1 00:00:05,800 --> 00:00:08,720 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 2 00:00:08,760 --> 00:00:11,520 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,640 --> 00:00:15,120 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:15,200 --> 00:00:17,840 Speaker 1: you and your money, whether you're at the grocery store 5 00:00:17,960 --> 00:00:20,720 Speaker 1: or the trading floor. Find the Bloomberg p m L 6 00:00:20,840 --> 00:00:33,120 Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Joining us, 7 00:00:33,200 --> 00:00:36,360 Speaker 1: of course, is Chris Ailman. He is our co host 8 00:00:36,800 --> 00:00:40,320 Speaker 1: for Bloomberg Markets. He is the chief Investment Officer, that's 9 00:00:40,360 --> 00:00:44,360 Speaker 1: his day job of the California State Teachers Retirement System, 10 00:00:44,360 --> 00:00:48,839 Speaker 1: helping to manage more than two billion dollars. Chris, you 11 00:00:48,880 --> 00:00:51,040 Speaker 1: know when we talk about billions and you know how 12 00:00:51,159 --> 00:00:53,840 Speaker 1: much money people do you wake up in the morning thinking, 13 00:00:53,880 --> 00:00:57,160 Speaker 1: oh my gosh, that's a lot of money. Or does 14 00:00:57,200 --> 00:01:00,560 Speaker 1: the number really matter to you in the sense of 15 00:01:00,640 --> 00:01:03,120 Speaker 1: what you have to do on a day to day basis? 16 00:01:03,160 --> 00:01:06,600 Speaker 1: I mean, would you behave and operate you know, whether 17 00:01:06,640 --> 00:01:09,120 Speaker 1: it was a hundred million dollars or two billion dollars 18 00:01:09,120 --> 00:01:11,720 Speaker 1: not two d and twenty eight billion dollars. No, it's 19 00:01:11,840 --> 00:01:15,160 Speaker 1: staggering number and I am in awe all the time. 20 00:01:15,840 --> 00:01:18,440 Speaker 1: I've been the c I O at calisters for over 21 00:01:18,560 --> 00:01:21,720 Speaker 1: seventeen years, so obviously that long you do tend to 22 00:01:21,760 --> 00:01:25,200 Speaker 1: get used to things. But I am still, um, just 23 00:01:25,600 --> 00:01:29,160 Speaker 1: very surprised and and all when the portfolio moves up 24 00:01:29,319 --> 00:01:32,600 Speaker 1: or down a billion dollars or two billion dollars in 25 00:01:32,600 --> 00:01:36,400 Speaker 1: a day, and I would operate differently if I had 26 00:01:36,720 --> 00:01:40,200 Speaker 1: one billion, I could be more nimble. Um pick. You know, 27 00:01:40,240 --> 00:01:42,360 Speaker 1: I often use the expression you've got to think of 28 00:01:42,440 --> 00:01:45,919 Speaker 1: us at a two billion. We're like a giant cruise 29 00:01:45,920 --> 00:01:48,120 Speaker 1: ship in the ocean. The board has picked a dot 30 00:01:48,160 --> 00:01:51,160 Speaker 1: on the horizon which is seven percent, and we aim 31 00:01:51,240 --> 00:01:54,520 Speaker 1: for it. And as we inch closer to the horizon, 32 00:01:55,120 --> 00:01:57,960 Speaker 1: like a horizon, it just keeps extending. So we're out 33 00:01:58,000 --> 00:02:01,800 Speaker 1: to see forever. We're never coming into port. So I 34 00:02:01,840 --> 00:02:04,760 Speaker 1: can't spend on a time. Um. I know those ships 35 00:02:04,760 --> 00:02:06,680 Speaker 1: had side thrusters, but they can't use them in the 36 00:02:06,680 --> 00:02:10,240 Speaker 1: open ocean, So I'm not you know, if I was well, 37 00:02:10,280 --> 00:02:11,960 Speaker 1: but if I was at Yale, or if I was 38 00:02:12,000 --> 00:02:14,600 Speaker 1: at the University of Texas, I might be a lot 39 00:02:14,639 --> 00:02:17,920 Speaker 1: more nimble. I would overweight certain asset classes at my 40 00:02:18,120 --> 00:02:21,120 Speaker 1: size and scale. I just can't, so it weighs on 41 00:02:21,240 --> 00:02:24,720 Speaker 1: us to put it in numbers. Every July one, when 42 00:02:24,720 --> 00:02:27,080 Speaker 1: we wake up, that's the beginning of our year. We 43 00:02:27,160 --> 00:02:30,520 Speaker 1: have to make fifteen billion dollars of profit from the 44 00:02:30,560 --> 00:02:33,160 Speaker 1: start of the year. And that number is staggering. But 45 00:02:33,200 --> 00:02:35,280 Speaker 1: it's a marathon. And the minute we finish a mile, 46 00:02:35,480 --> 00:02:38,799 Speaker 1: you know what, there's another mile ahead of us. So, Chris, 47 00:02:38,880 --> 00:02:42,679 Speaker 1: I'm struck by also the amount of money, the nearly 48 00:02:42,680 --> 00:02:46,720 Speaker 1: two billion dollars that you manage. And I think about 49 00:02:46,760 --> 00:02:50,359 Speaker 1: as we head into the anniversary of Lehman's collapse, how 50 00:02:50,480 --> 00:02:54,240 Speaker 1: much money has shifted from the banks to the asset 51 00:02:54,280 --> 00:02:58,320 Speaker 1: management industry, and with pensions with their assets exploding, And 52 00:02:58,320 --> 00:03:01,520 Speaker 1: I have to wonder, you know, how concerned are you 53 00:03:01,600 --> 00:03:05,600 Speaker 1: or how confident are you about the oversight of all 54 00:03:05,680 --> 00:03:08,560 Speaker 1: of the asset management industry and the pension industry with 55 00:03:08,600 --> 00:03:12,639 Speaker 1: respect to risks building there and potential systemic problems emerging 56 00:03:12,680 --> 00:03:15,760 Speaker 1: there outside of the banks. Well, you know, I think 57 00:03:15,800 --> 00:03:18,399 Speaker 1: in this town the word Dodd Frank is a dirty word, 58 00:03:18,440 --> 00:03:21,120 Speaker 1: but I actually I think it's been very positive. I 59 00:03:21,160 --> 00:03:23,320 Speaker 1: like the banks. The fact that the banks have stress 60 00:03:23,400 --> 00:03:25,840 Speaker 1: tests from the FED. You have to keep in mind 61 00:03:25,880 --> 00:03:28,760 Speaker 1: that for a hundred and fifty years, the broker terms 62 00:03:28,800 --> 00:03:32,880 Speaker 1: were generally eight to maybe twelve times leverage on their 63 00:03:32,880 --> 00:03:36,120 Speaker 1: balance sheet. Then in two thousand and six and seven, 64 00:03:36,160 --> 00:03:39,040 Speaker 1: they suddenly went to forty times leverage. That's what we 65 00:03:39,040 --> 00:03:41,200 Speaker 1: had to pay attention to, and that's what the average 66 00:03:41,200 --> 00:03:43,800 Speaker 1: consumer had no visibility of the risk that was suddenly 67 00:03:43,800 --> 00:03:46,440 Speaker 1: being put on the books. UM. I think the system 68 00:03:46,760 --> 00:03:50,560 Speaker 1: UH is actually operating very well. Should it be more regulated? Oh, 69 00:03:50,640 --> 00:03:52,880 Speaker 1: there's some key areas as we mentioned earlier. I think 70 00:03:52,880 --> 00:03:56,839 Speaker 1: the fiduciary UH rules should be put in place, UM 71 00:03:57,000 --> 00:04:00,600 Speaker 1: for retail. But I think overall, the pen and industry 72 00:04:00,720 --> 00:04:05,040 Speaker 1: is actually steadily improving and doing better all the time. UM. 73 00:04:05,080 --> 00:04:09,520 Speaker 1: I think from a broad picture standpoint, there are a 74 00:04:09,520 --> 00:04:13,800 Speaker 1: lot of opportunities. UM. The baby boom is retiring Generation 75 00:04:14,080 --> 00:04:16,960 Speaker 1: X and and obviously the millennials are coming into position 76 00:04:17,760 --> 00:04:20,520 Speaker 1: they need to be saving more for retirement. And that's 77 00:04:20,640 --> 00:04:24,800 Speaker 1: an absolutely huge issue because the average worker in the 78 00:04:24,880 --> 00:04:27,000 Speaker 1: USA is protected by a four oh one K and 79 00:04:27,120 --> 00:04:29,840 Speaker 1: most don't have a big enough balance. So there are 80 00:04:30,000 --> 00:04:32,120 Speaker 1: looming risks on the horizon. But I think we're in 81 00:04:32,160 --> 00:04:36,039 Speaker 1: a good place UH for continued growth and and when 82 00:04:36,040 --> 00:04:38,040 Speaker 1: it comes to the risk of the investment portfolio. I 83 00:04:38,080 --> 00:04:40,240 Speaker 1: think we're actually, at least I think we're fairly balanced. 84 00:04:40,279 --> 00:04:43,600 Speaker 1: We've got a good blend of Yes, we're heavily exposed 85 00:04:43,640 --> 00:04:47,080 Speaker 1: to global equities, but we've got a good balance of 86 00:04:47,120 --> 00:04:53,039 Speaker 1: other stocks real estate, UH, fixed income, private equity, other opportunities. 87 00:04:53,080 --> 00:04:56,080 Speaker 1: I think the most profound change we've seen since two 88 00:04:56,080 --> 00:04:59,920 Speaker 1: thousand and eight is the number of companies public come 89 00:05:00,000 --> 00:05:03,640 Speaker 1: companies UH that have gone private and state private. So 90 00:05:03,760 --> 00:05:07,799 Speaker 1: there are fewer publicly traded companies in the marketplace today 91 00:05:07,800 --> 00:05:10,800 Speaker 1: than that we're back then, and the huge volume that 92 00:05:10,839 --> 00:05:14,000 Speaker 1: we've seen. The banks have gotten out of the private 93 00:05:14,040 --> 00:05:18,320 Speaker 1: debt business and we've seen really long term investors come 94 00:05:18,320 --> 00:05:20,520 Speaker 1: in and fill that. That's not really a bad thing, 95 00:05:21,160 --> 00:05:24,839 Speaker 1: but it certainly is something to watch. Private debt transactions 96 00:05:25,400 --> 00:05:28,640 Speaker 1: have more covenants, which is a good thing, UM, but 97 00:05:28,760 --> 00:05:30,800 Speaker 1: it still is something to keep an eye on because 98 00:05:30,880 --> 00:05:36,320 Speaker 1: the amount of money chasing the debt transactions. Chris Sleman, 99 00:05:36,600 --> 00:05:39,479 Speaker 1: when you were attending you see Santa Barbara, did you 100 00:05:39,520 --> 00:05:42,200 Speaker 1: ever think that you would be in the role you 101 00:05:42,240 --> 00:05:45,680 Speaker 1: are now? No. I point out we have a mentoring programmer, 102 00:05:45,839 --> 00:05:48,839 Speaker 1: we have student interns come in every summer, and we 103 00:05:48,880 --> 00:05:51,240 Speaker 1: had some that were shadowing me last week, and I 104 00:05:51,279 --> 00:05:54,560 Speaker 1: pointed out that my job did not exist when I 105 00:05:54,600 --> 00:05:57,359 Speaker 1: went to school. UM, so that may be true for 106 00:05:57,440 --> 00:06:01,120 Speaker 1: them as well. Don't necessarily study one specific thing, but 107 00:06:01,279 --> 00:06:05,200 Speaker 1: be a broad spectrum of education and learn about a 108 00:06:05,279 --> 00:06:08,039 Speaker 1: lot of things. I knew I wanted to be oddly enough, 109 00:06:08,040 --> 00:06:10,400 Speaker 1: coming from California, I wanted to be involved in Wall 110 00:06:10,440 --> 00:06:13,599 Speaker 1: Street and in finance. Um, not a popular thing on 111 00:06:13,680 --> 00:06:15,360 Speaker 1: the on the West. I was gonna say, you see, 112 00:06:15,360 --> 00:06:17,479 Speaker 1: Santa Barbara, I can't imagine that there are a huge 113 00:06:17,480 --> 00:06:20,600 Speaker 1: cohort of individuals like you. Yeah, the the Wall Street 114 00:06:20,640 --> 00:06:22,760 Speaker 1: Journal did reach there, but it was not I think 115 00:06:22,800 --> 00:06:24,520 Speaker 1: it was still a day late by the time I 116 00:06:24,600 --> 00:06:26,680 Speaker 1: got there. They sold it over on State Street. You 117 00:06:26,680 --> 00:06:30,240 Speaker 1: could just over there, but you know it. I think 118 00:06:30,240 --> 00:06:33,200 Speaker 1: it gave you a perspective. You're not locked on the 119 00:06:33,240 --> 00:06:36,040 Speaker 1: Manhattan and everything that goes on and all the emotion. 120 00:06:36,120 --> 00:06:38,039 Speaker 1: You can look at it from afar. I actually like 121 00:06:38,160 --> 00:06:40,240 Speaker 1: managing money on the West Coast. You have to realize 122 00:06:40,279 --> 00:06:43,360 Speaker 1: that we're off time zones. So the the US equity 123 00:06:43,360 --> 00:06:46,360 Speaker 1: market is opening at the crack of don basically six 124 00:06:46,440 --> 00:06:49,000 Speaker 1: thirty in the morning and it's closed by one Um 125 00:06:49,080 --> 00:06:51,359 Speaker 1: and Lisa as she knows, and him. That's when I 126 00:06:51,360 --> 00:06:54,360 Speaker 1: go for bike rides and and it gives me a chance. 127 00:06:54,400 --> 00:06:56,960 Speaker 1: I listened to Bloomberg Radio, so I'll plug for you guys. 128 00:06:57,120 --> 00:06:59,680 Speaker 1: And one of the things I do is really that 129 00:06:59,720 --> 00:07:02,480 Speaker 1: way gives me a broader perspective to look at, to 130 00:07:02,600 --> 00:07:04,680 Speaker 1: step away from the day to day noise and look 131 00:07:04,720 --> 00:07:07,320 Speaker 1: at the broad trends, because I think when you're doing 132 00:07:07,320 --> 00:07:10,800 Speaker 1: retirement planning, you've got to think longer term. I'm just wondering, 133 00:07:10,800 --> 00:07:14,880 Speaker 1: and you talked about sort of the rational aspect of 134 00:07:14,960 --> 00:07:18,200 Speaker 1: managing money and looking at the finances. Do you worry, 135 00:07:18,360 --> 00:07:24,640 Speaker 1: especially given the rhetoric that we're experiencing politically, especially with trade, 136 00:07:24,760 --> 00:07:27,360 Speaker 1: that we're moving away from looking at just sort of 137 00:07:28,040 --> 00:07:32,520 Speaker 1: a capitalistic financial outlook of what makes sense and going 138 00:07:32,600 --> 00:07:37,560 Speaker 1: towards something different. Well, I think yes, because this is 139 00:07:37,600 --> 00:07:40,840 Speaker 1: a prolonged ball market. Obviously, you know we're nine and 140 00:07:40,880 --> 00:07:43,280 Speaker 1: a half years into this ball market. Ball markets, as 141 00:07:43,320 --> 00:07:46,040 Speaker 1: we know, typically don't die of old age. They die 142 00:07:46,040 --> 00:07:49,120 Speaker 1: of an event or some occurrence. Trade is one of 143 00:07:49,160 --> 00:07:51,280 Speaker 1: those things. One of the things I do for the 144 00:07:51,280 --> 00:07:54,200 Speaker 1: board is in essence, go up into the crow's nest, 145 00:07:54,240 --> 00:07:57,040 Speaker 1: look at the horizon, and identify for them the risks 146 00:07:57,080 --> 00:08:01,960 Speaker 1: that I see the storm's brewing, and this trade skirmish 147 00:08:02,080 --> 00:08:04,920 Speaker 1: battle is definitely one of them. UH. To pick fights 148 00:08:04,960 --> 00:08:08,040 Speaker 1: with Mexico and Canada. It's good that the US has 149 00:08:08,080 --> 00:08:11,120 Speaker 1: a stronger negotiating stance, but we're doing it in the 150 00:08:11,120 --> 00:08:13,920 Speaker 1: typical real estate style where we throw the keys at 151 00:08:13,960 --> 00:08:16,320 Speaker 1: the bank and threatened to walk away from the transaction. 152 00:08:16,800 --> 00:08:20,280 Speaker 1: I don't think that's an effective strategy when it comes 153 00:08:20,320 --> 00:08:24,880 Speaker 1: to global diplomacy. Were an interlinked global economy, and so, 154 00:08:25,400 --> 00:08:28,440 Speaker 1: as you've heard from companies, we can't just pick fights 155 00:08:28,520 --> 00:08:32,040 Speaker 1: with our trading partners. And this skirmish that's going on 156 00:08:32,120 --> 00:08:35,440 Speaker 1: with China really is a significant thing to watch. It 157 00:08:35,559 --> 00:08:38,120 Speaker 1: is a huge risk. China is the number two largest economy, 158 00:08:38,480 --> 00:08:41,160 Speaker 1: it is the biggest part of the emerging markets. UH, 159 00:08:41,200 --> 00:08:44,240 Speaker 1: it's going to affect us in numbers of ways. So 160 00:08:44,760 --> 00:08:46,840 Speaker 1: those are the types of things that I'm worried about. 161 00:08:47,320 --> 00:08:50,440 Speaker 1: I was concerned starting this year, coming up on this 162 00:08:50,600 --> 00:08:53,960 Speaker 1: tenure anniversary, how investors would react, and I have to 163 00:08:53,960 --> 00:08:58,959 Speaker 1: say they're surprisingly resilient. UM, but we know the downside 164 00:08:59,559 --> 00:09:03,200 Speaker 1: is quick. The old adage Wall Street climbs the stairs, 165 00:09:03,240 --> 00:09:06,560 Speaker 1: but it goes down the elevator. Um. I'm constantly worried 166 00:09:06,600 --> 00:09:10,600 Speaker 1: about hedging the portfolio for what might be something we're 167 00:09:10,640 --> 00:09:13,440 Speaker 1: not foreseeing that would cause the market to trade off 168 00:09:13,520 --> 00:09:17,079 Speaker 1: as we saw in January in early February. It will 169 00:09:17,120 --> 00:09:19,640 Speaker 1: do it quick, and people often forget when you look 170 00:09:19,640 --> 00:09:22,160 Speaker 1: back at two thousand and eight, the destruction in the 171 00:09:22,200 --> 00:09:25,360 Speaker 1: market really occurred about over a hundred calendar days. It 172 00:09:25,520 --> 00:09:28,800 Speaker 1: was very fast, um, and not that we would do 173 00:09:28,840 --> 00:09:31,880 Speaker 1: that again. But I think that you've got to be 174 00:09:31,920 --> 00:09:35,080 Speaker 1: balanced in your portfolio. You can't just be all long stocks. 175 00:09:35,960 --> 00:09:37,920 Speaker 1: I want to go back to something you mentioned briefly 176 00:09:37,960 --> 00:09:44,160 Speaker 1: about mentors, and I'm wondering if there are other pension plans, 177 00:09:44,800 --> 00:09:48,240 Speaker 1: maybe someone's listening, they're interested in getting into the business. 178 00:09:49,240 --> 00:09:52,600 Speaker 1: Should they just write a letter to the head of 179 00:09:52,600 --> 00:09:55,040 Speaker 1: the pension plan and say, look, I'd like to learn 180 00:09:55,200 --> 00:09:58,200 Speaker 1: what you're doing, how you do it. Can I get 181 00:09:58,240 --> 00:10:00,320 Speaker 1: involved in some way? Because that may not be a 182 00:10:00,360 --> 00:10:03,240 Speaker 1: traditional g I want to go and work there. I 183 00:10:03,280 --> 00:10:05,600 Speaker 1: don't have the skills yet. But on the other hand, 184 00:10:06,040 --> 00:10:08,679 Speaker 1: you're going to learn a lot from just being around. 185 00:10:08,760 --> 00:10:10,520 Speaker 1: Oh yeah, well I think I think just not the 186 00:10:10,559 --> 00:10:13,120 Speaker 1: pension plan side, the bye side as we call it 187 00:10:13,120 --> 00:10:16,760 Speaker 1: in our industry lingo, which is that we're the asset owners, 188 00:10:16,760 --> 00:10:20,160 Speaker 1: so we're buying investment transactions rather than being on the 189 00:10:20,200 --> 00:10:23,439 Speaker 1: cell side, which predominates this. But I meant, for example, 190 00:10:23,480 --> 00:10:25,599 Speaker 1: you know, previous to being at Cowsters, so how do 191 00:10:25,679 --> 00:10:27,240 Speaker 1: they get you were at Washington, You were at the 192 00:10:27,280 --> 00:10:31,040 Speaker 1: Washington State Investment Board, right, So the idea would be, okay, 193 00:10:31,120 --> 00:10:33,480 Speaker 1: just write a blind letter, find out who's in charge, 194 00:10:33,800 --> 00:10:37,280 Speaker 1: write a letter, explain why you're interested, and you just 195 00:10:37,400 --> 00:10:40,120 Speaker 1: never know because it's not a traditional you know, it's 196 00:10:40,160 --> 00:10:42,360 Speaker 1: not on you necessarily on a list of things to 197 00:10:42,400 --> 00:10:44,480 Speaker 1: do if you're looking to get into the business. I 198 00:10:44,600 --> 00:10:48,439 Speaker 1: have been speaking to the business school at U C. Davis, 199 00:10:48,520 --> 00:10:50,800 Speaker 1: at Sack State. I've tried to be open to UC 200 00:10:50,960 --> 00:10:53,600 Speaker 1: Santa Barbara, any of the schools to go back and 201 00:10:53,640 --> 00:10:56,640 Speaker 1: make them realize that if you want a job in investments, 202 00:10:56,760 --> 00:10:59,480 Speaker 1: you don't have to be in Manhattan. You can work 203 00:10:59,480 --> 00:11:01,960 Speaker 1: in you g in Oregon, you could or Salem, Oregon. 204 00:11:02,080 --> 00:11:06,920 Speaker 1: You could work in Olympia, Washington. You could work in Sacramento, California. 205 00:11:07,000 --> 00:11:09,080 Speaker 1: So I think that's been part of our program, is 206 00:11:09,120 --> 00:11:11,839 Speaker 1: to reach out and make them realize, UM, if you're 207 00:11:11,880 --> 00:11:13,120 Speaker 1: on the BI side, you can be in a lot 208 00:11:13,120 --> 00:11:17,400 Speaker 1: of different places. It's an exciting job. It's a unique opportunity, 209 00:11:17,760 --> 00:11:21,120 Speaker 1: and you're right, you're gonna learn about a wide variety 210 00:11:21,200 --> 00:11:24,840 Speaker 1: of asset classes, not just be stuck in one narrow area. 211 00:11:25,000 --> 00:11:28,560 Speaker 1: Is it still exciting in the world of indexing indexing, yes, 212 00:11:28,600 --> 00:11:31,000 Speaker 1: because it's that beta exposure, you know. I think it's 213 00:11:31,000 --> 00:11:33,080 Speaker 1: going to be interesting. There's a lot of debate about 214 00:11:33,600 --> 00:11:37,360 Speaker 1: indexing to what index not to be wonky, but the 215 00:11:37,400 --> 00:11:40,880 Speaker 1: fact that it isn't just the broad Russell three thousand 216 00:11:41,080 --> 00:11:45,600 Speaker 1: or MSCI index. People are now indexing to a wide 217 00:11:45,720 --> 00:11:49,240 Speaker 1: variety of E s G indexes, um getting off the 218 00:11:49,320 --> 00:11:53,160 Speaker 1: cap weighted structure. So the definition of the market is 219 00:11:53,200 --> 00:11:55,559 Speaker 1: constantly changing. I do have to wonder, I want to 220 00:11:55,600 --> 00:11:58,440 Speaker 1: go back to the idea of fewer public companies and 221 00:11:58,480 --> 00:12:01,040 Speaker 1: just quickly get your opinion. What do you think is 222 00:12:01,080 --> 00:12:06,079 Speaker 1: the consequence of a move away from being public into private. Well, 223 00:12:06,679 --> 00:12:11,040 Speaker 1: there's a huge consequence. Obviously, your access to capital changes dramatically, 224 00:12:11,160 --> 00:12:13,199 Speaker 1: and that's one of the things In the past, there 225 00:12:13,320 --> 00:12:15,840 Speaker 1: wasn't capital for the private markets, but now there are 226 00:12:15,880 --> 00:12:19,440 Speaker 1: so many large institutions like ourselves that are willing to 227 00:12:19,480 --> 00:12:21,600 Speaker 1: fund that. I think in a way, we're fueling that 228 00:12:21,760 --> 00:12:25,320 Speaker 1: interest in staying private. UM. Obviously we create a lot 229 00:12:25,360 --> 00:12:28,680 Speaker 1: of rules and regulations on public companies. I think that's good, 230 00:12:29,000 --> 00:12:31,760 Speaker 1: but it's weighed enough on ceo s. You know, one 231 00:12:31,760 --> 00:12:34,600 Speaker 1: of the requirements of Dodd Frank was simply the requirement 232 00:12:34,640 --> 00:12:37,960 Speaker 1: that a CEO sign off on their financial statements that 233 00:12:37,960 --> 00:12:41,240 Speaker 1: they're accurate. I was shocked that so many people were 234 00:12:41,320 --> 00:12:44,200 Speaker 1: up in arms about that UH. And and yet we've 235 00:12:44,200 --> 00:12:46,520 Speaker 1: had CEOs who say, well, I'd rather stay private so 236 00:12:46,559 --> 00:12:48,040 Speaker 1: I don't have to do that. It's like, come on, 237 00:12:48,520 --> 00:12:53,200 Speaker 1: you can't verify and attest to your financial statements. So 238 00:12:53,640 --> 00:12:56,720 Speaker 1: people cry about many of the facets of Dodd Frank. 239 00:12:56,840 --> 00:12:59,440 Speaker 1: Maybe that needs to be some small adjustment, but I 240 00:12:59,440 --> 00:13:02,920 Speaker 1: think it's actually proven to be a tremendous UH safety 241 00:13:02,960 --> 00:13:05,640 Speaker 1: net under the U S system. And I think there's 242 00:13:05,679 --> 00:13:08,439 Speaker 1: there's pros and cons to being public and being private, 243 00:13:08,480 --> 00:13:11,560 Speaker 1: but you're using other people's capital when you're public, and 244 00:13:11,679 --> 00:13:14,520 Speaker 1: they have to have a voice. Well, Donna, thanks for 245 00:13:14,559 --> 00:13:16,520 Speaker 1: your voice, and we're going to be hearing more of 246 00:13:16,520 --> 00:13:18,360 Speaker 1: it because you're gonna stick around. We've got more with 247 00:13:18,480 --> 00:13:21,880 Speaker 1: Chris Alman. He is the chief investment officer for the 248 00:13:21,920 --> 00:13:26,760 Speaker 1: California State Teachers Retirement System, Yes, helping to manage more 249 00:13:26,800 --> 00:13:31,319 Speaker 1: than two hundred and twenty five billion dollars. You're listening 250 00:13:31,480 --> 00:13:48,920 Speaker 1: to Bloomberg right now. We are joined by, of course 251 00:13:49,040 --> 00:13:52,680 Speaker 1: Chris Alman, who is our guest host for today's show. 252 00:13:52,720 --> 00:13:55,920 Speaker 1: He's chief Investment Officer of the California State Teachers Retirement 253 00:13:55,960 --> 00:13:58,679 Speaker 1: System in Sacramento, but he's here in our eleven three 254 00:13:58,679 --> 00:14:00,880 Speaker 1: oh studios and we're all so very lucky to have 255 00:14:01,080 --> 00:14:04,640 Speaker 1: Jim Anderson, chief executive officer of Social Flow, here with 256 00:14:04,760 --> 00:14:07,400 Speaker 1: us to talk about a very important topic as social 257 00:14:07,440 --> 00:14:10,520 Speaker 1: media companies continue to come under scrutiny about the amount 258 00:14:10,520 --> 00:14:14,640 Speaker 1: of information that they deliver, especially to advertisers. So just 259 00:14:15,000 --> 00:14:17,920 Speaker 1: bring us up to speed on just sort of the 260 00:14:18,000 --> 00:14:21,200 Speaker 1: dynamics that are affecting the advertising industry right now as 261 00:14:21,240 --> 00:14:24,920 Speaker 1: they pertain to social media. Yeah, exactly. The problem is 262 00:14:24,920 --> 00:14:27,080 Speaker 1: is that the tech companies are making a fortune right 263 00:14:27,080 --> 00:14:30,359 Speaker 1: Facebook and Google take the lion share of digital advertising 264 00:14:30,400 --> 00:14:32,440 Speaker 1: dollars and and they've got a brilliant business model that 265 00:14:32,480 --> 00:14:34,840 Speaker 1: they don't have to pay to create any of the content. Right, 266 00:14:35,080 --> 00:14:38,640 Speaker 1: Companies like Bloomberg, BBC, CNN, you name it. Media outlets 267 00:14:38,760 --> 00:14:42,040 Speaker 1: create the content and ultimately are not benefiting from monetization. 268 00:14:42,080 --> 00:14:44,800 Speaker 1: So everybody in the digital world knows this is the problem. 269 00:14:45,040 --> 00:14:47,320 Speaker 1: What we're doing is taking the next logical step and 270 00:14:47,280 --> 00:14:49,800 Speaker 1: introducing a blockchain based token to try to get the 271 00:14:49,800 --> 00:14:53,080 Speaker 1: media companies better compensated for the content they create. What 272 00:14:53,160 --> 00:14:58,840 Speaker 1: does that mean? I know what blockchain token? I understand. Well, 273 00:14:59,040 --> 00:15:02,240 Speaker 1: I don't go ahead, you're gonna inte. Well, it's great. 274 00:15:02,280 --> 00:15:04,720 Speaker 1: I I am as guilty as anybody of talking about 275 00:15:04,720 --> 00:15:07,000 Speaker 1: things like distributed im mutable ledgers. And that's just simply 276 00:15:07,000 --> 00:15:09,360 Speaker 1: a terrible way to talk, right about anything. So I'm 277 00:15:09,360 --> 00:15:12,000 Speaker 1: carrying around Obviously your listeners can't see this book I'm holding. 278 00:15:12,000 --> 00:15:13,920 Speaker 1: But it's just a little bound ledger, right, So think 279 00:15:14,160 --> 00:15:16,280 Speaker 1: old school write the old bound ledger that you would 280 00:15:16,280 --> 00:15:19,040 Speaker 1: find in the courthouse, or that you would uh you know, 281 00:15:19,080 --> 00:15:21,560 Speaker 1: a merchant would have. They opened it up. Those pages 282 00:15:21,600 --> 00:15:23,600 Speaker 1: they're sewn in so you you see if a page 283 00:15:23,600 --> 00:15:25,960 Speaker 1: has been removed or added, the pages are numbered, you 284 00:15:26,000 --> 00:15:27,720 Speaker 1: fill it out with indelible ink, and now you have 285 00:15:27,760 --> 00:15:30,760 Speaker 1: a ledger of what's happened. That's not necessarily forged proof, 286 00:15:31,160 --> 00:15:33,600 Speaker 1: but it's very fraud resistant. I think that's what blockchain 287 00:15:33,720 --> 00:15:35,680 Speaker 1: is in the digital world. It gives you the ability 288 00:15:35,720 --> 00:15:37,800 Speaker 1: to have sort of the equivalent of a bound ledger 289 00:15:37,960 --> 00:15:39,800 Speaker 1: that you can actually put some degree of trust in. 290 00:15:40,080 --> 00:15:44,280 Speaker 1: All Right, So, Chris, when you hear companies, UH engage blockchain, 291 00:15:44,720 --> 00:15:48,000 Speaker 1: do you tune out? Do you get more interested? Or 292 00:15:48,240 --> 00:15:51,040 Speaker 1: is it just another technology in a way of recording things? 293 00:15:51,080 --> 00:15:53,320 Speaker 1: I mean, how do you sort of engage? No? I 294 00:15:53,320 --> 00:15:57,840 Speaker 1: think blockchain has a definite it's a tool of the future. Um. 295 00:15:57,880 --> 00:16:02,040 Speaker 1: It's a software system that allows a record keeping and 296 00:16:02,080 --> 00:16:05,520 Speaker 1: I think it has a place. My question, um is really, 297 00:16:05,600 --> 00:16:08,520 Speaker 1: how do you make money? How do you compensate the 298 00:16:08,760 --> 00:16:12,280 Speaker 1: media companies for their content? Are consumers going to pay 299 00:16:12,320 --> 00:16:16,200 Speaker 1: for that? Uh? It's interest advertisers ultimately. So there are 300 00:16:16,240 --> 00:16:18,320 Speaker 1: two ways you can do it exactly consumers and sort 301 00:16:18,320 --> 00:16:20,560 Speaker 1: of think subscription businesses. What whether you want to think 302 00:16:20,560 --> 00:16:22,800 Speaker 1: about New York Times, Wall Street Journal or even Netflix. 303 00:16:22,840 --> 00:16:25,880 Speaker 1: I mean, there's plenty of incentives to do that. The 304 00:16:25,920 --> 00:16:27,960 Speaker 1: problem there we see as a share of wallet problem 305 00:16:28,000 --> 00:16:31,200 Speaker 1: is everybody tries to get subscriptions. How many media companies 306 00:16:31,200 --> 00:16:35,040 Speaker 1: can realistically get vibrant subscriber basis. So that's why we've 307 00:16:35,120 --> 00:16:37,880 Speaker 1: landed on the advertising side. There's a long history of 308 00:16:37,920 --> 00:16:41,160 Speaker 1: advertising supported media. I mean, it's it's a multi trillion 309 00:16:41,160 --> 00:16:44,360 Speaker 1: dollar industry right now, and in the digital world in particular, 310 00:16:44,440 --> 00:16:46,200 Speaker 1: that that that is sort of rife with a lack 311 00:16:46,240 --> 00:16:50,680 Speaker 1: of trust, right, lack of transparency, fraud, bots, not real traffic. 312 00:16:50,720 --> 00:16:52,480 Speaker 1: And so that's one of the things that blockchain really 313 00:16:52,520 --> 00:16:54,920 Speaker 1: has the potential to solve. Is there a way of 314 00:16:55,120 --> 00:17:01,480 Speaker 1: quantifying good views, quality views, and irrelevant views? You know what? 315 00:17:01,600 --> 00:17:04,080 Speaker 1: You know what I'm saying. Well, and so the first 316 00:17:04,119 --> 00:17:06,880 Speaker 1: thing is can you quantify real humans? Right? I mean 317 00:17:07,119 --> 00:17:09,560 Speaker 1: so almost by definition, a boat or a robot or 318 00:17:09,600 --> 00:17:11,720 Speaker 1: some kind of automated account is not a real view. 319 00:17:11,800 --> 00:17:14,040 Speaker 1: And that's a huge problem in the industry right now. 320 00:17:14,080 --> 00:17:16,199 Speaker 1: So that's the first and most important thing. And by 321 00:17:16,240 --> 00:17:18,000 Speaker 1: the way, what Facebook and Twitter and all the other 322 00:17:18,040 --> 00:17:20,000 Speaker 1: social platforms are really spending a lot of time is 323 00:17:20,000 --> 00:17:22,080 Speaker 1: trying to get the bot traffic out of there, because 324 00:17:22,119 --> 00:17:25,600 Speaker 1: it really artificially inflates metrics. It adds a whole dynamic 325 00:17:25,960 --> 00:17:29,480 Speaker 1: of fraud and and sort of just frankly bad business 326 00:17:29,800 --> 00:17:32,480 Speaker 1: to those platforms. Then the next step with what you're 327 00:17:32,480 --> 00:17:35,080 Speaker 1: saying is, okay, well, not all views are created equal, right, 328 00:17:35,080 --> 00:17:38,080 Speaker 1: the drive by viewer versus somebody who's really engaged in 329 00:17:38,080 --> 00:17:41,159 Speaker 1: your content. And I think most media outlets like to 330 00:17:41,160 --> 00:17:43,119 Speaker 1: think of that in terms of some kind of subscription funnel. 331 00:17:43,119 --> 00:17:45,800 Speaker 1: How do I take my most active viewers and try 332 00:17:45,840 --> 00:17:48,840 Speaker 1: to convert them into some kind of paying subscriber. I 333 00:17:48,960 --> 00:17:50,919 Speaker 1: just want to follow up on somethings said having to 334 00:17:51,080 --> 00:17:58,600 Speaker 1: do with bots and sort of what shadow activity that 335 00:17:58,640 --> 00:18:02,119 Speaker 1: doesn't really exist, and advertisers are paying for it and 336 00:18:02,160 --> 00:18:06,240 Speaker 1: publishers are looking forward, what's the big deal if you buy? 337 00:18:06,320 --> 00:18:08,080 Speaker 1: If you if you know, there used to be this 338 00:18:08,119 --> 00:18:10,000 Speaker 1: time when if you've got to be a vice president 339 00:18:10,080 --> 00:18:12,960 Speaker 1: of major corporation, you would get a subscription to a newspaper, 340 00:18:13,040 --> 00:18:15,200 Speaker 1: let's say the Wall Street Journal, right, and then you'd 341 00:18:15,240 --> 00:18:17,520 Speaker 1: go into these buildings and you would see a pile 342 00:18:17,600 --> 00:18:21,879 Speaker 1: of them thrown at the elevator banks. What's the difference 343 00:18:21,920 --> 00:18:23,600 Speaker 1: whether they read it or not, as long as they 344 00:18:23,600 --> 00:18:27,360 Speaker 1: buy the subscription, well, for a subscription business. I mean, ultimately, 345 00:18:27,440 --> 00:18:29,320 Speaker 1: if somebody is willing to pay, I mean that's the judge. 346 00:18:29,320 --> 00:18:31,560 Speaker 1: If it's not, I have a credit card, then maybe 347 00:18:31,560 --> 00:18:33,920 Speaker 1: you're okay with But isn't that the same point when 348 00:18:33,920 --> 00:18:38,280 Speaker 1: you're talking about online subscriptions, Well the words someone has 349 00:18:38,320 --> 00:18:41,560 Speaker 1: to subscribe or at least give their email or some 350 00:18:41,720 --> 00:18:46,280 Speaker 1: personal data, which some markets somewhere in the whole ether says, 351 00:18:46,359 --> 00:18:49,919 Speaker 1: oh yeah, this is valuable. I have five thousand names, 352 00:18:50,040 --> 00:18:53,280 Speaker 1: or I have fifty million names, then we can now 353 00:18:53,400 --> 00:18:56,600 Speaker 1: send them lots of junk mail. It's it's about the 354 00:18:56,640 --> 00:19:00,560 Speaker 1: way the industry works as opposed to the actual infra nation. Right. 355 00:19:00,600 --> 00:19:03,360 Speaker 1: I mean advertising used to work because you'd have an 356 00:19:03,440 --> 00:19:07,000 Speaker 1: ad buyer who was told to go out and buy 357 00:19:07,200 --> 00:19:12,400 Speaker 1: a certain CPM, a certain cost per fouse. Right, that's 358 00:19:12,440 --> 00:19:16,600 Speaker 1: all changed now because Google and Facebook have automated the 359 00:19:16,640 --> 00:19:20,840 Speaker 1: actual activity. You never need the advertising manager never needs 360 00:19:20,880 --> 00:19:24,919 Speaker 1: to meet with Google or Facebook. They just type in 361 00:19:25,280 --> 00:19:27,840 Speaker 1: the parameters of what they want and then they buy 362 00:19:27,880 --> 00:19:30,280 Speaker 1: as many clicks as they want. Right, Well, there's two 363 00:19:30,320 --> 00:19:32,479 Speaker 1: things wrapped up in there. The first one, though, it 364 00:19:32,520 --> 00:19:34,639 Speaker 1: is important. I mean, if you're buying a million access 365 00:19:34,640 --> 00:19:37,320 Speaker 1: to a million people for ten million impressions, and half 366 00:19:37,320 --> 00:19:39,320 Speaker 1: of those are fraudulent. Well, then there's a lot of 367 00:19:39,320 --> 00:19:41,280 Speaker 1: waste built in, right, You're you're paying for things you're 368 00:19:41,320 --> 00:19:43,679 Speaker 1: not really getting, not real human views. But you do 369 00:19:43,760 --> 00:19:46,679 Speaker 1: raise a really important point, which is the self served 370 00:19:46,720 --> 00:19:50,040 Speaker 1: nature of these platforms. Right. It's just it's ridiculously easy. 371 00:19:50,080 --> 00:19:51,879 Speaker 1: I can pull out my credit card right now and 372 00:19:51,920 --> 00:19:55,359 Speaker 1: go buy twenty five do and Facebook advertising and and 373 00:19:55,400 --> 00:19:57,920 Speaker 1: reach you know, real human beings. And so Facebook and 374 00:19:57,960 --> 00:20:01,960 Speaker 1: Google have built amazingly powerful to technology platforms. The question 375 00:20:02,040 --> 00:20:04,400 Speaker 1: is is, well, what about the companies that actually create 376 00:20:04,440 --> 00:20:07,159 Speaker 1: the content to populate those platforms? And that's what we're 377 00:20:07,200 --> 00:20:09,080 Speaker 1: trying to solve for. So Chris, come on in here, 378 00:20:09,119 --> 00:20:11,439 Speaker 1: because I know that social responsibility is a big focus 379 00:20:11,560 --> 00:20:14,080 Speaker 1: of yours, and as we talk about identifying bots and 380 00:20:14,160 --> 00:20:18,000 Speaker 1: identifying humans, it raises a really interesting question about the 381 00:20:18,080 --> 00:20:20,639 Speaker 1: oversight of social media companies and sort of where do 382 00:20:20,760 --> 00:20:23,719 Speaker 1: advertisers come in with respect to that, where do regulators 383 00:20:23,760 --> 00:20:25,639 Speaker 1: come into that, Especially on the heels of the hearings 384 00:20:25,680 --> 00:20:28,639 Speaker 1: we heard in Washington, d C. Well, it's the wild West. 385 00:20:28,760 --> 00:20:31,199 Speaker 1: I mean, it's just nuts. People consumers have to be 386 00:20:31,280 --> 00:20:34,800 Speaker 1: much more savvy about where they're getting information and the 387 00:20:34,840 --> 00:20:37,160 Speaker 1: type of information they're getting. I think far too many 388 00:20:37,200 --> 00:20:40,320 Speaker 1: people have been taken astray. But Lisa, when I look 389 00:20:40,359 --> 00:20:44,160 Speaker 1: at at at social Flow your company, I don't understand 390 00:20:44,359 --> 00:20:48,080 Speaker 1: how you make money in the middle of You're going 391 00:20:48,119 --> 00:20:51,600 Speaker 1: to charge consumers, you charge the advertisers for eyeballs. How 392 00:20:51,600 --> 00:20:54,320 Speaker 1: does this all work? Well? So we make money by 393 00:20:54,760 --> 00:20:56,800 Speaker 1: sort of taking a slice of the money that we 394 00:20:56,920 --> 00:20:59,000 Speaker 1: pass along to publishers. Our goal is to get the 395 00:20:59,000 --> 00:21:01,360 Speaker 1: media companies paid right, So that's what we do now, 396 00:21:01,480 --> 00:21:03,800 Speaker 1: that's what we do in the future with blockchain. We 397 00:21:03,840 --> 00:21:07,040 Speaker 1: work for two of the world's biggest media companies, including Bloomberg, 398 00:21:07,240 --> 00:21:09,680 Speaker 1: in terms of getting their content out to the social platform. 399 00:21:09,760 --> 00:21:13,360 Speaker 1: So what we want to do is enable those companies 400 00:21:13,400 --> 00:21:15,200 Speaker 1: to be paid more and then we'll take a slice 401 00:21:15,240 --> 00:21:17,320 Speaker 1: of that. That's how we'll make our money. And if 402 00:21:17,359 --> 00:21:20,200 Speaker 1: we succeed and do well, the advertisers get real value, 403 00:21:20,200 --> 00:21:23,920 Speaker 1: the consumers get real value, the media companies get real value, 404 00:21:23,920 --> 00:21:26,480 Speaker 1: and of course we get real value as compensation for 405 00:21:26,480 --> 00:21:28,520 Speaker 1: for pulling it all together. So that's one of the 406 00:21:28,520 --> 00:21:30,240 Speaker 1: things that drives me nuts when you think about the 407 00:21:30,280 --> 00:21:34,720 Speaker 1: social media world, they're focused on eyeballs. Eyeballs are more 408 00:21:34,840 --> 00:21:38,400 Speaker 1: engaged when they're fearful, and so that's why I think, 409 00:21:38,680 --> 00:21:40,439 Speaker 1: while they won't want to admit it, they're in the 410 00:21:40,480 --> 00:21:43,919 Speaker 1: business of pumping out fear and pumping out negative news 411 00:21:43,960 --> 00:21:46,359 Speaker 1: so that people may our attention. I don't know that 412 00:21:46,400 --> 00:21:49,479 Speaker 1: advertisers really want to be associated with that emotion. If 413 00:21:49,560 --> 00:21:52,600 Speaker 1: I'm angry about reading an article and then suddenly an 414 00:21:52,640 --> 00:21:54,560 Speaker 1: ad for home depot pops up, I don't know if 415 00:21:54,640 --> 00:21:57,359 Speaker 1: that's a good thing. Well, except that if you if 416 00:21:57,400 --> 00:22:01,119 Speaker 1: you've got a lot of eyeballs clicking on your pages 417 00:22:01,320 --> 00:22:03,600 Speaker 1: and you tend to have a lot of horrific stuff 418 00:22:03,880 --> 00:22:06,280 Speaker 1: people more people will probably come. I mean we've seen 419 00:22:06,320 --> 00:22:08,960 Speaker 1: that time and time again. Right, the more catastrophic kinds 420 00:22:09,000 --> 00:22:12,680 Speaker 1: of stories, the ones that get more attention. Uh more 421 00:22:12,760 --> 00:22:15,720 Speaker 1: viewership is is good viewership? No? I mean is there 422 00:22:15,840 --> 00:22:17,399 Speaker 1: I guess that this raises a question. Is there a 423 00:22:17,400 --> 00:22:22,480 Speaker 1: delineation between sensationalized news and you know, dryer news that 424 00:22:22,560 --> 00:22:25,840 Speaker 1: might cater to people who perhaps are better educated or 425 00:22:25,840 --> 00:22:28,399 Speaker 1: sort of more in the industry. I definitely think there is. 426 00:22:28,400 --> 00:22:30,520 Speaker 1: But Chris, let me say this, I mean Facebook made 427 00:22:30,560 --> 00:22:33,800 Speaker 1: last quarter what fourteen billion dollars in revenue, So the 428 00:22:33,800 --> 00:22:36,800 Speaker 1: proof is in the delivery. I don't disagree with your points. Sensationalized, 429 00:22:36,880 --> 00:22:39,560 Speaker 1: you know, click baity and and sort of more tragic 430 00:22:39,760 --> 00:22:42,560 Speaker 1: stories are not particularly brand, say for advertiser friendly. And 431 00:22:42,560 --> 00:22:45,040 Speaker 1: you ask the home depot example, No Home Depot does 432 00:22:45,040 --> 00:22:47,800 Speaker 1: not want to be associated with stories about terrorism or 433 00:22:47,840 --> 00:22:50,240 Speaker 1: crime or those types of things. But do they really 434 00:22:50,280 --> 00:22:52,320 Speaker 1: care if people are clicking on them? Do they really care? 435 00:22:52,359 --> 00:22:54,600 Speaker 1: They do? They do? I mean, no brand manager is 436 00:22:54,600 --> 00:22:56,320 Speaker 1: going to be comfortable with that if for no other 437 00:22:56,320 --> 00:22:58,240 Speaker 1: reason than when somebody points it out. It's just sort 438 00:22:58,280 --> 00:23:00,080 Speaker 1: of appalling on a on a human level. What you 439 00:23:00,160 --> 00:23:03,560 Speaker 1: doing advertising against tragedy? It happens, clearly, I mean, it 440 00:23:03,600 --> 00:23:05,960 Speaker 1: happens a lot in the digital advertising ecosystem. But if 441 00:23:06,000 --> 00:23:08,400 Speaker 1: you ask any of these brand managers, they certainly would 442 00:23:08,600 --> 00:23:11,280 Speaker 1: much prefer to be associated with content about puppies and 443 00:23:11,359 --> 00:23:15,080 Speaker 1: kittens and picnics and happy occasions. Would would certainly be 444 00:23:15,160 --> 00:23:18,480 Speaker 1: the preference. We want to thank Jim Anderson. He is 445 00:23:18,560 --> 00:23:22,439 Speaker 1: the chief executive of Social Flow for enlivening us with 446 00:23:22,560 --> 00:23:27,560 Speaker 1: the discussion about advertising and blockchain. You're listening to Bloomberg 447 00:23:41,440 --> 00:23:45,960 Speaker 1: Hurricane Florence has caused over a million people to evacuate 448 00:23:46,160 --> 00:23:49,359 Speaker 1: as this dangerous hurricane bears down on the East coast 449 00:23:49,359 --> 00:23:51,880 Speaker 1: of the United States. Here to tell us more about 450 00:23:52,280 --> 00:23:55,600 Speaker 1: the effects of the hurricane and the hurricane itself is 451 00:23:55,640 --> 00:23:59,680 Speaker 1: Jeffrey Flynn. He is our insurance industry analyst for Bloomberg Intelligence. 452 00:24:00,119 --> 00:24:03,600 Speaker 1: And we also have with us Brian Sullivan, enager and 453 00:24:03,720 --> 00:24:09,000 Speaker 1: commodities reporter for Bloomberg News. Brian Sullivan, let's begin with you. 454 00:24:09,000 --> 00:24:11,200 Speaker 1: You join us from our one oh six one Boston 455 00:24:11,240 --> 00:24:15,520 Speaker 1: Newburyports Station studio rather in Boston, and can you give 456 00:24:15,600 --> 00:24:20,160 Speaker 1: us an update on where the hurricane is tracking and 457 00:24:20,320 --> 00:24:23,520 Speaker 1: some of the details wind speed and so on. Alright, 458 00:24:23,560 --> 00:24:25,720 Speaker 1: so the hurricanes about nine hundred miles away from Cape 459 00:24:25,720 --> 00:24:28,280 Speaker 1: Fear in North Carolina, and it's got wind speeds of 460 00:24:28,640 --> 00:24:31,280 Speaker 1: one hundred and thirty miles an hour that should get 461 00:24:31,280 --> 00:24:35,680 Speaker 1: a little stronger as it nears North Carolina. Um, there's 462 00:24:35,680 --> 00:24:39,000 Speaker 1: some interesting things buried in the forecast this vast update, 463 00:24:39,080 --> 00:24:43,159 Speaker 1: and that is that it may weaken a quite a 464 00:24:43,240 --> 00:24:45,560 Speaker 1: bit before it gets actually gets on the coastline, so 465 00:24:45,600 --> 00:24:48,399 Speaker 1: it may not come ashore as a category four but 466 00:24:49,000 --> 00:24:52,600 Speaker 1: meteorologists are warning everyone that because of its large size 467 00:24:52,800 --> 00:24:54,760 Speaker 1: and the fact that it's been sitting out there such 468 00:24:54,760 --> 00:24:58,320 Speaker 1: a long time, the devastation really can't be measured by 469 00:24:58,400 --> 00:25:02,480 Speaker 1: a category one, two, three, or four. Jeffrey, come on 470 00:25:02,560 --> 00:25:06,359 Speaker 1: in here, because I love your impression on what's at stake, 471 00:25:06,440 --> 00:25:09,760 Speaker 1: Which insurance companies are most potentially on the hook, what 472 00:25:09,880 --> 00:25:13,679 Speaker 1: the potential damage might look like, and whether most of 473 00:25:13,720 --> 00:25:17,840 Speaker 1: it's insured or not. Yeah, No, it's UM, it's interesting actually, UM, 474 00:25:17,880 --> 00:25:20,560 Speaker 1: you know, looking at the exposures in North Carolina and 475 00:25:20,960 --> 00:25:24,879 Speaker 1: Virginia and South Carolina. UM. Actually, the mutuals are probably 476 00:25:24,880 --> 00:25:27,399 Speaker 1: going to take non publicly traded firms may kind of 477 00:25:27,400 --> 00:25:30,520 Speaker 1: see the largest losses that I'm talking about. UM, you know, 478 00:25:30,560 --> 00:25:33,640 Speaker 1: like State Farm nationwide in USA A A. They seem 479 00:25:33,680 --> 00:25:35,879 Speaker 1: to have the highest market shares in those states of 480 00:25:35,920 --> 00:25:39,320 Speaker 1: homeowners insurance. UM. You know, in terms of the publicly 481 00:25:39,359 --> 00:25:42,720 Speaker 1: traded firms, UM, all State and Travelers have the most 482 00:25:42,280 --> 00:25:46,639 Speaker 1: significant exposure. UM. There they each write, um, you know, 483 00:25:46,760 --> 00:25:50,560 Speaker 1: roughly two million of premiums in North Carolina. UM. So 484 00:25:50,600 --> 00:25:54,000 Speaker 1: that those two should probably stand out. UM. In the 485 00:25:54,160 --> 00:25:57,960 Speaker 1: publicly traded peer group, those stocks are off about about 486 00:25:58,000 --> 00:26:01,760 Speaker 1: three percent over the past week, UM, you know, and 487 00:26:01,760 --> 00:26:04,680 Speaker 1: and that UM that that kind of kind of dives 488 00:26:04,760 --> 00:26:06,919 Speaker 1: with with kind of the losses that they might see. 489 00:26:07,119 --> 00:26:10,480 Speaker 1: UM on an industry wide perspective, in terms of insured losses, 490 00:26:10,840 --> 00:26:14,760 Speaker 1: it probably UM either higher the flooding. Flooding is typically 491 00:26:14,760 --> 00:26:19,159 Speaker 1: not covered by standard homeowners policy, so UM the larger 492 00:26:19,640 --> 00:26:22,280 Speaker 1: percentage of flooding is of the total damages will kind 493 00:26:22,280 --> 00:26:25,719 Speaker 1: of reduce the percentage of insured losses. But I think 494 00:26:25,760 --> 00:26:28,720 Speaker 1: we're looking at kind of insured losses perhaps between UM 495 00:26:28,760 --> 00:26:32,440 Speaker 1: five and ten billion, and I think damages economic damages 496 00:26:32,480 --> 00:26:36,359 Speaker 1: maybe as as high as twenty UM. The industry has 497 00:26:36,400 --> 00:26:42,640 Speaker 1: about UM two billion in total capital excluding Berkshire, so UM, 498 00:26:42,840 --> 00:26:45,240 Speaker 1: you know, a ten billion dollar impact on the insured 499 00:26:45,320 --> 00:26:49,440 Speaker 1: loss might be about three um of industry of industry capital. 500 00:26:49,720 --> 00:26:53,920 Speaker 1: One of the other smaller smaller companies, UM Assurance, a smaller, 501 00:26:54,240 --> 00:26:57,359 Speaker 1: more MidCap insurance company, has some decent exposure in the reason, 502 00:26:57,760 --> 00:27:00,680 Speaker 1: so they could also also be affected. Those are kind 503 00:27:00,680 --> 00:27:03,760 Speaker 1: of the ones you want to focus on. I understand 504 00:27:03,800 --> 00:27:06,720 Speaker 1: this is a risk that this hurricane may stall over 505 00:27:06,720 --> 00:27:10,200 Speaker 1: the Carolinas and then just dump rein. So who does 506 00:27:10,280 --> 00:27:16,199 Speaker 1: bear the loss when it comes to flooding. UM, you know, 507 00:27:16,320 --> 00:27:18,600 Speaker 1: and I'm sure Brian, Brian come in as well, but 508 00:27:18,760 --> 00:27:20,760 Speaker 1: it's it's largely going to go to the n f 509 00:27:20,800 --> 00:27:24,400 Speaker 1: I T the National Flood Insurance Program, and it it 510 00:27:24,520 --> 00:27:27,679 Speaker 1: obviously depends on how many UM you know, in some 511 00:27:27,800 --> 00:27:32,240 Speaker 1: of the more coastal regions, UM homeowners are required required 512 00:27:32,280 --> 00:27:37,120 Speaker 1: to buy that insurance. The the in regions that are 513 00:27:37,119 --> 00:27:39,920 Speaker 1: further away from the coast, UM but still at risk, 514 00:27:39,960 --> 00:27:43,120 Speaker 1: a lot of times it's not purchased by homeowners. But 515 00:27:43,119 --> 00:27:45,800 Speaker 1: but this all you know that there's been a long 516 00:27:46,119 --> 00:27:48,960 Speaker 1: sort of political history with with the National Flood Program, 517 00:27:49,000 --> 00:27:52,480 Speaker 1: which is in debt pretty significantly. But but this should 518 00:27:52,520 --> 00:27:55,280 Speaker 1: be you know, to the extent that that homeowners do 519 00:27:55,400 --> 00:27:58,679 Speaker 1: have National n f I P coverage, it will be paid, 520 00:27:59,000 --> 00:28:02,119 Speaker 1: although tax bears will obviously ultimately bear that as that 521 00:28:02,240 --> 00:28:05,879 Speaker 1: program goes probably goes more into debt. Brian, can you 522 00:28:05,920 --> 00:28:07,800 Speaker 1: just talk a little bit about the flood damage that 523 00:28:07,840 --> 00:28:11,240 Speaker 1: could potentially happen, especially if the storm does stall out, well, 524 00:28:11,560 --> 00:28:13,840 Speaker 1: you know, you start to get flood damage away from 525 00:28:13,840 --> 00:28:16,480 Speaker 1: the floodplains and now you're getting into areas where people 526 00:28:16,480 --> 00:28:19,119 Speaker 1: don't have flood insurance. So UM, you know, they're going 527 00:28:19,160 --> 00:28:21,040 Speaker 1: to be on the hook for it themselves. And we've 528 00:28:21,080 --> 00:28:24,920 Speaker 1: seen this numerous times in these storms that the the 529 00:28:25,000 --> 00:28:27,199 Speaker 1: rain comes down, it just swells. The river's up, you know, 530 00:28:27,280 --> 00:28:31,200 Speaker 1: way beyond where they've ever been before. UM. Last year 531 00:28:31,200 --> 00:28:33,440 Speaker 1: with Hurricane Harvey, for instance, a lot of people who 532 00:28:33,440 --> 00:28:36,600 Speaker 1: were damaged by flood or had their homes destroyed by 533 00:28:36,640 --> 00:28:39,479 Speaker 1: flood um they didn't have insurance at all, so they 534 00:28:39,520 --> 00:28:42,880 Speaker 1: were on the hook totally for it themselves. Brian, what 535 00:28:43,080 --> 00:28:46,800 Speaker 1: kind of storm surge can we expect UM? Right now, 536 00:28:46,840 --> 00:28:50,360 Speaker 1: they're talking about a twelve foot maximum UM, which is 537 00:28:50,640 --> 00:28:55,440 Speaker 1: definitely enough to um cover your house. Thank you both 538 00:28:55,480 --> 00:28:57,920 Speaker 1: for joining us. Really a pleasure to have both of you. 539 00:28:58,000 --> 00:29:02,080 Speaker 1: Jeffrey Flynt, insurance industry analysts for bloom Intelligence from Skillman, 540 00:29:02,120 --> 00:29:06,000 Speaker 1: New Jersey. Brian Sullivan, energy and commodities reporter for Bloomberg News, 541 00:29:06,040 --> 00:29:09,160 Speaker 1: will be keeping track of the storm as it approaches. 542 00:29:09,200 --> 00:29:11,800 Speaker 1: Coming to us from our Bloomberg One of six one 543 00:29:11,960 --> 00:29:15,080 Speaker 1: studio in Boston. Chris Almond still with us of a 544 00:29:15,440 --> 00:29:18,480 Speaker 1: cow Star's chief investment officer and UH and in the 545 00:29:18,560 --> 00:29:20,160 Speaker 1: last moment the show, I want to talk a little 546 00:29:20,160 --> 00:29:22,760 Speaker 1: bit about this hurricane that's coming, and the sort of 547 00:29:22,800 --> 00:29:26,080 Speaker 1: expectation that we're going to get more major storms as 548 00:29:26,320 --> 00:29:30,760 Speaker 1: the climate does change. How is that affecting your investments 549 00:29:30,760 --> 00:29:34,240 Speaker 1: if at all? Um it does. Absolutely, we have already 550 00:29:34,240 --> 00:29:36,800 Speaker 1: looked at rising sea levels and tried to start to 551 00:29:36,800 --> 00:29:39,880 Speaker 1: factor that into real estate. I think the biggest change 552 00:29:40,040 --> 00:29:44,600 Speaker 1: that we've seen is understanding that as the climate changes, 553 00:29:44,720 --> 00:29:47,880 Speaker 1: we don't know how severely and at what what rate 554 00:29:47,920 --> 00:29:51,840 Speaker 1: of time is this going to be a event to event. 555 00:29:52,600 --> 00:29:56,560 Speaker 1: The one thing we do know is more weather extremes hot, cold, 556 00:29:56,960 --> 00:29:59,640 Speaker 1: uh and particularly with the rain, the fact that it 557 00:29:59,680 --> 00:30:02,400 Speaker 1: won't rain in certain parts that create drought and stress, 558 00:30:02,480 --> 00:30:06,120 Speaker 1: and then other areas will be deluged. So we're already 559 00:30:06,120 --> 00:30:09,840 Speaker 1: starting to see infrastructure investments as governments recognize that and 560 00:30:09,880 --> 00:30:13,240 Speaker 1: try and put that infrastructure in place. But I think 561 00:30:13,280 --> 00:30:15,440 Speaker 1: it's a higher risk that we've had to factor it in. 562 00:30:16,000 --> 00:30:18,360 Speaker 1: You look at and the insurance companies were definitely the 563 00:30:18,440 --> 00:30:22,480 Speaker 1: leaders when it comes to interacting climate change with their forecast, 564 00:30:22,720 --> 00:30:25,560 Speaker 1: but you already start to see other companies realize, like 565 00:30:25,640 --> 00:30:29,120 Speaker 1: Coca Cola and PepsiCo, they can't rely on water sources. 566 00:30:29,160 --> 00:30:32,320 Speaker 1: They need to secure their own water. Um, You've started 567 00:30:32,320 --> 00:30:35,880 Speaker 1: to see other companies factor that in despite all the 568 00:30:36,000 --> 00:30:39,080 Speaker 1: hype and all the rhetoric about whether climate change is real, 569 00:30:39,680 --> 00:30:43,160 Speaker 1: smart business people are factoring that into their risk models 570 00:30:43,240 --> 00:30:47,720 Speaker 1: and managing it. And of course in California, where you're 571 00:30:47,760 --> 00:30:54,120 Speaker 1: based in Sacramento, wildfires, droughts and then substantial rains. That's 572 00:30:54,160 --> 00:30:58,120 Speaker 1: not a good combination now. And the wildfires are really 573 00:30:58,480 --> 00:31:02,040 Speaker 1: uh horrific this season, and I think, unfortunately we're gonna 574 00:31:02,040 --> 00:31:04,040 Speaker 1: be saying that every year and all the way up 575 00:31:04,040 --> 00:31:08,040 Speaker 1: to the Northwest. We took our vacation up to cord Alone, Idaho, 576 00:31:08,200 --> 00:31:11,480 Speaker 1: and up into Spokane, and the air quality was honestly 577 00:31:11,520 --> 00:31:14,440 Speaker 1: worse than it is in Beijing, China this year, and 578 00:31:14,480 --> 00:31:16,640 Speaker 1: I was quite surprised to hear from people that said, 579 00:31:16,680 --> 00:31:19,560 Speaker 1: you know what, every August, we get air quality problems. 580 00:31:19,600 --> 00:31:22,080 Speaker 1: Now that wasn't true in the past, but the fires 581 00:31:22,080 --> 00:31:25,400 Speaker 1: in British Columbia begin because of droughts and changes in patterns. 582 00:31:25,800 --> 00:31:29,400 Speaker 1: You're starting to see the West coast have air quality issues. 583 00:31:30,200 --> 00:31:32,280 Speaker 1: We're traveling now looking at the a q u I 584 00:31:32,360 --> 00:31:36,800 Speaker 1: Air Quality Index. Thanks very much, Chris Ailman. Always a pleasure, 585 00:31:37,240 --> 00:31:40,440 Speaker 1: much appreciated to spend time with us. Chris Ailman, our 586 00:31:40,520 --> 00:31:43,760 Speaker 1: co host today, chief investment officer for Calisters. We look 587 00:31:43,840 --> 00:31:46,080 Speaker 1: forward to having you in the future. Thank you very much, 588 00:31:46,120 --> 00:31:49,160 Speaker 1: great honor to be with both of you. This is Bloomberg. 589 00:32:03,960 --> 00:32:08,960 Speaker 1: The widening gap between the highest earning in people in 590 00:32:09,000 --> 00:32:11,200 Speaker 1: the world and the lowest earning ones has raised a 591 00:32:11,240 --> 00:32:15,000 Speaker 1: lot of questions about the way that we value certain things, 592 00:32:15,320 --> 00:32:19,640 Speaker 1: and our next guest argues that currently our economy values 593 00:32:20,040 --> 00:32:25,360 Speaker 1: uh that rewards value extraction rather than value creation. Marianna Matsukato, 594 00:32:25,440 --> 00:32:28,080 Speaker 1: Professor of of the Economics and founder and director of 595 00:32:28,080 --> 00:32:31,360 Speaker 1: the Institute for Innovation and Public Purpose at the University 596 00:32:31,400 --> 00:32:33,840 Speaker 1: College London, as well as the author of the new 597 00:32:33,840 --> 00:32:36,800 Speaker 1: book The Value of Everything, Making and Taking in the 598 00:32:36,840 --> 00:32:40,360 Speaker 1: Global Economy is here with us, and of course Chris Alman, 599 00:32:40,720 --> 00:32:44,320 Speaker 1: CEO of Calisters, is also with us today. Marianna, what 600 00:32:44,320 --> 00:32:47,080 Speaker 1: do you mean about that that our current economy rewards 601 00:32:47,120 --> 00:32:50,280 Speaker 1: value extraction rather than the value creation. Well, what we 602 00:32:50,360 --> 00:32:54,040 Speaker 1: need in order to drive investment led growth, and we 603 00:32:54,000 --> 00:32:56,280 Speaker 1: should remember that that is the ideal kind of growth. 604 00:32:56,360 --> 00:32:59,720 Speaker 1: We don't want growth to be growing simply because of consumption, 605 00:33:00,160 --> 00:33:03,800 Speaker 1: taking out debts simply because their incomes aren't rising. Investment 606 00:33:03,880 --> 00:33:07,960 Speaker 1: actually has a direction. We all talk about innovation. We 607 00:33:08,000 --> 00:33:12,200 Speaker 1: want innovation to happen, but innovation actually requires long term finance. Instead, 608 00:33:12,240 --> 00:33:15,760 Speaker 1: we have a financial sector which remains quite short terms 609 00:33:15,800 --> 00:33:18,800 Speaker 1: and speculative even after the financial crisis, and we have 610 00:33:19,040 --> 00:33:21,600 Speaker 1: the real economy players. So in industry, think of it 611 00:33:22,120 --> 00:33:25,440 Speaker 1: energy and pharma increasingly spending their profits and areas like 612 00:33:25,480 --> 00:33:28,160 Speaker 1: share by backs to boost stock prices, stock options, and 613 00:33:28,200 --> 00:33:30,960 Speaker 1: surprise surprise, executive pay. Now, what I argue in the 614 00:33:31,000 --> 00:33:33,760 Speaker 1: book is that these practices are actually being rewarded, and 615 00:33:33,800 --> 00:33:36,640 Speaker 1: these are not about creating value. They're really just moving 616 00:33:36,720 --> 00:33:39,560 Speaker 1: around existing assets. And part of the blame, I think 617 00:33:39,640 --> 00:33:44,080 Speaker 1: is economic theory, where we basically assigned value to what 618 00:33:44,240 --> 00:33:46,720 Speaker 1: has a price. And this is a huge change from 619 00:33:46,720 --> 00:33:49,840 Speaker 1: how value used to be debated over the last three years. 620 00:33:49,840 --> 00:33:51,760 Speaker 1: So just think of Adam Smith's whole emphasis on the 621 00:33:51,760 --> 00:33:55,240 Speaker 1: division of labor, technological change, Karl Marks as well David Ricardo. 622 00:33:55,600 --> 00:33:58,040 Speaker 1: They first thought about what is value and then use 623 00:33:58,160 --> 00:34:01,040 Speaker 1: that to determine price. Today we have mic theory, which 624 00:34:01,040 --> 00:34:04,320 Speaker 1: starts with prices and then uses that to determine value. 625 00:34:04,400 --> 00:34:07,360 Speaker 1: And this is why by the way. Lloyd blankfeend after 626 00:34:07,400 --> 00:34:10,720 Speaker 1: the financial crisis in two thousand and nine, said Goldman, 627 00:34:10,760 --> 00:34:13,319 Speaker 1: sax workers are the most productive in the world, So 628 00:34:13,400 --> 00:34:16,000 Speaker 1: there's a tautology there. They're being paid a huge amount. 629 00:34:16,280 --> 00:34:18,560 Speaker 1: That's how we actually measure value. So of course they 630 00:34:18,560 --> 00:34:21,680 Speaker 1: are valuable. So how do we measure this, Christi Alman? 631 00:34:21,719 --> 00:34:24,200 Speaker 1: How do we measure the output? How do we measure 632 00:34:24,239 --> 00:34:27,600 Speaker 1: that value and put the emphasis on that. Well, what's 633 00:34:27,600 --> 00:34:31,080 Speaker 1: interesting is that some people for decades now have been 634 00:34:31,160 --> 00:34:33,480 Speaker 1: arguing that there's a problem. So just think of g 635 00:34:33,600 --> 00:34:37,240 Speaker 1: d P. If you marry you're cleaner, GDP will actually 636 00:34:37,239 --> 00:34:39,799 Speaker 1: go down because you know, the cleaner maybe was being 637 00:34:39,800 --> 00:34:41,640 Speaker 1: paid or hopefully was being paid, and then you marry 638 00:34:41,719 --> 00:34:43,960 Speaker 1: him or her and all of a sudden, um, they're 639 00:34:43,960 --> 00:34:46,120 Speaker 1: still doing the same work, but they're not being paid. 640 00:34:46,120 --> 00:34:48,160 Speaker 1: So GDP would go down because we only include in 641 00:34:48,239 --> 00:34:51,160 Speaker 1: GDP those goods and services that have a price. Similarly, 642 00:34:51,560 --> 00:34:55,160 Speaker 1: if firms pollute, GDP goes up because we don't actually 643 00:34:55,200 --> 00:34:58,680 Speaker 1: have a way to automatically, you know, subtract those things 644 00:34:58,719 --> 00:35:00,080 Speaker 1: that are bad. But as long as you pay to 645 00:35:00,120 --> 00:35:03,239 Speaker 1: clean up the pollution, GDP will rise. Now this is 646 00:35:03,239 --> 00:35:05,319 Speaker 1: a well known problem. What I argue is that the 647 00:35:05,360 --> 00:35:09,319 Speaker 1: bigger problem is that because we've confused value extraction with 648 00:35:09,400 --> 00:35:14,239 Speaker 1: value creation, we've also confused rents with profits, and much 649 00:35:14,280 --> 00:35:16,880 Speaker 1: of what's in GDP is actually rent. And so before 650 00:35:16,920 --> 00:35:20,040 Speaker 1: adding in different types of indicators that people are arguing 651 00:35:20,080 --> 00:35:22,319 Speaker 1: for about well being, I say, let's clean the house 652 00:35:22,360 --> 00:35:25,440 Speaker 1: and get get rid of the rent. So what is rent? Rent? 653 00:35:25,520 --> 00:35:28,760 Speaker 1: For the classical economists again who I mentioned before, Adam Smith, 654 00:35:28,800 --> 00:35:33,360 Speaker 1: David Ricardo, Karl Marx, was basically unearned income. So different 655 00:35:33,360 --> 00:35:35,920 Speaker 1: actors in the economy maybe just playing some sort of 656 00:35:35,960 --> 00:35:39,680 Speaker 1: intermediating role. Think of a troll under a bridge getting huh, 657 00:35:39,840 --> 00:35:43,040 Speaker 1: some money, not really adding any value. And so because 658 00:35:43,239 --> 00:35:46,480 Speaker 1: their theory of value is actually nested in objective conditions 659 00:35:46,480 --> 00:35:51,000 Speaker 1: related to production, division of labor, technology, innovation, they could 660 00:35:51,040 --> 00:35:54,680 Speaker 1: actually kind of make lists almost of who they thought 661 00:35:54,880 --> 00:35:58,200 Speaker 1: was actually adding value and who was extracting it. Um. Now, 662 00:35:58,239 --> 00:36:00,279 Speaker 1: I don't think the point is about making lists and 663 00:36:00,360 --> 00:36:03,279 Speaker 1: you know, shaming anyone, but really rethinking how we can 664 00:36:03,320 --> 00:36:07,280 Speaker 1: actually reform finance so it is actually providing, for example, 665 00:36:07,320 --> 00:36:11,000 Speaker 1: patient long term committed finance to industries to innovate, versus 666 00:36:11,280 --> 00:36:14,000 Speaker 1: making quite a bit of money just moving around existing assets. 667 00:36:14,200 --> 00:36:16,759 Speaker 1: Just about a minute left. Is there any way that 668 00:36:16,800 --> 00:36:19,480 Speaker 1: these ideas could be implemented without a widespread crisis that 669 00:36:19,520 --> 00:36:22,200 Speaker 1: make people really rethink the entire financial system? Or is 670 00:36:22,239 --> 00:36:25,200 Speaker 1: this just basically a theoretical Uh no, No, I mean 671 00:36:25,440 --> 00:36:27,719 Speaker 1: to be honest, the reason I'm tired, besides the fact 672 00:36:27,719 --> 00:36:29,719 Speaker 1: that I have four kids, is I go around the 673 00:36:29,760 --> 00:36:33,040 Speaker 1: world actually trying to turn this into practice. Um of 674 00:36:33,120 --> 00:36:34,799 Speaker 1: report we're writing, which will be out in a couple 675 00:36:34,840 --> 00:36:37,080 Speaker 1: of weeks, is about what does this mean. For example, 676 00:36:37,360 --> 00:36:40,760 Speaker 1: for the pharmaceutical industry, why are they getting away with charging, 677 00:36:41,320 --> 00:36:44,080 Speaker 1: you know, astronomical prices in the name of value. They 678 00:36:44,080 --> 00:36:48,000 Speaker 1: actually have a formula called value based pricing. But first 679 00:36:48,000 --> 00:36:50,719 Speaker 1: of all, something like of the drugs that are in 680 00:36:50,760 --> 00:36:53,000 Speaker 1: the market, we're actually funded by the public sector, so 681 00:36:53,160 --> 00:36:56,359 Speaker 1: taxpayers through the National Institutes of Health, the prices being 682 00:36:56,400 --> 00:36:59,520 Speaker 1: set do not take that into consideration. We also have 683 00:37:00,160 --> 00:37:04,640 Speaker 1: all over the world different types of taxpayer funded investments 684 00:37:04,719 --> 00:37:07,360 Speaker 1: that are then free rider. On top of I just 685 00:37:07,400 --> 00:37:10,200 Speaker 1: heard you talking about Tesla. Tesla received a four hundred 686 00:37:10,200 --> 00:37:13,120 Speaker 1: and sixty five million guaranteed loan by the Department of 687 00:37:13,200 --> 00:37:15,479 Speaker 1: Energy the same amount. By the way that Celindra got 688 00:37:15,520 --> 00:37:18,120 Speaker 1: Clindra went bust, the taxpayer came in to bail them out, 689 00:37:18,360 --> 00:37:21,400 Speaker 1: Tesla what happened there for the taxpayer, So really rethinking 690 00:37:21,400 --> 00:37:24,799 Speaker 1: these things could actually turn into practical ways to make 691 00:37:24,840 --> 00:37:26,560 Speaker 1: sure that we don't just have growth, but we have 692 00:37:26,600 --> 00:37:30,759 Speaker 1: inclusive growth, innovation led growth, and sustainable growth. Want to 693 00:37:30,800 --> 00:37:32,560 Speaker 1: thank you very much for coming in and spending the 694 00:37:32,600 --> 00:37:37,759 Speaker 1: time with us. Marianna matsu Kato is the author of 695 00:37:38,000 --> 00:37:43,000 Speaker 1: Making and Taking in the Global Economy, The Value of Everything, 696 00:37:43,239 --> 00:37:46,560 Speaker 1: very interesting and very well written. Thanks very much for 697 00:37:46,560 --> 00:37:52,160 Speaker 1: being here. Thanks for listening to the Bloomberg P and 698 00:37:52,239 --> 00:37:55,279 Speaker 1: L podcast. You can subscribe and listen to interviews at 699 00:37:55,320 --> 00:37:59,719 Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm 700 00:37:59,719 --> 00:38:03,239 Speaker 1: pim Fox. I'm on Twitter at pim Fox. I'm on 701 00:38:03,280 --> 00:38:06,560 Speaker 1: Twitter at Lisa Abramo wits one. Before the podcast, you 702 00:38:06,600 --> 00:38:09,120 Speaker 1: can always catch us worldwide on Bloomberg Radio.