44,720 --> 00:09:48,080 Speaker 1: led by hands Redika over a Moregan Stanley, how should 175 00:09:48,120 --> 00:09:50,920 Speaker 1: we be framing the effects market? What is the appropriate, 176 00:09:50,960 --> 00:09:53,840 Speaker 1: the most efficient way of thinking about how some of 177 00:09:53,880 --> 00:09:57,800 Speaker 1: these currencies are behaving? We think the particularly I think 178 00:09:58,120 --> 00:10:00,520 Speaker 1: the thing that we want to watch and that hands 179 00:10:00,520 --> 00:10:02,880 Speaker 1: would tell will tell you to watch is really the 180 00:10:02,920 --> 00:10:06,959 Speaker 1: where is the flow of liquidity happening? And the I 181 00:10:07,000 --> 00:10:11,520 Speaker 1: would consider to be non hedged um flows into dollar 182 00:10:11,679 --> 00:10:14,360 Speaker 1: and dollar assets. So this is a buy America story, 183 00:10:14,520 --> 00:10:16,959 Speaker 1: which which dominated much. It's funny eighteen you see a 184 00:10:17,080 --> 00:10:20,120 Speaker 1: repeat a reply of that it is it is that 185 00:10:20,200 --> 00:10:23,480 Speaker 1: whether how long it is sustainable UM, that's very questionable. 186 00:10:23,600 --> 00:10:25,800 Speaker 1: I think if you when you talk about credit, it's 187 00:10:25,800 --> 00:10:29,679 Speaker 1: hard to see that being a sustainable story when, especially 188 00:10:29,720 --> 00:10:33,240 Speaker 1: in the front end the opportunity set for say Asian 189 00:10:33,480 --> 00:10:36,960 Speaker 1: Japanese investors for into in the front end of the credit, 190 00:10:37,280 --> 00:10:39,680 Speaker 1: it's really not appealing. You're almost getting into a negative 191 00:10:39,760 --> 00:10:43,560 Speaker 1: territory on a hedged basis. So it has to be 192 00:10:43,600 --> 00:10:47,160 Speaker 1: an unhedged story, and that that brings a lot of 193 00:10:47,200 --> 00:10:48,959 Speaker 1: challenges and a lot of challenges and a lot of 194 00:10:49,040 --> 00:10:51,480 Speaker 1: exposure as well. Let's go quiet here in the final minute, 195 00:10:51,559 --> 00:10:55,119 Speaker 1: we have with you that systemic risk Greek letters epsilon. 196 00:10:55,600 --> 00:10:59,760 Speaker 1: We're up there with unknown and unknown amount of epsilon. 197 00:11:00,120 --> 00:11:02,560 Speaker 1: How much unknown is out there right now in the 198 00:11:02,640 --> 00:11:05,800 Speaker 1: link quantitative system. I think there is a lot of uncertainty, 199 00:11:05,880 --> 00:11:10,320 Speaker 1: and the uncertainty is confounding on multiple on from on 200 00:11:10,440 --> 00:11:15,480 Speaker 1: multiple fronts, and so U I would say the whole 201 00:11:16,120 --> 00:11:19,920 Speaker 1: um the investing universe is blocked in on I would 202 00:11:19,920 --> 00:11:23,920 Speaker 1: consider three different things. That the FED has completely fed 203 00:11:24,160 --> 00:11:26,959 Speaker 1: broadly and the central banks you know even more broadly 204 00:11:27,640 --> 00:11:31,760 Speaker 1: have completely been will be remain very dubish. The China 205 00:11:31,840 --> 00:11:34,600 Speaker 1: growth has drought and we are looking at an upside, 206 00:11:34,880 --> 00:11:38,000 Speaker 1: and trade tensions have ald okay, But the online from 207 00:11:38,000 --> 00:11:40,320 Speaker 1: that is it a jump conditioner? Can we manage it forward? 208 00:11:40,360 --> 00:11:44,200 Speaker 1: As chairman Power would like. One would hope that it is. 209 00:11:44,320 --> 00:11:48,280 Speaker 1: I would say it is a very challenging to to manage. 210 00:11:48,600 --> 00:11:51,120 Speaker 1: As the latter in the cycle we get and the 211 00:11:51,200 --> 00:11:54,160 Speaker 1: higher the valuations get, it is increasing to in my 212 00:11:54,240 --> 00:11:58,600 Speaker 1: mind it is harder and harder to manage without any um, 213 00:11:58,640 --> 00:12:02,720 Speaker 1: you know Alternity and Walter. Another point is extremely lowan 214 00:12:02,800 --> 00:12:05,600 Speaker 1: has driven maybe had a really really low point across 215 00:12:05,600 --> 00:12:08,120 Speaker 1: the university, across all assets. Can you stay around for 216 00:12:08,160 --> 00:12:11,760 Speaker 1: another three hours? Can you can you make it for 217 00:12:11,800 --> 00:12:15,280 Speaker 1: it to tomorrow? I don't know. You could do them 218 00:12:15,280 --> 00:12:18,520 Speaker 1: on oh my word, or you could run assault from 219 00:12:18,520 --> 00:12:22,720 Speaker 1: what we've got. Appreciate thank you new weakness on euro 220 00:12:23,600 --> 00:12:40,120 Speaker 1: right now since I had the clearest memory. John Farrell 221 00:12:40,679 --> 00:12:45,880 Speaker 1: of the New Hampshire of seven in in a senator 222 00:12:45,920 --> 00:12:49,440 Speaker 1: from Delaware not feeling well joining us now from New Hampshire, 223 00:12:49,480 --> 00:12:52,840 Speaker 1: Greg Bellier with a g F Toronto as well. Greg, 224 00:12:53,000 --> 00:12:55,319 Speaker 1: I'm going to cut to the chase because of time, 225 00:12:56,240 --> 00:13:01,480 Speaker 1: Vice President Biden has been not fragile, but enthusiastic, but 226 00:13:01,600 --> 00:13:06,880 Speaker 1: at times ill over a lengthy political career. Does he 227 00:13:07,080 --> 00:13:10,560 Speaker 1: have the stamina to move this thing forward over the 228 00:13:10,600 --> 00:13:14,640 Speaker 1: next eighteen months. I do think he does have his stamina. Tom. 229 00:13:14,720 --> 00:13:17,800 Speaker 1: I think he's got another very important asset, and that's 230 00:13:17,920 --> 00:13:21,640 Speaker 1: organized labor. That's going to be the core of his support. Uh, 231 00:13:21,679 --> 00:13:25,079 Speaker 1: it's going to perhaps propel him to a good showing 232 00:13:25,160 --> 00:13:29,160 Speaker 1: in Michigan, Pennsylvania, Wisconsin. He's the front runner, right, Okay, 233 00:13:29,200 --> 00:13:31,559 Speaker 1: he's the front runner. But it's not the organized labor 234 00:13:31,760 --> 00:13:35,840 Speaker 1: of September of n is it. No, it's not. It's 235 00:13:35,840 --> 00:13:39,400 Speaker 1: not as strong. But you've also got a strong organization 236 00:13:39,520 --> 00:13:42,600 Speaker 1: for Biden in places like South Carolina, where he'll do 237 00:13:42,760 --> 00:13:47,640 Speaker 1: very well with African Americans, unlike Bernie Sanders. Let's just 238 00:13:47,679 --> 00:13:51,880 Speaker 1: talk about how organized this campaign whall be. His first 239 00:13:51,920 --> 00:13:55,240 Speaker 1: appearance is on the view reportedly tomorrow for our Internet. 240 00:13:55,280 --> 00:13:57,400 Speaker 1: We didn't get the listeners, we did not get him. 241 00:13:57,400 --> 00:13:59,520 Speaker 1: He will be on the view here in America. Villier, 242 00:13:59,679 --> 00:14:02,880 Speaker 1: that's how important do you think that choices to go 243 00:14:03,000 --> 00:14:06,320 Speaker 1: on the view tomorrow? Well, I think it's important because 244 00:14:06,600 --> 00:14:10,560 Speaker 1: he's perhaps, as Tom said, fragile with female voters. I 245 00:14:10,559 --> 00:14:13,280 Speaker 1: think he needs to show up his support and uh 246 00:14:13,720 --> 00:14:18,319 Speaker 1: make it clear that his creepy shoulder passages were nothing 247 00:14:18,360 --> 00:14:22,680 Speaker 1: more than, uh something out of a different generation. Greg 248 00:14:23,080 --> 00:14:27,440 Speaker 1: Marty Schenker, our chief content officer, alluded back to Reagan earlier. 249 00:14:27,520 --> 00:14:30,520 Speaker 1: Ronald Reagan's prescription was to go right and then flip 250 00:14:30,560 --> 00:14:34,240 Speaker 1: and go centrist to the election. Does that formula work anymore? 251 00:14:34,320 --> 00:14:39,560 Speaker 1: Can Vice President Biden go progressive, ghost, social democratic, socialist, 252 00:14:39,600 --> 00:14:41,920 Speaker 1: whatever it is, and then bring it on back to 253 00:14:42,000 --> 00:14:45,520 Speaker 1: the land of Pelosi and Stenny Lawyer. Well that's gonna 254 00:14:45,560 --> 00:14:48,960 Speaker 1: be his his strategy, obviously, and I think he can. 255 00:14:49,520 --> 00:14:52,239 Speaker 1: But he's got an awful lot of Democrats saying provocative 256 00:14:52,280 --> 00:14:57,040 Speaker 1: things about taxes, voting rights for convicted murderers and prison 257 00:14:57,120 --> 00:14:59,880 Speaker 1: all this crazy stuff we heard earlier this week and 258 00:15:00,000 --> 00:15:02,560 Speaker 1: the town hall for New Hampshire. He's part of a 259 00:15:02,600 --> 00:15:06,120 Speaker 1: party that has opened up the moderate lane. Really, with 260 00:15:06,160 --> 00:15:08,960 Speaker 1: the exception of Amy Klovichar and Hick and Looper there 261 00:15:08,960 --> 00:15:12,760 Speaker 1: aren't any monets, so that lane is wide open for Biden. Okay, 262 00:15:12,840 --> 00:15:15,680 Speaker 1: I'll say it's wide open. We spoke to Howard Dean, Dr. 263 00:15:15,760 --> 00:15:18,440 Speaker 1: Dean of Vermont earlier today and he's all gung ho 264 00:15:18,680 --> 00:15:21,960 Speaker 1: universal healthcare, as Howard Dean has been forever. Where is 265 00:15:22,040 --> 00:15:25,400 Speaker 1: Joe Biden on the litmus paper of the last election 266 00:15:25,560 --> 00:15:30,080 Speaker 1: on healthcare? A moderate, certainly not one of the progressives. 267 00:15:30,320 --> 00:15:33,400 Speaker 1: But I think Biden realizes he's got to be market friendly, 268 00:15:33,440 --> 00:15:35,640 Speaker 1: He's got to raise some money from the markets, and 269 00:15:35,680 --> 00:15:39,440 Speaker 1: I think that yes, he may have to swallow some 270 00:15:39,480 --> 00:15:42,640 Speaker 1: progressive ideas, but he will be at the centrist in 271 00:15:42,720 --> 00:15:45,080 Speaker 1: the race. Well, let's talk about that. Whether he will 272 00:15:45,160 --> 00:15:48,680 Speaker 1: be pro market. There are always these anti business undertones 273 00:15:48,720 --> 00:15:51,880 Speaker 1: to the Obama presidency. They turn around and say things 274 00:15:51,960 --> 00:15:55,880 Speaker 1: like you didn't build, that there was something incompatible with 275 00:15:55,920 --> 00:15:59,840 Speaker 1: American capitalism, and the tone you would often get from 276 00:15:59,840 --> 00:16:05,080 Speaker 1: that administration. Where does that leave the Vice President Joe Biden? Well, John, 277 00:16:05,120 --> 00:16:07,880 Speaker 1: I think he would argue that he's from Scranton, p 278 00:16:07,960 --> 00:16:10,960 Speaker 1: A's from an area that is not part of the 279 00:16:11,000 --> 00:16:15,280 Speaker 1: progressive movement, and that he does understand capital formation in 280 00:16:15,320 --> 00:16:17,720 Speaker 1: the creation of jobs. All of the stuff that the 281 00:16:17,800 --> 00:16:20,600 Speaker 1: markets want to hear. The problem is, if he wins 282 00:16:20,600 --> 00:16:24,280 Speaker 1: the presidency, can he keep the rest of left at 283 00:16:24,320 --> 00:16:28,200 Speaker 1: bay or really have to compromise. Well, then let me 284 00:16:28,240 --> 00:16:30,560 Speaker 1: extend that and rip up the scripture, Greg Dell. Yeah, 285 00:16:30,640 --> 00:16:35,160 Speaker 1: if if Biden captures the nomination, if he gets a 286 00:16:35,280 --> 00:16:38,120 Speaker 1: forward moment and whatever the news flow is, can you 287 00:16:38,280 --> 00:16:43,640 Speaker 1: ever frame a Democrat Senate? Well, Tom, that's that's a 288 00:16:43,680 --> 00:16:46,160 Speaker 1: big deal. If you got a Senate controlled by the 289 00:16:46,240 --> 00:16:51,160 Speaker 1: Democrats and the House controlled by Liberals after a Biden win, 290 00:16:51,560 --> 00:16:53,840 Speaker 1: that would not be a great scenario for the markets. 291 00:16:53,880 --> 00:16:57,360 Speaker 1: I think they would worry about a very activist agenda. Well, 292 00:16:57,400 --> 00:16:58,880 Speaker 1: I want to give you an open question. Did you 293 00:16:58,960 --> 00:17:01,520 Speaker 1: write your memo for today and then into tomorrow as well? 294 00:17:01,800 --> 00:17:05,679 Speaker 1: What's the one thing about Vice President Biden that needs 295 00:17:05,840 --> 00:17:10,440 Speaker 1: analysis right now away from all the punditry. His age. 296 00:17:11,240 --> 00:17:13,159 Speaker 1: It's the elephant in the room, guys. You have to 297 00:17:13,200 --> 00:17:16,560 Speaker 1: say it. He's had two brain aneurysms, which I alluded 298 00:17:16,600 --> 00:17:20,440 Speaker 1: to in New Hampshire in seven exactly. He's seventy six 299 00:17:20,520 --> 00:17:23,679 Speaker 1: years old. He sounds a lot like he's from a 300 00:17:23,720 --> 00:17:26,720 Speaker 1: different generation. A lot of kids have never really heard 301 00:17:26,760 --> 00:17:29,600 Speaker 1: of him, so An ages the elephant in the room. 302 00:17:29,880 --> 00:17:31,880 Speaker 1: You're the second one today to mention that, Greg Billy. 303 00:17:32,040 --> 00:17:34,000 Speaker 1: Just because the news flow, we're gonna have to leave 304 00:17:34,000 --> 00:17:37,119 Speaker 1: it there. This has been wonderful, Greg Villier, thank you 305 00:17:37,200 --> 00:17:40,120 Speaker 1: so much for joining us UH this morning. Mr Villia 306 00:17:40,200 --> 00:17:44,200 Speaker 1: of course writing that really must read morning note as 307 00:17:44,280 --> 00:18:02,600 Speaker 1: well with a g F Toronto. UH this morning, Karen, 308 00:18:02,640 --> 00:18:04,000 Speaker 1: thanks so much. You know, as many of you know, 309 00:18:04,080 --> 00:18:06,560 Speaker 1: I got off Facebook like everybody else. I just said 310 00:18:06,600 --> 00:18:09,240 Speaker 1: I'm not doing Facebook and and that. So here in 311 00:18:09,280 --> 00:18:12,320 Speaker 1: the Bloomberg Interactive Brooker Studios, John, I'm just going to 312 00:18:12,440 --> 00:18:14,399 Speaker 1: point out that if you look at the f A screen, 313 00:18:14,440 --> 00:18:19,680 Speaker 1: the financial analysis screen for Facebook, they're actually making money. 314 00:18:19,920 --> 00:18:24,760 Speaker 1: And the crisis Netflix and it's just bizarre the valuation 315 00:18:24,800 --> 00:18:29,600 Speaker 1: of Netflix versus this cheap value trap called Facebook. Is 316 00:18:29,640 --> 00:18:31,560 Speaker 1: it a value trap? But let's talk about that share 317 00:18:31,640 --> 00:18:34,800 Speaker 1: over date joining a snap Bloomberg opinion columnist. If anything, 318 00:18:35,359 --> 00:18:39,840 Speaker 1: the multiple undervalues the growth that this company generates, doesn't 319 00:18:39,840 --> 00:18:42,840 Speaker 1: it share A Yeah, I think that's a fair point 320 00:18:42,840 --> 00:18:46,240 Speaker 1: that if you look at companies that are in Facebook's 321 00:18:46,320 --> 00:18:50,520 Speaker 1: peer group, right like Snap, uh and Twitter, those companies 322 00:18:51,240 --> 00:18:55,159 Speaker 1: are not growing faster or not much faster in snapcase 323 00:18:55,400 --> 00:18:57,920 Speaker 1: than Facebook. There, but they're valued more highly, at least 324 00:18:57,920 --> 00:18:59,960 Speaker 1: on a price to revenue basis. So I think, you know, 325 00:19:00,040 --> 00:19:02,439 Speaker 1: you can make a good argument that Facebook is relatively 326 00:19:02,480 --> 00:19:07,320 Speaker 1: inexpensive compared to its peers. You want me to dive 327 00:19:07,320 --> 00:19:11,600 Speaker 1: in here? Can go? Sure? I mean, I love what 328 00:19:11,640 --> 00:19:16,480 Speaker 1: you say. They're free cash flow Facebook fifteen billion twelve months, 329 00:19:16,480 --> 00:19:20,960 Speaker 1: Snap free cash flow negative seven million. I mean, this 330 00:19:20,960 --> 00:19:25,080 Speaker 1: thing is basically a Dow component compared to its competitors, 331 00:19:25,119 --> 00:19:28,280 Speaker 1: isn't it. Yeah. I think that's a fair point that 332 00:19:28,560 --> 00:19:32,879 Speaker 1: we now have seen Facebook over the course of certainly 333 00:19:32,920 --> 00:19:36,359 Speaker 1: the last few years, that it is like Google, this 334 00:19:36,520 --> 00:19:42,120 Speaker 1: incredible combination of consistently high revenue and really high free 335 00:19:42,119 --> 00:19:44,360 Speaker 1: cash Fleger. Then, did you in the last twenty four 336 00:19:44,359 --> 00:19:47,000 Speaker 1: hours did you hear religion from Mr Zuckerberg that it's 337 00:19:47,040 --> 00:19:50,560 Speaker 1: like a new Facebook or a new management team, or 338 00:19:50,600 --> 00:19:55,359 Speaker 1: you know, a new responsibility to push the critics away. 339 00:19:55,800 --> 00:19:58,280 Speaker 1: I think they've been saying that for some time. You know, 340 00:19:58,440 --> 00:20:01,040 Speaker 1: whether that's rhetoric or whether that's real from them, I 341 00:20:01,040 --> 00:20:04,159 Speaker 1: think as an open question, but you certainly have heard 342 00:20:04,280 --> 00:20:07,920 Speaker 1: from Mark Zuckerberg and Cheryl Sandberg for some time now 343 00:20:07,960 --> 00:20:13,400 Speaker 1: that they're taking seriously the responsibility of overseeing these websites 344 00:20:13,440 --> 00:20:17,760 Speaker 1: and apps that are basically among the Internet's most important 345 00:20:17,800 --> 00:20:22,159 Speaker 1: communication and news distribution tools. And we've seen ways that 346 00:20:22,200 --> 00:20:25,359 Speaker 1: those tools can be abused and in ways in which 347 00:20:25,400 --> 00:20:30,520 Speaker 1: Facebook has been a poor steward of these really important 348 00:20:30,920 --> 00:20:34,480 Speaker 1: Internet hangouts that they that it owns. Uh So, certainly 349 00:20:34,520 --> 00:20:36,880 Speaker 1: they were saying all the right things in terms of 350 00:20:37,480 --> 00:20:42,280 Speaker 1: being much more careful about oversight, protecting from violence and 351 00:20:42,359 --> 00:20:47,080 Speaker 1: election manipulation attempts on Facebook and Instagram and what's happened 352 00:20:47,080 --> 00:20:50,000 Speaker 1: other places. But yes, certainly they're not out of the 353 00:20:50,000 --> 00:20:53,320 Speaker 1: woods yet by any stretch of the imagination. And that, 354 00:20:53,440 --> 00:20:55,760 Speaker 1: to me is the biggest risk to Facebook, is this 355 00:20:55,840 --> 00:21:01,600 Speaker 1: kind of overhang of regulatory intervention or people and advertisers 356 00:21:01,680 --> 00:21:05,439 Speaker 1: fleeing Facebook if these problems get worse. I guess the 357 00:21:05,440 --> 00:21:08,159 Speaker 1: good news is that management have finally owned the issue. 358 00:21:08,680 --> 00:21:10,960 Speaker 1: I mean, it just sounds like that listening to Mark 359 00:21:11,040 --> 00:21:13,479 Speaker 1: Zuckerberg yesterday, I finally share and you and I were 360 00:21:13,480 --> 00:21:16,040 Speaker 1: both so critical of management and how they reacted to 361 00:21:16,080 --> 00:21:18,439 Speaker 1: the problems and the data privacy issues. Do you get 362 00:21:18,440 --> 00:21:21,600 Speaker 1: a feeling now they are actually owning the issue. I 363 00:21:21,880 --> 00:21:24,880 Speaker 1: think I'm not comfortable saying that yet. There is still 364 00:21:25,560 --> 00:21:28,399 Speaker 1: there are still so many problems that are, to be 365 00:21:28,480 --> 00:21:31,880 Speaker 1: fair very difficult to solve. But look, not very long 366 00:21:31,920 --> 00:21:35,160 Speaker 1: ago we saw those attacks in New Zealand where Facebook 367 00:21:35,240 --> 00:21:39,600 Speaker 1: Live was used to live stream these this act of terrorism, right, 368 00:21:39,680 --> 00:21:43,359 Speaker 1: and that is the products Facebook Live that doesn't should 369 00:21:43,359 --> 00:21:46,040 Speaker 1: not exist basically and does share. In the last minute 370 00:21:46,080 --> 00:21:48,760 Speaker 1: we've got with you, let's segui over to Amazon. I 371 00:21:48,800 --> 00:21:51,040 Speaker 1: guess they're out this afternoon. What will you look for 372 00:21:51,240 --> 00:21:55,159 Speaker 1: from Fortress Bezos? Basically the thing I look for an 373 00:21:55,200 --> 00:21:58,760 Speaker 1: Amazon is growth. We've seen the last six months some 374 00:21:58,920 --> 00:22:02,280 Speaker 1: niggles about growth rate there that it looks like there's 375 00:22:02,280 --> 00:22:05,359 Speaker 1: a significant slowdown. And so the question is what happened 376 00:22:05,359 --> 00:22:08,159 Speaker 1: in the third quarter with e commerce the street the 377 00:22:08,200 --> 00:22:13,320 Speaker 1: streets growth twelve months trailing in down growth forward? I 378 00:22:13,320 --> 00:22:16,919 Speaker 1: mean that's a ginormous move is I mean again, this 379 00:22:17,000 --> 00:22:19,159 Speaker 1: has been a significant slowdown. And to me it's a 380 00:22:19,160 --> 00:22:23,440 Speaker 1: little puzzling because e commerce as a market has continued 381 00:22:23,480 --> 00:22:26,880 Speaker 1: to grow at a healthy rate and h but yet 382 00:22:26,920 --> 00:22:29,480 Speaker 1: Amazon is slowing down. So I'm not really sure what's 383 00:22:29,480 --> 00:22:31,280 Speaker 1: happening there. Do you know who makes a cardboard in 384 00:22:31,320 --> 00:22:34,440 Speaker 1: the cardboard boxes? Are you up to speed on that shore? 385 00:22:34,560 --> 00:22:37,560 Speaker 1: Is that tech? I am unfamiliar with. Cardboard box makes 386 00:22:37,600 --> 00:22:41,359 Speaker 1: all the car I'm guessing for Amazon, prompting I don't know. 387 00:22:42,040 --> 00:22:44,200 Speaker 1: You look at the I mean it's in a business 388 00:22:44,200 --> 00:22:45,920 Speaker 1: you want to get involved in. I don't know. I'm 389 00:22:45,920 --> 00:22:48,439 Speaker 1: looking at my my front lobby, which is a small, 390 00:22:48,440 --> 00:22:51,359 Speaker 1: little cozy lobby, and they cram all the boxes and 391 00:22:51,720 --> 00:22:55,600 Speaker 1: a lot of hundreds of boxes come in. You've got 392 00:22:55,600 --> 00:22:58,840 Speaker 1: some kind of gutch business inside that did it? It's 393 00:22:58,880 --> 00:23:02,600 Speaker 1: evaluation should make of books, says thank you so much, 394 00:23:05,400 --> 00:23:22,480 Speaker 1: us far too much. You know, he has a professor 395 00:23:22,560 --> 00:23:26,639 Speaker 1: at New York University. His book is the must read 396 00:23:27,080 --> 00:23:30,120 Speaker 1: for those of you that are curious about this tech 397 00:23:30,200 --> 00:23:33,560 Speaker 1: juggernaut we're living. The book is The four. Scott Galloway 398 00:23:33,640 --> 00:23:36,000 Speaker 1: joins us, Scott, are you gonna refreshen up the book? 399 00:23:36,160 --> 00:23:40,680 Speaker 1: Do you rewrite? Addition to uh? Well, first off, thanks 400 00:23:40,720 --> 00:23:42,840 Speaker 1: for the kind words, Tom. I think if you were 401 00:23:42,840 --> 00:23:45,119 Speaker 1: going to write a sequel would be probably called The One. 402 00:23:45,359 --> 00:23:47,879 Speaker 1: And the company you mentioned, Amazon is just firing on 403 00:23:47,920 --> 00:23:51,040 Speaker 1: all twelve thousand cylinders. Now, it's really pulling away from 404 00:23:51,040 --> 00:23:53,160 Speaker 1: the rest of the park. But it's not really a 405 00:23:53,200 --> 00:23:55,480 Speaker 1: tech company. I mean in terms of you know, the 406 00:23:55,560 --> 00:23:58,800 Speaker 1: fancy stuff you talk about in the classroom. They're all 407 00:23:59,000 --> 00:24:02,440 Speaker 1: unique and different, including Microsoft, which is tangential in the book. 408 00:24:02,840 --> 00:24:08,639 Speaker 1: But there's just something different about this distributive societal nature 409 00:24:08,720 --> 00:24:12,560 Speaker 1: of Amazon, isn't there. Ye have people describe it as 410 00:24:12,600 --> 00:24:15,320 Speaker 1: a disruption platform, but I still think the reason for 411 00:24:15,359 --> 00:24:17,720 Speaker 1: their success is something a little bit more mundane, and 412 00:24:17,760 --> 00:24:20,840 Speaker 1: it's the things you look at every daytime, and that 413 00:24:20,960 --> 00:24:24,000 Speaker 1: is their core competence of storytelling, and they're kind of 414 00:24:25,000 --> 00:24:28,959 Speaker 1: I don't know. His relentless, maniacal focus on his truisms 415 00:24:29,000 --> 00:24:32,840 Speaker 1: of nonperishable truisms of consumer value, selection and convenience has 416 00:24:32,920 --> 00:24:36,520 Speaker 1: resulted in the cheapest cost of capital in the history 417 00:24:36,520 --> 00:24:39,359 Speaker 1: of modern business. It's just very difficult to compete with 418 00:24:39,359 --> 00:24:41,840 Speaker 1: the company that can reinvest a hundred cents on the 419 00:24:41,920 --> 00:24:45,199 Speaker 1: dollar when you can invest somewhere between seventy cents on 420 00:24:45,240 --> 00:24:48,679 Speaker 1: the dollar. So Scott, it's it's just amazing what that company, 421 00:24:48,720 --> 00:24:52,000 Speaker 1: what Amazon has done with Jeff Bezos, has done. And 422 00:24:52,080 --> 00:24:53,680 Speaker 1: you know, some of the areas he goes into, whether 423 00:24:53,720 --> 00:24:57,239 Speaker 1: it's you know, uh, drones or more recently, you know 424 00:24:57,359 --> 00:25:00,600 Speaker 1: the supermarket business. You know, see the odd to a 425 00:25:00,640 --> 00:25:02,359 Speaker 1: lot of investors and a lot of people, what do 426 00:25:02,800 --> 00:25:06,320 Speaker 1: you think is behind some of his investments away from 427 00:25:06,320 --> 00:25:11,399 Speaker 1: the core marketplace business. Hi, Paul good, Good to be 428 00:25:11,480 --> 00:25:13,800 Speaker 1: with you. So I think at the end of the day, 429 00:25:13,840 --> 00:25:17,399 Speaker 1: Amazon says, you know, what percentage of the consumer business 430 00:25:17,440 --> 00:25:19,919 Speaker 1: do you want? And as IBM said in the hearings 431 00:25:19,920 --> 00:25:22,320 Speaker 1: back and I think the seventies of eight, he thinks 432 00:25:22,320 --> 00:25:25,720 Speaker 1: I want all of it. And Amazon, I believe, is 433 00:25:25,840 --> 00:25:28,840 Speaker 1: entering or moving towards the space where you're all of 434 00:25:28,840 --> 00:25:32,040 Speaker 1: your commerce and all of your media can be delivered 435 00:25:32,040 --> 00:25:35,520 Speaker 1: by one kind of membership or recurring revenue bundle in 436 00:25:35,560 --> 00:25:39,080 Speaker 1: the form of Prime And what Bezos did that was 437 00:25:39,119 --> 00:25:42,200 Speaker 1: probably the most value of creative shaffuld or a creative 438 00:25:42,240 --> 00:25:44,879 Speaker 1: decision in the history of business, maybe the exception of 439 00:25:44,920 --> 00:25:47,960 Speaker 1: Apple's decision to open stores because he got out of 440 00:25:47,960 --> 00:25:51,240 Speaker 1: a transactional kind of terrible business of retail where you 441 00:25:51,280 --> 00:25:54,560 Speaker 1: have to reinvent your business every day and convince the 442 00:25:54,560 --> 00:25:56,760 Speaker 1: consumer to come back into your store, and went into 443 00:25:56,840 --> 00:25:59,919 Speaker 1: a recurring revenue software like business that's valued at them 444 00:26:00,440 --> 00:26:04,360 Speaker 1: revenues versus a multiple of vibada called recurring revenue. And 445 00:26:04,760 --> 00:26:08,640 Speaker 1: if you want to talk about a recurring revenue juggernaut, Microsoft, 446 00:26:08,760 --> 00:26:10,960 Speaker 1: most valuable company in the world as of today, has 447 00:26:11,040 --> 00:26:14,240 Speaker 1: the ultimate recurring revenue relationship with the corporate world in 448 00:26:14,240 --> 00:26:17,960 Speaker 1: the form of Microsoft Office. But Amazon Prime is probably 449 00:26:17,960 --> 00:26:20,800 Speaker 1: a close number two. Anybody who cancels or breaks up 450 00:26:20,800 --> 00:26:23,480 Speaker 1: with Prime has done it because their credit cards expired, 451 00:26:23,560 --> 00:26:25,560 Speaker 1: or they've moved in with someone else. Who asked Brian, 452 00:26:26,520 --> 00:26:28,399 Speaker 1: that's a nice way of putting it to show how 453 00:26:28,440 --> 00:26:31,800 Speaker 1: out front Paul Sweeney, Mr Galloway is Chapter eight to 454 00:26:31,880 --> 00:26:36,439 Speaker 1: t algorithm what it takes to get to a trillion exactly, So, Scott. 455 00:26:36,640 --> 00:26:39,159 Speaker 1: Another company that features prominently in your book and in 456 00:26:39,200 --> 00:26:41,439 Speaker 1: your work over the years is Facebook. And you know 457 00:26:41,440 --> 00:26:45,240 Speaker 1: they just reported another strong quarter uh last night, stocks 458 00:26:45,320 --> 00:26:48,320 Speaker 1: up about a seven percent this morning. It now has 459 00:26:48,320 --> 00:26:51,840 Speaker 1: a market cap of fifty billion dollars. But what was 460 00:26:51,880 --> 00:26:54,560 Speaker 1: interesting is they paid a three billion dollar fine for 461 00:26:54,600 --> 00:26:57,199 Speaker 1: the Federal Trade Commission and probably suggested that there's more 462 00:26:57,280 --> 00:27:01,960 Speaker 1: to come. What really is I mean, let's quantify this risk. 463 00:27:02,000 --> 00:27:05,960 Speaker 1: It's more than three billion dollars, isn't it. The Facebook. Yeah, 464 00:27:06,000 --> 00:27:08,960 Speaker 1: but I would argue in Tom, you would love this book. 465 00:27:08,960 --> 00:27:11,439 Speaker 1: I don't know if you've read a professor Timothy whose 466 00:27:11,440 --> 00:27:16,600 Speaker 1: book The Curse of Bigness. He he says in the 467 00:27:16,680 --> 00:27:19,840 Speaker 1: book that a key step on the road to tyranny 468 00:27:19,920 --> 00:27:22,920 Speaker 1: is when the government is no longer a countervailing force 469 00:27:22,960 --> 00:27:25,960 Speaker 1: to the private sector, but as a co conspirator. And 470 00:27:26,000 --> 00:27:29,119 Speaker 1: I would argue that the actions by the FTC have 471 00:27:29,520 --> 00:27:32,720 Speaker 1: essentially and maybe unwittingly made them a co conspirator. And 472 00:27:32,760 --> 00:27:35,600 Speaker 1: what is an organization that has become somewhat dangerous? Because 473 00:27:35,600 --> 00:27:39,040 Speaker 1: when Facebook announces that they're setting aside three to five 474 00:27:39,040 --> 00:27:42,639 Speaker 1: billion dollars for a fine, and the next morning the 475 00:27:42,720 --> 00:27:46,680 Speaker 1: stock is up by about thirty five billion, what they're 476 00:27:46,720 --> 00:27:49,800 Speaker 1: saying is is this fine is not doing its job. 477 00:27:50,480 --> 00:27:52,920 Speaker 1: A fine is supposed to be the amount times the 478 00:27:53,040 --> 00:27:55,600 Speaker 1: risk of getting caught serves as an effect of deterrent. 479 00:27:56,160 --> 00:27:59,560 Speaker 1: And when Facebook can bring certainty to the markets that 480 00:27:59,680 --> 00:28:03,399 Speaker 1: it's watching its hands of this problem for about seven 481 00:28:03,440 --> 00:28:06,520 Speaker 1: weeks of cash flow or two income and the stock 482 00:28:06,560 --> 00:28:08,960 Speaker 1: goes up thirty five going the next day, that means 483 00:28:09,000 --> 00:28:12,600 Speaker 1: effectively the FDC is now a co conspirator with Facebook. 484 00:28:12,760 --> 00:28:15,359 Speaker 1: I can't disagree with that logic, Scott. I want you 485 00:28:15,400 --> 00:28:18,399 Speaker 1: to talk about what Paul Sweene an ideal with every day, 486 00:28:18,480 --> 00:28:22,000 Speaker 1: which is sell side analysts saying a given company wants 487 00:28:22,040 --> 00:28:26,199 Speaker 1: the Amazon model, but they're really not Amazon. Everybody's out there, 488 00:28:26,240 --> 00:28:29,720 Speaker 1: all these unicorns and all that saying that that they 489 00:28:29,720 --> 00:28:32,400 Speaker 1: want to just focus on revenues to help with free 490 00:28:32,400 --> 00:28:35,720 Speaker 1: cash flow, etcetera, etcetera. Are they all going to go 491 00:28:35,800 --> 00:28:38,680 Speaker 1: down in flames? I mean, how do you identify you 492 00:28:38,720 --> 00:28:44,280 Speaker 1: can actually get away with an Amazon philosophy? You know 493 00:28:44,320 --> 00:28:47,120 Speaker 1: that's the correct question, Tom, and I would argue that 494 00:28:48,120 --> 00:28:52,120 Speaker 1: what you have here is an organization. Again, I'll be 495 00:28:52,120 --> 00:28:54,840 Speaker 1: in forty one board meetings in two thousand and nineteen. 496 00:28:54,960 --> 00:28:57,040 Speaker 1: That's what I did thirty eight last year. I'll grow 497 00:28:57,080 --> 00:28:59,960 Speaker 1: at ten percent. And they all have the same question, 498 00:29:00,000 --> 00:29:02,680 Speaker 1: and how do we compete with Amazon? And I have 499 00:29:02,720 --> 00:29:06,280 Speaker 1: the same answer. It's impossible because we have entered into 500 00:29:06,280 --> 00:29:09,560 Speaker 1: an entirely different construct of a relationship between the markets 501 00:29:09,560 --> 00:29:14,080 Speaker 1: and investors and consumers where no company has been previously 502 00:29:14,240 --> 00:29:17,800 Speaker 1: allowed to get to this level of dominance without the 503 00:29:17,840 --> 00:29:21,640 Speaker 1: market forcing them to be more profitable. So the end 504 00:29:21,640 --> 00:29:24,400 Speaker 1: of world War two, the Allies had thirty eight gallons 505 00:29:24,400 --> 00:29:27,760 Speaker 1: of gasoline for everyone that the access power had, so 506 00:29:27,800 --> 00:29:30,240 Speaker 1: we could just show up and overwhelm them with route 507 00:29:30,280 --> 00:29:33,400 Speaker 1: force and gasoline. And Amazon is a company you can 508 00:29:33,440 --> 00:29:37,560 Speaker 1: show up that any category with thirty eight gallons of gasoline. 509 00:29:37,560 --> 00:29:40,040 Speaker 1: So I think we're at a point here, Tom, where 510 00:29:40,040 --> 00:29:42,680 Speaker 1: the markets are no longer competitive and the only real 511 00:29:42,760 --> 00:29:46,880 Speaker 1: solution of oxygenating the marketplace requires anti trust action. Are 512 00:29:46,880 --> 00:29:49,800 Speaker 1: they a standard oil of New Jersey coming, Scott Gallaway? 513 00:29:49,800 --> 00:29:52,000 Speaker 1: Are you going to be the new editor? Bill? I mean, 514 00:29:52,000 --> 00:29:56,040 Speaker 1: is that what we're talking about? I love the reference. 515 00:29:56,080 --> 00:29:59,120 Speaker 1: I'd like my my real hero is brandis here? We 516 00:29:59,240 --> 00:30:01,640 Speaker 1: need to move back to a BRANDISI inform of anti 517 00:30:01,640 --> 00:30:04,360 Speaker 1: trust as opposed to the Chicago boiler kind of consumer 518 00:30:04,400 --> 00:30:06,760 Speaker 1: harm tests. But but yeah, I think I think I 519 00:30:06,760 --> 00:30:08,760 Speaker 1: think it's time time. I think we're overdue. Do we 520 00:30:08,800 --> 00:30:10,680 Speaker 1: just have a nerdal? I think there might have been 521 00:30:11,080 --> 00:30:14,600 Speaker 1: a massive antitrust So, Scott, that's kind of the path 522 00:30:14,600 --> 00:30:15,960 Speaker 1: I was going to go down because I know it's 523 00:30:16,000 --> 00:30:18,280 Speaker 1: it's a topic you're raised in your book, in your 524 00:30:18,560 --> 00:30:21,840 Speaker 1: your work. You know, when you think about big US tech, 525 00:30:22,160 --> 00:30:25,520 Speaker 1: the regulatory backlash are the regulatory oversight not backlash. Oversight 526 00:30:25,600 --> 00:30:27,640 Speaker 1: has really just come from Europe, the European Union, going 527 00:30:27,640 --> 00:30:30,160 Speaker 1: all the way back to Microsoft and and the dominance 528 00:30:30,160 --> 00:30:33,640 Speaker 1: in their software. There's never really been an appetite in 529 00:30:33,680 --> 00:30:38,080 Speaker 1: the US for a heavy regulatory hand of big tech. 530 00:30:38,640 --> 00:30:40,360 Speaker 1: Is there any appetite for that to change? Do you 531 00:30:40,360 --> 00:30:43,959 Speaker 1: think with in Washington? I'd like to think, you know, 532 00:30:44,000 --> 00:30:46,080 Speaker 1: I don't want to think the world is what it 533 00:30:46,200 --> 00:30:48,160 Speaker 1: is and that they're just going to continue to do this. 534 00:30:48,280 --> 00:30:49,880 Speaker 1: I think the world is what we make of it, 535 00:30:49,960 --> 00:30:53,080 Speaker 1: and we are starting to hear more noises. But you're 536 00:30:53,120 --> 00:30:55,760 Speaker 1: absolutely right where we're going to see the war against 537 00:30:55,800 --> 00:30:58,200 Speaker 1: big tech breakout is where every major conflict of the 538 00:30:58,200 --> 00:31:01,480 Speaker 1: twentieth century broke out, and that is to Europe. And 539 00:31:01,520 --> 00:31:04,120 Speaker 1: it's just straight logic and math because here in the 540 00:31:04,200 --> 00:31:07,720 Speaker 1: US we're net gainers from big tech. Now, the problem 541 00:31:07,760 --> 00:31:10,080 Speaker 1: with that statement is the word net, because we're having 542 00:31:10,120 --> 00:31:13,520 Speaker 1: an important conversation around some of the negative externalities a 543 00:31:13,560 --> 00:31:16,840 Speaker 1: big tech, but on the whole we're likely net gainers. 544 00:31:16,840 --> 00:31:19,280 Speaker 1: And I say that as a critic. Europe is not 545 00:31:19,360 --> 00:31:21,920 Speaker 1: a net gainer. They got all of the downside, the 546 00:31:22,000 --> 00:31:24,840 Speaker 1: job destruction, of monopoly abuse. The weapon is lation of 547 00:31:24,920 --> 00:31:27,440 Speaker 1: these platforms to the burke for elections. But there are 548 00:31:27,560 --> 00:31:31,240 Speaker 1: very few university buildings are hospital wings named after Facebook 549 00:31:31,280 --> 00:31:34,200 Speaker 1: or Google billionaires. This is stiff in the backbone of 550 00:31:34,240 --> 00:31:37,440 Speaker 1: the regulators. Now we gotta leave there. Scott Gilla again, 551 00:31:37,480 --> 00:31:41,320 Speaker 1: congratulations two years ago, just exceptionally Prussian book for any 552 00:31:41,360 --> 00:31:45,040 Speaker 1: of you flabbergasted by the tech juggernaut, The four I 553 00:31:45,080 --> 00:31:49,000 Speaker 1: can't say enough about it, the hidden DNA of Amazon, Apple, 554 00:31:49,440 --> 00:31:52,400 Speaker 1: Facebook and Google, and somewhere in his forty one board meetings, 555 00:31:52,640 --> 00:31:55,240 Speaker 1: Scott galloware right. The second edition. We need that out 556 00:31:55,720 --> 00:31:59,280 Speaker 1: within twelve months. He is at New York University. Thanks 557 00:31:59,280 --> 00:32:03,560 Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen 558 00:32:03,760 --> 00:32:09,080 Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform 559 00:32:09,200 --> 00:32:13,520 Speaker 1: you prefer. I'm on Twitter at Tom Keene before the podcast. 560 00:32:13,560 --> 00:32:17,080 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio