WEBVTT - Bloomberg Wall Street Week - November 10th, 2023 0:00:00.240 --> 0:00:02.440 This is Bloomberg Wall Street Week. 0:00:02.480 --> 0:00:04.400 I mean may not have an overall recesion. We're having 0:00:04.400 --> 0:00:06.680 a rolling recession. A kind of role looks pretty strongly 0:00:06.680 --> 0:00:08.840 it is when it comes to jobs. The financial stories 0:00:08.920 --> 0:00:11.920 that shape our world. Three major regional bank failures send 0:00:12.000 --> 0:00:14.680 shockwaves through the banking system. We're all trying to figure 0:00:14.680 --> 0:00:17.320 out what to make of generative AI through. 0:00:17.160 --> 0:00:19.320 The eyes of the most influential voices. 0:00:19.440 --> 0:00:22.400 Welcome down, Doctor Paul Krugman, Ryan Moynihan, a Bank of America, 0:00:22.520 --> 0:00:25.320 Zebra Lair of the Paulson Institute, Glenn Hubbard of the 0:00:25.320 --> 0:00:26.280 Columbia Business School. 0:00:26.280 --> 0:00:30.120 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.520 --> 0:00:34.560 A war intensifies, an election, hints at what lies ahead, 0:00:34.920 --> 0:00:38.720 a startup Darling goes bankrupt, and a king lays out 0:00:38.760 --> 0:00:42.360 his commitment to fight inflation. This is Bloomberg Wall Street Week. 0:00:42.479 --> 0:00:46.600 I'm David Weston. This week Nobel Laureate Michael Spence on 0:00:46.680 --> 0:00:48.559 the promise of generative AI. 0:00:49.520 --> 0:00:54.040 Generative AI is mainly, not exclusively, but mainly going to 0:00:54.120 --> 0:00:56.960 turn out to be a powerful digital assistant. 0:00:57.600 --> 0:01:00.800 Rock Creek Asny Bacheloss, explains how to make money investing 0:01:00.840 --> 0:01:02.280 in climate in China. 0:01:03.040 --> 0:01:05.480 While a lot of countries in the West talked about it, 0:01:05.600 --> 0:01:10.360 the Chinese actually became more than eighty percent of solar. 0:01:10.360 --> 0:01:13.440 And Melissa Karney is the Aspen Economic Strategy Group on 0:01:13.600 --> 0:01:16.679 building economic resilience by addressing the deficit. 0:01:17.120 --> 0:01:19.440 It's important that people are now paying attention to this. 0:01:19.800 --> 0:01:22.360 I mean, we're really on an unsustainable path. 0:01:35.640 --> 0:01:39.360 Global Wall Street spent another week watching Israel's war with 0:01:39.400 --> 0:01:43.959 Hamas unfold as Israeli forces surrounded Gaza City and the 0:01:43.959 --> 0:01:45.240 fighting intensify. 0:01:46.040 --> 0:01:50.000 Ground oppressions by the israel Defense Forces and continued bombardments 0:01:50.680 --> 0:01:54.560 are hitting civilians. At the same time, Hamas and other 0:01:54.640 --> 0:01:58.880 militants use civilians as human shields and continue to launch 0:01:58.960 --> 0:02:02.200 rockets in these streme in its league towards Israel, and. 0:02:02.160 --> 0:02:04.240 The United States joined much of the rest of the 0:02:04.240 --> 0:02:07.480 world in calling for a humanitarian pause. 0:02:08.360 --> 0:02:12.120 I don't think you know Israel is interested in a 0:02:12.160 --> 0:02:16.280 cease fire at this point, but they are perhaps willing 0:02:16.320 --> 0:02:18.680 to have what we do call humanitarian pauses. 0:02:19.200 --> 0:02:23.320 Off Your elections in Ohio, Kentucky, and Virginia tipped decidedly 0:02:23.400 --> 0:02:24.440 toward the Democrats. 0:02:24.880 --> 0:02:28.919 What's fascinating about this series of elections and the ones 0:02:28.960 --> 0:02:32.160 we had in November of twenty twenty two for the 0:02:32.200 --> 0:02:35.239 midterm election is that they're saying the same. 0:02:35.040 --> 0:02:39.440 Thing, suggesting maybe that abortion rights could play a role 0:02:39.480 --> 0:02:42.640 in the presidential election less than one year away. 0:02:43.400 --> 0:02:46.160 If you look at from the midterms to last night, 0:02:46.800 --> 0:02:53.680 from California to Kansas, Ohio to Virginia, the voters said, look, 0:02:54.360 --> 0:02:56.280 the government should not be telling a woman what. 0:02:56.240 --> 0:02:57.000 To do with her body. 0:02:57.600 --> 0:03:00.679 In two short years, the real estate startup work went 0:03:00.720 --> 0:03:05.400 for a huge potential IPO to asspack to bankruptcy. I 0:03:05.520 --> 0:03:07.079 think billions in the process. 0:03:07.720 --> 0:03:11.720 As a company, we need to accept this reality and 0:03:11.840 --> 0:03:15.480 also or need to learn the lesson from this for 0:03:15.600 --> 0:03:17.280 our future investment activity. 0:03:18.120 --> 0:03:21.480 On Wednesday, the picket lines came down in Hollywood as 0:03:21.520 --> 0:03:24.840 the studios reached a tentative agreement with SAG after raising 0:03:24.919 --> 0:03:28.560 hopes that movies and TV shows would get back into production. 0:03:29.680 --> 0:03:34.400 This and a very clear message that union's work, labor movements. 0:03:34.040 --> 0:03:37.280 Work, and no less than the King of England weighed 0:03:37.360 --> 0:03:40.480 in on the need to fight for an economic soft landing. 0:03:41.360 --> 0:03:45.400 My government will continue to take action to bring down 0:03:45.440 --> 0:03:50.240 inflation to ease the cost of living for families. And 0:03:50.360 --> 0:03:54.080 help businesses fund new jobs and investments. 0:03:55.480 --> 0:03:59.240 And then after the equity markets closed on Friday, Movies 0:03:59.280 --> 0:04:02.200 cut the US credit outlook to negative as the country 0:04:02.240 --> 0:04:05.720 looks at yet another government funding deadline next Friday. Through 0:04:05.760 --> 0:04:07.600 the week, the bond market was on something of a 0:04:07.680 --> 0:04:10.040 roller coaster, with the yield on the ten year ranging 0:04:10.080 --> 0:04:12.240 as low as four point four to seven, and then 0:04:12.280 --> 0:04:15.000 it shot up again late Friday after the Moody's news 0:04:15.120 --> 0:04:17.880 to end the week at four point sixty five. Stocks 0:04:17.920 --> 0:04:19.720 were a bit more upbeat as the S and P 0:04:19.800 --> 0:04:22.200 five hundred added another one point three percent to come 0:04:22.360 --> 0:04:25.159 within thirty points of the year end median number of 0:04:25.200 --> 0:04:28.120 four four three five that our Bloomberg elves are projecting 0:04:28.200 --> 0:04:31.600 right now, while the NASDAD gained nearly two point four percent. 0:04:31.880 --> 0:04:34.120 To explain it all to us, we welcome back now 0:04:34.160 --> 0:04:37.279 to Sonatasai. She is Franklin Temple and chief investment officer 0:04:37.279 --> 0:04:39.080 for fixed income. So thank you so much for being 0:04:39.120 --> 0:04:41.200 back with us. So before we get to what happened 0:04:41.200 --> 0:04:42.960 over all in the week, what about there right at 0:04:42.960 --> 0:04:47.120 the end on Friday with the Moody's downgraded US credit, 0:04:47.360 --> 0:04:48.599 How material is that? 0:04:50.160 --> 0:04:53.440 So you know, material is they're talking about, does it 0:04:53.600 --> 0:04:58.039 have an important impact on people's desire or ability to 0:04:58.080 --> 0:05:01.080 hold US debt. It's not going to be so important, 0:05:01.160 --> 0:05:07.160 but as a signal of how dysfunctional the US policy 0:05:07.200 --> 0:05:10.080 making is right now, it's very important, I'd say. I mean, 0:05:10.120 --> 0:05:15.240 it's a reminder that we are looking at an extremely 0:05:15.360 --> 0:05:20.240 serious fiscal problem between the debt and the deficit, and 0:05:20.520 --> 0:05:24.080 the way we are operating right now is not very reasonable. 0:05:24.400 --> 0:05:28.640 So it's a good reminder that fiscal policy is an 0:05:28.680 --> 0:05:32.520 issue and markets should pay potentially more attention than they 0:05:32.560 --> 0:05:34.360 are to fiscal issues. 0:05:34.800 --> 0:05:36.720 And it comes against the backdrop of a fair amount 0:05:36.720 --> 0:05:38.680 of volatility in your neck of the woods, that is 0:05:38.720 --> 0:05:41.880 fixed income. We saw again this week the ups and downs. 0:05:41.920 --> 0:05:43.960 They may not have been quite as big, the amplitude 0:05:43.960 --> 0:05:46.440 maybe a litle less than it has been, but it's 0:05:46.440 --> 0:05:48.719 still a fair amount of volatility because I'm not sure 0:05:48.760 --> 0:05:50.520 the markets know where it's going. 0:05:51.839 --> 0:05:52.320 I think that. 0:05:52.320 --> 0:05:55.120 Actually, if you look at what's happening that markets, what 0:05:55.160 --> 0:06:01.440 we saw last week really was once again, we've been 0:06:01.520 --> 0:06:04.440 to this show, David right, We've done this before many 0:06:04.520 --> 0:06:08.080 times over the last year and a half. You have 0:06:08.120 --> 0:06:11.279 a FED meeting, the market here's what it wants to 0:06:11.320 --> 0:06:15.719 hear from what the Fed is saying, and runs with it. 0:06:16.160 --> 0:06:19.479 So what I think that Japowell was trying to do, 0:06:20.240 --> 0:06:22.560 not this week, but the week before, was to give 0:06:22.600 --> 0:06:26.120 the market a gentle nudge in the direction of a 0:06:26.320 --> 0:06:30.920 slightly more dubvish message. The market took that slightly dubbsh 0:06:31.040 --> 0:06:34.040 message and simply ran with it. We had a close 0:06:34.120 --> 0:06:38.200 to forty basis points rally in the tenure on the 0:06:38.240 --> 0:06:42.240 back of the Fed, on the back of slightly different 0:06:42.720 --> 0:06:47.680 than anticipated a schedule from Treasury in terms of issuance, 0:06:47.960 --> 0:06:50.440 and a slightly softer job market report. 0:06:50.640 --> 0:06:52.360 The three of them together do. 0:06:52.480 --> 0:06:56.960 Not change enough of what's happening on the ground to 0:06:57.200 --> 0:07:00.320 justify the type of rally we saw. And indeed, this 0:07:00.360 --> 0:07:02.599 week we've seen a bit of a sell off that 0:07:02.680 --> 0:07:05.479 roller coaster you were talking about. I think the market's 0:07:05.480 --> 0:07:09.560 still really really focused on trying to figure out whether 0:07:09.600 --> 0:07:14.720 the Fed or the Treasury can swoop in and make 0:07:14.760 --> 0:07:18.600 it all okay again so that rates can rally and 0:07:18.640 --> 0:07:20.080 we can go back to the races. 0:07:20.480 --> 0:07:22.800 Given that situation, So now, what's an investor to do? 0:07:23.400 --> 0:07:25.280 How do you try to protect yourself and actually make 0:07:25.360 --> 0:07:28.080 some money in this environment right now, cash is actually 0:07:28.080 --> 0:07:30.880 worth something. Now when your cash is worth something, but 0:07:31.720 --> 0:07:34.680 what do you do with your bond Portfoliot's talk about 0:07:34.680 --> 0:07:35.440 that specifically. 0:07:36.480 --> 0:07:38.080 So actually, you know you're right. 0:07:38.200 --> 0:07:41.720 Cash has been very good, good for people this year. 0:07:42.040 --> 0:07:45.960 You're getting a very good, very good, good return on cash. However, 0:07:46.320 --> 0:07:49.160 as we get towards the end of this year, I 0:07:49.200 --> 0:07:51.320 said that I've been saying for a while that the 0:07:51.320 --> 0:07:54.720 FED is likely to maintain higher rates for somewhat longer 0:07:54.760 --> 0:07:56.240 than the market is anticipating. 0:07:56.520 --> 0:07:57.920 We're not getting ready. 0:07:57.640 --> 0:08:00.960 We are certainly not forecasting a hundred basis points of 0:08:01.040 --> 0:08:03.560 rape cuts starting already from the middle of next year, 0:08:04.040 --> 0:08:05.160 as is being. 0:08:05.000 --> 0:08:06.760 Now priced by the market. 0:08:07.360 --> 0:08:11.360 Nonetheless, as we get towards the next several months, I 0:08:11.400 --> 0:08:14.680 think the time to start moving away from that very 0:08:14.800 --> 0:08:19.280 very short duration and cash in fixed income. It's coming 0:08:19.680 --> 0:08:22.600 because we are looking once you get ten years at 0:08:22.680 --> 0:08:25.880 RAM five, once you look at high quality investment, great 0:08:25.960 --> 0:08:31.040 credits and mortgages areas like this are yielding over six percent. 0:08:31.600 --> 0:08:36.560 These are actually pretty attractive for attractive yields. To start 0:08:36.679 --> 0:08:40.000 slowly averaging into a little bit of duration is how 0:08:40.040 --> 0:08:42.400 I would put it. I don't think we chase the 0:08:42.480 --> 0:08:45.439 yield because the type of volatility we've seen it's. 0:08:45.320 --> 0:08:46.080 Not gone away. 0:08:46.480 --> 0:08:48.640 I do think we're going to probably see five again, 0:08:48.960 --> 0:08:50.199 so there's time to. 0:08:50.200 --> 0:08:51.920 Start factoring that in. 0:08:52.400 --> 0:08:56.760 But averaging in a true fixed income portfolio, where you 0:08:56.840 --> 0:09:01.040 start adding a little bit of duration, it's a good 0:09:01.080 --> 0:09:03.920 idea to do it right now, around now, over the 0:09:03.920 --> 0:09:07.920 next three months, over the next six months, and I'm 0:09:07.960 --> 0:09:11.560 looking forward to fixed income actually playing that traditional role 0:09:12.040 --> 0:09:15.400 of delivering income rather than equity like returns. 0:09:15.880 --> 0:09:16.840 Looking at next. 0:09:16.640 --> 0:09:20.360 Year, I'm not looking for massive capital gains out of 0:09:20.360 --> 0:09:21.000 fixed income. 0:09:21.280 --> 0:09:25.000 What about trend? Sorry? What about what side? The United States? Europe? Japan? 0:09:26.120 --> 0:09:27.959 So that's a really interesting point. 0:09:28.000 --> 0:09:30.840 So in Europe, we actually think that the underlying growth 0:09:30.880 --> 0:09:35.320 fundamentals make duration plays in Europe potentially more attractive even 0:09:35.800 --> 0:09:39.320 than the US. So that's one area because growth in 0:09:39.360 --> 0:09:43.040 the euro area is simply not as well supported as 0:09:43.040 --> 0:09:45.040 it continues to be in the US. We're slowing in 0:09:45.080 --> 0:09:48.240 the US, but we're starting from a very good place. Japan, 0:09:48.400 --> 0:09:52.160 to me is the really fascinating one because Japan and 0:09:52.280 --> 0:09:56.360 Japanese investors have actually been a major source of support 0:09:56.440 --> 0:09:58.880 for the long end of the US yield cup because 0:09:58.960 --> 0:10:03.160 rates have been so low, and Japan within the G three, 0:10:02.840 --> 0:10:08.040 the BOG is very much behind the FED and the ECB. 0:10:07.960 --> 0:10:10.400 In terms of changing its Montrey policy stunts. 0:10:10.600 --> 0:10:12.600 Thank you so much to snaw this. I always great 0:10:12.600 --> 0:10:19.120 to have you with us. She's from Franklin Templeton. Coming up, 0:10:19.120 --> 0:10:22.240 what generative AI will mean for our jobs and whether 0:10:22.360 --> 0:10:26.360 we get to decide the Nobel Laureate Michael Spence of Stanford. 0:10:27.240 --> 0:10:31.320 You can influence the direction of technology and development, and 0:10:31.360 --> 0:10:33.960 I think you know within Santas and so on, and 0:10:34.000 --> 0:10:35.439 you should be influenced in. 0:10:35.400 --> 0:10:38.559 The direction of collaboration and augmentation. 0:10:39.760 --> 0:10:42.199 That's next on Wall Street Week on Bloomberg. 0:10:43.640 --> 0:10:47.880 This is Bloomberg Wall Street Week with David Weston from 0:10:48.000 --> 0:10:53.480 Bloomberg Radio. 0:10:55.640 --> 0:10:57.840 This is Wall Street Week. I'm David Weston. We know 0:10:57.960 --> 0:11:00.360 it's coming and we're told it's going to be big, 0:11:00.520 --> 0:11:03.240 But what generative AI will mean to our economy and 0:11:03.320 --> 0:11:06.240 our lives is yet to be determined, including what it 0:11:06.280 --> 0:11:09.560 will be doe to what jobs and productivity. For his analysis, 0:11:09.600 --> 0:11:12.680 we welcome now Michael Spence. He's Nobel Prize winner in economics. 0:11:12.760 --> 0:11:15.360 Diana Maritis of the Stanford Business School and co author 0:11:15.400 --> 0:11:18.480 with Gordon Brown and Muhammad al Area of Permacrisis, A 0:11:18.520 --> 0:11:21.480 Plan to fix a fractured world. So, doctor Spence, thank 0:11:21.520 --> 0:11:23.960 you so much for being with us. You've written an article, 0:11:24.120 --> 0:11:26.880 co author and article in Foreign Affairs, specifically the coming 0:11:26.920 --> 0:11:30.640 AI Economic Revolution. So you've thought through these things. First 0:11:30.679 --> 0:11:32.840 of I'll start with what the challenges are that we 0:11:32.920 --> 0:11:35.400 have in terms of the size of workforce and productivity 0:11:35.600 --> 0:11:37.200 that perhaps AI could help us on. 0:11:37.559 --> 0:11:39.720 So we have a lot of what I what we 0:11:39.800 --> 0:11:44.520 call secular headwinds to growth. So we lived for three decades, David, 0:11:44.559 --> 0:11:48.520 in a world that produced massive amounts of incremental productive 0:11:48.559 --> 0:11:52.199 capacity made mainly in the emerging economies. As a result, 0:11:52.280 --> 0:11:55.320 we had a deflationary kind of you know pattern in 0:11:55.400 --> 0:11:58.960 the economy of inflation wasn't much of a problem. 0:11:59.120 --> 0:12:02.480 And all that's that force is fading rapidly. 0:12:03.160 --> 0:12:06.559 Then you've got aging in the global economy. More than 0:12:06.600 --> 0:12:09.480 seventy five percent of the global economy is in a 0:12:09.559 --> 0:12:13.080 serious pattern of aging, you know, declining workforces in some cases, 0:12:13.640 --> 0:12:16.120 you have big changes in labor market behavior. You have 0:12:16.200 --> 0:12:22.120 shortages in all the major employment sectors in the American economy, uh, 0:12:22.480 --> 0:12:25.880 the big ones. And then and then you know, you 0:12:25.960 --> 0:12:31.720 have geopolitical tensions and shocks coming from multiple sources like pandemics, climate, 0:12:32.720 --> 0:12:37.560 and a pattern of diversification initiated both by businesses, you know, 0:12:37.640 --> 0:12:41.560 in pursuit of kind of resilience and longer term you know, profitability, 0:12:41.880 --> 0:12:46.760 but also now by by economic policy and multiple jurisdictions. 0:12:46.800 --> 0:12:50.160 And when you combine all those forces and the declining 0:12:50.200 --> 0:12:54.160 productivity trend, which has been fairly dramatic in the last decade, 0:12:54.600 --> 0:12:58.960 you've got a world that switched relatively rapidly from you know, 0:12:59.160 --> 0:13:03.880 demand constraint to supply constraint growth patterns, and so we're 0:13:03.920 --> 0:13:08.200 looking for solutions to the supply side issues that are 0:13:08.360 --> 0:13:11.160 that are creating not only problems for growth, but you know, 0:13:11.280 --> 0:13:16.160 problems for the reappearance of inflation, you know, for higher 0:13:16.160 --> 0:13:20.960 interest rates, higher lower valuations, higher costs of capital and 0:13:21.000 --> 0:13:23.720 so on. And we're doing it in an environment where 0:13:23.720 --> 0:13:27.160 we have to make enormous investments and things like sustainability. 0:13:27.600 --> 0:13:30.800 So it's when I stand back and look at it, it's, 0:13:31.000 --> 0:13:33.920 you know, it's a big challenge. And so that led 0:13:34.000 --> 0:13:37.480 me and others to try to start looking for well 0:13:37.480 --> 0:13:40.720 what tools and technologies do we have to try to 0:13:40.760 --> 0:13:41.760 solve this problem. 0:13:42.360 --> 0:13:44.959 We all live through something of digital revolution in the 0:13:45.040 --> 0:13:47.560 late nineties and the early oughts in the move to 0:13:47.640 --> 0:13:50.599 the Internet, and there was a real growth impetus from that. 0:13:50.760 --> 0:13:53.360 Is our call. In what ways does this new move 0:13:53.440 --> 0:13:57.080 to digital revolution through AI compared to that. Maybe it's 0:13:57.120 --> 0:13:58.960 similar to or maybe different from. 0:13:59.320 --> 0:14:02.000 So we did get a productivity surge. 0:14:02.000 --> 0:14:04.320 It came, you know, in the late nineteen nineties after 0:14:04.440 --> 0:14:07.560 everybody got access to the Internet and the Worldwide Web 0:14:07.640 --> 0:14:11.319 came in, you know, into its own and that lasted 0:14:11.360 --> 0:14:14.559 into the early two thousands, and some of that is ongoing, 0:14:14.600 --> 0:14:18.520 you know, the digitalization of supply chains and so on. 0:14:19.520 --> 0:14:25.560 That was pretty powerful and it had had noticeable effects. 0:14:25.600 --> 0:14:30.640 It produced decline in middle class jobs in the advanced 0:14:30.680 --> 0:14:35.680 economies like ours. It produced what David Otter calls job 0:14:35.720 --> 0:14:39.640 and income polarization. There was a lot of automation in it. 0:14:39.760 --> 0:14:42.560 You know, we automated things like you know, the keeping 0:14:42.640 --> 0:14:44.960 of the General Ledger. Most of the most of the 0:14:45.000 --> 0:14:48.840 information systems that a corporation runs on are now sort. 0:14:48.640 --> 0:14:52.120 Of digital and fairly automated and so on. 0:14:52.200 --> 0:14:56.240 So, you know, it was powerful but it feels to 0:14:56.280 --> 0:14:59.760 me at least very different from the current round. 0:15:00.040 --> 0:15:01.560 One of the things you point out in your paper 0:15:02.000 --> 0:15:05.800 in Foreign Affairs is the effect that this new genera 0:15:05.800 --> 0:15:08.480 of AI could have on so called knowledge economy, which 0:15:08.520 --> 0:15:11.600 is different from the automation referred to from the Internet. 0:15:12.440 --> 0:15:15.840 That may well affect a different strata of jobs as 0:15:15.880 --> 0:15:16.640 I understand it. 0:15:16.840 --> 0:15:20.080 Yeah, I mean, you know, the knowledge economy, when you 0:15:20.120 --> 0:15:22.800 think about it carefully, kind of runs through and across 0:15:23.560 --> 0:15:27.880 the entire economy. So even in what we think of 0:15:28.360 --> 0:15:31.480 as sectors that are sort of largely blue collar, you know, 0:15:31.520 --> 0:15:34.000 there's a fair amount of knowledge, you know that goes 0:15:34.040 --> 0:15:36.920 into these skills, knowledge and so on. I mean, take 0:15:37.000 --> 0:15:41.320 something like nursing. You know, nurses are pretty highly trained people. 0:15:41.320 --> 0:15:44.440 They have to respond in intelligent ways to the signals 0:15:44.440 --> 0:15:48.840 they get from you know, the equipment that patients are 0:15:49.320 --> 0:15:50.840 using and they're. 0:15:50.560 --> 0:15:51.800 Looking after and so on. 0:15:52.360 --> 0:15:56.200 But you know, but yes, I mean, the CEO of 0:15:56.840 --> 0:15:58.880 Google when asked you know, where is this going to 0:15:58.920 --> 0:16:00.000 have its immediate impact. 0:16:00.040 --> 0:16:01.680 It's going to be in the knowledge economy. 0:16:02.120 --> 0:16:04.720 But I think, you know, we tend to think of 0:16:04.800 --> 0:16:08.680 that as sort of white collar work, and there's an 0:16:08.720 --> 0:16:10.800 element of truth in that, but I think it actually 0:16:10.800 --> 0:16:14.320 does run right across the entire economy. Maybe not to 0:16:14.360 --> 0:16:20.400 the same depth in every sector, but nevertheless it's very 0:16:20.400 --> 0:16:21.040 broad based. 0:16:21.440 --> 0:16:23.320 Do we have a sense and I understand this may 0:16:23.360 --> 0:16:25.560 not be determinate, I mean that is to say, it 0:16:25.600 --> 0:16:27.560 may differ as on what we do, but do we 0:16:27.600 --> 0:16:29.520 have a sense of the extent to which this general 0:16:29.600 --> 0:16:33.400 AI will displace jobs? They will go away as opposed 0:16:33.440 --> 0:16:34.880 to transform jobs. 0:16:35.200 --> 0:16:40.080 Look, I mean we're in a period of intense expiration 0:16:40.240 --> 0:16:44.920 and experimentation. So you know, people often say, you know 0:16:45.320 --> 0:16:47.960 that it's important to acknowledge it. You know, real. 0:16:47.800 --> 0:16:50.880 Uncertainty when you're in the early stages of this, and 0:16:50.920 --> 0:16:55.080 that's certainly characteristic of this. Having said that, James and I, 0:16:55.440 --> 0:17:00.000 our best guess is that generative AI is mainly, not exclusively, 0:17:00.120 --> 0:17:02.960 but mainly going to turn out to be, you know, 0:17:03.640 --> 0:17:05.480 a powerful digital assistant. 0:17:05.800 --> 0:17:08.000 One of the points you make in the paper is that, 0:17:08.040 --> 0:17:10.520 as I say, this is not predestined to some extent. 0:17:10.560 --> 0:17:12.800 How this ends up depends upon us and what we 0:17:12.880 --> 0:17:15.320 decide to do about it. Explain to us, well, what 0:17:15.400 --> 0:17:18.080 you think needs to be done or should be done, 0:17:18.320 --> 0:17:20.880 so that we get the most good out of generative AI, 0:17:21.560 --> 0:17:24.320 and as a subpoint, how much of that can be 0:17:24.320 --> 0:17:26.720 trusted to the markets as opposed to governments. 0:17:27.119 --> 0:17:29.399 So, you know, I think the markets in government and 0:17:29.440 --> 0:17:32.359 attitudes and what and biases you know, are all part 0:17:32.359 --> 0:17:34.600 of the mix. So I think the first order of 0:17:34.640 --> 0:17:39.040 business is to avoid what Eric Bridenelson calls that an 0:17:39.040 --> 0:17:43.800 influential paper that the touring trap. So Alan Turing proposed 0:17:43.880 --> 0:17:49.040 that we evaluate progress with digital machines by using. 0:17:48.800 --> 0:17:51.240 The following tests. Can we build a machine that. 0:17:51.400 --> 0:17:54.120 Interacts with the human and the human thinks that it's 0:17:54.160 --> 0:17:55.560 interacting with another human? 0:17:56.280 --> 0:17:58.720 Is a fairly small step, and. 0:17:58.680 --> 0:18:01.880 This is common in the AI world to evaluate progress 0:18:01.920 --> 0:18:06.000 in AI by determining how well machines do relative to 0:18:06.160 --> 0:18:09.800 human performance. So we do that in language recognition, we 0:18:09.880 --> 0:18:12.240 do it in the image recognition, which is a huge 0:18:12.280 --> 0:18:15.720 breakthrough in the you know, in the last six seven years. 0:18:17.200 --> 0:18:19.480 And we do it, you know, with the generative AI. 0:18:19.680 --> 0:18:22.359 Does the generative AI do better than the average human? 0:18:22.440 --> 0:18:24.520 On the l s at the law school have to 0:18:24.560 --> 0:18:29.919 do tests. That's okay, but there's a very small step 0:18:30.200 --> 0:18:34.080 from that to thinking that, you know, well, once the 0:18:34.119 --> 0:18:35.320 machine passes the human. 0:18:35.359 --> 0:18:38.080 Why don't we get rid of the human And that 0:18:38.520 --> 0:18:39.280 leads you to. 0:18:39.359 --> 0:18:42.679 What you might call the automation bias, and that I 0:18:42.720 --> 0:18:45.840 think we do have to resist. And that's not government, 0:18:45.920 --> 0:18:49.480 that's not business, that's got any particular sector, it's just 0:18:49.520 --> 0:18:50.800 the way we think about it. 0:18:51.160 --> 0:18:53.280 So I think that's step one. 0:18:53.640 --> 0:18:57.600 Step two is, you know, you can influence the direction 0:18:57.680 --> 0:19:01.280 of technology and development, and I think you know, with 0:19:01.440 --> 0:19:03.960 incentives and so on, and you should be influenced in 0:19:04.000 --> 0:19:07.200 the direction of collaboration and augmentation. 0:19:07.840 --> 0:19:09.960 And then third, with the way James and. 0:19:09.920 --> 0:19:12.320 I thought of it, we don't want to repeat that 0:19:12.359 --> 0:19:16.600 pattern of you know, sort of high adoption rates and 0:19:17.200 --> 0:19:19.840 very low adoption rates that we saw in earlier rounds 0:19:19.840 --> 0:19:22.440 of digital you know adoption. 0:19:23.240 --> 0:19:25.399 Doctor Spence, thank you so much for being here on 0:19:25.440 --> 0:19:27.680 Wall Street Week, really appreciate That's not to Michael Spence 0:19:27.920 --> 0:19:32.240 of the Stanford Business School. Coming up, as we count 0:19:32.359 --> 0:19:35.600 down the months until next year's elections, our colleague Michael 0:19:35.680 --> 0:19:38.760 McKee takes us back through what happened to some other 0:19:38.920 --> 0:19:44.720 incumbent presidents when the economy was in flux. That's next 0:19:44.760 --> 0:19:45.600 on Wall Street Week. 0:19:45.760 --> 0:19:51.280 On Bloomberg, this is Bloomberg Wall Street Week with David 0:19:51.280 --> 0:19:53.359 Weston from Bloomberg Radio. 0:20:01.119 --> 0:20:05.440 China and climate investing two destinations that were once all 0:20:05.560 --> 0:20:06.080 the rage. 0:20:06.400 --> 0:20:08.720 If I had to bet on one market or the 0:20:08.800 --> 0:20:12.520 other over the next several years, I would bet on China's. 0:20:12.720 --> 0:20:15.800 If you're global investor, you've got to be watching and 0:20:15.840 --> 0:20:17.000 investing here in China. 0:20:17.359 --> 0:20:21.240 ESG investing has gone from niche to mainstream. 0:20:21.359 --> 0:20:26.200 We're integrating ESG environmental, social and governance into every aspect 0:20:26.240 --> 0:20:29.720 of our investment decisions and across our investment workfelows, but 0:20:29.760 --> 0:20:32.520 there recently have given up some of their momentum as 0:20:32.600 --> 0:20:35.000 foreign direct investment in China has dropped off. 0:20:35.520 --> 0:20:38.919 The big question will be whether she jmping pivots and 0:20:39.040 --> 0:20:42.560 focus is more on market opening and creating the confidence 0:20:42.680 --> 0:20:46.560 and the conditions to continue to attract foreign business, which 0:20:46.600 --> 0:20:49.359 is necessary if he's going to continue to grow his economy, 0:20:49.400 --> 0:20:53.000 he can't do it without foreign business being present. 0:20:53.680 --> 0:20:57.159 And green investing has gotten increasingly controversial. 0:20:57.840 --> 0:21:02.720 Energy transition is very much misguided in my opinion. It's 0:21:02.760 --> 0:21:06.359 based on politics and emotion, it's not based on sciences. 0:21:06.480 --> 0:21:09.720 Back we're really all we're doing is we're substituting one 0:21:09.840 --> 0:21:13.639 form of mineral extraction for another. 0:21:14.040 --> 0:21:16.680 But now there's reason to take a second look as 0:21:16.720 --> 0:21:19.399 technology may be taking the place of real estate in 0:21:19.440 --> 0:21:20.560 the Chinese economy. 0:21:21.000 --> 0:21:23.520 Yes, there are excesses in parts of the Chinese economy 0:21:23.520 --> 0:21:29.160 in real estate, but their technological process is really strong. 0:21:29.760 --> 0:21:34.680 The entire clean energy economy cannot exist without Chinese components 0:21:34.720 --> 0:21:36.520 and Chinese raw materials. 0:21:36.359 --> 0:21:39.080 And China races ahead of the West and extracting the 0:21:39.160 --> 0:21:41.600 minerals that drive the move away from carbon. 0:21:42.040 --> 0:21:46.240 China has been developing this industry for twenty or thirty years, 0:21:46.240 --> 0:21:49.880 so they're really ahead of most Western democracies. It's now 0:21:49.880 --> 0:21:53.080 important for us to make sure we have diversified supply 0:21:53.240 --> 0:21:55.439 chains because no matter what the product, whether it's critical 0:21:55.480 --> 0:21:58.719 minerals or rares, having options. 0:21:58.240 --> 0:22:01.160 Around where you get these things to be really important. 0:22:01.320 --> 0:22:04.200 Leading Western investors to take a second look at parts 0:22:04.200 --> 0:22:07.840 of the Chinese economy that may be opportunities even as 0:22:07.920 --> 0:22:09.240 other parts slow down. 0:22:09.760 --> 0:22:11.320 What I would say is, I think the story on 0:22:11.359 --> 0:22:13.680 what's growing in China's actually misunderstood. 0:22:14.040 --> 0:22:15.680 Right One is that housing. 0:22:15.840 --> 0:22:18.000