WEBVTT - The 2016 Car Swoon Is Turning Into a Skid in 2017, Tynan Says 0:00:04.760 --> 0:00:08.080 Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 0:00:08.119 --> 0:00:11.159 Along with my co host Lisa Abramowitz. Each day we 0:00:11.280 --> 0:00:14.480 bring you the most important, noteworthy, and useful interviews for 0:00:14.520 --> 0:00:16.880 you and your money, whether at the grocery store or 0:00:16.920 --> 0:00:20.680 the trading floor. Find the Bloomberg P L Podcast on iTunes, 0:00:20.840 --> 0:00:29.479 SoundCloud and at Bloomberg dot com. There might be a 0:00:29.680 --> 0:00:33.040 snow jump coming to the East Coast, but there is 0:00:33.120 --> 0:00:36.720 a dump of bad news coming for the auto industry. 0:00:36.800 --> 0:00:40.240 You have uh the U S subprime auto lenders losing 0:00:40.280 --> 0:00:43.200 the most money on car loans at the highest rate 0:00:43.560 --> 0:00:46.159 since the aftermath of the two thousand and eight financial crisis. 0:00:46.600 --> 0:00:51.320 And Kevin Tynan, Bloomberg Intelligence automobile analyst for North America, 0:00:51.600 --> 0:00:54.240 put out a report today saying as bad as two 0:00:54.240 --> 0:00:57.200 thousand and sixteen looked for car sales, two thousand and 0:00:57.240 --> 0:01:00.600 seventeen starting off worse. Let's bring him in, Kevin. We 0:01:00.720 --> 0:01:05.200 appreciate you joining us, and you have this fantastic statistic 0:01:05.280 --> 0:01:09.160 that cars accounted for just thirty nine percent of total 0:01:09.240 --> 0:01:13.479 US sales, the lowest percentage in history. But that might 0:01:13.520 --> 0:01:15.560 not not be as bad as it gets, right, Oh No, 0:01:15.800 --> 0:01:18.800 it's it's definitely going to get worse. Um And I 0:01:18.840 --> 0:01:22.920 think what is different now. Historically what you would see 0:01:23.040 --> 0:01:27.600 is demand cycle in and out of cars to trucks 0:01:27.600 --> 0:01:31.399 and back and forth, and um in some inventory adjustment 0:01:31.400 --> 0:01:34.560 with incentive spending, and then everything sort of levels out. 0:01:34.600 --> 0:01:38.480 And what different this time is that the and and 0:01:38.520 --> 0:01:40.280 this was the sort of crux of the piece, was 0:01:40.319 --> 0:01:44.520 that the revenue generating segments are all trucks, the top 0:01:44.600 --> 0:01:47.840 three or trucks and really pushing cars further and further 0:01:47.920 --> 0:01:50.520 down the list. And why it's different this time is 0:01:50.600 --> 0:01:54.400 because the automakers see where that revenue is being generated 0:01:54.520 --> 0:01:59.600 and are actively unwinding their car positions, understanding that these 0:01:59.640 --> 0:02:02.160 segments they're going to continue to shrink and shrink and shrink, 0:02:02.760 --> 0:02:06.640 and they will align supply with demand which will be 0:02:06.800 --> 0:02:09.760 much lower. So rather than waiting for it to come back, 0:02:09.800 --> 0:02:13.120 they're actively getting out of those those segments, and it 0:02:13.160 --> 0:02:16.520 will make it impossible for cars to ever recover, regardless 0:02:16.520 --> 0:02:21.120 of gas lean prices. Kevin has the automobile industry ever 0:02:21.440 --> 0:02:25.640 embarked on a similar strategy and found it to be 0:02:25.840 --> 0:02:31.800 wanting um no uh in the sense that we've I 0:02:31.840 --> 0:02:38.680 think what's happening Wednesday with cafe rules and and that 0:02:38.919 --> 0:02:41.359 I tell people about this because this is very important 0:02:41.360 --> 0:02:45.799 to the overall disposition of an automaker's fleet, and it's 0:02:45.800 --> 0:02:47.919 related to how many miles per gallon the fleet has 0:02:47.960 --> 0:02:51.160 to get right and arguably, and if you look at 0:02:51.160 --> 0:02:54.880 some of the some of the graphs in the US 0:02:54.919 --> 0:02:57.560 in North America, we've always wanted to buy trucks. There's 0:02:57.560 --> 0:03:01.160 a period between the two recessions that truck sales spiked 0:03:01.160 --> 0:03:04.359 as well, and that's the two times that that car 0:03:04.720 --> 0:03:08.520 car sales recovered were cash for clunkers. Uh and then 0:03:08.560 --> 0:03:10.640 when guest Lee went above four dollars a gallon in 0:03:10.680 --> 0:03:13.480 two thousand and eight. Uh. So we've always wanted to 0:03:13.480 --> 0:03:16.960 buy trucks, but this, this corporate average fuel economy standard 0:03:17.040 --> 0:03:21.000 has had sort of affecting the supply side of the equation. 0:03:21.080 --> 0:03:23.320 Telent automakers, you have to build these things to be 0:03:23.440 --> 0:03:26.360 compliant with these rules, whether or not the consumer wants 0:03:26.360 --> 0:03:28.040 them or not. And I think that's where we're in 0:03:28.120 --> 0:03:31.680 new territory that says those rules didn't really take into 0:03:31.680 --> 0:03:35.080 account the consumer. All all the onus was on the manufacturers. 0:03:35.880 --> 0:03:39.720 Now with production and the administration saying we want you 0:03:39.760 --> 0:03:42.120 to produce in the US. I think the automakers are 0:03:42.120 --> 0:03:45.000 going back to President Trump and saying, we will produce 0:03:45.040 --> 0:03:47.520 in the US, but it has to be trucks. If 0:03:47.520 --> 0:03:49.320 it's going to be trucks, you have to help us 0:03:49.320 --> 0:03:51.880 on the cafe side. Well, so just to give us 0:03:51.880 --> 0:03:54.280 a little bit of perspective here, how much more expensive 0:03:54.360 --> 0:03:57.640 on average our trucks and cars? Well, if you look 0:03:57.680 --> 0:04:00.960 at it segment by segment, and I'll just take for example, 0:04:01.240 --> 0:04:05.400 the largest truck segment by volume, not by not by revenue, 0:04:05.440 --> 0:04:09.119 but by volume, is compact crossover SUVs. The largest car 0:04:09.160 --> 0:04:13.480 segment is compact car. So those two line up pretty nicely. Um, 0:04:13.520 --> 0:04:17.480 the difference in retail revenue is about six thousand dollars 0:04:17.480 --> 0:04:19.640 between the two. So you'd be in the low twenties 0:04:19.680 --> 0:04:23.080 for your average compact car. You'd be in the mid 0:04:23.120 --> 0:04:25.960 to upper twenties for your average compact crossover. And I 0:04:26.000 --> 0:04:28.560 wanted to get back to the whole idea of subprime 0:04:28.640 --> 0:04:32.559 auto loans. Is there an equal proportion of subprime auto 0:04:32.600 --> 0:04:36.080 loans for people to buy trucks as well as cars. 0:04:36.320 --> 0:04:38.760 Is it more directed toward cars. I'm just basically trying 0:04:38.800 --> 0:04:40.520 to figure out, you know, because potentially that could mean 0:04:40.560 --> 0:04:42.920 that the losses are that much greater on the trucks 0:04:42.920 --> 0:04:45.240 if somebody is not able to pay. Correct. Yeah, it 0:04:45.279 --> 0:04:48.239 would be because those transaction prices are higher. And really, 0:04:48.360 --> 0:04:50.839 I think what you're seeing when you look at the 0:04:50.880 --> 0:04:54.680 average retail transaction price in the US, it's continually going 0:04:54.760 --> 0:04:58.000 up because of this mixed shift. But at the same time, 0:04:58.000 --> 0:04:59.919 it's also why we're seeing a lot of lease penet 0:05:00.080 --> 0:05:03.640 ration because it creates affordability. So what you have is 0:05:03.720 --> 0:05:06.800 this subprime is pulling new buyers into the market, whether 0:05:06.880 --> 0:05:11.560 that's lower credit ratings, whether that's longer terms, uh, you know, 0:05:11.640 --> 0:05:13.960 bigger down payments, or however you have to get that 0:05:14.160 --> 0:05:17.240 consumer to that monthly payment that they can afford, because 0:05:17.279 --> 0:05:20.080 that's really how we buy vehicles in the US. So 0:05:20.160 --> 0:05:23.440 if leasing makes more sense, we'll just we'll basically rent 0:05:23.520 --> 0:05:25.599 you the car for part of the term and get 0:05:25.640 --> 0:05:28.200 you to that number that makes sense to you. So 0:05:28.200 --> 0:05:30.440 so there's a lot of different ways that that the 0:05:30.520 --> 0:05:33.479 lenders and the automakers are getting people off the sidelines 0:05:33.480 --> 0:05:36.800 and into vehicles, and it's resulting in higher prices. A 0:05:36.880 --> 0:05:40.479 shift from into luxury entry luxury more so than we 0:05:40.520 --> 0:05:43.560 had seen historically. But there's a lot of risk associated 0:05:43.560 --> 0:05:45.920 with that as well. Well. As much as I will 0:05:46.000 --> 0:05:49.400 miss my you know, the nine nine Chevrolet Camaro with 0:05:49.520 --> 0:05:52.680 the zero one engine, I'm sorry, Kenneth, I'm not going 0:05:52.760 --> 0:05:55.200 to Kevin, I'm not gonna be able to, uh, you know, 0:05:55.360 --> 0:05:58.040 sort of look at it anymore with those feelings because 0:05:58.279 --> 0:06:01.880 everything will have disappeared, at least in that segment category. 0:06:02.000 --> 0:06:05.560 So who's so who and where are the people who 0:06:05.560 --> 0:06:07.000 are going to make up the difference who are going 0:06:07.040 --> 0:06:09.880 to actually continue that tradition. And then I want you 0:06:09.920 --> 0:06:13.599 to just give your thoughts about US auto companies maybe 0:06:13.640 --> 0:06:17.599 doing cars outside the United States, right, And let me 0:06:17.680 --> 0:06:21.159 just say, I think in one of the areas on 0:06:21.200 --> 0:06:24.440 the car side that I think is reasonably protect protected 0:06:24.520 --> 0:06:27.919 is is that performance segment. And you look at uh, 0:06:28.360 --> 0:06:32.760 you know, Tim kneskis at at Chrysler, who's a maniac 0:06:32.800 --> 0:06:34.880 in a good way, you know, and you have hell 0:06:35.000 --> 0:06:38.000 cats and demons. And I'm glad because I was, you know, 0:06:38.040 --> 0:06:41.479 I was looking at a seventeen Camaro to SS you know, 0:06:41.520 --> 0:06:45.600 the fiftieth anniversary edition. Yeah, those I think you're okay there. 0:06:45.640 --> 0:06:48.200 I think that that the performance stuff and even if 0:06:48.200 --> 0:06:51.200 you look at Cadillac, the V series stuff, and even 0:06:51.240 --> 0:06:55.040 in the luxury segments, I think performances is a little 0:06:55.080 --> 0:06:58.200 bit protected. People will always want that and the physics 0:06:58.279 --> 0:07:00.880 just don't work as well in trucks. So there, I 0:07:00.920 --> 0:07:03.680 think you're okay. I think it's it's the garden variety, 0:07:03.800 --> 0:07:09.000 the sort of commodity cars. How about the Lincoln in China. Yeah, 0:07:09.040 --> 0:07:12.040 you know, And I think that that markets outside of 0:07:12.080 --> 0:07:15.040 the US will adjust to things and taste are a 0:07:15.040 --> 0:07:19.040 little bit different. Whether it's weather, congestion, there's issues that 0:07:19.080 --> 0:07:21.560 go into it to what the consumer prefers. But we're 0:07:21.560 --> 0:07:25.720 also seeing globally, even in Europe, we're seeing a mixed 0:07:25.720 --> 0:07:30.720 shift to trucks because we can do more with fuel economy, lightweighting. 0:07:30.760 --> 0:07:35.240 We're getting better driving dynamics out of truck bodies than 0:07:35.280 --> 0:07:38.360 we than we ever have, and it's it's helping shift 0:07:38.720 --> 0:07:42.080 away from cars to trucks. Thanks very much for illuminating 0:07:42.080 --> 0:07:45.720 all this force and talking cars. Kevin Tynan. He's our 0:07:45.800 --> 0:07:50.040 senior a senior auto's analyst for Bloomberg Intelligence, and you 0:07:50.080 --> 0:08:06.840 can follow him on Twitter at keV Tynan Ten, Lisa Abrams. 0:08:06.880 --> 0:08:11.000 We've been learning a lot about artificial intelligence robots. You know, 0:08:11.040 --> 0:08:14.720 I think that three D printing can also be included 0:08:14.920 --> 0:08:18.800 in that particular list. Because there is a huge conference 0:08:18.880 --> 0:08:21.800 that is going to take place beginning tomorrow at the 0:08:21.920 --> 0:08:26.360 Javits Center, and it is inside three D printing. It's 0:08:26.400 --> 0:08:28.720 the conference and the expo. It's got thirty eight events. 0:08:28.800 --> 0:08:33.640 It's the largest event worldwide. And get this the presentation. 0:08:33.760 --> 0:08:36.400 One of them is by Dr Orn Temper and he 0:08:36.520 --> 0:08:41.320 uses three D printing in plastic and reconstructive surgery. Let's 0:08:41.400 --> 0:08:43.360 learn more about all of these things. We want to 0:08:43.360 --> 0:08:47.959 bring in Tyler Benster, general partner at Asimov Ventures in Seattle, Washington. 0:08:48.120 --> 0:08:52.080 Also Samil Hargovn, co founder and CEO of We've spelled 0:08:52.320 --> 0:08:55.800 w I I VV might not be exactly intuitive in 0:08:55.880 --> 0:08:59.760 San Diego, California. So Tyler, I want to start with you, 0:09:00.240 --> 0:09:02.600 what do you think is going to be the hottest 0:09:02.679 --> 0:09:05.720 development at this three D printing conference this year? So 0:09:05.720 --> 0:09:07.920 it's a really exciting year for three D printing. We've 0:09:07.920 --> 0:09:09.959 been saying for a long time in industry, how three 0:09:10.040 --> 0:09:12.280 D printing is going to go mainstream and key where 0:09:12.280 --> 0:09:15.120 they're going to and I think Seen is the year 0:09:15.160 --> 0:09:17.960 where we actually are seeing this happen. So we have 0:09:17.960 --> 0:09:20.440 a few new developments. UM on the medical side has 0:09:20.480 --> 0:09:24.120 highlighted earlier with dr Orn incredible new developments going on 0:09:24.160 --> 0:09:27.640 in implants, orthopedic game plants, companies like added to orthopedics. 0:09:27.679 --> 0:09:31.560 We have a wonderful new technologies that are allowing doctors 0:09:31.559 --> 0:09:34.880 to literally save lives and separate can join twins bas 0:09:34.880 --> 0:09:37.560 surgical planning and actual surgical cutting guides. And then we 0:09:37.559 --> 0:09:40.160 have this whole new movement in medals where we're finally 0:09:40.160 --> 0:09:42.920 starting to see this transition from three D printing is 0:09:42.920 --> 0:09:46.160 a prototyping technology to want to finished good production. And 0:09:46.200 --> 0:09:48.120 I know that we're really delighted to have Shamille on 0:09:48.160 --> 0:09:51.280 here with us who has really been actually practicing finish 0:09:51.360 --> 0:09:54.840 kid production in the flesh. I got a note that Shamil, 0:09:54.960 --> 0:09:58.240 before you answer to the details of Weave, is that 0:09:58.679 --> 0:10:01.720 you are the company. You're the CEO of the startup 0:10:01.760 --> 0:10:04.000 company we've and you're trying to make it happen, and 0:10:04.040 --> 0:10:08.400 you're wearing the suit. And Tyler, who happens to just 0:10:08.480 --> 0:10:11.400 work at Asithma benches as a partner, he's the money guy. 0:10:11.800 --> 0:10:16.080 He is wearing this Stanford hoodie. I mean, the contrast 0:10:16.280 --> 0:10:20.120 cannot be better for for the setup. So I think 0:10:20.160 --> 0:10:22.480 you you're on the bright path. Well, it's not every 0:10:22.559 --> 0:10:24.960 day a startup CEO like me gets to get pulled 0:10:25.040 --> 0:10:27.360 up to New York to give this conversation. Well, I 0:10:27.400 --> 0:10:29.800 was going to say to you raised over five million 0:10:29.840 --> 0:10:32.880 dollars in a series A financing just recently, right, Yes, sir, 0:10:32.960 --> 0:10:34.800 all right, tell us what you're gonna do with the money. 0:10:35.080 --> 0:10:38.520 And you've brought some things along, custom fit three D 0:10:38.720 --> 0:10:44.120 printed insoles. Yes, yes, we are what I would say 0:10:44.280 --> 0:10:48.199 actually doing it today, which is manufacturing in America three 0:10:48.280 --> 0:10:52.560 D printed final product. And specifically we're working with custom 0:10:52.640 --> 0:10:57.000 footwear which you order by measuring your feet using your smartphone, 0:10:57.600 --> 0:11:00.400 and from there we are able to say into your 0:11:00.400 --> 0:11:03.280 product in under seven days. And what I'm here to 0:11:03.320 --> 0:11:06.040 tell you is for the footwear and apparel industry, like 0:11:06.440 --> 0:11:09.560 like many other industries, made in America, is starting to 0:11:09.600 --> 0:11:12.800 make business sense again in order to offer consumers that 0:11:12.880 --> 0:11:15.080 kinds of products that they expect and want. Can I 0:11:15.120 --> 0:11:19.240 can I just ask Shamille, what's the difference between a 0:11:19.280 --> 0:11:22.800 machine that is automated and you know, just that's maybe 0:11:22.880 --> 0:11:26.280 directed by one person somewhere at least overseen, which we've 0:11:26.280 --> 0:11:30.880 seen for years. And three D printing, Yeah, and three 0:11:30.920 --> 0:11:34.280 D printing it essentially allows you to take the complexity 0:11:34.320 --> 0:11:38.120 away from the human uh and and and it digitally 0:11:38.280 --> 0:11:41.120 is able to make the complex custom parts of products 0:11:41.160 --> 0:11:43.720 that you need. And what we do is we marry 0:11:43.720 --> 0:11:47.000 that with with sort of traditional manufacturing to make what 0:11:47.040 --> 0:11:50.880 we called hybrid products. Okay, and then Tyler, I wanted 0:11:50.920 --> 0:11:53.400 to ask you. You you talked about how this is 0:11:53.440 --> 0:11:56.600 the year that three D printing is going to go mainstream. 0:11:56.720 --> 0:11:59.600 What gives you confidence to say that? Well, I think 0:11:59.640 --> 0:12:02.240 if we trace where the investment in R and D 0:12:02.360 --> 0:12:04.800 has been going into we've seen an explosion on the 0:12:04.880 --> 0:12:07.440 venture capital side. In sixteen, we had more than a 0:12:07.480 --> 0:12:10.800 quarter billion dollars flow into startups UM, which was really 0:12:10.800 --> 0:12:13.560 outstripping the public markets for the first time. UM. We 0:12:13.600 --> 0:12:16.319 also have seen an incredible increase in M and a 0:12:16.320 --> 0:12:18.560 activity of d E snatching up to the largest metal 0:12:18.600 --> 0:12:21.760 companies UM. We've seen a large uptick in investments in 0:12:21.760 --> 0:12:24.200 that sector. And I think that we're starting to see 0:12:24.200 --> 0:12:27.079 this growth really being driven by the bottom up. If 0:12:27.080 --> 0:12:29.360 we look at what's happening like with Stratesis is outlook 0:12:29.400 --> 0:12:32.960 for seen and the public markets reaction, I think that 0:12:33.080 --> 0:12:34.800 the markets are in agreement that a lot of this 0:12:34.840 --> 0:12:36.960 growth is being driven by the small disruptive players that 0:12:36.960 --> 0:12:40.200 are moving quickly. Well, you mentioned Stratusis, and I mean, boy, 0:12:40.280 --> 0:12:42.760 if you're an investor in Stratusists, you have watched it 0:12:44.160 --> 0:12:47.200 move high and then move low. And in fact, they 0:12:47.280 --> 0:12:49.280 just released their results I guess it was on March 0:12:49.360 --> 0:12:52.520 the seventh, and while the results were great for the 0:12:52.600 --> 0:12:56.240 previous time period, their guidance and you know they were 0:12:56.280 --> 0:12:58.120 not giving the kind of guidance any of the stock 0:12:58.240 --> 0:13:01.000 ended up down about nine percent just that particular day. 0:13:01.040 --> 0:13:04.160 So it's been rough going for them. Uh, Shamille, I 0:13:04.240 --> 0:13:06.240 want you to just talk a little bit about your 0:13:06.280 --> 0:13:10.079 background because this was a kickstarter campaign, right, I mean 0:13:10.120 --> 0:13:13.160 that's how it all started. And now what you've managed 0:13:13.200 --> 0:13:16.360 to purchase the Souls I love this e Souls is 0:13:16.400 --> 0:13:20.959 a company that has a database of foot scans. Tell 0:13:21.040 --> 0:13:24.720 us what that gives you? Yeah? Absolutely? Uh, you know, 0:13:24.880 --> 0:13:27.720 to really build out this vision. What we're seeing in 0:13:27.720 --> 0:13:30.480 the market is the big players like Apple Intel and 0:13:30.559 --> 0:13:34.480 Google are spending Microsoft included are spending hundreds of millions 0:13:34.520 --> 0:13:36.839 and dollars and three D scan and they're gonna bring 0:13:36.880 --> 0:13:39.440 this to your phone very soon. And then you've got 0:13:39.520 --> 0:13:42.800 Carbon and Hewlett Packard and Stratusis and three D systems 0:13:42.800 --> 0:13:46.160 working on the printer engines. Now why this Soul's acquisition 0:13:46.160 --> 0:13:48.600 was important for us? Is it meant that we now 0:13:48.679 --> 0:13:51.680 have a bigger database of three D scans that we 0:13:51.720 --> 0:13:54.880 can feed to train our technology to take that scan 0:13:55.000 --> 0:13:58.640 and turn it into an STV STL file more efficiently. 0:13:58.640 --> 0:14:01.559 That's the file format most pree in three D printing today. 0:14:01.679 --> 0:14:05.400 And so that's really more new that fifty thousand scans 0:14:05.440 --> 0:14:07.959 of three D scans of your feet would be worth 0:14:08.000 --> 0:14:10.600 that much on it Well, well, Tyler, though, I wanted 0:14:10.640 --> 0:14:12.480 to ask that that brings me to the next question, 0:14:12.520 --> 0:14:15.439 which is where does the real money lie. Is it 0:14:15.559 --> 0:14:19.080 in the programming behind the three D printers? Is it 0:14:19.200 --> 0:14:22.560 in the actual machines that can take the technology and 0:14:22.600 --> 0:14:25.160 make it into uh, make it into action? Where does 0:14:25.160 --> 0:14:28.320 it go? So today it's very much on the material side. 0:14:28.360 --> 0:14:30.320 It's the razor razor blades model, where if you look 0:14:30.320 --> 0:14:33.120 at the margins and industry. We see margins as high 0:14:33.160 --> 0:14:35.760 as a thousand percent on the raw feedstock, which is 0:14:35.800 --> 0:14:39.440 pretty incredible considering most manufacturing margins. However, I think in 0:14:39.480 --> 0:14:41.640 the long term, as the patent landscape has started to 0:14:41.680 --> 0:14:44.600 shake out in competition has really increased, we're going to 0:14:44.600 --> 0:14:47.560 see the long term margins on three D printing drop 0:14:47.640 --> 0:14:50.800 to about two to three, which is the manufacturing standard. 0:14:51.200 --> 0:14:53.280 I think that much of the VIA will be captured, 0:14:53.320 --> 0:14:56.320 as we've seen in electronics, by the design. So companies 0:14:56.360 --> 0:14:58.320 are really going to be able to command high premium 0:14:58.520 --> 0:15:01.960 if they have a proprietary sort vertically integrated, and end 0:15:01.960 --> 0:15:05.640 experience that is really i P driven design. If I 0:15:05.680 --> 0:15:08.440 may just echo what Tyler said, you know, one thing 0:15:08.480 --> 0:15:12.120 hasn't changed, making a product that people want and then 0:15:12.200 --> 0:15:15.760 marketing that product that that hasn't changed fundamentally. So for 0:15:15.880 --> 0:15:18.520 us as we've we've even learned that as we've gone 0:15:18.520 --> 0:15:20.880 about what we're doing. It was one thing to figure 0:15:20.920 --> 0:15:22.920 out the technology, but it was another thing to build 0:15:22.960 --> 0:15:25.080 the market and have people realize you can actually get 0:15:25.120 --> 0:15:27.760 these end products. And so having the brand in the 0:15:27.640 --> 0:15:30.880 in the market and having a product people want is key. 0:15:30.880 --> 0:15:33.040 Thank you so much for joining us. This is really interesting. 0:15:33.400 --> 0:15:36.920 Tyler Benster, general partner at Asthma Ventures in Seattle, Washington. 0:15:37.040 --> 0:15:39.040 Here with us in our Bloomberg eleven three studio. Also 0:15:39.040 --> 0:15:42.480 with us Shamil Hargovan, co founder and CEO of We've 0:15:42.600 --> 0:15:58.440 in San Diego, California. I am so excited about our 0:15:59.080 --> 0:16:02.360 next guest. He is a long time UH person who 0:16:02.360 --> 0:16:05.440 I have looked up to tremendously cast Sunseen Harvard Professor, 0:16:05.760 --> 0:16:11.120 Bloomberg View contributor and author of hashtag Republic, Divided Democracy 0:16:11.240 --> 0:16:14.120 in the Age of Social Media. UH. He comes to 0:16:14.200 --> 0:16:16.480 us now casts. Thank you so much for joining us UH. 0:16:16.920 --> 0:16:20.080 This the premise of this book is fascinating that basically 0:16:20.360 --> 0:16:23.960 the new challenge to democracy is the way that increasing 0:16:24.000 --> 0:16:26.160 technology is allowing people to sort of live in their 0:16:26.160 --> 0:16:28.440 own bubbles without getting exposure to one another. Can you 0:16:28.440 --> 0:16:31.320 explain what drew you to this and and how severe 0:16:31.760 --> 0:16:35.440 this problem was as you found? Well, I guess I've 0:16:35.440 --> 0:16:37.880 been drawn to it since the beginning of the Internet, 0:16:37.880 --> 0:16:41.560 when you could see that the UH capacity for people 0:16:41.600 --> 0:16:44.960 to sort themselves and little kind of mirrors where they're 0:16:45.000 --> 0:16:48.600 just looking at mirrors of oneself or people who have 0:16:48.640 --> 0:16:53.200 the same view as oneself at least, that capacity just skyrocketed. 0:16:53.680 --> 0:16:57.000 And in the recent past we've seen it in the elections, 0:16:57.000 --> 0:16:59.960 of course, but also in political discussion that would say 0:17:00.000 --> 0:17:02.800 spook and Twitter. And of course, with your ability to 0:17:03.240 --> 0:17:07.600 just scoot from one congenial view to another, you can 0:17:07.680 --> 0:17:10.679 just hear topics and points of view that make you 0:17:10.720 --> 0:17:13.560 feel like you're in a cozy little cocoon. And that's 0:17:14.000 --> 0:17:18.560 uh comforting cocoons are, but it's also a form of 0:17:18.560 --> 0:17:21.760 prison for individuals and for democracy. It's it's a danger, 0:17:22.960 --> 0:17:25.240 uh ms Sunstein. I wonder if you could just give 0:17:25.280 --> 0:17:28.240 us a little bit of your historical perspective, because I 0:17:28.280 --> 0:17:30.480 note that you know, in September two thousand nine, you 0:17:30.520 --> 0:17:34.440 were confirmed as the director of the White House omb 0:17:34.600 --> 0:17:39.840 Office of Information and Regulatory Affairs. Uh. This is an 0:17:39.840 --> 0:17:44.360 important agency, and I'm wondering if you could just describe 0:17:44.400 --> 0:17:48.120 its work and what you see happening to the current 0:17:49.160 --> 0:17:52.520 Office of Information and Regulatory Affairs. And as much as 0:17:52.920 --> 0:17:57.080 President Donald Trump has asked for agency wide reviews to 0:17:57.160 --> 0:18:00.560 reduce regulations, sure so the goal of the office, which 0:18:00.600 --> 0:18:04.960 goes back to President Reagan, is to oversee environmental regulation, 0:18:05.160 --> 0:18:09.120 safety regulation, labor health, lots of stuff, including some national 0:18:09.200 --> 0:18:12.520 security stuff, and to make sure basically it's consistent with 0:18:12.560 --> 0:18:15.800 the law that the costs are under control and the 0:18:15.800 --> 0:18:19.879 benefits justify the costs. So it's not the most visible office, 0:18:19.960 --> 0:18:22.200 but it is an office that has a pretty central 0:18:22.359 --> 0:18:25.960 role in affecting things that affect people every day. UM. 0:18:26.160 --> 0:18:29.320 Under President Trump, it could go in two different directions 0:18:29.359 --> 0:18:32.320 where still at early days, UH, there's some signs of 0:18:33.320 --> 0:18:37.439 kind of making sure that if we're going to be 0:18:37.480 --> 0:18:41.879 issuing new regulations in an economically challenging time, they really 0:18:42.200 --> 0:18:46.760 survive some sort of hurdle of justification. And that's accompanied 0:18:46.760 --> 0:18:48.919 by an idea if you're going to issue one, you 0:18:48.960 --> 0:18:52.440 have to get rid of too. Now, in principle that's 0:18:52.440 --> 0:18:54.959 not the best idea in the world, because you may 0:18:55.000 --> 0:18:57.159 have one good one and not too bad ones to 0:18:57.200 --> 0:19:00.840 get rid of. But in practice, UH, the people in 0:19:00.880 --> 0:19:03.440 the Office of Information Regulatory Affairs, I think they can 0:19:03.440 --> 0:19:06.119 make it work, certainly for a year or two. So 0:19:06.200 --> 0:19:09.000 one direction is just have a lot of discipline about 0:19:09.119 --> 0:19:12.680 new regulations going out. UH. And I would favor that 0:19:12.680 --> 0:19:15.480 that's continuous with a lot of things I've worked on 0:19:15.560 --> 0:19:18.760 when I was there, and Another direction, which isn't so 0:19:18.800 --> 0:19:21.560 good is what has been referred to as the deconstruction 0:19:21.560 --> 0:19:24.720 of the administrative state. Probably some people nod their heads 0:19:24.760 --> 0:19:26.480 when they hear that word, even though it comes from 0:19:26.480 --> 0:19:29.480 a French literary theorist who, Uh, the critics of the 0:19:29.520 --> 0:19:33.560 administrative state don't like so much the French literary people. Um, 0:19:33.600 --> 0:19:35.920 but I think nodding the head isn't a very good 0:19:35.960 --> 0:19:40.679 idea because there's UH safety regulation that prevent deaths on 0:19:40.720 --> 0:19:43.960 the highways, their safety regulation that make sure our food 0:19:44.040 --> 0:19:47.320 is safe, and there's UH safety regulation that makes sure 0:19:47.400 --> 0:19:50.040 that our error is clean to breathe, and deconstruction of 0:19:50.040 --> 0:19:52.920 the administrative state wouldn't be the best idea. So there's 0:19:52.960 --> 0:19:55.879 a long way of saying, Uh, Trump administration could go 0:19:55.960 --> 0:19:58.680 in one of two directions, and the first direction isn't 0:19:58.680 --> 0:20:01.320 so bad. You know. I want to go back to 0:20:01.359 --> 0:20:03.720 the point that you're making about people sort of seeing 0:20:04.680 --> 0:20:07.520 themselves in mirrors or seeing their ideas just in mirrors, 0:20:07.640 --> 0:20:10.480 and how that, I mean arguably has dictated what we 0:20:10.520 --> 0:20:13.200 are seeing right now in the current political cycle. Uh 0:20:13.240 --> 0:20:17.719 that's my extrapolation, not necessarily yours, but uh, but I'm 0:20:17.760 --> 0:20:21.000 wondering how much are you seeing that in academia, because 0:20:21.200 --> 0:20:25.400 you know what people think of uh institutions, academic institutions 0:20:25.400 --> 0:20:28.439 being a bastion of of thought and in conversation. But 0:20:28.480 --> 0:20:31.160 often there isn't a lot of diversity of views even 0:20:31.200 --> 0:20:34.440 among the professors. Well, I don't see a whole lot 0:20:34.480 --> 0:20:37.119 in academia, I confess, but that this may be my 0:20:37.200 --> 0:20:39.399 limited travels. So I spent a long time at the 0:20:39.440 --> 0:20:42.200 University of Chicago, and if you go through a day 0:20:42.240 --> 0:20:45.760 without hearing twenty different views, you're probably just staying in 0:20:45.760 --> 0:20:50.680 your office. UH. And the universities, even though they're often 0:20:50.720 --> 0:20:55.480 reputed to be echo chamber areas, UM my own experience, 0:20:55.520 --> 0:20:58.359 as I say, is as they just aren't. So some 0:20:58.440 --> 0:21:00.359 of the places that are supposed to be left the 0:21:00.400 --> 0:21:03.720 center and kind of Obama territory, there are people who 0:21:03.760 --> 0:21:06.960 think that Obama was awful and you know, and that 0:21:07.040 --> 0:21:09.520 the Trump direction is much better, and then we need 0:21:09.600 --> 0:21:11.919 some conservatives in charge. And there are places that are 0:21:11.920 --> 0:21:15.120 supposed to be conservative bastions where there are people who say, 0:21:15.200 --> 0:21:18.000 you know what, the Democrats have some really good ideas. 0:21:18.320 --> 0:21:21.240 So I think it's a problem in the political domain 0:21:21.320 --> 0:21:25.040 where people self stored into little cocoons, and they regard 0:21:25.080 --> 0:21:29.359 their fellow citizens as traders or enemies or you know, 0:21:29.440 --> 0:21:32.960 deeply confused or in the crip of lies. That seems 0:21:33.000 --> 0:21:35.040 to me a much more serious problem than what the 0:21:35.040 --> 0:21:37.720 professors are doing. Do you have any hope that the 0:21:37.840 --> 0:21:41.960 situation will improve where people will seek out views the 0:21:42.040 --> 0:21:44.400 disagree with their own. Well, one of the great things 0:21:44.400 --> 0:21:48.200 about our country is that we're not hopeless, and that's 0:21:48.320 --> 0:21:52.879 meant has a pun. It's first, we're not pessimistic, and second, 0:21:52.920 --> 0:21:56.439 we have capacity to put the future in our own hands. 0:21:56.560 --> 0:21:59.400 That's what we the people did a long time ago, 0:21:59.560 --> 0:22:03.879 and we've that repeatedly since. So the fact is that 0:22:04.119 --> 0:22:07.280 what our communications world is is if it's a world 0:22:07.400 --> 0:22:10.680 of self sorting where we uh, you know, just learned 0:22:10.760 --> 0:22:14.359 a single thing about civil rights, let's say that maybe 0:22:14.400 --> 0:22:16.399 not be true or at least is in the full picture, 0:22:16.600 --> 0:22:19.040 or we learned a bunch of different things, depends on 0:22:19.080 --> 0:22:23.840 our own choices, both as individuals and people are providing 0:22:23.840 --> 0:22:26.880 the stuff. So I think that there are some good 0:22:26.920 --> 0:22:31.040