WEBVTT - Bloomberg Businessweek Weekend - October 22nd, 2022 0:00:01.040 --> 0:00:05.440 This is Bloomberg Business Week inside from the reporters and 0:00:05.600 --> 0:00:09.200 editors who bring you America's most trusted business magazine, plus 0:00:09.240 --> 0:00:13.200 global business, finance and tech news as it happens. Bloomberg 0:00:13.240 --> 0:00:16.759 Business Week with Carol Messier and Bloomberg Quick Takes Tim 0:00:16.800 --> 0:00:21.439 Stinovic on Bloomberg Radio. Hi, everyone, Welcome to the weekend 0:00:21.600 --> 0:00:25.959 edition of Bloomberg Business Week. While earning season in full swing, 0:00:26.000 --> 0:00:29.680 with all the big banks, the top three US airlines, Tesla, Netflix, 0:00:29.680 --> 0:00:32.479 and dozens more already out with third quarter earnings, and 0:00:32.520 --> 0:00:34.800 big tech on tap this coming week, I had on 0:00:34.840 --> 0:00:37.720 the program our Bloomberg Business Week and news teams take 0:00:37.800 --> 0:00:41.200 us inside the likes of Goldman, Sachs, Exxon, Meta Platforms, 0:00:41.200 --> 0:00:44.519 and Netflix to help us understand some of these storylines 0:00:44.560 --> 0:00:48.040 affecting these closely watched companies. And as we explore, some 0:00:48.040 --> 0:00:50.800 of the world's most influential companies, will also zoom out 0:00:50.800 --> 0:00:53.680 to look at why the global economy and financial system 0:00:53.800 --> 0:00:57.480 may permanently be fractured into We'll do that with investigative 0:00:57.520 --> 0:01:00.120 journalist know Me Prince. All of that to come. We 0:01:00.160 --> 0:01:02.240 begin though with one of the companies we mentioned at 0:01:02.240 --> 0:01:05.480 the top. We're talking about Goldman Sacks, the world's most 0:01:05.560 --> 0:01:08.479 valuable investment bank, scored an earnings beat thanks to its 0:01:08.600 --> 0:01:12.120 fixed income traders helping to drive revenue above analysts estimates. 0:01:12.200 --> 0:01:14.560 And this is all happening as CEO David Solomon looks 0:01:14.600 --> 0:01:17.480 to engineer the third major reorg at Goldman during his 0:01:17.600 --> 0:01:21.680 four year tenure. Bloomberg News finance reporter Shri Natarajan broke 0:01:21.720 --> 0:01:23.920 it down for US just ahead of the big banks 0:01:23.959 --> 0:01:27.360 earnings release, Goldman shaking up its leadership ranks and yet 0:01:27.400 --> 0:01:31.080 another overhaul. What's the big headline here, what's the what's 0:01:31.080 --> 0:01:34.039 the what's the re org? Who's taking who's taking over 0:01:34.080 --> 0:01:36.000 for these divisions? It's not with the last three words 0:01:36.000 --> 0:01:38.760 of the headline, yet another overhaul. And I feel to 0:01:38.840 --> 0:01:41.800 some extent that's more the news than actually what they're 0:01:41.840 --> 0:01:44.160 moving around. It's not the rearranging of the deck chats, 0:01:44.480 --> 0:01:47.360 to be clear, without any Iceberg inside, but it is 0:01:47.400 --> 0:01:50.680 not about the changes itself, but the fact that it's 0:01:50.680 --> 0:01:54.200 happening again because David Solomon, the CEO of Goldman SAX, 0:01:54.440 --> 0:01:56.720 is four years into the top job at the Wall 0:01:56.760 --> 0:01:59.760 Street joint and this is this is the third major 0:02:00.120 --> 0:02:04.120 structuring he's undertaking. Not just that with this move, he 0:02:04.240 --> 0:02:07.520 will be undoing a lot of the signature moves he 0:02:07.560 --> 0:02:11.320 put in place and changes he made just two years ago. 0:02:11.680 --> 0:02:13.960 That is not a good look and that gives a 0:02:14.000 --> 0:02:16.280 little bit of whiplash to investors. So let me actually 0:02:16.320 --> 0:02:18.680 step in and tell you what the changes are. You 0:02:18.720 --> 0:02:24.200 have a Goldman Sacks with four distinct divisions trading, investment, banking, 0:02:24.440 --> 0:02:28.720 two units where their strength is it's fair to say unparalleled. 0:02:29.120 --> 0:02:32.000 Then they had this asset management business, which is the 0:02:32.360 --> 0:02:35.720 Goldman Sacks asset management business, investing in public markets on 0:02:35.800 --> 0:02:39.120 behalf of other investors, as well as this merchant bank, 0:02:39.160 --> 0:02:41.960 which was sort of their in house private equity shop. 0:02:42.280 --> 0:02:44.560 And then the fourth pillar, which was actually created in 0:02:45.520 --> 0:02:48.799 was this consumer and wealth management business because that catered 0:02:48.800 --> 0:02:52.040 to individual money, some very very very very rich people 0:02:52.400 --> 0:02:55.239 and some averages. But those were all people that Goldman 0:02:55.320 --> 0:02:58.360 was targeting. They wiped the slate clean. They've combined banking 0:02:58.360 --> 0:03:00.320 and trading in a way to try and or gets 0:03:00.360 --> 0:03:02.560 to the market that hey, if you see banking and 0:03:02.600 --> 0:03:06.080 trading as one combined group, similar to how JP Morgan 0:03:06.240 --> 0:03:08.560 does it, similar to how Morgan Stanley does it, you 0:03:08.639 --> 0:03:12.839 may be able to appreciate how good it is. That's 0:03:12.880 --> 0:03:15.800 one goal with c IB Then what they did, and 0:03:15.840 --> 0:03:18.119 we've talked about for a few months now, they've had 0:03:18.240 --> 0:03:21.799 major issues with their consumer business. They're effectively dismembering that, 0:03:22.480 --> 0:03:26.680 bringing back wealth management into their asset management business, shoving 0:03:26.760 --> 0:03:29.440 up part of their director consumer business, which operated under 0:03:29.440 --> 0:03:32.840 the Marcus brand name, into that unit. And then the 0:03:32.919 --> 0:03:38.160 third is this weirdly named business called platform Solutions, has 0:03:38.240 --> 0:03:42.960 such a mckenzian ring to it, but it is taking 0:03:43.000 --> 0:03:46.560 their you know, the online loans provided that they bought 0:03:46.640 --> 0:03:49.480 last a Green Sky, the credit card partnerships which is 0:03:49.880 --> 0:03:51.840 the ones that they have with Apple in general motors, 0:03:51.840 --> 0:03:54.440 and the transaction banking business, bringing it under one roof 0:03:54.960 --> 0:03:57.280 having it as a standalone business. Think of it somewhat 0:03:57.320 --> 0:03:59.560 like embedded finance, which a lot of people are hot on, 0:04:00.080 --> 0:04:03.840 including McKenzie. Wow, I'm actually closed on this McKenzie conspiracy theory. 0:04:03.880 --> 0:04:06.400 They might have been behind this name. To be clear, 0:04:06.520 --> 0:04:08.160 I do not know for sure. I hear some reporting 0:04:08.160 --> 0:04:10.080 a little bit later on, but it is a standalone 0:04:10.120 --> 0:04:13.880 business and it will be interesting to watch because that 0:04:13.960 --> 0:04:16.320 business will report losses for the first stable future for 0:04:16.400 --> 0:04:19.200 the next quarter or two, or three or four or more. 0:04:19.240 --> 0:04:21.880 Not many Wall Street banks have a standardone division that 0:04:21.960 --> 0:04:24.200 where the pm L. It will be so visible and 0:04:24.240 --> 0:04:27.479 so painful. Goldman's got to hope that investors don't pay 0:04:27.560 --> 0:04:30.400 too much scary attention to it, are willing to cut 0:04:30.440 --> 0:04:33.440 them some slag and actually see the new, new, new 0:04:33.560 --> 0:04:38.039 narrative that they're trying to uh spread and believe in it. 0:04:38.600 --> 0:04:44.119 What prompted this shift a number of things. First off, 0:04:44.440 --> 0:04:47.599 why this shift just in January? You did a massive 0:04:48.480 --> 0:04:51.760 change of the asset management leadership in twenty We just 0:04:51.800 --> 0:04:55.040 talked about all the other changes they made, but the 0:04:55.120 --> 0:04:57.800 mumbling and grumbling outside of Goldman SAX had been clear 0:04:57.880 --> 0:05:01.159 for the better part of the last six months. They 0:05:01.200 --> 0:05:03.880 worried about the situation and asked management group and how 0:05:03.920 --> 0:05:06.600 the new leadership is getting along. They really worried about 0:05:06.640 --> 0:05:09.480 the consumer business, which, as we've reported at mid year, 0:05:09.520 --> 0:05:12.320 they projected would lose a while more than one point 0:05:12.320 --> 0:05:14.560 two billion dollars in a year, in a year when 0:05:14.560 --> 0:05:18.719 the bank's total earnings is expected to drop from the success, 0:05:18.760 --> 0:05:21.800 the fabulous success they had in one that was just 0:05:22.160 --> 0:05:24.960 too harsher. Spotlight on that business, so it was clear 0:05:25.080 --> 0:05:27.000 something had to be done, and it's fair to say 0:05:27.040 --> 0:05:30.360 that the problems with consumer accelerated some of the discussions 0:05:30.360 --> 0:05:33.640 they had about other orcs. If you're bringing back asset 0:05:33.720 --> 0:05:36.520 in wealth management and making this large one unit, you 0:05:36.600 --> 0:05:39.880 probably do the c IB aspect of it. The banking 0:05:39.920 --> 0:05:42.320 and trading combination is something people had been pushing for 0:05:42.600 --> 0:05:45.680 the firm. David Solomon and esteem had been reluctant about 0:05:45.720 --> 0:05:48.799 that because they were more interested in steering investor attention 0:05:48.839 --> 0:05:53.560 towards asset management and consumer, those recurring fee businesses that 0:05:53.640 --> 0:05:57.320 they think investors will appreciate. Now that they've actually made 0:05:57.360 --> 0:06:00.200 this combined banking, Global Banking and Markets Group or has 0:06:00.200 --> 0:06:03.160 it's an acknowledgement that maybe it is fair to shine 0:06:03.200 --> 0:06:06.240 the sport light on their crown jewel, and maybe it 0:06:06.279 --> 0:06:09.039 will give them a boost with investors that we don't 0:06:09.040 --> 0:06:11.159 know yet and that we'll see over the coming months 0:06:11.200 --> 0:06:14.280 and quarters. That was Bloomberg News finance reporter Shrina Irain 0:06:14.560 --> 0:06:16.880 coming up. She worked at Goldman Sachs and is now 0:06:16.960 --> 0:06:19.520 writing about how the division between Wall Street and Main 0:06:19.560 --> 0:06:22.320 Street is growing faster than ever before. We're like in 0:06:22.360 --> 0:06:26.280 the middle of potentially, you know, hue forever um, even 0:06:26.320 --> 0:06:28.240 if books come down by a little bit. And so 0:06:28.400 --> 0:06:30.760 what does that mean? I mean the real economy doesn't 0:06:30.800 --> 0:06:33.960 necessarily get the benefit of financing the same way it 0:06:34.120 --> 0:06:36.200 used to get the benefit of financing in the sixties 0:06:36.240 --> 0:06:38.000 and the seventies and the fifties when we're building roads 0:06:38.000 --> 0:06:42.919 and highways, because it's come second to money being created quickly, 0:06:43.160 --> 0:06:46.560 being leveraged excessively, and flowing into financial assets that are 0:06:46.600 --> 0:06:49.960 quicker to turn around. Economist, journalist, and author Naomi Prince 0:06:50.040 --> 0:06:53.279 joins us next, you're listening to Bloomberg Business Week. This 0:06:53.680 --> 0:07:05.360 is Bloomberg. This is Bloomberg Business this Week with Carol 0:07:05.400 --> 0:07:09.640 Messer and Bloomberg Quick Takes Tim Stinovik from Bloomberg Radio. 0:07:11.000 --> 0:07:13.480 Our next guest spent years working at several iconic Wall 0:07:13.520 --> 0:07:17.000 Street firms. She's a former Goldman Sachs managing director, former 0:07:17.080 --> 0:07:20.160 senior managing director at bear Stearns that was over in London, 0:07:20.400 --> 0:07:22.800 and then before that, she held positions at Lehman Brothers 0:07:22.800 --> 0:07:25.960 and Chase Manhattan Banknomi Prinds is an economist. She's also 0:07:26.000 --> 0:07:29.040 an author and investigative journalist. She's got a new book out, 0:07:29.120 --> 0:07:32.400 it's called Permanent Distortion. How the financial markets abandoned the 0:07:32.400 --> 0:07:35.560 real economy forever. She joined us in studio to discuss 0:07:35.600 --> 0:07:37.840 why she left the world of finance and the fast 0:07:37.840 --> 0:07:40.920 growing gap between Wall Street and Main Street. The real 0:07:40.960 --> 0:07:44.920 economy doesn't necessarily get the benefit of financing the same 0:07:44.960 --> 0:07:47.120 way it used to get the benefit of financing in 0:07:47.160 --> 0:07:48.880 the sixties and the seventies and the fifties when we're 0:07:48.880 --> 0:07:53.160 building roads and highways, because it's come second to money 0:07:53.200 --> 0:07:57.400 being created quickly, being leveraged excessively, and flowing into financial 0:07:57.400 --> 0:07:59.560 assets that are quicker to turn around. So can I 0:07:59.640 --> 0:08:03.200 ask you, I think so the sophistication of markets and 0:08:03.240 --> 0:08:05.840 how we can trade it and slice and dice it, 0:08:05.880 --> 0:08:08.400 is that why you're saying it doesn't. It's just a 0:08:08.440 --> 0:08:12.480 whole different game on Wall Street versus years ago, decades ago, 0:08:12.600 --> 0:08:14.800 when it really was reflective of what was going on 0:08:14.880 --> 0:08:17.680 in the economy. Well, there was certainly more information that 0:08:17.760 --> 0:08:20.280 was coming from the direct economy through companies that were 0:08:20.320 --> 0:08:22.680 involved in creating different components of the economy and being 0:08:22.720 --> 0:08:25.600 more directly related to individuals. And now, of course we 0:08:25.640 --> 0:08:27.960 have much more technology and much more analysis. We also 0:08:28.040 --> 0:08:31.440 far more leverage um, and so we combine the technological 0:08:31.560 --> 0:08:35.120 leverage with the financial leverage, we have this complete disconnect 0:08:35.400 --> 0:08:39.000 between again, money going into the economy and sticking around 0:08:39.080 --> 0:08:42.360 and being used for longer term capital investments and creation 0:08:42.400 --> 0:08:45.000 and all of that relative to I'm here now, I'm there. Now, 0:08:45.040 --> 0:08:48.439 I'm trading on momentum, on trading on technological factors, I'm 0:08:48.480 --> 0:08:51.680 trading on computer science, and I'm not necessarily trading on 0:08:51.800 --> 0:08:55.360 value and the long term view. You said something that 0:08:55.679 --> 0:08:58.320 makes me think about the role that government takes, because 0:08:58.320 --> 0:09:00.640 when you think about big infrastructure projects the nineteen fifties 0:09:00.679 --> 0:09:02.240 and nineteen six does you think about the post World 0:09:02.280 --> 0:09:04.760 War two boom here in the United States, the building 0:09:04.760 --> 0:09:08.400 of Levittown for example, all of these like shovel ready projects. 0:09:08.760 --> 0:09:11.520 That's something that you need to have widespread agreement on 0:09:11.520 --> 0:09:14.280 when it comes to putting that, you know, implementing them. 0:09:14.320 --> 0:09:16.200 We don't have that right now. It's all a joke. 0:09:16.240 --> 0:09:19.160 It's always infrastructure Week right in Washington, and nothing ever 0:09:19.520 --> 0:09:22.760 gets done. Is that a big obstacle to kind of 0:09:22.800 --> 0:09:26.360 getting past where we are the financialization of the economy. 0:09:26.760 --> 0:09:28.480 That's a really good question, and it's true. In the 0:09:28.480 --> 0:09:31.000 fifties and sixties, we had we had a connection in 0:09:31.160 --> 0:09:33.320 politics that related to the connection of what was needed 0:09:33.320 --> 0:09:35.480 to be done in the country, the building of those highways, 0:09:35.480 --> 0:09:38.440 the building of the space program, the building of permanent, 0:09:38.559 --> 0:09:40.679 lasting features. We've been had that in the nineteen thirties. 0:09:40.760 --> 0:09:43.079 Whoever dam was built in the middle of the Great Depression, 0:09:43.360 --> 0:09:45.600 because it was a process that had started and it 0:09:45.720 --> 0:09:48.600 had financing, and it retrieved that financing throughout the all 0:09:48.600 --> 0:09:50.120 the years that it took to build it. So there's 0:09:50.120 --> 0:09:53.560 a lot of longer term thinking and longer term capital 0:09:53.600 --> 0:09:57.400 commitment in those days, not just from the direction of Washington. 0:09:57.920 --> 0:09:59.800 I had that too, but also from the direction of 0:10:00.000 --> 0:10:02.480 of it industry, from Wall Street, from companies throughout the country. 0:10:02.480 --> 0:10:06.280 That there was a collaboration that that has really become disintegrated. 0:10:06.320 --> 0:10:07.960 Now what I want to talk to you is about 0:10:08.000 --> 0:10:12.440 how you made the transition from banking into becoming an 0:10:12.440 --> 0:10:15.560 author an investigative journalist, Like why did you leave the industry? 0:10:15.760 --> 0:10:18.280 Did you run from the industry? Now? Just kidding, um 0:10:18.440 --> 0:10:20.360 nine eleven had two things happened from the industry, right, 0:10:20.400 --> 0:10:22.640 nine eleven happened. I was at Goldman Sachs Corner office 0:10:22.640 --> 0:10:24.960 and twenty floor, the whole, the whole thing UM that 0:10:25.000 --> 0:10:26.959 was going on at the time. And at the time 0:10:27.000 --> 0:10:29.400 also there was a lot of corruption that was happening 0:10:29.400 --> 0:10:30.800 on the corporate side. That was sort of when en 0:10:30.880 --> 0:10:32.600 Ron was breaking, you know, it was in world calm 0:10:32.600 --> 0:10:34.520 was breaking. There was a lot of like tension in 0:10:34.640 --> 0:10:36.880 terms of what the reality of balance sheets were, what 0:10:36.960 --> 0:10:38.760 the role of Wall Street was, and then of course 0:10:38.760 --> 0:10:40.800 what we found it to be UM in all those 0:10:40.840 --> 0:10:42.920 corporate scandals, and I was I was seeing a lot 0:10:42.960 --> 0:10:46.000 of that and getting sort of, you know, very disgusted 0:10:46.040 --> 0:10:47.640 with a lot of that. And then of course eleven 0:10:47.640 --> 0:10:49.679 happens and sort of you know, add one and one, 0:10:49.800 --> 0:10:51.480 get two and two is based on I need to 0:10:51.480 --> 0:10:53.040 go and I need to talk about this stuff, and 0:10:53.040 --> 0:10:55.000 so a lot of them the first writings I did 0:10:55.440 --> 0:10:57.720 UM were about what was going on in terms of 0:10:57.720 --> 0:11:01.240 the corporate scandals, telecom sector, the due SECTORUM in Wall 0:11:01.240 --> 0:11:03.960 Streets connection, and I wound up taking that route into 0:11:04.280 --> 0:11:07.000 my first book, Other People's Money, The Corporate Monky of America, 0:11:07.480 --> 0:11:09.680 which also talked about the internmance of Golden Sacks as 0:11:09.679 --> 0:11:11.600 well as a banking industry and everything that was going 0:11:11.600 --> 0:11:13.200 on there, because I thought at the time nobody was 0:11:13.240 --> 0:11:15.360 talking about it. I mean, at the time, we couldn't 0:11:15.360 --> 0:11:17.240 even talk about being inside wall streets, not like today 0:11:17.240 --> 0:11:19.480 where everybody's talking sort of about everything all the time. 0:11:19.760 --> 0:11:21.480 It wasn't like that. It was. It was very much 0:11:21.559 --> 0:11:24.120 a sort of more secretive sort of situation, and I 0:11:24.600 --> 0:11:26.840 needed to talk about it. So I needed to be 0:11:26.880 --> 0:11:31.199 outside to talk about inside. Nomi Prints, author and investigative journalist. 0:11:31.559 --> 0:11:33.880 Google her because her backgrounds incredible. She's got a new 0:11:33.920 --> 0:11:36.760 book app Permanent Distortion, How the financial markets abandoned the 0:11:36.800 --> 0:11:41.920 real economy forever Permanent Distortion? Why is it permanent? Excellent question. 0:11:42.000 --> 0:11:44.200 It was not taken lightly because I like words as 0:11:44.240 --> 0:11:46.480 well being an author. Um. It's because in the wake 0:11:46.480 --> 0:11:48.559 of the financial crisis, when we went down to zero 0:11:48.559 --> 0:11:51.079 percent interest and and and we created four and a 0:11:51.120 --> 0:11:53.280 half trillion dollars worth of money from nowhere to take 0:11:53.280 --> 0:11:55.640 debt out of the market. At the time, US debt 0:11:55.640 --> 0:11:57.520 in general is nine trillion dollars. Four and a half 0:11:57.559 --> 0:11:59.800 trillion equivalent was on the Fed's books. Some of that 0:11:59.840 --> 0:12:02.880 was mortgages, treasuries, was all connected. Then we had a 0:12:02.880 --> 0:12:05.800 double down situation that happened in twenty So the period 0:12:05.840 --> 0:12:08.120 in between, there was a lot of speculation when will 0:12:08.160 --> 0:12:11.040 the FED rais race, etcetera. They raised in markets where 0:12:11.040 --> 0:12:14.280 we're insanely negative on that whole prospect. They didn't raise 0:12:14.280 --> 0:12:16.440 again until twenty six and then sort of bits along 0:12:16.440 --> 0:12:19.080 the way to turned around in twenty nineteen and to 0:12:19.120 --> 0:12:22.400 twenty nineteen because Wall Street collateral wasn't working between Wall 0:12:22.400 --> 0:12:25.120 Street and its own its own, its own customers, UM, 0:12:25.120 --> 0:12:27.240 the repo markets were falling apart, so the FED turned 0:12:27.280 --> 0:12:30.400 around and created more q E, brought rates down again. 0:12:30.720 --> 0:12:32.960 UM talked about as if it was related to the economy, 0:12:33.000 --> 0:12:35.280 but in fact was related to liquidity on Wall Street, which, 0:12:35.480 --> 0:12:37.240 by the way, when we got into twenty just a 0:12:37.280 --> 0:12:40.520 few months after that and the pandemic hit, that's when 0:12:40.520 --> 0:12:42.840 there was an overdrive factor. And that's when the FED 0:12:42.880 --> 0:12:45.000 went to nine trillion dollars from at the time four 0:12:45.040 --> 0:12:47.160 point one, but effectively doubled in a few months what 0:12:47.280 --> 0:12:48.720 it took a number of years to get to the 0:12:48.760 --> 0:12:51.240 first time. Other central banks around the world following and 0:12:51.240 --> 0:12:54.320 what became just a sort of help which was enormous 0:12:54.360 --> 0:12:58.480 to begin with, became a permanent artificial cushion to the markets. 0:12:58.520 --> 0:13:00.640 And even right now, even with Ray it's coming up 0:13:00.640 --> 0:13:03.200 now and all the speculations the FEDS, you know, totally changing, 0:13:03.240 --> 0:13:05.280 and it's going to be this inflation hawk. Even though 0:13:05.320 --> 0:13:06.920 can't fight a lot of the inflation it says it's 0:13:06.920 --> 0:13:09.600 trying to fight, it doesn't actually change the fact that 0:13:09.679 --> 0:13:12.920 this cushion is underneath all the financial markets. And that's 0:13:12.920 --> 0:13:15.320 why we have days like today where the market basically 0:13:15.360 --> 0:13:18.520 spans the fifteen hundred points and day on the doubt, 0:13:18.559 --> 0:13:21.640 that's not normal, that's not healthy. That's related to the 0:13:21.679 --> 0:13:26.040 speculation versus this permanent idea of this distortion between where 0:13:26.040 --> 0:13:27.560 the money goes to the real economy, how it gets 0:13:27.559 --> 0:13:30.559 to the markets where it stays. It's not a question 0:13:30.600 --> 0:13:33.840 of blaming the FED. It's a question of the FED 0:13:34.000 --> 0:13:37.760 is responsible for creating the cushion. So I blame the cushion. 0:13:37.760 --> 0:13:40.160 The FED created the cushion. So in that respect, yes, 0:13:40.240 --> 0:13:42.160 I do blame the FET. But you have to look 0:13:42.200 --> 0:13:44.400 at the bigger picture, not just not just what is 0:13:44.440 --> 0:13:46.839 the FED doing now with interest rates? That obviously is 0:13:46.880 --> 0:13:49.720 creating uncertainty in the markets, and it's certainly oppressing people 0:13:49.760 --> 0:13:51.880 trying to get mortgages right now, which are twice as 0:13:51.880 --> 0:13:54.240 expensive as they were six months ago. That and that's 0:13:54.240 --> 0:13:56.200 a really quick change. And if you're trying to budget 0:13:56.280 --> 0:13:58.080 and you're the bottom level of your own you know, 0:13:58.120 --> 0:14:00.720 sort of the economy. But this is more about the 0:14:00.760 --> 0:14:02.760 fact that cushion exists. It's not just the FETE, it's 0:14:02.800 --> 0:14:04.679 the Bank of England, it's the European Central Bank is 0:14:04.679 --> 0:14:08.000 a bankage, but it's the global um central bank network 0:14:08.440 --> 0:14:12.160 that has basically created this this outside source of capital 0:14:12.880 --> 0:14:15.520 in order to be there when it deems necessary. And 0:14:15.559 --> 0:14:19.600 that that uncertainty about what's necessary is now what's permeating 0:14:19.600 --> 0:14:22.240 in the markets, and it's a reason why capital can't 0:14:22.240 --> 0:14:24.080 go outside of those markets when they're going up or 0:14:24.080 --> 0:14:26.760 when they're going down, to long term projects into the 0:14:26.760 --> 0:14:29.680 foundational economy to the same extent as before. That was 0:14:29.720 --> 0:14:32.560 former Wall Street or turned investigative journalists know Me Prince 0:14:32.600 --> 0:14:36.080 her latest book, Permanent Distortion, How the financial markets abandoned 0:14:36.080 --> 0:14:38.840 the real economy forever and it's out now still ahead 0:14:38.880 --> 0:14:42.320 on Bloomberg Business Week. Exxonmobile is making more money than 0:14:42.440 --> 0:14:45.520 ever as the energy market stays robust and yet top 0:14:45.560 --> 0:14:48.760 talent is fleeing the company in droves. And exclusive look 0:14:48.760 --> 0:14:51.600 at the deep cultural problems exposed at the one forty 0:14:51.680 --> 0:14:54.240 year old oil giant during the pandemic and where the 0:14:54.280 --> 0:15:01.960 company goes from here. This is Bloomberg Broadcasting from the 0:15:02.000 --> 0:15:05.840 financial capital of the world Bloomberg eleven Frio in New 0:15:05.920 --> 0:15:10.400 York to Washington, d C. Bloomberg to Boston, Bloomberg one 0:15:10.440 --> 0:15:13.560 oh six one to San Francisco, Bloomberg nine sixty to 0:15:13.640 --> 0:15:16.720 the country Sirius xm Chado one nine team, and around 0:15:16.760 --> 0:15:20.920 the globe the Bloomberg Business app and Bloomberg Radio dot Com. 0:15:20.920 --> 0:15:25.360 This is Bloomberg Business Week. Well, the latest issue Bloomberg 0:15:25.360 --> 0:15:28.840 Business Week magazine. You know it is out now on newstands, online, 0:15:28.920 --> 0:15:32.240 and on the Bloomberg terminal. Featured in this special double 0:15:32.320 --> 0:15:36.560 issue is a Bloomberg exclusive about Excen's toxic culture and 0:15:36.560 --> 0:15:39.280 how it's driving away workers who once coveted a career 0:15:39.320 --> 0:15:41.240 at the company. With more on the story, let's bring 0:15:41.240 --> 0:15:44.680 in Bloomberg News US Big Oil reporter Kevin Crowley along 0:15:44.680 --> 0:15:47.000 with the editor of Bloomberg Business Week, Joel Weber, to 0:15:47.040 --> 0:15:50.080 help explain the exodus from the oil giant, you know, 0:15:50.360 --> 0:15:53.880 excellent is built on engineers really and science, and this 0:15:53.960 --> 0:15:57.200 is like a place where one of the few remaining 0:15:57.600 --> 0:16:02.600 companies really in America where a job is really for years, right, 0:16:02.640 --> 0:16:05.960 if not life. But what Kevin was able to report 0:16:06.120 --> 0:16:09.440 is that not only has there been this success, but 0:16:09.600 --> 0:16:13.120 there's a difference with Exxon, which, as Kevin writes, it's 0:16:13.120 --> 0:16:16.840 almost like the culture has been trapped in this amber. So, Kevin, 0:16:16.880 --> 0:16:19.360 you spoke to more than forty people for this article. 0:16:19.480 --> 0:16:22.520 It was a major feat of reporting. Not an easy 0:16:22.560 --> 0:16:24.840 story to get, and I'm curious what did you learn 0:16:24.920 --> 0:16:26.800 along the way. Yes, really, as you said, they've been 0:16:26.800 --> 0:16:29.680 started out really like just just not a great resignation story, 0:16:29.920 --> 0:16:32.520 but really once so once I really started to speak 0:16:32.520 --> 0:16:34.520 to people and dig in, there was there was really 0:16:34.560 --> 0:16:36.840 one common reason why people were quitting, and that was 0:16:36.880 --> 0:16:39.680 this toxic culture. People that were scared too to speak 0:16:39.680 --> 0:16:42.760 against their bosses. They didn't feel comfortable speaking freely about 0:16:42.840 --> 0:16:46.680 climate change or breaking diversity. There was there was a 0:16:46.680 --> 0:16:50.280 real lack of of exchange, of free ideas, lack of innovation. 0:16:50.800 --> 0:16:52.640 There was also a fear of being dropped in the 0:16:52.680 --> 0:16:58.760 company's zero sum performance ranking. System. So what really changed 0:16:58.920 --> 0:17:01.120 was that you know exone would was was, as you said, 0:17:01.240 --> 0:17:04.280 very much, were one of America's last job for life corporations. 0:17:04.280 --> 0:17:06.320 They used to take care of you as a graduate 0:17:06.560 --> 0:17:08.280 all the way through to retirement, so long as you 0:17:08.280 --> 0:17:10.600 were loyal, so long as you worked hard. That all 0:17:10.680 --> 0:17:13.760 change during the pandemic because they decided they were going 0:17:13.800 --> 0:17:16.520 to cut people. They cut people through layoffs that basically 0:17:16.600 --> 0:17:20.399 used the performance evaluation system, and everything just became a 0:17:20.440 --> 0:17:23.920 lot more apped up. And over the last two years, 0:17:24.000 --> 0:17:28.159 really two we've seen huge amounts of employees leaving this 0:17:28.359 --> 0:17:31.440 time of their own position. Okay, so there's a metaphor 0:17:31.480 --> 0:17:33.399 in the story that we got to talk about here, Kevin, 0:17:33.440 --> 0:17:37.800 which is Rex's Tree UM. Rex being Rex Hillerson, who 0:17:37.840 --> 0:17:41.520 is the prior CEO. At that time, the company was 0:17:41.680 --> 0:17:44.520 doing great. It had made forty billion dollars in a 0:17:44.560 --> 0:17:48.040 single year, the biggest profit of any company in u 0:17:48.119 --> 0:17:51.199 S history at the time. UM the company built a 0:17:51.240 --> 0:17:56.040 whole new compound and put a tree, moved a hundred 0:17:56.080 --> 0:17:59.040 foot oak tree that was meant to be sort of 0:17:59.080 --> 0:18:02.040 like Peace Days, the done of good, be honest campus. 0:18:02.600 --> 0:18:06.880 And what happened from there, So they moved. They moved 0:18:06.880 --> 0:18:09.399 the tree. It's a huge feat of engineering to to 0:18:09.560 --> 0:18:12.879 dig up the roots system a hundred foot oak tree, 0:18:13.080 --> 0:18:16.359 to to move it into into the middle of campus. UM. 0:18:16.400 --> 0:18:18.360 It was. It was really a remarkable feat to even 0:18:18.359 --> 0:18:22.119 had its own custom built irrigation system UM to keep it, 0:18:22.160 --> 0:18:25.280 to keep it alive. After the move, and basically over 0:18:25.320 --> 0:18:29.800 the years, the canopy thins. It lost leaves, it lost branches, 0:18:30.000 --> 0:18:33.000 It got hit by lightning at least once UM and 0:18:33.280 --> 0:18:37.040 it really it really started to look worse for for aware. 0:18:37.080 --> 0:18:39.439 The employees started to joke it was a bit like 0:18:39.480 --> 0:18:44.600 the giving tree UM the shelves steel that's Silverstein book. 0:18:44.800 --> 0:18:52.000 And eventually over eventually, over Memorial Day one, the campus 0:18:52.480 --> 0:18:56.280 arborists removed the entire tree and a memo went out 0:18:56.280 --> 0:18:59.239 in the morning saying that despite its outward appearance, it 0:18:59.280 --> 0:19:02.280 was dying. And so take this to the company, right, 0:19:02.320 --> 0:19:04.960 because that tree was supposed to be, you know, a 0:19:05.040 --> 0:19:07.280 symbol if you will, or I think as you write 0:19:07.280 --> 0:19:10.160 the company's reverence for the surrounding landscape and the environment. 0:19:10.600 --> 0:19:14.560 You know, we see big oil companies thinking about life 0:19:14.560 --> 0:19:18.080 after fossil fuels UM and this was, I guess supposed 0:19:18.119 --> 0:19:20.840 to kind of indicate to you know, x On thinking 0:19:20.880 --> 0:19:23.960 about what's next, and yet it's not been the case inside, 0:19:24.000 --> 0:19:27.119 has it. So this is this is a This is 0:19:27.160 --> 0:19:29.560 the biggest issue facing thing eggs On at the moment 0:19:29.720 --> 0:19:33.119 is the energy transition. That oil prices are surging up 0:19:33.119 --> 0:19:35.480 at ninety dollars barrel eggs On. Eggs On made more 0:19:35.480 --> 0:19:38.040 money than it ever did before last quarter. This year 0:19:38.040 --> 0:19:40.639 on track to make more money than Amazon, Tesla, Procter, 0:19:40.720 --> 0:19:43.960 and Gamble combined. However, long term, there is an energy 0:19:43.960 --> 0:19:48.199 transition underway. We just passed the biggest climate bill here 0:19:48.240 --> 0:19:51.000 in the US. Europe is moving much faster towards clean 0:19:51.080 --> 0:19:53.920 energy features results of what's going on with Russia. UM 0:19:53.960 --> 0:19:56.680 and this is this is the issue challenge for Exxon 0:19:56.880 --> 0:19:59.920 and sees really feel this. Employees want ex On to 0:20:00.040 --> 0:20:02.359 push harder. Employees want them to be on the cutting 0:20:02.440 --> 0:20:06.119 edge of new technologies, which they really haven't been. UM 0:20:06.160 --> 0:20:08.720 and employees expect them as an industry leader, to be 0:20:08.760 --> 0:20:11.320 able to build that clean energy future. And this is 0:20:11.320 --> 0:20:14.320 coming from the bottom. And the big challenge should really 0:20:14.359 --> 0:20:16.640 is that if EGSS to dominate the next century as 0:20:16.680 --> 0:20:18.840 it did the last century, it's going to have to 0:20:18.840 --> 0:20:21.400