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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p L Podcast

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Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. Pim I

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Speaker 1: was reading a story this morning. I want to read

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Speaker 1: the lead to you when Donald Trump starts work in

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Speaker 1: the Oval Office in January. In January, he will have

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Speaker 1: more potential business and financial conflicts of interest than any

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Speaker 1: other president in US history. The author of that is

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Speaker 1: Timothy O'Brien, the head of Bloomberg Gadfly, Bloomberg Editor, Bloomberg View,

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Speaker 1: UH publisher. Tell us, what are some of those conflicts? Well,

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Speaker 1: they're myriad, Lisa. You know, he's he's coming into the

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Speaker 1: b office having sat a top a boutique branding organization,

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Speaker 1: the Trump Organization. It has a small clutch of lucrative buildings,

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Speaker 1: hotel operations and um UH and his basically a licensing operation. UH.

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Speaker 1: He's been a human shingle for about the last ten

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Speaker 1: years or so of his business life. He licenses his

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Speaker 1: name on everything from mattresses and underwear to other people's

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Speaker 1: building buildings, etcetera, etcetera, and um, his kids run it.

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Speaker 1: He's got a small clutch of family of close associates

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Speaker 1: who have helped him in that business for a long time.

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Speaker 1: Now he's going into the White House and as president,

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Speaker 1: there are very few conflict of interest laws that apply

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Speaker 1: to him, basically none. What kinds of disclosures does he

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Speaker 1: have to do as far as the business because it's

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Speaker 1: a private, private business. Yeah. I mean, he's said throughout

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Speaker 1: the campaign that he didn't need to release his tax

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Speaker 1: returns because he had already given the FEC documents about

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Speaker 1: his business operation. But the reality is all of that

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Speaker 1: stuff is self reported. There are no meaningful numbers associated

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Speaker 1: with any of it. We have a guy coming into

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Speaker 1: the White House who has substantial financial and business connections

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Speaker 1: and we don't really know the full excent of what

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Speaker 1: they are, and he's free to make a number of

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Speaker 1: policy decisions that could essentially feather his own nest. Timothy O'Brien,

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Speaker 1: I want to also mention that you were the author

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Speaker 1: of Trump Nation, so you have some detailed history about

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Speaker 1: Mr Trump. The president elect. If you could characterize what

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Speaker 1: are the most potentially the most confrontational uh, conflicts of interest,

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Speaker 1: what would they be. Well, he's a real estate developer,

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Speaker 1: so he has a lot of leverage. He's got a

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Speaker 1: lot of loans. In particular, Deutsche Bank, the big German bank,

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Speaker 1: is one of his primary lenders. Deutsche is currently under

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Speaker 1: investigation by the Justice Department. Uh. The Trump's you know,

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Speaker 1: the Trump cabinet, will have influence over the course of

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Speaker 1: that investigation. UM. Deutsche is very close to the German government.

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Speaker 1: So of course any foreign policy or trade agreements that

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Speaker 1: Trump engages in overseas comes to bear on that. UM.

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Speaker 1: He he campaigned on being against lobbying and entrenched lobbyists,

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Speaker 1: but he's got lobbyists throughout his transition team. UM. Policy

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Speaker 1: domestically on taxes is going to affect his real estate operations. UM.

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Speaker 1: He's got I think currently about seventy five lawsuits outstanding,

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Speaker 1: either being filed against him or that he's followed against others,

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Speaker 1: including quite prominently the Trump University case. UM. He gets

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Speaker 1: immunity from having to appear on the witness stand in

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Speaker 1: those case is, but he's not immune from the consequences

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Speaker 1: of that litigation, So that's going to play out as well.

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Speaker 1: And there was a story today that Berkeley's analysts expect

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Speaker 1: that the potential Deutsche Bank find by the Department of

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Speaker 1: Justice will probably be much lower in a Trump presidency.

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Speaker 1: To your point about Dutch Bank being his major lender,

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Speaker 1: I don't know how much that's gonna play into it.

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Speaker 1: Um is there or who will play the biggest watchdog

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Speaker 1: within the government. Who can play that role? Well, it's

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Speaker 1: it really the chief executive of the United States has

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Speaker 1: a lot of latitude. There is by design not a watchdog.

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Speaker 1: The almost all of the conflict of interest laws at

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Speaker 1: the federal level UM and at the executive branch don't

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Speaker 1: apply to the president. UM. We've relied on presidents in

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Speaker 1: the past creating blind trusts to store their assets so

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Speaker 1: someone else can manage them. But those tend to be

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Speaker 1: security stocks and bonds. They don't It doesn't include things

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Speaker 1: like a real estate operation and golf courses. Trump has

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Speaker 1: said that he will distance himself from those operations by

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Speaker 1: letting his three children run them, but in fact that's

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Speaker 1: really not a prophylactic. He'll be talking. One would assume

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Speaker 1: about those businesses with his kids every day, so right

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Speaker 1: now we lack a watchdog. Well, coming up, we're gonna

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Speaker 1: be speaking with the Thin Dean, our government analyst for

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Speaker 1: Bloomberg Intelligence. We're gonna talking about the defense rather the

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Speaker 1: Dodd Frank legislation and any attempts to change that. But

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Speaker 1: it's just your point about lobbyists and people who are

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Speaker 1: veterans in Washington understand that a former representative, Mike Rogers,

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Speaker 1: he was a former Reagan attorney general and Heritage Foundation

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Speaker 1: fellow Edwin Meees also, so both of them. Uh, don't

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Speaker 1: don't forget about Rudy Giuliani himself, the firm that he

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Speaker 1: has been with until recently. Greenberg Um did lobby and

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Speaker 1: work for the Trump organization over the years on casino issues.

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Speaker 1: So all of this stuff is fairly deep and deeply

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Speaker 1: embedded in his portfolio and his transition team. Yeah, you're

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Speaker 1: saying that I Trump currently has owes as much as

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Speaker 1: six hundred and fifty million dollars. So that's a lot

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Speaker 1: of money that he has. Be's a lot of money

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Speaker 1: that he has at stake here potential for just a

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Speaker 1: quickly potential for reinstituting a glass Stiegel as a replacement

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Speaker 1: for Dodd Frank. You know, Trump has said all sorts

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Speaker 1: of varying things about bank regulation, regulatory reform, Elizabeth Warren

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Speaker 1: of all people today, so that she'd love to allie

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Speaker 1: with him on some of this. So who would have

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Speaker 1: ever thought that Donald Trump and Elizabeth Warren would wind

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Speaker 1: up as strange bedfellows. So we're gonna have a lot

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Speaker 1: of wait and see on him in public policy. Thank

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Speaker 1: you very much. Timothy O'Brien, Executive editor Bloomberg, Gadfly and

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Speaker 1: Bloomberg View. He is also the author of the book

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Speaker 1: Trump Nation. I'm Pim Fox along with Lisa Abramowitz. This

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Speaker 1: is Bloomberg. I want to turn our attention now to

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Speaker 1: Dodd Frank legislation. Nathan Dean is our government analyst for

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Speaker 1: Bloomberg Intelligence. He joins us, Now, bank stocks have had

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Speaker 1: a great run over the last five days. A city

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Speaker 1: group up seven and a half percent, Golden Sacks of fourteen,

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Speaker 1: Morgan Stanley up fifteen, JP Morgan up twelve. Tell us

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Speaker 1: about the future of Dodd Frank, Nathan Dean, So, the

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Speaker 1: future of Dodd Frank is that it's going to get weakened. Uh.

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Speaker 1: You know now that we have President elect Donald Trump,

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Speaker 1: a Republican Senate and a Republican House. UH, Congress is

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Speaker 1: going to be able to push forth many of the

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Speaker 1: changes that they wanted to do for the last couple

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Speaker 1: of years on dot frank. And they're going to weaken it. Well,

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Speaker 1: but what are the changes that they want to make?

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Speaker 1: So they can't repeal it and they can't get rid

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Speaker 1: of anything material, so vocal rule, for example, they can't

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Speaker 1: do that because you need sixty votes in the Senate

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Speaker 1: to overcome a Democratic filibuster. But what they're gonna do

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Speaker 1: is there's a plan out in Congress right now called

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Speaker 1: the Financial Choice Act. You pay ten percent of the LIBERATORYTIO,

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Speaker 1: so increased capital requirements buy the out of dot frank. UH.

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Speaker 1: And another rule that we're going to see, the fiduciary

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Speaker 1: duty rule at the Department of Labor. We expect that

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Speaker 1: to get weakened. Uh. And so you're gonna see targeted

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Speaker 1: relief to certain sectors of the financial services industry small

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Speaker 1: mid sized banks round two or fifty billion in assets

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Speaker 1: and below, asset managers, insurers, But you're not going to

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Speaker 1: see like a global repeal of dot frank. Nathan, just

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Speaker 1: go back for just a second. I want to want

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Speaker 1: you to recast maybe just offer that detail about if

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Speaker 1: you pay the ten percent at and if you have

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Speaker 1: that that capital cushion, then you get to opt out.

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Speaker 1: You can in a sense, you're pain to get out

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Speaker 1: of Dodd Frank exactly. So there's this idea for higher

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Speaker 1: requiring coup requirements, less regulation. The planets out in Congress

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Speaker 1: right now, and it has to be reintroduced next year,

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Speaker 1: so it may look a little bit different. Requires the

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Speaker 1: big eight g cs, Bank America, JP, Morgan, etcetera. To

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Speaker 1: have a ten percent leverage ratio right now, they're around

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Speaker 1: six now. Chairman Henseling estimates that in order to get

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Speaker 1: from six to eight a six to ten, those eight

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Speaker 1: banks would have to pony up about three D five

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Speaker 1: hundred billion in new capital. Now that's a pretty high

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Speaker 1: price to pay. But if you go further down the line,

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Speaker 1: you start looking at the banks that are around fifty

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Speaker 1: billion in assets, ten billion assets, many of them are

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Speaker 1: already at that leverage ratio. So, uh, this Financial Choice

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Speaker 1: Act really does favor the small and community sized banks.

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Speaker 1: So it's you know, it's sort of interesting. I think

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Speaker 1: when I talk to people. Their impression is that UH

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Speaker 1: and Mr Trump will roll back the majority of the

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Speaker 1: Dodd Frank Act, and that include dudes much more risk

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Speaker 1: taking at the big banks, and that's one reason why

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Speaker 1: people are expecting profitability to go up. And yet it

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Speaker 1: sounds like that's not necessarily the case. Well, there are

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Speaker 1: many ways that they can do this. So for two

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Speaker 1: things to point out. One, the Republicans have tried over

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Speaker 1: a times since two thousand ten to amend dot Frank.

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Speaker 1: They haven't succeeded because they've never been able to get

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Speaker 1: that sixty vote in the Senate. Elizabeth warrened she's going

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Speaker 1: to be able to cause a lot of problems in

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Speaker 1: the Senate and block a lot of that big regulation. However,

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Speaker 1: Donald Trump now controls the financial regulators, and so he

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Speaker 1: can instruct the new heads of the SEC, se IFDC, UH,

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Speaker 1: you know the Photo Reserve, when if Janet Yen leaves

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Speaker 1: into thousand eighteen to start looking at rolling back regulation

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Speaker 1: and so UH, they can do things like putting out

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Speaker 1: notices saying that we're not going to enforce certain regulations,

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Speaker 1: We're not going to hold you accountable. So I think

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Speaker 1: if you see in the short term, you're not going

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Speaker 1: to see a lot of change, but in the long

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Speaker 1: term you're gonna see a lot more. Is there a

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Speaker 1: particular regular lation that you're thinking they could sort of

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Speaker 1: ignore or pushed to the side. The fiduciary duty is

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Speaker 1: the perfect example. So this rule came up from the

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Speaker 1: Labor Department. Uh. It caused a lot of problems with

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Speaker 1: the life insurance industry, the broker dealers, the retirement investment advisors,

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Speaker 1: lots of pushback both from the Democrats, some Democrats and Republicans.

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Speaker 1: Rule went into forest compliances in April. So what we

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Speaker 1: could see there is, uh, the new administration come out

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Speaker 1: put out a notice in March saying you don't have

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Speaker 1: to comply, and then they'll have to repropose the rule. Uh.

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Speaker 1: You know, any regulation, it's not like Donald Trump can

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Speaker 1: come in on day one, just sign an executive order

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Speaker 1: and it goes away. They have to repropose it. And

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Speaker 1: so the quickest way to overturn a regulation is to

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Speaker 1: have Congress passidents law. But if they can't do it

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Speaker 1: and they turn to the regulatory agencies, they have to

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Speaker 1: do a rulemaking process, which could take up the eighteen

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Speaker 1: months to two years Nathan non bank financial institutions such

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Speaker 1: as A I G, Met Life, Prudential Financial what can

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Speaker 1: we expect there? So, the Financial Stability or Recite Council

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Speaker 1: is the one that controls the designation for A I

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Speaker 1: G and Prudential and met UH. And they serve at

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Speaker 1: the pleasure of the Secretary of the Treasury. They can't

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Speaker 1: do anything unless the Treasury Secretary signs off on it.

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Speaker 1: And now the Secretary Treasury is going to serve at

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Speaker 1: the pleasure of Donald Trump. And so when A I

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Speaker 1: G and Prudential have their annual reviews over their city status,

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Speaker 1: which which will take place sometime in the September of

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Speaker 1: October of two thousand seventeen, UH, it's not unlikely to

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Speaker 1: see at that time the f stocks say we're just

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Speaker 1: going to d designate you. You know, there's a lot

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Speaker 1: of talk about town. Is the f stock going to

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Speaker 1: be finished or not? Uh? And one of the easiest

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Speaker 1: ways to get rid of that that designation for AI

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Speaker 1: G and Prudential is to have the f stock do

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Speaker 1: it in you know, later next year. Have the Republicans

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Speaker 1: been against the city a designation just real quick, yes, absolutely,

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Speaker 1: across the board, really really interesting Nathan dean government analyst

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Speaker 1: at Bloomberg Intelligence in Washington, d C, talking about the

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Speaker 1: implications UH in a Donald Trump administration. Well, our benchmark.

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Speaker 1: When we want to know anything about the retail industries,

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Speaker 1: we call Bert Flickinger. He's the managing director a Strategic

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Speaker 1: Resource Group. He can be followed on Twitter at Bert

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Speaker 1: underscore Flickinger. Alright, Bert underscore Flickinger, tell me about the

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Speaker 1: retail ice age that you've most recently witnessed. There's an

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Speaker 1: accelerating retail ice age, PIM and Lisa, and you're going

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Speaker 1: to see a record number of bankruptcies UH for retailers.

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Speaker 1: You're seeing the corporate bond debt trade down for everyone

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Speaker 1: from Neiman Marcus trading at eight year below most of

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Speaker 1: your listeners know issued in a hundred jay cruise trading

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Speaker 1: below forty searies is really struggling. And even today you

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Speaker 1: and Lisa talked about the Southsayer of South Korea and

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Speaker 1: the magic purses. The rasputant of retail is in the

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Speaker 1: headlines today and Bill Ackman, as he left j C

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Speaker 1: Penney on death store step dropped the stock from forty

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Speaker 1: three to about a dollar twenty and then Steve sat off,

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Speaker 1: the pride of Hamilton's College and sex fifth Avenue came back,

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Speaker 1: brought Penny back from the dead. They missed today, but

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Speaker 1: they're gonna make it where a lot of their competitors

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Speaker 1: like the Bonton Uh as well as Sears Holdings which

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Speaker 1: still has softer side of Sears, are struggling, and even

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Speaker 1: Neiman Marcus Group with Jones Barney their bonds are trading

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Speaker 1: at eighty year below. So there's gonna be a real

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Speaker 1: rationalization whether companies are impaired by RASP mutants like Bill

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Speaker 1: Ackman or just poor consulting and financial advice. Well, and

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Speaker 1: you noted that will be the most troubling year for

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Speaker 1: retail in a decade, and not to be outdone, eighteen

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Speaker 1: will be worth Why well, Lisa, and you you, you

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Speaker 1: and PIM already reported declining oil prices. So so for us,

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Speaker 1: the Harbinger is really Kazakhstan where Hudson Bay Company opener

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Speaker 1: Brand was not expecting that the Harbingers her list to travel.

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Speaker 1: But go ahead, but tell us this story because Hudson

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Speaker 1: Bay owns a fifth SAX with SAX with the Avenue

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Speaker 1: put their latest Crown Crown jewel license store uh in Kazakhstan.

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Speaker 1: I know from our work with the State Department in USA.

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Speaker 1: It was only a few years ago where people were

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Speaker 1: showing up on Saturdays with livestock and butcher butchering cattle

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Speaker 1: on their cars and selling pieces of meat, and State

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Speaker 1: Department was asking us to come up with basic retail.

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Speaker 1: How you get to that luxury goods is beyond me.

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Speaker 1: But Sachs did at Harvey Nichols did at Harvey Nichols

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Speaker 1: closed their Kazakhstan store in less than a hundred days.

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Speaker 1: What's what's the barometer? The petro dollars aren't there. We

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Speaker 1: were in Paris for Fashion Week as well as Golden Week.

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Speaker 1: All the people from their maz to Le um Le

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Speaker 1: Bon Marche. Printon told us the Sinoa, which your listeners

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Speaker 1: know as the Chinese, are there with cameras or calculators,

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Speaker 1: just snapping pictures and looking for a lower price. And

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Speaker 1: his pen reference in the b break. You can go

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Speaker 1: to every luxury offline retailer. And that's why Neiman Marcus,

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Speaker 1: with its mountain of debt with Bergdorf, is in a

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Speaker 1: bad position for for maybe eighteen but Barney's is an

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Speaker 1: even worse position for seventeen and Jay Crew possibly for

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Speaker 1: this Christmas, Hanka and Kansas. How do you square the

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Speaker 1: sudden surgeon optimism about growth in the US and the

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Speaker 1: possibility of inflation. And frankly, the more that markets gain,

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Speaker 1: the more that the wealthiest people will will gain money

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Speaker 1: that they can spend at these at these retailers. So

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Speaker 1: why isn't this a positive? It's it's a positive in

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Speaker 1: terms of the stock market. The wealth effect is your

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Speaker 1: referenced well, Lisa, but but but at the end, uh,

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Speaker 1: you also have political problems. Mayor Michael Bloomberg under understood

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Speaker 1: the balance of the public and private sector. Average family

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Speaker 1: takes four hours and forty minutes to come from the

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Speaker 1: suburbs the shop in Midtown Manhattan and Los Angeles, Mischigan

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Speaker 1: have Chicago with the traffic density, and the major cities

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Speaker 1: in the US, UH, sevent of that time's lofts and traffic,

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Speaker 1: So people don't come anymore. So footfalls way down for

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Speaker 1: leading department stores and and luxury stores and all of

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Speaker 1: what we call the gateway cities. And it's not unique

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Speaker 1: to Los Angeles or Vancouver, New York, or Miami at

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Speaker 1: Aventure Mall. It's something we're seeing in Singapore and and

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Speaker 1: uh we're seeing in in Tokyo and and worldwide. And

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Speaker 1: also people have expenses coming up, So it's the aspirational

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Speaker 1: middle class. It's the middle upper UH that is has

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Speaker 1: everything from higher healthcare to tuition. So they're cutting back

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Speaker 1: on retail spending UH spending spending in other areas. And

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Speaker 1: then you have the millennials who even if they have

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Speaker 1: good jobs and have the money, UH, there are nesting

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Speaker 1: or what we call thrift ng and going to UH

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Speaker 1: savers or good wealth thrift stores or ladies ladies village

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Speaker 1: home improvement stores. So you could out to towns like

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Speaker 1: East Hampton and luxury retails not just boarded up. In

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Speaker 1: the faller of the Winner, it's largely boarded up. In

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Speaker 1: part of the summer, Tiffany had to close their store

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Speaker 1: um uh and a number of others closer stores. So

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Speaker 1: there'll be a great retail rationalization in the next few years.

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Speaker 1: To your point, but there'll be a real retail renaissance

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Speaker 1: starting in and really well capitalized capable retailers are win

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Speaker 1: particularly the ones with great merchant leaders. So who's that

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Speaker 1: who's it going to be? Who are the winners? Uh?

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Speaker 1: We we see, we see the winners across sector. Uh,

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Speaker 1: multi multi tier. It'll be Kroger, off Price, dollar dollar General,

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Speaker 1: t J t J, t j X, Cross stores early.

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Speaker 1: If you look at your point him the best leader

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Speaker 1: in retailer retailers Ben Camorados, a seminal genius founder of

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Speaker 1: t j X, with Carol Meyer, Woods and Ernie Herman. Uh,

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Speaker 1: their margins are twice as biggest Amazon. Their inventory turns

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Speaker 1: or six times. The rest of the department stores are

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Speaker 1: turning inventory two point three to two point seven times.

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Speaker 1: It's cash flow. The department stores are paying Uh, many

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Speaker 1: of them are paying their vendors late. So the vendors

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Speaker 1: need cash to give to Lean fong in their factors,

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Speaker 1: less credit available exactly, Well, right, Bert, So then I'll

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Speaker 1: ho about on the flip side. I mean you said

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Speaker 1: that there could be, was it correct? A record number

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Speaker 1: of bankruptcies and retail in the upcoming years. So which

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Speaker 1: companies do you expect to go bankrupt? It's uh, you

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Speaker 1: never you never want to say it's it's all the

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Speaker 1: way over. But it looks like vulnerable. You could just

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Speaker 1: say which ones are vulnerably vulnerable to the curtain coming down?

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Speaker 1: So when the day Dumas stage. For lease day Dumas

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Speaker 1: stage is everybody from Jay Crew to Sears holding UH

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Speaker 1: Bontan's trade traded way down, uh Neiman, Marcus Berg Door's

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Speaker 1: credit worthy now, but but see issues for them going forward.

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Speaker 1: And then UM yeah, even even undercapitalized on the on

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Speaker 1: the low end, UH Fred's seems seems to be struggling

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Speaker 1: quite a bit. And and then UM chain drug discount

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Speaker 1: shop COO. Wherever you see private equity getting greedy and

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Speaker 1: up streaming money to themselves, UH and big fees and

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Speaker 1: and that's that's my professional view of Bill Ackman UH

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Speaker 1: in retail and won't comment on what he's done more

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Speaker 1: recently at Valiant. But when you have a great turnaround

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Speaker 1: leader like UM our mutual friend Frank Blake at Home

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Speaker 1: Depot Bob near Delhi half killed the company, the UH

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Speaker 1: three founders Marcus blank Et Cetera brought Blake in and

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Speaker 1: UH complete upside Bert Clicking Share managing director at Strategic

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Speaker 1: Resource Group on all things retail. This is Bloomberg Einstein's

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Speaker 1: The Greatest miss Stake, The Life of a Flawed Genius.

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Speaker 1: It was published in September and the author of the

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Speaker 1: book David bodenis it joins us now from London. David,

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Speaker 1: thank you very much for being with us. Thank you sir. Now.

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Speaker 1: Your previous books have included such titles as E equals

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Speaker 1: MC squared. You've also written about computer generated fascism. What

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Speaker 1: inspired you to write this latest book, Einstein's Greatest Mistake?

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Speaker 1: I thought, you know, if you write a book called

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Speaker 1: Einstein is smarter than us and we're a bunch of

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Speaker 1: dumb schmunks, nobody's interested in that. But if you have

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Speaker 1: a book that's like, oh, Paul Einstein, he had something

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Speaker 1: wrong because there was a psychological aspect of him that

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Speaker 1: we could understand when everybody's interested, including this author. I

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Speaker 1: loved um turning him into a human being and really

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Speaker 1: seeing not just his great strength, which were magnificent, but

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Speaker 1: also what happened when he stumbled? How did he get stuck?

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Speaker 1: And what lessons does it give us? So what was

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Speaker 1: his biggest mistake? Because because stake, it was a psychologic

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Speaker 1: most it was a psychological mistake. He he believed that

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Speaker 1: the universe was like a beautiful, clear book, that everything

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Speaker 1: was crisp and clear, that there was an order. It

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Speaker 1: wasn't like a random magazine with a bit of this

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Speaker 1: and a bit of that. Um, And then he had

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Speaker 1: had so much reason for believing this. It made all

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Speaker 1: sorts of sense about outer space. It led to notions

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Speaker 1: of the expanding universe, just terrific insights that later when

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Speaker 1: people started studying things on the microscual on the micro

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Speaker 1: small level and quantum mechanics, which seem to be just

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Speaker 1: that the universe isn't orderly, that it isn't super clear

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Speaker 1: and crisp when you analyze. He just couldn't accept it.

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Speaker 1: You know. He he had this comment, God does not

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Speaker 1: play dice. Was he a religious person? Um? If you

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Speaker 1: if you make a sort of just I could to

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Speaker 1: say about that comment. So yeah, so Einstein said God

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Speaker 1: does not play dice with the universe. Everything's orderly and clear,

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Speaker 1: there's a pattern set up in advance. And this good

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Speaker 1: friend Nell's boy used to say, Einstein, stop telling God

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Speaker 1: what to do, Like, how do you know it's great? Um?

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Speaker 1: So for religion. If Einstein he wasn't an atheist, He

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Speaker 1: thought atheism was very unscientific it um, you know, like

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Speaker 1: you're presuming to know too much. At the other hand,

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Speaker 1: he wasn't a believer in traditional like the details of

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Speaker 1: revealed religion. So he would think that Moses was very wise,

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Speaker 1: But he didn't think that Moses got the commandments from

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Speaker 1: gathering on Sinai. But there's a big space in between.

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Speaker 1: And uh, Einstein loves the seventeenth century death Jewish philosopher Spinoza.

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Speaker 1: He thought, Spinoza, what what wrote about this? These waiting

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Speaker 1: patterns in the universe, not presuming to say where they

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Speaker 1: came from, but just thinking, how magnificent is it that

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Speaker 1: there's instead of chaos and disorder around us, there's this harmony.

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Speaker 1: There's these patterns. Where do they come from? Maybe maybe

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Speaker 1: really floatful human beings can just discern that pattern, take

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Speaker 1: away the veil between us and deepest reality and see

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Speaker 1: what's there. And Einstein really wanted to do that. Can

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Speaker 1: you maybe draw some connection to the way people look

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Speaker 1: at the markets and and money because you talk about

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Speaker 1: patterns and being able to understand the patterns and the

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Speaker 1: and the moves is there. Can you define the difference

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Speaker 1: between a psychological mistake and a technical mistake that might

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Speaker 1: be applied to looking at the world of business and finance? Sure,

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Speaker 1: very much. The reason Einstein got stuck in his psychological

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Speaker 1: mistake was because his particular approach had been really successful before.

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Speaker 1: And if something's worked really well, if your company has

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Speaker 1: done well, you tend to think it's because of my approach,

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Speaker 1: my approach to the markets, my insight. Well, it might

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Speaker 1: actually just be chats, right, I mean, that's why tracker

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Speaker 1: funds on a simple level have done so well. So

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Speaker 1: very often people get not just so much a ruther

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Speaker 1: of failure, but a rut of success. You're doing something

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Speaker 1: well and it's really hard to change it because it's

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Speaker 1: been very successful. The other thing that comes from Einstein

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Speaker 1: which might apply to the markets is he developed his

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Speaker 1: own tools, which is a great thing to do for him.

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Speaker 1: It was certain tools and mathematics. Within the markets, it

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Speaker 1: might be I don't know, certain quantitative people would brings

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Speaker 1: in or certain analytic approaches, and you become really proud

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Speaker 1: of your tools. You get good at using your tools,

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Speaker 1: and you find it hard to imagine what would be

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Speaker 1: like using very very different tools. And then of course

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Speaker 1: behind it all is maybe what was your your first question?

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Speaker 1: If you believe, like Spinoza and Einstein, there's a deep

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Speaker 1: patterns waiting in the universe, you're not going to give

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Speaker 1: up till you find them. And some people, you know,

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Speaker 1: it always comes up. Somebody has this guaranteed way to understand,

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Speaker 1: which appears to be turbulence in the market actually follows

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Speaker 1: such and such deep patterns, and we're very often disappointed.

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Speaker 1: Those those in tights tend not to hold for more

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Speaker 1: than than temporary intervals. But just that belief is there,

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Speaker 1: and that belief, well, you can move a lot of

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Speaker 1: money on that belief. Well, you know, one sort of

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Speaker 1: cliche about Einstein is that he took a long time

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Speaker 1: to read and didn't do so well in school and um,

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Speaker 1: and so what can we learn from where he was

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Speaker 1: a genius? And is that true? Oh, it turns out

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Speaker 1: that the story that Einstein was a bad students I've

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Speaker 1: managed to trace it back to Rocky one and written

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Speaker 1: by Sylvester Stallone. And although Mr Stallone had magnificent biceps

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Speaker 1: and um, other muscles, he's not noted as an Einstein scholar.

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Speaker 1: And it turns out Einstein was actually einesteme was a

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Speaker 1: perfectly good student. Um, he was a good beat plus

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Speaker 1: or a minor students. He went to the Polytechnic in Zurich.

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Speaker 1: He did fail to get in on his first tribe.

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Speaker 1: But he's only sixteen, he hadn't even finished high school,

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Speaker 1: and his scores and math and physics were strong, but

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Speaker 1: his his Latin and some of his friend led him down.

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Speaker 1: And he did quite well after a year of media

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Speaker 1: high school. So he was a strong student. But it's

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Speaker 1: nice is that he wasn't a perfect student. He wasn't

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Speaker 1: like oh an a plus student from Harvard or Columbia

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Speaker 1: who's always had the things easy. So Einstein got used

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Speaker 1: to looking at things with a bit of a struggle.

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Speaker 1: So he was I don't want to call him a

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Speaker 1: total outsider. He was a moderate outsider. And there's a

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Speaker 1: great advantage as being a moderate outsider. You know what's

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Speaker 1: going on, but you're kind of willing that, you're kind

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Speaker 1: of willing to take a fresh perspective. David bodanis author

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Speaker 1: of Einstein's Greatest Mistake. Joining us from London. Thank you

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Speaker 1: so much. Thanks for listening to the Bloomberg pien L podcast.

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Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,

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Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm

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Speaker 1: out there on Twitter at pim Fox. I'm out there

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Speaker 1: on Twitter, at Lisa Abramo. It's one before the podcast.

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Speaker 1: You can always catch us worldwide on Bloomberg Radio