Speaker 1: This is Wall Street Week. I'm David Weston bringing you
Speaker 1: stories of capitalism. President Trump managed to get a slew
Speaker 1: of tariffs in place, either unilaterally or by agreement before
Speaker 1: his August one deadline, but at least so far, we
Speaker 1: haven't seen them do much to the economy. We explore
Speaker 1: what CEOs of major companies are doing to make sure
Speaker 1: their business stays on track despite the tariffs, and we
Speaker 1: get a somewhat different perspective from the head of a
Speaker 1: modest sized textile company in Colorado that counts heavily on
Speaker 1: imports and exports. Plus, not everyone is welcoming all those
Speaker 1: data centers with open arms. We travel to Warranton, Virginia,
Speaker 1: a town where some are concerned about what they will
Speaker 1: mean for their community. But we start with another comfortable
Speaker 1: truths linked to AI, the possibility that this time it
Speaker 1: really is different. Different in what technological change is doing
Speaker 1: to recent college graduates trying to start their careers. There
Speaker 1: is no question that AI is here to stay. Just
Speaker 1: last month, we reported that Anthropic, a company that didn't
Speaker 1: exist six years ago, could be worth more than Nike
Speaker 1: or Starbucks.
Speaker 2: Anthropic one hundred and seventy billion, XAI and talks for
Speaker 2: two hundred.
Speaker 3: Billion, then I think there's nowhere to go about up.
Speaker 1: And there's no question that at least some employees stand
Speaker 1: to make a great deal of money for their ride
Speaker 1: on the AI train. Apple's top executive in charge of
Speaker 1: AI models is leaving for meta platforms.
Speaker 2: I'm told this pay package is probably somewhere north of
Speaker 2: two hundred million dollars.
Speaker 1: We have never seen anything like this before, and there's
Speaker 1: a lot we don't know about what it will do
Speaker 1: for business and the economy, but we do know that
Speaker 1: leaders of the world's largest and most powerful firms expect
Speaker 1: a title wave, are preparing for it, and already some
Speaker 1: people are feeling the effects on the ground right now,
Speaker 1: people not at the very top of the corporate ladder,
Speaker 1: but those trying to get a step on the bottom rung.
Speaker 1: This year, Jacob Ayub and Tiffany Lee are joining millions
Speaker 1: of their fellow college graduates trying to get their career started.
Speaker 4: This is just one of the case studies that I've done,
Speaker 4: but it's pretty representative of what you can expect if
Speaker 4: you're applying for any full time role at a private
Speaker 4: equity company. Luckily, Boston College does a really good job
Speaker 4: of setting that financial background. We've done in class DCFS
Speaker 4: and class LBOs.
Speaker 3: Manchesk, Milk, thank you, thank you agree today me too.
Speaker 3: I have a few case studies on my portfolio, just
Speaker 3: showcasing the work that I've done at school for the
Speaker 3: companies and nonprofits that I've worked for. The last experience
Speaker 3: I have is another contract role with a startup that
Speaker 3: I did through a club at Cornell as well.
Speaker 1: They have studied different subjects at different schools, Tiffany information
Speaker 1: science and psychology at Cornell, Jacob economics and finance at
Speaker 1: Boston College, but the two graduates have a lot in common.
Speaker 1: They both got good grades, networked widely, and lended prestigious internships,
Speaker 1: Tiffany at Apple and Jacob at a boutique private equity firm,
Speaker 1: and for both it has yet to add up to
Speaker 1: a job.
Speaker 4: Since graduating college. I would say I've applied to around
Speaker 4: two hundred jobs.
Speaker 3: I would say I've applied to about one hundred and
Speaker 3: fifty maybe more now.
Speaker 4: Some of the interview processes consist of constructing models and valuations.
Speaker 4: Some of them are pitch decks.
Speaker 3: I made it to the final round for one like
Speaker 3: big tech company, didn't know getting it. I passed round
Speaker 3: two for another one, and the other ones I either
Speaker 3: haven't heard back or just like ghosted.
Speaker 1: It's a story that's becoming more common, and it's being
Speaker 1: reflected in an unusual new trend in the economic data.
Speaker 1: As far back as the numbers go, the unemployment rate
Speaker 1: for recent college graduates has been below the rate for
Speaker 1: all US workers. But over the past few years, unemployment
Speaker 1: among recent grads climbed above the rate for the broader population.
Speaker 5: This is essentially the first time on a ongoing basis
Speaker 5: of this has occurred in the forty five plus years
Speaker 5: that we have data going back.
Speaker 1: To Matthew Martin is a senior economist at Oxford Economics.
Speaker 5: So really this is pointing towards a lot of people
Speaker 5: who have that higher educational attainment are actually worse off
Speaker 5: than many of their peers who have lower educational attainment.
Speaker 5: That's an interesting dynamic to have in a market where
Speaker 5: you're told you go to college, you work hard, you'll
Speaker 5: have a job after graduation, and unfortunately for many at
Speaker 5: the moment, that's just not happening.
Speaker 1: Recent college grads may be having a harder time right
Speaker 1: now finding their first job but it depends in part
Speaker 1: on what kind of job they're seeking. Entry level jobs
Speaker 1: in the areas Tiffany and Jacob want, tech and finance, respectively,
Speaker 1: turn out to be particularly hard to find.
Speaker 4: A lot of my peers who were in years advance
Speaker 4: for me and trying to give me insights on how
Speaker 4: the process worked, all either had had internships or were
Speaker 4: in the process of getting them, or had full time offers.
Speaker 4: And these are sometimes people that are just juniors who
Speaker 4: have a full time offer at a bank or different firm.
Speaker 4: And I think with my graduation class there's been a
Speaker 4: pretty drastic change. I'd say about fifty percent of my
Speaker 4: graduating class is unemployed.
Speaker 3: I see a lot of job descriptions that are asking
Speaker 3: for two years of experience or like three years of experience.
Speaker 3: And in design specifically, it's been pretty hard. I think
Speaker 3: it's just a very saturated field and there's a lot
Speaker 3: of talent out there.
Speaker 5: Tech is one of those that has been really slowed
Speaker 5: down from a lot of that comes down to the
Speaker 5: hiring boom that they did post pandemic and then looking
Speaker 5: to the right size. You also have other mathematical occupations
Speaker 5: and finance, legal. Some of these fields that you would
Speaker 5: again have been in high demands over the last couple
Speaker 5: of years that just aren't seeing as much.
Speaker 1: Economists say the reasons can be difficult to trace. Some
Speaker 1: of it is likely the overall labor market cooling after
Speaker 1: the post pandemic hiring surge, But now there's a new
Speaker 1: cause coming on the scene. Artificial intelligence AI will leave
Speaker 1: a lot of white color people behind. All junior level
Speaker 1: jobs in any industry are at high risk.
Speaker 3: This is like a tsunami hitting the labor market.
Speaker 1: For months, economists and executives have been raising concerns about
Speaker 1: AI or publicly embracing it, sometimes both. Amazon CEO Andy
Speaker 1: Jesse wrote a note to employees in June saying that
Speaker 1: AI would change the way work is done at the
Speaker 1: tech giant and that jobs would be cut as AI
Speaker 1: increased efficiency, and Thropic CEO Dario Amoday told one news
Speaker 1: outlet that AI could potentially wipe out half of all
Speaker 1: entry level white collar jobs and send unemployment rates surging.
Speaker 1: We may not be seeing anything quite that bad yet,
Speaker 1: but AI's impact does seem to be showing up in
Speaker 1: unemployment figures for recent college graduates.
Speaker 5: I think there is definitely a link between the two.
Speaker 5: It's hard to very parse through and just say, you know,
Speaker 5: X amount of this issue is because of AI, X
Speaker 5: amount is because of just a slower demand overall. But
Speaker 5: when we look at the numbers, there definitely could be
Speaker 5: a connection there. So one of the things we're seeing
Speaker 5: is that a the tech sector is one of the
Speaker 5: industries with the highest adoption rates AI. They have around
Speaker 5: twenty five percent adoption rates for all businesses using it
Speaker 5: in their day to day operations, whereas the national average
Speaker 5: is around five percent. So clearly the sector is just
Speaker 5: using it more in general. And then when we look
Speaker 5: into the specifically the recent college graduate data, we see
Speaker 5: that in the last years employment for recent college grads
Speaker 5: twenty two to twenty seven, they've seen a decrease in
Speaker 5: employment opportunities overall, whereas if you look in the same
Speaker 5: fields for those twenty eight onwards, they've actually seen slightly
Speaker 5: flat to maybe a little bit up overall.
Speaker 1: A similar story appears in the latest company hiring data.
Speaker 1: An analysis by Indeed conducted for Wall Street Week shows
Speaker 1: junior level job postings have tumbled over the last two
Speaker 1: years and are now twenty one percent below their pre
Speaker 1: pandemic level, even as senior level openings are up. Although
Speaker 1: tech maybe one area where AI is particularly affecting entry
Speaker 1: level positions, it's not the only one. As Martin says,
Speaker 1: they see vulnerability in finance jobs like the one that
Speaker 1: Jacob is seeking. To learn more, we sat down with
Speaker 1: Blair Ephron, co founder of center View Partners, one of
Speaker 1: the world's most prestigious investment banks. We see an awful
Speaker 1: lot of money being invested in AI. Are we far
Speaker 1: enough into the process now to know whether it's going
Speaker 1: to work?
Speaker 6: Now?
Speaker 1: Obviously there are different ways it could work high, medium, low,
Speaker 1: But do we know it's fundamently going to work that
Speaker 1: There's no chance this is a bubble.
Speaker 7: So it's not a bubble. I am always a believer
Speaker 7: in progress. AI is progress over the long haul. It
Speaker 7: will be good in the short term. I have big concerns.
Speaker 7: I believe the impact on employment is going to be
Speaker 7: dramatic sooner than we think now.
Speaker 8: With that set, AI for us as an example, is
Speaker 8: a positive.
Speaker 7: We're less focused on productivity, more focused on freeing up
Speaker 7: someone's time so that they can use that time more productively.
Speaker 7: But given all the positive, we have to absolutely look
Speaker 7: after the watchout sign.
Speaker 8: What is going to go on with employment.
Speaker 1: One outcome could be a workforce that looks very different
Speaker 1: than it does today, fewer jobs in computer science, finance,
Speaker 1: or law, and more jobs that benefit from interpersonal interaction.
Speaker 1: Matthew Martin says these trends are already showing up in
Speaker 1: the data, whether or not they can be traced to AI,
Speaker 1: and they are affecting men and women differently.
Speaker 5: While the recent college graduate unemployment has raised overall, it's
Speaker 5: really been concentrated in males specifically. A lot of that
Speaker 5: comes down to what industries are they looking to work in.
Speaker 5: If we do a quick breakout of the industries of
Speaker 5: recent college graduates, females tend to move towards healthcare services
Speaker 5: and educational services or demands quite high. I think between
Speaker 5: those two they account for over forty percent of recent
Speaker 5: college graduates for females, whereas males specifically in healthcare services
Speaker 5: only counts around five percent. So it's an imbalance of
Speaker 5: what positions are these males versus females going into. Males
Speaker 5: tend to skew towards these computer science professions, whether that's
Speaker 5: programming or the tech sector just in general. That's closer
Speaker 5: to twenty twenty five percent for them. So you just
Speaker 5: have this imbalance of males tending to want to go
Speaker 5: to these industries where demand is really low at the moment,
Speaker 5: whereas females are entering industries where demand remigins quite high.
Speaker 1: Although a picture of AI's economic impact may be just
Speaker 1: starting to come into focus, we can be sure that
Speaker 1: the best and the worst are yet to come. Some
Speaker 1: advice from the C suite to help the next generation prepare,
Speaker 1: stay flexible, and develop the skills that remain so far
Speaker 1: uniquely human.
Speaker 8: Broad based thinking, deep thinking.
Speaker 7: And there are just so many different fields and so
Speaker 7: many different kinds of enterprises, big and small, that will
Speaker 7: help you do that wide in the aperture of what
Speaker 7: you think might be a fit. Taking a lot of
Speaker 7: writing courses, a lot of humanities, learning how to think, critically,
Speaker 7: learning the art of learning, curiosity, thinking about judgment, thinking
Speaker 7: about coming out with an output and answer based on
Speaker 7: facts that is contrary to what a model.
Speaker 8: May show you.
Speaker 7: This is what we need, because this is what I
Speaker 7: think will never got a style.
Speaker 8: Judgment's not going out of style.
Speaker 1: The benefits of AI in the long run may well
Speaker 1: dwarf the problems, but when you're in the middle of
Speaker 1: that first job search, the long run may seem very
Speaker 1: far off.
Speaker 4: You put in a lot of work starting from high school.
Speaker 4: I get the right SAT score, go to the right college,
Speaker 4: get internships, get experience. You come out with kind of
Speaker 4: an uncertainty.
Speaker 3: It kind of makes me want to consider a master's
Speaker 3: but I know that it's really expensive, and I just
Speaker 3: don't know if it's worth all that money just to
Speaker 3: get an entry level job.
Speaker 4: It's more so frustration towards the system and overall process,
Speaker 4: but you also start questioning your underlying abilities.
Speaker 1: Jacob and Tiffany, it seems did everything right, and it's
Speaker 1: not quite that they're falling behind, but that the entire
Speaker 1: world is shifting under their feet. The rules have suddenly changed,
Speaker 1: and what are those new rules for all of us?
Speaker 1: That still remains to be seen. Coming up, we hear
Speaker 1: more from Blair Ephron, this time not on what AI
Speaker 1: means for corporate leaders, but on what those leaders are
Speaker 1: doing to make sure that Trump tariffs don't disrupt their businesses.
Speaker 1: This is a story about adapting. Charles Darwin taught us
Speaker 1: that it is not the smartest or strongest that survive,
Speaker 1: but those who are best able to adapt to the
Speaker 1: changing environment. And when it comes to CEOs of major companies,
Speaker 1: there's no question that President Trump's approach has changed their environment.
Speaker 1: Blair Ephron, co founder of Centerview Partners, has watched them adapt.
Speaker 1: President Trump came to office saying I'm going to change
Speaker 1: the economy in fundamental ways. Has it changed the lives
Speaker 1: of American.
Speaker 7: CEOs much less than you think. And the fact of the
Speaker 7: matter is they're growing well under Biden. They're going well. Now,
Speaker 7: what is that about for the most part the US economy?
Speaker 7: In my world, the big company CEOs, big company senior executives,
Speaker 7: they've learned to one operate quite apart from policy in Washington,
Speaker 7: and two they have been operating a period of volatility
Speaker 7: for so many years now they've just gotten much better
Speaker 7: about how to remove uncertainty in their own businesses. However,
Speaker 7: coos certainly talk about long term impacts of policy, and
Speaker 7: what I hear about most more than anything is our
Speaker 7: federal debt situation, which is clearly dramatic and clearly something
Speaker 7: that at some point will create a problem.
Speaker 1: CEOs may have the tools to adapt to short term
Speaker 1: changes in trade policy, but they may not have the
Speaker 1: same ability to do anything about the US fiscal imbalance
Speaker 1: over the long term.
Speaker 7: Twenty ten Simpson Bowls put together talk about the debt.
Speaker 7: We had sixteen trillion dollars of debt. Thet we're heading
Speaker 7: towards forty three times what we had. Then trillion dollars
Speaker 7: of interest expense.
Speaker 8: Being spent by the government.
Speaker 7: That's almost twenty percent of what they do, more than
Speaker 7: they do on defense. That is something that CEO's are
Speaker 7: attuned to. They know that it wasn't this crowding out effect.
Speaker 8: You could have even more growth. They would benefit.
Speaker 1: President Trump's goal in imposing substantial tariffs on imports is
Speaker 1: to move manufacturing back on shore, and so far EFRON
Speaker 1: sees them as having mixed results.
Speaker 8: It goes two ways. I think you have to start
Speaker 8: with what.
Speaker 7: Is the most secure way to help your supply chain,
Speaker 7: and that certainly can be on shore. It certainly can
Speaker 7: be to more friendly markets in Southeast Asia, can certainly
Speaker 7: be to Mexico. It's been going both ways. I know
Speaker 7: of a company that services Canada with its plants in Michigan.
Speaker 7: It's thinking about putting capital in Canada because of what's
Speaker 7: going on, so they can produce locally, so it actually
Speaker 7: goes both ways. And the kind of manufacturing we're talking about,
Speaker 7: for the most part, is a very advanced manufacturing, so
Speaker 7: it's not labor intensive, it's not people in a plant,
Speaker 7: it's the equipment. So I think that on balance, it's
Speaker 7: hard to talk to any CEO who thinks that tariffs
Speaker 7: are a good thing and that high tariffs more't heavy
Speaker 7: dramatic negative impact.
Speaker 1: There's a good deal to talk about uncertainty, and the
Speaker 1: uncertainty over everything from tariffs to who's going to be
Speaker 1: the FED share the interest rates. Now, does that really
Speaker 1: affect the real economy?
Speaker 7: The answer is clearly not, okay, And CEOs have gotten
Speaker 7: so good about blocking all noise, all noise from all
Speaker 7: political quarters. They focus on facts, substance, real policy. They
Speaker 7: know that something said today by any elected official doesn't
Speaker 7: mean much unless there's consisting to it and staying with it,
Speaker 7: and they just block out the noise.
Speaker 8: That CEOs for the most part are really.
Speaker 7: Experienced, really talented, and have been through the volatility wars.
Speaker 7: But the reason I have been, and we've talked about it,
Speaker 7: more optimistic about the economy is because of that, and
Speaker 7: I believe.
Speaker 8: I can make a case for dark clouds well down
Speaker 8: the road.
Speaker 7: But barring some unforced error, which certainly we are prone
Speaker 7: to make, I think the economy will continue to show
Speaker 7: tailwind and resilience.
Speaker 1: That tailwind may look a bit different in New York City,
Speaker 1: where New York State Assemblyman Zorian Mamdani is in a
Speaker 1: strong position to become its next mayor and is running
Speaker 1: on policies not generally seen as pro business.
Speaker 7: So let's first talk about New York trillion dollar economy,
Speaker 7: sixty three million visitors, ten percent of every student graduating
Speaker 7: college comes to the city.
Speaker 8: New York will be fine.
Speaker 7: That said, the mayor, whoever that person is, needs to
Speaker 7: be mayor for eight and a half million people in
Speaker 7: every borough. It has to be a mayor who appreciates
Speaker 7: what it means to attract business formation, what attracts capital formation,
Speaker 7: what it means to keep people in the city and thriving.
Speaker 7: For example, Zoramndani, he's going to have to make the
Speaker 7: choice whether he must be mayor or whether he must be.
Speaker 8: An effective mayor.
Speaker 7: And I believe to be an effective mayor, a talented
Speaker 7: political official, and he's talented will have to be attuned
Speaker 7: to that a lot of us met with him in
Speaker 7: the business community the other.
Speaker 8: Day, and clearly one it was worthwhile meeting.
Speaker 7: He listened creatus for him to come to this group.
Speaker 7: The questions were pointed, and my goal is that the
Speaker 7: more he hears from the business community, and now the
Speaker 7: business community helps drive the engine of New York along
Speaker 7: with many other communities here, the more he is the
Speaker 7: mayor will appreciate that he needs to be the mayor
Speaker 7: for everyone.
Speaker 1: Having heard from him directly, do you have a sense
Speaker 1: that he knows what he doesn't know? Because that may
Speaker 1: be one of the most important things in life. To
Speaker 1: really say there are things I don't know I need
Speaker 1: to learn.
Speaker 8: I would say I don't know. However, I'm going to
Speaker 8: make a judgment.
Speaker 7: He has said publicly, publicly informs where I've been just
Speaker 7: that that he wants to get the best people in
Speaker 7: every position, people who know more about that ptic area
Speaker 7: than he does. He strikes me as someone who is
Speaker 7: absolutely willing to learn, and I don't think you can
Speaker 7: do as well as he's done as a candidate without
Speaker 7: that ability. Whoever the mayor is, I hope, really appreciates
Speaker 7: that the skill set of a mayor as opposed to
Speaker 7: somebody in Congress, is less about policy and more about
Speaker 7: making sure day to day the city is affordable and livable.
Speaker 1: It's hard to be against being affordable and livable. But
Speaker 1: as far as I can tell, an essential work of
Speaker 1: governance is unintended consequences. For example, we can say we're
Speaker 1: going to freeze rents, which sounds good for people who
Speaker 1: are renting, but it doesn't necessarily give incentive for building
Speaker 1: a lot more units. We will bring prices down. Is
Speaker 1: he learning? Can he learn those sort of understanded consequences that,
Speaker 1: in fact, the best way to make things more affordable
Speaker 1: may not be the most obvious way.
Speaker 8: It's going to be very clear.
Speaker 7: I don't know yet or does anyone what he's learning,
Speaker 7: But make no mistake, rent control will reduce housing stock.
Speaker 8: Putting at grocery store in each borough.
Speaker 7: That's five relative to the twenty five hundred grocery stores
Speaker 7: we have in the five boroughs doesn't do much. Let's
Speaker 7: be clear, anyone here is already paying a lot of tax.
Speaker 7: It's a privilege to live in New York. There is
Speaker 7: a point where, and we sit in studies, it has
Speaker 7: an impact if it gets out of line with other states.
Speaker 7: So the point is we all need to focus on
Speaker 7: a probability. I think he is spot on, But to
Speaker 7: your point, there are many ways to attack it. I
Speaker 7: think we need to be much more focused as a
Speaker 7: city to do just that.
Speaker 1: You make a powerful case for why New York will
Speaker 1: be just fine in terms of the economy overall. But
Speaker 1: do we need in New York City to be more
Speaker 1: concerned with competing with other centers around the country, around
Speaker 1: the world, but particularly around the country than we have
Speaker 1: it in the past. We've heard allowed to talk about
Speaker 1: moving to Dallas, about moving to Miami. Is that a
Speaker 1: real issue for New York City?
Speaker 8: Is it a real issue? Absolutely? Have you risen to
Speaker 8: the challenge? You bet?
Speaker 7: New York is longer today than it was four years ago.
Speaker 7: We have more people coming in than not. We have
Speaker 7: the second biggest tech hub in New York City. We
Speaker 7: have more drugs and healthcare coming out of here than
Speaker 7: any other city.
Speaker 8: But for Boston, we're doing fine.
Speaker 1: Where is the Democratic Party right now and what do
Speaker 1: you see as a forward path?
Speaker 8: Great question.
Speaker 7: I think the Democratic Party is a work in progress,
Speaker 7: and the next test.
Speaker 8: Will obviously be in a few quarters. November twenty six.
Speaker 7: What I can tell you is as a party, Democrats
Speaker 7: ought to have the base case that the economy will
Speaker 7: have a tailwind. I ought to have his base case. Therefore,
Speaker 7: it has to be much more about what the party's for,
Speaker 7: not for the other guys for. And when I think
Speaker 7: about that, the party has to do a much better
Speaker 7: job diagnosing what the issues are, coming up with solutions
Speaker 7: that meet the needs of all Americans. I don't think
Speaker 7: we've done a very good job focusing on affordability in
Speaker 7: a very practical way, understanding that policy should be driven
Speaker 7: from people up, not from thinkers down, and has to
Speaker 7: clearly be much more unified about how that's going to happen.
Speaker 8: I think that has been an issue for us. I
Speaker 8: do find.
Speaker 7: Parties in general are pretty nimble about course correcting, whether
Speaker 7: a Republican or Democrat. I assume by the time midterms
Speaker 7: come around, Democrats, well, I figured out how Court's correct.
Speaker 7: But it better be not just an agenda based on
Speaker 7: fairness as opposed to fairness and growth.
Speaker 1: Who will help guide the Democrat Party away from a
Speaker 1: very obvious alternative, which is to go to the other extreme.
Speaker 1: I mean, some people think we're seeing that right now.
Speaker 1: With you could name names aoc or Bernie Sanders, or
Speaker 1: even Mamdani. There's a natural reaction to say, Okay, we've
Speaker 1: got to compensate. If we've got right wing populism over here,
Speaker 1: let's go left from podcism. How will the Democratic Party
Speaker 1: avoid that? If in fact it should so.
Speaker 7: I'm quite confident that the Democratic Party has enough voices
Speaker 7: across the spectrum that by the time.
Speaker 8: We get to.
Speaker 7: The election, we will have a strong group of candidates
Speaker 7: will reflect the thinking of most Americans, which is less
Speaker 7: about political ends of the spectrum, more about just getting
Speaker 7: tomorrow put on the table, getting a good job, raising
Speaker 7: your family the right way.
Speaker 8: And I believe that the party always should.
Speaker 7: Focus on all ends of the spectrum, but I do
Speaker 7: believe it will end up unifying on what matters most,
Speaker 7: solving people's issues.
Speaker 1: Next, we turn from the c suites of some of
Speaker 1: America's largest companies to one specific, modest sized company that
Speaker 1: depends on imports and exports for its textile business. We
Speaker 1: go to Bend, Oregon and hear from Jeff Bowman, CEO
Speaker 1: of Cocona Labs. This is a story about friendly fire.
Speaker 1: President Trump has embraced tariffs as a way to protect
Speaker 1: domestic US businesses from unfair foreign competition.
Speaker 9: I might go up with that tariff in the not
Speaker 9: too distant future.
Speaker 7: The higher you go, the more likely it is they
Speaker 7: build a plant here.
Speaker 1: Last week, we've brought you the story of a music
Speaker 1: accessories company that is finding new ways of getting the
Speaker 1: supplies it needs and maintaining its export business despite those tariffs.
Speaker 1: But for some industries that's easier said than done.
Speaker 2: Already, it's impacted our business because it's reduced the amount
Speaker 2: of volume of business that's out there.
Speaker 1: Jeff Bowman is the CEO of Cocona Labs, which makes
Speaker 1: a compound used in fabric.
Speaker 2: We have a technology called thirty seven point five technology.
Speaker 2: The purpose of it is to remove humidity from the
Speaker 2: microclimate next to your skin. That helps you stay more
Speaker 2: comfortab in both warm and cold weather conditions, and it
Speaker 2: helps you operate at a peak performance. If you're an athlete,
Speaker 2: you can operate in peak performance longer. And what we
Speaker 2: do is we mine a mineral in the United States.
Speaker 2: Essentially it's a volcanic sand. We convert that into what's
Speaker 2: called master batch, which is a concentration of that mineral
Speaker 2: that's then put into the spinning operations for things like
Speaker 2: nylon and polypropylene and polyester. They make filaments and yarns
Speaker 2: out of that. Those yarns and filaments are then made
Speaker 2: into fabrics.
Speaker 6: Those fabrics are.
Speaker 2: Made into clothing or bedding or footwear, and we make
Speaker 2: money by selling the master batch, which we make in
Speaker 2: the United States. Primarily we export that because most yarn
Speaker 2: spinners are outside of the United States. And then we
Speaker 2: also license the technology to brands that use it. Sleep
Speaker 2: Numbers for betting, the Men's Warehouse for clothing, Solomon for
Speaker 2: technical clothing. If they're hunters, they know first light. So
Speaker 2: there's well over one hundred brands that we license the
Speaker 2: technology to.
Speaker 1: And that's a proprietary process.
Speaker 6: It is.
Speaker 2: It's very difficult to take a water loving mineral and
Speaker 2: put it into manufacturing operations at hate water, So we
Speaker 2: have patents on it and a ton of trade secrets.
Speaker 2: You know, we're very cognizant of keeping those trade secrets secret.
Speaker 1: The United States is the world's second largest exporter of textiles.
Speaker 1: It used to be first, employing one and a half
Speaker 1: million workers, but now it employs only about four hundred
Speaker 1: and seventy thousand. As China has risen to become the
Speaker 1: number one producer, we.
Speaker 2: Do have customers in the United States. Generally, the spinners
Speaker 2: outside of the United States are more competitive from a
Speaker 2: price standpoint, and they've got more capacity, more infrastructure. Decades ago,
Speaker 2: most of that did reside in the United States and
Speaker 2: eventually moved outside of the United States. China at one
Speaker 2: point in time decided that it was a strategic industry,
Speaker 2: so they worked with their business people to develop that infrastructure,
Speaker 2: and now that's primarily where.
Speaker 6: The most of it's done today.
Speaker 2: India is also a big export country for US as well.
Speaker 1: The tariffs being imposed by the Trump administration affect a
Speaker 1: textile business like Cocona Labse both in the cost of
Speaker 1: its raw products and ironically in its exports to places
Speaker 1: like China.
Speaker 2: People are not placing orders because they're uncertain in terms
Speaker 2: of what the ultimate pricing is going to be. I
Speaker 2: spent this morning all morning talking to my team about
Speaker 2: a business that we're working on right now with one
Speaker 2: of the largest hotel chains in the United States. They're
Speaker 2: looking to incorporate our technology in their bedding, and one
Speaker 2: of the questions that we're getting from our Chinese partners
Speaker 2: who would be spinning the yarn for that is, how
Speaker 2: should they price the yarn based on the tariffs, And
Speaker 2: of course that's a very difficult question for us to answer.
Speaker 2: We did exports some product of China last week. We
Speaker 2: ate the tariff ourself of about sixteen and a half percent.
Speaker 6: We actually ate ten percent of that.
Speaker 2: Previously there was six and a half percent tariff in
Speaker 2: place already, So it's kind of a wait and see
Speaker 2: right now. But in the short term, it is reducing
Speaker 2: the amount of business that's out there, and it's reducing
Speaker 2: the amount of investment that people are willing to make
Speaker 2: in new products. Specific to us, because we're a small
Speaker 2: company that exports as opposed to imports, you know, from
Speaker 2: China and Indian those other places, the reciprocal tariffs also
Speaker 2: impact us. And when Trump first announced, you know, the
Speaker 2: large tariffs on China, China retaliated with one hundred and
Speaker 2: forty five percent tariff. That would have been a killer
Speaker 2: for us, It would have killed our business. We just
Speaker 2: happened to have a bunch of our product in our
Speaker 2: Shanghai warehouse the time, so within thirty six hours we
Speaker 2: were able to sell that to our customers, move it
Speaker 2: out of the warehouse, and that brought us a few
Speaker 2: months traff free. We're waiting to see what's going to
Speaker 2: happen with the tariffs. It impacts our business in several ways.
Speaker 2: We're also trying to develop a domestic business in those countries.
Speaker 2: So this shirt is an example. It's a shirt made
Speaker 2: in China and it's sold to Chinese customers. And when
Speaker 2: the price of the yarns increase, then it impacts the
Speaker 2: price of the finished products, and it impacts our business.
Speaker 1: They charge us.
Speaker 6: We judge him.
Speaker 1: In pursuing his approach to tariffs, President Trump has said
Speaker 1: again and again one of his main goals is to
Speaker 1: bring manufacturing back on shore in the United States. Would
Speaker 1: that work out that way in your business.
Speaker 6: No, definitely not.
Speaker 2: You'd have to cut and sew this garment or bedding
Speaker 2: or any other garment. You'd have to make that garment
Speaker 2: in the United States, and people just don't want those jobs.
Speaker 2: Number one, and number two, the cost of labor here
Speaker 2: is so much higher that the price of those goods
Speaker 2: would dramatically increase if they're made in the United States.
Speaker 2: So it would make everything much more expensive. You know,
Speaker 2: even the deal with Vietnam is a case in point.
Speaker 2: I don't think most people understand that those goods coming
Speaker 2: into the United States already had a tariff on them,
Speaker 2: And the case of clothing coming from Vietnam as an example,
Speaker 2: there was a sixteen and.
Speaker 6: A half percent tariff before Trump.
Speaker 2: With the additional twenty percent that was just negotiated, that
Speaker 2: means that there's a thirty six and a half percent
Speaker 2: tariff on apparel now coming into the United States from Vietnam.
Speaker 2: Some of that's going to get passed on, there's no
Speaker 2: question about it. So the price of goods will go up.
Speaker 2: With the increase in the price of goods, the amount
Speaker 2: of business will go down. I mean, Trump and I
Speaker 2: both went to the same business school, Wharton, and apparently
Speaker 2: he didn't take the tariff class, because certainly the teachings
Speaker 2: and the empirical history showed is that when you impose tariff,
Speaker 2: the net effect is that you reduce the amount of
Speaker 2: business that takes place, and we're seeing that happen.
Speaker 6: Already, costs go up.
Speaker 2: Consumers pay the price eventually, and there's just less business
Speaker 2: being conducted.
Speaker 1: Whatever proves out from President Trump's tterarf at this point,
Speaker 1: it appeers there are going to be tariffs. We already
Speaker 1: see fifteen percent effective and think in some place it
Speaker 1: could be higher than that. So assuming that happens, just
Speaker 1: let's assume from it's fifteen to twenty percent effective tariff.
Speaker 1: What do you do to change your business to make
Speaker 1: sure it's still a good business, it's viable.
Speaker 6: Well, what we have.
Speaker 2: Been doing is number one, making sure that our customers
Speaker 2: have options, So we ship master Match around the world.
Speaker 2: We ship it to Turkey, we ship it to India, Taiwan, China, Korea,
Speaker 2: et cetera. Making sure that they have options so that
Speaker 2: there's so we can mitigate the tariffs hopefully in any
Speaker 2: one country.
Speaker 6: That's the first thing that we're doing.
Speaker 2: And second is, you know, we're looking at in some
Speaker 2: cases potentially moving some of our manufacturing out of the
Speaker 2: United States into China, something that we're loath to do,
Speaker 2: just to reduce the reciprocal tariffs that are being placed
Speaker 2: on our goods. You know, ultimately it will help with
Speaker 2: the cost of goods coming back to the United States.
Speaker 2: It will certainly help even more with the goods that
Speaker 2: are being sold into those countries we're worried about tariffs.
Speaker 2: I mean, candidly, we shipped a master batch to China
Speaker 2: two weeks ago. We paid sixteen and a half percent
Speaker 2: tariff on it. We eight ten percent of that. That's
Speaker 2: not sustainable for us long term. You know, we'd have
Speaker 2: to raise our prices. When we raise our prices, it
Speaker 2: will ultimately affect the amount of volume that's being sold.
Speaker 2: So it's not good.
Speaker 1: How elastic or inelastic is that demand for your product?
Speaker 1: I mean, how what pricing power do you have to
Speaker 1: pass along some or all of those increases?
Speaker 2: You know, we have to pass on some otherwise we'll
Speaker 2: go out of business. And there's trade off. And that's
Speaker 2: the fact what I was talking about this morning. Our
Speaker 2: Chinese partners are trying to figure out how to price
Speaker 2: their yarn for this very large hotel chain opportunity, and
Speaker 2: they want to know how to account for the tariffs,
Speaker 2: and we don't have an answer form candidly, other than
Speaker 2: to tell them that we're not going to eat that tariff.
Speaker 6: We may eat a portion of it.
Speaker 2: I think we're waiting to see what ultimately happens and
Speaker 2: what the tariffs actually end up being, and then we'll adjust,
Speaker 2: you know, accordingly as best we can there will be collaboration,
Speaker 2: I'm sure throughout the supply chain. Ultimately you'll see higher
Speaker 2: prices at the consumer level.
Speaker 1: And if in fact these tariffs continue, what's going to
Speaker 1: happen to your employment situation in general?
Speaker 2: You know, we don't lay anybody off. We were actually
Speaker 2: voted one of the top fifty small companies in the
Speaker 2: United States to work for last year, so you know,
Speaker 2: we value our employees greatly and try to hold on
Speaker 2: to them. Definitely, during COVID, everybody took a pay cut
Speaker 2: for a period of time. It's just so that we
Speaker 2: can survive. So we'll do what we have to do
Speaker 2: to survive. We'll do it we have to do to
Speaker 2: hold on to our employees. Ideally, we'll do we have
Speaker 2: to do to continue manufacturing in the United States.
Speaker 6: We're very adaptable.
Speaker 1: As difficult as the tariffs may be for kcona Lab's business,
Speaker 1: Bowman does believe they deserve to have a role in
Speaker 1: economic policy, just not quite as broad a role as
Speaker 1: they are being given. If you got to sit down
Speaker 1: with your fellow Wharton graduate in the White House and
Speaker 1: give him a piece of your mind about what he
Speaker 1: should be doing, what would you advise him.
Speaker 2: Well, I think tariffs are a strategic tool. I think
Speaker 2: if they're used surgically, they can help. I think broadbrushed
Speaker 2: tariffs don't work in my opinion, so I would encourage
Speaker 2: him to be surgical about it. We're a small American
Speaker 2: company trying to do business in China, where historically there
Speaker 2: has been very little tariff of our goods go into China.
Speaker 2: It's still very difficult to do business in China because
Speaker 2: of the non tariff barriers to doing business, things like
Speaker 2: the banking laws and the marketing laws and the administrative
Speaker 2: issues that you have to deal with on a daily basis.
Speaker 6: And it's not.
Speaker 2: Clear to me that this tariff war that we're in
Speaker 2: is going to impact any of that. All I see
Speaker 2: happening is that we're going to increase the price of
Speaker 2: goods coming into the United States. We're not going to
Speaker 2: address the fundamental issues that are making it different difficult
Speaker 2: for companies like mine to do business in places like China.
Speaker 2: And that's those non tariff barriers to doing.
Speaker 1: Business, whether it's to break down barriers to US exports
Speaker 1: or to discourage production abroad. One of President Trump's main
Speaker 1: goals is increasing US manufacturing overall something special contributor to
Speaker 1: Larry Summers of Harvard says, tariffs will not accomplish.
Speaker 10: This isn't a debate about whether manufacturing is important or not.
Speaker 10: That's an important debate to have as we go forward.
Speaker 10: But even if you take as given the central importance
Speaker 10: of cutting edge manufacturing, taxing inputs, alienating partners, and enraging
Speaker 10: those who control the external markets can't possibly be the
Speaker 10: right strategy for rebuilding American manufacturers. Look, I take another
Speaker 10: way of looking at this. We think of ourselves. We
Speaker 10: think of automobiles as like a traditional industry that we're
Speaker 10: trying to protect in a good way. But this is
Speaker 10: slashing general motors profits. This is slash all the automobile
Speaker 10: companies are complaining about our tariff policies because what they
Speaker 10: mean for integrated production in North America. So even for
Speaker 10: the people who were the traditional constituency for this kind
Speaker 10: of policy, they're not seeing it as as a positive.
Speaker 10: So this is not some debate between the coastal people
Speaker 10: who like finance and movies as businesses and the people
Speaker 10: in the middle of the country who are focused on
Speaker 10: the heartland of manufacturing. Even if you just look at
Speaker 10: what you're doing for the heartland of manufacturing higher priced inputs,
Speaker 10: much more uncertainty for investors and alienating of customers can't
Speaker 10: be the right strategy. There's a winner here. There really
Speaker 10: is a winner here in the strategy that we are pursuing.
Speaker 10: His name is she Jinping, and I hope we'll stop.
Speaker 1: Up next. Data centers may be the path to an
Speaker 1: AI future. But what if a community isn't sure they
Speaker 1: want more data centers? We go to Warrenton, Virginia to
Speaker 1: find out. This is a story about needs and wants.
Speaker 1: Sometimes what we need may not be what we want.
Speaker 1: We need more productivity from AI, but we don't want
Speaker 1: young college graduates going unemployed. And at least some of
Speaker 1: us may not want our local communities transformed by the
Speaker 1: building of all those data centers we need for AI.
Speaker 11: Warrenton is a tiny town ten thousand people. Picture Norman
Speaker 11: Rockwell Pictures picture Mayberry and Andy Griffith.
Speaker 1: Cindy Burbank lives in Warrenton, Virginia. She took us to
Speaker 1: what would have been a data center down This.
Speaker 11: We did pathway is the forty two acre site that
Speaker 11: Amazon purchased to build a data center.
Speaker 1: On without data centers to process, store, and distribute information.
Speaker 1: We don't have AI with everything from internet search.
Speaker 8: We are on an exponential curve and a relatively steep.
Speaker 1: One to drug discovery and approval.
Speaker 12: Is going to propel the biological research AI in unprecedented ways.
Speaker 1: To reap all the benefits AI has to offer. Global
Speaker 1: data center capacity is expected to grow at a rate
Speaker 1: of fifteen percent per year, and even that may not
Speaker 1: be enough to keep up with demand. Christine Wood is
Speaker 1: the data center practice lead at Burns and MacDonald and
Speaker 1: consults with company building data centers.
Speaker 13: Power is becoming the long pole in the tent to
Speaker 13: be able to find a data center site, and so
Speaker 13: it really starts with that is the power puzzle that
Speaker 13: we're seeing associated with the data center site.
Speaker 1: But supplying all that power can cause disruption to the
Speaker 1: communities where data centers want to be located. Not everyone
Speaker 1: wants a data center for a neighbor.
Speaker 9: We're situated about forty five miles to the west of Washington. D. C.
Speaker 1: Carter Neville is a native of Warrenton, Virginia. He has
Speaker 1: been the mayor of the town since twenty nineteen.
Speaker 9: We are heavily depended upon our meal taxes, and our
Speaker 9: largest meal sax provider is Chick fil A. We have
Speaker 9: very fortunate to have as residents very low taxes in
Speaker 9: terms of real estate taxes, and so pretty much our
Speaker 9: largest employer is the school board, followed by the hospital
Speaker 9: in Walmart.
Speaker 1: Warrenton's data center journey began in twenty twenty three when
Speaker 1: the town council voted to consider an Amazon data center
Speaker 1: on a forty two acre site.
Speaker 9: On the up side to provide a significant amount of revenue,
Speaker 9: which we are desperately in need of. Our infrastructure is aging.
Speaker 9: We're behind the eight ball and a lot of our
Speaker 9: improvements needed to our water treatment and wastewater treatments especially.
Speaker 9: You know, we have parts going back that can't even
Speaker 9: be produced anymore, you know, parts of dating back to
Speaker 9: the nineteen fifties, and we're desperate need of upgrading that
Speaker 9: facility for the safety of our community.
Speaker 1: But even the economic benefit couldn't outweigh the town's concerns.
Speaker 11: Our frustration was the fact that we were being kept
Speaker 11: in the dark. Then finally a year and a half later,
Speaker 11: we learn about it because Dominion is proposing these massive
Speaker 11: transmission lines, and that is what was like throwing a
Speaker 11: match onto a powder keg. The citizens exploded and first
Speaker 11: against the transmission lines and dominion, and then they learned
Speaker 11: it was tied to the data center. Then we learned
Speaker 11: from our neighboring jurisdictions what data centers were and the impacts.
Speaker 11: They had a lot of noise, huge energy generation, monster
Speaker 11: size to dominate your landscape and bringing transmission lines and
Speaker 11: other problems. We did a Freedom of information Act for
Speaker 11: the town records how many people spoke up or wrote
Speaker 11: in support of the Amazon data center, how many opposed it?
Speaker 11: And the result was, I'll show you this number, two thousand,
Speaker 11: three hundred and eighty nine of our citizens, our residents,
Speaker 11: took the time to oppose the data center. They came
Speaker 11: to the town council meetings, they wrote emails to the
Speaker 11: town council, and so forth. Eleven, only eleven people here
Speaker 11: wanted that data center to happen, and yet we were
Speaker 11: ignored because Amazon had cut a deal with our elected
Speaker 11: officials before we even knew about it.
Speaker 9: As the opposition grew, it got very very heated, it
Speaker 9: got very very emotional. I think that there was a
Speaker 9: lot of information that was selectively put out to the
Speaker 9: community and so by the time it came to a vote,
Speaker 9: it was a very divided community, and I'm grateful for
Speaker 9: the council members that had the courage to do what
Speaker 9: they believe was right.
Speaker 1: Last month, Warrenton's City Council voted unanimously on a zoning
Speaker 1: change that effectively bans data centers altogether. Among the citizens'
Speaker 1: concerns is the amount of power a data center needs,
Speaker 1: which would eat up their own access.
Speaker 12: Yeah.
Speaker 9: I think the biggest concern, and the one that the
Speaker 9: industry itself really needs to address, is the energy usage.
Speaker 9: That is just huge, and that is something as I've
Speaker 9: pointed out to many people, the data centers are coming.
Speaker 9: Whether one community says yes or no, does not ultimately
Speaker 9: impact them to demand on energy. The industry and the
Speaker 9: energy producers have got to figure that out. They've got
Speaker 9: to find a better way of providing of that energy
Speaker 9: without hitting the rate payers like you and me.
Speaker 13: Fifteen years ago, a twelve megawatt data center was a
Speaker 13: huge data center. Now with AI, what we're seeing on
Speaker 13: the development side is more than a gigawatt.
Speaker 6: On the campus.
Speaker 13: And to put that in real terms for you, I'm
Speaker 13: sitting in Dallas Dallas takes about three gigawatts to five gigawats,
Speaker 13: depending on the time of year, to power the entire city.
Speaker 1: One alternative to drawing the needed power from the grid
Speaker 1: is small modular nuclear reactors, but even they may not
Speaker 1: be enough to keep up.
Speaker 12: When it comes to AI data centers, they are an
Speaker 12: order of magnitude more power hungry than the data centers
Speaker 12: we are used to since the Internet age.
Speaker 1: Kr street Ar is the founder and CEO of Bloom Energy,
Speaker 1: which just signed a deal to provide power to Oracle
Speaker 1: for its infrastructure data centers in the United States. Is
Speaker 1: there an overall approach to addressing that enormous demand.
Speaker 8: For power today?
Speaker 12: It is a scramble for that AI data centers. Collectively,
Speaker 12: they're investing more than six hundred billion dollars just this year.
Speaker 12: That's the publicly uttered commitments. That's mind boggling, right, almost
Speaker 12: two billion dollars a day to feed this beast.
Speaker 1: Sweetheart's. Bloom Energy was created to do just that, provide
Speaker 1: clean energy on site, eliminating the need for transmission lines
Speaker 1: and traditional power generators.
Speaker 12: The world is completely digital dependent. Not having power even
Speaker 12: for a millisecond is not an option because critical life
Speaker 12: functions depend on it, like a surgery happening in a hospital,
Speaker 12: for example.
Speaker 8: So we said.
Speaker 12: Power needs to be extremely reliable. You cannot get that
Speaker 12: redundant reliability at very high nines unless you have on
Speaker 12: site power. If you're going to have on site power,
Speaker 12: because you're going to be breathing that air when you're
Speaker 12: sitting in your office or when you're in your bedroom,
Speaker 12: by definition, it needs to be clean, and it needs
Speaker 12: to be very efficient, and it needs to be quiet.
Speaker 12: So this is the principle on which we found a
Speaker 12: bloom energy.
Speaker 1: For the citizens of Warrenton, Virginia. Finding that optimal solution
Speaker 1: of providing data center power in ways the community can
Speaker 1: tolerate has been elusive, but that has real fiscal consequences
Speaker 1: for the town.
Speaker 9: We are so revenue strapped, but we're facing about ninety
Speaker 9: one million dollars of investment in our waste water and
Speaker 9: water treatment plants, and so you know that money is
Speaker 9: just going to have to come out of debt unless
Speaker 9: we find revenue streams. Our streets are cracked, you know,
Speaker 9: we have things that are falling apart, and we're just
Speaker 9: kind of keeping trying to keep the lights on.
Speaker 1: Amazon declined to comment on the status of the warrant
Speaker 1: and data center. For now, the fate of the project
Speaker 1: will have to be decided by the courts.
Speaker 9: There's a March hearing data on that. There's a citizen
Speaker 9: group that challenged it in court, and so we are
Speaker 9: waiting to see what that decision is in March. And
Speaker 9: I believe that Amazon is probably moved on, but I
Speaker 9: do expect that, you know, if they remain, if the
Speaker 9: courts favor the town and Amazon, that they will eventually
Speaker 9: build there. But as of now, I'm not sure where
Speaker 9: it stands.
Speaker 1: The transformative power of AI means that we need to
Speaker 1: have it, and that means we need to have data
Speaker 1: centers even with their enormous power demands. The question now
Speaker 1: is where they will go and whether we can find
Speaker 1: ways to make them the good neighbors that people in
Speaker 1: towns like Warranton, Virginia will welcome. That does it for
Speaker 1: us Here at Wall Street Week, I'm David Weston. See
Speaker 1: you next week for more stories of capitalism.