1 00:00:09,720 --> 00:00:12,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keen with 2 00:00:13,560 --> 00:00:16,520 Speaker 1: David Gura. Daily we bring you insight from the best 3 00:00:16,560 --> 00:00:22,279 Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance 4 00:00:22,320 --> 00:00:27,000 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course 5 00:00:27,320 --> 00:00:33,639 Speaker 1: on the Bloomberg and beg to Steve Whiting today. He's 6 00:00:33,640 --> 00:00:35,800 Speaker 1: the global chief strategist at City Private Bank and he's 7 00:00:35,840 --> 00:00:37,800 Speaker 1: here in her Bloomberg Lemon three. Ste It feels like 8 00:00:37,800 --> 00:00:39,480 Speaker 1: it's been an age, Steve, It's been a wow. Great 9 00:00:39,479 --> 00:00:41,360 Speaker 1: to see you once again. Thank you. Let me ask 10 00:00:41,400 --> 00:00:43,280 Speaker 1: you first of all about a tax reform. As we 11 00:00:43,320 --> 00:00:46,199 Speaker 1: watched this process unfold, I mentioned the delay, the one 12 00:00:46,240 --> 00:00:47,800 Speaker 1: day at least delay that we've gotten from the house 13 00:00:47,840 --> 00:00:50,120 Speaker 1: ways and means, how closely are you watching this? How 14 00:00:50,159 --> 00:00:53,120 Speaker 1: closely our markets watching what's unfolding here. It's an incredibly 15 00:00:53,120 --> 00:00:56,160 Speaker 1: tight a timeline of very narrow calendar, very narrow window 16 00:00:56,240 --> 00:00:58,000 Speaker 1: for lawmakers to get something done here by the end 17 00:00:58,000 --> 00:01:00,240 Speaker 1: of the calendar year. Well, I'm watching it very close, Slee. 18 00:01:00,280 --> 00:01:04,520 Speaker 1: I think that markets all year long have been tempted 19 00:01:04,560 --> 00:01:07,640 Speaker 1: to think that something was imminent. It's going to happen quickly. 20 00:01:07,640 --> 00:01:09,920 Speaker 1: It's this vote or that vote, and they don't really 21 00:01:09,920 --> 00:01:12,920 Speaker 1: have the patients to stay on this particular issue in 22 00:01:12,920 --> 00:01:16,000 Speaker 1: the legislative process. If it turns out to be early 23 00:01:16,040 --> 00:01:19,280 Speaker 1: two thousand eighteen, I would think that the probability of 24 00:01:19,319 --> 00:01:23,760 Speaker 1: something passing is quite high and markets can actually focus 25 00:01:23,800 --> 00:01:26,040 Speaker 1: on other things if for some reason there's a delay 26 00:01:26,080 --> 00:01:28,680 Speaker 1: for a couple of weeks. But it is material. I mean, 27 00:01:28,680 --> 00:01:30,800 Speaker 1: there's a lot of devil in the details here. I 28 00:01:30,840 --> 00:01:32,679 Speaker 1: just took a look. For example, if you were to 29 00:01:32,680 --> 00:01:35,840 Speaker 1: take a look at the original Trump campaign headlines, you're 30 00:01:35,880 --> 00:01:38,160 Speaker 1: gonna getting a lot of those, but they seem to 31 00:01:38,200 --> 00:01:41,280 Speaker 1: be with a one point five trillion dollar price tag 32 00:01:41,680 --> 00:01:46,000 Speaker 1: sevent or more offset by offsetting revenues, which is what 33 00:01:46,120 --> 00:01:48,840 Speaker 1: the really interesting details. You know, we'll see where all 34 00:01:48,880 --> 00:01:50,880 Speaker 1: those other taxes have to go up in order to 35 00:01:50,880 --> 00:01:54,480 Speaker 1: pay for this. Uh, that part will I'll hopefully learn tomorrow. 36 00:01:54,680 --> 00:01:56,360 Speaker 1: Devils and the details, of course you have. But on 37 00:01:56,360 --> 00:01:58,640 Speaker 1: the issue of growth, we hear from members of this administration, 38 00:01:58,640 --> 00:02:02,080 Speaker 1: from economic advisors to it, UH that tax reform would 39 00:02:02,120 --> 00:02:03,800 Speaker 1: lead to more growth. We get to that three or 40 00:02:03,800 --> 00:02:06,800 Speaker 1: four percent range that they've been talking about since the campaign, 41 00:02:07,040 --> 00:02:08,840 Speaker 1: any indications of that as you look at the at 42 00:02:08,840 --> 00:02:11,760 Speaker 1: the data, I think that there are subtle positives here. 43 00:02:11,840 --> 00:02:14,320 Speaker 1: If you take a look at the corporate tax rate, 44 00:02:14,400 --> 00:02:17,960 Speaker 1: just having a globally competitive corporate tax rate will mean 45 00:02:18,000 --> 00:02:20,520 Speaker 1: a difference. Now, of course there's some revenue lost for that, 46 00:02:20,560 --> 00:02:24,760 Speaker 1: but we only collect about ten of all federal UH 47 00:02:24,880 --> 00:02:28,920 Speaker 1: taxes are come from the corporate sector. And so in essence, 48 00:02:28,960 --> 00:02:31,959 Speaker 1: if you can have a more globally competitive tax rate, 49 00:02:32,600 --> 00:02:35,200 Speaker 1: you can incentivize domestic production. Now that will be a 50 00:02:35,240 --> 00:02:38,720 Speaker 1: subtle but positive shift up. And then you have the 51 00:02:38,840 --> 00:02:41,200 Speaker 1: other issues here that are we really cutting down on 52 00:02:41,240 --> 00:02:44,440 Speaker 1: all the complexity? Are we really raising enough revenue on 53 00:02:44,480 --> 00:02:46,440 Speaker 1: these other issues if it's really just a tax cutter 54 00:02:46,560 --> 00:02:50,119 Speaker 1: or reform. But you know, I would not expect suddenly 55 00:02:50,200 --> 00:02:54,360 Speaker 1: the economy has this tremendous new technological potential to grow, 56 00:02:54,440 --> 00:02:57,360 Speaker 1: the population will grow more rapidly. You know, it's subtle, 57 00:02:57,360 --> 00:02:58,959 Speaker 1: but it could be. It could be in the direction 58 00:02:58,960 --> 00:03:01,280 Speaker 1: of a more positive direction. You've learned about bowl market 59 00:03:01,320 --> 00:03:03,680 Speaker 1: psychology and the degree to which it's spreading around the world. 60 00:03:03,680 --> 00:03:07,600 Speaker 1: What are you seeing there? How how unwilling are investors 61 00:03:07,639 --> 00:03:11,520 Speaker 1: to reckon with central bank policy, political risk? Are they 62 00:03:11,560 --> 00:03:14,440 Speaker 1: squarely focused here? What we're seeing is a rising still 63 00:03:14,520 --> 00:03:17,480 Speaker 1: rising stock market. We'll just think about Catalonia versus Greece 64 00:03:17,520 --> 00:03:21,360 Speaker 1: some years ago, and again, you know, the financial ramifications 65 00:03:21,360 --> 00:03:23,919 Speaker 1: are very, very different, but the impact and market is 66 00:03:23,960 --> 00:03:27,239 Speaker 1: so tremendously different. You know, we worried in two thousand 67 00:03:27,280 --> 00:03:29,920 Speaker 1: and ten whether the you know, the horrible earthquake in 68 00:03:29,919 --> 00:03:32,600 Speaker 1: Fukushima was going to derail the world economy. That's how 69 00:03:32,960 --> 00:03:36,880 Speaker 1: how everyone felt so incredibly fragile about everything. And now 70 00:03:37,000 --> 00:03:38,800 Speaker 1: what you see with North Korea has had no more 71 00:03:38,840 --> 00:03:42,960 Speaker 1: impact than flammable smartphones. Right. So, these these types of 72 00:03:43,000 --> 00:03:47,360 Speaker 1: things show that markets feel as if there's adorability, and 73 00:03:47,400 --> 00:03:49,920 Speaker 1: that means that they're taking more risk and that future 74 00:03:49,960 --> 00:03:52,400 Speaker 1: returns will be reduced because we're taking more risk right now. 75 00:03:52,680 --> 00:03:55,760 Speaker 1: But I think it is more correct than incorrect that 76 00:03:55,800 --> 00:03:58,320 Speaker 1: when we have problems, they tend to be regional, and 77 00:03:58,400 --> 00:04:01,640 Speaker 1: that most recessions aren't act regional. And if you diversify 78 00:04:01,680 --> 00:04:05,320 Speaker 1: across the world, you can uh you can actually take 79 00:04:05,320 --> 00:04:06,640 Speaker 1: down rest. It's one of the few things we can 80 00:04:06,640 --> 00:04:09,720 Speaker 1: do to mitigate risk. Stephen Wading with this city private 81 00:04:09,760 --> 00:04:12,720 Speaker 1: bank getting and started here in this hour FED day, 82 00:04:12,920 --> 00:04:15,320 Speaker 1: David grew up providing wisdom in the one hour on 83 00:04:15,320 --> 00:04:18,360 Speaker 1: Bloomberg Television. Then I'll wander in on radio and television 84 00:04:19,000 --> 00:04:21,520 Speaker 1: with the FED show, Scarlet Food leading our coverage with 85 00:04:22,120 --> 00:04:25,160 Speaker 1: Alan Blinder and Bill Gross and Jeff Rosenberg with us 86 00:04:25,680 --> 00:04:29,120 Speaker 1: as well. All the tax reform dynamic runs up against 87 00:04:29,200 --> 00:04:33,359 Speaker 1: all the mail I get from listeners, which is about 88 00:04:33,360 --> 00:04:39,159 Speaker 1: the fiscal deficit. I believe tax reform is really about 89 00:04:39,200 --> 00:04:43,080 Speaker 1: cutting taxes. So far in the discussion I've heard when 90 00:04:43,120 --> 00:04:47,599 Speaker 1: does the deficit impinge on the markets? Impinge on the markets? 91 00:04:47,960 --> 00:04:50,400 Speaker 1: These are another thing that could be quite subtle, because 92 00:04:50,400 --> 00:04:54,000 Speaker 1: the deficit does indeed matter to independently of the interest 93 00:04:54,040 --> 00:04:57,039 Speaker 1: rate level. But this is how we use savings now. 94 00:04:57,040 --> 00:04:59,680 Speaker 1: In the future, you know, what will we pay for? 95 00:05:00,080 --> 00:05:02,520 Speaker 1: What will we give up? You know? Right now we 96 00:05:02,640 --> 00:05:05,520 Speaker 1: certainly have a surplus of savings. Where you can see 97 00:05:05,560 --> 00:05:08,080 Speaker 1: interest rates your pointing earlier on the air to the 98 00:05:08,120 --> 00:05:10,640 Speaker 1: cost of capital for Apple in the debt market, for 99 00:05:11,760 --> 00:05:15,120 Speaker 1: rate is three point or something. The personal savings rates 100 00:05:15,120 --> 00:05:19,760 Speaker 1: in the neighborhood of five. Yeah, the national savings is higher. 101 00:05:20,080 --> 00:05:22,760 Speaker 1: Federal obviously have dis savings and in the long run, 102 00:05:22,800 --> 00:05:26,360 Speaker 1: it will get worse. And you know what will we do, Well, 103 00:05:26,360 --> 00:05:31,800 Speaker 1: we will finance a good deal of healthcare consumption, or 104 00:05:31,880 --> 00:05:34,440 Speaker 1: will we finance plant and equipment. And that's a question 105 00:05:34,960 --> 00:05:37,000 Speaker 1: of what the deficit is doing, and that it is 106 00:05:37,279 --> 00:05:40,159 Speaker 1: the treasury will get financed that we will be able 107 00:05:40,200 --> 00:05:43,440 Speaker 1: to borrow and spend. But what will we be giving 108 00:05:43,560 --> 00:05:46,400 Speaker 1: up if we don't have an endless supply of savings 109 00:05:46,440 --> 00:05:50,520 Speaker 1: in real savings UH inflation adjusted saving. And that's the 110 00:05:50,600 --> 00:05:53,800 Speaker 1: question is to how we use capital, Steve, you talked 111 00:05:53,800 --> 00:05:56,000 Speaker 1: about the need to to diverse f internationally. How how 112 00:05:56,040 --> 00:05:57,839 Speaker 1: broadly does one do that? Or how broadly would you 113 00:05:57,839 --> 00:05:59,800 Speaker 1: counsel one one to do that? Is it targeting one 114 00:05:59,800 --> 00:06:02,320 Speaker 1: mark in particular, one sector in one market? How how 115 00:06:02,360 --> 00:06:03,720 Speaker 1: broad a brush to you use when you when you 116 00:06:03,800 --> 00:06:06,880 Speaker 1: talk about the international versification. Well, I'm a little worried 117 00:06:06,920 --> 00:06:10,160 Speaker 1: when you know, for example, we're now overweight all emerging 118 00:06:10,200 --> 00:06:13,920 Speaker 1: markets regionally, and that's in both equities and fixed income. 119 00:06:14,080 --> 00:06:16,479 Speaker 1: We spent most of the last five years underweight. Instead, 120 00:06:17,320 --> 00:06:19,920 Speaker 1: Now when we do that, people will say, well, I 121 00:06:19,960 --> 00:06:22,480 Speaker 1: bought this one emerging market country E t F or 122 00:06:22,560 --> 00:06:25,600 Speaker 1: something like that, and it didn't work well. The reality 123 00:06:25,720 --> 00:06:28,400 Speaker 1: is is that there's a lot of idiosyncratic country level 124 00:06:28,480 --> 00:06:30,920 Speaker 1: risk and you need to be careful. Things that look 125 00:06:31,279 --> 00:06:34,880 Speaker 1: quite good have idiosyncratic risks. If you take a look 126 00:06:34,920 --> 00:06:38,160 Speaker 1: at fixed income in Brazil, for example, give us give 127 00:06:38,240 --> 00:06:41,560 Speaker 1: us a plus and a minus adios syncretic risk. We'll 128 00:06:41,560 --> 00:06:44,599 Speaker 1: think about the elections of two thousand eighteen that are coming. 129 00:06:44,640 --> 00:06:47,240 Speaker 1: In the case of Mexico and Brazil. These are markets 130 00:06:47,279 --> 00:06:51,159 Speaker 1: where yields are tremendous compared to what you see and 131 00:06:51,160 --> 00:06:54,080 Speaker 1: developed markets. In the case of Brazil, you also have 132 00:06:54,120 --> 00:06:57,720 Speaker 1: a good equity valuation. But could you say that I 133 00:06:57,960 --> 00:07:00,520 Speaker 1: put those into a portfolio of other emerging markets and 134 00:07:00,560 --> 00:07:04,359 Speaker 1: I will probably have a good high expected return. Yes. 135 00:07:04,600 --> 00:07:06,760 Speaker 1: Can you say that if I concentrate solely in that 136 00:07:06,839 --> 00:07:10,160 Speaker 1: country and something goes wrong on the political front, then 137 00:07:10,360 --> 00:07:12,720 Speaker 1: you have a problem. So that's why we need broadly 138 00:07:12,760 --> 00:07:16,800 Speaker 1: diversified global portfolios. UH. And if we have an emerging 139 00:07:16,840 --> 00:07:21,320 Speaker 1: market's overweight, it's not the entire portfolio. When when you 140 00:07:21,320 --> 00:07:23,600 Speaker 1: when you look at Asia in particular, and we've heard 141 00:07:23,600 --> 00:07:25,760 Speaker 1: so much about trade UH, and we're looking to the 142 00:07:25,800 --> 00:07:27,760 Speaker 1: president heading over to Asia at the end of this 143 00:07:27,760 --> 00:07:31,200 Speaker 1: this week, has that risk ebbed or subsided a bit? Uh? 144 00:07:31,600 --> 00:07:33,360 Speaker 1: Do you have a better sense here what trade policy 145 00:07:33,440 --> 00:07:35,280 Speaker 1: is likely to be. It is as big a risk 146 00:07:35,280 --> 00:07:39,320 Speaker 1: factory as it was. Well. I think the notion that 147 00:07:39,840 --> 00:07:42,800 Speaker 1: some had at the beginning of two thousand seventeen that 148 00:07:42,840 --> 00:07:44,800 Speaker 1: if you can't make it in the United States, you 149 00:07:44,840 --> 00:07:48,760 Speaker 1: can't buy it, that whole risk has diminished now it 150 00:07:49,080 --> 00:07:52,320 Speaker 1: has fallen. Uh in terms of how the markets rate 151 00:07:52,520 --> 00:07:54,680 Speaker 1: that political risk. You can see how the Mexican pay 152 00:07:54,800 --> 00:07:57,640 Speaker 1: so has risen pretty tremendously and suddenly there's a little 153 00:07:57,640 --> 00:08:00,160 Speaker 1: bit more risk there. So I think that market are 154 00:08:00,200 --> 00:08:03,080 Speaker 1: coming around and could could face another relapse and concern 155 00:08:03,120 --> 00:08:05,680 Speaker 1: about that. I think the issue of Asia, though, is 156 00:08:05,720 --> 00:08:09,080 Speaker 1: that there's a greater adorability in Asia than many investors believe. 157 00:08:09,360 --> 00:08:11,720 Speaker 1: I just spent a week in Shanghai a couple of 158 00:08:11,720 --> 00:08:15,720 Speaker 1: weeks back, and it is amazing how differently investors there 159 00:08:15,720 --> 00:08:19,240 Speaker 1: feel about China than Western investors. Do you know we've 160 00:08:19,280 --> 00:08:21,960 Speaker 1: had declines on corporate debt in China since two thousand 161 00:08:22,000 --> 00:08:24,000 Speaker 1: and sixteen? Where where do you read about that? You 162 00:08:24,080 --> 00:08:28,679 Speaker 1: see large declines in capacity in industries that have problems 163 00:08:28,720 --> 00:08:31,040 Speaker 1: with overcapacity. You know where do you read about that? 164 00:08:31,080 --> 00:08:33,400 Speaker 1: Those are the things that I think are underappreciated right now, 165 00:08:33,400 --> 00:08:36,400 Speaker 1: particularly about China. Do we treasure our guests, and we 166 00:08:36,480 --> 00:08:42,199 Speaker 1: particularly treasure them for their proclivities, their oddities, their focus 167 00:08:42,200 --> 00:08:47,080 Speaker 1: and weirdness. Within the game of economics, fans investment. So 168 00:08:47,120 --> 00:08:50,120 Speaker 1: if you're speaking with Stephen Whiting and City Private Bank, 169 00:08:50,600 --> 00:08:53,319 Speaker 1: and he has an intellectual skill to talk on eight 170 00:08:53,440 --> 00:08:58,319 Speaker 1: nine things at once, it always comes back to corporate 171 00:08:58,360 --> 00:09:01,839 Speaker 1: profits and their link in to the economy, and that 172 00:09:01,920 --> 00:09:07,400 Speaker 1: means investment, dynamics, consumption sixty nine point five percent now 173 00:09:07,559 --> 00:09:09,360 Speaker 1: of g DP. Do you do you know, by the way, 174 00:09:09,520 --> 00:09:13,280 Speaker 1: the whole Medicare system is consumption is consumer spending that 175 00:09:13,559 --> 00:09:17,960 Speaker 1: essentially all government healthcare benefits anything that goes Yeah, you know, 176 00:09:18,040 --> 00:09:19,920 Speaker 1: it's one of these things that sort of folks don't 177 00:09:19,920 --> 00:09:22,520 Speaker 1: want to always, you know, trot out sevent I'm going 178 00:09:22,559 --> 00:09:24,600 Speaker 1: to put a chart out here on Twitter for Bloomberg 179 00:09:24,720 --> 00:09:27,440 Speaker 1: Radio which will feature over the next coming days, that 180 00:09:27,679 --> 00:09:31,800 Speaker 1: goes to that investment is the partial differential, It's the 181 00:09:31,920 --> 00:09:35,480 Speaker 1: dynamics of g d P. Are we at a subpart 182 00:09:35,600 --> 00:09:39,760 Speaker 1: g DP simply because we can't get investment going over 183 00:09:39,800 --> 00:09:43,679 Speaker 1: the last several years, it's been across the board moderation 184 00:09:43,760 --> 00:09:45,560 Speaker 1: in terms of the pace of ground. When I say moderation, 185 00:09:45,559 --> 00:09:47,720 Speaker 1: I don't want to say, you know, lacks volatility. That 186 00:09:47,720 --> 00:09:51,599 Speaker 1: would lead to another conversation. But consumption has not been powerful, 187 00:09:52,080 --> 00:09:55,800 Speaker 1: income dynamics have not been powerful, and investment I've all 188 00:09:55,880 --> 00:09:58,280 Speaker 1: been on the slow side. We're seeing a bit of 189 00:09:58,280 --> 00:10:00,480 Speaker 1: a pickup now and I think the question I should 190 00:10:00,600 --> 00:10:02,559 Speaker 1: probably spend a bit more time on this myself, is 191 00:10:02,760 --> 00:10:05,320 Speaker 1: to the extent that the energy boom and bust. The 192 00:10:05,360 --> 00:10:07,920 Speaker 1: one thing that boomed in the U. S economy last 193 00:10:07,960 --> 00:10:10,120 Speaker 1: several years, it's a bit energy related investment. Then it 194 00:10:10,200 --> 00:10:13,680 Speaker 1: went bust. And now it's coming back to what extent 195 00:10:13,800 --> 00:10:16,559 Speaker 1: is that contributing to the rebound that we're seeing investment. 196 00:10:16,559 --> 00:10:19,120 Speaker 1: But we are seeing stronger investment now that we've seen 197 00:10:19,160 --> 00:10:21,600 Speaker 1: for a very long period of time. Ideally it's more 198 00:10:21,600 --> 00:10:24,800 Speaker 1: broad based than interest energy. We're looking at the conclusion 199 00:10:24,840 --> 00:10:26,600 Speaker 1: of the FED meeting today Tomorrow we're likely to hear 200 00:10:26,640 --> 00:10:28,320 Speaker 1: from the President, who has picked to head the FEED 201 00:10:28,480 --> 00:10:30,760 Speaker 1: is going to to be tell us a bit about 202 00:10:30,920 --> 00:10:33,959 Speaker 1: how you from investing perspective. See Jerome Powell, the gentleman 203 00:10:34,000 --> 00:10:36,720 Speaker 1: who's reportedly in the running to get that job. You've 204 00:10:36,760 --> 00:10:40,000 Speaker 1: written about him being sort of a benign, predictable UH. 205 00:10:40,040 --> 00:10:42,680 Speaker 1: Maybe not guy, But in terms of policy choice, what 206 00:10:42,720 --> 00:10:44,280 Speaker 1: do we know about him and what might that mean 207 00:10:44,320 --> 00:10:46,800 Speaker 1: for markets? I think we said something about, you know, 208 00:10:46,840 --> 00:10:49,560 Speaker 1: the principal teaching an art class, you get these people 209 00:10:49,600 --> 00:10:53,800 Speaker 1: are really passionate about monetary policy, and and you know 210 00:10:53,840 --> 00:10:58,440 Speaker 1: you obviously the carrot Kevin Warsh for example. So this 211 00:10:58,520 --> 00:11:02,559 Speaker 1: is UH an environment where the marketplace probably overreacts some 212 00:11:02,800 --> 00:11:05,320 Speaker 1: to the practical impact of the choice of FED share 213 00:11:05,559 --> 00:11:09,600 Speaker 1: that it is a committee, that the institution is very powerful. UM. 214 00:11:09,600 --> 00:11:12,760 Speaker 1: I've never served in the Federal Reserve system, so you know, 215 00:11:12,800 --> 00:11:15,480 Speaker 1: others can speak to this much better. But the idea 216 00:11:15,559 --> 00:11:18,400 Speaker 1: here is that in the very short term, when it 217 00:11:18,440 --> 00:11:22,679 Speaker 1: comes to confidence and clarity about monetary policy, how market 218 00:11:22,720 --> 00:11:26,800 Speaker 1: participants feel they can forecast the FED staying with someone 219 00:11:26,880 --> 00:11:29,679 Speaker 1: who is part of the yelling FED. UH, and it's 220 00:11:29,760 --> 00:11:35,120 Speaker 1: laid out conditions for unwinding monetary accommodation the way Jerome 221 00:11:35,160 --> 00:11:38,880 Speaker 1: Powell has it seems much more predictable, UH than going 222 00:11:38,920 --> 00:11:41,360 Speaker 1: to an outsider. Right now, a great value of horizon investments, 223 00:11:41,360 --> 00:11:43,640 Speaker 1: writing this morning in his note about Janet Yellen likely 224 00:11:43,640 --> 00:11:45,520 Speaker 1: not to be a FED chair for another term, saying 225 00:11:45,640 --> 00:11:47,720 Speaker 1: should go out on top widely praise for engineering an 226 00:11:47,720 --> 00:11:50,880 Speaker 1: economic recovery and presiding over a historic stock market rally. 227 00:11:51,080 --> 00:11:53,960 Speaker 1: Lucky Janet Yellen getting out just in time. How much 228 00:11:54,000 --> 00:11:55,640 Speaker 1: your thing is going to change here when you look 229 00:11:55,679 --> 00:11:57,520 Speaker 1: at what she's set up with this committee has has 230 00:11:57,559 --> 00:11:59,360 Speaker 1: set up. How likely is it to change under the 231 00:11:59,440 --> 00:12:02,480 Speaker 1: leadership of some buty else, Well, if it is J Powell. 232 00:12:03,000 --> 00:12:06,160 Speaker 1: I do think that monetary policy is not going to be, 233 00:12:06,760 --> 00:12:10,960 Speaker 1: you know, the driving force that changes the whole economic outlook. 234 00:12:11,280 --> 00:12:13,400 Speaker 1: You know, I think there are many economists who go 235 00:12:13,480 --> 00:12:15,480 Speaker 1: out and say, well, you know, the federal reserve and 236 00:12:15,520 --> 00:12:18,280 Speaker 1: monetary tightening, all the recessions are about that. Only if 237 00:12:18,280 --> 00:12:20,280 Speaker 1: we just it would almost give you the notion that 238 00:12:20,320 --> 00:12:22,760 Speaker 1: if you stayed easy forever, you'd never have a downturn. 239 00:12:23,000 --> 00:12:25,400 Speaker 1: And I think that that, you know, is a real mistake. 240 00:12:25,840 --> 00:12:28,680 Speaker 1: That the imbalances that you can build in an economy 241 00:12:28,720 --> 00:12:33,160 Speaker 1: by having monetary policy off sides or otherwise um irrational exuberance, 242 00:12:33,160 --> 00:12:35,200 Speaker 1: these sorts of things, whether but it has to be 243 00:12:35,440 --> 00:12:37,800 Speaker 1: I think real side as well as financial When you 244 00:12:37,840 --> 00:12:40,840 Speaker 1: get that, I think you can have downturns, and clearly 245 00:12:40,840 --> 00:12:42,400 Speaker 1: what you saw I know eight, which I don't think 246 00:12:42,559 --> 00:12:45,040 Speaker 1: has to happen again in any by any means. You know, 247 00:12:45,120 --> 00:12:47,400 Speaker 1: these are things that were not well predicted by the 248 00:12:47,400 --> 00:12:50,800 Speaker 1: stance of monetary policy alone. I just came up with 249 00:12:50,840 --> 00:12:54,040 Speaker 1: a phrase. I'm not saying it's original, but it goes 250 00:12:54,080 --> 00:12:57,599 Speaker 1: back to the military industrial complex of the fifties. Is 251 00:12:57,640 --> 00:13:01,240 Speaker 1: there such a thing as the medical industrial complex? When 252 00:13:01,240 --> 00:13:05,319 Speaker 1: you look at the hybridization of government investment, combine them 253 00:13:05,320 --> 00:13:08,360 Speaker 1: all in a where medicine is just become the beast 254 00:13:08,559 --> 00:13:12,520 Speaker 1: of all of our dynamics. Are GDP dynamics, well, that is, 255 00:13:12,600 --> 00:13:16,079 Speaker 1: it is the secular grower. And the United States just 256 00:13:16,280 --> 00:13:18,480 Speaker 1: stands out though. I mean, this is this is a 257 00:13:18,520 --> 00:13:21,760 Speaker 1: problem for us because you know, a good deal of 258 00:13:21,760 --> 00:13:23,880 Speaker 1: our health care is sort of like a stock option 259 00:13:23,920 --> 00:13:26,160 Speaker 1: going into the money when you turn sixty five. You know, 260 00:13:26,200 --> 00:13:29,680 Speaker 1: the Medicare system covers those and outside the United States, 261 00:13:29,720 --> 00:13:32,920 Speaker 1: people if they have government healthcare programs, you know, they're 262 00:13:32,920 --> 00:13:34,600 Speaker 1: covered for the entire of their life. So there's not 263 00:13:34,640 --> 00:13:37,640 Speaker 1: this massive kink up and expenditures that occur like that. 264 00:13:38,080 --> 00:13:40,360 Speaker 1: But you know, around the world, one of the interesting 265 00:13:40,400 --> 00:13:43,640 Speaker 1: things to to note is that healthcare expenditures are less 266 00:13:43,640 --> 00:13:46,040 Speaker 1: cyclical in income. Most you know, things go up and 267 00:13:46,040 --> 00:13:49,760 Speaker 1: down even more than income, and healthcare only goes brilliant. 268 00:13:49,800 --> 00:13:52,360 Speaker 1: Thank you so much. He is with City Private thank 269 00:13:52,480 --> 00:13:57,000 Speaker 1: or Global chief investment strategist. Futures Up eleven del Futures 270 00:13:57,040 --> 00:13:59,880 Speaker 1: Up a big one five the vix nine point eight six. 271 00:14:00,640 --> 00:14:15,959 Speaker 1: This is Bloomberg. This is an honor. What we are 272 00:14:16,120 --> 00:14:19,480 Speaker 1: humbled by the guests we have in their perspective. Frederick 273 00:14:19,560 --> 00:14:22,920 Speaker 1: Michigan is at Colombia. You've heard me rave about his textbook, 274 00:14:22,920 --> 00:14:26,480 Speaker 1: which is policy driven, particularly back half of it. He 275 00:14:26,520 --> 00:14:28,920 Speaker 1: holds court at Colombian Dark in the door of the 276 00:14:28,920 --> 00:14:32,640 Speaker 1: Echoes Building. Years ago as a Fed governor. Rick in 277 00:14:33,720 --> 00:14:37,560 Speaker 1: few years ago you wrote a chapter in Crashes and 278 00:14:37,640 --> 00:14:42,080 Speaker 1: Panics and Historical Perspective comment on who put the mania 279 00:14:42,840 --> 00:14:46,800 Speaker 1: and tulip mania? And this goes to the This goes 280 00:14:46,840 --> 00:14:50,480 Speaker 1: to the idea of asset bubbles. Are we bubblicious now? 281 00:14:50,640 --> 00:14:54,680 Speaker 1: If we skewed things to such a manner that we 282 00:14:54,840 --> 00:14:59,880 Speaker 1: have a mania within our financial systems, well, I think 283 00:15:00,280 --> 00:15:02,040 Speaker 1: you have to be very careful in terms of thinking 284 00:15:02,040 --> 00:15:04,400 Speaker 1: about two different kinds of bubbles, and one is very 285 00:15:04,480 --> 00:15:07,320 Speaker 1: dangerous and one much less so. So as at prices 286 00:15:07,360 --> 00:15:10,440 Speaker 1: do wild and crazy things. And who knows whether in 287 00:15:10,480 --> 00:15:13,080 Speaker 1: fact the stock market is too high right now. This 288 00:15:13,160 --> 00:15:15,880 Speaker 1: is something that economists have a really hard time uh 289 00:15:15,960 --> 00:15:20,080 Speaker 1: predicting or even explaining even after the fact. But uh, 290 00:15:20,320 --> 00:15:23,480 Speaker 1: currently the stock market may be very high, but we're 291 00:15:23,520 --> 00:15:29,520 Speaker 1: not seeing excessive risk taking on in terms of credit markets, 292 00:15:29,560 --> 00:15:32,080 Speaker 1: and that's really very very different. We get many bubbles, 293 00:15:32,160 --> 00:15:34,240 Speaker 1: which are the ones that are very dangerous. We like 294 00:15:34,360 --> 00:15:38,280 Speaker 1: when we had preceding these global financial crisis we had recently, 295 00:15:39,000 --> 00:15:42,360 Speaker 1: where in fact there's a huge incluse and asset prices, 296 00:15:42,400 --> 00:15:45,400 Speaker 1: but they're fueled by credit. And if the fueled by credit, 297 00:15:45,520 --> 00:15:48,800 Speaker 1: when they've ascid, bubble births, now you have a contraction 298 00:15:48,800 --> 00:15:51,160 Speaker 1: of credit and that destroys the economy. And that's what 299 00:15:51,280 --> 00:15:54,520 Speaker 1: happened in this in this recent episode. That's not what 300 00:15:54,560 --> 00:15:57,120 Speaker 1: we see going on now. And we've had many cases 301 00:15:57,120 --> 00:16:00,000 Speaker 1: where stock market has gone way up, it's sometimes crashed. 302 00:16:00,040 --> 00:16:02,400 Speaker 1: Just think about the tech bubble um in in the 303 00:16:02,400 --> 00:16:05,520 Speaker 1: early two thousand's that crashed and the economy had very 304 00:16:05,520 --> 00:16:08,080 Speaker 1: little impacts from it. So I think the key issue 305 00:16:08,200 --> 00:16:10,320 Speaker 1: is not that we need need to predict what's going 306 00:16:10,320 --> 00:16:12,640 Speaker 1: to happen asset prices. If I could do that, I 307 00:16:12,880 --> 00:16:17,040 Speaker 1: would own Bloomberg. On the other hand, uh, not that 308 00:16:17,160 --> 00:16:20,680 Speaker 1: good and so. But in the other hand, we can 309 00:16:20,800 --> 00:16:24,120 Speaker 1: tell whether a very high asset price are associated with 310 00:16:24,160 --> 00:16:27,000 Speaker 1: a lot of risky credit taking, and in that case 311 00:16:27,040 --> 00:16:28,760 Speaker 1: we've got to get very nervous and we have to 312 00:16:28,800 --> 00:16:31,440 Speaker 1: do something about it. That's not the situation now, but 313 00:16:31,520 --> 00:16:34,360 Speaker 1: that's one of the lessons we learned from the last crisis. Rick, 314 00:16:34,440 --> 00:16:36,479 Speaker 1: let me ask you about the evolution of rules basedness. 315 00:16:36,720 --> 00:16:39,240 Speaker 1: I gather you were at the Boston FED conference a 316 00:16:39,240 --> 00:16:41,160 Speaker 1: couple of weeks back when John Taylor spoke about his 317 00:16:41,240 --> 00:16:43,680 Speaker 1: rule in a new broader context of you know, not 318 00:16:45,000 --> 00:16:46,680 Speaker 1: go ahead. In fact, by the way he let he 319 00:16:47,080 --> 00:16:51,360 Speaker 1: led off the conference, and I was the count or conference. Well, 320 00:16:51,400 --> 00:16:52,920 Speaker 1: I just I wonder what you made of what he 321 00:16:52,960 --> 00:16:55,640 Speaker 1: had to say, the fact that he suggested there could 322 00:16:55,640 --> 00:16:57,480 Speaker 1: be some discretion infused with that rule that could be 323 00:16:57,560 --> 00:16:59,440 Speaker 1: used in tannem are we're seeing an evolution in the 324 00:16:59,480 --> 00:17:02,240 Speaker 1: way that we have roach rules based monetary policy. You know, 325 00:17:02,280 --> 00:17:05,240 Speaker 1: it's hard to say, uh that I think if John 326 00:17:05,400 --> 00:17:08,239 Speaker 1: was actually put in the position of being FED chair, uh, 327 00:17:08,320 --> 00:17:11,320 Speaker 1: he'd be more flexible. But that's nearly not what what 328 00:17:11,320 --> 00:17:15,480 Speaker 1: what he said. He he actually talked about that the 329 00:17:15,520 --> 00:17:19,880 Speaker 1: fact that that the kind of discretion that Ben Bernanky 330 00:17:19,920 --> 00:17:23,480 Speaker 1: in the FED used was way weight too much, and 331 00:17:23,520 --> 00:17:27,080 Speaker 1: in fact, I think he mischaracterized what happened during that period. 332 00:17:27,960 --> 00:17:31,000 Speaker 1: I would describe the the operation under the Banancy FED 333 00:17:31,080 --> 00:17:34,520 Speaker 1: as very rulelike. The key thing that Ben Banankey emphasized 334 00:17:35,040 --> 00:17:37,600 Speaker 1: was that he wanted to anchor inflation expectations. One of 335 00:17:37,600 --> 00:17:40,840 Speaker 1: the huge successes of that period is in this case, 336 00:17:40,880 --> 00:17:44,119 Speaker 1: he anchored inflation expectations so they didn't fall. So remember 337 00:17:44,160 --> 00:17:46,680 Speaker 1: at one point we actually had a huge negative shock. 338 00:17:46,920 --> 00:17:49,160 Speaker 1: We actually had deflation for a very brief period of time, 339 00:17:49,160 --> 00:17:51,399 Speaker 1: but it was very temporary. The fact it was so 340 00:17:51,480 --> 00:17:56,080 Speaker 1: temporary that inflation expectations stayed around two percent. That's very ruleike, 341 00:17:56,200 --> 00:17:59,360 Speaker 1: that's looking to the future. That's exactly the great success 342 00:17:59,400 --> 00:18:01,720 Speaker 1: of the to reserve. And I think that that that 343 00:18:01,880 --> 00:18:04,080 Speaker 1: John just doesn't get that, and in fact I called 344 00:18:04,119 --> 00:18:07,080 Speaker 1: him out on that in the conference And how did 345 00:18:07,119 --> 00:18:11,920 Speaker 1: you d you respond? Well, you responded that he disagreed 346 00:18:11,960 --> 00:18:14,600 Speaker 1: with me, but that's you know, Uh, one thing about 347 00:18:14,600 --> 00:18:17,239 Speaker 1: economist John is a wonderful person, by the way. One 348 00:18:17,280 --> 00:18:20,239 Speaker 1: thing about economist is we love to disagree. But I 349 00:18:20,280 --> 00:18:24,439 Speaker 1: do have a very formal, very strong disagreements with views, 350 00:18:24,800 --> 00:18:27,080 Speaker 1: very strong disagreements with the bill that he has helped, 351 00:18:27,240 --> 00:18:32,919 Speaker 1: uh encouraged through Congress, which actually requires to have a 352 00:18:32,920 --> 00:18:35,920 Speaker 1: directed policy. I think this is incredibly important because of time, 353 00:18:35,960 --> 00:18:38,840 Speaker 1: Professor Michigan, we got to cut to the chase. Are 354 00:18:38,960 --> 00:18:43,320 Speaker 1: we gonna have these debates and discussions if we have 355 00:18:43,400 --> 00:18:48,320 Speaker 1: a non PhD economists running the FED? Well? I think 356 00:18:48,359 --> 00:18:51,280 Speaker 1: the answer is these debates and discussions will always take place. 357 00:18:51,800 --> 00:18:55,320 Speaker 1: That there are some very strong reason why rules have advantages, 358 00:18:55,800 --> 00:18:58,600 Speaker 1: and also some strong reasons why pure discretion, which is 359 00:18:58,640 --> 00:19:00,720 Speaker 1: not with Ben Bernaki was doing at the FED and 360 00:19:00,840 --> 00:19:03,760 Speaker 1: not what Janet Yellen is doing at the FED. That Uh, 361 00:19:03,960 --> 00:19:06,359 Speaker 1: that that can have real problems too. So we do 362 00:19:06,480 --> 00:19:09,000 Speaker 1: need to think about how we if we do exactly that. 363 00:19:09,080 --> 00:19:11,720 Speaker 1: In fact, the paper I presented the conference was actually 364 00:19:12,000 --> 00:19:14,280 Speaker 1: directed as saying, how do we get the use of 365 00:19:14,320 --> 00:19:17,640 Speaker 1: discretion the use of rules? Just right? You didn't answer 366 00:19:17,720 --> 00:19:21,879 Speaker 1: my question will we have these discussions if we have 367 00:19:22,040 --> 00:19:26,919 Speaker 1: a mckesley Martin, William G. Miller J Powell type running 368 00:19:26,920 --> 00:19:29,800 Speaker 1: the FED. Well, first of all, let's not talk about 369 00:19:30,080 --> 00:19:32,960 Speaker 1: William and Miller. He was a disaster, but Besnie Martin 370 00:19:33,080 --> 00:19:35,520 Speaker 1: was actually very capable, and I think J. Powell is 371 00:19:35,640 --> 00:19:40,240 Speaker 1: very capable. Uh So I think that that, uh that 372 00:19:41,280 --> 00:19:43,560 Speaker 1: my view is, I think Jay will do a terrific job. 373 00:19:43,720 --> 00:19:46,600 Speaker 1: I think the Janet would be even better because Janet 374 00:19:46,600 --> 00:19:50,720 Speaker 1: really uh has shown great performance and it's a terrific, 375 00:19:50,800 --> 00:19:54,560 Speaker 1: terrific economist. But Jay is extremely capable. I interacted with 376 00:19:54,640 --> 00:19:58,800 Speaker 1: him a lot over time. Uh. He's extremely sensible. He 377 00:19:58,880 --> 00:20:01,760 Speaker 1: understands how to listen. He also understands how they actually 378 00:20:01,840 --> 00:20:04,720 Speaker 1: use the staff in the where it should be used. 379 00:20:05,720 --> 00:20:07,199 Speaker 1: Should be a very good choice. This has been a 380 00:20:07,280 --> 00:20:09,800 Speaker 1: great briefing Rick Michigan as a Columbia and I'll say 381 00:20:09,800 --> 00:20:12,040 Speaker 1: it again, folks, he did a wonderful econ one on 382 00:20:12,040 --> 00:20:14,720 Speaker 1: one macro text a couple of years ago, which is 383 00:20:14,760 --> 00:20:18,400 Speaker 1: an act of God because it's a little less Matthew 384 00:20:18,480 --> 00:20:22,040 Speaker 1: than some of them and a lot more policy driven. 385 00:20:22,119 --> 00:20:39,160 Speaker 1: Rick Michigan is at Football Power Columbia. Columbia University. Let's 386 00:20:39,160 --> 00:20:41,520 Speaker 1: turn out to a friend of the show, Austin Gulsby, 387 00:20:41,600 --> 00:20:42,800 Speaker 1: who was for a long time the Chairman of the 388 00:20:42,800 --> 00:20:45,239 Speaker 1: Council Economic Advisors in the Obama White House. He's now 389 00:20:45,440 --> 00:20:47,720 Speaker 1: back at the Booth School for Business at the University 390 00:20:47,760 --> 00:20:49,639 Speaker 1: of Chicago. He joins us now as we continue to 391 00:20:49,680 --> 00:20:52,200 Speaker 1: look at the prospects for taxio for him, talk a 392 00:20:52,200 --> 00:20:54,680 Speaker 1: little bit about the prospects for for further growth as well. 393 00:20:54,760 --> 00:20:56,680 Speaker 1: Professor Goolsby, great to have you with us, and I 394 00:20:56,680 --> 00:20:58,240 Speaker 1: want to just get you to react, first of all, 395 00:20:58,280 --> 00:21:01,360 Speaker 1: to the delay that we learned about yesterday, that there's 396 00:21:01,359 --> 00:21:03,480 Speaker 1: gonna be another day until we get this legislation from 397 00:21:03,480 --> 00:21:06,199 Speaker 1: the House Ways and Means Committee, and maybe just react, 398 00:21:06,240 --> 00:21:08,879 Speaker 1: if you could, to the timetable for all of this happening. 399 00:21:08,880 --> 00:21:11,199 Speaker 1: Give us your sense of of how possible it is 400 00:21:11,280 --> 00:21:13,520 Speaker 1: to get some sort of comprehensive reform done here over 401 00:21:13,520 --> 00:21:18,280 Speaker 1: these next few months. Well that's a how fast it's 402 00:21:18,280 --> 00:21:21,960 Speaker 1: going to happen is perhaps the key question. I would 403 00:21:22,560 --> 00:21:27,040 Speaker 1: disagree a little with the premise about comprehensive tax reform, 404 00:21:27,080 --> 00:21:29,400 Speaker 1: though I don't think that's an accurate description. I think 405 00:21:29,920 --> 00:21:34,159 Speaker 1: what they're what they're seeing is what's been the reality 406 00:21:34,280 --> 00:21:37,000 Speaker 1: that they that they did not want to admit all along, 407 00:21:37,080 --> 00:21:41,960 Speaker 1: which is they're not trying. They're not even remotely trying 408 00:21:42,000 --> 00:21:46,600 Speaker 1: to do a six style comprehensive thing. They're just gonna 409 00:21:46,720 --> 00:21:49,800 Speaker 1: try to figure out a way to cut some taxes. 410 00:21:50,400 --> 00:21:55,560 Speaker 1: And I think the delay, you know, you you may 411 00:21:55,760 --> 00:21:59,120 Speaker 1: disagree with me, but I think the delay of one 412 00:21:59,200 --> 00:22:07,320 Speaker 1: day my harbor delays of more days because ultimately they've 413 00:22:07,359 --> 00:22:10,600 Speaker 1: agreed that they are going to increase the deficit by 414 00:22:10,600 --> 00:22:15,879 Speaker 1: one point five trillion in doing this, but they've described 415 00:22:16,200 --> 00:22:21,000 Speaker 1: in the President's framework, what he calls his framework, more 416 00:22:21,040 --> 00:22:24,879 Speaker 1: than five trillion of tax cuts. So to get to 417 00:22:24,960 --> 00:22:28,320 Speaker 1: the one point five number, they have to raise three 418 00:22:28,359 --> 00:22:32,560 Speaker 1: and a half trillion. Austin, I don't think they'll be 419 00:22:32,600 --> 00:22:34,320 Speaker 1: able to do it. We had too short a time 420 00:22:34,320 --> 00:22:36,160 Speaker 1: with you today, but just one more question and we'll 421 00:22:36,240 --> 00:22:37,720 Speaker 1: let you go on and get you for a longer 422 00:22:37,760 --> 00:22:42,119 Speaker 1: time again. I had huge response to the idea that 423 00:22:42,119 --> 00:22:44,399 Speaker 1: they would play around with the four oh one K funding. 424 00:22:44,440 --> 00:22:49,399 Speaker 1: People were just baffled um by by that. With within 425 00:22:49,440 --> 00:22:53,040 Speaker 1: these limits, what is the constraint of the federal deficit? 426 00:22:53,200 --> 00:22:58,040 Speaker 1: Is that a valid constraint to the legislative process forward. 427 00:22:59,160 --> 00:23:02,720 Speaker 1: I think it's only a political constraint. Certainly in the 428 00:23:02,800 --> 00:23:06,080 Speaker 1: short run, the dead capacity of the U. S. Government 429 00:23:06,119 --> 00:23:08,840 Speaker 1: is vastly in excess of where we are, so I 430 00:23:08,840 --> 00:23:12,240 Speaker 1: don't think that that's a market constraint. I do think 431 00:23:12,600 --> 00:23:16,600 Speaker 1: that there are a fair number of Republicans who so 432 00:23:16,920 --> 00:23:22,760 Speaker 1: put their credibility on the line attacking President Obama for 433 00:23:22,920 --> 00:23:27,000 Speaker 1: the stimulus that for them already to be calling for 434 00:23:27,040 --> 00:23:30,280 Speaker 1: a tax cut twice as large as the stimulus. That's 435 00:23:30,320 --> 00:23:32,320 Speaker 1: about the limit of how far they're willing to go. 436 00:23:32,640 --> 00:23:35,800 Speaker 1: Because of the services at the New York Stocks, James, 437 00:23:35,800 --> 00:23:37,800 Speaker 1: Austin is too short of visit with you. Would like 438 00:23:37,880 --> 00:23:40,879 Speaker 1: to get you on again, and particularly to talk to 439 00:23:40,920 --> 00:23:43,760 Speaker 1: the Cubs, talk to you about the Cubs fan, the 440 00:23:43,840 --> 00:23:48,640 Speaker 1: laureate Richard Taylor. We haven't had that moment with you yet, 441 00:23:48,640 --> 00:23:51,480 Speaker 1: but we'd like to get Austin goes beyond again. Professor Gouldsby, 442 00:23:51,560 --> 00:23:54,800 Speaker 1: thank you so much. With Chicago, of course, Ken Griffith, 443 00:23:54,920 --> 00:23:59,320 Speaker 1: citcal Citadel donating hundred and fifty million to the institution. 444 00:24:00,000 --> 00:24:02,280 Speaker 1: Austin will get his fair share of David. I think 445 00:24:03,040 --> 00:24:09,679 Speaker 1: as what we thank Uh, things I could say. No, 446 00:24:09,880 --> 00:24:13,840 Speaker 1: probably get a copy of Samuelson. Austin goes to be 447 00:24:13,840 --> 00:24:17,199 Speaker 1: the former chairman of the President's Council of Economic Advisors. 448 00:24:30,000 --> 00:24:33,240 Speaker 1: David gurl has got lots of intelligent questions and technology 449 00:24:33,280 --> 00:24:37,440 Speaker 1: for the author of The Four, The Hidden DNA of Amazon, Apple, Facebook, 450 00:24:37,480 --> 00:24:39,520 Speaker 1: and Google. But I've just got one question for Scott 451 00:24:39,560 --> 00:24:44,120 Speaker 1: Galloway of New York University on Amazon, I mean, you're 452 00:24:44,160 --> 00:24:47,760 Speaker 1: living the benefits of Amazon twenty eight dollars for your 453 00:24:48,160 --> 00:24:51,320 Speaker 1: book The Four. They're walking out the door at eighteen 454 00:24:51,440 --> 00:24:54,960 Speaker 1: dollars thirty cents prime free one day shipping. That's a 455 00:24:55,000 --> 00:24:58,720 Speaker 1: discount of thirty Is Amazon your friend or enemy when 456 00:24:58,720 --> 00:25:03,040 Speaker 1: you're flogging a book? I think the answer is yes. Uh, 457 00:25:03,119 --> 00:25:05,679 Speaker 1: they're They're so dominant in the book business that I 458 00:25:05,680 --> 00:25:08,560 Speaker 1: think they've reshaped it. What's interesting about the book business, though, 459 00:25:08,640 --> 00:25:11,920 Speaker 1: is that Amazon has arguably done less damage or less 460 00:25:11,920 --> 00:25:14,400 Speaker 1: disruption of the book business than a lot of the categories. 461 00:25:14,400 --> 00:25:17,359 Speaker 1: It's kind of too after that. So they're, you know, 462 00:25:17,400 --> 00:25:20,080 Speaker 1: they're the biggest player in books. But at the same time, 463 00:25:20,119 --> 00:25:23,280 Speaker 1: as an author, they're very good at figuring out how 464 00:25:23,320 --> 00:25:25,480 Speaker 1: to track people who maybe have checked out your book, 465 00:25:25,520 --> 00:25:28,120 Speaker 1: you'll start getting haunted by ads. For the four few 466 00:25:28,280 --> 00:25:31,119 Speaker 1: I have I have, you know they'll start stalking you. 467 00:25:31,400 --> 00:25:34,280 Speaker 1: So there. I almost wanted Scott Galloway last night for Halloween. 468 00:25:35,440 --> 00:25:40,320 Speaker 1: That is a terrifying costume. And trust me, it doesn't 469 00:25:40,320 --> 00:25:43,399 Speaker 1: work anywhere. Um doesn't get you into restaurants and doesn't 470 00:25:43,440 --> 00:25:48,240 Speaker 1: it doesn't help anywhere. So yeah, Amazon, Amazon, look it dominant, 471 00:25:48,600 --> 00:25:50,720 Speaker 1: I would say on the whole good for authors. Okay, 472 00:25:50,800 --> 00:25:53,040 Speaker 1: David Garrol, why din't you start on the tech frenzy 473 00:25:53,760 --> 00:25:56,200 Speaker 1: is people know, I think it's just a bunch of blooming. 474 00:25:56,320 --> 00:25:59,280 Speaker 1: But David trying to be more intelligent than I could be. 475 00:25:59,440 --> 00:26:02,240 Speaker 1: What we learn yesterday? You had three representatives from three 476 00:26:02,240 --> 00:26:04,920 Speaker 1: of the Big four on Capitol Hill yesterday testifying before 477 00:26:04,920 --> 00:26:07,320 Speaker 1: the Senate Judiciary Committee, a subcommittee of that committee. Today, 478 00:26:07,359 --> 00:26:08,960 Speaker 1: move over to the House and we'll see a repeat 479 00:26:08,960 --> 00:26:11,520 Speaker 1: of what we saw yesterday when it comes to what 480 00:26:11,560 --> 00:26:14,120 Speaker 1: these companies did and are doing to change their behaviors. 481 00:26:14,160 --> 00:26:16,840 Speaker 1: What do we learn? So what you the new sort 482 00:26:16,880 --> 00:26:20,520 Speaker 1: of non denial denial or non apology apology is the 483 00:26:20,640 --> 00:26:24,280 Speaker 1: term we must do better and the key to it's 484 00:26:24,320 --> 00:26:26,840 Speaker 1: not a crisis itself to damage is a firm. It's 485 00:26:26,880 --> 00:26:29,639 Speaker 1: the response to the crisis. Mar the student Martha Sturgeon 486 00:26:29,720 --> 00:26:31,359 Speaker 1: go to jail for insider trading because she went to 487 00:26:31,800 --> 00:26:35,520 Speaker 1: jail for denying it, specifically obstruction, obstruction of justice. And 488 00:26:36,080 --> 00:26:38,000 Speaker 1: the only thing you really have to remember in crisis 489 00:26:38,040 --> 00:26:41,520 Speaker 1: management is to overcorrect or at least be perceived is overcorrecting. 490 00:26:41,600 --> 00:26:44,639 Speaker 1: And I would argue these guys have yet to really 491 00:26:44,720 --> 00:26:47,919 Speaker 1: put out the necessary statement and that's it. That is 492 00:26:47,960 --> 00:26:50,119 Speaker 1: the following. The CEO needs to stand in front of 493 00:26:50,119 --> 00:26:53,480 Speaker 1: America comm Risk consumer, sheha olders and say I'm personally 494 00:26:53,520 --> 00:26:56,879 Speaker 1: committing to making sure this never happens again. And they 495 00:26:56,920 --> 00:26:59,560 Speaker 1: haven't done that. How difficult is that? From a technical perspective, 496 00:26:59,560 --> 00:27:01,320 Speaker 1: how much some ppathy do you have for these companies 497 00:27:01,320 --> 00:27:02,960 Speaker 1: who say to do the kind of screening with the 498 00:27:03,000 --> 00:27:05,520 Speaker 1: individulants have the kind of vidulance that would be required 499 00:27:05,760 --> 00:27:10,400 Speaker 1: is technically an impossibility. I have almost no sympathy because 500 00:27:10,440 --> 00:27:12,280 Speaker 1: we're not talking about the realm of the possible. We're 501 00:27:12,320 --> 00:27:14,359 Speaker 1: talking about the realm of the profitable. And that is 502 00:27:15,000 --> 00:27:17,280 Speaker 1: if The New York Times can protect us from the 503 00:27:17,280 --> 00:27:19,960 Speaker 1: weaponization of their platform. On ninety million dollars in cash flow, 504 00:27:20,040 --> 00:27:22,800 Speaker 1: Facebook can figure it out. With twelve billion, Facebook could 505 00:27:22,880 --> 00:27:26,760 Speaker 1: hire ten thousand people to screen content. They could spend 506 00:27:26,840 --> 00:27:29,280 Speaker 1: half a billion dollars a year on artificial intelligence to 507 00:27:29,280 --> 00:27:32,080 Speaker 1: help those ten people identify and flag that content, and 508 00:27:32,119 --> 00:27:34,639 Speaker 1: it would dent their free cash flow five or ten percent. 509 00:27:34,800 --> 00:27:38,639 Speaker 1: When big tech tells you something is impossible, that's Latin 510 00:27:38,680 --> 00:27:41,400 Speaker 1: for it. We would be less profitable if we did this. 511 00:27:41,400 --> 00:27:43,679 Speaker 1: This is look a better business model for our country 512 00:27:43,680 --> 00:27:46,560 Speaker 1: club is to have no lifeguard to the pool, and 513 00:27:46,920 --> 00:27:49,080 Speaker 1: that's what they've done. But for some reason they've co 514 00:27:49,119 --> 00:27:52,080 Speaker 1: opted us into believing it's impossible. That's just ridiculous. Why 515 00:27:52,080 --> 00:27:54,000 Speaker 1: are they the police of all this? They're just a 516 00:27:54,119 --> 00:27:57,280 Speaker 1: kind of it. They're just a distribution system, aren't they. 517 00:27:57,320 --> 00:27:59,680 Speaker 1: That's a fair point. And that's the argument that they're 518 00:27:59,680 --> 00:28:03,320 Speaker 1: a quote unquote platform. This alterms are that platform or 519 00:28:03,400 --> 00:28:05,800 Speaker 1: the media? I would argue, I would argue the part 520 00:28:05,800 --> 00:28:07,480 Speaker 1: of the fourth of state. You create content, you spend 521 00:28:07,480 --> 00:28:10,200 Speaker 1: a billion dollars in original content, you run ads against 522 00:28:10,280 --> 00:28:13,040 Speaker 1: that content, boom. Should they be regulated by the FCC? 523 00:28:13,880 --> 00:28:16,360 Speaker 1: I mean back then, you know, I remember in Douglas 524 00:28:16,400 --> 00:28:20,000 Speaker 1: Brinkley's wonderful one volume and Walter Cronkite the whole radio 525 00:28:20,080 --> 00:28:23,720 Speaker 1: regulation when Cronkite was nobody in Kansas City. I don't 526 00:28:23,720 --> 00:28:25,720 Speaker 1: see why they shouldn't be subject to the same scrutiny. 527 00:28:25,720 --> 00:28:28,160 Speaker 1: The rest of the media is media to I looked 528 00:28:28,160 --> 00:28:30,480 Speaker 1: at the definition last night. Media is a medium that 529 00:28:30,560 --> 00:28:33,760 Speaker 1: is used to influence and reach people. Facebook defines what 530 00:28:33,840 --> 00:28:35,480 Speaker 1: it is to be a media company, and they still 531 00:28:35,520 --> 00:28:38,440 Speaker 1: haven't admitted their media company. They keep saying that they're 532 00:28:38,480 --> 00:28:42,959 Speaker 1: a platform. This would be like McDonald's serving of their 533 00:28:42,960 --> 00:28:45,960 Speaker 1: hamburgers or fake can we get encephalitis and make bad decisions? 534 00:28:46,000 --> 00:28:48,840 Speaker 1: And McDonald's defense would be, We're not a fast food restaurant, 535 00:28:48,840 --> 00:28:51,880 Speaker 1: We're a fast food platform. Facebook defines what it is 536 00:28:51,920 --> 00:28:54,760 Speaker 1: to be a media company and should and should live 537 00:28:54,880 --> 00:28:57,480 Speaker 1: up to the interesting to the responsibilities of being part 538 00:28:57,480 --> 00:28:59,520 Speaker 1: of the fourth of State. How much self awareness to 539 00:28:59,520 --> 00:29:01,560 Speaker 1: these company these have? I always have flended funding when 540 00:29:01,560 --> 00:29:04,120 Speaker 1: I go out to San Francisco Silicon Valley, the rhetoric 541 00:29:04,200 --> 00:29:06,840 Speaker 1: that you hear people toiling away to change the world. 542 00:29:06,840 --> 00:29:09,640 Speaker 1: They have these broad, big ambitions, and I wonder if 543 00:29:09,640 --> 00:29:12,080 Speaker 1: there are sense of of of place in the United 544 00:29:12,120 --> 00:29:15,800 Speaker 1: States in the world in society generally, UH is somehow 545 00:29:15,840 --> 00:29:19,640 Speaker 1: skill show. And this is gonna sound cynical, but I 546 00:29:19,680 --> 00:29:23,200 Speaker 1: believe what Peter Drucker said that organizations are here to 547 00:29:23,200 --> 00:29:25,840 Speaker 1: create a middle class and four profit entities, which these 548 00:29:25,840 --> 00:29:29,400 Speaker 1: companies are, are primarily there to create economic security for 549 00:29:29,440 --> 00:29:32,360 Speaker 1: their employees and their shareholders, not in that order. And 550 00:29:32,400 --> 00:29:34,800 Speaker 1: the notion that they're there to connect the world or 551 00:29:34,880 --> 00:29:37,720 Speaker 1: save the planet or do no evil, I think it 552 00:29:37,760 --> 00:29:40,680 Speaker 1: is more marketing than it is reality. And every quarter 553 00:29:40,880 --> 00:29:43,240 Speaker 1: people analysts don't ask them if they're saving the world, 554 00:29:43,240 --> 00:29:45,440 Speaker 1: are connecting the earth, They ask them what were your earnings? 555 00:29:45,680 --> 00:29:48,920 Speaker 1: And I think they are very focused on profitability, as 556 00:29:48,920 --> 00:29:51,360 Speaker 1: they should be. I don't. I think they're doing exactly 557 00:29:51,360 --> 00:29:54,320 Speaker 1: what they're supposed to be. The problem is we've personified 558 00:29:54,320 --> 00:29:57,040 Speaker 1: these companies and we think they're almost christ like. We've 559 00:29:57,080 --> 00:29:59,200 Speaker 1: given them the mother of all hall passes because we've 560 00:29:59,240 --> 00:30:03,000 Speaker 1: decided who's we us society. I think we look at 561 00:30:03,000 --> 00:30:06,840 Speaker 1: these companies differently. Even even these questions if they should 562 00:30:06,920 --> 00:30:09,719 Speaker 1: be subject to the same regulation as radio, why wouldn't 563 00:30:09,720 --> 00:30:13,920 Speaker 1: they Why why wouldn't these companies be subject If if 564 00:30:13,920 --> 00:30:17,080 Speaker 1: a company is weaponized by Russia and other media firms 565 00:30:17,080 --> 00:30:19,920 Speaker 1: were not. Then isn't the obvious and answer or logic 566 00:30:20,680 --> 00:30:22,960 Speaker 1: 'to our more regulations. Let's let's take all the clicks 567 00:30:22,960 --> 00:30:25,440 Speaker 1: that fit to print. I mean, do the analog of 568 00:30:25,560 --> 00:30:29,320 Speaker 1: Facebook to the New York Times, do the analog of facebooks? 569 00:30:29,320 --> 00:30:32,080 Speaker 1: And how is Facebook? Well, it's because you know, I'm 570 00:30:32,160 --> 00:30:36,080 Speaker 1: I'm at I'm recently, sir, Professor Gellow. Compare the New 571 00:30:36,160 --> 00:30:39,240 Speaker 1: York Times, then the Facebook, the the pressures that the 572 00:30:39,280 --> 00:30:44,040 Speaker 1: Sulzburgs have, yeah versus Zuckerberg. Okay, So I was on 573 00:30:44,040 --> 00:30:45,320 Speaker 1: the board of the New York Times for a couple 574 00:30:45,320 --> 00:30:48,640 Speaker 1: of years, and in my second board meeting, and this 575 00:30:48,760 --> 00:30:51,440 Speaker 1: might be inside baseball, I suggested we shut off Google. 576 00:30:51,600 --> 00:30:54,680 Speaker 1: I think it's ridiculous. The stupidest thing we've done in 577 00:30:54,760 --> 00:30:57,960 Speaker 1: old media was buy into this lie that information wants 578 00:30:57,960 --> 00:31:00,840 Speaker 1: to be free. Your boss doesn't think information wants to 579 00:31:00,880 --> 00:31:03,400 Speaker 1: be free. And there's a reason why this firm is 580 00:31:03,440 --> 00:31:06,720 Speaker 1: still fabulously successful. But we at the New York Times. 581 00:31:06,800 --> 00:31:09,120 Speaker 1: Let Google show up with a dump truck and start 582 00:31:09,160 --> 00:31:12,720 Speaker 1: taking cash from us, crawling our data, slicing it up, 583 00:31:13,120 --> 00:31:16,000 Speaker 1: serving it against ads that they could monetize a ten 584 00:31:16,080 --> 00:31:19,800 Speaker 1: act what we could monetize and debased our gorgeous content. 585 00:31:19,840 --> 00:31:23,560 Speaker 1: We took Birken bags and distributed them through Walmart. Information 586 00:31:23,600 --> 00:31:26,840 Speaker 1: Wants to Be Free one of the stupidest things we've 587 00:31:26,920 --> 00:31:29,840 Speaker 1: ever bought into. We're talking with Scott Galloway of New 588 00:31:29,880 --> 00:31:32,880 Speaker 1: York University's book The Four. I have a rave review 589 00:31:32,920 --> 00:31:36,760 Speaker 1: on it, the hidden DNA of Amazon, Apple, Facebook, and Google. 590 00:31:36,800 --> 00:31:41,120 Speaker 1: It's incredibly refreshing given the other business books that are 591 00:31:41,160 --> 00:31:43,680 Speaker 1: out there. And what's refreshing about you, Scott, as you've 592 00:31:43,680 --> 00:31:46,760 Speaker 1: been on both sides of the fences. J Putney migrates 593 00:31:46,800 --> 00:31:50,640 Speaker 1: down under three dollars per share? What was it like advising, 594 00:31:50,800 --> 00:31:55,640 Speaker 1: consulting and being on the board of Edward Bauer old Line? 595 00:31:55,800 --> 00:31:59,560 Speaker 1: What Seattle Retailer? Yeah, Seattle retail are kind of an 596 00:31:59,720 --> 00:32:02,160 Speaker 1: icon brand in the in the Northwest. I was put 597 00:32:02,240 --> 00:32:05,000 Speaker 1: on late by the hedge funds who wanted to kind 598 00:32:05,040 --> 00:32:09,680 Speaker 1: of muscle it into reorganizations. So you know, I was 599 00:32:09,800 --> 00:32:11,520 Speaker 1: there when it was kind of near the end. But 600 00:32:11,560 --> 00:32:14,480 Speaker 1: what's interesting is it got bought again in another bout, 601 00:32:14,560 --> 00:32:16,320 Speaker 1: and it's about to do kind of chapter twelve. I 602 00:32:16,360 --> 00:32:19,200 Speaker 1: think it's about to go bankrupt again. But you're seeing 603 00:32:19,240 --> 00:32:22,800 Speaker 1: brands everywhere under attack. The era of what I would 604 00:32:22,800 --> 00:32:24,680 Speaker 1: refer to as a brand era, the sun has passed 605 00:32:24,720 --> 00:32:28,240 Speaker 1: midday on traditional kind of brand, brand building and shareholder 606 00:32:28,280 --> 00:32:31,720 Speaker 1: value through through a marginal product with great associations. That's over. 607 00:32:32,160 --> 00:32:34,760 Speaker 1: How much is what we're seeing here a governance issue? 608 00:32:34,840 --> 00:32:37,560 Speaker 1: Of course, Uber is an outlier example of problems with 609 00:32:37,640 --> 00:32:39,920 Speaker 1: the with the board of directories. But with these big companies, 610 00:32:39,920 --> 00:32:43,000 Speaker 1: are they adequately governed by folks who know business and 611 00:32:43,920 --> 00:32:47,120 Speaker 1: know about what historically business has been and stood for. 612 00:32:48,360 --> 00:32:51,240 Speaker 1: So in media companies, media has and this is not 613 00:32:51,400 --> 00:32:54,160 Speaker 1: just YOURR Facebook and Google, but all media companies have 614 00:32:54,320 --> 00:32:56,640 Speaker 1: talked themselves or most of them into believing that they're 615 00:32:56,680 --> 00:33:01,720 Speaker 1: special and that the founders have some sort of special insight, 616 00:33:01,920 --> 00:33:04,280 Speaker 1: that they need protection from shareholders and the owners. So 617 00:33:04,320 --> 00:33:06,560 Speaker 1: they typically have two classes of stock. And that's true 618 00:33:06,600 --> 00:33:09,280 Speaker 1: of UM, It's true the New York Times Company. I 619 00:33:09,320 --> 00:33:11,520 Speaker 1: believe it's true of news Core, and I know it's 620 00:33:11,520 --> 00:33:15,040 Speaker 1: true of Google and Facebook. Now it's also true of Snap. 621 00:33:15,160 --> 00:33:16,840 Speaker 1: You have a twenty seven year old will you buy 622 00:33:16,880 --> 00:33:19,200 Speaker 1: a share? And Snap you have no rights, you have 623 00:33:19,360 --> 00:33:21,240 Speaker 1: no say, you have no ability to put anyone on 624 00:33:21,320 --> 00:33:24,120 Speaker 1: the board, and it's run by a twenty seven year 625 00:33:24,120 --> 00:33:26,200 Speaker 1: old whose company is now worth more than Vatcom, the 626 00:33:26,240 --> 00:33:29,680 Speaker 1: New York Times and combined, It's like, what could go wrong? Right? 627 00:33:29,760 --> 00:33:33,040 Speaker 1: So corporate governance, there isn't a lot of corporate governance. 628 00:33:33,080 --> 00:33:35,520 Speaker 1: Here's the board of directors of these companies aren't really 629 00:33:35,560 --> 00:33:38,320 Speaker 1: a board. They're an advisory board because they don't get 630 00:33:38,360 --> 00:33:40,280 Speaker 1: to fire the CEO and they don't don't get to 631 00:33:40,360 --> 00:33:41,760 Speaker 1: buy or sell the company, which at the end of 632 00:33:41,760 --> 00:33:43,800 Speaker 1: the day is really the only two things that matters 633 00:33:43,840 --> 00:33:45,560 Speaker 1: for board. How do we get to that point? I 634 00:33:45,560 --> 00:33:47,120 Speaker 1: look at the sort of social side of things and 635 00:33:47,200 --> 00:33:49,600 Speaker 1: our willingness or to be complicit, to give away data, 636 00:33:49,600 --> 00:33:51,960 Speaker 1: to give away information because it's convenient or easy, And 637 00:33:52,040 --> 00:33:53,960 Speaker 1: I look at it on the other side, led you 638 00:33:54,040 --> 00:33:56,040 Speaker 1: with the with governance and management and just the way 639 00:33:56,080 --> 00:33:58,960 Speaker 1: these companies are run. How did we we become we 640 00:33:59,160 --> 00:34:00,680 Speaker 1: society again? Talk and that it with it with a 641 00:34:00,760 --> 00:34:03,880 Speaker 1: capitalists become so comfortable with that happening. Sure we were 642 00:34:03,880 --> 00:34:05,680 Speaker 1: talking about this during the break. I believe that we 643 00:34:05,800 --> 00:34:08,120 Speaker 1: no longer worship at the altar of character and kindness, 644 00:34:08,200 --> 00:34:11,520 Speaker 1: but the altar of innovators and shareholder value, and we 645 00:34:11,600 --> 00:34:14,200 Speaker 1: believe that these people are good for society, good people. 646 00:34:14,560 --> 00:34:17,759 Speaker 1: I think they're incredibly savvy, they're incredibly impressive, and there's 647 00:34:17,800 --> 00:34:20,040 Speaker 1: a political bend here. I believe they've wrapped themselves in 648 00:34:20,120 --> 00:34:23,279 Speaker 1: a pink or rainbow or a neon blue blanket. Because progressives, 649 00:34:23,360 --> 00:34:25,960 Speaker 1: as a general rule are perceived as being very nice 650 00:34:26,160 --> 00:34:29,480 Speaker 1: and weak. It's a great foil for for a company 651 00:34:29,560 --> 00:34:32,200 Speaker 1: that acts like Darth Vader and in a rand during 652 00:34:32,239 --> 00:34:34,839 Speaker 1: the day, wrap yourself in a progressive blanket and you're 653 00:34:34,840 --> 00:34:37,200 Speaker 1: not seeing this threatening. Look. At Microsoft, they were perceived 654 00:34:37,280 --> 00:34:40,719 Speaker 1: as more conservative, and conservatives are largely seen as being 655 00:34:40,920 --> 00:34:44,840 Speaker 1: smart but mean. So the foil, the illusionist trick is 656 00:34:44,960 --> 00:34:48,160 Speaker 1: to come off as very very progressive and liberal and 657 00:34:48,320 --> 00:34:51,360 Speaker 1: caring about other people, because then during the day you 658 00:34:51,440 --> 00:34:54,600 Speaker 1: can be Darth Vader. But give the parallel. Then then 659 00:34:54,680 --> 00:34:57,200 Speaker 1: you do this a bit. In the book before of 660 00:34:57,360 --> 00:35:01,120 Speaker 1: these giants and John d Rockefe are literally the first 661 00:35:01,239 --> 00:35:04,360 Speaker 1: business book I ever read was I did tarrible. To 662 00:35:04,480 --> 00:35:06,719 Speaker 1: this day, I can't tell you why I pulled it 663 00:35:06,800 --> 00:35:10,480 Speaker 1: off the shelf at Fairport High School a million years ago. 664 00:35:11,120 --> 00:35:14,440 Speaker 1: How do they relate to John D. Rockefeller, Well, you 665 00:35:14,480 --> 00:35:18,080 Speaker 1: mean in terms of concentration, concentration and come on power 666 00:35:18,360 --> 00:35:24,640 Speaker 1: simply so. So I would argue that at share of 667 00:35:24,840 --> 00:35:28,279 Speaker 1: search and search is now a bigger business than the 668 00:35:28,480 --> 00:35:32,840 Speaker 1: entire advertising business by dollar volume of any country except 669 00:35:32,880 --> 00:35:35,400 Speaker 1: in the US. And you have one company that controls 670 00:35:35,520 --> 00:35:38,680 Speaker 1: nine percent of it. It's Google. So I would argue, 671 00:35:38,680 --> 00:35:41,520 Speaker 1: I would bet Google it has more power and concentration 672 00:35:41,560 --> 00:35:44,040 Speaker 1: of market share than the railroads? Are mob Bel did 673 00:35:44,040 --> 00:35:46,239 Speaker 1: when they were broken? Are we waiting for I did 674 00:35:46,400 --> 00:35:50,000 Speaker 1: Tarble to come along to break up Google? Well? Are 675 00:35:50,600 --> 00:35:53,200 Speaker 1: the equip analog to that? And the only regulator in 676 00:35:53,239 --> 00:35:55,520 Speaker 1: the world now who I would describe whose testicles have 677 00:35:55,640 --> 00:35:59,040 Speaker 1: descended is Marguerite Messenger. She's the one that's going after them. 678 00:35:59,440 --> 00:36:02,120 Speaker 1: And it's because as war, the war against big tech 679 00:36:02,280 --> 00:36:03,960 Speaker 1: is going to break out where all the other big 680 00:36:04,040 --> 00:36:06,480 Speaker 1: conflicts have broken out, It's going to break out in Europe, Tom, 681 00:36:06,600 --> 00:36:09,160 Speaker 1: because we register a lot of benefit here and a 682 00:36:09,239 --> 00:36:11,320 Speaker 1: lot of downside in Europe they register all of the 683 00:36:11,360 --> 00:36:14,400 Speaker 1: downside and a fractory I'll agree with that analysis, But 684 00:36:14,520 --> 00:36:17,279 Speaker 1: then how do you respond to the natural lockey in 685 00:36:17,920 --> 00:36:23,719 Speaker 1: individualistic We're American we're gonna do it ourselves attitude that 686 00:36:23,800 --> 00:36:27,239 Speaker 1: pushes against Mr Investiger in Europe. I mean we push 687 00:36:27,280 --> 00:36:29,680 Speaker 1: against that theme, don't we? Yeah? No, I don't. I 688 00:36:29,760 --> 00:36:31,920 Speaker 1: don't think people say what could get in the way 689 00:36:31,920 --> 00:36:33,680 Speaker 1: of these guys and people. I believe the only thing 690 00:36:33,719 --> 00:36:35,680 Speaker 1: that standing between any of them and a trillion dollars 691 00:36:35,719 --> 00:36:38,520 Speaker 1: in market cap right now is Washington or Brussels, and 692 00:36:38,600 --> 00:36:41,560 Speaker 1: it's definitely more likely going to be Brussels. But I 693 00:36:41,640 --> 00:36:43,920 Speaker 1: don't you know, at some point Tom one of these 694 00:36:44,239 --> 00:36:47,360 Speaker 1: Northern European nations is going to say, is the model 695 00:36:47,440 --> 00:36:49,759 Speaker 1: of letting these guys in worked out better? Or is 696 00:36:49,800 --> 00:36:51,879 Speaker 1: the Chinese model where you let them in just long 697 00:36:51,960 --> 00:36:53,719 Speaker 1: enough to steal their i P and then prop up 698 00:36:53,760 --> 00:36:56,400 Speaker 1: a local competitor and capture all the value. Do the 699 00:36:56,560 --> 00:36:58,800 Speaker 1: Chinese have it wrong? Who are the dumb ones here? So? 700 00:36:58,840 --> 00:37:01,960 Speaker 1: I wouldn't be surprised if we see a small European 701 00:37:02,080 --> 00:37:04,880 Speaker 1: nation actually outright ban one or more of these companies. 702 00:37:04,920 --> 00:37:07,319 Speaker 1: I think the worm has turned against big Tech. I've 703 00:37:07,360 --> 00:37:09,880 Speaker 1: had a case to talk to to Margaret Vesker in Washington, 704 00:37:09,960 --> 00:37:11,720 Speaker 1: and she's kind of seen, at least as I perceived 705 00:37:11,719 --> 00:37:13,560 Speaker 1: it as a curiosity there in terms of where she's 706 00:37:13,560 --> 00:37:15,120 Speaker 1: coming from, what she's trying to do, and I think 707 00:37:15,160 --> 00:37:17,480 Speaker 1: she's probably the subject of a lot of ire there, 708 00:37:17,520 --> 00:37:20,400 Speaker 1: of course in the Bay Area as well. What accounts 709 00:37:20,400 --> 00:37:22,840 Speaker 1: for the cultural difference there between where Brussels is and 710 00:37:22,880 --> 00:37:25,879 Speaker 1: where Washington is And are there any indications that our 711 00:37:25,920 --> 00:37:28,000 Speaker 1: sense of competition is going to change or revolve as 712 00:37:28,000 --> 00:37:29,360 Speaker 1: a result of what we saw in this election, of 713 00:37:29,400 --> 00:37:31,840 Speaker 1: what we've see in terms of the micro or size 714 00:37:31,880 --> 00:37:34,520 Speaker 1: of these companies there, there's a big difference. And it 715 00:37:34,600 --> 00:37:38,640 Speaker 1: said in the US, it's hard to deny we register 716 00:37:38,680 --> 00:37:40,759 Speaker 1: a great deal of benefit from these firms. Amazon is 717 00:37:40,760 --> 00:37:43,680 Speaker 1: the largest recruiter from my class. You have the real 718 00:37:43,800 --> 00:37:47,440 Speaker 1: estate prices in California or northern California skyrocketed because of 719 00:37:47,520 --> 00:37:51,000 Speaker 1: the wealth created there. They they're sources of national pride there. 720 00:37:51,360 --> 00:37:54,239 Speaker 1: You know they are ours. It's a huge sort. They 721 00:37:54,320 --> 00:37:59,040 Speaker 1: create competition, economic growth, the all the concerns around privacy, job, 722 00:37:59,440 --> 00:38:03,239 Speaker 1: job just direction, weaponization by foreign adversaries are a real conversation. 723 00:38:03,320 --> 00:38:05,719 Speaker 1: We're having it. But in Europe there aren't a lot 724 00:38:05,760 --> 00:38:09,040 Speaker 1: of university buildings or hospital wings named after Facebook or Google. 725 00:38:09,120 --> 00:38:12,920 Speaker 1: Billionaires show the question is if if if I don't 726 00:38:13,040 --> 00:38:15,440 Speaker 1: get the upside and I get all the downside, that 727 00:38:15,560 --> 00:38:18,960 Speaker 1: stiffens the regulators backbones in Europe. David, just to point 728 00:38:19,040 --> 00:38:21,799 Speaker 1: things out, and you know, I've read most of Galloway's 729 00:38:21,880 --> 00:38:24,920 Speaker 1: tone here. I've read the first point of the Old Testament, 730 00:38:25,000 --> 00:38:28,040 Speaker 1: but not the New. Did I know, David Gura, that 731 00:38:28,160 --> 00:38:32,480 Speaker 1: Amazon has five d forty one thousand employees. I don't 732 00:38:32,520 --> 00:38:35,719 Speaker 1: believe I knew that. Is there a point at which 733 00:38:35,840 --> 00:38:38,520 Speaker 1: got you push against the company becoming too big? And others? 734 00:38:38,560 --> 00:38:40,520 Speaker 1: We can talk about how regulation might curb the growth 735 00:38:40,560 --> 00:38:43,160 Speaker 1: through the influence of a company, but just I guess 736 00:38:43,160 --> 00:38:44,920 Speaker 1: it's a principle of physical Can it get too big? 737 00:38:44,960 --> 00:38:46,640 Speaker 1: Can a company get two sides of Can Google and 738 00:38:46,680 --> 00:38:49,399 Speaker 1: Amazon become too big? I don't know if they've become 739 00:38:49,440 --> 00:38:51,359 Speaker 1: too big. They're definitely not too big. Keep in mind, 740 00:38:52,200 --> 00:38:54,440 Speaker 1: I mean Tom talked about the half a million employees 741 00:38:54,640 --> 00:38:58,520 Speaker 1: at Amazon. The more interesting fact is that Facebook is 742 00:38:58,560 --> 00:39:00,319 Speaker 1: now I think, the fourth most valuable company in the world. 743 00:39:00,360 --> 00:39:02,520 Speaker 1: They do with twenty two th employees. And if you 744 00:39:02,600 --> 00:39:06,080 Speaker 1: take these companies combined, it's the population of the Lower 745 00:39:06,120 --> 00:39:09,640 Speaker 1: East Side with the GDP of India so GDP of 746 00:39:09,680 --> 00:39:12,239 Speaker 1: India spread across the Lower East Side. They outside. It's 747 00:39:12,239 --> 00:39:13,640 Speaker 1: not that can they become too big? Is it? Can 748 00:39:13,680 --> 00:39:16,200 Speaker 1: they become too powerful? And that's a that's a legitimate question. 749 00:39:16,440 --> 00:39:19,319 Speaker 1: You do your gen mooriss imitation at the back end 750 00:39:19,360 --> 00:39:21,960 Speaker 1: of the book and you say the four in you 751 00:39:22,400 --> 00:39:25,239 Speaker 1: what should you do about this moment? And this is 752 00:39:25,320 --> 00:39:29,200 Speaker 1: a profoundly American issue, which is the de peopling of 753 00:39:29,320 --> 00:39:31,480 Speaker 1: America to the cities, and this has to do with 754 00:39:31,600 --> 00:39:35,040 Speaker 1: our American politics. Get to a city, Yeah, what do 755 00:39:35,080 --> 00:39:37,520 Speaker 1: you mean by that? Two thirds of economic value is 756 00:39:37,520 --> 00:39:38,920 Speaker 1: going to be created in a city. When you're in 757 00:39:38,960 --> 00:39:41,680 Speaker 1: a city of bump into people who are better or 758 00:39:42,040 --> 00:39:43,880 Speaker 1: you know, are the best in the world. It's when 759 00:39:43,920 --> 00:39:45,719 Speaker 1: you play tennis, so someone who's better than you, you 760 00:39:45,840 --> 00:39:48,360 Speaker 1: get better. So rally with someone who's great and the 761 00:39:48,440 --> 00:39:50,839 Speaker 1: best in the world. Are gravitating to cities because that's 762 00:39:50,880 --> 00:39:52,919 Speaker 1: where the economic value is. To get to a city 763 00:39:52,960 --> 00:39:55,319 Speaker 1: and pump off in rally with better tennis. Twenty five 764 00:39:55,360 --> 00:39:57,359 Speaker 1: year old in Brooklyn, they can't afford to live large, 765 00:39:57,440 --> 00:40:00,320 Speaker 1: Like David Girl, which city should they move to? Where's 766 00:40:00,320 --> 00:40:04,160 Speaker 1: Galloway's favorite city right now? Oh? Gosh, Tom, if you 767 00:40:04,200 --> 00:40:05,919 Speaker 1: can afford to, you want to live in New York 768 00:40:06,200 --> 00:40:08,920 Speaker 1: or San Francisco because it's a very endeah. But come on, 769 00:40:09,000 --> 00:40:11,960 Speaker 1: they can't. I mean no, you know it's outrageous. Give 770 00:40:12,040 --> 00:40:14,000 Speaker 1: me a secondary city here. I gotta make some news 771 00:40:14,040 --> 00:40:18,000 Speaker 1: and sell serious XM Channel one nineteen somewhere Miami, a 772 00:40:18,800 --> 00:40:23,520 Speaker 1: small city like Miami, Miam is fantastic. Nashville, Um, Queens, Yeah, 773 00:40:23,640 --> 00:40:26,880 Speaker 1: there's there's there's a ton of great cities. Uh. St. Louis, 774 00:40:26,960 --> 00:40:30,319 Speaker 1: Wash you that probably the fastest. There we go. We'll 775 00:40:30,360 --> 00:40:35,280 Speaker 1: leave at their Washington University, St. Louis. Riley from St. Louis, 776 00:40:35,400 --> 00:40:37,959 Speaker 1: we say good morning to you. Scott Galloway. The book 777 00:40:38,080 --> 00:40:41,000 Speaker 1: is The Four Even Riley from St. Louis is going 778 00:40:41,040 --> 00:40:54,440 Speaker 1: to read it. This is Bloomberg. Thanks for listening to 779 00:40:54,520 --> 00:40:59,160 Speaker 1: the Bloomberg Surveillas podcast. Subscribe and listen to interviews on 780 00:40:59,360 --> 00:41:04,200 Speaker 1: Apple Pie, Guests, SoundCloud, or whichever podcast platform you prefer. 781 00:41:04,760 --> 00:41:07,799 Speaker 1: I'm on Twitter at Tom Keene, David Gura is at 782 00:41:07,960 --> 00:41:12,719 Speaker 1: David Gura. Before the podcast, you can always catch us worldwide. 783 00:41:13,000 --> 00:41:14,040 Speaker 1: I'm Bloomberg Radio