Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: we bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: all of this news, within the stories of the day,
Speaker 1: there's an ability to triangulate and what the pros triangulate
Speaker 1: with it's foreign exchange. From our Bloomberg Interactive Brooker Studios,
Speaker 1: we go to London and Jane Folly of Robbo Bank,
Speaker 1: Jane within the blur. Sometimes when I look at my
Speaker 1: Bloomberg screen, I squint my eyes. It's just because the
Speaker 1: red and the green could tell me what's going on.
Speaker 1: When you try to triangulate the markets right now, you've
Speaker 1: got to be focused on more than cable right well.
Speaker 1: I think Sterling really does give us a really good
Speaker 1: reflection about how vulnerable investors are feeling with respect to
Speaker 1: the uncertainty, the political uncertainty in the UK right now.
Speaker 1: And it's been very interesting this morning listening to jurisam May.
Speaker 1: She came in front of Parliament and she sounded very
Speaker 1: defiant initially with respect to you, her dear, but she
Speaker 1: has been stood now for two hours, more than two hours,
Speaker 1: and there has been a lot of pressure from MP's
Speaker 1: John Ferrell is going Jane, come on now. I just
Speaker 1: thought it's really interesting watching these headlines to drop across
Speaker 1: the bloomberg of people I've never heard of resigning, and
Speaker 1: I imagine most people in the FX market have never
Speaker 1: heard of them either, with the exception of tomic rap Jane,
Speaker 1: how important is that just in terms of we don't
Speaker 1: know who these people are, but just the numbers are
Speaker 1: what is important here. You have had already four ministers
Speaker 1: resigning and an additional to a parliamentary Private secretary. But
Speaker 1: even if you didn't know those names, you would know
Speaker 1: the name as you pointed out of Brexit secretary rather
Speaker 1: now he is he has resigned and you could say,
Speaker 1: you know, this is the second Brexit minister to set
Speaker 1: to step down, the second one that really does reinforce
Speaker 1: the splits within the cabinet. So we have here in
Speaker 1: the UK an extremely divided cabinet and extremely divided government
Speaker 1: and an opposition party which is very market unfriendly, an
Speaker 1: opposition party which is on the far left that has
Speaker 1: policies to renationalize, etcetera. So the political backdop from an
Speaker 1: investor's point of view now is looking really very ugly
Speaker 1: and right now also, as many and pis have pointed
Speaker 1: out to the Prime Minister in Parliament this morning, there
Speaker 1: probably isn't parliamentary backing for her deal, and she has
Speaker 1: said if there isn't a deal, the UK is still
Speaker 1: going to leave the EU in March next year, meaning
Speaker 1: that the prospect of a hard bread is looking very
Speaker 1: tangible today. So Jane, looking at the market right now
Speaker 1: overnight ball on cable really elevated yesterday and today as well.
Speaker 1: Still I'm looking at the pricing for a bank having
Speaker 1: them great hike being taken out for the spring of
Speaker 1: next year. What do you think we should be paying
Speaker 1: attention to in markets right now? Well, you know, unfortunately,
Speaker 1: because it's so political, there are a lot of investors
Speaker 1: who are waiting on the headline, on the sidelines, just
Speaker 1: waiting for those headlines, waiting to see what's going to happen.
Speaker 1: So politics is very dominant certainly for the UK. I
Speaker 1: mean beyond that, of course, there is still the focus
Speaker 1: on on the trade deals on China and the US,
Speaker 1: on the U s data, see how much that the
Speaker 1: Fed can hike, to see how much the Federal Reserve
Speaker 1: could be impacted by the global growth outlook. There is
Speaker 1: still bad data for Q three from Germany, from Japan,
Speaker 1: et cetera, so that there is still an awful lot
Speaker 1: to focus on. But in the UK for sterling, it's
Speaker 1: really quite simple. It's on those headlines regarding the UK
Speaker 1: politic political backdrop, it's it's the end of the year.
Speaker 1: You're going to start writing the rabble being piece. What
Speaker 1: are you writing on the dollar right now? I mean,
Speaker 1: I know the cables the focus today one, but do
Speaker 1: you have an interesting dollar call or are you just
Speaker 1: waiting to see what breaks well. I've been really since
Speaker 1: since March. It's much of its extincts. To be precise,
Speaker 1: I've been adollable and my focus was one twelve, which
Speaker 1: really right now doesn't look that far away. I'm talking
Speaker 1: about your dollar clearly doesn't look that far away. Now. Now,
Speaker 1: I think I can present an argument many commentators can
Speaker 1: that next year we could see a sarin in the
Speaker 1: outlook for the US, we could see growth platoning, we
Speaker 1: could see a platoning in U S rates. But I'm
Speaker 1: also still really quite concerned about Europe. I'm concerned about
Speaker 1: European growth, I'm concerned about ECB policy, concerned very much
Speaker 1: about populism and the politics in Europe too. So I
Speaker 1: don't really see a case well by the euro is
Speaker 1: going to be in any position to take back a
Speaker 1: lot of ground against I've never asked this question. I'm
Speaker 1: going to do it right now. Is Brexit just pop
Speaker 1: is um United Kingdom flavor? Yeah, we've seen populism obviously
Speaker 1: in the US. We've seen populism in the UK. We've
Speaker 1: seen populism. We have it. We have it in Sweden,
Speaker 1: in Germany, we have it in Poland and in Czech Republic.
Speaker 1: Jane Folly's excellence totally different than yours. Like when Jane talks,
Speaker 1: you know where she's from. Where are you from? Jane?
Speaker 1: Actually I'm from Ireland, but I was. I grew up
Speaker 1: in Southland, South London, and so that's that much different
Speaker 1: from where you are up in the Midlands. Yeah, OK,
Speaker 1: though if I had a Midlands accent, you wouldn't be
Speaker 1: a radio very very different, but ware into your joinus.
Speaker 1: I mean, Brexit is just the populism of the era
Speaker 1: defined in the United The really interesting thing about Brexit
Speaker 1: is that on the dawn of Brexit, when we had
Speaker 1: the sun come up the following day after the votes,
Speaker 1: and many people sat there and said, big problem for
Speaker 1: the continent, perhaps the world. Within a couple of months
Speaker 1: it became less the world, maybe the continent, and then
Speaker 1: a couple of months after that it could be came
Speaker 1: maybe this is just a U case. So what's a
Speaker 1: big problem right now, Jane? Is it expanding back out
Speaker 1: from the United Kingdom or is it a discreet story.
Speaker 1: I think there's two aspects here which could impact the
Speaker 1: the Eurozone and the EU and and the FIRTS is
Speaker 1: just as trade in the UK, we import a lot
Speaker 1: more from Europe than they do from US, and particularly Germany,
Speaker 1: so that so there's a straight trade front. Um. There's
Speaker 1: a lot of concerns about supply change, cars, autos except
Speaker 1: are going back and forth across the border. So we
Speaker 1: have this story. But there is the other story, and
Speaker 1: this is about the integrity of the European project, of
Speaker 1: the Eurozone project, of the EU. And and this is
Speaker 1: a question or this is a threat perhaps, so Brexit
Speaker 1: is potentially a threat to both of those, particularly when
Speaker 1: you have populism and Italy nibbling at the at the
Speaker 1: the project as well, where you have nationalism in some
Speaker 1: countries as well, So populism nationalism they already there in
Speaker 1: Europe and that to have Brexit happening on the advocates
Speaker 1: here is thing which again could undermine the project. So
Speaker 1: the letters are going in leading Brexit backer Jacob Reese
Speaker 1: Mark calling for a leadership challenge. Now as we know, Jane,
Speaker 1: you need forty eight of these letters to trigger a
Speaker 1: leadership challenge. Is that what is next on the horizon
Speaker 1: as you sit there in the city of London, people
Speaker 1: coming around to that idea that a leadership challenge is coming.
Speaker 1: We've seen several headlines this morning. I think this weekend
Speaker 1: is going to be really crucial. We've seen treason May
Speaker 1: really fighting for her job before UM and I think
Speaker 1: this weekend is going to be really crucial for her too.
Speaker 1: And what's really quite interesting and the two hours where
Speaker 1: she's been on her feet in Parliament today is a
Speaker 1: lot of lack of support to some of the funds
Speaker 1: for that for the deal, but also a lot of
Speaker 1: questions here for a second referendum, to a lot of
Speaker 1: people saying that they don't think that there is enough
Speaker 1: support in Parliament for her, and calls again again about
Speaker 1: her her leadership or questions about her ship. You know,
Speaker 1: of course I get all my history out of movies
Speaker 1: and and Jane Foley to go back to Lincoln. Daniel
Speaker 1: day Lewis is Lincoln. They're all job owning about the
Speaker 1: Emancipation Act. And basically it's like, if you vote for this,
Speaker 1: I'll give you a you know, some bargain in your
Speaker 1: district in Ohio or wherever. Is that what goes on here?
Speaker 1: I mean this Prime Minister may leave House of Commons
Speaker 1: and go find and can ask a question in English?
Speaker 1: Hold on, but could some does a member of Parliament
Speaker 1: get a phone call? You know, we'll give you a subway,
Speaker 1: a subway stop, or you know, some infrastructure project. It's
Speaker 1: that's what we're doing in America. It's not as it's
Speaker 1: common in the UK. But where do you have that is?
Speaker 1: Obviously with the d Up Treason may have a minority.
Speaker 1: The Troy Party have a minority in the House of
Speaker 1: Commons and she very reliant on the nine of tendencies
Speaker 1: from the Northern Island d Up Party to support her
Speaker 1: and went in order to buy that support after the
Speaker 1: election that last year, and she did certainly the several confessions.
Speaker 1: Now this is Reese marg Is that how you said?
Speaker 1: Did I do well? Calls for a leadership challenge to
Speaker 1: check that? Three minutes ago I missed it, did I
Speaker 1: was just sending fan letters out and Jacoba, where your keyboard, Jim?
Speaker 1: Jane Fowley, what's a leadership challenge? This would be when
Speaker 1: within the the electoral process is very different. We don't
Speaker 1: elect a president or Prime minister in the way that
Speaker 1: you do. We elect the party and then the party
Speaker 1: chooses the leadership. So this is the different here in
Speaker 1: the US. So they would be potentially putting other names
Speaker 1: in the hats and choosing a new OA. We would
Speaker 1: still have a Tory government. Jane Fowley. Thank you Civics
Speaker 1: with Jane Foley of Rabble Bank today for our American audience. John,
Speaker 1: My worst woman in London was that ending in line
Speaker 1: at the Tower of London to get in. It was
Speaker 1: finding a bar. I could watch an American Football League
Speaker 1: game and the Detroit Lions are playing, and that's why
Speaker 1: it's so important to get deep Brexit perspective from our
Speaker 1: London bureau chief who loves he worships the Detroit Lions.
Speaker 1: He does, he doesn't care about Villa west Ham East
Speaker 1: Poultry whatever the Calean. This is the one guy in
Speaker 1: the United Kingdom I want to talk to you today.
Speaker 1: Why do you bring him? Mr Calenan of the Detroit
Speaker 1: Lion not speaking to our London bureau chief about the
Speaker 1: Detroit Lions. We're going to talk to him about Brexit.
Speaker 1: Good morning to you or good afternoon to you, Neil Canahan,
Speaker 1: good morning. I could give your chapter in first about
Speaker 1: the Lions as well, obviously carriage Tom you probably will
Speaker 1: do that, Neil. Just the Prime Minister last the week
Speaker 1: looking increasingly unlikely, Jonathan Um. She came about today at
Speaker 1: ten thirty am. She looked confident, she was prepared, the
Speaker 1: speech was good, and then it just all began to
Speaker 1: fall apart. MP after MP it stood up and said
Speaker 1: that they would oppose the deal that she has agreed,
Speaker 1: and the chatter during the morning was increasingly that they
Speaker 1: were getting close to the number of votes that would
Speaker 1: trigger a vote of confidence in her leadership. The BBC
Speaker 1: is now saying that that looks likely. Jacob Reese magg
Speaker 1: who's an arch your your skeptic. He's now said that
Speaker 1: he's going to send in a letter of no confidence.
Speaker 1: He wouldn't do that, I don't think unless he was
Speaker 1: actually confident that they have the votes to trigger that,
Speaker 1: to trigger the leadership confidence motion. And so it will
Speaker 1: be very, very tough for Treason May to survive the week.
Speaker 1: But then she we've been writing her offer in nearly
Speaker 1: two years and she's still there. Forty eight votes, forty
Speaker 1: eight letters needed to get the leadership contest, and I
Speaker 1: understand you need about a hundred and fifty eight votes
Speaker 1: to push him out of the position. Now do they
Speaker 1: have the numbers? They have about a core of about
Speaker 1: a g who have consistently been against the deal that
Speaker 1: was under negotiation, and her in favor of no deal.
Speaker 1: But now based on what we saw earlier on or MP,
Speaker 1: after MP and her own party stood up and basically
Speaker 1: congratulated her for her work, but said this is not
Speaker 1: going to fly with me or my constituents, and I'm
Speaker 1: going to oppose the deal. And therefore she's really going
Speaker 1: to struggle in that leadership contest. The question is who
Speaker 1: comes forward? Does Boris Johnson finally make a move. He's
Speaker 1: treating to before and never has. Who's going to be
Speaker 1: the obvious competitor to her? Dominic rab who who resigned
Speaker 1: this morning is probably a contender as well. And then
Speaker 1: the dangerous that the votes get split and she survives,
Speaker 1: and what's the alternative? And I think that's what's interesting
Speaker 1: about all of this. Prime Minister Masa's it's my deal,
Speaker 1: no deal, or no Brexit at all. The people, the
Speaker 1: individuals that have resigned have said plenty about why they
Speaker 1: don't like the deal on the table, but said little
Speaker 1: about what the alternative if they pursue would be. Do
Speaker 1: we have any idea what the brexit? He has actually
Speaker 1: one here, Neil I think that the Parliament is so
Speaker 1: split you just can't say. Because there is an animent
Speaker 1: of people who do want to second referendum, and she
Speaker 1: left opened that possibility last night when she talked about
Speaker 1: now Brexit and the last two years with being a
Speaker 1: lot of talk about nothing, but that that would seem unlikely.
Speaker 1: They don't have enough votes at the momentum. High bragsit
Speaker 1: that the right at the risk of that has risen marketly,
Speaker 1: and that's what markets are showing this morning. Neil I
Speaker 1: can get away with this you with your Irish heritage.
Speaker 1: If we go back to David Lloyd George, who, among
Speaker 1: other things folks spoke Welsh and English was a second language,
Speaker 1: which I find extraordinary. But within the Irish question in
Speaker 1: the huge battles coming out of World War One, he
Speaker 1: was shown the door in nine two. When in a
Speaker 1: parliamentary system, when you're showing the door, do you know
Speaker 1: who's going to take over or is it a mystery
Speaker 1: right to the last moment? Is are there ducks lined
Speaker 1: up now to take over for prime minister? May I
Speaker 1: think that's exactly what will be happening in this afternoon.
Speaker 1: People will be justling for a position so that they're
Speaker 1: ready to launch their pitch and to go for the leadership.
Speaker 1: Baris Johnson, Dominick rab maybe even Michael go if treason
Speaker 1: it's gone, Jim Ferroll. It's so different than America. Well,
Speaker 1: it's not a presidential system. You're the leader of the
Speaker 1: party and then you are therefore also the prime minister
Speaker 1: of your in power um and you vote for the
Speaker 1: leader of the party. As a conservative core, it's not
Speaker 1: the people that vote for not all of the country,
Speaker 1: it's the conservative members that ultimately will vote for the
Speaker 1: like the part today it was about speaking to her party,
Speaker 1: Parliament and the country. You know, it's it's just different.
Speaker 1: But some people speaking to their constituency and you know
Speaker 1: the political game for so many people. Tom, that's how
Speaker 1: do I get reelected? Neil Alliance Packers and the Lions
Speaker 1: pack I mean, can the Lions do it to the Packers?
Speaker 1: They're stumbling the way we've been playing for the last
Speaker 1: few we with no corner box radio against ironn Rodgers. No, okay,
Speaker 1: there you are folks from London and Ireland nailing the
Speaker 1: Michael Bard talk on the Detroit Lions, Neil calling and
Speaker 1: joining us. Is that? That's the coolest thing about Bloomberg
Speaker 1: is a guy running or London office is from Ireland
Speaker 1: and loves Michael Barr's Detroit. You keep asking how they
Speaker 1: film one body stadium with NFL fans. There are tons
Speaker 1: in snowing. If you been over to blooming deal ship
Speaker 1: my music, I'm gonna get I wouldn't. I would never
Speaker 1: do that. Have you been over to Bloomingdale's and seeing
Speaker 1: their Christmas display into other respects? Oh? Mr? You real's you?
Speaker 1: Not me? You got that right? Feel like him? This morning.
Speaker 1: You means and I quote stink stop the Brexit vote
Speaker 1: was clubs call it fifty eight, depending on who's counting
Speaker 1: and what the mood was. But in David blanch Flowers Cardiff,
Speaker 1: where Whales said leave, Cardiff said remain. The prosperity perhaps
Speaker 1: of Cardiff with a sizeable vote of remains six and leave.
Speaker 1: David blanche Flower, of course a member of the Bank
Speaker 1: of England's committee, and of course iconic and wage economics
Speaker 1: and macro economics at Dartmouth College, Professor blanch Flower, wonderfully
Speaker 1: have you with us this morning, Just give us a
Speaker 1: glimmer of your whales. Why did Cardiff say remain in
Speaker 1: in Whales stunned? In certainly, well, in some sense what
Speaker 1: we've seen around the globe is the big cities essentially
Speaker 1: work in pre content with where things were. So think
Speaker 1: about in the US New York and the big cities Chicago,
Speaker 1: in Britain, London, Um, Edinburgh all voted to remain. The
Speaker 1: rest of the rest of Wales essentially was pretty unhappy,
Speaker 1: the old coal towns and the steel towns and rural Wales.
Speaker 1: But I think the answer now is actually that it
Speaker 1: appears that the polling in Wales has kind of moved
Speaker 1: in the other direction, particularly has as Brittles has not delivered.
Speaker 1: And obviously today is a big day where markets are
Speaker 1: in turmoil because it's quite clear that there really hasn't
Speaker 1: been a deal and there's no deal, there's credible on
Speaker 1: the table. So now we have I think particularly the
Speaker 1: big deal today is Scottland back, because Scotland is pretty
Speaker 1: unhappy and they're not even included, not the words of
Speaker 1: Scotland isn't even in the in this five page document,
Speaker 1: and the and the Scots and the Welsh, I think
Speaker 1: saying if Ireland has a deal, we want to deal
Speaker 1: well exactly. And Prime Minister May, in a huge emotion
Speaker 1: earlier this morning, it seems hours ago, said Scotland is
Speaker 1: part of the United Kingdom which carries a certain seventeen
Speaker 1: oh three residents. Residents I should say to it, Professor
Speaker 1: Blanche Flower, within this and there's been upset one, upset
Speaker 1: two checkers dot dot don Here we are in November
Speaker 1: of two thousand and eighteen. Are we any closer in
Speaker 1: your reading to a desire for a second referendum? Or
Speaker 1: is that the great untouchable? Well, I think we probably
Speaker 1: are closer to revos. I mean essentially there's three options
Speaker 1: on the table, leave with no deal, don't leave it all,
Speaker 1: or leave with this deal. And this deal looks hugely unacceptable. Um. Um.
Speaker 1: Reese has actually called for a maze resignation. UM. I
Speaker 1: think in the end what we're going to see is
Speaker 1: this deal isn't very isn't a really very good I mean,
Speaker 1: the person in charge of negotiating the deal, Dominic Rum,
Speaker 1: has now quit. He's the person supposedly in charge of it.
Speaker 1: So I think this just looks like, you know, a
Speaker 1: total collapse of the deal, lack of political support, and
Speaker 1: I suspect in the end we're going to see some
Speaker 1: kind of revote. I when there was seven hundred thousand
Speaker 1: people demonstrating in London very peacefly a week or so ago.
Speaker 1: So I think I think in some sense that the option,
Speaker 1: this option of take this deal looks already like it's
Speaker 1: not going to happen. Them in the market responding, we've
Speaker 1: seen a huge collapse in British banks, RBS and Barkleys.
Speaker 1: We've seen the British house builders Persimmon and and and others.
Speaker 1: I mean they've done eight per cent or so so
Speaker 1: when markets respond like that, I think you kind of
Speaker 1: have to rethink. And even if there's a fall of
Speaker 1: the government, um, the people are not going to be
Speaker 1: you know, the deal is not going to be much
Speaker 1: better if you have a new prime minister tomorrow. So
Speaker 1: I think the answer is that this, this is really
Speaker 1: not a credible outcome. We may well see another another vote,
Speaker 1: and we may well in the end see you know that.
Speaker 1: I don't think the no Deal is going to happen.
Speaker 1: I think we've probably going to be um back to
Speaker 1: where you were, folks, Royal Bank of Scotland down ten eleven.
Speaker 1: Here in London trading today David blanche Flower, Governor Kearney
Speaker 1: has some constraints here, fewer degrees of freedom, and one
Speaker 1: of them, as we saw in US retail sales, goes
Speaker 1: to a blanch Flower tone, which is where's the inflation?
Speaker 1: I mean every report is sort of kind of like, really,
Speaker 1: where's the inflation? Where is that dynamic? From where you
Speaker 1: sit right now? Are are are central bankers misjudging that
Speaker 1: modest measured inflation fear? Absolutely? I mean if you look
Speaker 1: both in the US and the UK, the question you
Speaker 1: probably ask yourself is where where is the evidence that
Speaker 1: you need to raise rates to deal with the inflation
Speaker 1: inflationing expectations of flat certainly not rising. Inflation looks to
Speaker 1: be very weak. There is and obviously the downside risk.
Speaker 1: Let's go to Karnie. I mean, Connie made it clear
Speaker 1: that he thought the biggest downside risk we're actually from
Speaker 1: brexit will too. Equally that that today you would clearly
Speaker 1: argue on what you and I've been talking about, that
Speaker 1: those risks are greater and the big deal, of course
Speaker 1: in the US we're hearing some business folks, is that
Speaker 1: the downside risk from trade wars. I suspect with rate
Speaker 1: rises coming the slowing of the world economy. What we're
Speaker 1: seeing is slowing of economy is induced by errors by
Speaker 1: the central bank, especially the stead I think it's all
Speaker 1: in all probability. The US is now slowing and what
Speaker 1: we're hearing out of the FED members is complete error. Daniel,
Speaker 1: I once attended and spoke modestly to one of your
Speaker 1: packed lecture halls at Dartmouth College, and folks, the thing
Speaker 1: was completely packed with Keynesians, just so yeah, you know,
Speaker 1: I mean completely stacked, but you could hear a pin
Speaker 1: drop over the under employed. This has been a life
Speaker 1: study for you. I get more male professor plants, flower
Speaker 1: and elite saying it's a fully employed economy that I've
Speaker 1: ever gotten before. How underemployed are the underemployed in America? Well,
Speaker 1: it's it's certainly clear that underemployment in America is a
Speaker 1: really big deal. Um and David Bell and I have
Speaker 1: a paper that people can see on my website. It
Speaker 1: basically shows you that it's the main variable that explains
Speaker 1: labor markets slack. It's under employment that's holding down wages.
Speaker 1: We have poorer data on the US than any other place.
Speaker 1: But it's not just the part time for economic reasons.
Speaker 1: It's people who are part time. They're happy to be
Speaker 1: part time, they want more hours, and many full time
Speaker 1: people do too, So that's the mismeasured factor. But it
Speaker 1: seems to me when you go around the country you
Speaker 1: talk to people that many of them say and like
Speaker 1: more hours. I'd like to work more than I can do.
Speaker 1: People are ours constrained. And if that's so, that probably
Speaker 1: means that the nerors so called full employment rate of
Speaker 1: woman is well below where we are, perhaps in the
Speaker 1: order of three percent, not four and a half of
Speaker 1: the FED thinks and then when the FED raises because
Speaker 1: it doesn't look at under employment properly. This is a
Speaker 1: major era. And it's called in the economy too slow
Speaker 1: because the economy is not at full employment. So okay,
Speaker 1: people say that, but it's actually that the story they're
Speaker 1: telling is a story date three two eight not posted out.
Speaker 1: Gotta leave it there. David blanche far and short and notist,
Speaker 1: thank you so much on his whales and his United Kingdom.
Speaker 1: Professor Blanchflower at Dartmouth College. This is a real joint
Speaker 1: pim Flax in Washington and Time King in New York.
Speaker 1: It is an annual visit off, hands down the most
Speaker 1: prestigious award in business journalism. It is hugely competitive, so
Speaker 1: many of our guests over the years have been winners
Speaker 1: of this. I think of Rob and Roger and I'm
Speaker 1: Hilarian and others that have really been part of the
Speaker 1: Financial Times Book Award. Just just fabulous effort by McKinsey
Speaker 1: and FT Lionel Barber's shop just doing a great job.
Speaker 1: And this year was an extraordinary list of books. And
Speaker 1: it is fabulous to know that John Carrerew is one
Speaker 1: for Bad Blood. We'll get into the book in a minute.
Speaker 1: But he comes into our studio, Pim totally depressed because
Speaker 1: Sterlings on nine seven in your award is paid in pounds. Sterling,
Speaker 1: did you cash it in for bitcoin this morning or something?
Speaker 1: Money hasn't come yet. The money hasn't That's the reason
Speaker 1: I'm so sad about Sterling's fault. And the check is
Speaker 1: in the mail and you'll see it and hopefully it
Speaker 1: won't be converted into bitcoin. There is a sentence, a
Speaker 1: painful sentence in a painful book, Bad Blood, Secrets and
Speaker 1: Allies in Silicon Valley. Elizabeth was accepted to Stanford in
Speaker 1: the spring of two thousand two as a President's Scholar,
Speaker 1: a distinction bestowed on top students. This was one of
Speaker 1: the everyone listening. They wanted their daughter, their son to
Speaker 1: be like Elizabeth. Who was she back then before this
Speaker 1: huge scandal. She was very smart and promising student. She
Speaker 1: had um spent her high school years in in Houston,
Speaker 1: had gone to St. John's, which is a prestigious private
Speaker 1: school in Houston, and graduated near the top of her
Speaker 1: class and gotten into Stanford with the scholarship that you mentioned.
Speaker 1: She was eighteen years old, and she lasted at Stanford
Speaker 1: less than a year and a half. She dropped out
Speaker 1: before the end of her sophomore year. In in the
Speaker 1: middle of her sophomore year and decided that she was
Speaker 1: going to create her company, which she called Paranos. It
Speaker 1: was a mix of the terms therapy and diagnosis, because
Speaker 1: her vision was for a medical device that would run
Speaker 1: all the blood tests pretty much known to man on
Speaker 1: just a tiny sample of blood drawn from a finger. John,
Speaker 1: can you describe for the listeners if you believe this
Speaker 1: was something the scandal of Taraos. Was it premeditated or
Speaker 1: did it start out as something real and then just
Speaker 1: snowball into something that sucked so many people into it.
Speaker 1: It was the ladder. This was not a premeditated long con.
Speaker 1: This was not Bernie Madoff who at some point in
Speaker 1: the mid eighties woke up one morning and said, I'm
Speaker 1: going to do a Ponzi scheme. And from that point
Speaker 1: on for the next years it was black and white.
Speaker 1: Elizabeth Holmes dropped out of Stanford truly uh, wanting to
Speaker 1: create a company and successful company, wanting to walk in
Speaker 1: the footsteps of Horitle Steve Jobs, and it became a
Speaker 1: fraud with the years. What what happened is, unlike Steve Jobs,
Speaker 1: she wasn't working on a computer product. She was working
Speaker 1: on a medical product, and medical science is hard, and
Speaker 1: she encountered setbacks, and she papered them over and refused
Speaker 1: to acknowledge them to her investors, to her board, eventually
Speaker 1: to the public, and began cutting corners and telling small
Speaker 1: lies that that snowballed into bigger lies, and by the
Speaker 1: time she went live with her supposedly innovative blood tests
Speaker 1: in two thousand thirteen, the gap between what she claimed
Speaker 1: she had achieved and what the reality of the technology
Speaker 1: was was was so big that it became a fraud.
Speaker 1: John to just to be a front about it. At
Speaker 1: one point, I was at an industry event and Elizabeth
Speaker 1: Holmes was the guests speaker, and during this speech, you know,
Speaker 1: people talk to each other and everybody said, I don't
Speaker 1: understand how they're doing this. I don't under stand what
Speaker 1: she's saying. Is that something that should have wrung a
Speaker 1: lot more bells than it did. Absolutely, I mean she
Speaker 1: when you look at her all her public appearances. She
Speaker 1: started raising her profile in late two thousand thirteen and
Speaker 1: then pretty soon became a fixture on the Silicon Valley
Speaker 1: conference circuit, at healthcare conferences and gracing the covers of
Speaker 1: magazines and doing a lot of TV. When you listener
Speaker 1: and you can go back and look at all these
Speaker 1: public appearances on YouTube, she never gets into the details
Speaker 1: of the technology or the science. It's all just these
Speaker 1: sort of canned you know, catchphrase. I totally agree with that,
Speaker 1: And what Pim just said is absolutely critical about a
Speaker 1: lot of people are like, really you the thing about
Speaker 1: giant Carrew folks, it's so important. And again with us
Speaker 1: with the F. T. Mackensey book award, Bad Blood, just
Speaker 1: a riveting book. The thing that's so important here is
Speaker 1: guys like you caught this early. You won the Pulitzer
Speaker 1: Prize for you you you want George Polka didn't. No,
Speaker 1: I won the poster the year before for for something else.
Speaker 1: But excuse me, but you're like the real You're like
Speaker 1: the real deal. When you were at the Wall Street
Speaker 1: Journal getting this done, why did the investment community not
Speaker 1: see your stuff and say, wait a minute. Well, for
Speaker 1: one thing, she scrupulously avoided sophisticated medical technology venture capitalists.
Speaker 1: In the latter part of you know, the latter stage
Speaker 1: of her company, which is when she raised most of
Speaker 1: the money, she she really avoided them and went to
Speaker 1: the family offices of billionaires who were less sophisticated. Um.
Speaker 1: And then, you know, I think it has to do
Speaker 1: with the gold rush environment of Silicon Valley. I think
Speaker 1: we're really you know, we've witnessed in the past uh
Speaker 1: what half dozen years, another boom, another sort of tulip fever,
Speaker 1: just fifteen twenty years after the dot com boom, And
Speaker 1: in that kind of environment, people just, uh, you know,
Speaker 1: it's the fear of missing out. They all want to
Speaker 1: hitch them cells to the next rocket ship too riches.
Speaker 1: They thought that this might be the next Facebook. Elizabeth
Speaker 1: Holmes might be the next Mark Zuckerberg. And I think
Speaker 1: that plays a big role. Robert Kraft, Betsy de Vos,
Speaker 1: Carlos Slim, George Schultz, Henry Kissinger. You could go on
Speaker 1: and on and list all the people associated and supporting
Speaker 1: Rupert Murdoch. Yes, you were in many ways vilify by
Speaker 1: the company and its supporters during your entire period of
Speaker 1: covering this. Did anyone ever come out and apologize and say, yeah,
Speaker 1: you got it right, John? Never? I mean The closest
Speaker 1: thing that's happened is David Boys, I think, in some
Speaker 1: recent interviews with The New York Times in New York Magazine,
Speaker 1: conceding that I did important work, uh but then uh,
Speaker 1: you know, adding uh something about my overwriting, and also
Speaker 1: taking issue with the fact that I've been calling the
Speaker 1: actions of his law firm thuggish in my book tour Um.
Speaker 1: But nonetheless I'll take uh, you know, those words of
Speaker 1: from from David Boys acknowledging that I had it. Nobody cares.
Speaker 1: All we care about is Adam McKay killed the big
Speaker 1: short Vanessa Taylor and Adam mccare and you get together
Speaker 1: and they're gonna do the big bad Blood. Have you
Speaker 1: met Jennifer Lawrence When I heard that she was gonna
Speaker 1: play Elizabeth? I said, that's perfect. I mean, did you
Speaker 1: does that fit for you? That Jennifer Lawrence is gonna
Speaker 1: play Elizabeth Holmes. I think it's great. I think she's great.
Speaker 1: She's an unbelievable actress. She she's sounds scary. I think
Speaker 1: she's going to nail the role, and and uh yeah,
Speaker 1: I couldn't be happier. And I think McKay is a
Speaker 1: great choice to produce and direct. Are you gonna do
Speaker 1: the little side vignettes through it like they did in
Speaker 1: Big Short where they actually explains, you know, credit the
Speaker 1: fault swaps and now are they going to do that?
Speaker 1: I don't, I don't know, I mean right now? And
Speaker 1: where at the stage where the screenplay is getting written.
Speaker 1: They hired Vanessa Taylor, who co out the Shape of
Speaker 1: Water with Giermo del Toro, to hire the screenplan So
Speaker 1: what that's what she's doing right now and I'm not
Speaker 1: I don't know what McKay's plans are, and I think
Speaker 1: it's just going to depend on what the screenplay looks like.
Speaker 1: This has been wonderful, Thank you so much. Bad Blood
Speaker 1: is a book in this it's again important book by itself,
Speaker 1: but it's really been vetted by the best in Financial
Speaker 1: journalism the f T. Mackenzie Book Awards, and it was
Speaker 1: a winner. Amid incredibly is an incredible year for book journalism.
Speaker 1: And to see John Carerew do so well as a
Speaker 1: joy to see. And again the movie it wants a
Speaker 1: movie up. I think they might start filming it, you know,
Speaker 1: next year, you never know. John, Thank you so much.
Speaker 1: Care The book is bad, but thanks for listening to
Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on
Speaker 1: Apple Podcasts, sound Out, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio