WEBVTT - Market Surprises in 2025 and US National Security Issues 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.000 us live on YouTube. 0:00:27.160 --> 0:00:30.960 He writes an exceptionally intelligent note at Morgan Stanley, Matthew 0:00:30.960 --> 0:00:33.240 Hornback joins us Right. 0:00:33.080 --> 0:00:35.000 Now, Man, I got a problem. 0:00:35.159 --> 0:00:39.440 Everybody from Stolfus over to OpCo down to the gloom 0:00:39.440 --> 0:00:41.960 at the lower end is optimistic this year. 0:00:42.159 --> 0:00:44.120 Is your Hornback radar up? 0:00:45.360 --> 0:00:48.120 Hey, Tom, thanks for having me on the show. Well, 0:00:48.200 --> 0:00:50.760 my radar is always off. It's just a matter of 0:00:51.400 --> 0:00:53.440 whether whether it's the end of the year or whether 0:00:53.479 --> 0:00:56.240 it's the beginning of the year. But the radar is up, 0:00:56.240 --> 0:00:58.040 and I do think that there are going to be 0:00:58.120 --> 0:01:01.040 some interesting opportunities twenty twenty five. 0:01:02.600 --> 0:01:06.759 All right, let's go there, matt Global head of Macro Strategy. 0:01:06.760 --> 0:01:09.960 That means you can go anywhere, anytime and look at 0:01:10.000 --> 0:01:13.119 any asset. What's your twenty twenty five lead right here? 0:01:13.920 --> 0:01:18.039 Well, I think one of the expectations investors are bringing 0:01:18.080 --> 0:01:21.320 into this year is that is that you know it's 0:01:21.319 --> 0:01:25.160 all it's all good and and and and there's nothing bad. 0:01:25.360 --> 0:01:27.319 And that may be the case by the time we 0:01:27.440 --> 0:01:30.560 get to the end of twenty twenty five. Nothing bad 0:01:30.600 --> 0:01:32.640 may it may have happened. But you know, when we 0:01:32.720 --> 0:01:37.399 talk about things like a recession, obviously nobody talks about 0:01:37.400 --> 0:01:41.039 recession anymore because it hasn't happened. But I'm actually less 0:01:41.080 --> 0:01:45.800 focused on the probability of a recession. What what I 0:01:45.880 --> 0:01:51.400 am worried about is that we may have more recession scares. 0:01:51.680 --> 0:01:54.200 You know, if you think about the past eighteen months, 0:01:54.560 --> 0:02:00.280 we've had one recession scare every six months. Every six months, 0:02:00.560 --> 0:02:05.240 the bond market prices in a very aggressive reduction in 0:02:05.320 --> 0:02:09.760 the Fed's policy rate. Now that aggressive reduction doesn't come 0:02:09.800 --> 0:02:13.320 to pass, the economy ends up hanging in there just fine. 0:02:13.760 --> 0:02:17.720 But for markets, which is what I focus on, you know, 0:02:18.120 --> 0:02:23.160 we have to be worried about being worried and think 0:02:23.200 --> 0:02:25.760 about where we end up at the end of that. 0:02:25.919 --> 0:02:28.320 Okay, we've got a frame out here. Paul Hornback is 0:02:28.400 --> 0:02:31.280 like was running you know, he's with Robbie Feldman running Japan. 0:02:31.400 --> 0:02:35.160 Years ago at Morgan Stanley. He was doing Japan, doing 0:02:35.200 --> 0:02:38.200 the end doing trade he probably flowing in Japan at 0:02:38.240 --> 0:02:41.160 the same time as a CMT. He's like a market technician. 0:02:41.200 --> 0:02:43.480 Oh boy, Matt, we're going to walk right now. I 0:02:43.480 --> 0:02:45.959 got to impress Tim Kraig. He just walked in the 0:02:46.000 --> 0:02:50.360 studio here on a semi log NDX. I have support 0:02:50.600 --> 0:02:54.760 on my climate exponential moving averages. Are you ready a 0:02:54.880 --> 0:03:00.080 thirty five percent drop from here? How extended is the NDX. 0:03:00.960 --> 0:03:04.400 Oh, I think it's It seems pretty extended for sure. 0:03:05.280 --> 0:03:07.560 One of the things that's also very extended related to 0:03:07.680 --> 0:03:11.600 Japan is dollar yen. You know, dollar yen in the 0:03:11.680 --> 0:03:17.720 high one fifties is a understandable why it's there. The 0:03:17.800 --> 0:03:21.120 rate differentials are still wide. People expect the US to 0:03:21.160 --> 0:03:25.880 remain exceptional, but I was just in Japan over the holidays, 0:03:26.080 --> 0:03:31.240 and it is exceptionally affordable. Given where the currency is, 0:03:31.280 --> 0:03:34.880 it just doesn't make much fundamental sense for the currency 0:03:35.040 --> 0:03:38.640 to be so weak. And so I would say one 0:03:39.120 --> 0:03:42.200 thing that I would be looking for quite a decline 0:03:42.240 --> 0:03:45.839 in twenty twenty five is the dollar yen exchange rate. 0:03:45.960 --> 0:03:49.240 I think that can very easily go below one forty 0:03:50.080 --> 0:03:51.760 by the time we get to the end of twenty 0:03:51.840 --> 0:03:52.360 twenty five. 0:03:52.840 --> 0:03:53.960 That's a big figure move. 0:03:54.000 --> 0:03:56.200 That is a big figure move, and we haven't seen 0:03:56.200 --> 0:03:59.920 that got the one to fifty seven spot seventy. Hey, Matt, 0:04:01.120 --> 0:04:03.520 the good friends at Morgan Stanley are are you guys 0:04:03.520 --> 0:04:08.240 seeing fun flows coming into the US, say from European investments, 0:04:08.600 --> 0:04:11.640 from Greenland and other parts in Europe. 0:04:12.560 --> 0:04:14.760 Well, I would say there's a lot of flows coming 0:04:14.800 --> 0:04:20.200 into Goldland, not necessarily Greenland, but but but certainly you 0:04:20.240 --> 0:04:23.719 know that the dollar does benefit when investors are looking 0:04:23.760 --> 0:04:29.240 to allocate into either a safety like gold or West treasuries, 0:04:29.440 --> 0:04:31.480 the dollar is going to benefit. So in that sense, 0:04:32.160 --> 0:04:36.480 Greenland and Goldland are are highly correlated at this moment. 0:04:37.120 --> 0:04:40.120 When you see US interest rates going up, you also 0:04:40.200 --> 0:04:44.520 see the US dollar appreciating. Uh, there's more real return 0:04:44.680 --> 0:04:46.880 offered in the US. And and even if they don't 0:04:46.880 --> 0:04:49.320 really hear that much about real return, you can just 0:04:49.360 --> 0:04:49.960 go buy gold. 0:04:50.120 --> 0:04:52.159 One final question, I want to swing it to Japan, 0:04:52.200 --> 0:04:55.359 but I'm gonna stand US dollar. Matt Hornbach to me, 0:04:55.480 --> 0:04:59.040 it's a non linear move on d X y it 0:04:59.160 --> 0:05:02.640 won one nine. Are we getting up to where there's 0:05:02.680 --> 0:05:06.039 a kink where there's a movement off dollar index or 0:05:06.080 --> 0:05:08.839 can it be a smooth ride to higher and strong dollar. 0:05:09.960 --> 0:05:12.800 Well, no, I think if you look at the dollar 0:05:12.880 --> 0:05:15.719 over the past couple of years, it has been anything 0:05:15.760 --> 0:05:19.080 but smooth there. You know, the dollar has largely been 0:05:19.680 --> 0:05:24.200 range bound, and that's a large part because interest rates 0:05:24.240 --> 0:05:27.800 have been largely range bound since the Fed stopped their 0:05:27.880 --> 0:05:33.600 hiking cycle back in July of twenty twenty three. So 0:05:33.720 --> 0:05:36.640 it's it's been a range bound market. It's definitely not 0:05:36.760 --> 0:05:39.479 been smooth. Twenty five is not expected to be a 0:05:39.480 --> 0:05:43.159 smooth year for the dollar. But but that's where a 0:05:43.240 --> 0:05:46.359 surprise could could could come to the foe is the 0:05:46.360 --> 0:05:49.680 dollar could actually could could move lower in a more 0:05:49.720 --> 0:05:53.560 smooth fashion because ultimately we think the Fed, the Fed 0:05:53.640 --> 0:05:57.120 is going to continue to lower rates and buy more 0:05:57.200 --> 0:05:59.479 than what you see priced into the market today. 0:06:00.000 --> 0:06:01.360 Okay, Matt, thank you. 0:06:01.400 --> 0:06:03.920 Matt hornback with a brief here to get us started 0:06:03.960 --> 0:06:10.400 in twenty twenty five. He is with Morgan Stanley. 0:06:12.720 --> 0:06:16.320 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:06:16.360 --> 0:06:19.520 weekday afternoons from seven to ten am Eastern Listen on 0:06:19.600 --> 0:06:23.000 Apple Karplay and Android Otto with the Bloomberg Business app, 0:06:23.200 --> 0:06:25.440 or watch us live on YouTube when. 0:06:25.240 --> 0:06:28.360 You grow up the son of a fireman. You've got 0:06:28.400 --> 0:06:32.080 that irascible kind of thing. John Bolton from the very 0:06:32.120 --> 0:06:36.159 beginning has been someone of opinion, and he's been someone 0:06:36.200 --> 0:06:39.599 who said it as clear as he can. People that 0:06:39.680 --> 0:06:43.400 are for John Bolton, his critics as well see a 0:06:43.440 --> 0:06:48.720 distinguished career in public service, and he has been very 0:06:48.839 --> 0:06:52.000 visible in the last number of weeks on the formation 0:06:52.160 --> 0:06:55.520 of the second Trump administration. Cabina, John, thank you so 0:06:55.600 --> 0:06:57.680 much for joining Bloomberg today. 0:06:58.040 --> 0:06:59.680 I'm just going to cut to the chase. 0:07:00.080 --> 0:07:03.240 Sometimes you write an essay and then you wrote in 0:07:03.279 --> 0:07:06.520 the Wall Street Journal an essay on mister Patel, who 0:07:06.600 --> 0:07:11.040 is being considered to run the FBI, and line by 0:07:11.200 --> 0:07:12.880 line you went through it. 0:07:13.080 --> 0:07:13.760 Why did you. 0:07:13.680 --> 0:07:17.720 Put that much energy into that essay on mister Patel 0:07:18.120 --> 0:07:20.680 are potential leader of the FBI. 0:07:21.760 --> 0:07:23.880 Well being Director of the FBI is one of the 0:07:23.880 --> 0:07:27.360 most important jobs in government, and it's been held by 0:07:27.360 --> 0:07:30.200 some distinguished people and by some people who are not 0:07:30.320 --> 0:07:34.520 so distinguished. But the power in that job is just enormous, 0:07:34.600 --> 0:07:38.239 and I wanted to show why, in my view, Patel 0:07:38.440 --> 0:07:42.800 wasn't qualified, not in terms of his competence or his experience, 0:07:42.880 --> 0:07:45.360 or his character. I just thought it was important for 0:07:45.480 --> 0:07:47.000 senators to have that in mind. 0:07:47.520 --> 0:07:49.840 The senators are the key. I can state, folks. 0:07:49.880 --> 0:07:52.760 My book of the year a number of years ago, ready, 0:07:52.880 --> 0:07:56.840 twelve years ago, eleven years ago, Garrett Graf The Threat 0:07:56.880 --> 0:08:02.120 Max Matrix, The FBI at War. It is a spectacular 0:08:02.280 --> 0:08:07.160 five hundred pages on the complexity of the FBI. John Boltons, 0:08:07.200 --> 0:08:11.280 You believe that the president elect doesn't understand the day 0:08:11.320 --> 0:08:13.679 to day grind of what the FBI does. 0:08:15.000 --> 0:08:18.640 Yeah, I think Trump has very little understanding how most 0:08:18.680 --> 0:08:21.160 of the government operates. He never took the time to 0:08:21.240 --> 0:08:23.720 learn it. He didn't know much before he became president, 0:08:23.760 --> 0:08:26.120 and he didn't learn very much when he was president. 0:08:26.520 --> 0:08:29.600 The FBI has roughly, I don't know, thirty eight forty 0:08:29.640 --> 0:08:33.240 thousand employees, most of whom spend their time working on 0:08:33.360 --> 0:08:37.440 investigating real crimes or real threats to the United States 0:08:37.440 --> 0:08:41.120 from overseas. And the idea that you're going to unleash 0:08:41.160 --> 0:08:44.840 somebody whose main job, in Trump's view is hunting down 0:08:44.880 --> 0:08:50.440 Trump's enemies really demeans the incredibly important work of the 0:08:50.520 --> 0:08:53.439 overwhelming majority of people in the department. I'm not saying 0:08:53.480 --> 0:08:56.440 the FBI is free of problems, it certainly is not. 0:08:56.800 --> 0:09:00.120 But if you want to have somebody come in and 0:09:00.160 --> 0:09:04.000 fix it, correct the problems, reform it, straighten it up, 0:09:04.320 --> 0:09:08.560 pick somebody like William Webster, who, when Ronald Reagan appointed him, 0:09:09.280 --> 0:09:15.320 was a distinguished federal judge and has since written he 0:09:15.360 --> 0:09:19.160 doesn't think either Cash Betel or Tulsey Gabbert or fit 0:09:19.240 --> 0:09:21.840 for the jobs they've held. Pick somebody who's got a 0:09:21.880 --> 0:09:26.720 background of integrity and judgment, who's gonna resolve the problems 0:09:26.720 --> 0:09:29.320 you're worried about and not make the worse. 0:09:30.200 --> 0:09:34.120 John for some of the candidates are point ease that 0:09:34.200 --> 0:09:37.440 you have raised some flags on it. Do you believe 0:09:37.559 --> 0:09:41.000 the Senate will in fact challenge them going forward in 0:09:41.040 --> 0:09:42.559 the confirmation process. 0:09:43.320 --> 0:09:45.320 Well, I think there's a real chance of it. You know, 0:09:45.920 --> 0:09:49.360 the the idea that the president nominates somebody and that 0:09:49.480 --> 0:09:52.880 choice is automatically accepted by the Senate doesn't is born 0:09:52.960 --> 0:09:56.200 out by history. I think the president's entitled the real 0:09:56.320 --> 0:09:59.760 deference in his picks, particularly in terms of what the 0:10:00.160 --> 0:10:04.200 pointees think about policies. That's what the president was elected 0:10:04.240 --> 0:10:06.920 to do. But the function of the Senate, the Federalist 0:10:06.920 --> 0:10:09.840 papers make this very clear, is to make sure that 0:10:09.920 --> 0:10:14.040 people who lack character and competence don't get through. Now 0:10:14.080 --> 0:10:16.800 we're all waiting after the first of the year for 0:10:16.840 --> 0:10:21.000 the FBI full field background investigations to come in. That's 0:10:21.040 --> 0:10:23.680 going to be interesting to read for the senators on 0:10:23.760 --> 0:10:26.640 the key committees. And then they're going to be confirmation 0:10:26.800 --> 0:10:31.160 hearings where if senators Republican and Democratic are doing their jobs, 0:10:31.360 --> 0:10:34.600 they'll ask the nominee some hard questions. This is still 0:10:34.600 --> 0:10:36.160 a long way from being over. 0:10:37.160 --> 0:10:40.800 John, From a national security perspective, what do you think 0:10:40.840 --> 0:10:44.760 the to do list should be for this incoming administration? 0:10:44.880 --> 0:10:47.160 Maybe for the first one hundred days, if not longer. 0:10:48.880 --> 0:10:50.440 Well, I think it's a long list. I think the 0:10:50.480 --> 0:10:53.720 world is very threatening to American interest in a variety 0:10:53.800 --> 0:10:56.800 of places. Certainly the Middle East is on fire, the 0:10:56.920 --> 0:11:00.600 Russian invasion of Ukraine continues, the Chinese threat to Taiwan 0:11:00.679 --> 0:11:03.720 and the South China Sea remain, and I think there 0:11:03.720 --> 0:11:06.920 needs to be a real focus on going after those 0:11:07.760 --> 0:11:11.200 countries that have become adversaries of ours and putting in 0:11:11.320 --> 0:11:14.760 place both the policies we need to protect there, but 0:11:14.840 --> 0:11:18.880 also getting resources. Maybe the highest priority the president has 0:11:19.320 --> 0:11:23.160 is getting a better defense budget, a substantially larger defense budget. 0:11:23.440 --> 0:11:25.679 Not to say that there aren't savings that can be 0:11:25.720 --> 0:11:29.120 had at defense, There certainly can be. But we face 0:11:29.240 --> 0:11:32.880 threats that are rising around the world, and we've had, 0:11:33.040 --> 0:11:36.720 over a sustained period of time inadequate resources to do 0:11:36.800 --> 0:11:40.719 the job. Our military is way overstretched and we are vulnerable. 0:11:41.520 --> 0:11:44.400 It ways to go here, joining us folks as John Bolton, 0:11:44.480 --> 0:11:47.040 of course you know him from as many years of 0:11:47.080 --> 0:11:53.480 service to America. Always controversial, always interesting, and opinionated as well. 0:11:53.520 --> 0:11:57.120 In nineteen sixty four at the McDonough's school, Owings Mills, Maryland, 0:11:57.640 --> 0:12:01.640 he ran the students for Goldwater campaign. You know, did 0:12:01.679 --> 0:12:03.920 John to go back to your first public service as 0:12:03.960 --> 0:12:08.120 a summer intern from the Vice President from Maryland, Mister Agnew, 0:12:08.559 --> 0:12:11.640 you've seen some White House movement away from the uproar 0:12:11.679 --> 0:12:17.360 of the first Trump administration. You were articulate about the generals, 0:12:17.440 --> 0:12:22.240 the admirals. It's surrounded President Trump in his first term. 0:12:22.800 --> 0:12:26.520 The military has now seen the Trump process. Can he 0:12:26.600 --> 0:12:31.120 get the same quality military advice now that he got 0:12:31.280 --> 0:12:34.000 in January six years or eight years ago. 0:12:35.640 --> 0:12:37.760 Well, I think it's open to question. I think part 0:12:37.760 --> 0:12:40.760 of the Trump effect is to try and intimidate people 0:12:41.559 --> 0:12:44.080 to prevent them from speaking out. I hope that's not 0:12:44.240 --> 0:12:49.559 the case. The civilian relationship is critical for our national security, 0:12:49.600 --> 0:12:53.280 and civilian leadership obviously is dominant, but it depends on 0:12:53.400 --> 0:12:58.160 getting straightforward, honest military advice, and if the Chairman of 0:12:58.160 --> 0:13:00.440 the Joint Chiefs, the other Joint Chiefs, the bat and 0:13:00.480 --> 0:13:03.920 commanders continue to provide that. Obviously it's up for the 0:13:03.960 --> 0:13:07.120 President to make the final decision, but they need to 0:13:07.160 --> 0:13:09.200 tell him what the facts are, whether he wants to 0:13:09.200 --> 0:13:09.840 hear him or not. 0:13:10.800 --> 0:13:13.840 Do you think that what is your confidence level that 0:13:13.840 --> 0:13:16.200 that will occur this second time around, because there are 0:13:16.240 --> 0:13:19.199 some concerns out there that in this second Trump administration 0:13:20.360 --> 0:13:24.839 he'll be more authoritative, he'll have more confidence in his moves, 0:13:24.880 --> 0:13:27.040 maybe at the expensive advice from others. 0:13:28.320 --> 0:13:31.600 Well, I think it's very likely that will happen, but 0:13:31.679 --> 0:13:33.760 you can't tell until the rubber meets the road. We 0:13:33.840 --> 0:13:35.840 need to know who the Secretary of Defense is going 0:13:35.880 --> 0:13:38.440 to be that's not resolved yet either, and know a 0:13:38.480 --> 0:13:41.199 lot more about what the other top civilian officials that 0:13:41.320 --> 0:13:43.560 defense are going to look like. But I think there 0:13:43.559 --> 0:13:45.680 are going to be crises that are going to require 0:13:45.720 --> 0:13:50.080 some pretty tough politico military decisions very early in Trump's term. 0:13:50.559 --> 0:13:53.160 We don't get to call the shots on when things 0:13:53.160 --> 0:13:56.160 in the wider world happen. It could happen on day one. 0:13:56.320 --> 0:13:58.000 In Besser Bolden. One final question. 0:13:58.120 --> 0:14:00.880 This is for Nick Wadhams in Washington, and it's on 0:14:00.920 --> 0:14:04.679 the machinery here. I see Iran pulling out of Syria. 0:14:05.320 --> 0:14:07.160 It's unfair to you because I guess you don't have 0:14:07.240 --> 0:14:11.000 all the present intelligence. But is it legitimate that Iran 0:14:11.120 --> 0:14:14.640 is retrenching from the greater Middle East? 0:14:15.640 --> 0:14:18.680 Look, Iran is in deep trouble. It's been dealt punishing 0:14:18.720 --> 0:14:23.760 blows by Israel against Hamas and Hezbela, two terrorist proxies 0:14:23.800 --> 0:14:26.520 that were major elements of Iranian patower. The fall of 0:14:26.560 --> 0:14:29.840 the Aside regime in Syria, it's a third critical blow. 0:14:30.680 --> 0:14:32.960 I think the Iotolas are on the back foot now, 0:14:33.000 --> 0:14:35.680 and this is a point to press them hard. It 0:14:35.720 --> 0:14:38.560 may well be the regime itself is shaking. At the 0:14:38.560 --> 0:14:41.560 same time, we've got to worry about making sure that 0:14:41.600 --> 0:14:45.360 the new government in Syria doesn't establish a terrorist state, 0:14:45.360 --> 0:14:48.480 a kind of Afghanistan on the Mediterranean. Something we need 0:14:48.520 --> 0:14:50.240 to pay a lot of attention to We've got a 0:14:50.240 --> 0:14:51.119 lot at stake. 0:14:50.920 --> 0:14:53.560 There, John Bolton, thank you so much for joining us today. 0:14:53.600 --> 0:14:56.320 We look forward to speaking to you again, the former 0:14:56.400 --> 0:14:58.440 Ambassador John Bolton. 0:14:58.520 --> 0:15:02.400 This is the Bloomberg Survey Podcast. Listen live each weekday 0:15:02.440 --> 0:15:05.480 starting at seven am Eastern on Apple Corplay and Android 0:15:05.480 --> 0:15:08.520 Auto with the Bloomberg Business app. You can also listen 0:15:08.600 --> 0:15:11.840 live on Amazon Alexa from our flagship New York station, 0:15:12.400 --> 0:15:15.040 Just say Alexa Play Bloomberg eleven thirty. 0:15:15.200 --> 0:15:18.120 We are thrilled to start the year with one of 0:15:18.160 --> 0:15:22.000 the great academics, of course, with the University of Oxford 0:15:22.080 --> 0:15:25.320 and always forever associated with the Financial Times. 0:15:25.880 --> 0:15:26.920 John K joins us. 0:15:26.960 --> 0:15:30.880 The new book is The Corporation in the twenty first Century. 0:15:31.680 --> 0:15:34.160 John K, thank you so much for joining us. My 0:15:34.280 --> 0:15:39.400 great theme here is the distrust in America of corporations, 0:15:39.440 --> 0:15:43.680 and to me, it's the monopsony of it all, the 0:15:43.800 --> 0:15:50.400 combination the inevitable transactions that lead to corporate power. Where 0:15:50.400 --> 0:15:54.040 are we on the cycle of capitalism in terms of 0:15:54.080 --> 0:15:57.560 the ever greater power of our corporations. 0:15:58.600 --> 0:16:01.360 I think we're not going to go play, but I 0:16:01.400 --> 0:16:05.000 wouldn't put as much emphasis as you do on the 0:16:05.040 --> 0:16:09.920 greater power of corporations, the greater power of the corporate sector. Yes, 0:16:10.880 --> 0:16:16.400 but the greater power of corporations. People exaggerate over people 0:16:16.440 --> 0:16:21.880 exaggerate the permanence of dominance of industries. It's quite amusing 0:16:21.920 --> 0:16:25.320 to watch at the moment the death rows in effect 0:16:25.640 --> 0:16:29.560 of traditional US Steel, which was when it was formed 0:16:29.560 --> 0:16:33.200 a century ago, the larger, by far, the most valuable 0:16:33.240 --> 0:16:37.600 corporation in the world. You were talking earlier about Nvidia, 0:16:37.720 --> 0:16:42.480 Everyone's favorite of the moment. It's quite hard for me 0:16:42.520 --> 0:16:46.160 to see how that dominance can be maintained for long 0:16:46.280 --> 0:16:51.160 enough to justify the three point seven trillion dollar market 0:16:51.240 --> 0:16:55.320 cap they've achieved. And of course, the great corporation in 0:16:55.360 --> 0:16:59.560 the first half of the twentieth century was General Motors, 0:17:00.840 --> 0:17:04.840 which doesn't even dominate the model the world automobile. 0:17:05.320 --> 0:17:09.280 Okay, how do you how do you determine when to 0:17:09.359 --> 0:17:12.600 get off the bend wagon? How do you determine when 0:17:12.640 --> 0:17:17.800 to exit? Generous Motors? How do you determine when to exit? 0:17:18.320 --> 0:17:22.400 Maybe British Telecom? How do you determine when to exit? 0:17:22.560 --> 0:17:23.119 In video? 0:17:24.359 --> 0:17:29.960 It's almost when there's no one left to be convinced. 0:17:30.240 --> 0:17:33.960 I have a strong memory of early two thousand and 0:17:34.080 --> 0:17:38.440 going to that Davis conference of the International Business Elite 0:17:38.480 --> 0:17:41.160 then and that was at the peak of the dot 0:17:41.240 --> 0:17:44.879 com boo, and I thought, there is no one left 0:17:44.920 --> 0:17:48.919 to be convinced that this is a permanent change. And 0:17:48.960 --> 0:17:52.040 I thought, that's a signal that this is the top. 0:17:52.480 --> 0:17:55.760 And of course it was within two or three months 0:17:55.800 --> 0:17:58.160 of that the great dot com. 0:17:58.280 --> 0:18:00.560 Do you feel that now? Do you feel that now 0:18:00.640 --> 0:18:01.600 about AI? 0:18:03.160 --> 0:18:06.040 I do feel that about AI. I mean AI is 0:18:06.119 --> 0:18:10.080 important and will change. And indeed, back into a thousand, 0:18:10.800 --> 0:18:15.160 I was unduly skeptical about the impact that the Internet 0:18:15.240 --> 0:18:20.240 would have on business. But the impact it had owned 0:18:20.240 --> 0:18:23.720 business was not an impact in two thousand and one. 0:18:23.840 --> 0:18:26.719 In two thousand and two, it was the impact that 0:18:26.760 --> 0:18:33.359 we're still gradually seeing as online retailer and online information 0:18:33.520 --> 0:18:38.960 acquisition took over. My life has been changed a lot 0:18:39.119 --> 0:18:42.600 by the Internet, but it's over twenty years, not over 0:18:42.680 --> 0:18:44.359 two john. 0:18:45.160 --> 0:18:51.520 Generations of managers, executives, board members, investors have been brought 0:18:51.560 --> 0:18:54.639 up in this concept of the responsibility of corporation is 0:18:54.640 --> 0:18:57.600 the maximize shareholder value? Is that still the case in 0:18:57.640 --> 0:18:58.040 your mind? 0:18:59.400 --> 0:19:02.399 What's the case in my mind is that the responsibility 0:19:02.400 --> 0:19:06.000 of executives in a corporation is to build great businesses. 0:19:06.880 --> 0:19:10.240 The truth is, if we're saying, how do you maximize 0:19:10.280 --> 0:19:15.080 shareholder value, which is a product of the profit the 0:19:15.119 --> 0:19:19.359 business will earn over even in a pessimistic view twenty 0:19:19.440 --> 0:19:23.679 thirty years, on an optimistic view fifty or two hundred years, 0:19:23.960 --> 0:19:27.480 no one can do that kind of sum. What executives 0:19:27.480 --> 0:19:32.520 should be doing is building great businesses and then shareholder 0:19:32.680 --> 0:19:36.800 value will follow from that. That's the story of Boeing, 0:19:36.840 --> 0:19:39.879 which is a good illustration of the problem. In the 0:19:39.880 --> 0:19:43.439 second half of the twentieth century, what we saw was 0:19:43.480 --> 0:19:47.840 Boeing Boeing with Bill Allen, who was CEO for Boeing 0:19:47.880 --> 0:19:50.919 for a time, said we live to eat, breathe and 0:19:50.960 --> 0:19:54.440 sleep the world ab aeronautics. That was what we did, 0:19:54.800 --> 0:19:58.199 and they built a great business with planes that revolutionize 0:19:58.240 --> 0:20:03.920 the aviation industry and everyone's lives. From two thousand they 0:20:03.960 --> 0:20:12.560 took a rather different view. Irby Stun famously said, people 0:20:12.600 --> 0:20:15.040 say this is a great engineering business. It is a 0:20:15.040 --> 0:20:18.560 great engineering business. But people invest in a company because 0:20:18.560 --> 0:20:22.640 they went to want to make money. Well, for a time, 0:20:22.720 --> 0:20:28.000 they did make money, but they craded in effect the 0:20:28.080 --> 0:20:33.639 reputation of the company for short term monetization. Actually, we 0:20:33.640 --> 0:20:36.880 see a lot of private equity people doing just that today. 0:20:37.520 --> 0:20:39.600 We have to leave it there, John K. But thank 0:20:39.640 --> 0:20:41.280 you so much for joining us. The book is a 0:20:41.320 --> 0:20:44.840 corporation in the twenty first century. I can't say enough 0:20:44.880 --> 0:20:48.800 about it, thought provoking tone, why almost everything. 0:20:48.440 --> 0:20:52.879 We are told about business is wrong? John K. And 0:20:52.920 --> 0:20:57.240 we'll look for that book in the coming weeks. 0:21:02.480 --> 0:21:06.400 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:21:06.440 --> 0:21:09.439 starting at seven am Eastern on Apple, Corplay, and Android 0:21:09.480 --> 0:21:12.480 Auto with the Bloomberg Business app. You can also watch 0:21:12.560 --> 0:21:15.480 us live every weekday on YouTube and always on the 0:21:15.520 --> 0:21:16.600 Bloomberg terminal. 0:21:16.800 --> 0:21:19.919 Take a look at different pages of Lisa Matteo our Lisa, 0:21:19.960 --> 0:21:20.399 what do you have? 0:21:20.600 --> 0:21:22.880 Okay, So we are in day three of New York 0:21:22.880 --> 0:21:26.560 City's congestion pricing. Okay, so this is how it's going. 0:21:26.560 --> 0:21:28.639 The New York Post is saying drivers are coming up with, 0:21:29.359 --> 0:21:32.400 i should say, creative ways to kind of beat the system. 0:21:32.760 --> 0:21:36.479 They're basically hiding their license plates. So the New York 0:21:36.520 --> 0:21:39.119 Post they spotted a few of these. They're covering like 0:21:39.160 --> 0:21:41.119 a single digit and the license plate to make it 0:21:41.119 --> 0:21:44.000 look like another one. They scratch it out, they paint 0:21:44.040 --> 0:21:45.800 over it, they put tape over it, they use this 0:21:45.880 --> 0:21:49.040 translucent glue to make it harder to read. They're doing 0:21:49.080 --> 0:21:52.399 all these different things, attaching those like fake dealer plates 0:21:52.400 --> 0:21:54.679 that can be taken off and put back on. And 0:21:54.680 --> 0:21:56.480 then you have the ones with the flate clippers that 0:21:56.520 --> 0:21:58.919 has the button inside the car that you press and 0:21:59.480 --> 0:22:03.520 the stuff so it gives a different number. But they're 0:22:03.520 --> 0:22:06.040 doing all these different things. We are not promoting this. 0:22:06.119 --> 0:22:08.560 I just want to say that because there could be 0:22:08.600 --> 0:22:11.879 a five hundred dollars Fine, yes, if you get to 0:22:12.200 --> 0:22:15.159 doing this, but it just goes to show you how people, 0:22:15.520 --> 0:22:17.560 how it's affecting, you know, so many different people. They're 0:22:17.560 --> 0:22:18.400 going to these extents. 0:22:18.600 --> 0:22:21.600 The huge response General Lieber with us yesterday from the 0:22:21.720 --> 0:22:24.360 MT is a classic answered yep, some tough. 0:22:24.200 --> 0:22:25.680 Questions, yep. He was there. 0:22:25.720 --> 0:22:27.960 And so we'll see how this plays out. But it 0:22:28.080 --> 0:22:30.400 seems to kind of be working so far. I haven't 0:22:30.440 --> 0:22:32.440 seen any major problems. 0:22:32.440 --> 0:22:36.200 But next we shall see day three going into day 0:22:36.200 --> 0:22:38.919 four tomorrow. Okay, so this new study, you know that 0:22:39.040 --> 0:22:41.680 what they call the Sandwich generation, those who are caring 0:22:41.680 --> 0:22:44.200 for the young kids as well as the older aging 0:22:44.240 --> 0:22:46.879 parents at the same time. So the study says that 0:22:47.520 --> 0:22:50.520 it's starting to affect their mental physical health. It's a 0:22:50.680 --> 0:22:53.600 UK study because this is from Financial Times, but it 0:22:53.680 --> 0:22:56.639 really shows similar things that are happening here in the US, 0:22:56.760 --> 0:22:59.480 typically those between the ages of thirty and forty nine. 0:23:00.040 --> 0:23:03.239 With some of those listeners who are experiencing this, so 0:23:03.320 --> 0:23:05.119 it just shows that their mental health is kind of 0:23:05.160 --> 0:23:07.639 deteriorating faster than others who don't have to kind of 0:23:07.720 --> 0:23:09.879 jungle both of these different sides of the fact with 0:23:10.080 --> 0:23:14.040 childcare and aging parent care and those who did it 0:23:14.119 --> 0:23:16.439 like twenty or more hours a week. But it just 0:23:16.480 --> 0:23:19.240 shows that more help is needed for some of these 0:23:19.280 --> 0:23:25.240 folks workplace flexibility. Also, it's a big debate later that's 0:23:25.240 --> 0:23:27.760 the reason why. Yeah, they're having kids later, So now 0:23:28.000 --> 0:23:29.760 they're at this age where their parents are aging, but 0:23:29.840 --> 0:23:32.240 yet they have kids who are like two, three, four, 0:23:32.359 --> 0:23:34.399