WEBVTT - Bloomberg Businessweek Weekend - April 14th, 2023 0:00:01.280 --> 0:00:05.640 This is Bloomberg business Week inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business, finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.640 Podcast with Carol Masser and Tim Stenebec from Bloomberg Radio 0:00:20.960 --> 0:00:29.960 Cross I'm the taxman. Yes, I'm the taxman. All right, everybody. Yeah, 0:00:30.000 --> 0:00:32.000 We're going to talk about the taxmen and women that 0:00:32.080 --> 0:00:35.479 are out there, truant taxpayers, decrepit technology, and a broken 0:00:35.520 --> 0:00:39.080 system that former IRS tax auditors say that cannot be 0:00:39.159 --> 0:00:42.120 fixed with the eighty billion dollars it's been allocated by 0:00:42.280 --> 0:00:45.080 federal government to do just that. This story found online 0:00:45.159 --> 0:00:47.600 up Bloomberg dot com slash BusinessWeek and on the Bloomberg 0:00:47.640 --> 0:00:50.400 and at Bloomberg dot com slash business Week. I said 0:00:50.400 --> 0:00:52.320 that twice on the Bloomberg terminal. It's that kind of 0:00:52.360 --> 0:00:54.920 a day anyway. It's not like I'm going to get 0:00:54.920 --> 0:00:57.440 an audit or something and I'm freaking out here with Moore. 0:00:57.520 --> 0:01:00.200 Let's get to it. Bloomberg News Wealth reporter benst We'm 0:01:00.200 --> 0:01:02.960 an incredible deep dive along with the editor of Bloomberg 0:01:02.960 --> 0:01:06.360 Business Weekte Webber here in our Bloomberg Interactive Broker Studio. Yeah, 0:01:06.360 --> 0:01:08.320 that would scare the heck out of me. Audens coming 0:01:08.680 --> 0:01:13.320 they got eighty billion dollars to play with at the RSUM. 0:01:14.120 --> 0:01:17.720 But actually, what we set out to find in this 0:01:17.840 --> 0:01:21.080 story with Ben Steberman at the HELM was, you know, 0:01:21.240 --> 0:01:24.960 what's it really like to work there? How bad is it? Really? 0:01:25.120 --> 0:01:29.000 We know it's bad, that's a given, but like, really, really, really, 0:01:29.080 --> 0:01:31.560 how about is it? And you know, if you were 0:01:31.600 --> 0:01:34.240 to fix it or to you know, give some pointers 0:01:34.240 --> 0:01:38.680 to people normal Americans, what would those fixes and pointers 0:01:38.680 --> 0:01:43.440 be and would you find? Ben? What I found was 0:01:44.000 --> 0:01:48.400 that part of the issue here is money. Obviously, UM 0:01:48.720 --> 0:01:53.400 this these are folks who have been suffering through decades 0:01:53.440 --> 0:01:57.200 of budget cuts. UM it's the agency is a shadow 0:01:57.320 --> 0:01:59.280 of its former self in a lot of ways. It's 0:01:59.320 --> 0:02:04.560 probably the worst funded government agency. UM. Technology doesn't work. 0:02:05.000 --> 0:02:10.920 UM systems crash. They're running on nineteen sixties computer programming languages. 0:02:11.200 --> 0:02:14.720 It's just basic analyses or is that like cards? Like 0:02:14.720 --> 0:02:17.080 what is it? Sorry I don't know the name of 0:02:17.080 --> 0:02:19.079 the language, but yeah, it's like one of these things 0:02:19.120 --> 0:02:22.920 where you need special training to uh, well they have 0:02:22.960 --> 0:02:25.799 they have these like veterans who like learn this stuff, 0:02:25.880 --> 0:02:30.040 and um, it's not very applicable to other software tech companies, 0:02:30.600 --> 0:02:36.760 and so it's it's bad and money can help, But 0:02:36.919 --> 0:02:39.400 there's also a culture problem. There's a culture shift that 0:02:39.440 --> 0:02:41.679 needs to happen there because this is like, this is 0:02:41.680 --> 0:02:45.639 an agency that's been demonized for fifty years and they 0:02:45.639 --> 0:02:48.440 have this bunk immortality and they have a really hard 0:02:48.440 --> 0:02:52.560 time even communicating with the public or or had to 0:02:52.600 --> 0:02:59.320 call that IRS. I understand what they're demonized. Yeah, and yeah, 0:02:59.360 --> 0:03:03.320 there's this credible loyalty that you kind of discovered among 0:03:03.360 --> 0:03:05.600 the people who have worked there. A lot of a 0:03:05.639 --> 0:03:08.800 lot of the people you spoke to were farmers, and 0:03:08.840 --> 0:03:11.880 that just really stuck out to me. It was like, yeah, 0:03:11.919 --> 0:03:14.680 you know, you bludgend the heck out of an agency 0:03:14.720 --> 0:03:17.280 that until it's like despised, and yet the people who 0:03:17.320 --> 0:03:19.320 are there, like I feel like they're like clinging to 0:03:19.360 --> 0:03:22.160 each other almost. Yeah, it's like they're like bonding in 0:03:22.200 --> 0:03:26.560 the trenches. Maybe. But I think what realized what surprised 0:03:26.600 --> 0:03:30.120 me maybe was I think because of the demonization, there's 0:03:30.120 --> 0:03:32.840 a sense that like an IRS auditor, Oh, there's somebody 0:03:32.880 --> 0:03:36.480 who would be like politically motive, seemed politically motivated or 0:03:36.960 --> 0:03:39.720 or like might want to squeeze tax the rich taxpayers. 0:03:39.760 --> 0:03:41.680 I mean, maybe that's why you go into it, because 0:03:41.720 --> 0:03:44.520 you get to like take rich people down a peck. 0:03:44.760 --> 0:03:46.640 I didn't get any of that vibe. In fact, what 0:03:46.680 --> 0:03:49.640 I got from these people is that they're big tax nerds, 0:03:49.760 --> 0:03:53.440 Like they just love the tax code. And there's something 0:03:53.480 --> 0:03:56.440 really fun about if you're if you are a tax 0:03:56.520 --> 0:03:59.680 nerd of like being in government service and working on 0:03:59.720 --> 0:04:02.600 that and the hours are saying it's a union shop, 0:04:02.800 --> 0:04:06.200 retirement benefits are good, Like, so all you have to 0:04:06.240 --> 0:04:10.600 do is understand this really complicated deck code. Yeah, it 0:04:10.680 --> 0:04:14.760 just gets more and more complicated, right, And also like 0:04:15.040 --> 0:04:17.400 be kind of embarrassed to tell people where you work. 0:04:17.440 --> 0:04:19.120 And I'm only saying that because you put it in 0:04:19.120 --> 0:04:22.440 your story. So this is this is editorially sound, but 0:04:22.520 --> 0:04:25.680 like that's kind of a tough pill to swallow. Yeah, 0:04:25.720 --> 0:04:29.320 So when multiple people told me, I kept asking, what 0:04:29.400 --> 0:04:31.440 do you tell people if if they ask you what 0:04:31.480 --> 0:04:34.240 do you do at a party and they're they're like, oh, 0:04:34.279 --> 0:04:37.880 I'm an accountant or I work at the Treasury Department. 0:04:37.920 --> 0:04:40.200 They had Also everybody had like a different strategy for 0:04:40.240 --> 0:04:44.159 like basically killing the conversation and not basically trying to 0:04:44.240 --> 0:04:46.359 trying to sound boring, and so people move on to 0:04:46.400 --> 0:04:50.200 a different conversations. Right, But everything's going to change, right. 0:04:50.279 --> 0:04:54.400 Eighty billion dollars, Well, they have a new commissioner. They 0:04:54.400 --> 0:04:58.560 do have eighty billion for now. Republicans in the House 0:04:58.600 --> 0:05:01.320 at least would like to send a lot of that money, 0:05:02.240 --> 0:05:05.760 especially for enforcement. They're probably not going to get their way, 0:05:05.760 --> 0:05:07.800 at least in the next couple of years, but we'll see. 0:05:08.760 --> 0:05:12.360 But yeah, they need to hire a lot now, and 0:05:12.480 --> 0:05:15.800 that's a challenge. I mean, the onboarding process can take months. 0:05:16.040 --> 0:05:20.120 And also they're paying government a government pay scale, and 0:05:20.120 --> 0:05:24.320 they're competing against the private sector, which obviously unemployment is low. 0:05:24.480 --> 0:05:27.160 And if you have some tax skills, you can make 0:05:27.200 --> 0:05:29.560 a lot more money by going to an accounting for 0:05:29.600 --> 0:05:32.120 a metal law firm. But one thing I don't understand 0:05:32.160 --> 0:05:35.440 is that it's important like how many tax sheets are there? 0:05:35.279 --> 0:05:37.480 Are there estimates because I would think that a very 0:05:37.600 --> 0:05:39.880 rigorous IRUs would be a good thing in terms of 0:05:39.920 --> 0:05:44.360 bringing tax revenue, justify revenue in part of the goal here, right, 0:05:44.400 --> 0:05:47.280 it's like you maybe modernize this place and let them 0:05:47.360 --> 0:05:50.479 do the job that they're supposed to be doing exactly correct. 0:05:50.560 --> 0:05:52.720 SAT spot they can hire that could maybe help them out. 0:05:53.400 --> 0:05:56.120 So there is one study that the IRIS does and 0:05:56.240 --> 0:06:00.320 it just came out. They do it every every few years. 0:06:00.360 --> 0:06:04.799 They found that almost five hundred billion dollars is missing 0:06:06.040 --> 0:06:09.279 compared to you know, if you compare what is owed 0:06:09.320 --> 0:06:12.040 to what is actually paid. They think it's peggeted about 0:06:12.040 --> 0:06:15.080 five hundred billion. But that is an estimated that is 0:06:15.080 --> 0:06:18.919 several years old. It is based on random audits that 0:06:19.160 --> 0:06:22.240 might not be conducted very well. They're they're not. That 0:06:22.320 --> 0:06:26.200 doesn't include crypto, it doesn't include all sorts of offshore 0:06:26.279 --> 0:06:29.640 game playing that that could be happening. So there are 0:06:29.680 --> 0:06:33.600 people who think, like academics, who think that much much 0:06:33.640 --> 0:06:38.320 more money could be hidden from the IRS by wealthy 0:06:38.360 --> 0:06:41.440 people in business owners. To be clear, like salaried workers 0:06:41.480 --> 0:06:45.799 like you and me find it very difficult, if not impossible, 0:06:45.800 --> 0:06:48.880 to cheat because our income is reported directly to the IRS, 0:06:48.960 --> 0:06:52.560 and that that matching software is actually very simple. What 0:06:52.600 --> 0:06:54.960 they want to develop is some kind of AI and 0:06:55.040 --> 0:06:58.599 machine learning and really crunch the data on what's going 0:06:58.640 --> 0:07:02.120 on with investment flows and wealthy people and try to 0:07:02.160 --> 0:07:08.040 find cheaters that way. UM and and be much more sophisticated, 0:07:08.160 --> 0:07:11.600 sophisticated about who they audit in the first place. Okay, 0:07:11.640 --> 0:07:14.160 so you actually did get to talk to some people 0:07:14.200 --> 0:07:18.920 who had recently joined the agency and recently left the 0:07:18.960 --> 0:07:24.280 AGE and then yes, yes, so what was their experience 0:07:24.400 --> 0:07:27.160 like because uh, you know they came in for maybe 0:07:27.200 --> 0:07:30.240 different reasons, but you know these are these are new 0:07:30.320 --> 0:07:33.320 hires and new exits, right, so what was their experience? Yeah, 0:07:33.360 --> 0:07:36.960 so you know you could argue that, well, one of 0:07:36.960 --> 0:07:40.320 my sources did argue that auditing is basically the toughest 0:07:40.360 --> 0:07:42.400 job you can possibly imagine. I mean, you're going in 0:07:42.440 --> 0:07:45.320 there and you're trying to figure out is there something 0:07:45.680 --> 0:07:49.600 like you're investigating somebody based on their tax return and 0:07:49.640 --> 0:07:51.600 that could be thousands of pages, and then you're comparing 0:07:51.640 --> 0:07:54.240 that with the tax code and that can be that 0:07:54.400 --> 0:07:57.440 is like tens of thousands of pages, Like how do 0:07:57.520 --> 0:07:59.720 you find how do you find that? In the beginning 0:07:59.720 --> 0:08:04.000 with UM so, unfortunately the last few years, especially with 0:08:04.040 --> 0:08:06.680 the pandemic, it's really been hard to bring people on 0:08:06.800 --> 0:08:11.320 and train them in that and training virtual training in taxes, 0:08:11.320 --> 0:08:13.920 like can you imagine? It's so apparently they have very 0:08:13.920 --> 0:08:18.160 good instructors, but um, you think that it would be anyways, 0:08:18.560 --> 0:08:21.640 I am. I was in awesome of these stories these 0:08:21.680 --> 0:08:25.480 people told about coming in and basically it's sink or swim, 0:08:25.480 --> 0:08:27.720 and they sunk like it was really hard. It was 0:08:27.760 --> 0:08:32.160 emotionally stressful to deal with taxpayers, especially low income taxpayers 0:08:32.160 --> 0:08:35.480 who are it's often connected with health issues, financial issues 0:08:35.520 --> 0:08:39.200 like poor people. Um, and then all the way up 0:08:39.240 --> 0:08:42.400 to the higher I've been thinking about everything there about 0:08:43.080 --> 0:08:46.200 Jamie Lee Curtis is an or and it's like so sad, 0:08:46.240 --> 0:08:49.559 but I mean we've been joking. But in all seriousness, 0:08:49.600 --> 0:08:52.800 you do profile people who talk about going into people's 0:08:52.840 --> 0:08:55.760 lives who are struggling and having to fight them on 0:08:55.800 --> 0:09:01.280 their taxes, like and and at the political environment right 0:09:01.360 --> 0:09:06.320 like you are a representation. Literally, the talking point from 0:09:06.840 --> 0:09:09.080 folks on the right in the last year has been 0:09:09.120 --> 0:09:12.360 that this is Biden is creating this new army of 0:09:12.679 --> 0:09:16.240 i RS agents that's going out there with weapons to 0:09:16.480 --> 0:09:20.120 poke through people's finances. That can feel very threatening if 0:09:20.120 --> 0:09:22.120 that's the message that's going out there, and if if 0:09:22.160 --> 0:09:24.880 you believe it and then someone shows up at your 0:09:24.880 --> 0:09:28.360 house or your business and these people are not armed 0:09:28.559 --> 0:09:31.200 to be clear, the vast, vast majority, except for some 0:09:31.200 --> 0:09:36.000 criminal investigators, a very very few. They do not have weapons. 0:09:36.040 --> 0:09:39.520 They have basically a laptop and that's it, and maybe 0:09:39.520 --> 0:09:45.079 that laptop doesn't work. There was some amazing stories that, 0:09:45.200 --> 0:09:49.200 like one guy said his laptop broke and then they 0:09:49.280 --> 0:09:51.160 didn't they didn't have the budget to like buy a 0:09:51.160 --> 0:09:53.920 new one. There wasn't a replacement in the office, so 0:09:53.920 --> 0:09:56.400 he had to mail it from Florida to Texas to 0:09:56.760 --> 0:09:59.520 be repaired and then wait for it to be sent back, 0:09:59.559 --> 0:10:01.680 and he he did not have a job to do 0:10:01.760 --> 0:10:03.640 for three weeks, because you can't do a job without 0:10:03.640 --> 0:10:06.800 a computer in twenty twenty three or whatever. It does 0:10:06.800 --> 0:10:10.679 speak to another element of the story that I found fascinating, 0:10:10.679 --> 0:10:14.880 which is so much of the job is actually the 0:10:14.960 --> 0:10:19.120 agents and auditors taking upon themselves to do things and 0:10:19.520 --> 0:10:24.480 learn things that maybe they haven't ever been exposed to 0:10:24.760 --> 0:10:27.520 in the course of the job. Right, So talk about 0:10:27.920 --> 0:10:30.800 those contours, because that it takes a certain someone to 0:10:30.800 --> 0:10:33.160 be like, Okay, I'm gonna government job, and actually I 0:10:33.280 --> 0:10:35.439 need to like do a little bit more work to 0:10:35.520 --> 0:10:37.960 understand what I'm supposed to do. Yeah. I found many 0:10:38.200 --> 0:10:42.000 instances of people paying for a course out of their 0:10:42.000 --> 0:10:45.240 own pocket. Again, these are tax nerds, so like that 0:10:45.480 --> 0:10:47.720 they're interested in it maybe to begin with, but also 0:10:47.800 --> 0:10:50.120 they felt like they couldn't do their job. And that's 0:10:50.160 --> 0:10:52.400 the running theme, is it. And so many of these 0:10:52.640 --> 0:10:55.000 people at the RS just told me I did not 0:10:55.120 --> 0:10:57.600 have the tools to do my job properly, and that 0:10:57.720 --> 0:11:00.760 can be very demoralizing. Even if you get along with 0:11:00.800 --> 0:11:03.640 their colleagues and like them, it can be just really 0:11:03.679 --> 0:11:06.520 just demoralizing that you can't fulfill your mission. What do 0:11:06.559 --> 0:11:09.600 they get paid, Um, it's a government pay scale and 0:11:09.640 --> 0:11:12.080 I think it's capped it like the hot like high 0:11:12.160 --> 0:11:17.640 hundred thousands basically yeah, yeah, yeah, one hundred thousand or so, 0:11:17.840 --> 0:11:20.560 one hundred thousand or so. I could be wrong about that. 0:11:20.600 --> 0:11:23.960 There might be some bumps. The IRS now that they're 0:11:24.000 --> 0:11:27.960 hiring is thinking, well, maybe we should hire because of 0:11:28.000 --> 0:11:31.000 remote work. Maybe we can hire more in like markets 0:11:31.040 --> 0:11:33.960 that are less expensive, like other than DC New York 0:11:34.200 --> 0:11:38.000 Bay Area, like higher auditors in other places, And maybe 0:11:38.360 --> 0:11:40.440 that's one of the strategies are coming up with to 0:11:40.440 --> 0:11:43.800 try to get some talent in there. But like it's 0:11:44.280 --> 0:11:46.640 basically these people can leave in DC or New York 0:11:46.880 --> 0:11:49.600 and get paid four times more five times more by 0:11:49.600 --> 0:11:52.360 going to the private sector. It's interesting too that, you know, 0:11:52.480 --> 0:11:55.880 in terms of the things that IRS is doing well diversity, 0:11:56.040 --> 0:11:59.600 it seems like they're killing it on gender equity and 0:12:00.480 --> 0:12:03.880 you know, just having an inclusive hiring practice. What did 0:12:03.920 --> 0:12:06.120 you make of that? Did that surprise you? Surprise me 0:12:06.160 --> 0:12:09.360 a little bit? Um. What I heard from veterans is 0:12:09.400 --> 0:12:11.599 that they maybe they came out of law school and 0:12:12.000 --> 0:12:14.040 way back in the eighties. This is a longstanding thing, 0:12:14.080 --> 0:12:15.760 you know, they maybe they came out of law school 0:12:15.800 --> 0:12:18.360 in the eighties and it wasn't was not a top 0:12:18.360 --> 0:12:20.920 tier law school, and they were able to get a 0:12:21.040 --> 0:12:27.240 job at the IRS and and then found it pretty meritocratic. 0:12:27.320 --> 0:12:30.320 And I think that basically almost I think almost a 0:12:30.360 --> 0:12:33.600 third of the workforce is black. There's two thirds as women, 0:12:34.760 --> 0:12:39.400 so it's a very diverse workforce and it much more 0:12:39.440 --> 0:12:42.200 than other even other government jobs. Right. I just found 0:12:42.240 --> 0:12:46.200 that so surprising and interesting. Yeah. The other thing that 0:12:46.720 --> 0:12:50.360 is worth mentioning here is one of the main reasons, 0:12:50.400 --> 0:12:53.360 in addition to being able to leave and get high 0:12:53.360 --> 0:12:57.160 paying job elsewhere, is retirements, right, which has been a 0:12:57.440 --> 0:13:02.040 huge force of Chaine at dirs because so many of 0:13:02.080 --> 0:13:07.280 the people who are there and have effectively tenure are retiring. 0:13:07.440 --> 0:13:11.679 So you know that there's this drain loss, brain loss, draining, 0:13:11.720 --> 0:13:16.240 brain brain brain drain there. It is that And I'm 0:13:16.280 --> 0:13:19.520 curious what you're reporting bore out about that topic because 0:13:19.640 --> 0:13:23.319 that that can have huge not only kind of cultural implications, 0:13:23.320 --> 0:13:27.880 but also you know, institutional ones. Yeah, so people told 0:13:27.880 --> 0:13:30.560 me about what the time when they joined the organization, 0:13:30.679 --> 0:13:34.480 say two decades ago, there would be a guy who 0:13:34.600 --> 0:13:38.080 is in an office in the DC in DC who 0:13:38.200 --> 0:13:43.520 was the expert on section forty two point k what 0:13:44.120 --> 0:13:48.600 they were the world expert. And that is actually an 0:13:48.600 --> 0:13:51.400 advantage for the tax collector that the private sector doesn't 0:13:51.440 --> 0:13:54.520 necessarily have. They have the ability because it's it really 0:13:54.600 --> 0:13:57.440 is eighty four thousand people in this workforce. It's a 0:13:57.440 --> 0:14:00.200 big workforce, much bigger than any firm. They have the 0:14:00.200 --> 0:14:05.319 ability to really master the minutia of this incredibly complicated 0:14:05.440 --> 0:14:08.440 tax code. Well, if those people leave, and they have 0:14:08.559 --> 0:14:11.440 been leaving in droves because basically in a lot of 0:14:11.480 --> 0:14:14.280 departments that the IRS didn't hire for years and years 0:14:14.280 --> 0:14:17.600 and years, we actually think that there's going they think 0:14:17.640 --> 0:14:19.920 that there's going to be about fifty thousand of those 0:14:19.960 --> 0:14:22.320 eighty thousand employees are either going to quit or retire 0:14:22.400 --> 0:14:25.360 in just the next several years, so no more audits 0:14:25.400 --> 0:14:29.320 than for us. Like so it just underlines how much 0:14:29.360 --> 0:14:31.640 they need to hire to replace these people and how 0:14:31.880 --> 0:14:35.560 and then it's going to take several years to ramp up. 0:14:35.600 --> 0:14:38.840 I mean it's amazing. Yeah. Now that these people are 0:14:38.840 --> 0:14:42.440 on the outside, a lot of them are helping clients 0:14:42.560 --> 0:14:45.880 deal with the IRS, and they're saying they're just holding 0:14:45.920 --> 0:14:48.560 their heads. I mean they are just in horror of 0:14:48.560 --> 0:14:51.920 what they're encountering because they're encountering auditors who've been on 0:14:51.960 --> 0:14:53.840 the job for a year or two and they do 0:14:53.920 --> 0:14:57.600 not know what they're doing. And we brought all this 0:14:57.760 --> 0:14:59.680 to the IRS and they did not push back on this. 0:14:59.760 --> 0:15:03.600 I mean there is so yes, Maddie, Yeah, I mean 0:15:03.760 --> 0:15:08.480 it's takeaway in competent Auditsum, you just get stuck in 0:15:08.520 --> 0:15:13.000 this customer service hell and ever exited unbelievable. Ben Steverman, 0:15:13.480 --> 0:15:16.280 wealth reporter at Bloomberg News. Joe Webber, Editor Bloomberg business Week. 0:15:16.400 --> 0:15:19.880 Check it out online. You're listening to the Bloomberg Business 0:15:19.960 --> 0:15:23.240 Week podcast. Got Us Live weekdays from two to five 0:15:23.280 --> 0:15:27.000 pm Easter on Bloomberg Radio, The Bloomberg Business A band 0:15:27.120 --> 0:15:30.000 you too. You can also listen live to our flagship 0:15:30.080 --> 0:15:33.720 New York station, Just Say Alexa play Bloomberg e Love 0:15:33.800 --> 0:15:37.120 and Dierdy. You're so delighted to have back with us. 0:15:37.160 --> 0:15:40.400 Andy Brown former editorial director of Bloomberg New Economy, and 0:15:40.600 --> 0:15:43.160 he spent three decades in Asia as both China editor 0:15:43.160 --> 0:15:45.720 and columnist for The Wall Street Journal. Today he leaves 0:15:45.720 --> 0:15:48.720 the China Hub. He is a partner at Brunswick Group. 0:15:48.760 --> 0:15:51.480 A critical issues advisory from Andy. Back with esvia Zoom 0:15:51.480 --> 0:15:54.000 in New York City. Andy, thank you, thank you. Good 0:15:54.000 --> 0:15:57.120 to have you here with Maddie and myself. Um, what's 0:15:57.160 --> 0:16:00.360 your read I'm President mccrone's visit and then the comments 0:16:00.840 --> 0:16:03.880 post his visit to China. Well, first of all, it's 0:16:03.880 --> 0:16:07.160 great to be with you, Carol and Maddie. The comments, 0:16:07.200 --> 0:16:11.480 as you say, really are quite extraordinary and have been 0:16:11.520 --> 0:16:18.600 interpreted as inflammatory in fact by China hooks in the US. 0:16:18.680 --> 0:16:20.680 I mean, you've got to remember the context. I mean 0:16:20.720 --> 0:16:25.240 here he is the French President Emmanuel mcron in China, 0:16:25.440 --> 0:16:29.560 saying that Europe should distance itself from the United States 0:16:29.920 --> 0:16:32.760 at a time when the United States is involved in 0:16:32.760 --> 0:16:39.120 intense strategic competition with China, competition over Taiwan, over the 0:16:39.160 --> 0:16:43.000 South China Sea. They're at loggerheads over high technology, over 0:16:43.120 --> 0:16:48.040 human rights, over the situation in Ukraine. And Macron comes 0:16:48.040 --> 0:16:51.480 out and he says, no, we need strategic autonomy. We're 0:16:51.480 --> 0:16:55.200 not going to be followers. And the most explosive of 0:16:55.280 --> 0:16:57.920 his comments was and We're not going to be dragged 0:16:58.080 --> 0:17:02.960 by the United States into an licked uh over over Taiwan. 0:17:03.560 --> 0:17:06.399 And you know, this is this is a this is 0:17:06.440 --> 0:17:12.480 this to the too politicians like Marco Rubio really is outrageous. 0:17:12.480 --> 0:17:15.720 So he's saying, okay, here we are the United States 0:17:16.240 --> 0:17:22.840 defending Europe, sending AID, sending arms, military equipment to Ukraine, 0:17:23.600 --> 0:17:26.080 and you're saying, you know you're not going to get in, 0:17:26.200 --> 0:17:30.800 You're not going to support us in Taiwan. Why now 0:17:31.080 --> 0:17:34.840 for this move from Macron? You know, he's he's always 0:17:34.960 --> 0:17:41.719 sought what he calls strategic autonomy somewhere between the United 0:17:41.760 --> 0:17:45.359 States and China. This time he talked about creating a 0:17:45.440 --> 0:17:50.960 European third superpower. But you know, business and economics plays 0:17:51.240 --> 0:17:56.880 very much into this scenario. Macrom arrives in China with 0:17:57.080 --> 0:18:06.359 fifty odd business executives in representing industries from fashion to 0:18:05.400 --> 0:18:10.320 to to nuclear, and they're all doing great deals. So 0:18:10.720 --> 0:18:15.040 he's making clear the difference between the United States and 0:18:15.200 --> 0:18:18.639 Europe on this and in fact that sense is quite 0:18:18.720 --> 0:18:22.280 broadly shared in Europe. That you know, Europe doesn't want 0:18:22.280 --> 0:18:26.879 to go in for economic decoupling. Ursola van Delay and 0:18:27.040 --> 0:18:31.320 the European President of European Commission was quite clear on 0:18:31.400 --> 0:18:34.399 this point. She said, we want de risking from China. 0:18:34.720 --> 0:18:40.840 We don't want decoupling. But certainly Macron sees commercial opportunity 0:18:41.240 --> 0:18:45.679 in China's reopening. And by the way, President Jimping of China, 0:18:45.920 --> 0:18:50.280 this is all music to his inness. Relations with the 0:18:50.359 --> 0:18:52.959 United States are on ice and here's Europe coming along 0:18:53.000 --> 0:18:57.879 with trade offers of trade and technology. It's exactly what 0:18:58.040 --> 0:19:01.359 he needs at this point. Well, is it similar, Andy, 0:19:01.480 --> 0:19:04.240 I know we've talked about this a lot over the years. 0:19:04.400 --> 0:19:06.560 Is it the same for US business as we just 0:19:06.600 --> 0:19:10.159 talked about Tesla building a large new battery factory in Shanghai. 0:19:10.240 --> 0:19:13.920 So further digging in deeper when it comes to China specifically, 0:19:14.200 --> 0:19:17.160 I mean US big companies, they're still going to be 0:19:17.200 --> 0:19:20.720 in China doing business or no. Yeah, well, in some ways, 0:19:20.800 --> 0:19:25.440 Elon Musk is quite exceptional. It's the rare US CEO 0:19:25.760 --> 0:19:29.800 that's going out there now and announcing big business deals 0:19:29.840 --> 0:19:33.080 with China. In fact, we just had a big conference 0:19:33.200 --> 0:19:36.040 in Beijing called the China Development Forum, run by the 0:19:36.119 --> 0:19:41.080 Chinese government, the Chinese State Council. Fewer US corporate executives 0:19:41.080 --> 0:19:45.360 than usual were there. They were rather reluctant to turn out. 0:19:45.400 --> 0:19:49.440 They definitely didn't want to do any media and they 0:19:49.640 --> 0:19:54.240 certainly didn't want to make any announcements of investments in China, 0:19:54.480 --> 0:19:58.399 which might expose them to criticism by this newly created 0:19:58.520 --> 0:20:03.640 House Committee on China, which plans to hold US CEOs 0:20:03.720 --> 0:20:07.680 and other prominent figures with connections to China in front 0:20:07.720 --> 0:20:12.280 of the Committee for televised hearings. They're very nervous about that. So, yeah, 0:20:12.320 --> 0:20:15.440 this is advantage Europe versus the United States, certainly when 0:20:15.440 --> 0:20:19.280 it comes to corporate engagement. It's it's so interesting because 0:20:19.320 --> 0:20:22.119 I also have to wonder whether when it comes to 0:20:22.200 --> 0:20:26.400 she Jane Payne, are these CEOs concerned about the lack 0:20:26.440 --> 0:20:29.879 of predictability there. We just got through years of COVID 0:20:30.000 --> 0:20:34.560 zero in China. To what extent are people willing and 0:20:34.600 --> 0:20:37.080 ready to move on from that and say, well, this 0:20:37.119 --> 0:20:39.199 is an opportunity now, so let's fly over there with 0:20:39.280 --> 0:20:44.600 fifty CEOs into Yeah, well, the the Joe Biden is 0:20:45.000 --> 0:20:50.680 highly unlikely to replicate that that kind of mission. In fact, 0:20:50.720 --> 0:20:54.560 the US is working in the opposite direction. It wants 0:20:54.640 --> 0:21:00.000 economic containment of China, not economic engagement with China, certainly 0:21:00.080 --> 0:21:03.200 in the area of high tech. That's what the Inflation 0:21:03.240 --> 0:21:06.040 Reduction Act is all about. That's what chips and science. 0:21:06.080 --> 0:21:09.280 It's all about billions of dollars to build supply chains 0:21:09.280 --> 0:21:12.879 in the United States, to bring jobs back from China, 0:21:13.160 --> 0:21:17.119 and to make the United States less reliant on China. 0:21:17.200 --> 0:21:21.320 So it's all working really in quite the opposite direction. 0:21:21.359 --> 0:21:24.000 But US businesses in China are worried about two things. 0:21:24.000 --> 0:21:27.399 First of all, geopolitics and particularly the situation in the 0:21:27.440 --> 0:21:31.000 Taiwan Strait and the possibility of a Chinese invasion. But 0:21:31.080 --> 0:21:35.480 they're also worried about domestic economic policy and whether the 0:21:35.600 --> 0:21:41.080 Chinese administration really has eased up on its extraordinary assaults 0:21:41.960 --> 0:21:44.600 on the private sector that we saw beginning in the 0:21:44.600 --> 0:21:47.200 middle of two thousand and twenty one with the attack 0:21:47.280 --> 0:21:52.760 on the big tech digital platforms Ali Baba, you know, 0:21:52.800 --> 0:21:55.720 and the and DD and the other and the other 0:21:55.760 --> 0:21:58.399 tech giants. Well, it just is always interesting and I 0:21:58.400 --> 0:22:00.919 feel like so many different things come at us from 0:22:01.080 --> 0:22:03.320 so many different angles. Andy, thank you. I know, another 0:22:03.320 --> 0:22:06.320 busy day, so so appreciated. Andy Brown, partner at the 0:22:06.320 --> 0:22:10.240 Brunswick Group. Joining us via zoom in New York City. 0:22:15.440 --> 0:22:19.040 You're listening to the Bloomberg Business Week podcast. Catch us 0:22:19.040 --> 0:22:22.760 live weekdays from two to five pm Easter on Bloomberg Radio. 0:22:22.920 --> 0:22:25.840 The Bloomberg Business a band you two. You can also 0:22:25.920 --> 0:22:29.200 listen live to our flagship New York station Just Say 0:22:29.280 --> 0:22:33.720 Alexa play Bloomberg e Love and Dirty. So you know 0:22:33.760 --> 0:22:36.560 the new wishie Bloomberg business Week gets out, It's on newsstands, 0:22:36.560 --> 0:22:39.080 it's online Bloomberg dot com, slash business Week and of 0:22:39.119 --> 0:22:42.600 course on the Bloomberg terminal. In it a well known 0:22:42.760 --> 0:22:44.920 name in the hedge fund space who was also part 0:22:44.920 --> 0:22:47.000 of former President Donald Trump's team at the White House. 0:22:47.680 --> 0:22:50.720 For a little bit, the story gets into his ties 0:22:51.000 --> 0:22:54.200 to and his hedge funds performance hit thanks to Sam Bakeman, 0:22:54.240 --> 0:22:56.800 Freed and FTX It is an incredible story, so many 0:22:56.880 --> 0:22:59.960 juicy nuggets in it. It is gotta get a table 0:23:00.160 --> 0:23:02.800 read at some point. Let's get to the story. Bloomberg 0:23:02.840 --> 0:23:05.280 News hedge fund reporter Kathy Burton, she wrote it cheese 0:23:05.280 --> 0:23:07.640 in her interactive broker studio along with the editor Bloomberg 0:23:07.640 --> 0:23:11.480 Business Week, Joel Webber. Joel, we're talking about the moves. Yeah, 0:23:11.520 --> 0:23:14.840 and you know before he was before and after he 0:23:14.920 --> 0:23:19.640 had that very brief stint as President Trump's presse secretary, 0:23:19.680 --> 0:23:24.000 he managed money, and Skybridge has been a big name 0:23:24.119 --> 0:23:28.320 within the hedge fund community. Founded Salt, which is basically 0:23:28.320 --> 0:23:31.280 a gathering with a big and important gathering within the 0:23:31.280 --> 0:23:35.400 hedge fund community, has managed as much as nine billion dollars, 0:23:35.400 --> 0:23:38.320 but not as much of late. Kathy Burton, what's going 0:23:38.400 --> 0:23:42.720 on right now? The assets have fallen to about two 0:23:42.760 --> 0:23:47.439 billion dollars and what's more, about half the assets are 0:23:47.480 --> 0:23:50.560 locked up in a fund, and he's not really letting 0:23:50.600 --> 0:23:52.800 all the investors out. He's letting it out really like 0:23:52.880 --> 0:23:56.200 ten percent or less. It must be happy about that. 0:23:56.760 --> 0:24:01.760