Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're right here every day bringing you the
Speaker 1: latest news from the world's of business and finance, plus technology, politics, economics,
Speaker 1: all harnessing the power of Business Week reporters and editors,
Speaker 1: and of course Carol that's part of a team of
Speaker 1: twenty seven hundred journalists and analysts more than a hundred
Speaker 1: and twenty countries and Jason. You can download Bloomberg Business
Speaker 1: Week on iTunes, SoundCloud, bl Bloomberg dot com. You can
Speaker 1: also listen to our radio show at two pm Eastern
Speaker 1: on Bloomberg Radio every weekday, or watch us on YouTube
Speaker 1: by searching Bloomberg Global News. Well, Facebook, we already had
Speaker 1: some news this week about the FTC preparing a possible
Speaker 1: antitrust suit against it, according to those in the know. Well,
Speaker 1: this week's cover story happens to be about Facebook and
Speaker 1: how employees of the social media giant really kind of
Speaker 1: fear that it's founder and CEO Mark Zuckerberg and his
Speaker 1: commitment to free speech is more about protecting President Trump
Speaker 1: than the company's ideals. Bloomberg News technology reporter and author
Speaker 1: of No Filter, The Inside Story of Instagram. Sarah Fryer
Speaker 1: joining us on the phone in San Francisco, along with
Speaker 1: Bloomberg business Week editor Jill Webber on the phone in Massachusetts.
Speaker 1: Amazing story and an amazing cover. Thank you so much,
Speaker 1: and do we have I think it's okay, come on in, Sarah. Hey,
Speaker 1: you know, listen, it's a virtual world technology. It's a
Speaker 1: little crazy, So go ahead, Sarah. Takeaway. It is an
Speaker 1: amazing story. I think it's just a compilation of all
Speaker 1: the things that my colleague Kurt Wagner and I have
Speaker 1: been hearing over the past few months and years about
Speaker 1: how Facebook has increasingly been willing to look the other
Speaker 1: way when members of Trump's world break the rules on Facebook.
Speaker 1: And that's not any mistake the company has. Um, you know,
Speaker 1: the Trump administration has leverage over Facebook. They're facing a
Speaker 1: potential regulation and even worse, potential for Trump to blow
Speaker 1: up and create another bad news cycle. But they are
Speaker 1: catering to that power, and employees are quite concerned about
Speaker 1: what that means, as we had into the November election.
Speaker 1: So you know, I think, um, Sarah, the there's a
Speaker 1: lot of stuff in here, and it makes me just
Speaker 1: think about everything that we've kind of observed um about
Speaker 1: politics and Facebook going back to basically team where obviously
Speaker 1: all the concerns were ended up being about sort of
Speaker 1: Russian interference and it's uh and its role on on
Speaker 1: on on manipulating the platform effectively. Um, and that is
Speaker 1: a concern um again, but it's actually it seems like
Speaker 1: the thrust of this might be in sort of the
Speaker 1: Facebook's response to that wasn't necessarily uh to take on
Speaker 1: that stuff. Um. And they've done, I think a pretty
Speaker 1: amazing job of at least recognizing ability to spot some
Speaker 1: of that stuff. But there seems to have been sort
Speaker 1: of a right word drift at Facebook, and and that
Speaker 1: has been um, you know, that's obviously the center of
Speaker 1: the story. Can you talk more about where those concerns
Speaker 1: are rooted in? Right? So, after the Russian election interference,
Speaker 1: remember Russia was was inserting itself into us of polarizing
Speaker 1: topics like immigration, like race, like like feminism. They were
Speaker 1: building groups on on basic using people pretending to be
Speaker 1: Americans who weren't. And what Facebook concluded from that is
Speaker 1: that it wasn't the thing that the fake people were saying.
Speaker 1: The problem was just that they were fakes. So Facebook
Speaker 1: really does not care if people are trying to manipulate
Speaker 1: others on Facebook and spreading um, sometimes at vary incendiary
Speaker 1: fake news. They don't want to take it down. They
Speaker 1: only want to get get their enforcements into gear if
Speaker 1: there are fake people behind it, if they're breaking other rules.
Speaker 1: And what that's done is it's created this environment where
Speaker 1: Trump can really test the limits of these policies. He's
Speaker 1: been spreading a lot of misinformation about how to vote,
Speaker 1: telling people things, um about mail in voting, saying that
Speaker 1: that would lead to fraud. Of course it's not true. Um.
Speaker 1: He has been using Facebook essentially to uh so doubt
Speaker 1: in the potential results of the election. And Facebook has said, well,
Speaker 1: I know we've said that we cared about voting misinformation,
Speaker 1: but we don't think that Trump is breaking our rules
Speaker 1: and we don't want to take down anything from a politician.
Speaker 1: So some with you know, I want to ask Sarah,
Speaker 1: is Mark Zuckerberg courting the president and and what's great
Speaker 1: about your stories? You did some really inside reporting talking
Speaker 1: to employees who have worked at the company and seen,
Speaker 1: you know, some of the policies that they have done
Speaker 1: and and kind of what they've been focusing on but
Speaker 1: is Zuckerberg courting the president. Well, he's not a Trump Republican.
Speaker 1: What he is is interested in power and dominance for Facebook,
Speaker 1: and that requires the support of people in power. And
Speaker 1: that's not just in the US. We've seen this in
Speaker 1: many countries throughout the world. Facebook always helped out the
Speaker 1: government in charge, caters to their concerns and in some cases,
Speaker 1: you know, give them face time with Zuckerberg, lets them
Speaker 1: break rules that they wouldn't let them break if they
Speaker 1: weren't powerful. And what employees are concerned about is that
Speaker 1: this is actually having this unbalanced effect on what Facebook
Speaker 1: users see and how they are learned about the election.
Speaker 1: One example that that we learned for the story is
Speaker 1: that there were a lot of changes to the new
Speaker 1: speed after presidential elections to try to reduce them out
Speaker 1: of incendiary and untrustworthy news because that was one of
Speaker 1: the big problems. Well, Facebook tested the potential outcome of
Speaker 1: an algorithm change, and the policy team reviewed that and thought, well,
Speaker 1: this is this is hurting the traffic more conservative outlets
Speaker 1: too much. We need to tweak this algorithm right and
Speaker 1: and have an equal effect on conservative liberal up outlets
Speaker 1: of where we roll it out to our users. That's
Speaker 1: an example. Yeah, listen, and there are so many examples.
Speaker 1: The reporting on this is just, you know, like you
Speaker 1: always do. Sarah, fantastic it. If anybody miss part of
Speaker 1: this interview, check it out because it will be on
Speaker 1: our feed and we're going to feature it too in
Speaker 1: our weekend show as well. It is the cover story
Speaker 1: of Bluebird Business Week. Sarah Fryar, thank you so much,
Speaker 1: and of course our thanks to Joel Webber, editor of
Speaker 1: the magazine. Check it out. This is Bloomberg Business Week
Speaker 1: with Carol Messer and Jason Kelly on Bloomberg Radio. Well,
Speaker 1: for those of you who have been paying attention, we
Speaker 1: actually kicked off this entire festival with one of the
Speaker 1: co founders. You might have heard of him, Matt Damon.
Speaker 1: Now we're going to turn to the folks who were
Speaker 1: doing some of the most important work in the world
Speaker 1: when it comes to water. We're talking about, of course,
Speaker 1: the CEO and co founder of water dot org, Gary White,
Speaker 1: and the president of water dot Org, Jennifer Shorsh. Guys,
Speaker 1: thank you so much for joining me. All right, thanks
Speaker 1: to be here. Good to your Jason. So Gary, I
Speaker 1: want to start with you, you know, tell me about
Speaker 1: the organization at this moment, because we are in a
Speaker 1: global pandemic. I don't need to remind anybody about that,
Speaker 1: but I do wonder how it has changed your work.
Speaker 1: That is the top headline every day. It feels like, well,
Speaker 1: it had had a tremendous impact on our work. And
Speaker 1: what what I see is it calls much more for
Speaker 1: us to pay attention to water and sanitation, particularly for
Speaker 1: the global community. One of the first things that we
Speaker 1: heard when this pandemic struck is like, you should wash
Speaker 1: your hands vigorously, and you should wash them often. And
Speaker 1: in the United States, and we have that ability without
Speaker 1: a thought having to be able to do that, but
Speaker 1: when you think about people around the world, more than
Speaker 1: two billion people who don't have access to safely manage
Speaker 1: water and sanitation, that simple act is a huge hurdle
Speaker 1: every day. So we can see how the pandemic is
Speaker 1: exacerbated in those types of environments. And as we know,
Speaker 1: this pandemic doesn't know any national borders, and so it's
Speaker 1: easy to see how that can can spread from one
Speaker 1: poor person living uh, you know, in the slum uh
Speaker 1: in Mumbai to somebody in New York and it is
Speaker 1: all interconnected. And I think the thing about water, sanitation, water,
Speaker 1: and particularly as we will see today, it's completely interconnected
Speaker 1: with climate. And when we talk about some of the
Speaker 1: world's most vulnerable populations and climate, what they're gonna see
Speaker 1: is this lack of security. As we get more flooding
Speaker 1: and more drought, it forces people who are already living
Speaker 1: on the margins, who might have access continuous access now
Speaker 1: to these services, to completely lose that and backslide. Well, Jennifer,
Speaker 1: let's get right to the heart of that, because Gary
Speaker 1: teed it up for us beautifully. Let's talk about that intersection.
Speaker 1: Because I have to confess, as I started to really
Speaker 1: dig into this, I was blown away by the connection
Speaker 1: and the urgency of this from a climate perspective that
Speaker 1: I don't think I fully appreciated. So help us understand,
Speaker 1: because you guys have done some amazing recent work that
Speaker 1: really crystallizes, as I say, this inter section of climate
Speaker 1: and water crises. Yeah. Thanks, Jason um you you struck
Speaker 1: upon a really important concept, which is the urgency of it.
Speaker 1: Like climate change, I think people really might think of
Speaker 1: this as an issue of tomorrow, but the water crisis
Speaker 1: is an issue of today. Um a third of the
Speaker 1: world's population lives in water stressed areas right now. We
Speaker 1: talked about COVID. Three billion people cannot wash their hands
Speaker 1: at home in the midst of a pandemic, and every
Speaker 1: morning women and girls around the world wake up and
Speaker 1: collectively spend two hundred million hours simply trying to provide
Speaker 1: for the needs of their family in water. And so
Speaker 1: it's and and on. Gary mentioned sanitation. That's more than
Speaker 1: twice the issue of water. So it's an issue right now,
Speaker 1: and is it? It is an issue that has real
Speaker 1: human costs and real economic costs. And as climate progresses,
Speaker 1: the water crisis will only get worse. And so let's
Speaker 1: talk a little bit more about that and how it manifests, Gary,
Speaker 1: because there are a number of different ways, some obvious,
Speaker 1: some not so obvious, where the changing climate is inextricably
Speaker 1: tied uh to the water crisis. One of them, sort
Speaker 1: of going the other way in terms of trying to
Speaker 1: get water to people, is that it's sometimes, just to
Speaker 1: put it very simply, isn't always good for the earth?
Speaker 1: M hm. Well, I think when we talk about water
Speaker 1: scarcity and how we allocate the water resources that we
Speaker 1: do have. It's important to keep in mind that you know, uh,
Speaker 1: only about ten percent of the water that we consume
Speaker 1: goes towards human needs, if you will, so household level
Speaker 1: water and sanitation. And then we especially look at those
Speaker 1: two billion people there there are folks that aren't showing up,
Speaker 1: you know, for water with you know, drinking it through
Speaker 1: a fire hose. They're coming with a straw, right. People
Speaker 1: living in poverty are certainly by if we get them
Speaker 1: access there certainly are not going to exacerbate this csis.
Speaker 1: There's many ways that we can do that while still
Speaker 1: conserving the water resources. And I think what when we
Speaker 1: see water and climate come together, we do see it
Speaker 1: in terms of adaptation. How are we going to ensure
Speaker 1: the resilience of the populations that are on the margins
Speaker 1: right now in the context of water access, And that's important.
Speaker 1: It's kind of the least among us who are going
Speaker 1: to be affected. First, we know that as drought strikes
Speaker 1: and water scarcity hits that we're going to have people
Speaker 1: that need to migrate, We're going to have climate refuge
Speaker 1: refugees because of their water supply. But on the other side,
Speaker 1: just to take it a little bit more in a
Speaker 1: different direction. It's interesting to hear Bill Gates talking about
Speaker 1: some of the carbon issues and like cement and things
Speaker 1: like that. I think one thing that people don't realize
Speaker 1: is how much carbon is embedded in water. So if
Speaker 1: we look at solving this crisis from a mitigation perspective
Speaker 1: for carbon and climate, that's important to to real eyes
Speaker 1: as well. We don't realize, for instance, of all the
Speaker 1: electricity consumed in California goes towards sourcing and moving and
Speaker 1: treating and distributing water that comes into people's homes. We
Speaker 1: don't recognize that. Globally, we have utilities that lose half
Speaker 1: of all that water that's treated because of leaky pipes
Speaker 1: and poor infrastructure. If we could just save of that,
Speaker 1: that's the equivalent between If we could save of those losses,
Speaker 1: that would be like taking two hundred and eleven million
Speaker 1: cars off the road for a year in the United States.
Speaker 1: So we uh, we need to get tuned into more
Speaker 1: how much this whole water supply system and infrastructure and
Speaker 1: the shortcomings in it cause us to to use more
Speaker 1: carving than we need to deliver the water. That's so important, Jennifer,
Speaker 1: I want to take it into a slightly different direction
Speaker 1: and stay a little bit domestic here, because one of
Speaker 1: the things that we've talked a lot about in this
Speaker 1: current crisis is where people live, how they live the
Speaker 1: disproportionate impact as we've been talking about of the pandemic.
Speaker 1: When we think about the climate, one of the things
Speaker 1: we know is that are rising sea levels are going
Speaker 1: to affect where we live. Water is going to play
Speaker 1: a detrimental role to some extent in that. How does
Speaker 1: your work sort of figure into that and how do
Speaker 1: you think about water in that context? Sure? Um so,
Speaker 1: if if we think about the water issue, we we
Speaker 1: really want to focus on the quality, the quantity of it,
Speaker 1: how much is available for use, the quality of the water,
Speaker 1: and then the accessibility of the water. And as we mentioned,
Speaker 1: we are really looking at those who are disproportionately affected
Speaker 1: by this. It was interesting hearing Bill talk about vaccines
Speaker 1: because like many things, the impact of the water crisis
Speaker 1: is disproportionately borne on the shoulders of people living in poverty.
Speaker 1: And so we are focused on the access element of
Speaker 1: water and sanitation and what I like to call the
Speaker 1: humanity of water. Um as Gary reference corporations, industrial and
Speaker 1: agricultural uses of the freshwater supply. About two thirds of
Speaker 1: the freshwater supply is used for its estimated the supply
Speaker 1: chain and the provisioning of products. So we have to
Speaker 1: have corporations participate in this, and we have to address
Speaker 1: not only stewardship, quality, health, and the quantity of water available,
Speaker 1: but also the access the accessibility of it. So our
Speaker 1: work is singularly focused on ensuring that those living in poverty,
Speaker 1: the two billion people who live without every day, have
Speaker 1: access to save water and sanitation, and that's what we
Speaker 1: bring to the table. The lens that we bring is different.
Speaker 1: We approached this through affordable finance, so it's really about
Speaker 1: removing the barriers that exist for those individuals ving in
Speaker 1: poverty and doing it by creating a system, wrapping a
Speaker 1: system around them that starts with an affordable loan to
Speaker 1: allow them to hook up to the water system that
Speaker 1: runs right under their feet. They just don't have the
Speaker 1: savings to connect to that or to build a toilet
Speaker 1: in their home. So we focus on that individual living
Speaker 1: in poverty. We enable often her to get access to
Speaker 1: um to alone to get that water connection. And what
Speaker 1: we're seeing is that there is a market that is
Speaker 1: playing out more than six million loans enabled. Thirty million
Speaker 1: people now have access to water and sanitation, and they're
Speaker 1: doing it through um saving their time and saving their resources.
Speaker 1: And that has created a commercial lending portfolio of two
Speaker 1: point four billion dollars which is put in the hands
Speaker 1: of people living on less than six dollars a day.
Speaker 1: So Gary talked about that a little bit more and
Speaker 1: and the growth of that and how that finance peace
Speaker 1: is essentially enabled. Because this is right in the Bloomberg
Speaker 1: sweet spot, I have to say, in terms of our
Speaker 1: audience and and sort of understanding the underpinnings financially. Yeah,
Speaker 1: and I think what's exciting about this is that there
Speaker 1: is a solution. And in many ways, this problem of
Speaker 1: helping people in poverty get access contains its own solution.
Speaker 1: And as Jennifer was mentioning, we worked through getting access
Speaker 1: to micro loans to people living in poverty and just
Speaker 1: real quickly how that how that works. Uh. There was
Speaker 1: a woman I met recently in the Philippines. Her name
Speaker 1: was Lenadiza, and she was paying a water vendor, someone
Speaker 1: who sold you know, dubious quality water in her neighborhood. Uh,
Speaker 1: you know about thirty dollars every month to bring water
Speaker 1: to her home. Uh and what I'm sorry she was
Speaker 1: saying about sixty dollars. And then so what we saw
Speaker 1: was the opportunity for her to connect to this utility,
Speaker 1: but she didn't have the upfront money to do you that.
Speaker 1: So through our program, she was able to get a
Speaker 1: small loan and able to capture those savings. So now
Speaker 1: she's paying about ten dollars a month for her water
Speaker 1: bill and for her loan combined, so she's able to
Speaker 1: save fifty dollars and so every month that's money that's
Speaker 1: back in her pocket. So that's how this this system
Speaker 1: can work, and it is about trying to bring the
Speaker 1: global capital markets to bear on this. So we work
Speaker 1: with local microfinance institutions to to bring that capital into
Speaker 1: the system so people like Lesa can get those loans.
Speaker 1: And as this is evolved, we've realized that we can
Speaker 1: actually see new ways and looking at social impact investing
Speaker 1: for instance, to drive more capital into the system so
Speaker 1: that these loans can be scaled up. And water dot
Speaker 1: org was actually able to create and stand up and
Speaker 1: spin off a new entity water equity that brings the
Speaker 1: capital markets to bear giving an investors in attractive rate
Speaker 1: of return so that we can then scale up these
Speaker 1: these small loans and then expand to micro enterprises that
Speaker 1: serve the poor as well as as utilities. And that's
Speaker 1: what we can offer accredited investors who want to learn more,
Speaker 1: they can invest in this with that type of vehicle.
Speaker 1: But also we need that philanthropic capital that sets all
Speaker 1: this in motion to do those things that Jennifer was
Speaker 1: talking about to correct those market failures, and that's what
Speaker 1: we're trying to do, use this these innovations to show that,
Speaker 1: you know, people living in poverty are actually not necessarily
Speaker 1: a problem to be solved, but a market to be served.
Speaker 1: So I love that um because I am engaging every
Speaker 1: day with a whole lot of capitalists who are seeing
Speaker 1: increasingly it feels like Gary this opportunity, this investment opportunity
Speaker 1: in also doing good. Was there an inflection point where
Speaker 1: this became possible the Water Equity Fund? Was it because
Speaker 1: of the appetite growing or was it because the model
Speaker 1: didn't exist before? What was the key moment in getting
Speaker 1: that stood up? I think that the key moment was
Speaker 1: when we were working with some of our local partners
Speaker 1: around the world, and we asked them what's preventing them
Speaker 1: from scaling up these loan portfolios much more, and it
Speaker 1: was an answer of, you know, access to safe I'm sorry,
Speaker 1: access to affordable and consistent capital. And at the same time,
Speaker 1: you know, uh, you know, Matt, Actually Matt and I
Speaker 1: were in the jeep driving around India when we were
Speaker 1: talking to our partners about this, and that's where we
Speaker 1: kind of hatched this idea of bringing the capital markets
Speaker 1: in through social impact investing. So it's kind of a
Speaker 1: perfect storm, right. We saw this incredible demand and you know,
Speaker 1: we see about an eighteen billion dollar demand for these
Speaker 1: small loans among people living in poverty that could serve
Speaker 1: about eight hundred million people. And we saw that demand
Speaker 1: bubbling from the bottom up in the form of our
Speaker 1: partner saying we need more capital to get out more
Speaker 1: loans from more water connections and more toilets. At the
Speaker 1: same time, we saw social impact investing really starting to
Speaker 1: come into its own and so we were able to
Speaker 1: create Water Equity. Is really this the first asset manager
Speaker 1: that's focused exclusively on solving this crisis to be able
Speaker 1: to bring in those accredited investors. Match that with people
Speaker 1: at the household level to get the loans from that
Speaker 1: capital and provide that attractive rate of return to investors
Speaker 1: while still helping people get water. So, Jennifer, let's talk
Speaker 1: a little bit more about the philanthropic side than especially
Speaker 1: in this time of crisis where there are so many
Speaker 1: people in need, so many organizations. We talked about this
Speaker 1: at the top of the conversation. How are you seeing
Speaker 1: the philanthropic side both from an individual and a corporate perspective. Yeah,
Speaker 1: I mean, the philanthropic environment right now is interesting. What
Speaker 1: we see is that philanthropists are stepping up in a
Speaker 1: in a way that has been unprecedented in some ways.
Speaker 1: What we're seeing is that a lot of those funds
Speaker 1: are going towards relief, immediate relief, um and the important
Speaker 1: issues of racial justice and so what what we are
Speaker 1: seeing is that now more than ever, we need to
Speaker 1: accelerate progress against against water and sanitation. It is the
Speaker 1: first and the second line defense against pandemic and frankly,
Speaker 1: the philanthropic environment for water and sanitation is challenging. So
Speaker 1: what we are trying to do is help folks think
Speaker 1: about this as building global resilience that we need to
Speaker 1: invest in water and sanitation. At water dot org, we
Speaker 1: need people to come and visit, whether you can give
Speaker 1: ten dollars or a million dollars to donate to water
Speaker 1: dot org to accelerate COVID. We've identified more than twenty
Speaker 1: five million projects that we want to accelerate to redouble
Speaker 1: our efforts in the light of COVID. But frankly, Jason,
Speaker 1: it is a challenge environment for us, given that so
Speaker 1: much is going against immediate relief. And if I could
Speaker 1: just say one other thing about the stakeholders that need
Speaker 1: to participate in this issue. Um as they referenced earlier
Speaker 1: corporations and their use of water. We need corporations to
Speaker 1: step up. We are fortunate to work with dozens of
Speaker 1: corporations and corporate foundations in fulfilling their water and stewardship needs.
Speaker 1: And what we want to see and what we're starting
Speaker 1: to see through things like the Water Resilience Coalition, is
Speaker 1: these corporations not only make elevating their ambitions, but accelerating
Speaker 1: their actions. And we want to partner with those corporations
Speaker 1: we at water dot org and use their philanthropy and
Speaker 1: that of philanthropists catalytically to create this system that wraps
Speaker 1: around that woman living in poverty and create sustainable solution. Well, Gary,
Speaker 1: there's certainly. I mean one of the things that I
Speaker 1: think is so appealing about this is you have a
Speaker 1: clarity of purpose and both of you have talked about it,
Speaker 1: uh so well, and it is a it's so fundamental
Speaker 1: to to what we're what we're all striving for. Here
Speaker 1: as we wrap up, I mean, what gives you in
Speaker 1: the in the uh, in the sense of maybe ending
Speaker 1: with some optimism, What does make you optimistic? What gives
Speaker 1: you a sense of hope at a time when man,
Speaker 1: we're looking for some I think what gives me hope
Speaker 1: is that the power of the people that we're trying
Speaker 1: to help get access to safe water and sanitation. I mean,
Speaker 1: there they are the ones who understand the value in that,
Speaker 1: and they're the ones who are willing to invest in
Speaker 1: helping create that value for their family, whether that's their
Speaker 1: daughter now being able to go to school because she's
Speaker 1: not carrying water, or because they're saving on medicine because
Speaker 1: they're not sick all the time. And that's what drives
Speaker 1: is there the center of this work. This is why
Speaker 1: the market can work because right now connecting people like
Speaker 1: that to the capital markets. It's a broken system and
Speaker 1: that's why we exist with our philanthropy capital to kind
Speaker 1: of help correct that failure. And you know, we've been
Speaker 1: doing this for thirty years and we developed a lot
Speaker 1: of different insights into this, into how we can do it,
Speaker 1: and we can do more of it. I think Jennifer mentioned,
Speaker 1: you know, we have twenty million dollars worth of projects
Speaker 1: and initiatives that are ready and waiting to go so
Speaker 1: that we can scale this up further. And so to me,
Speaker 1: what we've done is like become this innovation engine in
Speaker 1: this market, helping people understand that it is there, and
Speaker 1: then finding these different tools, whether it be philanthropy to
Speaker 1: scale this up and create new solutions, whether it be
Speaker 1: helping corporations pursue their e s G scores and drive
Speaker 1: those up because they are looking at their social license
Speaker 1: to operate with respect to water for these communities where
Speaker 1: we work, or whether it's impact investing and looking to
Speaker 1: accredited investors to come in and deploy their capital in
Speaker 1: a way in a way that gets them that financial
Speaker 1: return that they need also then serves those need needing water.
Speaker 1: In particular, Foundations right now, as we look towards foundations
Speaker 1: investing in mission related investments and these types of things,
Speaker 1: we can deliver that type of impact. We can solve
Speaker 1: this global water crisis. We can do it from the
Speaker 1: bottom up with the people who are impacted by it,
Speaker 1: and from the top down with the people who can
Speaker 1: bring the capital. All right, Well, a really interesting discussion.
Speaker 1: I learned a ton. I know that our audience did
Speaker 1: as well. As I said. This is a core issue
Speaker 1: for us as humans. It's a core issue as it
Speaker 1: relates to the environment, a core issue as it relates
Speaker 1: to as we all figure out where we go from here.
Speaker 1: My thanks to Gary White, the CEO and co founder
Speaker 1: of water dot org, and as well to Jennifer Sure
Speaker 1: she is the president of water dot Org. They joined
Speaker 1: me from their respective locals, Kansas City and Seattle, respectively.
Speaker 1: This is Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. All right, let's talk a little
Speaker 1: bit about economics with one of our favorite economists. He's
Speaker 1: the chief economist at lending Tree, Tinda kept Feezy. He
Speaker 1: joins on the phone from New York City today. Have
Speaker 1: you been what's going on doing good. Guys, how are
Speaker 1: you hi? We're doing all right. It's kind of a
Speaker 1: funky week, as they all are. The week I think
Speaker 1: working from home although I'm in the studio, Carol's at home.
Speaker 1: I'm guessing you're at home still. So what is this
Speaker 1: economy telling us right now? What data are you looking at?
Speaker 1: You have access through lending Tree too. I feel like
Speaker 1: a trove of data that many people don't. Um, yeah,
Speaker 1: we do have a lot of data today though. I'm
Speaker 1: looking at the housing starts, which is a piece of
Speaker 1: data that the senseless bureau puts out and how he starts.
Speaker 1: They actually felt in August five month of the month, uh,
Speaker 1: and the decline was driven by the multifamily housing, but
Speaker 1: single family houses were actually up. My whole family was
Speaker 1: down twenty month of a month, a pretty big drop,
Speaker 1: which I think reflect changing preferences amongst home buyers and
Speaker 1: rents as well. So what does that tell you about
Speaker 1: kind of where we are in this cycle, this economic cycle?
Speaker 1: Because I think we know the hit was hard. We
Speaker 1: know initially there was a big bounce back and then
Speaker 1: now we're just kind of depending on the statistic you
Speaker 1: look at trending water trending water too. I'm sorry, Jason,
Speaker 1: I think it's just your trending water. Water. Water is trending,
Speaker 1: but trending water is what I meant to say. So
Speaker 1: are we treading water tonight? Um? I think we certainly are.
Speaker 1: In terms of the other sectors of the economy, right
Speaker 1: the housing sector is actually a big positive upside surprise,
Speaker 1: and that's largely because of interest rates. But if you
Speaker 1: look at something like we sale sales, which came out yesterday, uh,
Speaker 1: it shows that, you know, after kind of initial recovery
Speaker 1: of some of the decline, we're really moving sideways. So
Speaker 1: we're you know, we're only making back uh maybe half
Speaker 1: of the decline that we saw from COVID, and you
Speaker 1: know that leaves the economy in a very deep hole.
Speaker 1: What does that mean? What does it mean that one
Speaker 1: like you know, we Jason I kind of laugh a
Speaker 1: little bit, but we don't mean to laugh. Um. But
Speaker 1: about you know, the lack of visibility from companies and
Speaker 1: CEOs when they report their earnings are like, yep, we
Speaker 1: don't have visibility still fore, but you know, we know
Speaker 1: they have to make decisions. We know some of them
Speaker 1: are making decisions like letting go workers, so they must
Speaker 1: have some kind of visibility about what the world looks like. Yeah,
Speaker 1: I'm actually very worried about because, you know, really the
Speaker 1: way to get back the economy is to solve the
Speaker 1: health crisis. And it's not clear right that we're gonna
Speaker 1: get a vaccine right. I used to work a spiser
Speaker 1: before my current job, and vaccines are not easy to make, uh,
Speaker 1: you know. Fives. Then a lot of other companies are
Speaker 1: working very hard to try and figure this out, but
Speaker 1: it's not a given that they will. And then from
Speaker 1: the economy perspective, what we've seen in is that a
Speaker 1: lot of companies have made pledges right to the employees
Speaker 1: that we're not doing COVID layoffs. A lot of big
Speaker 1: companies have done this. I think in one when these
Speaker 1: pledges end, we're going to have another round of job
Speaker 1: losses if the economy hasn't truly come back. And that's
Speaker 1: a big concern I think for next year. And so
Speaker 1: when you listen to what J. Powell said yesterday and
Speaker 1: I you look at the publicly available data, you look
Speaker 1: at your data that you guys are able to get
Speaker 1: through lending tree, is there, what's the what's the signal
Speaker 1: in the noise, I guess, I mean, what is the
Speaker 1: thing that we need to be focused on even in
Speaker 1: the next thirty to sixty days as we think about, say,
Speaker 1: the elections, everything is noise except if they come up
Speaker 1: with some vaccine or you know, some way to mitigate
Speaker 1: the health risk. Everything else, I think is is noise.
Speaker 1: And you can't really solve for anything without solving for
Speaker 1: the health problems. What about the a big you know,
Speaker 1: aid package from government. Does that do it? Yeah? It
Speaker 1: does it for a while. Right, we saw that earlier
Speaker 1: this year. Really what you know kind of sustained or
Speaker 1: prevented the decline from being greater was this huge stimulus package,
Speaker 1: which the idea was to you know, build a bridge
Speaker 1: the other side and hopefully would have had some solutions
Speaker 1: to the health crisis. Unfortunately, we didn't really build that bridge.
Speaker 1: We didn't really solve for the health issues. So again, uh,
Speaker 1: you know, you can do all kinds of things, you know,
Speaker 1: power can do all kinds of things, but really you
Speaker 1: have to solve the root problem in order for any
Speaker 1: of these other actions to have their maximum impact. All right,
Speaker 1: Tinda Fez, thank you so much, Chief Economists for a
Speaker 1: lending treat joining us on the phone from New York City.
Speaker 1: And that's interesting to hear him say basically, nothing matters
Speaker 1: except a vaccine. I'm roc a journal. But you let
Speaker 1: me drive. Oh no, no, no no, no, honey, please, I'll
Speaker 1: do the riding revels. I want to drive, Just drive, baby,
Speaker 1: good questions trying. This is the Drive to the Globe Commune.
Speaker 1: Thanks well, run on Bloomberg Radio. It is time for
Speaker 1: the Drive to the close. We're both so excited to
Speaker 1: welcome back Cold Smead, President and portfolio manager of Smeet
Speaker 1: cap At Management, joining us on the phone from Phoenix, Arizona. Cole,
Speaker 1: How are you? How are things out in Arizona? Thanks?
Speaker 1: Are actually pretty normal on here. It's it's, uh, it's
Speaker 1: a pretty strange world where people go to lunch and
Speaker 1: do business meetings and you go out to dinner in
Speaker 1: the evening and uh, you live life pretty normally, which
Speaker 1: is kind of the shock too right now. So not
Speaker 1: where it was, that's for sure, Yeah, no question, it's
Speaker 1: so it's on outside. It's we couldn't feel more blessed. Yeah,
Speaker 1: that's pretty Uh, that's pretty incredible because we feel I
Speaker 1: think I can speak for a lot of people here
Speaker 1: in the Tri State area where still very much on lockdown.
Speaker 1: I mean, I'm looking even across our barely occupied office
Speaker 1: and seeing, you know, the folks who are moving around
Speaker 1: wearing masks, and you know, moving around New York City
Speaker 1: a little bit over the past few weeks. Not a
Speaker 1: lot of um, not a lot of people out and about.
Speaker 1: Still it's getting better, um, but it is. It is
Speaker 1: sort of interesting. And you know, we talked with an
Speaker 1: economist earlier, Cole, who was basically saying that from an
Speaker 1: economic perspective, nothing is close to normal until there's a vaccine.
Speaker 1: I think we can we could dissect that a little bit.
Speaker 1: But I would ask you, from a market's perspective, how
Speaker 1: does an investor look at sort of this underlying pandemic
Speaker 1: and how to think about it as you look at
Speaker 1: a portfolio. Well, it's like great question, and I will uh,
Speaker 1: I will cheat and copy and paste straight from Sir
Speaker 1: John Templeton. He would say that people often ask me,
Speaker 1: you know, what looks the best, and he said, that's
Speaker 1: not the right question to ask you. Could you should
Speaker 1: be asking where things look the worst? And that's what
Speaker 1: he was interested as an investor, So to your point.
Speaker 1: For the economists to say that, I love that because
Speaker 1: obviously they're great predictors of everything and nothing at the
Speaker 1: same time. So so that is a picture that people
Speaker 1: have in their mind right now that nothing will be
Speaker 1: normal until a vaccine, okay, which means that security prices
Speaker 1: are completely miss allocated up until then, or until the
Speaker 1: market gets a better sense of then. Um. You know,
Speaker 1: people always talk about the wisdom of the crowds. Markets
Speaker 1: tend to sniff out things better. By the time the
Speaker 1: market sniff sniffs out the change that the economists was
Speaker 1: referring to, a lot of the security opportunities could be
Speaker 1: gone in things like oil, malls, et cetera that are
Speaker 1: incredibly depressed at this point. So it's the value guys saying, hey, folks,
Speaker 1: there's some great deals out there, correct, Because well Dave
Speaker 1: Dave Wilson, who does our Chart of the Day earlier,
Speaker 1: came on specifically looking at value stocks, and you know,
Speaker 1: those relatively cheap names are more out of favor with
Speaker 1: investors in developed markets, and they have been in almost
Speaker 1: four decades. But you know, having said that, cold, to
Speaker 1: be fair, they can get even cheaper from here. Well
Speaker 1: they can, but my gut instinct says that two weeks
Speaker 1: ago this thing ended. Just see, you guys are aware, okay,
Speaker 1: and I'm just telling you out of watching and experience. Um,
Speaker 1: there was a half a trillion dollars being wagered on
Speaker 1: UH options tied to small retail traders the four weeks
Speaker 1: that ended last week. And just to give you guys
Speaker 1: a sense, that was that was five times as large
Speaker 1: as what we saw in the late ninet So you
Speaker 1: can see all the elements of a speculative euphoria. You know,
Speaker 1: John Kenneth Galberth probably did the best writing on that
Speaker 1: subject matter. And what I love about it is, I'm
Speaker 1: thirty six. For my generation, this is really the first
Speaker 1: time that people have tried to figure out ways to
Speaker 1: take speculative risk in the stock market. They've done it
Speaker 1: to the highest degree of speculative risk. And like Rich Bernstein,
Speaker 1: the famous former meryal strategists, would say, they're not just
Speaker 1: gonna with lower returns. They will actually be poorer coming
Speaker 1: out of this, which is most people's experience in common
Speaker 1: stock investing. They never have success, they wake up poorer,
Speaker 1: and these episodes is what causes that to happen. Where
Speaker 1: do you think investors are making mistakes specifically, Uh, well,
Speaker 1: just as a picture. Your colleague John Authors wrote a
Speaker 1: great piece on Monday, and he was comparing I think
Speaker 1: that it was a foot see to Apple. Okay, and
Speaker 1: he noted that Apple had passed up the market cap
Speaker 1: size of the foot. Well, what's interesting about it, he
Speaker 1: commented on, Let's just say the capex He pointed out
Speaker 1: the foots he does a hundred eight billion of CAPEX
Speaker 1: versus eight billion dollars of CAPEX and Apple. Okay, do
Speaker 1: you actually take the R and D and add that
Speaker 1: back to those numbers and say, okay, let's just say
Speaker 1: CAPEX and R and D is going to be something
Speaker 1: that kind of decides how sustainable a business model is
Speaker 1: in profitability. Well, the foots he's doing about five fold
Speaker 1: of CAPEX, R and D relative to Apple. So all
Speaker 1: things equal, you'd say, well, probably the company that's reinvesting
Speaker 1: the most would be able to sustain the best. But
Speaker 1: then if you add security prices into that, you'll find that,
Speaker 1: well that's not really true. Right, one is doing one
Speaker 1: fifth the other and has the same market cap. So
Speaker 1: that just highlights how screwed up the allocation of money
Speaker 1: is right now. Now, does that mean that Apple hasn't
Speaker 1: had a lot of success and isn't a great business. No,
Speaker 1: that that's not what it says. It just means the
Speaker 1: capitalization of that is ruining the future returns for investors.
Speaker 1: And we've done we've done, I think in the piece
Speaker 1: we'd share with you guys, we've done some work looking
Speaker 1: at the ten biggest market cups since nineteen eight each decade,
Speaker 1: and you know, IBM had the same thing in it
Speaker 1: was still the biggest company. What did it do? It
Speaker 1: underperformed the market for ten years to still stay the
Speaker 1: biggest company. That's the rule. Did you say IBM? Would
Speaker 1: you really put IBM on Facebook? Uh? In the same category.
Speaker 1: They called it big Blue for a reason. It was
Speaker 1: a small g god in the stock market. And by
Speaker 1: the way, g have the same phenomena at one point too.
Speaker 1: So I say that because um it. Once again, it's
Speaker 1: not the question of whether you know these businesses. I'll
Speaker 1: give example. I think the biggest problem in the market
Speaker 1: is Microsoft, not because it isn't a great business and
Speaker 1: it's not a great not that it's not a great
Speaker 1: American company, it's that that seems so safe to say, oh,
Speaker 1: look at these two great businesses in office and the
Speaker 1: operating system, and then what hosting could be. They feel
Speaker 1: so safe, and yet if people wake up finding out
Speaker 1: that's forty times earnings, will never fulfill their wildest dreams
Speaker 1: and they can actually lose money with the best businesses
Speaker 1: in the world, that will destroy common stock trust. And
Speaker 1: that's why people will do what they do. They use
Speaker 1: survivorship bias. They look at these things and say, oh,
Speaker 1: they're the survivors. They performance chase. They wake up two
Speaker 1: years later getting punished, and that is why I'll have
Speaker 1: a job in ten or twenty years. Here you go,
Speaker 1: and you're a young man as you confidence. Great Cole,
Speaker 1: love catching up with you. Really great cold Smead of course,
Speaker 1: the president portfolio manager at Smeat Capital Management. Johnny's on
Speaker 1: the phone from apparently pretty normal Phoenix, Arizona. Good to
Speaker 1: hear that things are going well out there. Thanks so
Speaker 1: much for listening to Bloomberg Business Week. Download the podcast
Speaker 1: on iTunes, South Cloud, Blomberg dot com, but wherever you
Speaker 1: get your podcasts, and of course you can always listen
Speaker 1: to our radio show at two pm Eastern on Bloomberg
Speaker 1: Radio or watch us on YouTube by searching Bloomberg Global
Speaker 1: News