1 00:00:02,720 --> 00:00:07,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:20,880 --> 00:00:23,520 Speaker 2: This is Wall Street Week. I'm David Weston, bringing you 3 00:00:23,680 --> 00:00:28,200 Speaker 2: stories of capitalism. The saga of Paramount Global continues as 4 00:00:28,240 --> 00:00:31,360 Speaker 2: President Trump moves to settle his lawsuit over a CBS 5 00:00:31,360 --> 00:00:34,880 Speaker 2: News interview, opening the way for yet another restructuring of 6 00:00:34,920 --> 00:00:38,080 Speaker 2: the company. It's a movie we have seen before three 7 00:00:38,120 --> 00:00:42,080 Speaker 2: times actually, plus American farmers may be the victims of 8 00:00:42,120 --> 00:00:46,000 Speaker 2: their own success. They produce more efficiently than ever, but 9 00:00:46,159 --> 00:00:49,640 Speaker 2: demand can't keep up with supply. We go to Central 10 00:00:49,680 --> 00:00:52,680 Speaker 2: Iowa to hear from the farmers themselves about what they 11 00:00:52,760 --> 00:00:56,640 Speaker 2: need to make farming a good business. But we start 12 00:00:56,880 --> 00:00:59,920 Speaker 2: with the news story being told that the food and druggedness. 13 00:01:00,680 --> 00:01:04,120 Speaker 2: As President Trump's FDA commissioner sets a different course for 14 00:01:04,200 --> 00:01:08,040 Speaker 2: the agency amid big changes in personnel, we traveled to 15 00:01:08,120 --> 00:01:11,039 Speaker 2: White Oak, Maryland to see for ourselves what the new 16 00:01:11,160 --> 00:01:14,880 Speaker 2: FDA head, doctor Marty McCarey, is up to and why 17 00:01:14,959 --> 00:01:19,960 Speaker 2: he believes it will help make America healthy again. Talk 18 00:01:19,959 --> 00:01:22,000 Speaker 2: to us about opioid. Did the FDA fail? 19 00:01:22,600 --> 00:01:24,760 Speaker 3: The FDA did fail. There were many. 20 00:01:26,120 --> 00:01:28,360 Speaker 4: Parts of our healthcare system that failed. Look, I feel 21 00:01:28,440 --> 00:01:34,480 Speaker 4: terrible about the opioid epidemic. I personally prescribed opioids with misinformation. 22 00:01:35,160 --> 00:01:37,520 Speaker 4: It was taught to me by my chief resident in 23 00:01:37,560 --> 00:01:41,560 Speaker 4: my surgical residency. And we sort of woke up to 24 00:01:41,640 --> 00:01:46,119 Speaker 4: this problem around twenty fourteen, twenty fifteen and thought, oh 25 00:01:46,120 --> 00:01:49,080 Speaker 4: my god, what have we done? What information did we 26 00:01:49,120 --> 00:01:52,280 Speaker 4: not have? I think was regulatory capture at the agency. 27 00:01:52,320 --> 00:01:54,840 Speaker 4: Now we can't prove that. But when the reviewer immediately 28 00:01:54,880 --> 00:01:58,960 Speaker 4: goes to work for Purdue Pharma after approving OxyContin for 29 00:01:59,040 --> 00:02:01,880 Speaker 4: chronic pain, and the approval for chronic pain was based 30 00:02:01,920 --> 00:02:04,800 Speaker 4: on a fourteen day study, have we seen the last 31 00:02:04,880 --> 00:02:07,680 Speaker 4: chapter of that No, We're going to look at the 32 00:02:08,200 --> 00:02:11,840 Speaker 4: label for OxyContin and that class of medications and ask, 33 00:02:12,280 --> 00:02:15,400 Speaker 4: how can we ensure that it's accurate and consistent with 34 00:02:15,440 --> 00:02:15,960 Speaker 4: the science. 35 00:02:16,040 --> 00:02:19,240 Speaker 2: How does your approach to science and common sense avoid 36 00:02:19,280 --> 00:02:20,399 Speaker 2: the next OxyContin? 37 00:02:20,560 --> 00:02:23,320 Speaker 4: One of the first actions I took was to remove 38 00:02:23,600 --> 00:02:29,239 Speaker 4: all industry members of FDA advisory committees wherever statutorily possible. 39 00:02:29,960 --> 00:02:32,600 Speaker 4: And so we've got to preserve that scientific process, and 40 00:02:32,600 --> 00:02:35,040 Speaker 4: we've got great scientists that are doing that right now. 41 00:02:36,160 --> 00:02:38,600 Speaker 4: The second thing is that we need to have eyes 42 00:02:38,760 --> 00:02:41,720 Speaker 4: on a drug and device the second it's approved and 43 00:02:41,919 --> 00:02:45,160 Speaker 4: keep eyes on those drugs. We shouldn't be learning nineteen 44 00:02:45,240 --> 00:02:48,480 Speaker 4: years after OxyContin was approved that it may have killed 45 00:02:48,520 --> 00:02:53,120 Speaker 4: nearly a million Americans in its downstream effects with other drugs. 46 00:02:54,280 --> 00:02:57,760 Speaker 4: We should be able to approve a drug and with 47 00:02:57,919 --> 00:03:01,080 Speaker 4: big data, go into big data, with our eyes, with 48 00:03:01,160 --> 00:03:05,400 Speaker 4: our epidemiologists, and watch a drug to see if there 49 00:03:05,400 --> 00:03:06,560 Speaker 4: are safety. 50 00:03:06,160 --> 00:03:07,360 Speaker 3: Signals that emerge. 51 00:03:07,680 --> 00:03:09,920 Speaker 4: One of the broken things about the FDA that I 52 00:03:10,000 --> 00:03:16,160 Speaker 4: learned just last week was that bureaucrats at the FDA 53 00:03:16,320 --> 00:03:18,920 Speaker 4: had the ability small group had the ability to block 54 00:03:19,360 --> 00:03:24,840 Speaker 4: a safety epidemiology study by our own safety epidemiology team. 55 00:03:25,880 --> 00:03:28,200 Speaker 3: And so we are announcing. 56 00:03:27,720 --> 00:03:30,680 Speaker 4: We're getting rid of that ability to block a safety 57 00:03:30,680 --> 00:03:34,200 Speaker 4: evaluation and we want that safety team to work freely 58 00:03:34,800 --> 00:03:38,640 Speaker 4: without any barriers. There's a bit of a conflict of 59 00:03:38,680 --> 00:03:41,040 Speaker 4: interest if you're the team that approved a drug, you 60 00:03:41,080 --> 00:03:43,640 Speaker 4: may not want to be embarrassed to learn that there's 61 00:03:43,640 --> 00:03:45,000 Speaker 4: a safety signal down the road. 62 00:03:45,160 --> 00:03:49,440 Speaker 2: What can the FDA do about reducing childhood abucity? 63 00:03:49,720 --> 00:03:53,040 Speaker 4: So we're doing an inventory of all the chemicals in 64 00:03:53,080 --> 00:03:57,160 Speaker 4: the US food supply that children eat that are banned 65 00:03:57,200 --> 00:03:59,480 Speaker 4: in Europe. We're going through them one by one we're 66 00:03:59,520 --> 00:04:02,160 Speaker 4: doing an inventory. We have a new office for post 67 00:04:02,200 --> 00:04:07,800 Speaker 4: marketing assessment, challenging this old notion, this old regulatory process 68 00:04:07,840 --> 00:04:10,400 Speaker 4: that was called grass, that is that some foods were 69 00:04:10,440 --> 00:04:15,320 Speaker 4: generally safe. Well, this has become now applied to novel 70 00:04:15,400 --> 00:04:19,040 Speaker 4: chemicals in the food supply where people do have significant 71 00:04:19,040 --> 00:04:20,120 Speaker 4: safety concerns. 72 00:04:20,800 --> 00:04:24,120 Speaker 2: One of the most controversial issues raised by Secretary Kennedy's 73 00:04:24,160 --> 00:04:28,040 Speaker 2: new leadership at HHS has involved vaccines, with a group 74 00:04:28,080 --> 00:04:31,760 Speaker 2: of medical associations suing this week over the withdrawal of 75 00:04:31,800 --> 00:04:37,120 Speaker 2: some recommendations about coronavirus vaccines. Looking back now on COVID 76 00:04:37,440 --> 00:04:39,919 Speaker 2: and deveilt of vaccines for COVID, was it that a 77 00:04:39,960 --> 00:04:42,400 Speaker 2: success story? Was WORP speed a success story or not? 78 00:04:42,560 --> 00:04:43,840 Speaker 3: I think it was a success story. 79 00:04:43,960 --> 00:04:47,919 Speaker 4: Remember when the initial vaccines were released, they were a 80 00:04:48,040 --> 00:04:50,839 Speaker 4: very good match for the circulating strain. At the time, 81 00:04:51,279 --> 00:04:55,840 Speaker 4: there was low levels of population natural immunity, and we 82 00:04:55,920 --> 00:04:59,240 Speaker 4: clearly saw a reduction in the severity of illness. But 83 00:04:59,440 --> 00:05:02,560 Speaker 4: now we're four years out from those initial randomized control 84 00:05:02,640 --> 00:05:08,680 Speaker 4: trials and parents are appropriately asking does my six year old, 85 00:05:08,760 --> 00:05:13,720 Speaker 4: healthy daughter need sixty five more COVID shots in her 86 00:05:13,800 --> 00:05:18,240 Speaker 4: annual lifespan? That is one each year or not, and 87 00:05:18,279 --> 00:05:20,919 Speaker 4: that is a scientific unknown. We'd like to see a 88 00:05:21,080 --> 00:05:21,919 Speaker 4: clinical trial. 89 00:05:21,960 --> 00:05:25,200 Speaker 2: What about measles? Are you worried about chilling effect of 90 00:05:25,240 --> 00:05:28,039 Speaker 2: the government really raising questions about some of these vaccines 91 00:05:28,160 --> 00:05:30,480 Speaker 2: that cause people not to get vaccines they ought to. 92 00:05:30,400 --> 00:05:33,320 Speaker 4: Be getting vaccines save lives. Let me be very clear 93 00:05:33,360 --> 00:05:36,559 Speaker 4: about that. But we at the same time have seen 94 00:05:36,800 --> 00:05:40,520 Speaker 4: a loss in public trust in doctors and hospitals. 95 00:05:40,640 --> 00:05:41,440 Speaker 3: Why was that? 96 00:05:42,320 --> 00:05:47,640 Speaker 4: In my opinion, it was because public health officials did 97 00:05:48,080 --> 00:05:50,960 Speaker 4: one of the worst things you can do with the 98 00:05:51,800 --> 00:05:53,960 Speaker 4: authority and power you have as a physician, and that 99 00:05:54,080 --> 00:05:57,839 Speaker 4: is demand that people do something when you're not really 100 00:05:57,880 --> 00:06:01,240 Speaker 4: sure and you're not honest with them that you're not sure. 101 00:06:01,400 --> 00:06:03,040 Speaker 2: Many of us think about the FDA, for the d 102 00:06:03,279 --> 00:06:05,880 Speaker 2: in the FDA, which is drugs and particularly approval of 103 00:06:05,960 --> 00:06:09,000 Speaker 2: new drugs, what parts maybe aren't working or you think 104 00:06:09,040 --> 00:06:10,640 Speaker 2: you might beable to help fix. 105 00:06:11,160 --> 00:06:11,240 Speaker 5: So. 106 00:06:11,400 --> 00:06:13,200 Speaker 4: Not only have we spent a lot of time with 107 00:06:13,360 --> 00:06:18,359 Speaker 4: individual reviewers, pulling them aside without their bosses and asking them, 108 00:06:18,760 --> 00:06:20,560 Speaker 4: what have you always wanted to do here? What do 109 00:06:20,600 --> 00:06:23,680 Speaker 4: you think could work better? We've done a national CEO 110 00:06:23,800 --> 00:06:28,159 Speaker 4: listening tour now in seven cities around the country where 111 00:06:28,800 --> 00:06:30,960 Speaker 4: we're in the middle of it, where we're asking CEOs, 112 00:06:30,960 --> 00:06:33,839 Speaker 4: what ideas do you have for a better FDA. We 113 00:06:33,880 --> 00:06:38,160 Speaker 4: need an FDA that is user friendly. Drug developers and 114 00:06:38,400 --> 00:06:42,320 Speaker 4: inventors of new drugs are trying to figure out how 115 00:06:42,320 --> 00:06:46,799 Speaker 4: do they get through this long, gnarly regulatory process. Well, 116 00:06:47,000 --> 00:06:50,480 Speaker 4: we can be more transparent, we can provide better communications, 117 00:06:50,680 --> 00:06:54,120 Speaker 4: we can provide guidance, we can answer questions on demand, 118 00:06:54,800 --> 00:06:56,880 Speaker 4: and we are announcing that we're going to make our 119 00:06:56,920 --> 00:07:02,240 Speaker 4: decision letters public so that drug developers can see why 120 00:07:02,360 --> 00:07:05,880 Speaker 4: drugs are not accepted. 121 00:07:05,400 --> 00:07:06,120 Speaker 3: At the FDA. 122 00:07:06,279 --> 00:07:07,279 Speaker 2: Why weren't they public. 123 00:07:07,560 --> 00:07:10,800 Speaker 4: Some of the drug companies don't want them public. We 124 00:07:10,880 --> 00:07:15,720 Speaker 4: learned that most companies will spin the results from the FDA. 125 00:07:15,920 --> 00:07:18,760 Speaker 4: The company will not even say that the FDA is 126 00:07:18,840 --> 00:07:21,520 Speaker 4: asking for a new clinical trial when we've asked for 127 00:07:21,560 --> 00:07:25,400 Speaker 4: a new clinical trial in our decision letter. So there's 128 00:07:25,440 --> 00:07:28,239 Speaker 4: an opportunity for companies to sort of spin the results, 129 00:07:28,320 --> 00:07:30,520 Speaker 4: make it sound like, oh, the FDA got back to 130 00:07:30,600 --> 00:07:32,880 Speaker 4: us and they just want to see one small tweak. 131 00:07:33,040 --> 00:07:37,600 Speaker 2: If in fact, there's more disclosure about letters that say 132 00:07:37,840 --> 00:07:40,920 Speaker 2: we're not approving your drug, could that help the rest 133 00:07:40,920 --> 00:07:44,720 Speaker 2: of the industry make progress faster on developing the right drug. 134 00:07:44,840 --> 00:07:47,880 Speaker 4: Absolutely, Look, we need more transparency. The FDA has been 135 00:07:47,920 --> 00:07:51,200 Speaker 4: a black box and companies have scratched their heads to 136 00:07:51,280 --> 00:07:52,160 Speaker 4: try to figure out. 137 00:07:52,280 --> 00:07:56,240 Speaker 3: What do the reviewers want? Why are they rejecting a drug? 138 00:07:56,800 --> 00:07:59,680 Speaker 4: Did they actually reject it with a big rejection or 139 00:07:59,760 --> 00:08:02,880 Speaker 4: just ask for a small modification. Well, no one's known 140 00:08:02,920 --> 00:08:05,520 Speaker 4: because none of this has been public information. Well that's 141 00:08:05,560 --> 00:08:06,200 Speaker 4: going to change. 142 00:08:06,280 --> 00:08:09,000 Speaker 2: How do you make sure the FDA is up with 143 00:08:09,120 --> 00:08:11,040 Speaker 2: the most recent technological development. 144 00:08:11,200 --> 00:08:12,640 Speaker 3: Yeah, so we've got to modernize. 145 00:08:12,680 --> 00:08:15,040 Speaker 4: We've got to keep the best people here, we've got 146 00:08:15,080 --> 00:08:17,040 Speaker 4: to listen to what's happening in the field. 147 00:08:17,880 --> 00:08:19,480 Speaker 3: And AI is a good example of that. 148 00:08:19,520 --> 00:08:24,720 Speaker 4: We're using AI to organize these gigantic applications, applications that 149 00:08:24,760 --> 00:08:27,840 Speaker 4: can be one hundred thousand pages, and we now have 150 00:08:28,440 --> 00:08:31,720 Speaker 4: thousands of scientists at the FDA using it every day 151 00:08:31,840 --> 00:08:34,520 Speaker 4: on their own volition. That is, it's an optional feature, 152 00:08:35,000 --> 00:08:37,720 Speaker 4: they find value in it, they're using it. And so 153 00:08:38,240 --> 00:08:43,280 Speaker 4: all of these things are designed to modernize the FDA 154 00:08:43,920 --> 00:08:47,760 Speaker 4: to ask the big question, why does it take over 155 00:08:47,960 --> 00:08:50,760 Speaker 4: ten years for a drug to come to market? We 156 00:08:50,960 --> 00:08:54,560 Speaker 4: introduced a pilot with a new priority voucher where if 157 00:08:54,640 --> 00:08:59,400 Speaker 4: a drug or a company's priority is in our. 158 00:08:59,480 --> 00:09:00,880 Speaker 3: US now sational priority. 159 00:09:02,080 --> 00:09:05,480 Speaker 4: We have vouchers now in a pilot program to give 160 00:09:05,520 --> 00:09:08,560 Speaker 4: companies a decision in one or two months instead of 161 00:09:08,600 --> 00:09:09,360 Speaker 4: nearly a year. 162 00:09:09,520 --> 00:09:12,280 Speaker 2: Can you increase the speed without taking a risk on 163 00:09:12,320 --> 00:09:12,840 Speaker 2: the safety? 164 00:09:12,920 --> 00:09:13,600 Speaker 3: I think you can. 165 00:09:13,920 --> 00:09:17,000 Speaker 2: Commissioner McCarey admits to a good deal of change at 166 00:09:17,000 --> 00:09:19,840 Speaker 2: the FDA. Change that has led to the departure of 167 00:09:19,920 --> 00:09:24,000 Speaker 2: some very senior, longtime leaders and the loss of a 168 00:09:24,000 --> 00:09:26,040 Speaker 2: good number of positions altogether. 169 00:09:26,440 --> 00:09:29,320 Speaker 4: So the FDA doubled in its number of employees since 170 00:09:29,360 --> 00:09:35,360 Speaker 4: two thousand and seven. Now there were massive redundancies with 171 00:09:35,559 --> 00:09:40,320 Speaker 4: twelve travel offices over two thousand HR, and budget procurement 172 00:09:40,360 --> 00:09:41,320 Speaker 4: and personnel. 173 00:09:41,679 --> 00:09:43,719 Speaker 3: There were duplications of services. 174 00:09:43,720 --> 00:09:46,880 Speaker 4: There were clunky adverse event reporting databases that were all 175 00:09:46,880 --> 00:09:50,120 Speaker 4: built from scratch. So we can benefit from a lot 176 00:09:50,160 --> 00:09:54,080 Speaker 4: of great consolidation in IT and communications and so many 177 00:09:54,120 --> 00:09:56,880 Speaker 4: other areas, but we have to make sure our scientific 178 00:09:56,920 --> 00:09:58,880 Speaker 4: reviewers and inspectors have everything they need. 179 00:09:59,000 --> 00:10:02,439 Speaker 2: At Bloomberg, we focus investors often and capital counts when 180 00:10:02,480 --> 00:10:06,760 Speaker 2: it comes to biotech. Change is not something investors usually like, 181 00:10:07,600 --> 00:10:10,280 Speaker 2: how do you think you're changing in the FDA may 182 00:10:10,720 --> 00:10:12,160 Speaker 2: affect investment. 183 00:10:12,320 --> 00:10:15,280 Speaker 4: I want investors to know that we are in a 184 00:10:15,320 --> 00:10:18,200 Speaker 4: deregulatory mindset. We're cutting red tape. We're going to speed 185 00:10:18,240 --> 00:10:22,280 Speaker 4: up the approval process without cutting any corners on safety. 186 00:10:22,600 --> 00:10:25,160 Speaker 4: We're going to continue to invest in our scientists and 187 00:10:25,200 --> 00:10:28,400 Speaker 4: inspectors and all the core staff central to their function, 188 00:10:29,080 --> 00:10:33,200 Speaker 4: and we're going to create predictability with clear guidance. We 189 00:10:33,280 --> 00:10:37,160 Speaker 4: are talking to industry constantly to figure out how we 190 00:10:37,200 --> 00:10:40,719 Speaker 4: can be helpful, which of their products being proposed or 191 00:10:40,760 --> 00:10:44,040 Speaker 4: in line with our national priorities. That is, meeting a 192 00:10:44,200 --> 00:10:49,880 Speaker 4: large unmet public health need, domesticating manufacturing as a national 193 00:10:49,880 --> 00:10:54,280 Speaker 4: security issue, increasing the affordability of drugs, which is an 194 00:10:54,400 --> 00:10:58,160 Speaker 4: access problem. This president does not like to see Americans 195 00:10:58,160 --> 00:11:00,960 Speaker 4: getting ripped off. And we've been paid more for drugs 196 00:11:00,960 --> 00:11:03,000 Speaker 4: than in many wealthy countries. 197 00:11:02,679 --> 00:11:03,200 Speaker 3: Around the world. 198 00:11:03,280 --> 00:11:04,400 Speaker 2: Can you do anything about that. 199 00:11:04,520 --> 00:11:09,000 Speaker 4: We can issue a National Priority Review voucher for companies 200 00:11:09,480 --> 00:11:13,599 Speaker 4: that are promising to equalize the price between other OECD 201 00:11:13,679 --> 00:11:17,600 Speaker 4: countries and the United States, even with other products that 202 00:11:17,640 --> 00:11:21,559 Speaker 4: they currently have. And so we want to incentivize good 203 00:11:21,640 --> 00:11:23,840 Speaker 4: behavior in the marketplace. 204 00:11:23,760 --> 00:11:26,960 Speaker 2: Coming up, battle lines are being drawn in the trade war. 205 00:11:27,480 --> 00:11:31,120 Speaker 2: Right through the cornfields of rural Iowa. We bring you 206 00:11:31,200 --> 00:11:34,200 Speaker 2: the story from the heartland of high tech, driving high 207 00:11:34,200 --> 00:11:38,080 Speaker 2: productivity and a desperate need for export markets to ramp 208 00:11:38,200 --> 00:11:53,800 Speaker 2: up demand. That's next on Wall Street Week. This is 209 00:11:53,800 --> 00:11:57,480 Speaker 2: a story about abundance and abundance of food and whether 210 00:11:57,520 --> 00:12:00,200 Speaker 2: we can ever have too much of a good thing. 211 00:12:00,520 --> 00:12:03,720 Speaker 2: The United States has the most productive agricultural sector in 212 00:12:03,800 --> 00:12:10,560 Speaker 2: the world, something every president, Republican and Democrat embraces since 213 00:12:10,679 --> 00:12:14,679 Speaker 2: nineteen thirty three. The government, your government has been a 214 00:12:14,679 --> 00:12:16,960 Speaker 2: friend of the farmer, farmers. 215 00:12:16,559 --> 00:12:19,280 Speaker 3: Farmers, US farmers, America's farmers, and I love. 216 00:12:19,160 --> 00:12:20,920 Speaker 4: Them and I'm never going to do anything to hurt 217 00:12:20,920 --> 00:12:23,920 Speaker 4: off farmers. 218 00:12:24,160 --> 00:12:27,680 Speaker 2: Welcome to Iowa, where dusty roads pierced through over twenty 219 00:12:27,800 --> 00:12:31,560 Speaker 2: million acres of corn and soybeans. The towns are small, 220 00:12:31,800 --> 00:12:35,280 Speaker 2: and the skyscrapers dotting the horizon aren't office buildings but 221 00:12:35,480 --> 00:12:40,680 Speaker 2: grain elevators. This is America's heartland, and farming runs in 222 00:12:40,720 --> 00:12:41,160 Speaker 2: the blood. 223 00:12:41,520 --> 00:12:44,680 Speaker 6: I am the third generation. My grandfather started farming in 224 00:12:44,760 --> 00:12:49,280 Speaker 6: Nebraska for generation one, and in the mid fifties moved 225 00:12:49,600 --> 00:12:54,400 Speaker 6: here to Central Iowa, and my father continued and then 226 00:12:54,800 --> 00:12:55,800 Speaker 6: now me after. 227 00:12:56,240 --> 00:12:58,640 Speaker 2: What brought your grandfather to Iowa. 228 00:12:58,960 --> 00:13:03,200 Speaker 6: The situation in Nebraska was three brothers farming together. They 229 00:13:03,200 --> 00:13:07,160 Speaker 6: weren't able to accumulate enough acres, and then drought situations 230 00:13:07,160 --> 00:13:12,040 Speaker 6: in Nebraska decided that they should split up. My grandfather 231 00:13:12,160 --> 00:13:15,400 Speaker 6: moved to Sioux City, Iowa originally and farmed there for 232 00:13:15,400 --> 00:13:18,640 Speaker 6: a couple of years, started a dairy herd that didn't 233 00:13:18,679 --> 00:13:21,640 Speaker 6: work out, so then there was an opportunity to rent 234 00:13:21,679 --> 00:13:22,920 Speaker 6: and buy this farm. 235 00:13:23,160 --> 00:13:25,400 Speaker 2: Are you hoping your children will continue in the farming 236 00:13:25,400 --> 00:13:26,199 Speaker 2: business in some way? 237 00:13:26,559 --> 00:13:29,599 Speaker 6: I certainly do, and I think that that was something 238 00:13:30,000 --> 00:13:32,200 Speaker 6: that I'm very proud of to pass on that tradition, 239 00:13:32,320 --> 00:13:34,640 Speaker 6: that appreciation for agriculture to all of my kids. 240 00:13:37,720 --> 00:13:42,800 Speaker 2: This have not done. That's Stu Swanson. His farming family 241 00:13:42,840 --> 00:13:45,920 Speaker 2: has seen dramatic changes in the business of agriculture since 242 00:13:45,960 --> 00:13:48,760 Speaker 2: his grandfather came from Nebraska seventy five years ago. 243 00:13:48,960 --> 00:13:51,840 Speaker 6: So each acre of corn will cover three times with 244 00:13:51,960 --> 00:13:52,800 Speaker 6: this machine. 245 00:13:53,480 --> 00:13:57,720 Speaker 2: Over that time, US farm productivity and output has nearly tripled, 246 00:13:58,040 --> 00:14:02,520 Speaker 2: helped by technological innovations. With that explosion in productivity has 247 00:14:02,520 --> 00:14:06,400 Speaker 2: come larger and larger farms, including for Swanson, who now 248 00:14:06,440 --> 00:14:10,280 Speaker 2: farms about nineteen hundred acres, a third of which he owns, 249 00:14:10,600 --> 00:14:13,160 Speaker 2: with the rest owned by investors from as far away 250 00:14:13,240 --> 00:14:14,080 Speaker 2: as Norway. 251 00:14:14,640 --> 00:14:16,480 Speaker 6: Yeah, I think for this time of the year in 252 00:14:16,520 --> 00:14:19,280 Speaker 6: mid June, the corn looks about as good as any 253 00:14:19,440 --> 00:14:21,720 Speaker 6: I farm for thirty three years. So this is my 254 00:14:21,920 --> 00:14:25,440 Speaker 6: thirty third crop that you're walking through today. Other than 255 00:14:25,440 --> 00:14:27,040 Speaker 6: a little excess water that we've. 256 00:14:26,840 --> 00:14:30,400 Speaker 2: Had, boots are sinking down here as we walk through it. 257 00:14:30,560 --> 00:14:33,440 Speaker 2: But also look at the color of the soil. Why 258 00:14:33,520 --> 00:14:34,280 Speaker 2: is this so rich. 259 00:14:35,200 --> 00:14:39,000 Speaker 6: We're lucky that the glaciers moved the top soil here. 260 00:14:39,520 --> 00:14:42,480 Speaker 6: We also are in an area of Iowa and of 261 00:14:42,520 --> 00:14:45,200 Speaker 6: the country that is called the Prairie Pothole region. So 262 00:14:45,240 --> 00:14:49,720 Speaker 6: we have really rich organic soils from the previous plants 263 00:14:49,720 --> 00:14:53,320 Speaker 6: and things that were grown here, and so that high 264 00:14:53,480 --> 00:14:58,080 Speaker 6: organic matter gives that black color that we are very 265 00:14:58,080 --> 00:14:59,720 Speaker 6: proud of here in Wright County. 266 00:15:02,000 --> 00:15:05,200 Speaker 2: That might all sound like good news, but as president 267 00:15:05,280 --> 00:15:09,200 Speaker 2: of the Iowa Corn Growers Association, Swanson knows all too 268 00:15:09,240 --> 00:15:12,720 Speaker 2: well the challenges facing America's row crop farmers. 269 00:15:13,120 --> 00:15:13,600 Speaker 3: A lot of. 270 00:15:13,560 --> 00:15:18,280 Speaker 2: Farms I understand are actually cash negative. Are you cash positive. 271 00:15:19,880 --> 00:15:23,440 Speaker 6: I haven't ran a number to tell you today. Certainly 272 00:15:23,640 --> 00:15:26,640 Speaker 6: we know that over the last three years we've seen 273 00:15:26,800 --> 00:15:30,680 Speaker 6: about a thirty percent decline in commodity prices. I think 274 00:15:30,760 --> 00:15:34,600 Speaker 6: over that same time we've seen the nine major crops 275 00:15:34,840 --> 00:15:39,560 Speaker 6: all be underwater, so we are producing at a loss 276 00:15:39,640 --> 00:15:40,880 Speaker 6: on the nine major crops. 277 00:15:41,280 --> 00:15:44,760 Speaker 2: Gold Eagle Cooperative is an intermediary for farmers in the 278 00:15:44,800 --> 00:15:47,880 Speaker 2: markets they serve. It is located on the outskirts of 279 00:15:47,960 --> 00:15:50,960 Speaker 2: Eagle Grove, a short twenty minute drive up the road 280 00:15:51,000 --> 00:15:54,680 Speaker 2: from Swanson's farm. We sat down there with Tom Haverson, 281 00:15:54,880 --> 00:15:56,320 Speaker 2: an Iowa native himself. 282 00:15:56,760 --> 00:15:59,560 Speaker 7: I remember when my grandfather started when I was a 283 00:15:59,560 --> 00:16:02,680 Speaker 7: little kid. He had a little tractor with a harvester 284 00:16:03,000 --> 00:16:06,800 Speaker 7: that would do one on each side. He'd be going 285 00:16:06,840 --> 00:16:09,600 Speaker 7: back and forth field like this for a couple of days. 286 00:16:10,120 --> 00:16:13,240 Speaker 2: After working around the world for Goldman Sachs, he's now 287 00:16:13,360 --> 00:16:16,880 Speaker 2: CEO of Cobank, which operates as a farm credit bank. 288 00:16:17,280 --> 00:16:21,400 Speaker 2: Counting his clients both Swanson's Farm and Gold Eagle, Halverson 289 00:16:21,400 --> 00:16:24,160 Speaker 2: has a front row seat for the storm brewing over 290 00:16:24,200 --> 00:16:25,520 Speaker 2: America's crop farms. 291 00:16:26,080 --> 00:16:29,520 Speaker 7: Corn, soybean, and wheat prices are meaningfully lower than they 292 00:16:29,520 --> 00:16:33,400 Speaker 7: were a couple of years ago. That translates into lower 293 00:16:33,520 --> 00:16:37,360 Speaker 7: cash flows for the producers themselves. At the same time, 294 00:16:38,080 --> 00:16:41,240 Speaker 7: rural Americans in general and farmers in particular, that are 295 00:16:41,280 --> 00:16:48,000 Speaker 7: not immune from macroeconomic conditions, including inflation, for example, they 296 00:16:48,040 --> 00:16:54,880 Speaker 7: are incredibly exposed to trade buying and selling internationally. Producers 297 00:16:54,880 --> 00:16:58,440 Speaker 7: have been squeezed quite dramatically over the last twelve, eighteen, 298 00:16:58,520 --> 00:17:02,240 Speaker 7: twenty four monthsamminational lower commodity prices for what they sell 299 00:17:02,320 --> 00:17:06,480 Speaker 7: on the one hand, and significantly higher prices for the inputs. 300 00:17:07,200 --> 00:17:10,560 Speaker 2: Once seen as the supermarket of the world, America is 301 00:17:10,600 --> 00:17:13,240 Speaker 2: instead finding out the hard way that the world is 302 00:17:13,280 --> 00:17:16,760 Speaker 2: doing its grocery shopping elsewhere and has been for some time. 303 00:17:17,640 --> 00:17:20,320 Speaker 2: This year, the US is expected to record its third 304 00:17:20,440 --> 00:17:25,000 Speaker 2: consecutive annual trade deficit in agriculture, something that hasn't happened 305 00:17:25,040 --> 00:17:29,800 Speaker 2: in seventy years. Javier Blass covers commodities for Bloomberg Opinion. 306 00:17:30,359 --> 00:17:33,240 Speaker 8: I think that the reverse aal on the agricultural trade 307 00:17:33,240 --> 00:17:35,920 Speaker 8: in the United States is a structural feature. I don't 308 00:17:35,920 --> 00:17:38,400 Speaker 8: think it's going to go away. There are two elements 309 00:17:38,440 --> 00:17:40,919 Speaker 8: there that they are very important. One is that the 310 00:17:41,040 --> 00:17:45,000 Speaker 8: United States is important more agricultural commodities that they used to. 311 00:17:45,520 --> 00:17:47,639 Speaker 8: And the reason for that is that we like to 312 00:17:47,720 --> 00:17:52,439 Speaker 8: have green beans and strawberries and other agricultural crops the 313 00:17:52,480 --> 00:17:54,640 Speaker 8: whole year. We don't really want to buy them when 314 00:17:54,640 --> 00:17:58,000 Speaker 8: they're in season. The other problem is that the United 315 00:17:58,000 --> 00:18:02,719 Speaker 8: States is starting to esport agricultural commodities that is a 316 00:18:02,800 --> 00:18:07,639 Speaker 8: lot in part due to mister Trump's trade policies. You 317 00:18:07,720 --> 00:18:10,560 Speaker 8: are hurting one of your largest buyers, one of the 318 00:18:10,640 --> 00:18:15,600 Speaker 8: largest importants, one of the largest customers of American food industry. 319 00:18:15,600 --> 00:18:19,880 Speaker 8: That's China. The big problem for the United States agricultural 320 00:18:19,920 --> 00:18:23,119 Speaker 8: sector right now is that in the past, if a 321 00:18:23,200 --> 00:18:26,359 Speaker 8: country was having a big disagreement on trade policy with 322 00:18:26,440 --> 00:18:30,840 Speaker 8: the United States, it still needed to continue buying corn 323 00:18:30,920 --> 00:18:34,359 Speaker 8: and solbing and wit from America because it didn't have 324 00:18:34,400 --> 00:18:38,320 Speaker 8: any other options. Today, there are many other options, and 325 00:18:38,480 --> 00:18:42,560 Speaker 8: particularly one, and it's Brazil. Brazil over the last forty 326 00:18:42,640 --> 00:18:46,440 Speaker 8: years have transformed itself into the supermarket of the world. 327 00:18:46,600 --> 00:18:48,679 Speaker 8: That is a role that the United States used to 328 00:18:48,720 --> 00:18:51,680 Speaker 8: play in the sixties, seventies and all the way into 329 00:18:51,680 --> 00:18:54,800 Speaker 8: the eighties. The damage is done. Every time that you 330 00:18:54,960 --> 00:18:59,040 Speaker 8: scare buyers. The buyers are looking for an alternative, and 331 00:18:59,080 --> 00:19:04,720 Speaker 8: they will have very memories. Japanese important still remember the 332 00:19:04,920 --> 00:19:08,400 Speaker 8: very brief trade embargo imposed by the United States more 333 00:19:08,440 --> 00:19:11,920 Speaker 8: than fifty years ago on soybeans, and that is half 334 00:19:11,920 --> 00:19:16,040 Speaker 8: a century later. The buyers still remember that once you 335 00:19:16,200 --> 00:19:19,280 Speaker 8: opened that door, you cannot put it back. It has 336 00:19:19,320 --> 00:19:21,600 Speaker 8: been done, and I think that the damage is done. 337 00:19:22,040 --> 00:19:25,040 Speaker 7: As far into the future as we can foresee, the 338 00:19:25,080 --> 00:19:29,119 Speaker 7: agricultural economy of the United States is very, very dependent 339 00:19:29,640 --> 00:19:34,399 Speaker 7: on access to overseas export markets. My uncle, who lived 340 00:19:34,920 --> 00:19:37,119 Speaker 7: about a mile from where we're right now sitting, was 341 00:19:37,119 --> 00:19:39,359 Speaker 7: one of the first American farmers to go on a 342 00:19:39,440 --> 00:19:43,320 Speaker 7: trade mission to China in the late nineteen seventies, and 343 00:19:43,400 --> 00:19:46,639 Speaker 7: back then we didn't sell any soybeans to China. 344 00:19:47,160 --> 00:19:49,160 Speaker 3: And since that time. 345 00:19:49,280 --> 00:19:52,320 Speaker 7: We've grown our export market to China from zero to 346 00:19:52,680 --> 00:19:58,040 Speaker 7: being the biggest export market, and until our recent trade 347 00:19:58,040 --> 00:20:01,120 Speaker 7: disagreements with China, we got up to the point where 348 00:20:01,119 --> 00:20:04,600 Speaker 7: it wasn't yet fifty percent, but it was close closing 349 00:20:04,640 --> 00:20:08,439 Speaker 7: on fifty percent of all US soybeans got exported to China, 350 00:20:08,680 --> 00:20:11,399 Speaker 7: which is an inconceivably large amount of soybeans that are 351 00:20:11,400 --> 00:20:14,639 Speaker 7: being grown in this part of the world, put on trains, 352 00:20:14,680 --> 00:20:17,920 Speaker 7: ship to the West coast, put on ships and sent 353 00:20:18,440 --> 00:20:21,600 Speaker 7: to China, and so you know, we now have a 354 00:20:21,840 --> 00:20:27,879 Speaker 7: very significant vulnerability to the need to sell our soybeans 355 00:20:28,320 --> 00:20:31,840 Speaker 7: internationally because we produce way more soybeans now than we 356 00:20:32,040 --> 00:20:33,600 Speaker 7: possibly consume in this country. 357 00:20:34,680 --> 00:20:37,760 Speaker 2: With China and others now looking elsewhere, the US is 358 00:20:37,800 --> 00:20:40,919 Speaker 2: finding ways to drum up domestic demand. Part of the 359 00:20:40,920 --> 00:20:44,360 Speaker 2: answer lies in alternative uses, and that's where Chris Bochart, 360 00:20:44,720 --> 00:20:46,640 Speaker 2: the CEO of Gold Eagle, comes in. 361 00:20:46,880 --> 00:20:50,440 Speaker 9: We're about a three thousand member owned cooperative. We provide 362 00:20:50,560 --> 00:20:53,240 Speaker 9: goods and services to farmers. So we provide a lot 363 00:20:53,280 --> 00:20:57,880 Speaker 9: of agronomy services where we'll sell farmers seed, fertilizers, crop 364 00:20:57,880 --> 00:21:01,480 Speaker 9: protection products to help their crops grow. Our feed group 365 00:21:01,560 --> 00:21:04,840 Speaker 9: will take farmer corn and grind that, blend that and 366 00:21:04,840 --> 00:21:06,639 Speaker 9: feed that back out to livestock, you know. And then 367 00:21:06,680 --> 00:21:09,080 Speaker 9: our grain division we take the farmer's corn in the 368 00:21:09,080 --> 00:21:11,159 Speaker 9: fall or whenever they need us to be there to 369 00:21:11,200 --> 00:21:13,560 Speaker 9: deliver it. We try to help them find the best markets. 370 00:21:13,640 --> 00:21:15,879 Speaker 9: We do have a partnership with an ethanol plant, so 371 00:21:15,920 --> 00:21:18,399 Speaker 9: we manage an ethanol plant that's just right out the 372 00:21:18,440 --> 00:21:21,399 Speaker 9: back door here. We grind about thirty million bushels of 373 00:21:21,400 --> 00:21:24,119 Speaker 9: corn a year. We're making about ninety million gallons of 374 00:21:24,160 --> 00:21:27,320 Speaker 9: ethanol out of that corn, shipping it all all over 375 00:21:27,359 --> 00:21:30,200 Speaker 9: the country for into the you know, our liquid fuel supply. 376 00:21:31,000 --> 00:21:33,200 Speaker 2: When you and I think of corn, we may think 377 00:21:33,240 --> 00:21:36,960 Speaker 2: of corn on the cob, corn chips, corn starch, or 378 00:21:37,000 --> 00:21:40,760 Speaker 2: even popcorn. But only about eight percent of the corn 379 00:21:40,800 --> 00:21:44,720 Speaker 2: America producers is eaten by humans. The majority is crushed 380 00:21:44,800 --> 00:21:48,840 Speaker 2: and turned into livestock feed or processed into ethanol and 381 00:21:48,960 --> 00:21:50,000 Speaker 2: used in gasoline. 382 00:21:50,359 --> 00:21:53,840 Speaker 9: We think that, you know, the ethanol policy hits debated 383 00:21:53,920 --> 00:21:56,320 Speaker 9: around from time to time. You know, the current administration 384 00:21:56,440 --> 00:21:58,960 Speaker 9: talks a lot about you know, domestic energy production and 385 00:21:59,000 --> 00:22:01,320 Speaker 9: has been really good for bile fuels. And we've seen 386 00:22:01,320 --> 00:22:05,879 Speaker 9: biofuels be a real bipartisan solution over our history and 387 00:22:05,880 --> 00:22:08,600 Speaker 9: it's barely been good. And so as far as you know, 388 00:22:08,680 --> 00:22:12,040 Speaker 9: corn demand today and where corn dan can grow into 389 00:22:12,040 --> 00:22:15,200 Speaker 9: the future, yeah, we really think that there's a huge 390 00:22:15,200 --> 00:22:18,679 Speaker 9: potential for ethanol to continue to be a bigger and 391 00:22:18,680 --> 00:22:21,080 Speaker 9: bigger part of that local demand. 392 00:22:22,640 --> 00:22:26,600 Speaker 2: The same transition from food to fuel is happening for soy. 393 00:22:26,880 --> 00:22:27,080 Speaker 10: Now. 394 00:22:27,119 --> 00:22:30,679 Speaker 7: We're trying to find alternative uses, for example, to those soybeans, 395 00:22:31,040 --> 00:22:35,280 Speaker 7: some of which can be turned into alternative sources of fuel. So, 396 00:22:35,320 --> 00:22:38,040 Speaker 7: for example, the government announced some changes to the renewable 397 00:22:38,040 --> 00:22:39,960 Speaker 7: fuel standards and so forth that have been very very 398 00:22:39,960 --> 00:22:41,600 Speaker 7: good for the soybean market. 399 00:22:42,040 --> 00:22:45,360 Speaker 2: But that may be only half the story. As farmers 400 00:22:45,440 --> 00:22:48,879 Speaker 2: real from a challenging export market. Higher interest rates have 401 00:22:49,000 --> 00:22:51,320 Speaker 2: delivered a second blow in what turns out to be 402 00:22:51,359 --> 00:22:53,200 Speaker 2: a pretty capital intensive business. 403 00:22:53,560 --> 00:22:58,760 Speaker 6: The high horsepower tractors in new situation is probably six 404 00:22:58,760 --> 00:23:02,400 Speaker 6: to seven hundred thousand dollars. This machine was actually built 405 00:23:02,400 --> 00:23:04,800 Speaker 6: in two thousand and nine, probably the oldest piece of 406 00:23:04,800 --> 00:23:08,920 Speaker 6: equipment that we utilize in a regular basis. So its 407 00:23:09,040 --> 00:23:12,480 Speaker 6: value as it sits today probably one hundred and fifty 408 00:23:12,560 --> 00:23:14,080 Speaker 6: to one hundred and seventy five thousand. 409 00:23:14,200 --> 00:23:15,119 Speaker 2: So how fast do. 410 00:23:15,160 --> 00:23:15,840 Speaker 3: They depreciate it? 411 00:23:16,400 --> 00:23:18,280 Speaker 6: Yeah? Really fast. 412 00:23:19,480 --> 00:23:23,120 Speaker 9: Farming is such a capital intensive endeavor, whether it's the 413 00:23:23,160 --> 00:23:28,080 Speaker 9: cost to finance their land acquisitions, just their interest rate 414 00:23:28,400 --> 00:23:31,080 Speaker 9: to put the operating loan in, you know, to put 415 00:23:31,119 --> 00:23:33,840 Speaker 9: a crop in. They're investing in hundreds of dollars in 416 00:23:33,880 --> 00:23:36,960 Speaker 9: acres just in the input side to put the crop in, 417 00:23:37,280 --> 00:23:40,960 Speaker 9: and then their machinery and equipment purchases have just really 418 00:23:41,000 --> 00:23:42,680 Speaker 9: skyrocketed in the last three years. 419 00:23:44,000 --> 00:23:47,080 Speaker 2: Rising costs and falling prices do not add up to 420 00:23:47,119 --> 00:23:50,920 Speaker 2: a successful business. So what do America's row crop farmers 421 00:23:51,000 --> 00:23:53,600 Speaker 2: do to make ends meet? And how much of it 422 00:23:53,640 --> 00:23:57,280 Speaker 2: depends on the federal government. That's where we turn next. 423 00:23:57,680 --> 00:24:00,440 Speaker 6: We don't want to rely on government payments. That's the 424 00:24:00,520 --> 00:24:02,400 Speaker 6: last thing that we want to do. 425 00:24:14,160 --> 00:24:17,320 Speaker 2: In the cornfields of Iowa. Farming is more than just 426 00:24:17,359 --> 00:24:20,520 Speaker 2: a business. It's a way of life passed down from 427 00:24:20,560 --> 00:24:24,040 Speaker 2: generation to generation. So do you come from a family 428 00:24:24,040 --> 00:24:24,640 Speaker 2: of farmers. 429 00:24:24,960 --> 00:24:25,280 Speaker 7: I do. 430 00:24:25,440 --> 00:24:26,600 Speaker 6: I am the third generation. 431 00:24:27,160 --> 00:24:29,040 Speaker 9: I was born on a farm in southeast Iowa. 432 00:24:29,119 --> 00:24:31,800 Speaker 7: Well, my grandfather came here. You couldn't farm very much 433 00:24:31,920 --> 00:24:34,520 Speaker 7: in this part of the state because it was all water. 434 00:24:34,880 --> 00:24:35,880 Speaker 3: It was wetlands. 435 00:24:36,440 --> 00:24:39,120 Speaker 1: This is where I grew up. Man, I'm the fifth generation. 436 00:24:39,400 --> 00:24:42,639 Speaker 1: So we're raising the sixth generation here on this farm. 437 00:24:42,760 --> 00:24:46,440 Speaker 1: So back in the late eighteen hundreds, my great great 438 00:24:46,440 --> 00:24:48,840 Speaker 1: grandparents would have came here and started the farm. 439 00:24:50,960 --> 00:24:54,680 Speaker 2: JD. Myers Farm lies a short drive from Stu Swanson's. 440 00:24:55,600 --> 00:24:57,400 Speaker 1: You'll start seeing I don't know if we can see 441 00:24:57,400 --> 00:25:00,760 Speaker 1: it yet, but you'll start seeing an earshoot. 442 00:25:00,160 --> 00:25:03,920 Speaker 2: And he too farms corn and soybeans. But where Swanson 443 00:25:04,040 --> 00:25:07,879 Speaker 2: is the third generation in his family growing row crops, JD. 444 00:25:08,040 --> 00:25:11,800 Speaker 2: Myers is fifth generation and plans on passing it along 445 00:25:11,920 --> 00:25:13,000 Speaker 2: to his own son. 446 00:25:13,320 --> 00:25:15,760 Speaker 1: Grander bushel on the botom of that ben that's left. 447 00:25:16,200 --> 00:25:19,359 Speaker 1: So take a few loads to get up there, but 448 00:25:19,640 --> 00:25:21,119 Speaker 1: other than that will be done and then we can 449 00:25:21,160 --> 00:25:25,960 Speaker 1: grease the shivers and get it, get it ready to go. 450 00:25:26,960 --> 00:25:29,640 Speaker 2: For decades, passing it on to the next generation has 451 00:25:29,680 --> 00:25:33,600 Speaker 2: been thus story of American farms, but the agricultural workforce 452 00:25:33,640 --> 00:25:37,159 Speaker 2: has been in steady decline, from eight million in nineteen 453 00:25:37,240 --> 00:25:41,520 Speaker 2: forty nine to just over two millions today. Technological innovation 454 00:25:41,640 --> 00:25:46,520 Speaker 2: has certainly made farming more efficient, but urbanization has also contributed. 455 00:25:46,720 --> 00:25:49,960 Speaker 9: As folks have moved into the cities, and we even 456 00:25:49,960 --> 00:25:52,399 Speaker 9: see that here in Iowa. You know, there's definitely an 457 00:25:52,480 --> 00:25:56,360 Speaker 9: urbanization trend. And that's all good. I mean, that's all 458 00:25:56,400 --> 00:25:58,920 Speaker 9: good and well, but I think that the value of 459 00:25:58,960 --> 00:26:02,639 Speaker 9: folks really truly understanding where their food and fuel come from. 460 00:26:02,840 --> 00:26:05,000 Speaker 9: There's just tremendous value there, and we got it. We 461 00:26:05,000 --> 00:26:07,920 Speaker 9: need to keep doing that as ag leaders, to keep 462 00:26:07,920 --> 00:26:08,680 Speaker 9: telling that story. 463 00:26:10,400 --> 00:26:13,080 Speaker 2: But if Iowa, as farming families hope to pass their 464 00:26:13,119 --> 00:26:15,600 Speaker 2: way of life onto the next generation, it has to 465 00:26:15,640 --> 00:26:18,359 Speaker 2: be a sound business as well as a way of life, 466 00:26:18,920 --> 00:26:22,200 Speaker 2: and the combination of low prices and higher costs has 467 00:26:22,240 --> 00:26:25,399 Speaker 2: meant that farm income has plummeted over the past few years, 468 00:26:25,960 --> 00:26:29,600 Speaker 2: meaning that sometimes financial institutions like Cobank have to make 469 00:26:29,640 --> 00:26:31,200 Speaker 2: up the difference through loans. 470 00:26:31,760 --> 00:26:36,000 Speaker 6: We rely not only on co Bank but local banks 471 00:26:36,520 --> 00:26:39,760 Speaker 6: to help provide financing. The cost of production is at 472 00:26:40,240 --> 00:26:43,600 Speaker 6: such a high level and it just keeps increasing that 473 00:26:43,680 --> 00:26:47,880 Speaker 6: we need that backstop to know that we can average 474 00:26:47,920 --> 00:26:49,480 Speaker 6: cash flows out. 475 00:26:50,080 --> 00:26:53,320 Speaker 7: One of the most important indicators of credit quality for 476 00:26:53,359 --> 00:26:58,960 Speaker 7: the farm credits system and indirectly for farmers as well, 477 00:26:59,280 --> 00:27:03,520 Speaker 7: is farmland value. Right, so we watch very carefully what's 478 00:27:03,520 --> 00:27:06,520 Speaker 7: happening to farmland value. My family owns some, so we 479 00:27:06,560 --> 00:27:11,879 Speaker 7: watch it too, And farmland values are always a massively 480 00:27:11,960 --> 00:27:14,800 Speaker 7: lagging indicator. Commodity prices have come down a lot, right, 481 00:27:14,880 --> 00:27:18,080 Speaker 7: Corns down, beans down, wheats down, since you know, the 482 00:27:18,119 --> 00:27:22,560 Speaker 7: peak two years ago, but farmland value is still like this. 483 00:27:22,720 --> 00:27:25,760 Speaker 3: It has sort of stopped. 484 00:27:25,640 --> 00:27:27,560 Speaker 7: Rising in the way that it had been rising for 485 00:27:27,600 --> 00:27:30,520 Speaker 7: a long time. But as you can imagine if prices 486 00:27:30,600 --> 00:27:32,800 Speaker 7: stay low and cash flows are negative for a lot 487 00:27:32,840 --> 00:27:35,399 Speaker 7: of producers, they don't have free cash flow in working 488 00:27:35,440 --> 00:27:37,560 Speaker 7: capital and they have to you know, draw down because 489 00:27:37,600 --> 00:27:40,760 Speaker 7: farmers tend to be asset rich and cash poor. Right 490 00:27:41,080 --> 00:27:43,960 Speaker 7: they own land and physical assets and machinery and stuff 491 00:27:43,960 --> 00:27:49,399 Speaker 7: that's worth things, but it's not liquid. So credit quality 492 00:27:49,440 --> 00:27:53,399 Speaker 7: is actually pretty good. Balance sheets of most farmers were 493 00:27:53,440 --> 00:27:56,440 Speaker 7: in good shape, you know, until until the last twelve 494 00:27:56,480 --> 00:28:00,560 Speaker 7: to eighteen months. But this this stress period we're now 495 00:28:00,640 --> 00:28:04,879 Speaker 7: in is going to manifest overcoming you know, six twelve 496 00:28:04,920 --> 00:28:08,600 Speaker 7: eighteen months, and I'll show up in tougher cash flows, 497 00:28:08,800 --> 00:28:13,000 Speaker 7: people needing to raise liquidity in other ways. 498 00:28:14,160 --> 00:28:17,639 Speaker 2: Farmers can't keep borrowing forever to make up shortfalls. But 499 00:28:17,680 --> 00:28:21,040 Speaker 2: there are signs that things could turn around, not because 500 00:28:21,040 --> 00:28:24,040 Speaker 2: of higher prices or lower costs, but because of the 501 00:28:24,040 --> 00:28:28,000 Speaker 2: government something. Farmers like JD would rather not rely on 502 00:28:28,880 --> 00:28:29,440 Speaker 2: big thing. 503 00:28:30,040 --> 00:28:30,280 Speaker 7: You know. 504 00:28:30,480 --> 00:28:32,920 Speaker 1: I guess for me as a farmers, I want to 505 00:28:32,920 --> 00:28:36,080 Speaker 1: make sure we have markets. I don't want direct payments. 506 00:28:36,200 --> 00:28:38,160 Speaker 1: I would rather not have direct payments from the government. 507 00:28:39,480 --> 00:28:42,320 Speaker 1: If we have markets that will buy the grain and 508 00:28:42,320 --> 00:28:45,040 Speaker 1: stuff from us, not have to depend on the government 509 00:28:45,840 --> 00:28:47,000 Speaker 1: and develop those markets. 510 00:28:48,080 --> 00:28:51,200 Speaker 6: We don't want to rely on government payments. That's the 511 00:28:51,280 --> 00:28:54,880 Speaker 6: last thing that we want to do. We've worked to 512 00:28:54,920 --> 00:28:57,720 Speaker 6: try to eliminate that, and we want to try to 513 00:28:57,760 --> 00:29:01,920 Speaker 6: create demand through domestic markets through exports to offset that. 514 00:29:02,680 --> 00:29:05,840 Speaker 2: Last year, the US government paid out roughly nine billion 515 00:29:05,880 --> 00:29:08,880 Speaker 2: dollars to farmers. This year, that figure is set to 516 00:29:08,920 --> 00:29:12,280 Speaker 2: surge to an estimated forty two billion dollars, much of 517 00:29:12,280 --> 00:29:15,320 Speaker 2: it aimed at weather related disaster relief and support for 518 00:29:15,360 --> 00:29:19,280 Speaker 2: those in financial distress. Still, the role of subsidies raises 519 00:29:19,360 --> 00:29:22,840 Speaker 2: tough questions. After all, the US didn't bail out DVD 520 00:29:23,000 --> 00:29:26,360 Speaker 2: manufacturers when streaming up ended the industry. But then again, 521 00:29:26,760 --> 00:29:30,120 Speaker 2: DVDs are a luxury while food is a necessity. 522 00:29:30,520 --> 00:29:33,720 Speaker 7: Now, your viewers who are not close to this will 523 00:29:33,760 --> 00:29:35,560 Speaker 7: probably say, well, why do we do that and how 524 00:29:35,640 --> 00:29:37,760 Speaker 7: much do we do that, and what's the explanation for that, 525 00:29:38,400 --> 00:29:42,200 Speaker 7: and to which the answer is, if you travel around 526 00:29:42,200 --> 00:29:45,200 Speaker 7: the world as I have in my career, you'll realize 527 00:29:45,200 --> 00:29:48,840 Speaker 7: and know that feeding your population is a national security 528 00:29:48,840 --> 00:29:52,440 Speaker 7: consideration for everyone on earth, right, and we kind of 529 00:29:52,480 --> 00:29:55,640 Speaker 7: take that for granted here because we're so productive in 530 00:29:55,680 --> 00:29:59,440 Speaker 7: our agricultural economy. We don't just feed ourselves, We feed 531 00:29:59,520 --> 00:30:02,320 Speaker 7: a lot of other people all around the world. But 532 00:30:02,440 --> 00:30:08,320 Speaker 7: being able to have a food self sufficiency and a comprehensive, productive, safe, 533 00:30:08,360 --> 00:30:12,720 Speaker 7: secure sources on a through the cycle basis of food 534 00:30:12,760 --> 00:30:15,640 Speaker 7: and fiber for the United States of America is frankly 535 00:30:15,680 --> 00:30:20,480 Speaker 7: a matter of fundamental and vital national security interest. And 536 00:30:20,520 --> 00:30:23,440 Speaker 7: in order to safeguard that we have put in place 537 00:30:23,520 --> 00:30:27,080 Speaker 7: over many decades in this country a whole bunch of 538 00:30:27,120 --> 00:30:31,120 Speaker 7: support infrastructure to ensure that we will be able to 539 00:30:31,160 --> 00:30:34,560 Speaker 7: feed our population under any and all circumstances. And that 540 00:30:34,680 --> 00:30:38,880 Speaker 7: infrastructure has been enormously successful for so long that almost 541 00:30:38,960 --> 00:30:40,560 Speaker 7: all Americans take it for granted. 542 00:30:40,920 --> 00:30:44,160 Speaker 2: Is there also a risk in terms of business in 543 00:30:44,240 --> 00:30:47,640 Speaker 2: the economy and ongoing subsidies to farmers. 544 00:30:48,720 --> 00:30:50,280 Speaker 3: It's a very important question. 545 00:30:50,360 --> 00:30:53,960 Speaker 7: Now, I never met a farmer that wants to make 546 00:30:54,000 --> 00:30:56,960 Speaker 7: a living at the expense of their fellow tax paying citizens. 547 00:30:57,080 --> 00:30:59,880 Speaker 7: That is a true statement. On the other hand, just 548 00:31:00,120 --> 00:31:04,680 Speaker 7: like every other advanced industrialized country in our peer groups, 549 00:31:04,720 --> 00:31:07,600 Speaker 7: so I think Japan, France, UK, Germany or whatever, because 550 00:31:07,640 --> 00:31:10,560 Speaker 7: of the national security implications and so forth, you've got 551 00:31:10,560 --> 00:31:13,280 Speaker 7: to have a good stable food supply. You've got to 552 00:31:13,320 --> 00:31:16,840 Speaker 7: make sure that that's taken care of. So you can't 553 00:31:16,920 --> 00:31:21,959 Speaker 7: leave that one to the to the vagaries of the marketplace. 554 00:31:22,600 --> 00:31:25,720 Speaker 7: And and so it's not a surprise therefore, that all 555 00:31:25,760 --> 00:31:29,600 Speaker 7: of our peer countries have a similar kinds of mechanisms 556 00:31:29,600 --> 00:31:34,040 Speaker 7: in place to ensure that and to ensure the the 557 00:31:33,760 --> 00:31:38,040 Speaker 7: the care and well and well being of the of 558 00:31:38,080 --> 00:31:42,040 Speaker 7: the of the rural you know land. But having said 559 00:31:42,040 --> 00:31:45,080 Speaker 7: all of that, it is a risk that that if you, 560 00:31:45,280 --> 00:31:49,320 Speaker 7: if you take too much too often and and get 561 00:31:49,360 --> 00:31:54,200 Speaker 7: your significant risks taken off the table for you whenever 562 00:31:54,240 --> 00:31:59,720 Speaker 7: they manifest by the government, that you become your subject 563 00:31:59,720 --> 00:32:02,680 Speaker 7: to the risk of the complacency of thinking that that's 564 00:32:02,720 --> 00:32:06,600 Speaker 7: always going to happen. And you know, that can be 565 00:32:06,680 --> 00:32:08,480 Speaker 7: true in a variety of ways. And I think in 566 00:32:09,120 --> 00:32:12,120 Speaker 7: our country and on our society these days, there is 567 00:32:12,200 --> 00:32:16,480 Speaker 7: a tendency for the population to want the government to 568 00:32:16,600 --> 00:32:19,360 Speaker 7: de risk things when they go wrong. All those things 569 00:32:19,400 --> 00:32:23,400 Speaker 7: are legitimate and reasonable, but they also over long periods 570 00:32:23,440 --> 00:32:26,800 Speaker 7: of time, change people's behavior in the marketplace, and they 571 00:32:26,840 --> 00:32:29,920 Speaker 7: start that the market starts to take risks that end 572 00:32:30,000 --> 00:32:33,520 Speaker 7: up becoming mispriced. You know what, I mean, and they 573 00:32:33,640 --> 00:32:36,640 Speaker 7: end up that the people who are having to provide 574 00:32:36,680 --> 00:32:38,719 Speaker 7: that support are going to have to provide more of 575 00:32:38,760 --> 00:32:42,480 Speaker 7: it more often than would otherwise be the case, and 576 00:32:42,520 --> 00:32:45,200 Speaker 7: that is a risk for the agricultural economy. The Congress, 577 00:32:45,240 --> 00:32:49,080 Speaker 7: i know, grapples with this on a consistent basis to 578 00:32:49,160 --> 00:32:55,320 Speaker 7: try and determine the appropriate and most effective place level 579 00:32:55,400 --> 00:32:57,640 Speaker 7: for this right. It needs to be enough to ensure 580 00:32:57,680 --> 00:32:59,719 Speaker 7: that we safeguard to stuff that we think we need 581 00:32:59,760 --> 00:33:02,840 Speaker 7: to say safeguard for the best interests of the country, 582 00:33:03,240 --> 00:33:06,400 Speaker 7: but not so much as to create bad risk taking 583 00:33:06,480 --> 00:33:14,160 Speaker 7: behavior or unsustainable subsidies, or to stimulate overproduction that we 584 00:33:14,240 --> 00:33:16,280 Speaker 7: don't or don't want her need. 585 00:33:17,120 --> 00:33:20,040 Speaker 11: If we don't have a strong agriculture sector, if we 586 00:33:20,120 --> 00:33:23,760 Speaker 11: can't feed ourselves, we are no longer the superpower in 587 00:33:23,880 --> 00:33:26,480 Speaker 11: the world. And so all of this it's a complicated 588 00:33:26,760 --> 00:33:30,000 Speaker 11: sort of balance that we're striking that we're working to achieve. 589 00:33:30,360 --> 00:33:34,280 Speaker 2: President Trump's Secretary of Agriculture, Brook Rollins, has a packed 590 00:33:34,360 --> 00:33:37,360 Speaker 2: travel agenda, visiting the likes of the UK and Italy 591 00:33:37,560 --> 00:33:41,120 Speaker 2: and scheduling trips to India, Brazil, and Peru, all in 592 00:33:41,160 --> 00:33:45,280 Speaker 2: an effort to drum up overseas interest in US agriculture. 593 00:33:45,160 --> 00:33:48,840 Speaker 11: Specific to soybean corn. Really are roa croppers. That's really 594 00:33:48,920 --> 00:33:52,120 Speaker 11: a very direct result of China. And I know we're 595 00:33:52,120 --> 00:33:55,240 Speaker 11: making progress on China, will continue to make progress hopefully, 596 00:33:55,480 --> 00:33:59,600 Speaker 11: but if we don't opening up markets all over the world, Listen, 597 00:34:00,000 --> 00:34:02,880 Speaker 11: thank you. For example, charges a ten percent tariff on 598 00:34:02,960 --> 00:34:06,520 Speaker 11: average on American products, and vice versa, we only charge 599 00:34:06,560 --> 00:34:09,800 Speaker 11: five percent. That's two x The average tariff charge around 600 00:34:09,800 --> 00:34:12,719 Speaker 11: the world is about fifteen percent on American products. When 601 00:34:12,719 --> 00:34:16,040 Speaker 11: we charge on average five percent, we've been taken advantage 602 00:34:16,080 --> 00:34:18,960 Speaker 11: of over and over and over again. So as we 603 00:34:19,040 --> 00:34:21,840 Speaker 11: are realigning, we're also opening up these markets with the 604 00:34:21,880 --> 00:34:25,440 Speaker 11: trade deal. So you'll continue to see this moving forward. Now, 605 00:34:25,800 --> 00:34:29,280 Speaker 11: if around harvest time into the summer beginning of the fall, 606 00:34:29,640 --> 00:34:33,120 Speaker 11: we see some real economic harm with our farmers, our 607 00:34:33,160 --> 00:34:37,800 Speaker 11: president has been unequivocal, unequivocal in saying that he's got 608 00:34:37,840 --> 00:34:41,040 Speaker 11: the farmers back, and if there is short term consequences, 609 00:34:41,360 --> 00:34:44,160 Speaker 11: we'll make sure to do everything we can to mitigate that. 610 00:34:44,840 --> 00:34:48,320 Speaker 2: Yet mitigation through subsidies could be detrimental to the farmers 611 00:34:48,360 --> 00:34:50,800 Speaker 2: of today and the generations to come. 612 00:34:51,360 --> 00:34:54,320 Speaker 7: I'm a big believer that Ultimately, market forces are the 613 00:34:54,360 --> 00:34:59,239 Speaker 7: most important thing. But government policy can become can be 614 00:34:59,280 --> 00:35:01,680 Speaker 7: either tailwind or a headwind, or it can be sometimes 615 00:35:01,680 --> 00:35:03,560 Speaker 7: it's confused, and it's both at the same time. 616 00:35:03,960 --> 00:35:07,280 Speaker 2: And right now, the market forces have swung against farmers. 617 00:35:07,840 --> 00:35:10,480 Speaker 8: So you put that all together, it's not good business 618 00:35:10,520 --> 00:35:13,520 Speaker 8: to be a farmer in America today. And what the 619 00:35:13,560 --> 00:35:15,920 Speaker 8: business is not good? What you see is that ultimately 620 00:35:15,960 --> 00:35:19,480 Speaker 8: some farmers will call the day. But more importantly, and 621 00:35:19,560 --> 00:35:21,319 Speaker 8: I think that here is the big problem, is that 622 00:35:21,320 --> 00:35:23,880 Speaker 8: we are going to see the children of those farmers 623 00:35:23,880 --> 00:35:27,400 Speaker 8: deciding that farming is not their way of living. 624 00:35:28,920 --> 00:35:30,880 Speaker 1: Right now, I'm going to I say, I hope to 625 00:35:30,880 --> 00:35:32,600 Speaker 1: come back and you know, try some new things on 626 00:35:32,640 --> 00:35:34,359 Speaker 1: the farm and continue to grow it. 627 00:35:35,800 --> 00:35:39,799 Speaker 2: America's history is rooted in agriculture. For JD. Myers and 628 00:35:39,800 --> 00:35:43,040 Speaker 2: Stuve Swanson, it's running the family for generations and their 629 00:35:43,120 --> 00:35:46,840 Speaker 2: children are set to continue the tradition. But for the 630 00:35:46,880 --> 00:35:50,120 Speaker 2: tradition to continue, they will need robust export markets for 631 00:35:50,160 --> 00:35:54,160 Speaker 2: what they produce. The technology is there, the land is fertile, 632 00:35:54,560 --> 00:35:56,759 Speaker 2: but ultimately there has to be a solid business to 633 00:35:56,840 --> 00:36:05,800 Speaker 2: make sure someone's around to farm it. Coming up breaking 634 00:36:05,880 --> 00:36:08,480 Speaker 2: up may not be hard to do after all, As 635 00:36:08,520 --> 00:36:11,600 Speaker 2: Discovery moves to break up with Warner Brothers, even as 636 00:36:11,680 --> 00:36:15,680 Speaker 2: Paramount Global tries to get together with sky Dance. That's 637 00:36:15,719 --> 00:36:29,040 Speaker 2: next on Wall Street Week. This is a story about 638 00:36:29,080 --> 00:36:33,440 Speaker 2: the company we keep and the company we lose. Sometimes 639 00:36:33,440 --> 00:36:36,080 Speaker 2: the world of corporate restructuring seems like an episode of 640 00:36:36,080 --> 00:36:39,200 Speaker 2: The Bachelor, what with all the theatrics of getting together 641 00:36:39,360 --> 00:36:42,440 Speaker 2: and then very publicly breaking up when the partnership doesn't 642 00:36:42,480 --> 00:36:43,480 Speaker 2: go as planned. 643 00:36:44,560 --> 00:36:48,040 Speaker 9: Warner Brothers Discovery announcing that they would be splitting into 644 00:36:48,080 --> 00:36:52,160 Speaker 9: two different companies. Changes are coming to comcasts, the Media 645 00:36:52,320 --> 00:36:55,400 Speaker 9: Giant announcing it will spin off its cable TV channels, 646 00:36:55,400 --> 00:36:57,640 Speaker 9: including MSNBC, a. 647 00:36:57,719 --> 00:37:03,960 Speaker 2: Deal finally between CBS and Ycom. The media world has 648 00:37:04,000 --> 00:37:07,360 Speaker 2: been particularly eager to break up and get back together again. 649 00:37:07,960 --> 00:37:11,480 Speaker 2: CBS merged with Vicom in nineteen ninety nine, split in 650 00:37:11,520 --> 00:37:15,120 Speaker 2: two thousand and five, and came back together in twenty nineteen. 651 00:37:15,800 --> 00:37:19,200 Speaker 2: Now renamed Paramount Global. It's on its way to merging 652 00:37:19,239 --> 00:37:22,600 Speaker 2: with sky Dance, and the saga of Warner Brothers is 653 00:37:22,760 --> 00:37:24,120 Speaker 2: almost as complicated. 654 00:37:24,920 --> 00:37:27,399 Speaker 10: It's kind of the trend, I think, and it's a 655 00:37:27,440 --> 00:37:30,000 Speaker 10: cycle that seems to happen over and over again, and 656 00:37:30,080 --> 00:37:32,520 Speaker 10: people don't really learn their lessons. You know, a well, 657 00:37:32,600 --> 00:37:35,480 Speaker 10: Time Warner was not that much different than Time Warner, 658 00:37:35,680 --> 00:37:39,400 Speaker 10: you know then versus how you look at Warner Discovery 659 00:37:39,440 --> 00:37:41,320 Speaker 10: today and how they saw aol. 660 00:37:41,800 --> 00:37:44,880 Speaker 2: Mark Patrikoff has spent a career as an investment banker 661 00:37:44,920 --> 00:37:49,759 Speaker 2: and technology investor, specializing in media and entertainment deals. He 662 00:37:49,800 --> 00:37:54,480 Speaker 2: now heads Patrikoff Company, working with athletes on their private investments. 663 00:37:54,960 --> 00:37:57,960 Speaker 10: Content's always going to be the most important thing. It's 664 00:37:58,000 --> 00:38:01,239 Speaker 10: one continuous part of our industry, and we know you 665 00:38:01,320 --> 00:38:04,480 Speaker 10: can't really change radically. It's about talent and creativity and 666 00:38:04,520 --> 00:38:07,120 Speaker 10: it continues to hold value, and distribution will catch up 667 00:38:07,160 --> 00:38:10,319 Speaker 10: and recreate itself, and new technologies will coome. But the 668 00:38:10,360 --> 00:38:11,880 Speaker 10: contents the constant. 669 00:38:12,760 --> 00:38:15,000 Speaker 2: With all the back and forth. When does it make 670 00:38:15,080 --> 00:38:19,480 Speaker 2: sense to merge companies or break them up? And most importantly, 671 00:38:19,680 --> 00:38:22,480 Speaker 2: when does it work for shareholders? And when does it not? 672 00:38:23,239 --> 00:38:26,960 Speaker 12: We see every year add half a dozen to a 673 00:38:27,080 --> 00:38:30,520 Speaker 12: dozen of these spin offs and breakups of S and 674 00:38:30,560 --> 00:38:34,480 Speaker 12: P five hundred companies. The long history of that is 675 00:38:34,520 --> 00:38:39,080 Speaker 12: that on average, they perform average and they end up 676 00:38:39,280 --> 00:38:42,719 Speaker 12: essentially receding to S and P. Five hundred kinds of returns. 677 00:38:43,800 --> 00:38:48,000 Speaker 2: Greg Taxon is the managing member of Spotlight Advisors, consulting 678 00:38:48,040 --> 00:38:52,960 Speaker 2: with corporate boards on activist shareholder campaigns, shareholder proposals, and 679 00:38:53,080 --> 00:38:54,440 Speaker 2: capital structure debates. 680 00:38:55,120 --> 00:38:58,759 Speaker 12: There are outliers where splitting a business makes a lot 681 00:38:58,800 --> 00:39:02,440 Speaker 12: of sense and can actually add value, both on a 682 00:39:02,560 --> 00:39:06,920 Speaker 12: valuation perspective or a growth and opportunity perspective, But by 683 00:39:06,960 --> 00:39:10,080 Speaker 12: and large, these things don't really create value. I think 684 00:39:10,080 --> 00:39:13,080 Speaker 12: when you look at those indices which which basically buy 685 00:39:13,280 --> 00:39:17,279 Speaker 12: the spun out entities and hold them, they tend to 686 00:39:17,360 --> 00:39:20,920 Speaker 12: perform in line or under the S and P. Five hundred, 687 00:39:21,360 --> 00:39:25,399 Speaker 12: So on average, these things don't really create value. There 688 00:39:25,440 --> 00:39:28,399 Speaker 12: are times when a spin out or a sale can 689 00:39:28,640 --> 00:39:32,880 Speaker 12: enable something different, but it's only really when the spin 690 00:39:32,920 --> 00:39:36,440 Speaker 12: out enables the two businesses to engage in some activity 691 00:39:36,760 --> 00:39:39,680 Speaker 12: or attract people or investors that are different than the 692 00:39:39,760 --> 00:39:41,800 Speaker 12: conglomerate that these things really work. 693 00:39:42,760 --> 00:39:45,400 Speaker 2: The fact that a company has different business lines growing 694 00:39:45,400 --> 00:39:48,600 Speaker 2: at different rates doesn't necessarily mean it needs to break 695 00:39:48,600 --> 00:39:49,200 Speaker 2: itself up. 696 00:39:49,719 --> 00:39:52,560 Speaker 12: The fact is that the people who are running every 697 00:39:52,600 --> 00:39:55,680 Speaker 12: division inside a business are pretty focused on that business, 698 00:39:56,120 --> 00:39:58,920 Speaker 12: and it's unclear to me at least how separating it 699 00:39:58,960 --> 00:40:02,600 Speaker 12: into either a separate public company or selling it creates 700 00:40:02,960 --> 00:40:05,640 Speaker 12: more focus out of the people whose job it is 701 00:40:06,120 --> 00:40:09,840 Speaker 12: to run that business. There are very complex businesses that 702 00:40:09,880 --> 00:40:15,080 Speaker 12: perform incredibly well. Think Amazon, which has two very disparate businesses, 703 00:40:15,200 --> 00:40:17,960 Speaker 12: with Amazon Web Services and all of their retail and 704 00:40:18,000 --> 00:40:21,680 Speaker 12: even within retail, an advertising business, of physical business, with 705 00:40:21,719 --> 00:40:24,520 Speaker 12: Whole Foods and online business. They've got lots of things. 706 00:40:24,680 --> 00:40:28,120 Speaker 12: They seem pretty focused on creating profit and growth and value, 707 00:40:28,200 --> 00:40:31,080 Speaker 12: and it's unclear to me that separating any one of 708 00:40:31,120 --> 00:40:33,840 Speaker 12: those putting Whole Foods back out as a public company 709 00:40:33,920 --> 00:40:36,520 Speaker 12: would actually create more focus on the part of the 710 00:40:36,520 --> 00:40:37,800 Speaker 12: people that run that business. 711 00:40:38,280 --> 00:40:41,800 Speaker 2: Julia Sneehor is a professor at the University of Navara. 712 00:40:42,360 --> 00:40:45,920 Speaker 2: Professor Sneehorr's study of spinoffs like Hewlett Packard splitting from 713 00:40:45,960 --> 00:40:49,040 Speaker 2: Hewlett Packard Enterprises has led her to conclude that there 714 00:40:49,080 --> 00:40:52,840 Speaker 2: is what she calls an ecosystem that can trigger corporate splits, 715 00:40:53,320 --> 00:40:57,040 Speaker 2: one driven by the balance between complexity and complementarity. 716 00:40:57,880 --> 00:41:04,280 Speaker 5: A recent split off eBay from PayPal, where the digital 717 00:41:04,320 --> 00:41:07,759 Speaker 5: payment the fintech started to evolve much faster than the 718 00:41:07,800 --> 00:41:13,360 Speaker 5: secondhand marketplaces where the eBay, the corporate parent, was competing, 719 00:41:13,960 --> 00:41:18,120 Speaker 5: and so this difference in growth between the payment business 720 00:41:18,120 --> 00:41:24,280 Speaker 5: model where PayPal was looking at serving many different customers 721 00:41:24,280 --> 00:41:27,040 Speaker 5: in addition to eBay at a much quicker pace with 722 00:41:27,200 --> 00:41:31,680 Speaker 5: a much higher complexity, was very different from the marketplace, 723 00:41:32,239 --> 00:41:37,000 Speaker 5: more mature business model of eBay, and this divergence over time, 724 00:41:37,400 --> 00:41:41,040 Speaker 5: this increasing difference between the two business models within the 725 00:41:41,040 --> 00:41:43,080 Speaker 5: same company led to a split in this case in 726 00:41:43,120 --> 00:41:47,719 Speaker 5: the case of HP, where HP was originally selling computers 727 00:41:47,800 --> 00:41:51,440 Speaker 5: selling printers with the razor and blade business model, but 728 00:41:51,640 --> 00:41:55,920 Speaker 5: it got also into software, particularly cloud, that started to 729 00:41:55,960 --> 00:41:58,360 Speaker 5: grow at a very different pace in the twenty tens 730 00:41:58,719 --> 00:42:02,799 Speaker 5: compared to what was happening in the computer commoditizing ecosystem. 731 00:42:03,080 --> 00:42:06,920 Speaker 5: We saw in nineteen eighties a lot of conglomerates building up, 732 00:42:07,000 --> 00:42:09,880 Speaker 5: and in the last twenty years we saw the vce 733 00:42:09,920 --> 00:42:14,040 Speaker 5: G simen several companies in this wave of the conglomerization 734 00:42:14,680 --> 00:42:19,640 Speaker 5: becoming much more focused and investors looking for pure place 735 00:42:20,000 --> 00:42:22,520 Speaker 5: out there. In the last ten twenty years, we see 736 00:42:22,560 --> 00:42:25,920 Speaker 5: the separation between investors who want growth and investors who 737 00:42:25,920 --> 00:42:30,080 Speaker 5: want value, and for a company that pursues both that 738 00:42:30,160 --> 00:42:32,920 Speaker 5: has a cash caou business that is delivering high dividends 739 00:42:32,920 --> 00:42:36,080 Speaker 5: to investors and has another business that is growing a 740 00:42:36,120 --> 00:42:38,160 Speaker 5: lot and needs a lot of investment. It's very hard 741 00:42:38,160 --> 00:42:41,080 Speaker 5: to balance these two businesses. It's like riding a skateboard 742 00:42:41,120 --> 00:42:44,040 Speaker 5: with one foot and writing a scooter or formula one 743 00:42:44,080 --> 00:42:45,399 Speaker 5: car on the other foot. 744 00:42:46,320 --> 00:42:49,319 Speaker 2: When it comes to the media sector, Patrokov's experience is 745 00:42:49,320 --> 00:42:52,640 Speaker 2: that these spin offs and consolidations are all about the 746 00:42:52,680 --> 00:42:55,240 Speaker 2: relationship between distribution and content. 747 00:42:55,760 --> 00:42:59,000 Speaker 10: It seems like these companies merge when they feel afraid 748 00:42:59,040 --> 00:43:02,239 Speaker 10: of the distribution and they need to own the distribution. 749 00:43:02,400 --> 00:43:06,960 Speaker 10: But then when a better distribution product where technology enters, 750 00:43:07,520 --> 00:43:09,520 Speaker 10: they of course want to move to that, and that 751 00:43:09,600 --> 00:43:11,480 Speaker 10: devalues the deal that. 752 00:43:11,440 --> 00:43:12,320 Speaker 5: They did when they merged. 753 00:43:12,400 --> 00:43:14,919 Speaker 10: It's like cells coming together and cell separating and cells 754 00:43:14,920 --> 00:43:19,040 Speaker 10: coming together again. Discovery with all these networks really is 755 00:43:19,080 --> 00:43:22,640 Speaker 10: a legacy of the cable industry. So cable was distribution, 756 00:43:23,600 --> 00:43:27,720 Speaker 10: content build distribution, and as soon as that distribution channel 757 00:43:27,719 --> 00:43:32,520 Speaker 10: seem less interesting late nineties, you had AOL convincing the 758 00:43:32,600 --> 00:43:34,960 Speaker 10: media giants that they were the future of distribution. 759 00:43:36,000 --> 00:43:40,000 Speaker 2: Cells may come together and separate regularly in the media sector, 760 00:43:40,480 --> 00:43:43,600 Speaker 2: but when it comes to the particular area of sports entertainment, 761 00:43:44,200 --> 00:43:47,200 Speaker 2: to get together, break up, and get back together trend 762 00:43:47,360 --> 00:43:48,359 Speaker 2: doesn't apply. 763 00:43:49,800 --> 00:43:53,120 Speaker 10: Ninety eight of the one hundred most watched television shows 764 00:43:53,120 --> 00:43:55,560 Speaker 10: in the last twelve months for sports programming, I mean 765 00:43:55,840 --> 00:44:01,320 Speaker 10: appointment based programming, live entertainment. It's all tobit nonscripted of course, 766 00:44:01,360 --> 00:44:02,640 Speaker 10: because you don't know the outcome. 767 00:44:03,239 --> 00:44:06,040 Speaker 2: Why isn't there delution and a lot of entertainment, You 768 00:44:06,080 --> 00:44:08,759 Speaker 2: get delution over time as you add more and more. 769 00:44:08,880 --> 00:44:11,000 Speaker 2: So far in sports, I can't see it. 770 00:44:10,880 --> 00:44:12,799 Speaker 10: Because I think the cream rises to the top. And 771 00:44:12,840 --> 00:44:16,240 Speaker 10: it's the same argument that people have with women's sports. 772 00:44:16,239 --> 00:44:20,240 Speaker 10: Ever generate significant amounts of value and our antlery sports, 773 00:44:20,280 --> 00:44:22,799 Speaker 10: whether it's volleyball or you know, men's or women's or 774 00:44:23,120 --> 00:44:26,839 Speaker 10: the Olympics. But basically there's so much value in these 775 00:44:27,640 --> 00:44:30,000 Speaker 10: few assets that are out there, and they put so 776 00:44:30,080 --> 00:44:34,000 Speaker 10: much money and energy into marketing them and maintaining them 777 00:44:34,440 --> 00:44:36,919 Speaker 10: that the consumer only has so many hours in the day, 778 00:44:37,440 --> 00:44:40,839 Speaker 10: and if you are a fanatic of football or basketball, 779 00:44:40,960 --> 00:44:43,200 Speaker 10: there's enough to satiate you over the course of a 780 00:44:43,239 --> 00:44:45,920 Speaker 10: twelve month calendar year that you're not really going to 781 00:44:46,000 --> 00:44:48,360 Speaker 10: take a lot of time to put it to other sports. 782 00:44:48,960 --> 00:44:51,799 Speaker 2: Unlike the rest of the media world, sports investors are 783 00:44:51,800 --> 00:44:54,399 Speaker 2: looking to get in rather than looking to get out 784 00:44:54,480 --> 00:44:58,120 Speaker 2: of slower growing business lines. So what does that mean 785 00:44:58,160 --> 00:44:59,239 Speaker 2: for potential investors. 786 00:44:59,520 --> 00:45:02,239 Speaker 10: There are plenty of funds out there now that have 787 00:45:02,360 --> 00:45:05,240 Speaker 10: raised a large amount of money to take minority stakes 788 00:45:05,280 --> 00:45:09,319 Speaker 10: in NFL teams, MLB teams, NBA teams. I think it's 789 00:45:09,360 --> 00:45:12,399 Speaker 10: an interesting idea. I think it helps professionalize the sport. 790 00:45:12,440 --> 00:45:15,560 Speaker 10: It's certainly driven up the valuations. I'm just not sure 791 00:45:15,560 --> 00:45:19,920 Speaker 10: how those limited investors, those small investors buying three percent 792 00:45:19,960 --> 00:45:22,160 Speaker 10: of the Spurs or five percent of the Giants, or 793 00:45:22,160 --> 00:45:25,720 Speaker 10: three percent of Dolphins, without a path to control, without 794 00:45:25,719 --> 00:45:31,239 Speaker 10: a path to exit, without information rights, it's probably inevitable. 795 00:45:31,480 --> 00:45:32,719 Speaker 10: I think the teams are going to have to be 796 00:45:32,719 --> 00:45:35,520 Speaker 10: public entities at some point down the road. The valuations 797 00:45:35,560 --> 00:45:37,560 Speaker 10: are getting too high. There won't be enough billionaires to 798 00:45:37,560 --> 00:45:40,919 Speaker 10: buy them. It will require board of directors to run 799 00:45:40,960 --> 00:45:46,240 Speaker 10: businesses of that scale. Community representation. Minorities are not represented 800 00:45:46,239 --> 00:45:48,200 Speaker 10: at the ownership level the way they should be, so 801 00:45:48,520 --> 00:45:50,799 Speaker 10: you need racial diversity at the ownership level. There's a 802 00:45:50,800 --> 00:45:53,000 Speaker 10: lot of things that are going to come into play now, 803 00:45:53,200 --> 00:45:57,279 Speaker 10: as these are no longer family businesses run by patriarchs 804 00:45:57,440 --> 00:45:59,920 Speaker 10: of family run companies from the fifties. 805 00:46:00,480 --> 00:46:03,360 Speaker 2: Whether it's traditional media coming to terms with the changing 806 00:46:03,400 --> 00:46:07,160 Speaker 2: world of distribution, or sports leagues and teams basking in 807 00:46:07,200 --> 00:46:10,799 Speaker 2: the glow of ever increasing interest. The one constant is 808 00:46:10,840 --> 00:46:13,000 Speaker 2: the quality of content on offer. 809 00:46:13,480 --> 00:46:17,440 Speaker 10: Content is king. I think content is the one constant. 810 00:46:17,680 --> 00:46:22,080 Speaker 10: There will be content. Consumers will want to experience a 811 00:46:22,200 --> 00:46:26,120 Speaker 10: regional content, nonscripted content, sports content. What I do for 812 00:46:26,160 --> 00:46:28,840 Speaker 10: a living. I think that that's something you could always 813 00:46:28,960 --> 00:46:31,920 Speaker 10: count on as having value. And then the question is 814 00:46:32,200 --> 00:46:35,239 Speaker 10: how has that value achieved? How do you monetize that value? 815 00:46:35,360 --> 00:46:38,360 Speaker 2: And there is ultimately one source for that high quality, 816 00:46:38,480 --> 00:46:42,000 Speaker 2: compelling content and one rule that has stood the test 817 00:46:42,040 --> 00:46:45,520 Speaker 2: of time. I work for a manner in cap cities ABC. 818 00:46:45,680 --> 00:46:47,560 Speaker 2: He used to say, sooner or later, all the money 819 00:46:47,560 --> 00:46:49,839 Speaker 2: goes to the talent. He was talking about shortstops back then, 820 00:46:50,000 --> 00:46:51,360 Speaker 2: I Kevin, is that true? 821 00:46:51,440 --> 00:46:54,040 Speaker 10: Sure? Look how much money the NFL quarterbacks are making. 822 00:46:54,200 --> 00:46:56,240 Speaker 10: There's going to be a separate salary cap for quarterbacks 823 00:46:56,280 --> 00:46:58,560 Speaker 10: for the next two or three years. I'll also give 824 00:46:58,600 --> 00:47:00,680 Speaker 10: you a prediction and hopefully we'll sit down again in 825 00:47:00,880 --> 00:47:05,080 Speaker 10: five years. It's inconceivable me to think that NFL quarterbacks 826 00:47:05,080 --> 00:47:07,759 Speaker 10: and other prime positions, and then we'll go to the 827 00:47:07,840 --> 00:47:10,319 Speaker 10: NBA and other sports won't be owners of the teams 828 00:47:10,360 --> 00:47:12,200 Speaker 10: they play on, and they'll be part of their contracts. 829 00:47:12,680 --> 00:47:15,400 Speaker 10: Why would a chief technology officer at a Facebook or 830 00:47:15,440 --> 00:47:17,879 Speaker 10: Google get equity in that business, But Joe Burrow doesn't 831 00:47:17,920 --> 00:47:21,719 Speaker 10: get equity in the Cincinnati Bengals. So the talent is 832 00:47:21,800 --> 00:47:25,200 Speaker 10: driving the value. They are part of the ecosystem that 833 00:47:25,680 --> 00:47:29,200 Speaker 10: historically had been undervalued while the owners and the media 834 00:47:29,239 --> 00:47:32,080 Speaker 10: rights holders and the people building stadiums were creating all 835 00:47:32,080 --> 00:47:35,040 Speaker 10: the wealth. But that pendulum has shifted, and that's part 836 00:47:35,080 --> 00:47:38,200 Speaker 10: of our business model. But more importantly, it's appropriate because 837 00:47:38,239 --> 00:47:40,600 Speaker 10: they are the ones who are doing the work. 838 00:47:41,320 --> 00:47:43,640 Speaker 2: In the end, it turns out that the company we 839 00:47:43,719 --> 00:47:46,920 Speaker 2: need to keep isn't so much the corporate form or name. 840 00:47:47,480 --> 00:47:51,240 Speaker 2: It's the company of outstanding talent. Talent that can create 841 00:47:51,280 --> 00:47:55,880 Speaker 2: the content that he is king that does it for us. 842 00:47:55,880 --> 00:47:58,160 Speaker 2: Here at Wall Street Week, I'm David Weston. See you 843 00:47:58,320 --> 00:48:08,240 Speaker 2: next week for more stories of capitalism.