Speaker 1: Welcome to Marry Talks Money the after show. This is
Speaker 1: where we unpacked all the commentary here in our regular podcast.
Speaker 2: I learned some set web this week.
Speaker 1: John Stepack, senior reporter at Bloomberg and author of the
Speaker 1: daily Money to Shelve newsletter, joined me as usual to
Speaker 1: discuss my conversation with Cock. Here's Society General's global head
Speaker 1: of Economics, cross at IT and quant Research and UK
Speaker 1: head of Research.
Speaker 2: Right, John, have you listened to this one?
Speaker 3: I've read the transcript again, so read it rather than
Speaker 3: listen to it?
Speaker 2: Do you do you?
Speaker 4: Yes?
Speaker 1: I hope everyone else listens to it. But what did
Speaker 1: you think of this conversation? Where would you like to
Speaker 1: say you absolutely do not agree.
Speaker 3: I mean, I'm going on my issue here and I
Speaker 3: think is actually a lot to do with the job
Speaker 3: descriptions that if you'd given me a list of the
Speaker 3: questions you were going to ask CORKU before I read
Speaker 3: this transcript, I could have told you what all of
Speaker 3: the answers were going to be pretty much.
Speaker 1: Wow, I don't have a list of questions in advance.
Speaker 1: It doesn't work like that. But oh yeah, if you
Speaker 1: try to send you the list to questions, you can
Speaker 1: tell me the answers, and we went bothered with all
Speaker 1: this boring podcasting business.
Speaker 3: If you give me the improv before you before you
Speaker 3: did the improv, I mean it's let's say it's not
Speaker 3: it's not really a Christmas so much as like it's okay.
Speaker 3: So the received wisdom is, surely there's going to be
Speaker 3: a recession, but does the recession thing even matter that much?
Speaker 3: And you know, interest rates have gone up an extraordinary rate,
Speaker 3: but somehow everything's going to basically be okay because we've
Speaker 3: got enough time role off that. And if you know
Speaker 3: there is a disaster, then it means, you know, the
Speaker 3: central plants can cut interest rates anyway to stop it
Speaker 3: from being a disaster. So it's basically everything is going
Speaker 3: to be okay, and therefore you should a diversified portfolio.
Speaker 2: That's not an acceptable answer.
Speaker 3: Oh yeah no. And they meant to be fairy through
Speaker 3: some ideas there. And you know, there's there's a lot
Speaker 3: to be said for warning passive investments and all the
Speaker 3: rest of it, and transition metals alone. Again, i'd sort
Speaker 3: of make the point that transmit transition metals are fine,
Speaker 3: but probably have to be a wee bit picky because
Speaker 3: I mean, like the lithium price is kind of like
Speaker 3: shot up and then collapsed when everyone realized that actually
Speaker 3: there's plenty of lithium in the world, and as soon
Speaker 3: as the price is high enough, assuming we even stick
Speaker 3: with elitium batteries, it's yeah, it's not going to be
Speaker 3: the new oil. It's you know, a pretty common substance,
Speaker 3: and as long as you know it's there's enough of
Speaker 3: it out there, it's just to be never had to
Speaker 3: use it before, So I don't I don't know, it's
Speaker 3: it's I know, sorry, it sounds like I'm being like
Speaker 3: terribly kind of I mean, but I think it's just
Speaker 3: at a high level, if you're not going to say
Speaker 3: something out of the ordinary about micro then the rest
Speaker 3: of it's just sort of like, oh, can the decimal points.
Speaker 3: Basically it's like, oh, is the decision going to be
Speaker 3: in this quarter or is it going to be in
Speaker 3: that quarter? And at the end of the day, that
Speaker 3: sort of thing doesn't matter that much. Forests, and then
Speaker 3: beyond that it's kind of they can have At the
Speaker 3: more detailed level, you kind of need to be a
Speaker 3: little bit peckier than just you know, okay, well buy
Speaker 3: by these transition metals or whatever.
Speaker 2: Yeah, I suppose the thing that I would I would
Speaker 2: have picked him up on. I probably did pick him
Speaker 2: up on.
Speaker 1: Is this idea that everything will be fine because interest
Speaker 1: rates of everything will be fine because interest rates have
Speaker 1: gone up so fast that they can come down again.
Speaker 2: Whereas I tend to feel more that interest.
Speaker 1: Rates went out very fast because they had to, because
Speaker 1: the central banks made some enormous mistakes and latinflation get
Speaker 1: out of control. So we now have rates at what
Speaker 1: you might consider to be historically historical normal levels. So
Speaker 1: the idea that as soon as something goes wrong, we
Speaker 1: can drag them back down again to beats historically extremely
Speaker 1: abnormal levels of you know, real terms negative or one percent,
Speaker 1: zero point five percent, et cetera.
Speaker 2: So the idea that that ammunation exists.
Speaker 1: So I'm not sure that it does, because the central
Speaker 1: banks may just may because they didn't alway learn their lessons,
Speaker 1: but they may have learned a lesson about how very
Speaker 1: very very low interest rates allow for the misallocation of
Speaker 1: capital and also open the.
Speaker 2: Door to inflation.
Speaker 1: So even if something does go very wrong in the
Speaker 1: global conin which I expect it will, at some point
Speaker 1: in the not two distal future. I'm not sure that
Speaker 1: that leeway exists, that put still exists.
Speaker 3: Oh yeah, because they went up for a reason. So
Speaker 3: it's kind of like with you know, if they go
Speaker 3: back down, then you can't sot. They can't just see
Speaker 3: that inflation is going to vite niche because it's convenient
Speaker 3: at that point for central banks to be cut in rates.
Speaker 3: The one thing that I did find kind of interesting
Speaker 3: or that I think is something that we could do
Speaker 3: with talking more about in a more specific way is
Speaker 3: the thing about productivity. There's a lot of time people
Speaker 3: talk about productivity and talk about his artificial intelligence going
Speaker 3: to help me out? It is tech going to help
Speaker 3: but it and I think it'd be interesting they just
Speaker 3: maybe break down, well, actually, how are these things going
Speaker 3: to help the productivity? And is there not an issue
Speaker 3: with the way really that we measure productivity? And like,
Speaker 3: one of the reasons productivity is falling so badly in
Speaker 3: the UK, for example, but in lots of other places
Speaker 3: is because productivity measures are basically based on manufacturing industries
Speaker 3: being much more significant parts of the economy than they are.
Speaker 3: And if we all acknowledge that, we'll actually, how does
Speaker 3: a hairdress have become more productive? What is the nature
Speaker 3: of an increase in hairdress is productivity? And what's kind
Speaker 3: of like, well, you know you can't it's going to
Speaker 3: measure that, and you're never going to get to a
Speaker 3: point where one hairdresser can do three haircuts in an
Speaker 3: hour rather than two haircuts in an hour.
Speaker 1: No, no, no, no, no, that's simply not true.
Speaker 2: Hair cutting takes too long.
Speaker 1: This is one of the conversations I have every time
Speaker 1: I go to the headdresser, say how long is this
Speaker 1: going to take? And they take an hour? I'm like,
Speaker 1: how can this take an hour? How can this possibly
Speaker 1: in any rational world take an hour?
Speaker 2: Man?
Speaker 1: This is why you always look five minutes to cut
Speaker 1: a woman's hair.
Speaker 2: Anyone's hair tops absolute tops this.
Speaker 1: I mean accept that it's very skilled work and that
Speaker 1: it's difficult, but an hour.
Speaker 2: No, no, no, there is a huge room for productivity
Speaker 2: gains in hedressing. You've chosen the wrong example.
Speaker 3: I don't be You could just get a set of
Speaker 3: clippers and then that would kind of, you know, boost
Speaker 3: productivity technically speaking, but but would it actually boost productivity
Speaker 3: if you've got a whole lot of unhappy people we
Speaker 3: know here.
Speaker 1: I can't answer that's that's that's too much for me
Speaker 1: today anyway, But I get your point. It's very hard
Speaker 1: to rise productivity in the service industries.
Speaker 3: But yeah, but I think this is I think this
Speaker 3: is the things that we talk about this again at
Speaker 3: the kind of very high level, but it's I think
Speaker 3: a lot of time it's if we talk about the
Speaker 3: abstract number of productivity, but they're actually talking about, well,
Speaker 3: what would the more productive economy actually look like? And
Speaker 3: also I think the product I mean, I find productivity
Speaker 3: are very abstract, difficult concept or at my head rounte.
Speaker 3: So I do not know what most of for example,
Speaker 3: or kind of non finance listeners think of whenever they
Speaker 3: think about productivity, because this is, like I say, it's
Speaker 3: this kind of like a concept that is infuriatingly abstract
Speaker 3: to me. I'd like to think that we break it
Speaker 3: down in more concrete levels, as in, what would this
Speaker 3: mean for you? Well, I think this means for these industries.
Speaker 1: One of the things in the UK is that it's
Speaker 1: public sector productivity that has been such a disaster, and
Speaker 1: really private sector productivity isn't great either. But when you
Speaker 1: look at our productivity numbers. It's the public sector that
Speaker 1: is genuinely letting us down. And the place where I
Speaker 1: think most people can see that productivity could be massively
Speaker 1: improved is in particular in the NHS. And that's where
Speaker 1: we have where when you talk about digitalization and you
Speaker 1: talk about AI et cetera, something an organization such as
Speaker 1: the NHS could be massively improved by a higher level
Speaker 1: of efficiency and productivity and middle management in particular. Yeah, definitely,
Speaker 1: that's somewhere where we really could see dramatic change have
Speaker 1: a huge benefit not just for us in our health,
Speaker 1: but for our government finances.
Speaker 3: And see on the private sector, say they can allaw
Speaker 3: lawyer area and the process of buying houses and selling
Speaker 3: houses and all the paperwork that kind of has to
Speaker 3: be chucked in between parties. I can see that's another
Speaker 3: area where that could improve it. I mean one thing
Speaker 3: one point I would make with that though, is that
Speaker 3: we sort of point to AI as being a solution
Speaker 3: for all this, but you know, the enertis is still
Speaker 3: using fax machines in some areas.
Speaker 2: This is the point.
Speaker 3: It's kind of like, well, it's not the fact that
Speaker 3: we've invented AI is not going to change this with
Speaker 3: What we need to do is break down some of
Speaker 3: the guilds that are protecting these professions. And I mean
Speaker 3: that's the big hurdle is things like the and all
Speaker 3: the you know, the kind of British Medical Association kind
Speaker 3: of you know, doctors, but also but on the laws side,
Speaker 3: you know a lot of paperwork could presumably have already
Speaker 3: been replaced, and it's all about professions protecting their you know,
Speaker 3: the leveled up status if you like, and rather than
Speaker 3: the technology lagging, because there's lots of technology that could
Speaker 3: already improve all of these areas that wouldn't require artificial intelligence.
Speaker 3: I mean, simple algorithms and spreadsheets would work very wellful
Speaker 3: things like tree eyes, if you know, we were more
Speaker 3: capable of getting them nty all these different parts of
Speaker 3: the bureaucracy. We kind of moved off the interview.
Speaker 1: We had totally and I was about to start talking
Speaker 1: at something else will together and then remembering that we're
Speaker 1: supposed to be talking about this interview. So one of
Speaker 1: the things that he did talk about when we came
Speaker 1: to productivities, he was talking about the Roaring twenties a.
Speaker 4: Little good point. I mean, there was a lot of
Speaker 4: comparison between the Roaring twenties and the Roaring twenty twenties.
Speaker 4: After the reopening of the economy, these sort of revenge
Speaker 4: spending et cetera. When you look at total factor productivity,
Speaker 4: it has actually sort of been flat to two, falling
Speaker 4: independent on countries. Obviously, the US clearly has a lot
Speaker 4: more investment in innovation and productivity, so for that you
Speaker 4: need investment in technology, robots, et cetera. Even artificial intelligent
Speaker 4: intelligence is expected to increase the productivity in the service industry,
Speaker 4: not just replace jobs, but make us a lot more
Speaker 4: efficient at what we do. So I think there is
Speaker 4: a there is a probability for productivity to increase because
Speaker 4: we won't have much alternative As businesses will are facing,
Speaker 4: as you said, real wage growth, they'll have to find
Speaker 4: ways to protect our margin by investing in more productive assets.
Speaker 4: Otherwise they'll just have to they'll struggle and under perform.
Speaker 1: So I think it is yeah, And I remember you
Speaker 1: and I are talking about there's a lot in twenty twenty.
Speaker 1: Twenty twenty one fully expected there'd be a Roaring twenties coming,
Speaker 1: and I wonder if that might still happen. I've started
Speaker 1: seeing mentions again after a break, Mentions of the Roaring
Speaker 1: twenties popping up all over the place. Eddie Ardini at
Speaker 1: Yardini Research is always talking about his Roaring Twenties outlook
Speaker 1: and how it centers on the technological innovations, etc. That
Speaker 1: we were talking about in this podcast, and that he
Speaker 1: thinks that this productivity boom is coming back, and that
Speaker 1: is reflected in the moves in the stock market this year.
Speaker 1: And so this is not just a pop and a
Speaker 1: bear market, but the beginning of a new bull markets
Speaker 1: that reflects this massive productivity search.
Speaker 2: This idea of the Roaring twenties is still out there.
Speaker 1: I don't know if you remember a few years ago,
Speaker 1: maybe it was last year Billy Gifford had a conference
Speaker 1: and it was called the Roaring Twenties and we all
Speaker 1: got notebooks with the Roaring Twenties written on the front.
Speaker 1: I still have that notebook and I must open it
Speaker 1: and see what it says inside, to remind myself of
Speaker 1: what we thought was going to happen for what actually happened.
Speaker 2: But it may come back.
Speaker 1: Maybe maybe next year, John, you and I'll be talking
Speaker 1: about Mooring twenties again.
Speaker 3: What do you think I'll be always I feel pretty optimistic.
Speaker 3: I can see these round twenties being a actually actually
Speaker 3: coming back and actually happening, because there is so much pessimism,
Speaker 3: you know, a high level. And I'm not saying I
Speaker 3: don't necessarily think interest rates will break anything or explode anything.
Speaker 3: I just think I sort of feel that either something
Speaker 3: either quite drastic will happen or actually we'll see a
Speaker 3: boom on the other side of this, because people actually realize, well, wait,
Speaker 3: I'm actually nothing particularly bad it's going to happen, and
Speaker 3: what we actually need to do is just get our
Speaker 3: heads down and get invest in and maybe high interest
Speaker 3: rates will get rid of some of the extraneous rubbish
Speaker 3: and the misallocated capital, and we'll start focusing on what
Speaker 3: matters I do. It's a weirdly uncertain setting outcomes, even
Speaker 3: compared tea, you know, the usual future uncertainty.
Speaker 1: I think it is, but I keep looking at it
Speaker 1: and thinking, as you just said, high interest rates will
Speaker 1: solve some of our capital misallocation problem, and the labor
Speaker 1: shortage may solve other problems, and that it is when
Speaker 1: there is a labor shortage that companies have to get
Speaker 1: a grip and use technology to solve their their general
Speaker 1: economic problems. And I know, I promise I wasn't going
Speaker 1: to talk about my holidays, but back to my holidays.
Speaker 1: So one of the things that I did at three
Speaker 1: Nank was I visited quite a few tea plantations because
Speaker 1: you know, I love a plantation and I love the factory, right,
Speaker 1: So I've also visited a couple of them tea factories,
Speaker 1: which was absolutely fascinating. And one of the things that
Speaker 1: constant complaint out there was the shortage of labor. That
Speaker 1: it's really hard to get people to pick tea or
Speaker 1: pluck teath, which seems which makes sense to me, because
Speaker 1: it's extremely hard work and it's horribly underpage. You get
Speaker 1: one one hundred and fifty rupieces a day as a
Speaker 1: base base pay for plucking tea, which is, you know,
Speaker 1: about three pounds I think, so really not very much,
Speaker 1: and the tea pluck is in in the hells around.
Speaker 1: Candy are demanding a doubling of their base break, which
Speaker 1: seems entirely reasonable. And there's also a incentive program on
Speaker 1: top of that where you get another fifty rupees for
Speaker 1: each kilo of tea that you pluck etc. So it's
Speaker 1: still extremely low wages. Even if it was double, that's
Speaker 1: still extremely low. However, a doubling of wage from whatever
Speaker 1: from a level plus a labor shortage means that the
Speaker 1: plantations are having to look at alternative ways. How can
Speaker 1: we make this more productive? How can each person have
Speaker 1: more tea picked at the end of the day. And
Speaker 1: so they've started looking at mechanical pickers, which is amazing
Speaker 1: because one of these machines and go look them up online,
Speaker 1: if anyone can be bothered, is quite everything.
Speaker 2: To look at.
Speaker 1: You can double or triple their productivity of each tea picker,
Speaker 1: ie the amount of tea that they pick every day,
Speaker 1: using a variety of machines that are two in particular,
Speaker 1: one one that is used by tvlee, one that is
Speaker 1: used by one person. And this is extremely innovative and
Speaker 1: it's a classic example of employers going, Okay, we can't
Speaker 1: get enough labor and we can't afford to pay labor
Speaker 1: what labor needs, or maybe you can't afford it and
Speaker 1: want to However, you look at it right, and so
Speaker 1: we need to come up with an innovative solution. And
Speaker 1: suddenly everyone is inventing ways to help a picker double
Speaker 1: the amount of tea they get during a day by
Speaker 1: using mechanical pickers. And I found that very interesting, just
Speaker 1: because there's actually a classic of the shortage of labor
Speaker 1: causes technological change genre. And that's all I'm going to
Speaker 1: say about the holidays for now. Anyway, we can talk
Speaker 1: about the beaches later.
Speaker 3: Yeah, and we'll look forward to motivate. It's also it's
Speaker 3: really interesting here there's a labor shortage like kin Sholanka
Speaker 3: as well, laker.
Speaker 1: Shortages, labor shotges coming everywhere, which is one of the
Speaker 1: reasons why I mean, we won't talk about immigration at
Speaker 1: the moment, but one of the one of the things
Speaker 1: about the idea that we can use migrants forever to
Speaker 1: cover our own lower paying jobs as absurd because there
Speaker 1: are labor shortages across the world, and across the world
Speaker 1: there are people who are saying, I see, do you
Speaker 1: know what, I'm not going to do that really hard
Speaker 1: work for their money.
Speaker 2: I'm going to need a bit more, which is entirely reasonable. Right.
Speaker 1: So this is a global dynamic, not just a UK dynamic.
Speaker 1: So it makes no sense for us to say we're
Speaker 1: going to solve our labor problem by importing labor from
Speaker 1: other countries, but there's also a labor shortage. It might
Speaker 1: work a short time, but its perfinitely not going to
Speaker 1: work long time. Excellent, right, John, I think we'd better
Speaker 1: leave it there and remember everybody that had diversified portfolio.
Speaker 1: Is a good thing, but it's not the most interesting thing.
Speaker 1: Thanks for listening to this week's Maren Talks Money the
Speaker 1: After Show. This episode was hosted by me Maren Sunset
Speaker 1: Web alongside John Stepic. It was produced by Some Society
Speaker 1: and additional editing by Blake Naples.
Speaker 2: Now we gould you like to hear more about my holiday?
Speaker 2: We've done here