Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p L Podcast
Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. Pim I
Speaker 1: was reading a story this morning. I want to read
Speaker 1: the lead to you when Donald Trump starts work in
Speaker 1: the Oval Office in January. In January, he will have
Speaker 1: more potential business and financial conflicts of interest than any
Speaker 1: other president in US history. The author of that is
Speaker 1: Timothy O'Brien, the head of Bloomberg Gadfly, Bloomberg Editor, Bloomberg View,
Speaker 1: UH publisher. Tell us, what are some of those conflicts? Well,
Speaker 1: they're myriad, Lisa. You know, he's he's coming into the
Speaker 1: b office having sat a top a boutique branding organization,
Speaker 1: the Trump Organization. It has a small clutch of lucrative buildings,
Speaker 1: hotel operations and um UH and his basically a licensing operation. UH.
Speaker 1: He's been a human shingle for about the last ten
Speaker 1: years or so of his business life. He licenses his
Speaker 1: name on everything from mattresses and underwear to other people's
Speaker 1: building buildings, etcetera, etcetera, and um, his kids run it.
Speaker 1: He's got a small clutch of family of close associates
Speaker 1: who have helped him in that business for a long time.
Speaker 1: Now he's going into the White House and as president,
Speaker 1: there are very few conflict of interest laws that apply
Speaker 1: to him, basically none. What kinds of disclosures does he
Speaker 1: have to do as far as the business because it's
Speaker 1: a private, private business. Yeah. I mean, he's said throughout
Speaker 1: the campaign that he didn't need to release his tax
Speaker 1: returns because he had already given the FEC documents about
Speaker 1: his business operation. But the reality is all of that
Speaker 1: stuff is self reported. There are no meaningful numbers associated
Speaker 1: with any of it. We have a guy coming into
Speaker 1: the White House who has substantial financial and business connections
Speaker 1: and we don't really know the full excent of what
Speaker 1: they are, and he's free to make a number of
Speaker 1: policy decisions that could essentially feather his own nest. Timothy O'Brien,
Speaker 1: I want to also mention that you were the author
Speaker 1: of Trump Nation, so you have some detailed history about
Speaker 1: Mr Trump. The president elect. If you could characterize what
Speaker 1: are the most potentially the most confrontational uh, conflicts of interest,
Speaker 1: what would they be. Well, he's a real estate developer,
Speaker 1: so he has a lot of leverage. He's got a
Speaker 1: lot of loans. In particular, Deutsche Bank, the big German bank,
Speaker 1: is one of his primary lenders. Deutsche is currently under
Speaker 1: investigation by the Justice Department. Uh. The Trump's you know,
Speaker 1: the Trump cabinet, will have influence over the course of
Speaker 1: that investigation. UM. Deutsche is very close to the German government.
Speaker 1: So of course any foreign policy or trade agreements that
Speaker 1: Trump engages in overseas comes to bear on that. UM.
Speaker 1: He he campaigned on being against lobbying and entrenched lobbyists,
Speaker 1: but he's got lobbyists throughout his transition team. UM. Policy
Speaker 1: domestically on taxes is going to affect his real estate operations. UM.
Speaker 1: He's got I think currently about seventy five lawsuits outstanding,
Speaker 1: either being filed against him or that he's followed against others,
Speaker 1: including quite prominently the Trump University case. UM. He gets
Speaker 1: immunity from having to appear on the witness stand in
Speaker 1: those case is, but he's not immune from the consequences
Speaker 1: of that litigation, So that's going to play out as well.
Speaker 1: And there was a story today that Berkeley's analysts expect
Speaker 1: that the potential Deutsche Bank find by the Department of
Speaker 1: Justice will probably be much lower in a Trump presidency.
Speaker 1: To your point about Dutch Bank being his major lender,
Speaker 1: I don't know how much that's gonna play into it.
Speaker 1: Um is there or who will play the biggest watchdog
Speaker 1: within the government. Who can play that role? Well, it's
Speaker 1: it really the chief executive of the United States has
Speaker 1: a lot of latitude. There is by design not a watchdog.
Speaker 1: The almost all of the conflict of interest laws at
Speaker 1: the federal level UM and at the executive branch don't
Speaker 1: apply to the president. UM. We've relied on presidents in
Speaker 1: the past creating blind trusts to store their assets so
Speaker 1: someone else can manage them. But those tend to be
Speaker 1: security stocks and bonds. They don't It doesn't include things
Speaker 1: like a real estate operation and golf courses. Trump has
Speaker 1: said that he will distance himself from those operations by
Speaker 1: letting his three children run them, but in fact that's
Speaker 1: really not a prophylactic. He'll be talking. One would assume
Speaker 1: about those businesses with his kids every day, so right
Speaker 1: now we lack a watchdog. Well, coming up, we're gonna
Speaker 1: be speaking with the Thin Dean, our government analyst for
Speaker 1: Bloomberg Intelligence. We're gonna talking about the defense rather the
Speaker 1: Dodd Frank legislation and any attempts to change that. But
Speaker 1: it's just your point about lobbyists and people who are
Speaker 1: veterans in Washington understand that a former representative, Mike Rogers,
Speaker 1: he was a former Reagan attorney general and Heritage Foundation
Speaker 1: fellow Edwin Meees also, so both of them. Uh, don't
Speaker 1: don't forget about Rudy Giuliani himself, the firm that he
Speaker 1: has been with until recently. Greenberg Um did lobby and
Speaker 1: work for the Trump organization over the years on casino issues.
Speaker 1: So all of this stuff is fairly deep and deeply
Speaker 1: embedded in his portfolio and his transition team. Yeah, you're
Speaker 1: saying that I Trump currently has owes as much as
Speaker 1: six hundred and fifty million dollars. So that's a lot
Speaker 1: of money that he has. Be's a lot of money
Speaker 1: that he has at stake here potential for just a
Speaker 1: quickly potential for reinstituting a glass Stiegel as a replacement
Speaker 1: for Dodd Frank. You know, Trump has said all sorts
Speaker 1: of varying things about bank regulation, regulatory reform, Elizabeth Warren
Speaker 1: of all people today, so that she'd love to allie
Speaker 1: with him on some of this. So who would have
Speaker 1: ever thought that Donald Trump and Elizabeth Warren would wind
Speaker 1: up as strange bedfellows. So we're gonna have a lot
Speaker 1: of wait and see on him in public policy. Thank
Speaker 1: you very much. Timothy O'Brien, Executive editor Bloomberg, Gadfly and
Speaker 1: Bloomberg View. He is also the author of the book
Speaker 1: Trump Nation. I'm Pim Fox along with Lisa Abramowitz. This
Speaker 1: is Bloomberg. I want to turn our attention now to
Speaker 1: Dodd Frank legislation. Nathan Dean is our government analyst for
Speaker 1: Bloomberg Intelligence. He joins us, Now, bank stocks have had
Speaker 1: a great run over the last five days. A city
Speaker 1: group up seven and a half percent, Golden Sacks of fourteen,
Speaker 1: Morgan Stanley up fifteen, JP Morgan up twelve. Tell us
Speaker 1: about the future of Dodd Frank, Nathan Dean, So, the
Speaker 1: future of Dodd Frank is that it's going to get weakened. Uh.
Speaker 1: You know now that we have President elect Donald Trump,
Speaker 1: a Republican Senate and a Republican House. UH, Congress is
Speaker 1: going to be able to push forth many of the
Speaker 1: changes that they wanted to do for the last couple
Speaker 1: of years on dot frank. And they're going to weaken it. Well,
Speaker 1: but what are the changes that they want to make?
Speaker 1: So they can't repeal it and they can't get rid
Speaker 1: of anything material, so vocal rule, for example, they can't
Speaker 1: do that because you need sixty votes in the Senate
Speaker 1: to overcome a Democratic filibuster. But what they're gonna do
Speaker 1: is there's a plan out in Congress right now called
Speaker 1: the Financial Choice Act. You pay ten percent of the LIBERATORYTIO,
Speaker 1: so increased capital requirements buy the out of dot frank. UH.
Speaker 1: And another rule that we're going to see, the fiduciary
Speaker 1: duty rule at the Department of Labor. We expect that
Speaker 1: to get weakened. Uh. And so you're gonna see targeted
Speaker 1: relief to certain sectors of the financial services industry small
Speaker 1: mid sized banks round two or fifty billion in assets
Speaker 1: and below, asset managers, insurers, But you're not going to
Speaker 1: see like a global repeal of dot frank. Nathan, just
Speaker 1: go back for just a second. I want to want
Speaker 1: you to recast maybe just offer that detail about if
Speaker 1: you pay the ten percent at and if you have
Speaker 1: that that capital cushion, then you get to opt out.
Speaker 1: You can in a sense, you're pain to get out
Speaker 1: of Dodd Frank exactly. So there's this idea for higher
Speaker 1: requiring coup requirements, less regulation. The planets out in Congress
Speaker 1: right now, and it has to be reintroduced next year,
Speaker 1: so it may look a little bit different. Requires the
Speaker 1: big eight g cs, Bank America, JP, Morgan, etcetera. To
Speaker 1: have a ten percent leverage ratio right now, they're around
Speaker 1: six now. Chairman Henseling estimates that in order to get
Speaker 1: from six to eight a six to ten, those eight
Speaker 1: banks would have to pony up about three D five
Speaker 1: hundred billion in new capital. Now that's a pretty high
Speaker 1: price to pay. But if you go further down the line,
Speaker 1: you start looking at the banks that are around fifty
Speaker 1: billion in assets, ten billion assets, many of them are
Speaker 1: already at that leverage ratio. So, uh, this Financial Choice
Speaker 1: Act really does favor the small and community sized banks.
Speaker 1: So it's you know, it's sort of interesting. I think
Speaker 1: when I talk to people. Their impression is that UH
Speaker 1: and Mr Trump will roll back the majority of the
Speaker 1: Dodd Frank Act, and that include dudes much more risk
Speaker 1: taking at the big banks, and that's one reason why
Speaker 1: people are expecting profitability to go up. And yet it
Speaker 1: sounds like that's not necessarily the case. Well, there are
Speaker 1: many ways that they can do this. So for two
Speaker 1: things to point out. One, the Republicans have tried over
Speaker 1: a times since two thousand ten to amend dot Frank.
Speaker 1: They haven't succeeded because they've never been able to get
Speaker 1: that sixty vote in the Senate. Elizabeth warrened she's going
Speaker 1: to be able to cause a lot of problems in
Speaker 1: the Senate and block a lot of that big regulation. However,
Speaker 1: Donald Trump now controls the financial regulators, and so he
Speaker 1: can instruct the new heads of the SEC, se IFDC, UH,
Speaker 1: you know the Photo Reserve, when if Janet Yen leaves
Speaker 1: into thousand eighteen to start looking at rolling back regulation
Speaker 1: and so UH, they can do things like putting out
Speaker 1: notices saying that we're not going to enforce certain regulations,
Speaker 1: We're not going to hold you accountable. So I think
Speaker 1: if you see in the short term, you're not going
Speaker 1: to see a lot of change, but in the long
Speaker 1: term you're gonna see a lot more. Is there a
Speaker 1: particular regular lation that you're thinking they could sort of
Speaker 1: ignore or pushed to the side. The fiduciary duty is
Speaker 1: the perfect example. So this rule came up from the
Speaker 1: Labor Department. Uh. It caused a lot of problems with
Speaker 1: the life insurance industry, the broker dealers, the retirement investment advisors,
Speaker 1: lots of pushback both from the Democrats, some Democrats and Republicans.
Speaker 1: Rule went into forest compliances in April. So what we
Speaker 1: could see there is, uh, the new administration come out
Speaker 1: put out a notice in March saying you don't have
Speaker 1: to comply, and then they'll have to repropose the rule. Uh.
Speaker 1: You know, any regulation, it's not like Donald Trump can
Speaker 1: come in on day one, just sign an executive order
Speaker 1: and it goes away. They have to repropose it. And
Speaker 1: so the quickest way to overturn a regulation is to
Speaker 1: have Congress passidents law. But if they can't do it
Speaker 1: and they turn to the regulatory agencies, they have to
Speaker 1: do a rulemaking process, which could take up the eighteen
Speaker 1: months to two years Nathan non bank financial institutions such
Speaker 1: as A I G, Met Life, Prudential Financial what can
Speaker 1: we expect there? So, the Financial Stability or Recite Council
Speaker 1: is the one that controls the designation for A I
Speaker 1: G and Prudential and met UH. And they serve at
Speaker 1: the pleasure of the Secretary of the Treasury. They can't
Speaker 1: do anything unless the Treasury Secretary signs off on it.
Speaker 1: And now the Secretary Treasury is going to serve at
Speaker 1: the pleasure of Donald Trump. And so when A I
Speaker 1: G and Prudential have their annual reviews over their city status,
Speaker 1: which which will take place sometime in the September of
Speaker 1: October of two thousand seventeen, UH, it's not unlikely to
Speaker 1: see at that time the f stocks say we're just
Speaker 1: going to d designate you. You know, there's a lot
Speaker 1: of talk about town. Is the f stock going to
Speaker 1: be finished or not? Uh? And one of the easiest
Speaker 1: ways to get rid of that that designation for AI
Speaker 1: G and Prudential is to have the f stock do
Speaker 1: it in you know, later next year. Have the Republicans
Speaker 1: been against the city a designation just real quick, yes, absolutely,
Speaker 1: across the board, really really interesting Nathan dean government analyst
Speaker 1: at Bloomberg Intelligence in Washington, d C, talking about the
Speaker 1: implications UH in a Donald Trump administration. Well, our benchmark.
Speaker 1: When we want to know anything about the retail industries,
Speaker 1: we call Bert Flickinger. He's the managing director a Strategic
Speaker 1: Resource Group. He can be followed on Twitter at Bert
Speaker 1: underscore Flickinger. Alright, Bert underscore Flickinger, tell me about the
Speaker 1: retail ice age that you've most recently witnessed. There's an
Speaker 1: accelerating retail ice age, PIM and Lisa, and you're going
Speaker 1: to see a record number of bankruptcies UH for retailers.
Speaker 1: You're seeing the corporate bond debt trade down for everyone
Speaker 1: from Neiman Marcus trading at eight year below most of
Speaker 1: your listeners know issued in a hundred jay cruise trading
Speaker 1: below forty searies is really struggling. And even today you
Speaker 1: and Lisa talked about the Southsayer of South Korea and
Speaker 1: the magic purses. The rasputant of retail is in the
Speaker 1: headlines today and Bill Ackman, as he left j C
Speaker 1: Penney on death store step dropped the stock from forty
Speaker 1: three to about a dollar twenty and then Steve sat off,
Speaker 1: the pride of Hamilton's College and sex fifth Avenue came back,
Speaker 1: brought Penny back from the dead. They missed today, but
Speaker 1: they're gonna make it where a lot of their competitors
Speaker 1: like the Bonton Uh as well as Sears Holdings which
Speaker 1: still has softer side of Sears, are struggling, and even
Speaker 1: Neiman Marcus Group with Jones Barney their bonds are trading
Speaker 1: at eighty year below. So there's gonna be a real
Speaker 1: rationalization whether companies are impaired by RASP mutants like Bill
Speaker 1: Ackman or just poor consulting and financial advice. Well, and
Speaker 1: you noted that will be the most troubling year for
Speaker 1: retail in a decade, and not to be outdone, eighteen
Speaker 1: will be worth Why well, Lisa, and you you, you
Speaker 1: and PIM already reported declining oil prices. So so for us,
Speaker 1: the Harbinger is really Kazakhstan where Hudson Bay Company opener
Speaker 1: Brand was not expecting that the Harbingers her list to travel.
Speaker 1: But go ahead, but tell us this story because Hudson
Speaker 1: Bay owns a fifth SAX with SAX with the Avenue
Speaker 1: put their latest Crown Crown jewel license store uh in Kazakhstan.
Speaker 1: I know from our work with the State Department in USA.
Speaker 1: It was only a few years ago where people were
Speaker 1: showing up on Saturdays with livestock and butcher butchering cattle
Speaker 1: on their cars and selling pieces of meat, and State
Speaker 1: Department was asking us to come up with basic retail.
Speaker 1: How you get to that luxury goods is beyond me.
Speaker 1: But Sachs did at Harvey Nichols did at Harvey Nichols
Speaker 1: closed their Kazakhstan store in less than a hundred days.
Speaker 1: What's what's the barometer? The petro dollars aren't there. We
Speaker 1: were in Paris for Fashion Week as well as Golden Week.
Speaker 1: All the people from their maz to Le um Le
Speaker 1: Bon Marche. Printon told us the Sinoa, which your listeners
Speaker 1: know as the Chinese, are there with cameras or calculators,
Speaker 1: just snapping pictures and looking for a lower price. And
Speaker 1: his pen reference in the b break. You can go
Speaker 1: to every luxury offline retailer. And that's why Neiman Marcus,
Speaker 1: with its mountain of debt with Bergdorf, is in a
Speaker 1: bad position for for maybe eighteen but Barney's is an
Speaker 1: even worse position for seventeen and Jay Crew possibly for
Speaker 1: this Christmas, Hanka and Kansas. How do you square the
Speaker 1: sudden surgeon optimism about growth in the US and the
Speaker 1: possibility of inflation. And frankly, the more that markets gain,
Speaker 1: the more that the wealthiest people will will gain money
Speaker 1: that they can spend at these at these retailers. So
Speaker 1: why isn't this a positive? It's it's a positive in
Speaker 1: terms of the stock market. The wealth effect is your
Speaker 1: referenced well, Lisa, but but but at the end, uh,
Speaker 1: you also have political problems. Mayor Michael Bloomberg under understood
Speaker 1: the balance of the public and private sector. Average family
Speaker 1: takes four hours and forty minutes to come from the
Speaker 1: suburbs the shop in Midtown Manhattan and Los Angeles, Mischigan
Speaker 1: have Chicago with the traffic density, and the major cities
Speaker 1: in the US, UH, sevent of that time's lofts and traffic,
Speaker 1: So people don't come anymore. So footfalls way down for
Speaker 1: leading department stores and and luxury stores and all of
Speaker 1: what we call the gateway cities. And it's not unique
Speaker 1: to Los Angeles or Vancouver, New York, or Miami at
Speaker 1: Aventure Mall. It's something we're seeing in Singapore and and
Speaker 1: uh we're seeing in in Tokyo and and worldwide. And
Speaker 1: also people have expenses coming up, So it's the aspirational
Speaker 1: middle class. It's the middle upper UH that is has
Speaker 1: everything from higher healthcare to tuition. So they're cutting back
Speaker 1: on retail spending UH spending spending in other areas. And
Speaker 1: then you have the millennials who even if they have
Speaker 1: good jobs and have the money, UH, there are nesting
Speaker 1: or what we call thrift ng and going to UH
Speaker 1: savers or good wealth thrift stores or ladies ladies village
Speaker 1: home improvement stores. So you could out to towns like
Speaker 1: East Hampton and luxury retails not just boarded up. In
Speaker 1: the faller of the Winner, it's largely boarded up. In
Speaker 1: part of the summer, Tiffany had to close their store
Speaker 1: um uh and a number of others closer stores. So
Speaker 1: there'll be a great retail rationalization in the next few years.
Speaker 1: To your point, but there'll be a real retail renaissance
Speaker 1: starting in and really well capitalized capable retailers are win
Speaker 1: particularly the ones with great merchant leaders. So who's that
Speaker 1: who's it going to be? Who are the winners? Uh?
Speaker 1: We we see, we see the winners across sector. Uh,
Speaker 1: multi multi tier. It'll be Kroger, off Price, dollar dollar General,
Speaker 1: t J t J, t j X, Cross stores early.
Speaker 1: If you look at your point him the best leader
Speaker 1: in retailer retailers Ben Camorados, a seminal genius founder of
Speaker 1: t j X, with Carol Meyer, Woods and Ernie Herman. Uh,
Speaker 1: their margins are twice as biggest Amazon. Their inventory turns
Speaker 1: or six times. The rest of the department stores are
Speaker 1: turning inventory two point three to two point seven times.
Speaker 1: It's cash flow. The department stores are paying Uh, many
Speaker 1: of them are paying their vendors late. So the vendors
Speaker 1: need cash to give to Lean fong in their factors,
Speaker 1: less credit available exactly, Well, right, Bert, So then I'll
Speaker 1: ho about on the flip side. I mean you said
Speaker 1: that there could be, was it correct? A record number
Speaker 1: of bankruptcies and retail in the upcoming years. So which
Speaker 1: companies do you expect to go bankrupt? It's uh, you
Speaker 1: never you never want to say it's it's all the
Speaker 1: way over. But it looks like vulnerable. You could just
Speaker 1: say which ones are vulnerably vulnerable to the curtain coming down?
Speaker 1: So when the day Dumas stage. For lease day Dumas
Speaker 1: stage is everybody from Jay Crew to Sears holding UH
Speaker 1: Bontan's trade traded way down, uh Neiman, Marcus Berg Door's
Speaker 1: credit worthy now, but but see issues for them going forward.
Speaker 1: And then UM yeah, even even undercapitalized on the on
Speaker 1: the low end, UH Fred's seems seems to be struggling
Speaker 1: quite a bit. And and then UM chain drug discount
Speaker 1: shop COO. Wherever you see private equity getting greedy and
Speaker 1: up streaming money to themselves, UH and big fees and
Speaker 1: and that's that's my professional view of Bill Ackman UH
Speaker 1: in retail and won't comment on what he's done more
Speaker 1: recently at Valiant. But when you have a great turnaround
Speaker 1: leader like UM our mutual friend Frank Blake at Home
Speaker 1: Depot Bob near Delhi half killed the company, the UH
Speaker 1: three founders Marcus blank Et Cetera brought Blake in and
Speaker 1: UH complete upside Bert Clicking Share managing director at Strategic
Speaker 1: Resource Group on all things retail. This is Bloomberg Einstein's
Speaker 1: The Greatest miss Stake, The Life of a Flawed Genius.
Speaker 1: It was published in September and the author of the
Speaker 1: book David bodenis it joins us now from London. David,
Speaker 1: thank you very much for being with us. Thank you sir. Now.
Speaker 1: Your previous books have included such titles as E equals
Speaker 1: MC squared. You've also written about computer generated fascism. What
Speaker 1: inspired you to write this latest book, Einstein's Greatest Mistake?
Speaker 1: I thought, you know, if you write a book called
Speaker 1: Einstein is smarter than us and we're a bunch of
Speaker 1: dumb schmunks, nobody's interested in that. But if you have
Speaker 1: a book that's like, oh, Paul Einstein, he had something
Speaker 1: wrong because there was a psychological aspect of him that
Speaker 1: we could understand when everybody's interested, including this author. I
Speaker 1: loved um turning him into a human being and really
Speaker 1: seeing not just his great strength, which were magnificent, but
Speaker 1: also what happened when he stumbled? How did he get stuck?
Speaker 1: And what lessons does it give us? So what was
Speaker 1: his biggest mistake? Because because stake, it was a psychologic
Speaker 1: most it was a psychological mistake. He he believed that
Speaker 1: the universe was like a beautiful, clear book, that everything
Speaker 1: was crisp and clear, that there was an order. It
Speaker 1: wasn't like a random magazine with a bit of this
Speaker 1: and a bit of that. Um, And then he had
Speaker 1: had so much reason for believing this. It made all
Speaker 1: sorts of sense about outer space. It led to notions
Speaker 1: of the expanding universe, just terrific insights that later when
Speaker 1: people started studying things on the microscual on the micro
Speaker 1: small level and quantum mechanics, which seem to be just
Speaker 1: that the universe isn't orderly, that it isn't super clear
Speaker 1: and crisp when you analyze. He just couldn't accept it.
Speaker 1: You know. He he had this comment, God does not
Speaker 1: play dice. Was he a religious person? Um? If you
Speaker 1: if you make a sort of just I could to
Speaker 1: say about that comment. So yeah, so Einstein said God
Speaker 1: does not play dice with the universe. Everything's orderly and clear,
Speaker 1: there's a pattern set up in advance. And this good
Speaker 1: friend Nell's boy used to say, Einstein, stop telling God
Speaker 1: what to do, Like, how do you know it's great? Um?
Speaker 1: So for religion. If Einstein he wasn't an atheist, He
Speaker 1: thought atheism was very unscientific it um, you know, like
Speaker 1: you're presuming to know too much. At the other hand,
Speaker 1: he wasn't a believer in traditional like the details of
Speaker 1: revealed religion. So he would think that Moses was very wise,
Speaker 1: But he didn't think that Moses got the commandments from
Speaker 1: gathering on Sinai. But there's a big space in between.
Speaker 1: And uh, Einstein loves the seventeenth century death Jewish philosopher Spinoza.
Speaker 1: He thought, Spinoza, what what wrote about this? These waiting
Speaker 1: patterns in the universe, not presuming to say where they
Speaker 1: came from, but just thinking, how magnificent is it that
Speaker 1: there's instead of chaos and disorder around us, there's this harmony.
Speaker 1: There's these patterns. Where do they come from? Maybe maybe
Speaker 1: really floatful human beings can just discern that pattern, take
Speaker 1: away the veil between us and deepest reality and see
Speaker 1: what's there. And Einstein really wanted to do that. Can
Speaker 1: you maybe draw some connection to the way people look
Speaker 1: at the markets and and money because you talk about
Speaker 1: patterns and being able to understand the patterns and the
Speaker 1: and the moves is there. Can you define the difference
Speaker 1: between a psychological mistake and a technical mistake that might
Speaker 1: be applied to looking at the world of business and finance? Sure,
Speaker 1: very much. The reason Einstein got stuck in his psychological
Speaker 1: mistake was because his particular approach had been really successful before.
Speaker 1: And if something's worked really well, if your company has
Speaker 1: done well, you tend to think it's because of my approach,
Speaker 1: my approach to the markets, my insight. Well, it might
Speaker 1: actually just be chats, right, I mean, that's why tracker
Speaker 1: funds on a simple level have done so well. So
Speaker 1: very often people get not just so much a ruther
Speaker 1: of failure, but a rut of success. You're doing something
Speaker 1: well and it's really hard to change it because it's
Speaker 1: been very successful. The other thing that comes from Einstein
Speaker 1: which might apply to the markets is he developed his
Speaker 1: own tools, which is a great thing to do for him.
Speaker 1: It was certain tools and mathematics. Within the markets, it
Speaker 1: might be I don't know, certain quantitative people would brings
Speaker 1: in or certain analytic approaches, and you become really proud
Speaker 1: of your tools. You get good at using your tools,
Speaker 1: and you find it hard to imagine what would be
Speaker 1: like using very very different tools. And then of course
Speaker 1: behind it all is maybe what was your your first question?
Speaker 1: If you believe, like Spinoza and Einstein, there's a deep
Speaker 1: patterns waiting in the universe, you're not going to give
Speaker 1: up till you find them. And some people, you know,
Speaker 1: it always comes up. Somebody has this guaranteed way to understand,
Speaker 1: which appears to be turbulence in the market actually follows
Speaker 1: such and such deep patterns, and we're very often disappointed.
Speaker 1: Those those in tights tend not to hold for more
Speaker 1: than than temporary intervals. But just that belief is there,
Speaker 1: and that belief, well, you can move a lot of
Speaker 1: money on that belief. Well, you know, one sort of
Speaker 1: cliche about Einstein is that he took a long time
Speaker 1: to read and didn't do so well in school and um,
Speaker 1: and so what can we learn from where he was
Speaker 1: a genius? And is that true? Oh, it turns out
Speaker 1: that the story that Einstein was a bad students I've
Speaker 1: managed to trace it back to Rocky one and written
Speaker 1: by Sylvester Stallone. And although Mr Stallone had magnificent biceps
Speaker 1: and um, other muscles, he's not noted as an Einstein scholar.
Speaker 1: And it turns out Einstein was actually einesteme was a
Speaker 1: perfectly good student. Um, he was a good beat plus
Speaker 1: or a minor students. He went to the Polytechnic in Zurich.
Speaker 1: He did fail to get in on his first tribe.
Speaker 1: But he's only sixteen, he hadn't even finished high school,
Speaker 1: and his scores and math and physics were strong, but
Speaker 1: his his Latin and some of his friend led him down.
Speaker 1: And he did quite well after a year of media
Speaker 1: high school. So he was a strong student. But it's
Speaker 1: nice is that he wasn't a perfect student. He wasn't
Speaker 1: like oh an a plus student from Harvard or Columbia
Speaker 1: who's always had the things easy. So Einstein got used
Speaker 1: to looking at things with a bit of a struggle.
Speaker 1: So he was I don't want to call him a
Speaker 1: total outsider. He was a moderate outsider. And there's a
Speaker 1: great advantage as being a moderate outsider. You know what's
Speaker 1: going on, but you're kind of willing that, you're kind
Speaker 1: of willing to take a fresh perspective. David bodanis author
Speaker 1: of Einstein's Greatest Mistake. Joining us from London. Thank you
Speaker 1: so much. Thanks for listening to the Bloomberg pien L podcast.
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