WEBVTT - Garlic Cartel: Markets, Credit, Code 0:00:03.120 --> 0:00:12.799 Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to 0:00:12.800 --> 0:00:15.640 the Money Stuff Podcast. You're a weekly podcast where we 0:00:15.680 --> 0:00:20.079 talk about stuff related to money. I'm Matt Levian and 0:00:20.120 --> 0:00:22.239 I write the Money Stuff column for Bloomberg Opinion. 0:00:22.400 --> 0:00:25.040 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:00:25.079 --> 0:00:26.680 an anchor for Bloomberg Television. 0:00:28.000 --> 0:00:29.639 What are we talking about today, Katie? 0:00:29.760 --> 0:00:32.120 We're going to talk about farmers markets, We're going to 0:00:32.159 --> 0:00:34.920 talk about private credit, and then we're going to talk 0:00:34.960 --> 0:00:38.080 about stealing some trade secrets and moving to China. 0:00:38.680 --> 0:00:39.360 That sounds good. 0:00:45.720 --> 0:00:49.600 I printed out the pricing charts for like beef, so 0:00:50.280 --> 0:00:51.360 we have a meaty section. 0:00:51.640 --> 0:00:53.760 I was at the one of the farmer's markets near me. 0:00:53.840 --> 0:00:57.000 I go to two farmers' markets per weekend. I was 0:00:57.080 --> 0:01:02.720 recognized by a person working at one of the stands. Wow, 0:01:02.840 --> 0:01:07.920 it works in financial media and also works at the 0:01:07.959 --> 0:01:10.440 farmer's market to get her mind off things, and she's 0:01:10.480 --> 0:01:13.480 apparently a fan of mine, and offered me free garlic. 0:01:13.880 --> 0:01:18.720 Did you take it? So you took the free garlic, 0:01:18.800 --> 0:01:22.320 and then you undercut some farm stands. Some farmer who 0:01:22.400 --> 0:01:25.640 like put in the labor, and you knew what to charge. 0:01:26.040 --> 0:01:29.200 Because this is before I knew anything about farmer's market pricing. 0:01:29.240 --> 0:01:31.280 I was a babe in the woods in terms. 0:01:31.120 --> 0:01:33.000 Of oh, I thought this was like last weekend. 0:01:33.400 --> 0:01:35.679 No, it was like three weekends. 0:01:36.560 --> 0:01:39.280 Okay, if only you had known. 0:01:39.560 --> 0:01:41.959 But I do not honestly pay that much attention to 0:01:42.040 --> 0:01:45.320 pricing at the farmer's markets. But I am aware of 0:01:45.360 --> 0:01:48.520 the disparity in garlic pricing at the different stands. There's 0:01:48.880 --> 0:01:52.880 a stand where I have seen but not purchased garlic 0:01:52.960 --> 0:01:56.640 for three dollars ahead. Seems really high for garlic. But 0:01:56.760 --> 0:01:59.720 also the farmers garlic is so good, Like I now 0:02:00.080 --> 0:02:02.800 they got farmer's market garlic can probably pay five x 0:02:02.880 --> 0:02:05.280 what i'd pat agressory store. Me. 0:02:05.400 --> 0:02:08.360 Trying to think of something relatable to say reminds me 0:02:08.600 --> 0:02:12.640 of the Arrested development scene or Luciel's like it's a banana, Michael, 0:02:12.680 --> 0:02:15.160 how much could it cost? Or something like that. Yeah, 0:02:15.200 --> 0:02:16.840 I feel like if you're at a farmer's market, you're 0:02:16.880 --> 0:02:18.840 kind of a price and sensitive buyer of produce. 0:02:18.960 --> 0:02:21.040 I'm pretty close to the ideal of price and sensitive 0:02:21.080 --> 0:02:24.160 buyer of produce. But even I was like three dollars garlic, hold. 0:02:24.040 --> 0:02:27.360 On whoa, it's too rich for my blood. Well, what 0:02:27.480 --> 0:02:30.560 a timely conversation that we're organically having about pricing at 0:02:30.560 --> 0:02:31.440 farmers markets. 0:02:31.760 --> 0:02:34.160 It's all I think about. Yeah, sorry, I just said 0:02:34.160 --> 0:02:35.600 if not anything, I think about it at all, and 0:02:35.600 --> 0:02:38.560 I'm totally which is closer to the truth. But now 0:02:38.600 --> 0:02:40.160 I'm thinking about pricing at farmer's markets. 0:02:40.240 --> 0:02:43.960 Yeah, so is Cornell University question mark great transition. Yeah, 0:02:44.160 --> 0:02:46.320 why don't you tell me about what they're doing. 0:02:46.720 --> 0:02:50.240 They're aggregating prices for farmers. They have like a website 0:02:50.280 --> 0:02:54.239 that publishes free information on prices of various agricultural goods 0:02:54.880 --> 0:02:59.040 for farmers at farmers' markets to basically help them set 0:02:59.080 --> 0:03:01.720 their prices. Because if you're a farmer at a farmer's market, 0:03:01.760 --> 0:03:04.840 you you know, are in the business of working the land, 0:03:05.000 --> 0:03:07.840 ground the produce, and you're maybe not like a savvy 0:03:08.080 --> 0:03:12.160 pricer of produce at farmers markets, and you know, the 0:03:12.200 --> 0:03:15.040 buyers at farmer's markets are not necessarily savvy pricers of 0:03:15.080 --> 0:03:17.120 produce either, so you could probably charge them a lot 0:03:17.120 --> 0:03:19.320 more than you do, and Cornell is helping you charge 0:03:19.360 --> 0:03:20.880 them more than you do by telling you what the 0:03:20.960 --> 0:03:22.440 actual price of garlic is. 0:03:22.600 --> 0:03:26.639 Seems like a real antitrust concern potentially, you know, you. 0:03:26.720 --> 0:03:29.679 Know, I sort of have jokingly suggested that if you 0:03:29.760 --> 0:03:32.440 have got kind of mad at me, like from your perspectives, 0:03:32.440 --> 0:03:34.840 one is like, no, it's not a farmer's no, no, no, 0:03:34.880 --> 0:03:37.440 like just my regular road. So it was like, no, 0:03:37.520 --> 0:03:39.760 it's not an antrost concern, which it is not really 0:03:39.800 --> 0:03:42.000 an intro trust concern. But the other thing is, like 0:03:42.520 --> 0:03:45.320 I made that suggestion because the Justice Department a couple 0:03:45.360 --> 0:03:49.080 of months ago sued Real Page, which is like, I'm 0:03:49.080 --> 0:03:53.160 gonna exaggerate and say this, but for landlords, right, it's 0:03:53.240 --> 0:03:56.920 like a software product that tells landlords how much other 0:03:57.000 --> 0:03:59.360 landlords are charging for rent so they know how to 0:03:59.400 --> 0:04:01.920 set the rent on their apartments. And the Justice Department 0:04:02.000 --> 0:04:05.839 said that Real Page is fostering collusion among landlords and 0:04:05.920 --> 0:04:11.120 reducing competition in the rental space and raising prices for tenants. 0:04:11.680 --> 0:04:15.280 And I sort of tongue in cheek compared this Farmer's 0:04:15.320 --> 0:04:17.720 Market stuff to Real Page, and people got mad because 0:04:17.720 --> 0:04:20.320 they're like, but the Real Page case is real. There's 0:04:20.440 --> 0:04:22.880 more stuff there, right, like the right page case the 0:04:22.920 --> 0:04:28.080 Farmer's Market stuff they're essentially using fairly straightforward technology to 0:04:28.160 --> 0:04:31.480 aggregate prices at a bunch of farmers' markets and also supermarkets. 0:04:32.040 --> 0:04:36.640 Real page is getting private information from landlords, so it's 0:04:36.680 --> 0:04:39.200 like they get more information than just like what's available 0:04:39.240 --> 0:04:41.719 to the public. And they're also using it to suggest 0:04:41.720 --> 0:04:44.039 the landlords or this is what the Justice Department alledge is. 0:04:44.160 --> 0:04:47.240 They're using it to suggest that landlords raise their prices, 0:04:47.560 --> 0:04:49.800 and like they've explicitly said things like a rising tide 0:04:49.839 --> 0:04:52.040 lifts all butts. It's like they're like, you know, in 0:04:52.080 --> 0:04:54.880 the business of trying to make landlords try to high rents. 0:04:55.040 --> 0:04:58.359 This one is, you know, based on publicly available prices. 0:04:58.520 --> 0:05:00.839 It's harder to get mad at it. It seems to 0:05:00.880 --> 0:05:03.440 me that there is a real continuum and that it 0:05:03.560 --> 0:05:06.719 just used to be the case that it was hard 0:05:07.040 --> 0:05:11.240 to be sophisticated about knowing your competitors' prices in like 0:05:11.320 --> 0:05:14.120 all sorts of areas, because yeah, your competitors' prices weren't 0:05:14.160 --> 0:05:17.359 like easily available on the internet. And now it is 0:05:17.400 --> 0:05:19.880 so much easier to like aggregate public data about prices, 0:05:19.920 --> 0:05:23.560 and so now you can anyone can be more sensitive 0:05:23.560 --> 0:05:26.520 to like what their competitors are charging. And the just 0:05:26.600 --> 0:05:28.960 this department gets nervous about that. Not the farmers, but 0:05:29.000 --> 0:05:29.480 in general. 0:05:29.600 --> 0:05:33.960 The goal here for the farmers is explicitly to raise prices. 0:05:34.040 --> 0:05:34.799 Yeah, that's true. 0:05:35.040 --> 0:05:38.599 Like there's there's a quote from someone involved in other words, 0:05:38.640 --> 0:05:40.360 to give them a better day at the farmers market, 0:05:40.440 --> 0:05:42.760 because they're going to be there for eight or six hours, 0:05:42.760 --> 0:05:45.360 whether they make four hundred dollars or eight hundred dollars. 0:05:45.680 --> 0:05:47.560 So we're looking for how we can help them earn 0:05:47.640 --> 0:05:51.359 more in those hours. So that's the goal. 0:05:51.720 --> 0:05:52.440 That's the goal. 0:05:52.560 --> 0:05:54.840 They want the farmers to charge more. We should say 0:05:54.880 --> 0:05:57.320 this is from a Marketplace article. It was a really 0:05:57.320 --> 0:06:01.600 fun read, I realized. So I was reading your real 0:06:01.640 --> 0:06:05.840 page column and it occurred to me that perhaps I'm 0:06:05.839 --> 0:06:09.280 being naive. I just don't see any situation where there 0:06:09.279 --> 0:06:10.599 wouldn't be a race to the bottom. 0:06:10.720 --> 0:06:11.960 What do you mean a race to the bottom line, 0:06:12.040 --> 0:06:12.280 like in. 0:06:12.240 --> 0:06:14.440 Terms of like, okay, we're all only going to charge 0:06:14.440 --> 0:06:18.400 three thousand dollars per month, guys, that's the bottom. I 0:06:18.440 --> 0:06:21.000 feel like, why wouldn't you just undercut that? 0:06:21.360 --> 0:06:24.719 Right? I mean, these cases are weird, right, This notion 0:06:24.800 --> 0:06:29.400 of like tacit collusion or algorithmic collusion is different from 0:06:29.560 --> 0:06:31.760 a classic cartel where you get together in a room 0:06:31.800 --> 0:06:33.520 and you're like, none of us are going to charge 0:06:33.560 --> 0:06:35.240 less than three thousand dollars and if you do break 0:06:35.240 --> 0:06:38.680 your legs, right, there's no suggestion of breaking your legs here, right, this. 0:06:38.600 --> 0:06:39.839 Is just not written down. 0:06:39.920 --> 0:06:41.800 No, I don't think at all. 0:06:41.960 --> 0:06:44.600 Maybe choking. They're not going to break your legs, Matt. 0:06:46.400 --> 0:06:48.880 We'll get to a story about that. But there's no 0:06:48.960 --> 0:06:51.719 like explicit cartel. Right, It's just like everyone wants to 0:06:51.760 --> 0:06:53.560 charge as much as they can, and like they're limited 0:06:53.560 --> 0:06:56.280 by competitive pressures where they have to charge less. And 0:06:56.800 --> 0:07:01.719 there is this suggestion that if you know, oh, your competitors' prices, 0:07:01.760 --> 0:07:05.560 it is easier to not undercut them or to like 0:07:05.680 --> 0:07:08.400 undercut them less. Right, Like if you don't, like, if 0:07:08.440 --> 0:07:11.720 you don't know what everyone else is charging, you might 0:07:11.920 --> 0:07:13.640 be like, I want to be the low cost provider, 0:07:13.680 --> 0:07:15.720 and so I'll charge twenty seven hundred. But if you 0:07:15.760 --> 0:07:17.120 know what everyone else is charging, you can be like, oh, 0:07:17.240 --> 0:07:19.560 charge twenty nine ninety nine, right, Like you can it's 0:07:19.600 --> 0:07:23.000 a little bit easier to coordinate on the same price 0:07:23.240 --> 0:07:25.960 if you have complete information. This is the theory. It's 0:07:26.000 --> 0:07:29.840 not necessarily true, And the Justice Department has been interested 0:07:29.880 --> 0:07:33.360 in the idea of like price sharing because like there's 0:07:33.400 --> 0:07:35.440 this theory that if like competitors in an industry are 0:07:35.480 --> 0:07:38.400 getting together and sharing prices with each other, it's because 0:07:38.400 --> 0:07:41.120 it's anti competitive, right, you don't have to know exactly 0:07:41.120 --> 0:07:42.440 what they're doing at the price. You have to be like, well, 0:07:42.440 --> 0:07:44.560 if they're sharing prices with each other, that's probably not 0:07:44.600 --> 0:07:46.600 good for consumers, Like they're probably doing it for a 0:07:46.680 --> 0:07:50.200 reason that involves maximizing their profits. And the Justice Department 0:07:50.200 --> 0:07:52.960 has like long been interested in that, and they had 0:07:53.000 --> 0:07:55.840 guidelines that were like certain kinds of price sharing are okay, 0:07:55.880 --> 0:07:58.760 including like if it's aggregated and not like broken down 0:07:58.760 --> 0:08:02.000 by competitor. If you know what each of your competitors charges, 0:08:02.040 --> 0:08:03.640 then like you can break the legs of the one 0:08:03.640 --> 0:08:06.000 who charge with the least, right, Whereas if it's just aggregated, 0:08:06.000 --> 0:08:08.800 it's like a little bit more just informational. But you know, 0:08:08.800 --> 0:08:11.760 they say, like aggregated data is okay, and data published 0:08:11.760 --> 0:08:14.040 by a third party, so like a trade magazine publishing 0:08:14.080 --> 0:08:17.520 prices rather than the competitors getting together and sharing prices. 0:08:17.920 --> 0:08:20.600 They said that stuff was okay and recently, there's been 0:08:20.600 --> 0:08:22.120 a change in their guidance where they're like, we're gonna 0:08:22.120 --> 0:08:23.880 actually look at that stuff more closely. And I think 0:08:23.920 --> 0:08:27.440 the impression is that they are worried that machine learning 0:08:27.480 --> 0:08:31.000 algorithms are going to make companies better at using this 0:08:31.160 --> 0:08:35.079 data to price at the maximum level to extract profits, 0:08:35.120 --> 0:08:37.400 and like the sharing of data is going to make 0:08:37.480 --> 0:08:41.240 industries less competitive. So there's also this interesting paper from 0:08:41.280 --> 0:08:43.640 a couple of months ago by John Jung Jong of 0:08:43.920 --> 0:08:48.959 University of North Carolina called Salaries on Display Unintended Consequences 0:08:49.000 --> 0:08:51.800 of Wage Disclosure, or there's a paper about you know, 0:08:52.080 --> 0:08:54.199 there's a lot of states have wage transparency laws where 0:08:54.240 --> 0:08:57.559 like when you advertise a position, you have to say yeah, exactly. 0:08:58.160 --> 0:09:02.480 And Jong finds that though, seem to lead to lower 0:09:02.520 --> 0:09:06.520 wages because if you don't have information, like the market 0:09:06.559 --> 0:09:08.920 is going to have disparities, right, and like some people 0:09:08.960 --> 0:09:11.160 are going to pay more than others because they're ignorant, right, 0:09:11.240 --> 0:09:12.920 Whereas like, if you know what everyone else is paying, 0:09:12.920 --> 0:09:15.480 you're not gonna pay anymore, like a dollar more, or 0:09:15.520 --> 0:09:17.840 you'll like be a little competitive, but there will be 0:09:17.840 --> 0:09:20.480 no outliers. And so I think that's the same intuition 0:09:20.559 --> 0:09:23.400 with pricing stuff, where if everyone is sharing information, you 0:09:23.440 --> 0:09:28.080 won't have any outlier cheap providers because everyone knows, like 0:09:28.280 --> 0:09:30.080 you know, the market price is this, Like I shouldn't 0:09:30.120 --> 0:09:30.679 charge less. 0:09:31.200 --> 0:09:34.120 That's interesting. The thing that I think the wage dis 0:09:34.160 --> 0:09:36.560 goes your laws lead to is just super wide salary 0:09:36.679 --> 0:09:37.680 ranges that make no sense. 0:09:37.679 --> 0:09:39.560 But that's I agree with that, Like they don't seem 0:09:39.600 --> 0:09:41.160 to yeah, tell you that much, but. 0:09:41.280 --> 0:09:43.280 Yeah, do you want to talk about some meat prices? 0:09:43.520 --> 0:09:43.720 Sure? 0:09:43.760 --> 0:09:47.640 I actually looked at the website from Cornell. This is 0:09:48.200 --> 0:09:50.880 monthly data, so I don't think it's the weekly days. 0:09:50.920 --> 0:09:52.520 I don't going to be a long podcast where you 0:09:52.559 --> 0:09:53.400 read out the price. 0:09:53.600 --> 0:09:56.640 Well, I think it's interesting. So at the farmers market 0:09:56.760 --> 0:10:00.480 in September, we're looking at price summary statistics across multiple 0:10:00.480 --> 0:10:03.080 meat products collected from ten farms selling in twenty one 0:10:03.240 --> 0:10:07.120 different farmers' markets in New York State. For chuck roast 0:10:07.200 --> 0:10:10.960 in September, your weighted average price per pound was nine 0:10:11.000 --> 0:10:13.640 dollars and sixty cents. Can you guess what it was 0:10:13.720 --> 0:10:14.760 from the grocery store? 0:10:15.320 --> 0:10:16.720 Seven dollars and twenty cents. 0:10:16.960 --> 0:10:18.160 Eight dollars and twenty five. 0:10:18.040 --> 0:10:19.880 Cents I don't know if I was close. 0:10:20.200 --> 0:10:22.480 I think you're doing it. But that's the average price 0:10:22.520 --> 0:10:25.280 per pound versus the weighted average price. 0:10:25.480 --> 0:10:27.880 So farmer's market's barely charging more than the gross well, 0:10:28.040 --> 0:10:29.680 and like your experience can't be beat. 0:10:29.880 --> 0:10:32.360 Hold your horses there, my friends, a big farmer's market. 0:10:32.360 --> 0:10:37.880 Propose non organic bacon from the farmer's market in September 0:10:38.040 --> 0:10:41.800 according to this data, seventeen dollars and twenty one cents 0:10:41.800 --> 0:10:44.560 per pound. What do you think it was from the 0:10:44.559 --> 0:10:45.319 grocery store? 0:10:46.120 --> 0:10:47.240 Seven dollars per pound? 0:10:48.000 --> 0:10:50.400 So close, seven dollars and ninety eight cents per pounds. 0:10:51.160 --> 0:10:55.319 I said, eight, Quite a mark up, your baby. 0:10:55.840 --> 0:10:58.480 That farmer's market bacon. It's going to be delicious, is it. 0:10:58.720 --> 0:11:00.240 I don't know. I'm not a bacon person on. 0:11:00.280 --> 0:11:04.320 The big farmer's market. Great experience, great food. Yeah, garlic 0:11:04.440 --> 0:11:06.280 cannot be beat. The ginger I got up my local 0:11:06.280 --> 0:11:09.560 farmer's market astonishingly expensive, so good. 0:11:09.640 --> 0:11:12.240 We were driving back from Albany this past weekend and 0:11:12.280 --> 0:11:14.960 we went to a rest stop and there was a 0:11:15.000 --> 0:11:19.280 farmer's market outside, like on the highway. 0:11:19.400 --> 0:11:20.480 I'm sure that was great. 0:11:20.640 --> 0:11:23.480 I got some dried beat chips and. 0:11:23.600 --> 0:11:25.840 I got I know that stand but okay. 0:11:25.720 --> 0:11:27.640 Yeah it was on the cusp of New Jersey. 0:11:28.000 --> 0:11:30.520 No, I just mean, like, oh, there's like stands that 0:11:30.520 --> 0:11:31.120 you see a lot of. 0:11:31.280 --> 0:11:34.720 You also at the rest stop on the highway. Yeah, 0:11:34.760 --> 0:11:36.720 but I don't think I'm a farmer's market person. I 0:11:36.720 --> 0:11:39.240 don't think I have the patience. Anyway, that was a 0:11:39.320 --> 0:11:40.160 robust discussion. 0:11:40.280 --> 0:11:41.800 I want to add one more thing, which I did 0:11:41.840 --> 0:11:44.320 write about, but I love it so much. Yeah, I 0:11:44.360 --> 0:11:46.600 got an email from a reader about the Ottawa Farmer's 0:11:46.600 --> 0:11:49.720 market where this reader sold strawberries for a while. Yeah, 0:11:49.720 --> 0:11:52.440 and like out of those farmer's market had explicit price fixing, 0:11:52.440 --> 0:11:54.280 where like the rules of the farmer's market said you 0:11:54.400 --> 0:11:57.440 couldn't undercut the prices that they that were agreed on, 0:11:57.600 --> 0:12:00.400 and you didn't say that legs were broken. But a 0:12:00.400 --> 0:12:05.440 little bit of ploot. He found a loophole where it 0:12:05.600 --> 0:12:07.880 was like, you know, a four liter container of strawberries 0:12:07.880 --> 0:12:09.840 had to cost this much, and he realized that if 0:12:09.840 --> 0:12:12.000 he sold the two and a half liter container, non 0:12:12.040 --> 0:12:15.480 standard size container, he could undercut because there was no 0:12:15.600 --> 0:12:18.960 rule about selling that size container. Wow, so he would 0:12:18.960 --> 0:12:21.520 sell two and a half leaders for half the price 0:12:21.559 --> 0:12:25.080 of four leaders and get more business. The kicker to 0:12:25.120 --> 0:12:26.800 the story is that he's now a data scientist at 0:12:26.800 --> 0:12:28.959 a tech fron because because I assumed that like a 0:12:29.000 --> 0:12:31.240 tech FIM recruiter is like walking through the market and 0:12:31.280 --> 0:12:34.560 be like this guy, yeah knows how to price ad auctions. 0:12:34.600 --> 0:12:37.040 I wouldn't have guessed that the pipeline worked in that direction. 0:12:37.360 --> 0:12:38.600 But that's pretty cool. You're right. 0:12:38.640 --> 0:12:40.960 It would normally go and like, I don't know if 0:12:40.960 --> 0:12:44.320 he was a data scientist taking a break but strawberries, but. 0:12:44.520 --> 0:13:02.000 Maybe he was on gardening leaves. So private credit, in 0:13:02.080 --> 0:13:06.880 the sofer world of private credit, there's a lot going on, 0:13:07.240 --> 0:13:09.120 is there or are there just a lot of headlines? 0:13:09.320 --> 0:13:12.160 I don't know. There's a really interesting Financial Time story 0:13:12.480 --> 0:13:14.520 the title something like State Street is shopping for a 0:13:14.559 --> 0:13:15.240 private credit man. 0:13:15.360 --> 0:13:16.560 That's exactly what it is. 0:13:16.840 --> 0:13:20.319 Photographic memory. The thing that I thought was interesting is 0:13:20.320 --> 0:13:22.360 that the C States trade is like, yes, we're desperate 0:13:22.360 --> 0:13:24.360 for a private credit manager. Do you know any I 0:13:24.400 --> 0:13:26.360 need to I need to buy one right away. It's 0:13:26.400 --> 0:13:29.200 just like the like intensity of the search for like 0:13:29.280 --> 0:13:31.800 every big asset manager, Yeah really wants to buy a 0:13:31.840 --> 0:13:35.480 private credit manager, which is just like a great position 0:13:35.559 --> 0:13:38.199 to be in a few a few years ago launched 0:13:38.200 --> 0:13:40.520 your private credit for people are like, yeah, that's weird. 0:13:40.559 --> 0:13:42.640 Does that do? It was like a little bit of 0:13:42.640 --> 0:13:44.319 time where private credit was like, you know, like a 0:13:44.320 --> 0:13:45.719 little bit in the wilderness, like a little bit of 0:13:45.760 --> 0:13:48.520 a niche strategy. And now it's like all these managers 0:13:48.559 --> 0:13:50.720 are like State Street is kicking down their door. 0:13:50.880 --> 0:13:53.400 Yeah, I wish that that's how I had spent my pandemic. 0:13:53.440 --> 0:13:56.800 But here I am recording this podcast. But i's great. 0:13:56.960 --> 0:13:59.280 I kind of like the honesty and the aggression. So 0:13:59.320 --> 0:14:01.640 this is a CEO of State Street Global Advisors. It's 0:14:01.679 --> 0:14:04.560 their asset management arm. She said, this area is so 0:14:04.600 --> 0:14:06.880 well established, and given the size of our clients and 0:14:06.920 --> 0:14:09.280 their need to build and invest in a meaningful size, 0:14:09.920 --> 0:14:12.120 I think it just makes more sense for us to 0:14:12.160 --> 0:14:14.679 either partner or take a stake in a much more 0:14:14.760 --> 0:14:18.960 established firm where it's one plus one equals three. That's interesting, 0:14:19.040 --> 0:14:22.360 rather than trying to do it organically. They're like, we're 0:14:22.480 --> 0:14:24.360 behind already, let's go by the way. 0:14:24.360 --> 0:14:26.240 Do it organically isn't even a thing like do it 0:14:26.320 --> 0:14:29.600 organically means like, hey, huge guarantee is to the people 0:14:29.640 --> 0:14:33.040 you hire, right, there's no like the market for people 0:14:33.040 --> 0:14:35.160 in private credit is just really a pricey whether you're 0:14:35.320 --> 0:14:36.880 hiring them or buying their firms. 0:14:37.000 --> 0:14:39.840 Yeah, I started thinking about Apollo because she also said 0:14:39.840 --> 0:14:42.920 we're shopping for either a full acquisition or a minority 0:14:42.920 --> 0:14:47.280 state combined with product partnerships. And they have a planned 0:14:47.320 --> 0:14:51.480 product partnership with Apollo. That ETF filing heard around the 0:14:51.480 --> 0:14:54.920 world between Apollo and State Street for private credit ETF 0:14:54.960 --> 0:14:56.720 which I don't know if that one is going to launch. 0:14:56.760 --> 0:14:59.960 There's a lot of skepticism over that. But that's interesting. 0:15:00.680 --> 0:15:03.040 Oh sure, but like they want a private credit offering 0:15:03.080 --> 0:15:05.480 for their clients, right, Like they want to be able 0:15:05.520 --> 0:15:09.920 to chuck billions of dollars institutional money into a private 0:15:09.960 --> 0:15:12.680 credit offering, and everyone wants to that. Yeah, you know, 0:15:12.800 --> 0:15:15.400 if you are running a private credit firm, you're raising 0:15:15.400 --> 0:15:18.040 funds and like you're getting all these offers from all 0:15:18.080 --> 0:15:20.560 these traditional firms. Yeah, you know. There's another article in 0:15:20.560 --> 0:15:23.000 the Wall Street Journal about black Rock looking for alts 0:15:23.080 --> 0:15:26.760 managers like private credit or other like alternatives, and the 0:15:26.800 --> 0:15:28.760 reason for it is so clear, Like you can charge 0:15:28.760 --> 0:15:31.560 like roughly one order of magnitude more n fees for 0:15:31.680 --> 0:15:35.480 running alternatives than for running you know, traditional long only money. 0:15:35.520 --> 0:15:39.280 Well to the point that State Street be shopping, Blackrock 0:15:39.800 --> 0:15:42.400 has been shopping in a big way. I mean they 0:15:42.440 --> 0:15:46.120 bought Prequin for example, that was you know, for data 0:15:46.360 --> 0:15:49.000 Global Infrastructure Partners that finally closed. 0:15:49.160 --> 0:15:50.760 Yeah, by the way, I think I forget it was 0:15:50.800 --> 0:15:52.240 the State Street or something else. But like one of 0:15:52.280 --> 0:15:54.720 the articles is like they're shopping for a private credit 0:15:54.840 --> 0:15:57.640 or infrastructure, but it's like anything at all. 0:15:57.800 --> 0:16:02.120 Yeah, yeah, as long as it's alts. And also maybe 0:16:02.280 --> 0:16:05.040 Blackrock is going to buy HPS. I don't know. 0:16:05.920 --> 0:16:09.400 There's a fascinating story about HBS a while back. Hs 0:16:09.480 --> 0:16:12.160 is like nominally preparing an IPO, but like also shopping 0:16:12.200 --> 0:16:17.160 themselves hard to probably Blackrock. But also like there's talks 0:16:17.200 --> 0:16:20.280 of talk of like JP Morgan is like maybe like yeah, 0:16:20.400 --> 0:16:22.600 like Jamie Diamond, like I think was asked about buying 0:16:22.600 --> 0:16:23.840 a private credit for him and he's like, no, we 0:16:23.880 --> 0:16:25.720 would never do that, and then like came back later 0:16:25.760 --> 0:16:26.840 and it's like my team tells. 0:16:26.600 --> 0:16:30.200 Me we might Yeah, I've been in form Yeah. 0:16:30.240 --> 0:16:32.120 Yeah, Like they're like they're like pulled them back. But 0:16:32.400 --> 0:16:34.120 a lot of ways that HPS could go but one 0:16:34.120 --> 0:16:36.240 of those ways is selling themselves the black Rock for 0:16:36.560 --> 0:16:37.760 an enormous premium. 0:16:37.800 --> 0:16:39.920 This strategy has worked out for black Rock. They have 0:16:40.000 --> 0:16:42.880 like four hundred and fifty billion dollars in alts. At 0:16:42.960 --> 0:16:46.120 least one hundred and sixteen billion dollars is coming from 0:16:46.440 --> 0:16:48.800 GIP for example. So it's a really easy way to 0:16:48.840 --> 0:16:49.400 just scale up. 0:16:50.200 --> 0:16:52.600 Yeah, I mean like scale up, Like you know, it's 0:16:52.680 --> 0:16:55.000 like what like four percent of black Rocks assets, right, 0:16:55.000 --> 0:16:57.920 but it's like the very juicy four percent, right, It's 0:16:57.960 --> 0:16:59.840 like the. 0:16:59.040 --> 0:17:00.800 Four percent that makes a lot of money. 0:17:00.920 --> 0:17:03.160 Yeah, you charge, it makes a lot of the money, 0:17:03.240 --> 0:17:06.119 and it gets a higher multiple, and it's like, yeah, 0:17:06.160 --> 0:17:08.840 it's just like really attractive. And like, you know, saying 0:17:08.840 --> 0:17:11.679 we're a giant index fund provider is just less appealing 0:17:11.720 --> 0:17:13.840 to investors now than saying we're a giant ults provider. 0:17:13.880 --> 0:17:16.560 I have some numbers in your column. You reference this 0:17:16.560 --> 0:17:20.800 Wall Street Journal article that pointed out that Blackrocks market 0:17:20.840 --> 0:17:24.800 cap is similar to those of Blackstone, Apollo, KKR, et cetera, 0:17:24.920 --> 0:17:28.240 even though Blackrock manages like eleven and a half trillion 0:17:29.080 --> 0:17:32.120 and they manage a fraction of that. I wrote about 0:17:32.160 --> 0:17:37.560 this in mid October following BlackRock's earnings, just about how 0:17:37.640 --> 0:17:41.879 much money they make per dollar of AUM. And for Blackrock, 0:17:42.240 --> 0:17:47.760 it's like, according to Bloomberg Intelligence, they have an annualized 0:17:47.800 --> 0:17:52.280 fee rate of fourteen point six basis points. You compare 0:17:52.320 --> 0:17:56.840 that to Apollo, and it's something like fifty two basis points. 0:17:57.320 --> 0:18:01.600 So I would have guessed the higher number for Apollo. Well, 0:18:01.600 --> 0:18:05.720 apparently for Blackstone and KKR and Ares, that figure ranges 0:18:05.720 --> 0:18:09.000 from fifty basis points to like one hundred basis points, right, So. 0:18:09.560 --> 0:18:12.440 Yeah, classically two and twenty right, Yeah, but like it's 0:18:12.480 --> 0:18:17.000 a much, much, much richer fee product. And like a 0:18:17.000 --> 0:18:18.840 lot of the stories about private credit are like, wow, 0:18:18.840 --> 0:18:20.000 there's so much more money in this. 0:18:20.600 --> 0:18:22.080 Oh my gosh. 0:18:22.240 --> 0:18:25.639 This is a Bloomberg article from September Bonus starved bankers 0:18:25.680 --> 0:18:29.120 are a jumping ship for private credit riches. Yeah, why 0:18:29.160 --> 0:18:30.160 wouldn't you do that? 0:18:30.160 --> 0:18:30.840 That makes sense? 0:18:31.080 --> 0:18:33.200 You know, all these like private credit funds are started 0:18:33.200 --> 0:18:35.159 by people who are like you know, lib fin bankers 0:18:35.200 --> 0:18:37.240 at Coldman and like went to start their own funds 0:18:37.400 --> 0:18:39.919 when that was like a somewhat contrariy and move, and 0:18:40.000 --> 0:18:42.879 now they can sell their firms for billions of dollars 0:18:42.680 --> 0:18:43.640 to Blackrock. 0:18:43.840 --> 0:18:45.000 If I could do it, I would. 0:18:45.560 --> 0:18:47.800 It's just like, you know, one thing I write about 0:18:47.800 --> 0:18:51.280 this is like it seems hard to run a private 0:18:51.320 --> 0:18:55.320 credit fund now from the perspective of like being an investor. 0:18:55.560 --> 0:18:57.600 Josh Harris said to David Rubinston the other day that 0:18:57.680 --> 0:18:59.200 like a lot of these alts funds are like the 0:18:59.680 --> 0:19:02.159 beata of aults. Right, private credit like its core is 0:19:02.160 --> 0:19:05.719 like direct lending to leverage biots, And so you are 0:19:05.720 --> 0:19:09.159 in a business of like being friends with twenty private 0:19:09.160 --> 0:19:11.760 equity sponsors, and when they do a biot, they call 0:19:11.840 --> 0:19:13.399 you and they say, would you like to lend us 0:19:13.400 --> 0:19:15.960