Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. Hi, I'm
Speaker 1: Jason Kelly and I'm Carol Masser. Welcome to the Bloomberg
Speaker 1: Business Week Weekend podcast. We're gonna bring you news of
Speaker 1: the week, insights from the magazine and more. And Jason,
Speaker 1: what I love about this week's issue is there are
Speaker 1: a bunch of deep dives into companies that you all
Speaker 1: know about, asking some big questions about moves that they've
Speaker 1: made and whether they're going to make sense really in
Speaker 1: the future. Plus, we catch up with CEO and chairman
Speaker 1: of Blackstone Steve Schwartzman, a fixture on Wall Street for
Speaker 1: a number of decades. He's got a new book out
Speaker 1: that really takes us inside what it's like to build
Speaker 1: one of the most influential investing firms in the world.
Speaker 1: And I love when you have someone who's so well
Speaker 1: known in the financial community taking us back to where
Speaker 1: he grew up, his family and all these experiences that
Speaker 1: really shaped him. So it's a really fun interview and
Speaker 1: very comprehensive. Plus, this week's cover story, it's all about
Speaker 1: GM What a timely piece with its workers going on
Speaker 1: strike this week. But first, the U S sanctioned Iran
Speaker 1: Central Bank and Sovereign Well Fund on Friday. It was
Speaker 1: a move aimed at retaliation for last weekends attacks on
Speaker 1: key Saudi Arabian oil facilities now and the Oval Office.
Speaker 1: President Trump spoke to reporters about the new sanctions. We
Speaker 1: want to see if it works out, and if it
Speaker 1: works out, that's great, and if it doesn't work out,
Speaker 1: that's great. In the end, it always works out. That's
Speaker 1: the way it is. It always works out. So you'll
Speaker 1: be seeing certain things happening. But a very major factor
Speaker 1: is what we did. These are the highest sanctions ever
Speaker 1: imposed on a country. We've never done it to this level.
Speaker 1: Let's say to our televie bureau now and speak with
Speaker 1: Ben Harvey for Macro view of the Middle East tensions. Ben,
Speaker 1: you say that Iran is holding the world economy hostage?
Speaker 1: How so? Yeah, as we see in this UM in
Speaker 1: the most recent attack on Saudi Arabia, what they've done
Speaker 1: is they've they've struck at the heart of the the
Speaker 1: global energy infrastructure UM. This is the world's biggest refiner.
Speaker 1: When they attacked this Ramco site with with a single attack,
Speaker 1: they managed to knock out about half of Saudi Arabia's
Speaker 1: production and about five percent of global production alright, so
Speaker 1: that certainly was noticed big deal by the global stage,
Speaker 1: certainly by the energy markets. What I think is interesting, though,
Speaker 1: is how you talk about that the pressure specifically by
Speaker 1: the United States that has been put on Iran. It
Speaker 1: is certainly created havoc in their economy, but it has
Speaker 1: put them in kind of a powerful position explain that, Yeah,
Speaker 1: Iran's economy is under massive stress, but for the past
Speaker 1: several decades, iron has invested in these essentially non state
Speaker 1: armies around the region. Um So, whereas this is a
Speaker 1: pretty cost effective investment for them, they invest in these
Speaker 1: nonstate actors that can are basically forces of disruption um
Speaker 1: and when Iran feels pressure to connectivate them and as
Speaker 1: we see saw in this attack in Saudi create massive damage.
Speaker 1: So Ben talked to us a little bit about because
Speaker 1: you do reference and you know, right out of the gate,
Speaker 1: you talk about the art of war, and this is
Speaker 1: certainly uh you know, something that has been quoted an
Speaker 1: awful lot throughout the year. But it's interesting you talk
Speaker 1: specifically about is asymmetrical warfare, which is what Iran is doing,
Speaker 1: and that is making it very powerful in the Middle
Speaker 1: East region. Even though it doesn't have the largest armies,
Speaker 1: are the most organized armies. It's made it a very
Speaker 1: powerful presence. Yeah, that's exactly right. I mean, Iran's main
Speaker 1: rival in the Middle East of Saudi Arabia. Iran cannot
Speaker 1: compete with Saudi Arabian conventtional ground. Saudi Arabia is the
Speaker 1: world's third biggest purchaser of military equipment after the United
Speaker 1: States and China. It's significantly higher spender than than uh
Speaker 1: than Russia. Is Iran can't compete with that. So instead,
Speaker 1: what they're doing is investing in, as you say, asymmetrical warfare.
Speaker 1: So they have small forces that can create havoc, whether
Speaker 1: it's on global shipping lanes, whether it's in in Iraq,
Speaker 1: whether it's in on the border of Israel, and also
Speaker 1: now of course in Yemen, where they have essentially gained
Speaker 1: a foothold in the Arabian Peninsula, which is Saudi Arabia's backyard.
Speaker 1: All right, So then what does this mean for some
Speaker 1: of the world's global powers, very developed powers like the
Speaker 1: United States. I mean, we know President Trump withdrew from
Speaker 1: the Joint Comprehensive Plan of action. That was an agreement
Speaker 1: to contain Iran's military, specifically it's nuclear ambitions. But by
Speaker 1: pulling out of that, now what needs to be the
Speaker 1: role of the United States here, because it's very tricky.
Speaker 1: It is very tricky, and it's a very hard position
Speaker 1: for the US administration to be in. Right now, they've
Speaker 1: essentially backed Iran into a corner. UM. Iran is playing
Speaker 1: the role of disruptor. They want to get it wrong.
Speaker 1: Back to the negotiations. Iran is refusing to come. So
Speaker 1: the question is how long do you do? Does the
Speaker 1: world put up with this? What you're seeing right now
Speaker 1: is a very interesting dance. For many years, the both sides,
Speaker 1: Iran and other sides that we're trying to counter Iran
Speaker 1: have benefited from this sort of UM strategy of plausible deniability.
Speaker 1: UM attacks would occur through Iranian affiliated proxies and then
Speaker 1: Iran could disclaim responsibility so that these were independent actors.
Speaker 1: The world would sort of accept that and move on
Speaker 1: because there's also very little appetite for UH for a
Speaker 1: direct conflict with Iran. UM Right now, what you're seeing
Speaker 1: is is a lot of caution and actually putting this
Speaker 1: attack directly on Iran's doorstep, even along those who have
Speaker 1: been strong advocates of attacking Iran because the cost of
Speaker 1: doing so would be so high. I also think the
Speaker 1: timing is just kind of impeccable. Ben, I don't know
Speaker 1: how you see it, and I know you address this
Speaker 1: as well. You know, Saudi Arabia has been moving towards
Speaker 1: the I p O of Saudi Aramco for a couple
Speaker 1: of years now. It's been usually anticipated. Uh, that's certainly,
Speaker 1: you know, kind of what happened this past week cast
Speaker 1: a different light on maybe the prospect of that, at
Speaker 1: least at this point. And I also think just the
Speaker 1: global economic picture, right we have a lot of question
Speaker 1: about global economic growth right now. So to see this
Speaker 1: kind of potential energy shock is a big deal. Sure, yeah,
Speaker 1: this this came into sensitive time for the global economy. UM,
Speaker 1: A lot of a lot of countries across the world
Speaker 1: are trying to find ways to stimulate their economies. They're
Speaker 1: lowering interest rates. UM. A supply like shock like this
Speaker 1: would be very hard to deal with if this were sustained.
Speaker 1: The question now is how big of an impact is
Speaker 1: this going to have. Ken's already get its production back online,
Speaker 1: immediately or will this take monster even longer to to
Speaker 1: solve um. And the other question, of course is you know,
Speaker 1: is this a one off event or could this continue
Speaker 1: to happen? Yeah, Ben, your remarks this week certainly reminding
Speaker 1: all of us it is as much a political, global
Speaker 1: political story as it is a global market story. Ben
Speaker 1: Harvey and Tel Aviv, Thanks so much, thank you very much.
Speaker 1: So very newsy story this week involving General Motors, because
Speaker 1: of course they had a strike which we feel like
Speaker 1: came out of nowhere. Uh, and we haven't seen GM
Speaker 1: workers go on strike in a long, long time. Another
Speaker 1: challenge for Mary Barr, right, the CEO of General Motors.
Speaker 1: She's already led that company through a lot of job
Speaker 1: cuts and she's really got a new focus when it
Speaker 1: comes to GM right now. And in this week's magazine,
Speaker 1: a deep dive into Mary bar and her strategy. David Well,
Speaker 1: Charge Detroit, your chief joins us from that fine city,
Speaker 1: rock city as they call it. So David, tell us
Speaker 1: what's going on, as Carol said very timely at General Motors. Sure,
Speaker 1: so we have this this strike right now that that
Speaker 1: as you mentioned, the union hasn't walked out on GM
Speaker 1: in a long time. And look, whenever you try to
Speaker 1: really overhaul a company or bring about great change, you're
Speaker 1: gonna have people who resist or react in in you know,
Speaker 1: kind of negative ways. And in this case, what GM
Speaker 1: has been doing for the past really five or six years,
Speaker 1: they've been downsizing things in the core business. They sold
Speaker 1: their European operations, they fled Russia, they fled some of
Speaker 1: the Southeast Asian markets, India. They've they've downsized by getting
Speaker 1: rid of certain models, certain plants in the US that
Speaker 1: makes small cars are thinly profitable models. That's where the
Speaker 1: Union gets angry. But what GM is really doing here,
Speaker 1: what Mary Borrows strategy really is, is getting out of
Speaker 1: low margin or money losing businesses that GM and other
Speaker 1: carmakers have just participated in for decades simply out of
Speaker 1: corporate inertion because car companies always thought they had to
Speaker 1: sell every vehicle to everybody across the globe. She's getting
Speaker 1: out of that stuff, and with the money she saves,
Speaker 1: she's putting it into electric cars autonomous vehicles, because she
Speaker 1: sees that as the real future of the company, and
Speaker 1: it really is. Let's call it strategically, and then in
Speaker 1: terms of actual capital spending financially transformative for the company
Speaker 1: if she can pull this off. Because the endgame for
Speaker 1: bar is sell cars to individual owners where you make
Speaker 1: a lot of money, right, build a service, robot taxis
Speaker 1: to to you know, se you're selling transportation by the
Speaker 1: ride with a self driving electric taxi at some point
Speaker 1: to other people. GM will become part manufacturer, part service.
Speaker 1: If all of this happens, it will take time. But
Speaker 1: if she succeeds, that's what's going on. But your point
Speaker 1: is she's plowing a lot of money into you know,
Speaker 1: the GM what she expects to be the GM of
Speaker 1: the future. Uh. You know, you've got a company that's
Speaker 1: making money, right, and I think workers at this point,
Speaker 1: David are saying, wait a minute, we should get some
Speaker 1: of that as well. Yeah. What I really loved about
Speaker 1: working on this story is that, uh it sort of
Speaker 1: touches on a big point within the Americans cause right now,
Speaker 1: which is questioning has capitalism gone too far? And when
Speaker 1: Mary Bara cuts models or plants because even if they
Speaker 1: make money, they don't make great money, uh, getting out
Speaker 1: of low margin businesses, or she moves a model like
Speaker 1: see the Chevy Blazer to Mexico A SUVs make good money.
Speaker 1: You don't need to make it with Mexican labor to
Speaker 1: make that profitably. The union reacts by same Wait a second,
Speaker 1: you've made record profits what's called record operating profits for
Speaker 1: the last three years. The company is guided to match
Speaker 1: or beat that this year. So the money's coming in.
Speaker 1: Why do you have to keep cutting? Why do you
Speaker 1: have to keep sending vehicles to Mexico. You need to
Speaker 1: take care of us. That's what that fight is really about. There.
Speaker 1: There's similar sentiments among the salary workers too. They just
Speaker 1: don't have a public platform and the union to really
Speaker 1: bring that voice to the foe. Well, and speaking of voices, me,
Speaker 1: Mary Barra has been seen as someone who is considered
Speaker 1: kind of one of them, right, I mean, she rose
Speaker 1: up through the ranks. She's part of the family, to
Speaker 1: say the least. How much eyebrow raising is there about
Speaker 1: her performance or what she's delivered on again for the workers.
Speaker 1: So well, it's a quick, quick point. A lot that
Speaker 1: Wall Street likes are quite a bit. GM stock is
Speaker 1: one of the few auto stocks that have kind of
Speaker 1: held up in a year when the whole sector, including
Speaker 1: the suppliers, have kind of been battered because the world
Speaker 1: thinks we're at peak auto and you'll see sales soften.
Speaker 1: So in terms of earnings, the best it's already happened
Speaker 1: is sort of the market's reaction to this, and that's
Speaker 1: who she's been trying to serve. The workers not quite
Speaker 1: so happy. You go on the message board and they're
Speaker 1: I'm talking about salary people. Now you're reading things like
Speaker 1: I've given the company twenty five years no loyalty. Uh.
Speaker 1: The u A W workers on their message board or
Speaker 1: in person will say, hey, we gave during bankruptcy. We
Speaker 1: gave up a lot of traditional union benefits and safeguards
Speaker 1: to keep GM alive through bankruptcy, and now you're making
Speaker 1: a lot of money, So where we want some payback?
Speaker 1: Where's our reward? So there's a lot of that sort
Speaker 1: of thing directed uh, straight at Mary Barra, which has
Speaker 1: been on because she does have a very amiable persona.
Speaker 1: She's actually pretty well liked among the staff the union.
Speaker 1: She's kind of less of a figure because she has
Speaker 1: people beneath her that do the negotiating, but she still
Speaker 1: did have this this very amiable persona inside and outside
Speaker 1: the company. So David One of the questions I think
Speaker 1: at this point is Mary Bara the focus, the attention,
Speaker 1: the money that she's spending on electric vehicles, autonomously driving vehicles,
Speaker 1: you know, whether or not her time is right, Is
Speaker 1: it right or she too early? You know, and that
Speaker 1: that might be problematic down the road. That is the
Speaker 1: big risk because GM is spending a billion dollars a
Speaker 1: year on autonomous vehicles and many other billions developing electric cars,
Speaker 1: and really only Tesla has proven that they can sell
Speaker 1: electric cars right now. You see fi Quisly, you see Toyota,
Speaker 1: which has a lot of smart people and a lot
Speaker 1: of money, taking a very conservative approach to this. That's
Speaker 1: really GM's risk here, plowing a lot of money into
Speaker 1: this stuff, and you don't find buyers for the electric vehicles,
Speaker 1: or as we're already seeing, autonomous vehicles are delaying their
Speaker 1: launch to the public because they keep finding more let's
Speaker 1: call it cases or incidences in traffic that the cars
Speaker 1: can't handle just right yet, and and and that stuff
Speaker 1: keeps getting pushed out. So uh yeah, she spends a
Speaker 1: lot of money on this stuff, diverts people and resources
Speaker 1: from the core business, and it doesn't pan out for five,
Speaker 1: ten fifteen years. But this is the risk you take
Speaker 1: when you want to be a leader in both. And
Speaker 1: that's really what she wants to do. She wants to
Speaker 1: get big scale and electric cars and sell them more
Speaker 1: cheaply and profitably than others. She wants to lead in
Speaker 1: autonomous vehicle software and and let's call it robotaxi services.
Speaker 1: Build the best brand first, and when you stick your
Speaker 1: neck out, sometimes you get chopped and sometimes you get
Speaker 1: across the finish line first. That's the risk right there,
Speaker 1: we're talking about cars and talking about electric vehicles. If
Speaker 1: we didn't ask you about Tesla and how that figures
Speaker 1: into Mary Barra's strategy here, she's got to be thinking
Speaker 1: about Elon Musk. She's got to be thinking about everybody
Speaker 1: else who's chasing after evs. Yeah. Well, Elon Musk has
Speaker 1: dragged the automotive world kicking and screaming into electric vehicles.
Speaker 1: And that brand is so powerful now that it's kind
Speaker 1: of the iPhone of evs. And everybody wants to see
Speaker 1: if they can come up with the Samsung Galaxy five
Speaker 1: uh and the Android system to go head to head
Speaker 1: with it. And so far, even say we have German
Speaker 1: car makers out there, we've got portion and we've got autie.
Speaker 1: With evs, they're not selling that great and that's who
Speaker 1: Mary Barr is looking at, and that's who she needs
Speaker 1: to go up against. That's David Welch, our Detroit Bureau chief.
Speaker 1: And I love this story because I remember when Mary
Speaker 1: Barr first made those moves. Everybody was really applauding her
Speaker 1: because she was thinking about what does the general motors
Speaker 1: of the future need to be and took some drastic moves.
Speaker 1: But timing will be so key in terms of what
Speaker 1: she's done well. And I loved that part of the conversation,
Speaker 1: and you really push that with David, which was great,
Speaker 1: which was this is largely about timing rather than the
Speaker 1: right decisions. We all know where the industry is going,
Speaker 1: but if you get the timing wrong, the whole thing
Speaker 1: falls apart exactly. So nothing is immune from the sharing economy.
Speaker 1: That includes legal advice. So enter Twitches co founder. We'll
Speaker 1: get into how that connection works here with the story
Speaker 1: Max Chaffkin features that are a business week in our
Speaker 1: studio today. So what's going on here? As you said,
Speaker 1: Twitch founder Justin Kahn, who if you're sort of on
Speaker 1: the older millennial side. You may remember as the reality
Speaker 1: TV star of Justin dot tv. This was like a
Speaker 1: very early Web two dotto thing. Put a camera, tracked everything,
Speaker 1: put a camera on his head. He he walked around
Speaker 1: San Francisco doing twenty year old coder stuff. Um, it
Speaker 1: wasn't a huge hit. But he's back with a new
Speaker 1: company called Atrium, which is basically trying to, as you said,
Speaker 1: kind of bring the sharing economy to legal services, to
Speaker 1: replace your corporate lawyer with a five month subscription. I
Speaker 1: want to talk about that business. But the reason we
Speaker 1: care of the is that crazy thing putting the camera,
Speaker 1: which wasn't necessary big hit eventually kind of morphed into Twitch,
Speaker 1: which did become kind of a big deal. Yeah and
Speaker 1: so so Twitch also sounded kind of crazy because who
Speaker 1: wants to watch, you know, other people play video games.
Speaker 1: Turns out lots of people. Twitch helped create the whole
Speaker 1: sort of notion of e sports uh and sold itself
Speaker 1: to Amazon for a billion dollars. It's now part of Amazon. Uh,
Speaker 1: you know, part of this vibrant, growing industry. Uh. And uh,
Speaker 1: you know, Justin Kahn kind of wended his way. He
Speaker 1: was an investor for a while and then as as
Speaker 1: he explained to me in an interview, you know, basically
Speaker 1: started wondering why he was spending so much money on
Speaker 1: legal services. He realized he'd spent you know, something like
Speaker 1: two million dollars over the previous decade and didn't feel
Speaker 1: like he was necessarily getting enough for it. Okay, so
Speaker 1: enter a triam. So tell me how this works, because
Speaker 1: it's a little bit max of a tiered service, right, yeah,
Speaker 1: I mean it's it's pretty similar to we work honestly, uh,
Speaker 1: five dollars and you get access to a an hour
Speaker 1: a month of general legal advice. So so you have
Speaker 1: a normal corporate lawyer who um comes from a big
Speaker 1: corporate law firm, who gets paid to a very high
Speaker 1: hourly wage, etcetera, etcetera. UM, and then you get this
Speaker 1: software platform which supposedly is going to automate a lot
Speaker 1: of um these functions. So so they walked me through,
Speaker 1: you know, an offer letter where you type in the
Speaker 1: employee's name, you you check a few boxes and then
Speaker 1: outcomes a sort of legal document or they can do
Speaker 1: it for an NDA. And the idea is that's going
Speaker 1: to expand to include lots of stuff. So so in
Speaker 1: the long run, a lot of the legal services are
Speaker 1: going to be handled by software, by a computer. Your
Speaker 1: your corporate lawyer is going to be spending way fewer
Speaker 1: hours um doing general lawyer stuff. I feel like some
Speaker 1: of it makes a lot of sense because we would
Speaker 1: talked about, you know, legal work in getting a mortgage
Speaker 1: or something. So much of it is formula that there's
Speaker 1: no reason why you can't kind of involve some types
Speaker 1: of technology or computer system to kind of walk us
Speaker 1: through it. Yeah, and we've seen this kind of on
Speaker 1: the sort of personal end of legal services. Legal Zoom
Speaker 1: has been around for a long time. Their websites that
Speaker 1: will help you prepare a will. Um. There's also kind
Speaker 1: of an interesting start that's that's doing this in small
Speaker 1: claims court called do not pay, so so it's happening
Speaker 1: in all sorts of areas. Atrium is kind of interesting
Speaker 1: because it's going after sort of like the core of
Speaker 1: the legal industry, these big corporate law firms that you know,
Speaker 1: generate enormous amounts of revenue and and pay these you
Speaker 1: know very you know, very well educated lawyers, you know,
Speaker 1: in some cases millions of dollars a year, al right,
Speaker 1: So it's the corporate legal world say oh, great idea.
Speaker 1: I mean, this stuff has been tried before, and I
Speaker 1: think it's it's key to to to understand that Atrium
Speaker 1: is really aiming at the startup market. I mean, it
Speaker 1: is based in San Francisco, It is very much aimed
Speaker 1: at companies like Atrium. And I think if you, if you,
Speaker 1: you know, take a few steps back, you might say,
Speaker 1: look like, this is never gonna you know, this is
Speaker 1: never gonna come for mergers and acquisitions. This is never
Speaker 1: going to come for the kind of like New York
Speaker 1: finance law, which is kind of a huge part of
Speaker 1: the legal industry. UM. But you know, justin Conn, the
Speaker 1: CEO of Atrium said that is their plan. They they're
Speaker 1: they're they're hiring lawyers and other cities. They want to
Speaker 1: eventually expand UM beyond Silicon Valley, but for now it's
Speaker 1: really startups for the most part. I gotta say I
Speaker 1: was pretty impressed because they already have what landed more
Speaker 1: than four hundred clients. Talked to us a little bit
Speaker 1: about because they've built up I mean, they have a
Speaker 1: pretty big number of employees already. Yeah, hundred and seventy employees,
Speaker 1: thirty of whom are lawyers. These are the kind of
Speaker 1: corporate law types um. So, and then the rest are
Speaker 1: mixed of engineers are working on the software, and then
Speaker 1: some legal assistants and and and paralegals and that sort
Speaker 1: of thing. Um. They had this pilot program for the
Speaker 1: past two years, uh, and now are launching, as we reported,
Speaker 1: this subscription which has these two tiers five dars a
Speaker 1: month as I mentioned, and then a fifteen hundred dollar
Speaker 1: a month you know, premium edition, and and it goes
Speaker 1: up from there. I mean they ideally, um, from their
Speaker 1: point of view, want to serve companies as they get
Speaker 1: larger and larger for the most part, now we're talking
Speaker 1: small companies handful of insize one, but they're not profitable yet.
Speaker 1: And then but they're what we've been around for two
Speaker 1: years two years, uh, not profitable and and that you
Speaker 1: know to to hear them talk about it as the
Speaker 1: whole point. I mean, they're their argument is that the
Speaker 1: problem with legal not to make money well for now anyway.
Speaker 1: The problem with legal services from their point of view
Speaker 1: is that it's basically a high end service business where
Speaker 1: you have the partners at the top pulling in huge
Speaker 1: salaries which is basically profit sharing from the from the
Speaker 1: from the rest of the business. So law firms are
Speaker 1: really profitable when they're successful. Um, the play here is
Speaker 1: is kind of the startup play to to grow really
Speaker 1: big and eventually generate profits, you know, once they've once
Speaker 1: they've amassed a huge client list, once the software, I
Speaker 1: guess is doing most of the work. The goal isn't
Speaker 1: to generate you know, profits on a per you know,
Speaker 1: engagement basis. And as a result, like the the actual
Speaker 1: costs that they're charging are are somewhat lower than a
Speaker 1: normal corporate lawer. And that's Max Chafkin. This was a
Speaker 1: fun story but also a reminder that not every industry
Speaker 1: has been totally disrupted yet, and they're coming for the
Speaker 1: lawyers exactly right. Folks are trying to make the legal
Speaker 1: industry more productive. Uh so enter into the sharing economy.
Speaker 1: That's what this story is all about. Two months after
Speaker 1: clinching it's sixty three billion dollar purchase of mont Santo
Speaker 1: by your face, a protracted legal battle of the U
Speaker 1: S Company's roundup, we'd killer it's those legal challenges that
Speaker 1: have wiped billions off the German conglomerates market value, which
Speaker 1: begs the question why y did buy or buy mont Santo?
Speaker 1: That feature story in the magazine this week joining us
Speaker 1: from Munich, Tim Lowe, Um, Tim, this is a big story,
Speaker 1: big corporate story. Let's go to the beginning. First of all,
Speaker 1: why did bear by mont Santo? Who was the executive
Speaker 1: behind it all? Sure? Well, the CEO's name is Vanner
Speaker 1: Bauman and H. He's the guy who will always be
Speaker 1: associated with this deal. He he was the driving force
Speaker 1: behind him. The chairman of Buyer's board of supervisors or
Speaker 1: guys we call board of directors in the US, is
Speaker 1: a guy Vanner Venning. They're called Big Vanner and Little
Speaker 1: Vanner and Labor Kussen and H. The Vanner Venning was
Speaker 1: CEO two CEOs prior to Vanner Bowman. Both of them
Speaker 1: are Buyer lifers. They've spent decades with the company and
Speaker 1: they've known each other for decades. And Vanner Venning the
Speaker 1: older one, Big Banner. Um, he sort of brought Vanna
Speaker 1: Bowman along over the years. So what happened was when
Speaker 1: in around the time frame UH, buyer was looking to
Speaker 1: make some sort of a deal and the question was,
Speaker 1: you know, are we going to continue this evolution that
Speaker 1: they'd been on into more and more into healthcare pharmaceuticals,
Speaker 1: or were they gonna zag and do something you know
Speaker 1: that was a bit more conglomerate, Like it's a company
Speaker 1: that for generations had been quite conglomerate heavy. And uh,
Speaker 1: most investors thought they were gonna go healthcare, gonna go pharma.
Speaker 1: And Vner Bauman, the CEO of Buyer, Now, he came
Speaker 1: up with this plan to go after Monsanto, and he
Speaker 1: he steered it through and it was bold, it was big,
Speaker 1: and uh it's uh, it's been pretty it's been pretty
Speaker 1: contentious here in Germany and abroad right to say the least.
Speaker 1: And as you said, though, it's surprised investors because when
Speaker 1: he initially took over, I think he had said, you know,
Speaker 1: no big corporate moves, at least not right away, and
Speaker 1: yet he quickly announced this deal. What was he hoping
Speaker 1: to tap into before we get into the problems, what
Speaker 1: was he hoping to tap into by making this purchase,
Speaker 1: Because as you say, in sixteen bear the company, I mean,
Speaker 1: they were facing some blockbuster drugs that we're going to
Speaker 1: go off patent. They really needed to kind of revitalize
Speaker 1: their business. Absolutely, they needed to do something there. They
Speaker 1: were at the time as valuable as they'd ever been
Speaker 1: on the public markets. Um, but they're two big key drugs,
Speaker 1: ones a Zarrelto and the other is a leah. Um.
Speaker 1: They had less than a decade left on patent protection,
Speaker 1: so everyone knew they had to do something. And UM,
Speaker 1: what was going on is in the agriculture space, you
Speaker 1: had this wave of consolidation that had begun and very
Speaker 1: quickly UM Dow and DuPont had merged, and then KEM
Speaker 1: China had come in and bought Syngenta, And suddenly the
Speaker 1: two big players left who had yet to make any
Speaker 1: moves was mont Santo and Buyer. And UM, there was
Speaker 1: the two portfolios do fit pretty well together on the
Speaker 1: eggs side and UM, but it wasn't quite clear how
Speaker 1: they might might join forces. It could be a JV.
Speaker 1: It could be mont Santo had tried to buy some
Speaker 1: Genta a couple of years ago or a year earlier.
Speaker 1: But the move from Buyer to just go in and
Speaker 1: buy Monsanto whole hog really caught people off guard. It
Speaker 1: was it was bold, it was big, and the markets
Speaker 1: Buyers shares tanked right after the news came out. It
Speaker 1: caught investors off guard. As you said, Venner Bauman that
Speaker 1: he'd been CEO for only two weeks when news of
Speaker 1: this came out, and in the lead up to him
Speaker 1: becoming CEO, he'd been telling investors and journalists that he
Speaker 1: wasn't planning on doing anything revolutionary. UM. I think that's
Speaker 1: something he regrets saying. Yeah, all right, so let's dast
Speaker 1: forward a little bit, so they make this purchase. Um.
Speaker 1: How much of the potential legal problems because of mont
Speaker 1: Santo's roundup weed killer were known at that time? Yeah, well,
Speaker 1: Uh depends who you ask. If you talk to the
Speaker 1: plaintiff attorneys in the US, it was it was all there.
Speaker 1: The key, the key thing that had happened. This was
Speaker 1: a year prior to Buyer's attempt to buy Monsanto. So
Speaker 1: it was. Uh. This organization called i ARC, which is
Speaker 1: a part of the World Health Organization and researches, you know,
Speaker 1: what causes cancer. Uh, they had identified glyphosate, which is
Speaker 1: the key chemical inside round up the weed killer. Uh
Speaker 1: that they identified glyphosate as probably carcinogenetic to humans, meaning
Speaker 1: it could cause cancer if you use it. UM. Global
Speaker 1: regulator bodies from the E P a in the US
Speaker 1: to Europe, Japan all over have for years um allowed
Speaker 1: glyphosate to be used, and there was They continued to
Speaker 1: argue that that's the winning argument and therefore this was
Speaker 1: a fine, fine decision to buy Monsanto. They claimed they
Speaker 1: did all sorts of the due diligence and they concluded
Speaker 1: the legal risk from roundup was low. Well, it wasn't low.
Speaker 1: It's been massive. There's now more than eighteen thousand lawsuits
Speaker 1: against the company in the US and they've lost three
Speaker 1: of three trials, and it's of one jury awarded two
Speaker 1: billion dollars to plaintiffs. A figure came down a little bit,
Speaker 1: but you know it's it's big. So yeah, I mean
Speaker 1: the long or the short answer is um. A lot
Speaker 1: of people were saying, listen, it's all out there. Um.
Speaker 1: These these lawsuits are taking place in California and in St. Louis,
Speaker 1: in places where juries tend to side with plaintiffs, and
Speaker 1: in places like the Bay Area where Monsanto is not popular.
Speaker 1: So it's it's for many people not much of a
Speaker 1: surprise that buyer has been losing these cases. Well, and
Speaker 1: what's interesting is, and you have a number that anlysis
Speaker 1: to make that these Settling all of the US lawsuits
Speaker 1: for the company could cost from about two and a
Speaker 1: half billion to twenty billion. I mean we're talking about
Speaker 1: some really big numbers at the same time. Round Up,
Speaker 1: I mean farmers continue to use this, correct, that's right.
Speaker 1: It's the world's most popular, most used weed killer. I
Speaker 1: mean it's been glypha state itself, which is the key ingredient,
Speaker 1: and round up has been likened to the holy Grail
Speaker 1: of weed killers. It's it's remarkably effective at doing its job. Um,
Speaker 1: and you know there there isn't a great replacement at
Speaker 1: the ready for for farmers on a big industrial scale.
Speaker 1: I mean, sure, there's you know, organic farming, and there's
Speaker 1: other methods of killing weeds. But when you take a
Speaker 1: big step back and you look around the world, man,
Speaker 1: there's a there's a big question about if you do
Speaker 1: get rid of glyphosate. Um, how are we gonna keep
Speaker 1: feeding the world's population, which is growing and on a
Speaker 1: planet where it's getting hotter and uh, you know, cropland
Speaker 1: is a limited resource right and food demands getting greater.
Speaker 1: Let's talk about those. Some of the plaintiffs in the lawsuits,
Speaker 1: I mean, tell us about uh, you talk about one
Speaker 1: groundskeeper from California, forty six year old former school district
Speaker 1: groundskeeper dying of cancer and set his illness had been
Speaker 1: caused by spraying hundreds of thousands of gallons of round up.
Speaker 1: Um tell us about the types of plaintiffs that are
Speaker 1: coming up in the kind of cancer that they're coming
Speaker 1: down with. Sure, well, I mean, one key figure to
Speaker 1: keep in mind is currently there's the latest figure Buyers
Speaker 1: given is there's like eighteen thousand, four hundred plaintiffs. It's
Speaker 1: probably much higher than that by now, maybe in the
Speaker 1: twenty thousand's, because that figures from July. So three cases
Speaker 1: have gone to trial so far, and uh, yeah, the
Speaker 1: first one was last August or last July and August,
Speaker 1: and that was the MANU referenced. His name is Duane
Speaker 1: Lee Johnson, and um, he's you know, a fairly young
Speaker 1: father in his forties and comes down with non Hodgkins lymphoma,
Speaker 1: very sick. They rushed the case to trial because they
Speaker 1: thought he might die beforehand. Um. And that was the
Speaker 1: real you know, Canary and coal mine, you know, can
Speaker 1: these planet attorneys win these cases, and they won big.
Speaker 1: The jury awarded two eighty nine million dollars to the family.
Speaker 1: A judge subsequently brought that down to about seventy nine million,
Speaker 1: but still massive. Um So he was the first, the
Speaker 1: first plantiff. The second one was a husband and wife
Speaker 1: duo actually, who both came down with non Hodgkins lymphoma.
Speaker 1: They've been using rat up for you know, decades on
Speaker 1: a handful of properties in California, and um they it's
Speaker 1: pre I mean, when you look at the odds of
Speaker 1: any individual, you know, coming down with a non Hodgkins lymphoma,
Speaker 1: and then you look at a husband and wife duo
Speaker 1: both getting it right, that is pretty improbable. And that
Speaker 1: was I think in the courtroom that played a role
Speaker 1: in this. That's Tim Low from Munich And as we said, Jason,
Speaker 1: this issue of the magazine really takes some deep dives
Speaker 1: in some well known global corporations. This one of course
Speaker 1: about buyer and you know, it's purchase of Montsanto, wondering
Speaker 1: whether or not that is ultimately going to be a
Speaker 1: mistake in the long term, or can they get through
Speaker 1: these legal battles and move on right And it's all
Speaker 1: back to round Up, a very well known brand to
Speaker 1: a lot of folks here in the United States, state
Speaker 1: and federal health authorities are investigating hundreds of breathing illnesses
Speaker 1: reported in people who have used East cigarettes and other
Speaker 1: vaping devices. And earlier this month, President Trump said his
Speaker 1: administration will propose banning thousands of flavors used in East cigarettes.
Speaker 1: We have a problem in our country. It's a new problem.
Speaker 1: It's a problem with nobody really thought about too much,
Speaker 1: uh a few years ago, and it's called vaping, especially
Speaker 1: vaping as it pertains to innocent children. So this week,
Speaker 1: the US Centers for Disease Control and Prevention launched its
Speaker 1: Emergency Operations Center to look into vaping lung injuries. You
Speaker 1: also had New York State waying in imposing a statewide
Speaker 1: emergency ban on flavored East cigarettes. What we are noticing
Speaker 1: is that more and more attention is being focused on vaping.
Speaker 1: Absolutely is Anna Edney is back with us from Washington.
Speaker 1: She had last week's cover story on a different part
Speaker 1: of the beat this week, the vaping controversy. I think
Speaker 1: it's fair to say and a great to have you
Speaker 1: back with us. So, how and why has this accelerated
Speaker 1: so fast? All this attention on vaping? What really has
Speaker 1: brought a lot of the attention were these vaping illnesses
Speaker 1: that you mentioned. There have been six deaths related to
Speaker 1: them so far, and the CDC is looking into more
Speaker 1: than three eight cases, so it's spread nationwide. And then
Speaker 1: on top of that, you have that a lot of
Speaker 1: underage UM users are vaping, and that number again even
Speaker 1: went up in twenty nineteen, UM H h S Secretary
Speaker 1: Alex Azar said it was about five million under age users.
Speaker 1: Last year it was about three point six million. So
Speaker 1: that's all converging to UM. You know, get the states
Speaker 1: involved as well as the President last week. Well, you know,
Speaker 1: this is one of those things and I know we've
Speaker 1: been talking about a lot in our news room. I
Speaker 1: feel like over the last year that where were the regulators?
Speaker 1: Where was the U s. F d A when you know,
Speaker 1: these things hit the market. Take us back initially because
Speaker 1: I think you talk a little bit about a press
Speaker 1: release that came back in the summer of That's right,
Speaker 1: It goes back a couple of years UM when the
Speaker 1: f d A. The commissioner then was Scott gottlieb Um,
Speaker 1: and he wanted to do a you know, implement this
Speaker 1: strategy that would not only look at the cigarettes but
Speaker 1: also would look at cigarettes and try to get people
Speaker 1: um off of, you know, tobacco altogether. So he was
Speaker 1: looking at this idea where you would reduce them out
Speaker 1: of nicotine in cigarettes, and at the same time he
Speaker 1: wanted to give room for e cigarettes to grow as
Speaker 1: sort of an alternative. While you're maybe getting adults off smoking,
Speaker 1: you're giving them something to to use instead. But it
Speaker 1: hasn't worked out that way. What we've seen is nothing
Speaker 1: yet has happened officially on the nicotine front in cigarettes.
Speaker 1: But at the same time, the vaping industry has taken off,
Speaker 1: and you have more kids hooked now than ever before.
Speaker 1: And so what happens next? Anna, who has the next
Speaker 1: move here? Because industry obviously has quite a stake in this,
Speaker 1: the President himself is weighing in via tweet and in
Speaker 1: public comments, seeming to make it sort of personal in
Speaker 1: a lot of ways. And then you have, as Carol
Speaker 1: alluded to, multiple regulators and departments of the government trying
Speaker 1: to figure out how to deal with this. Who's got
Speaker 1: the next move? The next move is looking like it
Speaker 1: will come from the f d A again, but this
Speaker 1: will be directed this time by the President and by
Speaker 1: um HHS Secretary Asar who last week, you know, both
Speaker 1: said that they were going to um look into taking
Speaker 1: the cigarettes off the market flavored ones, um, so anything
Speaker 1: except tobacco flavor off the market, and they would have
Speaker 1: to reapply to the f d A to get approval
Speaker 1: to resume sales again. So you know, we're looking to
Speaker 1: that to be the next, um, next policy that comes
Speaker 1: out that could have a huge effect on the industry.
Speaker 1: If it happens the way that the Trump and as
Speaker 1: are said, it could happen very quickly. UM. And you
Speaker 1: know that's something that we'll have to kind of see
Speaker 1: what what exactly the details are because we haven't seen
Speaker 1: those yet. Well, and your point is that there's been
Speaker 1: you know, delay after delay, and here we are a
Speaker 1: couple of things going on right We have an acting
Speaker 1: FDA commissioner, it's going to take time to nominate somebody,
Speaker 1: get them confirmed, and then you also have elections which
Speaker 1: are going to keep lawmakers and everyone kind of busy.
Speaker 1: So we could see even more delay than any kind
Speaker 1: of true regulatory framework actually happening when it comes to
Speaker 1: the cigarettes. Yes, it's really tough to get major policy
Speaker 1: proposals through when you have an acting f d a commissioner. UM,
Speaker 1: it helps a lot to have someone who has has
Speaker 1: sent it confirmation. And we're not even sure exactly who
Speaker 1: Trump is going to nominate for the permanent position, whether
Speaker 1: it would be the acting commissioner or someone else he's
Speaker 1: been talking to as well. So there's a lot of
Speaker 1: pieces at play here that, UM, you know, don't indicate
Speaker 1: a whole lot of backing. Full disclosure. Michael Bloomberg, of course,
Speaker 1: the owner Bloomberg LP, the owner of Bloomberg Radio, TV
Speaker 1: and Business Week. UM. He has committed nearly a billion
Speaker 1: dollars to aid anti tobacco efforts. And we also want
Speaker 1: to mention that he's committed just recently a hundred and
Speaker 1: sixty million dollars to ban flavored East cigarette. I want
Speaker 1: to be fair too, because east cigarettes really came uh
Speaker 1: to the marketplace under the Obama administration. Why don't we
Speaker 1: see regulations again? At that time Congress gave the FDA
Speaker 1: the authority to regulate tobacco in two thousand nine. They
Speaker 1: immediately said, okay, we're regulating cigarettes. Um, and this is
Speaker 1: a given. But Congress said, we want to let you
Speaker 1: guys decide what else you're going to put under this
Speaker 1: umbrella that we're going to call tobacco. So it took
Speaker 1: the f d A m until to say that it
Speaker 1: was going to include the cigarettes, and until to actually
Speaker 1: include the cigarettes. So it was a very long process
Speaker 1: to get there, um and and deciding that the cigarettes
Speaker 1: would actually fall under the tobacco umbrella for the f
Speaker 1: d A. And that's Anna Edny joining us from Washington.
Speaker 1: The Jump administration's moves to weaken the Affordable Care Act
Speaker 1: have resulted in healthcare policies that leave holders often footing
Speaker 1: large bills. Here with more on this future story. Investigative
Speaker 1: reporter Zeke Fox Zeke, this story is definitely a troubling one.
Speaker 1: I mentioned to that to you as we kind of
Speaker 1: got settled. Tell us first of all about the Das family,
Speaker 1: because I think you tell it well about what's going
Speaker 1: on through their experience. So Marisia lives out in Arizona.
Speaker 1: She's uh married to her husband is David, and a
Speaker 1: couple of years ago they were shopping for health insurance
Speaker 1: because the insurer that they had been buying policy from
Speaker 1: had decided to stop offering those kinds of policies in
Speaker 1: their area. So one mite, she went on Google. She
Speaker 1: went to look for you know, affordable health care. She
Speaker 1: talked to a few people and one of them was
Speaker 1: a friendly seeming broker who said, I have a great
Speaker 1: policy for you, and Mercia you know, signed up and thought,
Speaker 1: you know, I'm covered. This is great, I have health
Speaker 1: insurance and you know, didn't pay much mind until until
Speaker 1: her husband woke up one morning and I couldn't get
Speaker 1: out of bed, and he asked her to pray with him,
Speaker 1: and instead their son called ambulance came and it turned
Speaker 1: out he'd had a heart attack. Um with discharge from
Speaker 1: the hospital. He's doing well now. And Mercy I thought,
Speaker 1: you know, her bills were covered. You know, she started
Speaker 1: to get things in the mail saying pay this, pay that,
Speaker 1: but like, as you know, the insurance company hasn't caught
Speaker 1: up yet, right exactly. But eventually she figured out no,
Speaker 1: actually she owes about two fifty thou dollars. She called
Speaker 1: her insurance company and they said, yeah, that's right, Like
Speaker 1: we're not going to pay all right, how can that
Speaker 1: be right? Because she was understanding she had hospital benefits
Speaker 1: and coverage, she had a deductible of what about exactly?
Speaker 1: So she thought that the deductible was all she do.
Speaker 1: But it turned out that she had what's known as
Speaker 1: a short term medical plan, and this is a kind
Speaker 1: of policy that's exempt from the requirements of the Affordable
Speaker 1: Care Act. So her policy had all sorts of limitations
Speaker 1: that she was not aware of, such as it covered
Speaker 1: a maximum of five thousand dollars for surgeries. So anyone
Speaker 1: who's ever seen a hospital bill knows that, right it's
Speaker 1: gonna be it's gonna be way more than that. So
Speaker 1: for any surgery her family had, it was five thousand
Speaker 1: macs that would be covered. That's what the policy says.
Speaker 1: I mean, the limitations are so weird that it's it's
Speaker 1: hard to believe. But uh, they when she called, they said, yeah,
Speaker 1: we won't be paying any We've paid a few thousand
Speaker 1: dollars of this bill and we won't be paying anymore. Seek.
Speaker 1: I feel like so many people are listening to this
Speaker 1: or watching this, and they're saying, oh, yeah, well, did
Speaker 1: you read the fine print? Tell us about the process
Speaker 1: in terms of maybe things in the fine print or
Speaker 1: something that the broker maybe was supposed to tell them
Speaker 1: and maybe didn't. So Marissia says that the broker told
Speaker 1: her this was comprehensive insurance and that it was comparable
Speaker 1: to what she had before. The broker wasn't willing to
Speaker 1: speak with me, so I don't know what her side
Speaker 1: of the story is. I assumed that she would say
Speaker 1: that that she informed Mariscia of the limitations. But the
Speaker 1: interesting thing about this is that since the Affordable Care
Speaker 1: Act passed, I think people have come to believe that
Speaker 1: there's a bunch of rules about health insurance and not
Speaker 1: any policy you buy is going to meet certain minimums.
Speaker 1: But it turns out there's this other kind of insurance
Speaker 1: called short term medical that the not have to follow
Speaker 1: these rules. They can exclude people with pre existing conditions,
Speaker 1: they can put a cap on how much they'll pay,
Speaker 1: and the Trump administration is actually promoting these kinds of
Speaker 1: policies as a way of giving people more choices and
Speaker 1: cheaper insurance. To be fair, go back to the Affordable
Speaker 1: Care Act, of course, President Obama's he was the president
Speaker 1: at the time, big changes in terms of healthcare. These
Speaker 1: short term insurance coverage were part of that too, right,
Speaker 1: but it was supposed to be very short term. Yes,
Speaker 1: so these were still allowed, but they were limited eventually
Speaker 1: to just three months, the idea being that you could
Speaker 1: buy this when you were between jobs, and the Trump
Speaker 1: administration has loosened that to up to a year with
Speaker 1: three rollovers. So essentially these policies could be your primary insurance.
Speaker 1: So tell me about because it sounds like then you've
Speaker 1: got that going on where that short term insurance now
Speaker 1: can actually go on for a lot longer. But then
Speaker 1: you also have and I think you talked specifically about
Speaker 1: one company health insurance innovations that seems to be giving
Speaker 1: out these short term policies a lot, and maybe people
Speaker 1: aren't aware of what they're getting. Yes, So this part
Speaker 1: of the story starts with a flashy thirty five year
Speaker 1: old down in South Florida who had Lamborghini and a
Speaker 1: dollar wedding. You guys always character right. I wouldn't be
Speaker 1: a good story for me if it didn't have one.
Speaker 1: This guy's name was Stephen Dorfman, and last year the
Speaker 1: Federal Trade Commission sued him and shut down his boiler
Speaker 1: rooms and said that he had conned thousands of people
Speaker 1: across the country and sold them sham health insurance. Of course,
Speaker 1: you know he denies, as he's fighting the case. But uh,
Speaker 1: short sellers like hedge funds that are looking for overvalued
Speaker 1: companies read through this lawsuit and they picked up on
Speaker 1: something which was that this uh Dorfman character, who seemed
Speaker 1: like just sort of on artists from what the lawsuit said,
Speaker 1: was actually selling real policies, and that he had been
Speaker 1: earning all his commissions or most of them from this
Speaker 1: company called Health Insurance Innovations, which is a big public company,
Speaker 1: you know, a big respectable company. And so people on
Speaker 1: Wall Street started questioning, what is this respectable company doing
Speaker 1: dealing with this kind of character, and started poking around
Speaker 1: on this Health Insurance Innovations publishing research saying that calling
Speaker 1: into question, you know, it's ties with these uh sketchy
Speaker 1: seeming brokers. So since like last year, this company has
Speaker 1: been uh, you know, it says it's under attack from
Speaker 1: short sellers, and it's been saying that having to defend
Speaker 1: itself from accusations that it's working with brokers who are
Speaker 1: misleading customers about uh, these limited health insurance policies. And
Speaker 1: I feel like the bigger issue now too is how
Speaker 1: do we make sure that Americans who are looking to
Speaker 1: get healthcare coverage are getting the right policy, are regulators
Speaker 1: looking at this more closely, so the I think it's
Speaker 1: the House Democrats are investigating the market for short term
Speaker 1: health insurance, and they've uh sent requests for information to
Speaker 1: a number of companies. But in general, regulators are promoting
Speaker 1: the short term health insurance, which they're saying, you know correctly,
Speaker 1: if you're someone who is healthy, it might be a
Speaker 1: cheaper option for you. Of course, you could also go
Speaker 1: without insurance that would also be cheaper. Um, So I
Speaker 1: wouldn't look to regulators to crack down on this. It's
Speaker 1: really actually at the center of the Trump administration's plan
Speaker 1: for healthcare from what we can tell that seek Fox
Speaker 1: and I really do feel like Jason, this is a
Speaker 1: story that people who have heard it read it are
Speaker 1: going to quickly look at their insurance policies to make
Speaker 1: sure that they're covered. God forbid that they have to
Speaker 1: be in a hospital or have some serious illness. It's
Speaker 1: never been more important to read the fun print. So
Speaker 1: it's a special pursuit section this week. From VR and
Speaker 1: Whiskey to milk bread reform bankers in Dowton Abbey. It
Speaker 1: is the food issue. Wait, what something for everyone? There's
Speaker 1: always some food she's got cooking and we see what
Speaker 1: I did there. She's here with us in New York City.
Speaker 1: So let's start with the opener, because even the image
Speaker 1: is so arresting Virtual reality dining for its reality dining.
Speaker 1: So we're going chronological forward and then we'll move back
Speaker 1: haunted out nabby. But R dining is something that we
Speaker 1: looked at really skeptically. UM. An author pitched it to us,
Speaker 1: and it's been something that's been really slow to take hold,
Speaker 1: Like dining in the dark. I don't know if you've
Speaker 1: ever been subjected to it, but it's not fun. Don't
Speaker 1: do it. Where's my food? You know, exactly as you're
Speaker 1: like spilling it down your front um. But VR dining
Speaker 1: is something that's starting to catch on. It was a
Speaker 1: big deal at this food conference in South Korea earlier
Speaker 1: this year, and now it's actually coming to New York.
Speaker 1: UM there's a company called Aero Banquets r MX that's
Speaker 1: bringing a situation to the James Beard House, which is
Speaker 1: right here in New York City and ford five dollars,
Speaker 1: you can put on a VR headset and have like
Speaker 1: five courses and it's gonna be like fast and furious.
Speaker 1: But you might be looking at a barn and tasting cheese, right.
Speaker 1: I mean that was the thing that I was trying
Speaker 1: to get my head around, literally and figuratively as I
Speaker 1: was reading this, that you're not looking at what you're eating,
Speaker 1: You're looking at something else, and so you're so informed.
Speaker 1: Your senses are essentially informed by what you're experiencing through
Speaker 1: your eyes, not necessarily what you would be experiencing if
Speaker 1: you were just looking at the food exactly. You're not
Speaker 1: looking at at the platonic ideal of like a cow
Speaker 1: marching through the through a field. You're looking at something
Speaker 1: that is going to expand your senses somehow, and whether
Speaker 1: you buy into it or not means to be seen.
Speaker 1: Did you do it? I haven't done it. I've done
Speaker 1: some version of it actually with food, and I have
Speaker 1: to say I'm not a fan because I think of
Speaker 1: it as I think of eating is the best social
Speaker 1: experience in a really good way to have a conversation.
Speaker 1: And if you're arrested by you know, if you have
Speaker 1: this arresting image in front of you, I think it's
Speaker 1: a lot sometime I'm simple is nice. It would feel
Speaker 1: weird if we all went out to dinner and like
Speaker 1: put on masks and then I don't know, but it
Speaker 1: is interesting that James Beard Foundation is getting involved. It's
Speaker 1: very smart for them because, you know what, you always
Speaker 1: have to find a way, Like they're sitting on pricey
Speaker 1: real estate in Greenwich Village and they had this floor
Speaker 1: that was unoccupied, so they get to trick it out
Speaker 1: and move forward into the twenty one century. So I
Speaker 1: think it's actually a very smart idea for them, and
Speaker 1: it's worth seeing what's behind a. Gail Simmons, who's great
Speaker 1: top chef judge, is narrating the experience, and so I
Speaker 1: think people should try it, Like whether they want to
Speaker 1: go back, you know, I don't know. I just want
Speaker 1: to eat my food, that's all I want. Can we
Speaker 1: take a step back? Okay? She's Can we go to
Speaker 1: Japanese milk bread? Yes we can. I've never heard of you.
Speaker 1: I have heard of it only because they sell it
Speaker 1: at the Japanese grocery just down the street here. I
Speaker 1: believe it category it would makes sense if they did.
Speaker 1: But budgets, um, so what is it? It's um, it's fantastic.
Speaker 1: It's just like it's a white bread, you know, and
Speaker 1: and for those of us who grew up in America
Speaker 1: with like not very good white bread on themselves wonderbread.
Speaker 1: You could call it wonderbread history. I mean, that's very true.
Speaker 1: But this is an amazing it's it's a bread that's
Speaker 1: about seven times as rich as white bread. Although it
Speaker 1: looks a little bit like it, but the center is
Speaker 1: like a pillow. It's especially light and fluffy, it's a
Speaker 1: little bit sweet. It's super enriched with butter and our
Speaker 1: eggs and our milk, so it's really healthy. It's really healthy.
Speaker 1: But no, it's like a treat. It's really like it's fantastic,
Speaker 1: and it's definitely helped bring like sandwiches, you know, boring
Speaker 1: like sandwiches now they all have to be tricked out somehow.
Speaker 1: It's definitely like helped heighten the profile of sandwiches. There
Speaker 1: was one um they're called sandos, the Japanese version is
Speaker 1: called sandos, and they're on these like just beautiful pieces
Speaker 1: of this milk bread and sometimes they can go they
Speaker 1: can be really thick, like at least an inch thick
Speaker 1: compared to regular. Right, It's just it's such a treat,
Speaker 1: like you realize, like what a fantastic treat it is
Speaker 1: sometimes to eat a precise little sandwich and um, it
Speaker 1: definitely caught hold in Japan, like after World War Two
Speaker 1: when they were having rice shortages. They've always been you know,
Speaker 1: they've been a culture that likes rice, but there was
Speaker 1: American wheat coming in and so they started to make
Speaker 1: bread and these sandwiches. But they really believe in things
Speaker 1: being well made. They have such a good culture for it.
Speaker 1: So um so, yeah, look out for these sandos that
Speaker 1: you're gonna see both the Japanese restaurants like Jason Store,
Speaker 1: but also um also in other restaurants, and you'll see
Speaker 1: them in sushi restaurants too. And that's cake crater our
Speaker 1: food guru. I love when they're sort of like a
Speaker 1: cake crater takeover of pursuits because you know it's gonna
Speaker 1: be fun. Yeah, there's great stuff. We talked about virtual
Speaker 1: reality with her, but there's also a story about Whiskey
Speaker 1: milkbread reform bankers opening up restaurants in a little bit
Speaker 1: of a story about a cookbook and doubt Nabbey. Yeah, exactly.
Speaker 1: You need it for your tailgate, trust me, you do.
Speaker 1: So if you think private equity, you definitely think of
Speaker 1: Steve Schwartzman. He co founded the private equity behemoth that
Speaker 1: is Blackstone Today with Pete Peterson in the mid nineteen eighties.
Speaker 1: After a successful career on Wall Street. He writes about
Speaker 1: his path, or what he calls a collection of inflection
Speaker 1: points that led him to who he is and where
Speaker 1: he is today. It's all in his new book, What
Speaker 1: it Takes Lessons in the Pursuit of Excellence. It's so
Speaker 1: great to sit down with you. Congratulations on the book.
Speaker 1: Oh thanks, fun to be here. Well, and if you
Speaker 1: could see us, you could see that we both have
Speaker 1: very well worn copies of this. It's really a great read. Steve. Congratulations.
Speaker 1: As Carol said, one of the things that really jumps
Speaker 1: out to me is the stories of Wall Street, the
Speaker 1: stories from your early days sort of getting into it.
Speaker 1: D L. J. Lehman of course Blackstone later on. How
Speaker 1: has Wall Street changed over the course of your career, Well,
Speaker 1: wall Street's changed enormously. Uh. When when I got to
Speaker 1: Wall Street, Uh, there there were a very large number
Speaker 1: of firms uh doing different things. When when negotiated commissions
Speaker 1: were implemented in may day, the cost structure of most
Speaker 1: of the firms was very high. And what happened is
Speaker 1: they were no longer competitive when somebody offered to do
Speaker 1: a brokerage trade for fraction uh. And so you you
Speaker 1: had this uh consolidation that occurred, uh with firms going
Speaker 1: out of business emerging with other firms. Uh. And and
Speaker 1: ultimately you ended up with you know, ten firms uh,
Speaker 1: down from probably in terms of active firms, probably a
Speaker 1: hundred and fifty so so so it was it was
Speaker 1: a dramatic change that that happened over a ten to
Speaker 1: fifteen year period, and as results of that, everything changed.
Speaker 1: Is it a better Wall Street today? It's a different
Speaker 1: Wall Street? Uh, It's certainly a much more efficient Wall Street.
Speaker 1: It's a wall Street that can mobilize much more capital.
Speaker 1: It's a world uh that that has printed so much money, uh,
Speaker 1: not just in the United States, but the deficits that
Speaker 1: have run uh that that it's easy to to aggregate
Speaker 1: a lot of money to do a lot of things.
Speaker 1: It feels like so much of what you've become and
Speaker 1: what you've created really does go back to those early days,
Speaker 1: first at DELJ briefly and then obviously business school, but
Speaker 1: Lehman Brothers. That's where you are really forged in a
Speaker 1: lot of ways. Talk to us about that time, the
Speaker 1: lessons you took from that experience. Well, Lehman was at
Speaker 1: that point, uh, fascinating place in the in the investment banking,
Speaker 1: but a difficult place. I would say, my my first
Speaker 1: day at work, somebody walked out of the elevator and
Speaker 1: welcomed me and said, you're very lucky to work here,
Speaker 1: because nobody here will ever stab you in the back. Actually,
Speaker 1: they'll just walk right up to you and stab you
Speaker 1: in the front. And I remember going home my wife said,
Speaker 1: how is your first day at work? And I said,
Speaker 1: this is going to be a really interesting experience. I
Speaker 1: feel like this leads and if if we may just
Speaker 1: talk a little bit about what's been going on in
Speaker 1: the world at large, because I feel like you have
Speaker 1: such a great vantage point in terms of some of
Speaker 1: the macro issues. And I think about US China and
Speaker 1: what you're just talking about. I think you have two
Speaker 1: individuals who completely believe that their course is the right
Speaker 1: one in terms of US China trade. Um, you know
Speaker 1: both of them. You've been on behalf of the administration
Speaker 1: to China. I think you said in your books something
Speaker 1: like eight times eighteen talk about tenacity. Yeah, yeah, how
Speaker 1: do you see this working out? Well, I think it's
Speaker 1: it's more interesting than two people. Because China has been
Speaker 1: the most rapidly growing country probably in world history over
Speaker 1: a forty year period. And and they did that with
Speaker 1: enormous energy, central planning and also adopting a lot of
Speaker 1: things that emerging markets countries do, which is hiding behind
Speaker 1: high terrafor falls, uh, closing its markets and if not closed,
Speaker 1: not making them as accessible as as the as the
Speaker 1: developed world does. Uh, and doing different things with intellectual property.
Speaker 1: And you know the US uh in um uh nineteenth
Speaker 1: century sort of did the same thing. We were a
Speaker 1: poor little country, uh, and we found a way to
Speaker 1: use tariffs to protect ourselves at a certain point. That
Speaker 1: creates imbalances around the world. So so now that you know,
Speaker 1: China's got three trillion dollars of reserves, uh, it's it's
Speaker 1: the biggest producer and fulfiller of jobs in the world.
Speaker 1: So jobs have moved from the developed world to China.
Speaker 1: Wealth has moved, and the global financial crisis basically created
Speaker 1: problems for the developed world. So now we have roughly
Speaker 1: half of the people, for example, in the United states
Speaker 1: who have income and insufficiency. Uh, they're in a bad way. Uh.
Speaker 1: And and that creates populism. And when domestic candidates for
Speaker 1: being attacked don't result in change for the people who
Speaker 1: are in trouble, they find a foreign devil. Uh. And
Speaker 1: I was pretty sure it was going to be China
Speaker 1: for those reasons. So so so in effect China recognize
Speaker 1: is that that the circumstances of the world have changed. Uh.
Speaker 1: But but like all people who have a really good deal,
Speaker 1: why would you change it? And you only change it
Speaker 1: because there's there's pressure and the change ends up being
Speaker 1: in their interest. On the other hand, UM, there are
Speaker 1: people in their country who don't believe that. They just
Speaker 1: want things the way they are. Remember, people don't like
Speaker 1: to change. And so here we have the developed world,
Speaker 1: represented by the United States, who wants them to change.
Speaker 1: So so it's a very interesting thing where we're China
Speaker 1: knows it has to change, the US wants them to change.
Speaker 1: It should be easy, uh, except Uh, it's not easy
Speaker 1: because people don't like giving up advantage. Uh. And and
Speaker 1: on the U S side, Uh, they would want to
Speaker 1: accomplish this rebalancing as quickly and as thoroughly as they can. So,
Speaker 1: so what's what's happening over the last best two and
Speaker 1: a half years roughly, is these two giant countries which
Speaker 1: which together have somewhere between thirty five of the world's economy.
Speaker 1: So this is like the two parents fighting, uh and
Speaker 1: the children you know, are like hiding, uh and they're upset.
Speaker 1: That's the rest of the world. It's just slowing trade.
Speaker 1: But long term potential decoupling of these two giant countries
Speaker 1: actually results in lower growth for everyone, right, And how
Speaker 1: much do you worry about that? How much do you
Speaker 1: worry about that decoupling, because that seems to be the
Speaker 1: biggest worry in the world right now, is that mom
Speaker 1: and dad will come together splitting of the world's right. Well,
Speaker 1: partly that's happening because because there hasn't been the overlap. Uh.
Speaker 1: And and I think that because ultimately, um, you know,
Speaker 1: people are rational on a certain level, that that as
Speaker 1: as these two countries see that that's not working for them, uh,
Speaker 1: that that they'll come to a table, which is what's
Speaker 1: happening now for the I guess the third time. Uh.
Speaker 1: And they're doing it not to just be helpful, that
Speaker 1: they're doing it as they as they recognize that the
Speaker 1: short term in in trying to can remain fine with
Speaker 1: policy adjustments, but they're borrowing from their future and long
Speaker 1: term if you really go off on your own and
Speaker 1: decouple uh and have a slower growing world, what's the
Speaker 1: wind in that? That's not a win, that's what And
Speaker 1: what can you use, Steve Schwartzman do to help this along? Well,
Speaker 1: I think there are a lot of people who know
Speaker 1: both countries, and I think it's it's it's important that
Speaker 1: that that people understand where this is ultimately going, which
Speaker 1: is not in their interest. And ultimately I I believe
Speaker 1: that people will act in their self interest and there
Speaker 1: will be an adjustment. No, no one can predict the way.
Speaker 1: Sort of the media wants what's going to happen in
Speaker 1: October and you know it's sort of in the you
Speaker 1: know sort of I guess, but it's a who knows,
Speaker 1: because it's really about for the primarily it's about China.
Speaker 1: They have their hardliners, they have their reformers. What do
Speaker 1: they actually want to put on a table? And President
Speaker 1: she has to balance that right now, well, somebody has
Speaker 1: to balance it. And and and in May when the
Speaker 1: trade talks basically were I was gonna say suspended, but
Speaker 1: at that point they were ended. Uh. You know, the
Speaker 1: balance of reform versus you know, sort of the harder
Speaker 1: line position, the harder line people you know, in effect
Speaker 1: had more influenced now as it's all becoming more complicated,
Speaker 1: not just because of trade. Other decisions that China has
Speaker 1: made over the last two or three years are creating
Speaker 1: more complexity there. You know, they've got other things going
Speaker 1: on us as well. They put pressure on them. Uh,
Speaker 1: that that they're coming and saying, let's let's see if
Speaker 1: we can do something. Uh is sensible. Uh, it's you
Speaker 1: can't get caught up in two people, and that's Steve Schwartzman, CEO, chairman,
Speaker 1: co founder Blackstone Group, and Uh, I loved our conversation. Obviously,
Speaker 1: we focused on his book and the lessons that he's learned,
Speaker 1: those inflection points that he talks about, and great also
Speaker 1: to get his views on some of the stories that
Speaker 1: are in today's headlines. And if you want to listen
Speaker 1: to the full interview, check out our Bloomberg Extra podcast.
Speaker 1: We had a long conversation with him, but funnily enough,
Speaker 1: as we were talking to abutterwards. He said, we'd barely
Speaker 1: scratched the surface. That's why he wrote a book. I
Speaker 1: guess that's exactly There's a lot in there. And I
Speaker 1: gotta just say, I really do love this issue. I
Speaker 1: think the story and buy are really deep dive into
Speaker 1: that big corporate move that they did, corporate acquisition of
Speaker 1: mont Santo and then General Motors. Right we we talk
Speaker 1: about electric vehicles, self driving vehicles, General Motors, Mary Barr.
Speaker 1: She may be ahead of the pack, and that may
Speaker 1: be spot on, or she just might be too early
Speaker 1: with her call. And that wraps up Bloomberg Business Week's
Speaker 1: weekend podcast. Thanks so much for joining us. I'm Jason
Speaker 1: Kelly and I'm Carol Masster. Be sure to tune into
Speaker 1: Bloomberg Business Week Radio Live Monday through Friday, starting at
Speaker 1: two pm Wall Street Time. Can't catch us live. Get
Speaker 1: our daily podcast for the Ride Home at iTunes, SoundCloud
Speaker 1: and Bloomberg dot Com, and of coursion. Get this week's
Speaker 1: edition of the magazine. It is on newsstands now. We'll
Speaker 1: be back right here next week at the same time.
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