WEBVTT - Bloomberg Wall Street Week - July 5th, 2024 0:00:00.280 --> 0:00:02.560 This is Bloomberg Wall Street Week. 0:00:02.680 --> 0:00:07.040 The global push into infrastructure, breaking the IPO logjam in text. 0:00:07.160 --> 0:00:10.640 The financial stories that sheep are work cutting inflation without 0:00:10.640 --> 0:00:13.240 losing jobs. Do we need rate cuts and if so, 0:00:13.400 --> 0:00:16.120 how many? Investing in a time of geopolitical turmoil. 0:00:16.200 --> 0:00:18.560 Through the eyes of the most influential voices. 0:00:18.720 --> 0:00:22.480 Ten Rogueff Economists of Harvard, former FDIC had Shila Bert 0:00:22.680 --> 0:00:27.360 ge CEO, Larry Kulp, San Francisco FED President Mary Daily Bloomberg. 0:00:26.840 --> 0:00:30.240 Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.440 --> 0:00:33.479 A big win for labor in Great Britain, the Biden 0:00:33.560 --> 0:00:37.239 presidency hangs in the balance, and France heads into the 0:00:37.280 --> 0:00:40.320 second round of elections. This is Bloomberg Wall Street Week. 0:00:40.440 --> 0:00:44.680 I'm David Weston. This week, Ken Jacobs of Lazard explains 0:00:44.680 --> 0:00:47.199 why the Supreme Court decisions in this term may not 0:00:47.320 --> 0:00:49.800 be as good for business as many people think. 0:00:50.120 --> 0:00:54.480 We shouldn't suddenly cheer this decision as pro business and. 0:00:54.600 --> 0:00:58.000 As the United States celebrates its Independence Day. The former 0:00:58.040 --> 0:01:00.600 head of Young and Rubacam tells the storyory of how 0:01:00.640 --> 0:01:02.720 he went from a boy in a labor camp in 0:01:02.800 --> 0:01:06.440 communists Romania to rise to the top of the advertising business. 0:01:06.760 --> 0:01:10.800 These idealistic views of America meant so much to me. 0:01:23.840 --> 0:01:26.320 We start with US jobs numbers that came out on 0:01:26.360 --> 0:01:28.760 Friday and what they tell us about the US economy 0:01:28.920 --> 0:01:33.080 with Stephanie Flanders, Bloomberg Senior Executive editor for Economics and Governments. So, Stephanie, 0:01:33.080 --> 0:01:34.759 thanks so much for being back with us. So it's 0:01:34.760 --> 0:01:36.880 an interesting set of jobs numbers. On one hand, they 0:01:37.040 --> 0:01:39.920 increased the non farm payrolls by a goodly amount, but 0:01:39.959 --> 0:01:42.600 they also took revisions taking them back down. So on 0:01:42.720 --> 0:01:43.880 net net, what did we learn? 0:01:44.200 --> 0:01:45.880 You know, I think we learned quite a lot from this, 0:01:45.959 --> 0:01:47.920 and I think one of it was that actually, something 0:01:47.960 --> 0:01:50.560 that our chief economist, Anna Wong has been talking about 0:01:50.640 --> 0:01:53.800 for a while is that there had been the rate 0:01:53.880 --> 0:01:56.240 of job growth that we've seen actually for the last 0:01:56.320 --> 0:02:00.320 year or so was being exaggerated by the way that 0:02:00.480 --> 0:02:04.600 there of label cysics is including those business failures and 0:02:05.200 --> 0:02:09.640 successes in their numbers. So she had estimated already that 0:02:09.960 --> 0:02:13.080 relative instead of the sort of two hundred thousand jobs 0:02:13.280 --> 0:02:15.959 additions every month that we've seen on average for some 0:02:16.160 --> 0:02:18.680 time now, it was actually going to be revised to 0:02:18.800 --> 0:02:21.359 half of that figure, more like one hundred thousand when 0:02:21.360 --> 0:02:25.080 you took business failures into account. And we haven't fully 0:02:25.080 --> 0:02:27.000 seen that revision yet, but I think that was one 0:02:27.040 --> 0:02:30.320 thing that certainly that bond market investors were focusing on 0:02:30.400 --> 0:02:32.880 in these numbers, that you had some big downward revisions 0:02:33.240 --> 0:02:36.120 in the past numbers. So even though the headline was 0:02:36.160 --> 0:02:38.639 pretty close to what we had forecast, but there was 0:02:38.960 --> 0:02:42.600 a bit lower than expected by others. Even though that 0:02:42.639 --> 0:02:45.640 headline looked healthy, I think we are starting to see 0:02:45.680 --> 0:02:49.359 that deterioration under the surface, which was emphasized also by 0:02:49.360 --> 0:02:52.320 the increase in the unemployment rate, which was again was 0:02:52.400 --> 0:02:55.280 higher than expected. So I think all of that points 0:02:55.320 --> 0:02:59.400 to a slightly more a more significant weakening, or a 0:02:59.400 --> 0:03:03.480 more advance weakening in the labor market than perhaps many 0:03:03.560 --> 0:03:04.080 had thought. 0:03:04.520 --> 0:03:07.359 Yeah, and that having is terribly important, as I understand it. 0:03:07.360 --> 0:03:10.120 Economists tell us that basically to sort of replicate the 0:03:10.200 --> 0:03:12.400 number of jobs you have now, it's around one hundred 0:03:12.440 --> 0:03:14.919 thousand a month. So if it's two hundred thousand, that's 0:03:14.960 --> 0:03:17.520 really a growing job market. If it's one hundred thousand, 0:03:17.680 --> 0:03:19.840 that's a lot closer to just break even flat. 0:03:20.360 --> 0:03:22.880 Yeah, and obviously you know we have seen we haven't 0:03:22.919 --> 0:03:26.800 seen the recession that the BlueBag economics had expected, and 0:03:26.840 --> 0:03:30.440 that's it's definitely been a stronger economy than we expected, 0:03:30.560 --> 0:03:32.880 you know, even six or six to nine months ago, 0:03:33.280 --> 0:03:38.200 but the sort beneath the surface weakening, and again pointing 0:03:38.240 --> 0:03:42.600 to that rising unemployment rate, I think all points to, 0:03:43.120 --> 0:03:47.800 you know, points as still towards rate cuts in September 0:03:47.920 --> 0:03:50.480 and then and maybe another one before the end of 0:03:50.520 --> 0:03:50.920 the year. 0:03:51.160 --> 0:03:53.200 I guess, you know, that's that's it. We were in 0:03:53.240 --> 0:03:53.880 normal times. 0:03:53.880 --> 0:03:55.360 But of course, you know, there's a few other things 0:03:55.360 --> 0:03:56.920 going on in the next six months, and those are 0:03:56.960 --> 0:03:59.360 things that the bond market and indeed the Federal Reserve 0:03:59.360 --> 0:04:01.520 are going to have to some attention to as well. 0:04:01.600 --> 0:04:03.880 Well. Let's talk about exactly that, Stephanie, because as you 0:04:03.920 --> 0:04:05.880 point out, there's sort of a push and pull going 0:04:05.880 --> 0:04:07.520 on here. On the one hand, there seems to be 0:04:07.560 --> 0:04:10.320 a slowing job market and as you say, the unemployment 0:04:10.440 --> 0:04:13.200 rate is ticking up slowly, which might indicate we really 0:04:13.200 --> 0:04:15.000 have to back off on the fiscal policy. On the 0:04:15.040 --> 0:04:16.880 other hand, we do have this little election coming up 0:04:16.880 --> 0:04:19.960 in November, and there have been some substantial developments this week, 0:04:20.160 --> 0:04:22.599 and that particularly about who the nominee is going to 0:04:22.600 --> 0:04:25.200 be for the Democrats. As President Biden is really going 0:04:25.200 --> 0:04:27.520 through a tough time. We've seen some reaction from the 0:04:27.560 --> 0:04:29.280 bond markets to that phenomenon. 0:04:30.279 --> 0:04:32.400 Yeah, a lot of talk about the Trump trade, and 0:04:32.440 --> 0:04:35.280 I think we saw that particularly in the immediate aftermath 0:04:35.320 --> 0:04:40.279 of that disastrous debate performance a week ago by President Biden. 0:04:40.880 --> 0:04:43.320 You know, we had perhaps been in a situation where 0:04:43.520 --> 0:04:45.640 many in the markets and certainly in the betting markets, 0:04:45.680 --> 0:04:48.600 thought it was more likely than not that President Trump 0:04:49.240 --> 0:04:52.520 would come into office in the November elections. But we 0:04:52.600 --> 0:04:55.240 sort of went from more likely than not to an 0:04:55.279 --> 0:04:59.240 apparently unstoppable over the last week or so. As a 0:04:59.279 --> 0:05:03.520 course of not us that just deteriorating sort of prospects 0:05:03.680 --> 0:05:06.680 potentially for President Biden on the back of that performance. 0:05:07.080 --> 0:05:09.400 But a lot of people, certainly a lot of people 0:05:09.440 --> 0:05:14.240 sitting in congressional seats and senators thinking on the Democrats side, wow, 0:05:14.279 --> 0:05:16.400 those not only is we not going to have cottails 0:05:16.440 --> 0:05:18.880 coming from an incoming, you know, a re elected president, 0:05:19.240 --> 0:05:21.320 we could seriously be in trouble and we could be 0:05:21.360 --> 0:05:26.120 looking at a clear, clean suite for the Republicans come November. 0:05:26.400 --> 0:05:29.240 If any of that it does come to pass, then 0:05:29.240 --> 0:05:31.480 I think people are looking down the track and saying, Okay, 0:05:32.360 --> 0:05:36.919 that's going to mean more unsustainable fiscal policies and are 0:05:37.080 --> 0:05:39.719 probably maybe good for the economy sort of short term 0:05:39.720 --> 0:05:42.159 in terms of growth, but it certainly points to higher 0:05:42.160 --> 0:05:44.160 interest rates for longer on the long end on the 0:05:44.200 --> 0:05:44.640 bond deal. 0:05:44.720 --> 0:05:47.159 Then, yeah, this is a terribly important point. I'm curious 0:05:47.160 --> 0:05:49.479 about your perspective, not only from your time in London. 0:05:49.480 --> 0:05:51.919 Also you spent some time in Washington in the administration. 0:05:52.000 --> 0:05:54.520 Actually you've been watching this for some time. Do the 0:05:54.560 --> 0:05:57.520 markets basically favor a divided government in the United States, 0:05:57.600 --> 0:05:59.240 that is to say, they don't like it when it's 0:05:59.240 --> 0:06:02.080 all Democrats or are Republicans in both houses of Congress 0:06:02.080 --> 0:06:04.919 plus the presidency, because a lot more can be done. 0:06:05.080 --> 0:06:06.920 I think there is a nervousness around that. And thank 0:06:06.960 --> 0:06:08.760 you for reminding me, David that actually the last time 0:06:08.800 --> 0:06:10.680 when I was in the Treasury, unfortunately I only had 0:06:10.720 --> 0:06:12.200 a junior job, but when I was in the US 0:06:12.240 --> 0:06:14.839 Treasury was the last time we had a budget surplus 0:06:14.839 --> 0:06:17.520 in the US on the federal side. It's been a 0:06:17.600 --> 0:06:19.240 very long time since we had one of those. But 0:06:19.279 --> 0:06:22.080 I think It's also there's a Trump specific factor here, right, 0:06:22.080 --> 0:06:25.720 but he's he's talking about across the board tariffs that 0:06:25.760 --> 0:06:28.440 would add to inflation at a time when yes, you 0:06:28.560 --> 0:06:32.159 want to also have increased defense spending. And we're already 0:06:32.200 --> 0:06:34.080 in an economy, you know, this is an economy that 0:06:34.200 --> 0:06:36.839 is probably you know, potentially at the peak of the cycles, 0:06:36.920 --> 0:06:40.359 certainly at full close to full capacity. That's been running 0:06:40.400 --> 0:06:43.680 at six or seven percent of GDP budget deficits year 0:06:43.760 --> 0:06:46.600 after year. And if that's only going to go up 0:06:46.680 --> 0:06:49.159 or at least stay at that level as the cost 0:06:49.240 --> 0:06:53.720 of servicing that debt goes up, that is looking very unsustainable. 0:06:53.839 --> 0:06:55.400 I guess the key question is, even if you have 0:06:55.440 --> 0:06:58.200 a strong equity market in that context, you're certainly going 0:06:58.240 --> 0:07:00.840 to have a sort of longer term sell off on 0:07:01.400 --> 0:07:03.920 bond from the bond market, and you're going to have 0:07:03.960 --> 0:07:07.080 trouble for the Fed, potentially pressure on the dollar for 0:07:07.279 --> 0:07:08.120 way down the road. 0:07:08.720 --> 0:07:11.360 Okay, it's in the books now, Stephanie, I think it's 0:07:11.360 --> 0:07:14.440 fair to say a landslide win for secure Starmer and 0:07:14.440 --> 0:07:16.760 the Labor Party. What do we think that may mean 0:07:17.000 --> 0:07:18.440 for economic policy going forward? 0:07:18.480 --> 0:07:22.560 If anything, Well, we do have a pretty we have 0:07:22.640 --> 0:07:26.560 a first female Chancellor of Exchequer almost certainly one called 0:07:26.680 --> 0:07:28.960 Rachel Reeves, who we're going to get to know. She 0:07:29.360 --> 0:07:32.480 is actually a former Bank of England economist and is 0:07:32.520 --> 0:07:36.080 considered to be very by the book, quite orthodox in 0:07:36.120 --> 0:07:38.960 her approach to economics. So at some level this is 0:07:39.000 --> 0:07:41.520 not a This is certainly not a corbyn Er Jeremy 0:07:41.560 --> 0:07:46.160 Corbyn style incoming Labor government, very more on the tradition 0:07:46.240 --> 0:07:48.320 of Blair. And that's what kir Starmer has done with 0:07:48.320 --> 0:07:50.080 the Labor Party. Has managed to sort of. 0:07:50.240 --> 0:07:53.920 Drag it back from that fringe period under. 0:07:53.760 --> 0:07:58.560 Jeremy Corbyn and make it an electable alternative to the Conservatives. 0:07:58.560 --> 0:08:01.400 And boy, the voters really wanted alternative to the Conservatives. 0:08:01.400 --> 0:08:03.920 They gave them an absolute kicking in this election, didn't 0:08:03.960 --> 0:08:07.440 really plant a lot more votes for Labor, but had 0:08:07.440 --> 0:08:11.480 a half of the votes for the Conservatives. 0:08:11.600 --> 0:08:13.040 The focus is going to be on growth. 0:08:13.120 --> 0:08:16.360 I think the big difference, if there is one, will 0:08:16.360 --> 0:08:21.000 be potentially the approach to Europe and the rigorous focus 0:08:21.040 --> 0:08:25.119 on house building and investments. You know, that is something 0:08:25.120 --> 0:08:28.800 where the previous government had not wanted to. You know, 0:08:28.800 --> 0:08:30.680 you get a lot of arguments from people Oh, I 0:08:30.680 --> 0:08:32.520 don't want to have that wind. 0:08:32.240 --> 0:08:35.200 Farm on my regret, you know, near me. I don't 0:08:35.320 --> 0:08:35.600 like it. 0:08:35.760 --> 0:08:38.200 I don't want to have this new housing estate near me. 0:08:38.600 --> 0:08:41.479 They have promised that they're going to push through that opposition, 0:08:41.559 --> 0:08:42.640 but I guess we'll wait and see. 0:08:42.720 --> 0:08:44.640 Oh, when you talk about the new chance with the checker, 0:08:44.880 --> 0:08:46.800 it's her job now to come up with the money 0:08:46.840 --> 0:08:50.000 for that investment. Where's that money going to come from? 0:08:50.320 --> 0:08:53.360 Well, so her answer to that is faster growth. But 0:08:53.440 --> 0:08:55.240 of course, you know, you have a chicken and egg problem. 0:08:55.280 --> 0:08:57.760 So if the UK had just grown at its long 0:08:57.880 --> 0:09:01.640 term average rate after the Globi Falantocrassis after two thousand 0:09:01.679 --> 0:09:04.600 and eight, the economy would be forty percent larger now 0:09:04.840 --> 0:09:06.839 and there will be a lot more tax revenues to 0:09:06.920 --> 0:09:09.960 fund a lot more of the demand for public services 0:09:09.960 --> 0:09:11.640 that is undeniably there. 0:09:11.440 --> 0:09:14.680 In the UK. Pent up demand we don't have. 0:09:14.800 --> 0:09:17.880 We've had much weaker growth than that, and it's hard 0:09:17.920 --> 0:09:20.280 to sort of immediately turn on the switch. But I 0:09:20.280 --> 0:09:25.360 think she will be looking for ways to get credit 0:09:25.520 --> 0:09:29.880 from the official, the independent fiscal watchdog for things that 0:09:29.920 --> 0:09:32.880 she's doing now affecting growth over the longer term. So 0:09:32.960 --> 0:09:36.480 if she does things that really convince that watchdog. Oh, 0:09:36.520 --> 0:09:38.640 actually growth could be a little bit higher over the 0:09:38.679 --> 0:09:41.920 next few years, while potential growth is going to go up. Well, 0:09:41.920 --> 0:09:44.320 that will also actually give her a bit more room 0:09:44.360 --> 0:09:47.880 on the spending side because it'll look more sustainable over time. 0:09:48.000 --> 0:09:50.520 So when you talk about the actual growth versus the 0:09:50.559 --> 0:09:53.240 potential growth for the British economy, some of us might 0:09:53.320 --> 0:09:56.160 think a question about Brexit and what effect it had 0:09:56.400 --> 0:09:59.120 on that differential. At the same time, I don't recall 0:09:59.200 --> 0:10:01.760 a lot of discussion Brexit at all in this election. 0:10:01.840 --> 0:10:04.199 It doesn't sound like Circuit Sharma is going to be 0:10:04.240 --> 0:10:06.880 saying let's get back into the European Union. So how 0:10:06.920 --> 0:10:10.520 are they going to bring back the actual growth without 0:10:10.640 --> 0:10:12.040 addressing the Brexit issues? 0:10:13.120 --> 0:10:14.959 You know, I think it's been it's been a controversial 0:10:15.040 --> 0:10:17.200 question and there's been a lot of pressure. When you 0:10:17.240 --> 0:10:20.920 look at polls, there is a large majority now, especially 0:10:20.960 --> 0:10:24.839 of many labor voters, wanting to potentially even go back 0:10:24.880 --> 0:10:27.240 in the EU, which I don't think is a practical suggestion, 0:10:27.360 --> 0:10:29.880 but certainly to have a closer relationship maybe in the 0:10:29.880 --> 0:10:33.160 Single Market, joined the Customs Union. He has ruled all 0:10:33.200 --> 0:10:35.720 of that out and has not wanted to talk about it. 0:10:35.920 --> 0:10:38.000 When we saw the results last night, we saw a 0:10:38.000 --> 0:10:42.520 little bit of why because the second place party in 0:10:42.600 --> 0:10:44.720 a lot of the seats that label was winning back 0:10:44.800 --> 0:10:47.600 were not the Conservatives but the Reform Party, which, as 0:10:47.600 --> 0:10:50.760 you'll remember, David, is a kind of an anti europe, 0:10:50.840 --> 0:10:53.960 anti immigrant party. That's the sort of remainder of the 0:10:54.000 --> 0:10:55.680 big campaigners for Brexit. 0:10:56.000 --> 0:10:57.840 So there's a still quite a. 0:10:59.400 --> 0:11:02.360 Many of the people who voted for Brexit, working class 0:11:02.480 --> 0:11:07.120 voters in northern constituencies, old industrial constituencies. They are still 0:11:07.800 --> 0:11:10.719 feeling aggrieved about Brexit, and I don't think Labour wants 0:11:10.760 --> 0:11:13.920 to go near it. They do want to unlock smaller 0:11:14.000 --> 0:11:17.360 deals that will reduce some of these obstacles. The red tape, 0:11:17.400 --> 0:11:19.679 which you're absolutely right, has hit growth, and I think 0:11:19.720 --> 0:11:22.080 even that could have an impact if they make it 0:11:22.160 --> 0:11:25.320 easier for importers and exporters who are now facing a 0:11:25.320 --> 0:11:28.640 lot more red tape, even without changing anything else, that 0:11:28.720 --> 0:11:31.080 could help trade at the margin and help growth. 0:11:31.440 --> 0:11:32.880 So Stephanie, let me push you here a little bit, 0:11:32.920 --> 0:11:34.959 because we have two big elections. We've just had the 0:11:35.600 --> 0:11:37.640 UK elections, now we're about to have the second and 0:11:37.640 --> 0:11:40.360 final round of the parliamentary elections in France, which seems 0:11:40.360 --> 0:11:42.800 to be a quite different story where actually you have 0:11:43.120 --> 0:11:46.959 one would to anticipate substantially to the right candidate in 0:11:47.040 --> 0:11:50.600 Marine Lapen, who looks like she'll do reasonably well there. 0:11:51.000 --> 0:11:54.199 The one constant seems to be anti incumbent. But is 0:11:54.240 --> 0:11:57.400 there any through line through those two elections. 0:11:59.400 --> 0:12:00.880 I think you've you've hit it, David. 0:12:00.880 --> 0:12:01.079 I'm not. 0:12:01.080 --> 0:12:02.920 Actually I'm on a bit of election road trip at 0:12:02.960 --> 0:12:04.320 the moment because I'm going to be going off to 0:12:04.400 --> 0:12:10.080 Paris and on Sunday to see those final results for myself. 0:12:10.120 --> 0:12:12.640 It's been quite the week, but it does look as 0:12:12.679 --> 0:12:17.319 though Marine le Penn's party Rassean Blemont Nationale is not 0:12:17.400 --> 0:12:20.720 going to win a majority, in part because they've been 0:12:20.720 --> 0:12:23.400 able to do the center, which is very weak. Mackerel's 0:12:23.440 --> 0:12:25.160 party have been able to do some deals on the 0:12:25.200 --> 0:12:29.200 sort of case by case basis with the left, who 0:12:29.200 --> 0:12:31.959 are way to the left of certainly of the Labor 0:12:31.960 --> 0:12:32.880 Party in the UK. 0:12:33.440 --> 0:12:35.280 Stephanie has always such a treat to have you on 0:12:35.320 --> 0:12:37.560 Wall Street Week. Thank you so much. That's Stephanie Flanders. 0:12:37.600 --> 0:12:42.760 She's Bloomberg Senior Executive editor for Economics, and government coming up. 0:12:42.800 --> 0:12:45.200 The Supreme Court thought it was helping business when an 0:12:45.240 --> 0:12:48.400 overruled Chevron, but was it right. We talked with Kenny 0:12:48.520 --> 0:12:51.080 Jacobs of Lazard. That's next time of Wall Street Week 0:12:51.200 --> 0:12:51.880 on Bloomberg. 0:12:54.960 --> 0:12:59.800 This is Bloomberg Wall Street Week with David Weston from Bloomberg. 0:12:59.800 --> 0:13:09.160 Great, this is Wall Street Week. I'm David Weston. Everyone 0:13:09.280 --> 0:13:11.320 is talking about the Supreme Court decision this week on 0:13:11.400 --> 0:13:15.079 presidential immunity. But for the business community, the more important 0:13:15.160 --> 0:13:17.640 ruling may have been the one a week ago that 0:13:17.800 --> 0:13:20.480 overturned the Chevron doctrine. To take us through what that 0:13:20.559 --> 0:13:23.040 may mean, we welcome back now, Ken Jacobs. He is 0:13:23.120 --> 0:13:26.160 executive chairman of Lazard, so Kent, welcome back. Almost two 0:13:26.240 --> 0:13:29.000 years exactly since we talked about this subject. You are 0:13:29.040 --> 0:13:32.440 ahead of your time on Chevron. Take us through exactly 0:13:32.480 --> 0:13:34.839 what the risks of overturning Chevron really are. 0:13:34.960 --> 0:13:40.959 Sure the potential exists contrary to conventional wisdom that Chevron 0:13:41.040 --> 0:13:43.840 turns out to be anti business. I think the knee 0:13:43.880 --> 0:13:47.000 jerk reaction, the immediate reaction is is that Chevron is 0:13:47.040 --> 0:13:48.240 a pro business decision. 0:13:48.480 --> 0:13:50.719 Because courts can overturn more than that. 0:13:51.080 --> 0:13:52.280 If you step back and you think about it. 0:13:52.280 --> 0:13:55.280 If the US has three competitive advantages that have endured 0:13:55.320 --> 0:13:57.600 for the last one hundred and fifty two hundred years. 0:13:57.960 --> 0:14:01.760 It has rule of law, it has actually favorable demographics, 0:14:01.800 --> 0:14:05.480 and it has one unified market. The risk in Chevron 0:14:05.760 --> 0:14:11.040 is twofold. First around unified market. Unified market means that 0:14:11.160 --> 0:14:12.920 when you have a product and you want to go 0:14:12.960 --> 0:14:15.240 to market, you've got a market of three hundred and 0:14:15.240 --> 0:14:19.560 thirty million people, second only to China, with one set 0:14:19.560 --> 0:14:21.960 of effectively one set of rules, with the exception of 0:14:22.000 --> 0:14:24.040 two or three industries financial. 0:14:23.600 --> 0:14:25.760 Services, utilities, healthcare services. 0:14:25.840 --> 0:14:28.640 With the exception of those industries, you essentially have one market, 0:14:28.800 --> 0:14:31.480 three hundred and thirty million people, one set of rules. 0:14:31.760 --> 0:14:35.240 As a startup company and an innovator, that's phenomenal. That's 0:14:35.280 --> 0:14:38.920 why this company attracts entrepreneurs innovators like no other country 0:14:39.000 --> 0:14:42.440 does in the world. The risk on Chevron is really twofold. 0:14:42.520 --> 0:14:46.720 One is that you end up with uncertainty related to 0:14:46.760 --> 0:14:48.240 the fact that there's just going to be a lot 0:14:48.280 --> 0:14:52.240 more litigation. This opens up the possibility of being much 0:14:52.240 --> 0:14:55.680 more litigation, so it creates unpredictability and uncertainty about what 0:14:55.720 --> 0:14:58.160 the rules really are and what they will really be. 0:14:58.560 --> 0:15:01.320 The second risk is around the fact that there just 0:15:01.400 --> 0:15:03.640 may not be as much rulemaking at the federal level 0:15:03.760 --> 0:15:05.960 for good reason. It's going to be more likely it'll 0:15:06.000 --> 0:15:08.640 be overturned or litigated in court. But what that means 0:15:08.680 --> 0:15:11.960 is there's a vacuum, and nature it abhors vacuums, and 0:15:12.000 --> 0:15:14.800 that tends to then end up being regulated at state level. 0:15:15.160 --> 0:15:17.240 And the risk of all this is you end up 0:15:17.280 --> 0:15:21.960 with a market that was unified fragmenting into ideological, partisan 0:15:22.000 --> 0:15:24.840 and procli interests. Now, I'm not suggesting that's taking place 0:15:24.880 --> 0:15:28.200 over overnight, and I think there are also some protections 0:15:28.240 --> 0:15:31.160 in place where that may not happen. But we shouldn't 0:15:31.240 --> 0:15:34.360 suddenly cheer this decision as pro business. 0:15:34.440 --> 0:15:36.840 It has a real risk of being the opposite. 0:15:36.920 --> 0:15:40.080 So can you've spent a distinguished career advising clients, thinking 0:15:40.080 --> 0:15:42.160 about doing M and A and things like that, What 0:15:42.160 --> 0:15:44.000 does it do to you as an advisor when a 0:15:44.040 --> 0:15:45.880 company comes to you and says, do I buy it? 0:15:45.880 --> 0:15:47.360 Do I not buy it? Do I do this deal? 0:15:47.440 --> 0:15:48.960 Not do this deal? What does it do if you're 0:15:48.960 --> 0:15:50.040 not exactly sure what the rules? 0:15:50.120 --> 0:15:54.960 Well, let's use real practical examples. You have a choice. 0:15:55.080 --> 0:15:57.320 You can buy a company in Europe that is primarily 0:15:57.360 --> 0:16:00.040 a European company, young company going to start up in 0:16:00.080 --> 0:16:03.480 Europe it's operations, or you can plant yourself or buy 0:16:03.480 --> 0:16:06.280 a company in the United States buying. If you think 0:16:06.280 --> 0:16:07.880 about a young company in the United States, you've got 0:16:07.920 --> 0:16:10.120 a market of three hundred and thirty million people. Accessing 0:16:10.160 --> 0:16:13.520 the market is easy in Europe. You know, the EU 0:16:13.640 --> 0:16:17.000 is better than the what existed before, but it's much 0:16:17.040 --> 0:16:19.360 more complex. You have rulemaking at the top level, but 0:16:19.400 --> 0:16:21.840 you still have enormous authority in the role of countries, 0:16:22.120 --> 0:16:24.320 so that market isn't as unified as the US. And 0:16:24.360 --> 0:16:26.560 as an innovator, you would always choose to be in 0:16:26.600 --> 0:16:28.880 the US. And as a company if you're buying an innovator, 0:16:29.040 --> 0:16:29.600 the same thing. 0:16:30.080 --> 0:16:32.720 Also, let's talk about the litigation costs, because, as you said, 0:16:33.040 --> 0:16:35.200 it looks like right now there'll be a big incentive 0:16:35.240 --> 0:16:37.840 for a lot of people to challenge rules, a lot 0:16:37.880 --> 0:16:40.280 of lawyer's money being generated. I'm not against that. I'm 0:16:40.320 --> 0:16:43.440 a lawyer. You know it's all fine, But what are 0:16:43.440 --> 0:16:46.400 the litigation costs, the friction costs they're being generated for this. 0:16:46.680 --> 0:16:50.360 Well, First, it just creates some predictability when you have 0:16:50.480 --> 0:16:54.560 decisions made by experts, which is, for better or worse, 0:16:54.640 --> 0:16:55.600 what we're dealing with. 0:16:55.520 --> 0:16:57.040 A lot of the time in agencies. 0:16:57.080 --> 0:16:58.880 I don't mean for worse, but you know, most of 0:16:58.920 --> 0:17:02.200 the agencies are people by civil servants who are really 0:17:02.280 --> 0:17:05.800 expert in their field. And when you have experts, you 0:17:05.920 --> 0:17:08.720 usually can predict what experts are going to do. I mean, yes, 0:17:09.080 --> 0:17:12.239 there's a lot of regulation that is imperfect, but you 0:17:12.240 --> 0:17:13.920 can generally guess what they're going to do. When it 0:17:13.960 --> 0:17:17.600 comes to courts, it's very different. You have ideology that 0:17:17.640 --> 0:17:19.320 gets involved. We can see that in some of the 0:17:19.320 --> 0:17:23.160 decisions coming out of Texas on abortion rights. We have 0:17:23.880 --> 0:17:28.760 deep social beliefs in the same way you have people's 0:17:28.760 --> 0:17:32.880 different views of the economy. Many of these trials could 0:17:32.920 --> 0:17:35.480 end up in the hands of juries, which become less predictable. 0:17:36.119 --> 0:17:38.000 So I think that's the real risk is you go 0:17:38.080 --> 0:17:41.480 from something that is not perfect really is not perfect. 0:17:41.520 --> 0:17:44.680 I'm a regulatory regime is not perfect at the federal level, 0:17:44.760 --> 0:17:48.239 but generally speaking, it's the same everywhere, and it's more 0:17:48.320 --> 0:17:50.879 predictable than it's likely to be under this new regime. 0:17:51.119 --> 0:17:53.119 So you have the Chevron decision, which is one of them, 0:17:53.119 --> 0:17:56.800 which really overturned the rule that regulatory agencies we defer 0:17:56.880 --> 0:17:59.160 to in the courts. Is this a pro business court? 0:17:59.200 --> 0:17:59.840 Supreme Court? 0:18:00.240 --> 0:18:01.920 I think this is a pro court court. 0:18:02.800 --> 0:18:05.120 That's how I describe it, because I'm not sure these 0:18:05.119 --> 0:18:07.920 decisions turn out to be pro business if you go 0:18:08.080 --> 0:18:12.040 from predictable to unpredictable, and I think the key to 0:18:12.119 --> 0:18:15.600 business is predictability. That is, uncertainty is the curse of 0:18:15.640 --> 0:18:18.840 business and the curse of markets. And you only really 0:18:18.880 --> 0:18:21.159 know that when things are really uncertain. That's when you 0:18:21.240 --> 0:18:23.280 crave the predictability. So I don't think we're going to 0:18:23.280 --> 0:18:26.440 see this overnight. But no, I don't think this is 0:18:26.520 --> 0:18:29.399 necessarily pro business. It may in the beginning feel like 0:18:29.480 --> 0:18:31.359 it is, but I think the real risk is the 0:18:31.359 --> 0:18:32.240 predictability issue. 0:18:32.240 --> 0:18:33.520 I think this is very pro courts. 0:18:33.560 --> 0:18:35.160 I think we're going to see a lot more litigation, 0:18:35.359 --> 0:18:38.080 a lot more intervention by courts and decisions which in 0:18:38.119 --> 0:18:39.520 the past sort of happened. 0:18:40.119 --> 0:18:43.159 As a business leader, how confident are you the Supreme 0:18:43.200 --> 0:18:46.560 Court understands the ramifications in the real world of what 0:18:46.600 --> 0:18:47.280 they're deciding. 0:18:48.080 --> 0:18:50.720 Look, I have huge respect for the people that are 0:18:50.720 --> 0:18:52.800 on the Supreme Court. I mean, these are all enormously 0:18:52.840 --> 0:18:54.800 accomplished people, and when you actually sit down and you 0:18:54.800 --> 0:18:58.080 read these decisions. I'm not a lawyer, they're impressive writing 0:18:58.320 --> 0:19:00.639 and they're very well argued and such. I think the 0:19:00.760 --> 0:19:03.960 risk at the Supreme Court, and I think generally if 0:19:04.000 --> 0:19:06.800 more power is going to the judiciary, is that I 0:19:06.840 --> 0:19:08.959 don't think any of these any of these judges have 0:19:09.119 --> 0:19:13.280 really ever managed a company. They've nearly They've never had 0:19:13.320 --> 0:19:15.880 to deal with a budget, They've never had to deal 0:19:15.920 --> 0:19:17.840 with a workforce, They've never had to deal with the 0:19:17.840 --> 0:19:20.480 board of directors or with shareholders, and so I think 0:19:20.480 --> 0:19:25.720 there's a little bit of ideology naivete at work here 0:19:25.840 --> 0:19:28.320 about not being in the real world. Now, maybe that's 0:19:28.560 --> 0:19:31.199 a curse of our system, that is it's next to impossible. 0:19:31.359 --> 0:19:33.200