WEBVTT - Markets Await Possible Fed Pause, Recession 0:00:01.360 --> 0:00:05.720 This is Bloomberg Business Wait inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:18.960 podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:21.560 --> 0:00:24.680 We are going to do an interview right now that 0:00:24.720 --> 0:00:27.520 I've really been looking forward to. Over the past couple 0:00:27.520 --> 0:00:31.800 of weeks. I've been getting a lot of well not 0:00:31.880 --> 0:00:34.080 a lot. I've been getting I guess, on a daily 0:00:34.159 --> 0:00:39.879 basis emails, usually holding a nugget or a chart that 0:00:40.080 --> 0:00:43.199 just really piques my interest. From Torson Slock. He's a 0:00:43.240 --> 0:00:46.440 chief economist and a partner over to Apollo Global Management, 0:00:46.640 --> 0:00:50.040 and I'm glad to welcome him to the show. Torson, 0:00:50.040 --> 0:00:52.880 Welcome to Bloomberg Business Week. I got to start by 0:00:52.920 --> 0:00:57.040 asking you about how worried you are. I see kind 0:00:57.040 --> 0:00:59.640 of a trend in the charts you send about rising 0:00:59.680 --> 0:01:03.160 credit card usage among consumers or rising, say, you know, 0:01:03.280 --> 0:01:07.399 car payment delinquencies, and I wonder if you're looking for 0:01:07.480 --> 0:01:09.080 this next recession to kick off. 0:01:10.240 --> 0:01:12.080 Yeah, no, thanks, Manni, thanks for having me on. 0:01:12.200 --> 0:01:14.760 I think that there's a number of indicators more recently 0:01:15.920 --> 0:01:20.280 that indeed are flashing a bit more yellow, and some 0:01:20.360 --> 0:01:20.920 of them. 0:01:20.840 --> 0:01:22.720 Actually even flashing some red. 0:01:23.520 --> 0:01:25.720 Specifically, as you just mentioned, if you look at the 0:01:25.760 --> 0:01:30.480 linguaity rates on credit cards across different age cohorts, you're 0:01:30.520 --> 0:01:34.560 seeing for younger generations that the level of delinquencies is 0:01:34.600 --> 0:01:36.440 now at the same level as we had in two 0:01:36.480 --> 0:01:37.080 thousand and eight. 0:01:37.720 --> 0:01:39.640 Likewise, if you look at the linguaity rates for. 0:01:39.600 --> 0:01:43.080 Auto loans, you're also seeing for younger cohorts and here 0:01:43.280 --> 0:01:45.639 meaning people who are twenties to thirty, thirty to forty, 0:01:46.000 --> 0:01:50.680 that we have also a level of delininguities that is 0:01:50.920 --> 0:01:52.559 close to what we had in two thousand and eight. 0:01:52.720 --> 0:01:56.760 Combining that with a fits Celrosa survey which tells us 0:01:56.800 --> 0:02:00.000 something about how tight are credit conditions, which both said 0:02:00.160 --> 0:02:02.760 is that demand for corporate loans is at two thousand 0:02:02.800 --> 0:02:04.960 and eight levels and also says that demand for cer 0:02:05.000 --> 0:02:07.040 re loans is at two thousand eight levels, and it 0:02:07.080 --> 0:02:09.720 also shows that credit conditions more broadly have tightened. 0:02:10.080 --> 0:02:11.359 I do get a bit worried that. 0:02:11.360 --> 0:02:15.520 Credit conditions are beginning to tighten so much that it 0:02:15.720 --> 0:02:19.400 ultimately is having that negative impact on the economy that 0:02:19.520 --> 0:02:22.200 the Fed quite frankly has been waiting for for now 0:02:22.200 --> 0:02:23.640 several quarters, Torstan. 0:02:23.720 --> 0:02:26.280 How do I chart this? How do I tight chart 0:02:26.360 --> 0:02:28.720 those tighter credit conditions? Because I look at things like 0:02:28.800 --> 0:02:33.440 financial conditions indexes and I don't know these accurse. Again, 0:02:33.480 --> 0:02:35.520 these are market based measures, and it shows that things 0:02:35.560 --> 0:02:37.640 are pretty easy. But then I listen to you and 0:02:37.639 --> 0:02:39.320 things sound pretty tight, and I want to know how 0:02:39.360 --> 0:02:39.919 to show this. 0:02:40.720 --> 0:02:42.240 Yeah, no, that's absolutely right, Katie. 0:02:42.280 --> 0:02:46.640 But if you wait together the market based measures of 0:02:46.680 --> 0:02:49.840 financial conditions, so that's the stock markets, that's the IG spread, 0:02:49.880 --> 0:02:53.120 the highyeer spread, the spread for loans, those are not 0:02:53.480 --> 0:02:55.160 flashing really any worries. 0:02:55.200 --> 0:02:58.840 If anything, they're still green on the recession worry front. 0:02:59.040 --> 0:03:02.560 So from that perspective, you're right that markets obviously have 0:03:02.639 --> 0:03:06.320 been waiting for the recession to arrive. A five type ECFC. 0:03:06.360 --> 0:03:08.959 Go on my Bloomberg screen and look at expectations to 0:03:09.040 --> 0:03:12.880 GDP growth. The consensus has expected a recession since October 0:03:13.720 --> 0:03:16.200 and the recession has still not arrived. So I think 0:03:16.240 --> 0:03:19.959 there's recession exhaustion in credit markets and equity markets, and 0:03:20.000 --> 0:03:22.520 people saying, well, where is this recession that these bond 0:03:22.560 --> 0:03:24.399 investsels have talked about for so long, and if there's 0:03:24.400 --> 0:03:27.760 no recession, maybe you should have equities trading higher and 0:03:27.840 --> 0:03:30.960 credits bressed trading tighter. So the only issue that I 0:03:31.000 --> 0:03:34.359 think is under appreciated in that debate is that behind 0:03:34.440 --> 0:03:38.360 all this is the FED trying to cool the economy down. 0:03:38.560 --> 0:03:41.120 And the number one domino break in this debate is 0:03:41.160 --> 0:03:45.120 that inflation today is in round numbers five percent, both 0:03:45.120 --> 0:03:46.840 if you look at call, if you look at headline, 0:03:46.920 --> 0:03:49.800 no matter what specific measure of inflation you look at, 0:03:49.880 --> 0:03:51.000 it is around five percent. 0:03:51.280 --> 0:03:53.400 And the Fed's target is that it should be two. 0:03:53.520 --> 0:03:55.440 And if inflation is five and it should be two, 0:03:55.800 --> 0:03:58.320 the FED is not going to ease anytime soon, and 0:03:58.360 --> 0:04:00.840 they may actually begin to race raise again in July. 0:04:01.200 --> 0:04:04.640 So if that's the case, the market is not appreciating 0:04:04.760 --> 0:04:07.120 enough that the FED is actually trying to cool the 0:04:07.160 --> 0:04:09.839 economy down. They're trying to slow down earnings growth, They're 0:04:09.840 --> 0:04:12.560 trying to lower the e in the pe ratio, and 0:04:12.600 --> 0:04:15.840 with that will of course come a slow down, and therefore, ultimately, 0:04:15.880 --> 0:04:18.640 in my view of recession, we have. 0:04:19.640 --> 0:04:21.880 A great story on the Bloomberg today, tourist and fedbacks 0:04:21.920 --> 0:04:25.479 away from wages focus, bolstering case for rate pause, And 0:04:25.520 --> 0:04:27.400 the idea here is that there's been more and more 0:04:27.440 --> 0:04:32.520 research showing that wage growth doesn't have a direct impact 0:04:32.640 --> 0:04:36.400 on inflation. Now, I can't understand how that could be, 0:04:36.400 --> 0:04:38.159 because to me, it makes sense if you pay people 0:04:38.200 --> 0:04:39.920 more money, they're going to have more money to buy 0:04:39.960 --> 0:04:42.680 more stuff or pay higher prices at least. But I've 0:04:42.680 --> 0:04:46.800 heard it from very smart people, including Danny Blanchflower from Dartmouth, 0:04:46.800 --> 0:04:49.680 that you know, the labor numbers we look at just 0:04:49.760 --> 0:04:54.400 really aren't effective in gauging whether or not we're going 0:04:54.440 --> 0:04:56.200 to have an inflation, whether or not the economy is 0:04:56.200 --> 0:04:59.400 slowing down enough to bring inflation down. What do you 0:04:59.400 --> 0:05:00.520 think about that connection? 0:05:01.440 --> 0:05:03.360 Yeah, so this is very important and I did see 0:05:03.400 --> 0:05:05.640 that story and it is a very good It's very 0:05:05.640 --> 0:05:08.239 well written and will very well laid out. You're right, 0:05:08.520 --> 0:05:11.320 this is a debate in FED working papers at the moment. 0:05:11.720 --> 0:05:14.400 There was a paper recently, and this is very controversial 0:05:14.520 --> 0:05:17.480 what you're highlighting, namely by the San Francisco FED, saying 0:05:18.160 --> 0:05:21.919 wage inflation is not important for consumer price inflation. And 0:05:21.960 --> 0:05:25.400 why is that controversial? Because that basically rips up page 0:05:25.400 --> 0:05:27.960 one in the economics textbook, which says that when you 0:05:28.040 --> 0:05:31.800 have higher cost of production through higher labor costs, then 0:05:31.880 --> 0:05:34.560 you should also see higher prices of the products that 0:05:34.600 --> 0:05:37.440 are produced. The issue with that paper, and the issue 0:05:37.480 --> 0:05:41.640 with that approach, is that that's a statistical correlation where 0:05:41.960 --> 0:05:45.320 the author basically finds that the correlation between wage inflation 0:05:45.400 --> 0:05:48.919 and consumer price inflation is basically very low, only. 0:05:48.800 --> 0:05:49.680 Zero point one. 0:05:50.160 --> 0:05:52.400 So now you can ask the question, Okay, does that 0:05:52.480 --> 0:05:55.240 mean that wages do not matify inflation? Well, if you 0:05:55.400 --> 0:05:58.640 doubled everyone's wages in the US economy, are you telling 0:05:58.680 --> 0:06:01.440 me that that would have no impact on inflation, on 0:06:01.480 --> 0:06:02.560 consumer price inflation? 0:06:02.720 --> 0:06:04.279 I think we can all agree that that would not 0:06:04.360 --> 0:06:04.880 be the case. 0:06:05.200 --> 0:06:09.799 So therefore it really becomes almost the statistical exercise of saying, 0:06:09.839 --> 0:06:13.080 maybe a statistical correlation is close to zero, but the 0:06:13.120 --> 0:06:16.479 economic connection is very obvious. Exactly as you said, Matt, 0:06:16.760 --> 0:06:19.600 that you would have expected if people high incomes, they 0:06:19.640 --> 0:06:22.280 go out and go more to restaurants, fly more on airplanes, 0:06:22.360 --> 0:06:25.320 day more hotels, and that all creates more inflation. So 0:06:25.360 --> 0:06:27.960 it is the case, in particular, given worth saving sign 0:06:28.000 --> 0:06:30.479 the economy is still being so strong that the amount 0:06:30.520 --> 0:06:33.400 of money that people spend on different things are still 0:06:33.400 --> 0:06:34.600 the key driver of. 0:06:34.760 --> 0:06:37.520 Inflation, right, Well, let's talk about some of the inflation 0:06:37.960 --> 0:06:40.919 figures that we're going to get tomorrow. For May, I 0:06:40.960 --> 0:06:42.720 want to zero in on what we're going to get 0:06:42.720 --> 0:06:45.960 on the year over year numbers. So headline CPI year 0:06:46.000 --> 0:06:47.880 over year is expected to come in at four point 0:06:48.000 --> 0:06:51.760 one percent. Core CPI year over year is expected at 0:06:51.760 --> 0:06:56.000 five point two percent. That seems like a really big 0:06:56.200 --> 0:06:59.040 gap to me over a percentage point. Does that have 0:06:59.160 --> 0:07:02.479 any bearing on what we might see from the fat 0:07:02.520 --> 0:07:05.200 How do they factor in that sort of divergence that 0:07:05.240 --> 0:07:07.359 we're seeing be between core and headline inflation. 0:07:08.520 --> 0:07:09.960 That's a very important question, Katie. 0:07:10.040 --> 0:07:12.040 So the reason for that difference, and that is also 0:07:12.080 --> 0:07:17.400 a bit unusual, is that when Russia invaded Ukraine, energy 0:07:17.440 --> 0:07:20.680 prices went not a lot. And of course, as you 0:07:20.760 --> 0:07:24.480 get through the episode, now we now are twelve months 0:07:24.760 --> 0:07:28.400 more away from that event in February twenty twenty two. 0:07:28.720 --> 0:07:30.400 So the result of that is that the year over 0:07:30.600 --> 0:07:34.160 year way of measuring inflation is that inflation is actually 0:07:34.200 --> 0:07:37.239 now beginning to decline in food and energy. 0:07:37.640 --> 0:07:40.239 So that means that the drag because. 0:07:39.960 --> 0:07:42.800 Of us getting to the other side of February twenty 0:07:42.840 --> 0:07:46.280 twenty three. The drag on headline inflation is bigger simply 0:07:46.320 --> 0:07:49.280 because food and energy can no longer quote unquote remember 0:07:49.600 --> 0:07:52.480 what happened in February twenty twenty zero. What the FED 0:07:52.520 --> 0:07:55.320 focuses on is coinflation. And as you highlighted, and I'm 0:07:55.400 --> 0:07:58.640 here on my Blueberg screen Tyving Ecoco, you can see 0:07:58.680 --> 0:08:01.160 as you say that coin inflation the spects to drop 0:08:01.160 --> 0:08:05.640 from five point five in the month of April to 0:08:05.680 --> 0:08:07.680 five point two in the month of May, and that, 0:08:07.800 --> 0:08:08.400 of course is. 0:08:08.360 --> 0:08:11.880 A decent decline. Again, the fit target is that inflationship 0:08:11.960 --> 0:08:12.560 be two. 0:08:12.640 --> 0:08:15.040 So all these numbers that we talk about here four, five, 0:08:15.200 --> 0:08:17.720 five and a half are way too high for the FAT. 0:08:17.920 --> 0:08:20.800 But that's why the Fed of course has this debate about, well, 0:08:21.000 --> 0:08:23.600 we need to have coin inflation in particular move down 0:08:23.640 --> 0:08:26.680 closer to two. And that's happening, but it's just happening 0:08:26.800 --> 0:08:30.400 very very slowly, and it does probably require interest rates 0:08:30.600 --> 0:08:33.440 at these elevated levels for at least well into next 0:08:33.480 --> 0:08:36.040 year before we begin to see a meaningful move down 0:08:36.080 --> 0:08:36.720 to two percent. 0:08:37.040 --> 0:08:39.800 All right, Tors and I have a ton of viewer 0:08:39.920 --> 0:08:42.680 slash listener questions, so I'm gonna fire off a couple 0:08:42.679 --> 0:08:43.440 of these here. 0:08:43.240 --> 0:08:45.200 And rapid fire around one. 0:08:45.160 --> 0:08:48.240 Especially that relates to a chart you sent recently that's 0:08:48.240 --> 0:08:50.360 stuck in my mind, which is the fact that there's 0:08:50.400 --> 0:08:54.560 still a lot of state excess savings in the economy 0:08:54.640 --> 0:08:59.160 or in bank accounts from the stimulus listener rites in, 0:08:59.200 --> 0:09:01.400 when do these elevation did prices start to hurt or 0:09:01.440 --> 0:09:04.160 pain in the consumer? You know, if you look like 0:09:04.280 --> 0:09:07.680 at the consumer like a monolith, then it's easier, I 0:09:07.679 --> 0:09:10.000 guess to answer this. Let's not get into the bifurcation 0:09:10.160 --> 0:09:14.360 that surveillance would start digging into. When is it going 0:09:14.440 --> 0:09:17.400 to really hit? You know, Joe Plumber. 0:09:18.800 --> 0:09:21.319 Yeah, So the FED actually also had a working paper. 0:09:21.040 --> 0:09:23.679 On that saying that households will basically run out of 0:09:23.720 --> 0:09:27.080 these excess savings by the end of this year. That's 0:09:27.120 --> 0:09:29.400 quite unusual for a FED working paper to spill that 0:09:29.440 --> 0:09:30.160 out so clearly. 0:09:30.480 --> 0:09:32.400 But that means that consumers. 0:09:31.840 --> 0:09:35.439 Still have more savings left even though prices have been 0:09:35.480 --> 0:09:39.200 going up. So from that question, we can basically exactly 0:09:39.240 --> 0:09:42.600 conclude that it still is at least a few quarters 0:09:42.640 --> 0:09:46.080 away before we get to the point when consumers will 0:09:46.080 --> 0:09:49.480 no longer have money to stay at hotels, go to restaurants, 0:09:49.600 --> 0:09:52.480 flying airplanes, go to sporting events and broadway shows. Because 0:09:52.480 --> 0:09:55.880 all that data continues to be reasonably strong, simply because 0:09:56.040 --> 0:09:57.319 savings are still so high. 0:09:57.480 --> 0:09:59.800 I just we never would have expected inflation to be 0:09:59.840 --> 0:10:03.360 this sticky, right. I remember watching Ben bernanke on sixty 0:10:03.400 --> 0:10:05.640 Minutes and he was like, we could crush inflation with 0:10:05.720 --> 0:10:08.960 a hammer, you know, but it's obviously more difficult. It's 0:10:09.040 --> 0:10:10.960 more easily said than done. 0:10:12.000 --> 0:10:14.720 Honestly, this whole episode of inflation going up and now 0:10:14.880 --> 0:10:17.559 down so slowly, it is a bit of an embarrassment 0:10:17.559 --> 0:10:21.480 for the economics profession. Nobody really predicted infistion would go up, 0:10:21.679 --> 0:10:22.760 and now everyone is so. 0:10:22.800 --> 0:10:24.720 Busy saying, oh, it will come down very quickly. 0:10:25.000 --> 0:10:27.679 And now there's more and more people, including myself, who 0:10:27.720 --> 0:10:29.520 are beginning to worry. Maybe it's not going to come 0:10:29.520 --> 0:10:31.720 down to it quickly. Maybe as an investor, I do 0:10:31.800 --> 0:10:34.120 need to take into account that the cost of capital 0:10:34.120 --> 0:10:36.360 will stay elevated for longer, that the fit is just 0:10:36.400 --> 0:10:39.040 not going to go at lower rates as quickly as 0:10:39.080 --> 0:10:42.439 markets currently uprising. So you're right, it is very surprising 0:10:42.600 --> 0:10:45.200 that the economics toolbox and the textbook that we all 0:10:45.480 --> 0:10:46.959 have been studying all these years. 0:10:47.000 --> 0:10:50.920 Well, well, Torson, don't be too embarrassed, because you absolutely rule. 0:10:51.559 --> 0:10:54.880 Thanks so much for joining us. Torson slock from Apollo Global. 0:10:56.200 --> 0:10:59.720 You're listening to the Bloomberg Business Week podcast. Catch us 0:10:59.760 --> 0:11:03.160 Lie weekday afternoons from three to six Eastern Listen on 0:11:03.200 --> 0:11:07.240 Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, 0:11:07.520 --> 0:11:10.280 or wants us live on YouTube. 0:11:10.800 --> 0:11:14.960 We have on with us the first black female CEO 0:11:15.440 --> 0:11:19.920 of a major PR firm, Lisa Osborne Ross joins us 0:11:19.960 --> 0:11:24.400 the US CEO at Adelman, And it's I think especially 0:11:24.440 --> 0:11:28.199 important because we also have the results of Adelman's Trust Barometer, 0:11:28.559 --> 0:11:34.000 Business and Racial Justice Report at a time when you know, 0:11:35.120 --> 0:11:39.720 more Americans are concerned about racism but fewer are optimistic 0:11:39.720 --> 0:11:43.760 about progress being made. It reminds me of last week. 0:11:43.800 --> 0:11:46.559 I saw this story the Supreme Court back's extra black 0:11:46.640 --> 0:11:49.959 Alabama district and the GOP rebuff, and I just thought, 0:11:49.960 --> 0:11:53.040 what year is it that we're still dealing with this 0:11:53.120 --> 0:11:56.440 kind of thing? How come we haven't already solved issues 0:11:56.520 --> 0:12:00.560 like this? So Lisa joins us right now on Zoom 0:12:00.640 --> 0:12:03.000 from Washington, DC and Lisa, it's great to have you here. 0:12:03.559 --> 0:12:07.360 Thanks so much for coming on the program. I would 0:12:07.720 --> 0:12:11.000 love to know first, just an overview of the results 0:12:11.080 --> 0:12:14.679 of your survey. I feel like more and more people 0:12:14.679 --> 0:12:17.280 are concerned. We talk more and more about this issue, 0:12:17.280 --> 0:12:21.280 but there's just not being not enough progress actually being made. 0:12:23.000 --> 0:12:27.080 Look, the research is critical because this, whether it should 0:12:27.080 --> 0:12:30.160 be or not, is an emotional issue. And the reason 0:12:30.280 --> 0:12:33.040 we do it is because the data matters. There's a 0:12:33.080 --> 0:12:37.920 wide range of feelings on this. There's defeatism to defensiveness. 0:12:37.960 --> 0:12:42.120 There's in some cases even an outright disagreement on whether 0:12:42.200 --> 0:12:45.240 racism even exists or not. Now, I'm happy to report 0:12:45.320 --> 0:12:49.520 that less than fifteen percent of those polled believe that 0:12:49.679 --> 0:12:53.840 racism is not a problem. But the example that you 0:12:54.040 --> 0:12:57.280 just gave is, you know, we live in two different worlds. 0:12:57.400 --> 0:13:01.840 You were shocked by the Supreme Court's movement, but others 0:13:01.960 --> 0:13:04.240 lived that on a daily basis, and they're. 0:13:04.000 --> 0:13:04.920 Not shocked at all. 0:13:05.400 --> 0:13:07.680 I think it's even no, you go ahead, no, I 0:13:07.679 --> 0:13:08.320 don't know others. 0:13:08.520 --> 0:13:11.800 There was only one black congressional district in Alabama. That's 0:13:11.800 --> 0:13:17.240 what blew me away. I mean, you know, there needs 0:13:17.240 --> 0:13:19.360 to be more. I've been to Alabama. There needs to 0:13:19.400 --> 0:13:22.280 be more representation there, right, So how come the supremium 0:13:22.440 --> 0:13:24.959 to make this decision in the sixties, right? 0:13:25.200 --> 0:13:25.400 Right? 0:13:25.440 --> 0:13:28.040 You and I both know that there are enough black 0:13:28.080 --> 0:13:30.520 people in Alabama for that to not be the case. 0:13:30.559 --> 0:13:32.240 But that is a that is. 0:13:32.240 --> 0:13:35.280 It's related to this conversation, but it is part and 0:13:35.360 --> 0:13:39.080 parcel of the environment that many people still live in, 0:13:39.400 --> 0:13:43.080 and it is problematic. I was I was struck when 0:13:43.080 --> 0:13:45.520 we saw the results of this research because I think 0:13:45.559 --> 0:13:48.440 people had one of four reactions. One people were like, 0:13:48.920 --> 0:13:52.840 tell me something I didn't know. Racism exists, fully exist 0:13:53.080 --> 0:13:55.880 in corporate America. Other people were like, you know what, 0:13:56.280 --> 0:13:59.120 I knew it. I felt it, felt it, felt it, 0:13:59.120 --> 0:14:01.000 but I couldn't put my finger on it, and the 0:14:01.080 --> 0:14:04.120 data supported it. A third group of people were like, 0:14:04.160 --> 0:14:06.400 oh my god, this is shocking, this is terrible. I 0:14:06.400 --> 0:14:09.040 don't know where those people have been, but for some 0:14:09.080 --> 0:14:13.120 people it was still very surprising. And most unfortunately, there's 0:14:13.160 --> 0:14:16.680 a fourth group of people who have said, Okay, it 0:14:16.840 --> 0:14:20.000 simply doesn't matter because nothing is going to change. 0:14:21.120 --> 0:14:24.040 And I mean, looking through the results of this report, 0:14:24.680 --> 0:14:26.520 you talk about two different worlds. It seems like there's 0:14:26.600 --> 0:14:30.760 a real sort of divergence between what executives think their 0:14:30.840 --> 0:14:33.320 company is doing or the progress that they've made, and 0:14:33.360 --> 0:14:38.080 what non executives say when we talk about making progress 0:14:38.120 --> 0:14:41.640 and addressing racism, it seems like the executives have a 0:14:41.760 --> 0:14:44.920 much different view on that than maybe the people that 0:14:45.000 --> 0:14:45.960 report to them. 0:14:46.520 --> 0:14:50.720 Bingo, I fell into that second category of you know what, 0:14:51.080 --> 0:14:55.080 I thought that there was a problem inside the organizations 0:14:55.120 --> 0:14:58.000 that I work with and that I counsel, and then 0:14:58.080 --> 0:15:00.120 just everything that I see and what you say that 0:15:00.240 --> 0:15:04.520 is exactly it. The executives are feeling good about themselves. 0:15:04.520 --> 0:15:08.680 They're like, hey, I go to my DEI training a 0:15:08.920 --> 0:15:13.800 mentor people of color. I'm supportive, I'm anti racist. But 0:15:14.040 --> 0:15:18.000 the rank and file see things very very differently. And 0:15:18.040 --> 0:15:21.000 the reason that we're not making progress is that those 0:15:21.040 --> 0:15:24.400 executives who are in decision making roles, they think they're 0:15:24.400 --> 0:15:26.880 doing well and don't have a problem. But the rank 0:15:26.920 --> 0:15:30.000 and file sees every day that we have a significant problem. 0:15:30.040 --> 0:15:31.600 And that to me was the most shocking. 0:15:32.400 --> 0:15:36.760 So why do executives think that they're doing well? 0:15:36.800 --> 0:15:36.960 Then? 0:15:37.200 --> 0:15:41.600 I mean, is it just that they're checking boxes here 0:15:42.320 --> 0:15:45.800 and not actually moving the ball forward? I mean, I 0:15:45.800 --> 0:15:46.520 don't understand. 0:15:47.320 --> 0:15:50.880 Yes, there's a lot of box checking, but also if 0:15:50.920 --> 0:15:54.200 you look at it, we've been having this conversation about 0:15:54.480 --> 0:15:58.160 racism and particularly racism in the workplace for some time. 0:15:58.760 --> 0:16:02.720 After the murder of George Floyd, the nation had a reckoning. 0:16:03.320 --> 0:16:06.800 They had a reckoning, and for many people this was 0:16:06.840 --> 0:16:09.920 the first time that they really started to pay attention 0:16:10.440 --> 0:16:13.400 to the conversations. They started to look at their teams 0:16:13.520 --> 0:16:17.200 and realize and recognize that their teams were not representative. 0:16:17.240 --> 0:16:19.640 They started to look at their leadership, at their boards, 0:16:19.880 --> 0:16:22.840 and they saw that they were not representative. And you know, 0:16:22.840 --> 0:16:25.640 there's been all this conversation about like a retraction on 0:16:25.960 --> 0:16:29.160 ESG and particularly the S and ESG. I have seen 0:16:29.320 --> 0:16:33.160 and said that those companies that got it in the 0:16:33.200 --> 0:16:36.320 first place, who were about it, who were not running 0:16:36.360 --> 0:16:39.800 DEI programs, but looking at representation at all levels of 0:16:39.840 --> 0:16:43.480 their organization, they haven't stopped. In fact, they are even 0:16:43.560 --> 0:16:48.200 stronger those organizations who for whatever reason FOMO peer pressure, 0:16:48.640 --> 0:16:50.800 Oh everybody's doing it, so I guess I should too. 0:16:51.120 --> 0:16:54.280 Those are the organizations that have pulled back. But those 0:16:54.320 --> 0:16:55.960 that were in it in the first place, they're even 0:16:55.960 --> 0:16:57.200 stronger in this space. 0:16:57.760 --> 0:17:01.280 So, Lisa, how does this problem get fixed? I mean, 0:17:01.360 --> 0:17:04.680 is the obvious answer here that perhaps you know, those 0:17:04.760 --> 0:17:08.040 at the executive rank should maybe look like the people 0:17:08.080 --> 0:17:11.399 that they represent, that we need more diversity in management, 0:17:11.480 --> 0:17:13.760 or what do you think really needs to happen to 0:17:14.000 --> 0:17:15.880 propel this conversation forward. 0:17:16.560 --> 0:17:19.679 I think wanted some honest conversation. For example, when I 0:17:19.720 --> 0:17:22.320 am interviewing people and they tell me how much they 0:17:22.440 --> 0:17:25.280 value DEI and how important it is to them, the 0:17:25.320 --> 0:17:28.720 first question I ask is, I think that's lovely, that's important. 0:17:29.200 --> 0:17:32.439 How diverse is your senior team? How many people of 0:17:32.440 --> 0:17:34.439 color do you have on your senior team that are 0:17:34.440 --> 0:17:37.000 in decision making roles? And so I think moving it 0:17:37.080 --> 0:17:40.120 from the box checking to the narrative, and I think 0:17:40.160 --> 0:17:43.959 we change when two things are realized by business leaders. 0:17:44.000 --> 0:17:46.320 And I say this to my team at Edelman. You 0:17:46.400 --> 0:17:51.359 cannot credibly create content, you can't credibly create campaigns, You 0:17:51.400 --> 0:17:55.399 can't represent a point of view unless you have a 0:17:55.440 --> 0:18:00.840 representative team. In this current day, you've got forty of 0:18:00.880 --> 0:18:06.679 the population that is non white, non male, non straight, 0:18:07.280 --> 0:18:11.000 And so if you don't put together teams that represent 0:18:11.400 --> 0:18:14.400 the wide array of what America looks like right now, 0:18:14.400 --> 0:18:16.560 and I say America because I'm a US CEO. 0:18:16.960 --> 0:18:18.120 So when when. 0:18:17.960 --> 0:18:21.320 Leaders realize their their work is not credible unless it's 0:18:21.359 --> 0:18:23.080 created by representative teams. 0:18:23.480 --> 0:18:26.119 Alice Osborne Ross from Edelman. Great to have you. 0:18:26.119 --> 0:18:29.679 You're listening to the Bloomberg Business Week podcast. Catch us 0:18:29.720 --> 0:18:33.840 live weekday afternoons from three to six Easter on Bloomberg Radio, 0:18:33.960 --> 0:18:37.200 the Bloomberg Business App, and YouTube. You can also listen 0:18:37.320 --> 0:18:40.440 live on Amazon Alexa from our flagship New York station, 0:18:40.880 --> 0:18:43.639 Just Say Alexa playing Bloomberg eleven thirty. 0:18:46.760 --> 0:18:56.840 It's ams Amymsra. All Right, I do want to fly, 0:18:57.960 --> 0:19:01.040 but not in a narrow body seven thirty seven. 0:19:01.160 --> 0:19:01.480 Max. 0:19:01.760 --> 0:19:03.879 I'm still a little bit worried about flying on a 0:19:03.880 --> 0:19:05.199 seven thirty seven? Is it just me? 0:19:05.480 --> 0:19:05.560 No? 0:19:05.680 --> 0:19:08.240 I get that I don't know enough about planes to 0:19:08.520 --> 0:19:10.080 sort of suss out what aircraft. 0:19:10.200 --> 0:19:12.240 I know very little about planes, but I know this 0:19:12.280 --> 0:19:13.840 one tends to crash a lot. 0:19:14.080 --> 0:19:15.560 Those numbers seem bad. 0:19:15.720 --> 0:19:18.880 Yeah, And apparently the Chinese for a while they were 0:19:18.880 --> 0:19:21.680 cool with it until the plane started to crash. They 0:19:21.680 --> 0:19:24.679 were buying a ton of boeings. Trump's trade war and 0:19:24.720 --> 0:19:27.080 then COVID and all of a sudden, Boeing went from 0:19:27.119 --> 0:19:31.280 like the most beloved plane maker in China to the 0:19:31.280 --> 0:19:34.520 biggest loser to air Bus. This duopoly is something we're 0:19:34.520 --> 0:19:37.639 going to talk about with Bloomberg BusinessWeek editor in chief 0:19:38.320 --> 0:19:40.920 Joel Weber. He joins us here in the Interactive Broker studio, 0:19:40.920 --> 0:19:43.840 as well as Julie Johnson, the Aerospace reporter, and Joel 0:19:43.880 --> 0:19:48.359 I was telling Katie earlier, my love for this business 0:19:48.880 --> 0:19:52.240 has grown exponentially since I read Airframe by Michael Crichton. 0:19:52.640 --> 0:19:55.240 H Okay, you read have you read it? No? 0:19:55.400 --> 0:19:57.960 Man, I feel like this is one of the most 0:19:58.119 --> 0:20:02.240 novels he wrote. Jurassic Park. Yeah, and it's a great movie. 0:20:02.440 --> 0:20:03.880 It touches on China to. 0:20:05.640 --> 0:20:05.920 Everyone. 0:20:06.960 --> 0:20:08.920 So how did how did Julie whin you over this pitch? 0:20:08.960 --> 0:20:09.120 Then? 0:20:09.560 --> 0:20:14.120 Well, you know, we have this interest in airplanes and 0:20:14.440 --> 0:20:19.160 air lines and the people who are running those companies 0:20:19.200 --> 0:20:23.480 and also the people who manufacture them. There's this thing 0:20:23.560 --> 0:20:26.159 that happened in China where you know, they closed the 0:20:26.160 --> 0:20:30.000 borders for a really long time during COVID travel and 0:20:30.119 --> 0:20:36.480 demand went away, uh internally domestically in China, uh internationally, 0:20:36.760 --> 0:20:40.240 and that had all kinds of implications for the global economy. 0:20:41.160 --> 0:20:45.360 It also had implications for people who make and sell airplanes, 0:20:45.480 --> 0:20:48.320 and and that was sort of an interest of us, 0:20:48.480 --> 0:20:52.119 especially ahead of the Paris Air Show, which is just 0:20:52.200 --> 0:20:54.800