WEBVTT - Will the U.S. Break Up Google? 0:00:00.560 --> 0:00:05.360 This is Bloomberg Law with June Grasso from Bloomberg Radio. 0:00:05.920 --> 0:00:10.520 It's a landmark antitrust case, the most aggressive antitrust action 0:00:10.560 --> 0:00:14.600 against an American company in two decades. The US Justice 0:00:14.600 --> 0:00:18.360 Department suited Google, calling it the monopoly gatekeeper to the 0:00:18.400 --> 0:00:22.600 Internet and accusing it of using exclusive deals costing billions 0:00:22.600 --> 0:00:26.920 of dollars to dominate search and lockout competition from rivals. 0:00:27.160 --> 0:00:31.200 US Deputy Attorney General Jeff Rosen announced the suit on Tuesday. 0:00:31.720 --> 0:00:34.560 Google is the gateway to the Internet and a search 0:00:34.640 --> 0:00:38.839 advertising behemoth. Google achieves some success in its earliers, and 0:00:38.840 --> 0:00:42.400 no one begrudges that. But as the nitrust complaint filed 0:00:42.400 --> 0:00:46.760 today explains, it has maintained its monopoly power through exclusionary 0:00:46.840 --> 0:00:51.720 practices that are harmful to competition. So the Justice Department 0:00:51.800 --> 0:00:57.080 has determined that an antitrust response is necessary to benefit consumers. 0:00:58.120 --> 0:01:02.200 But Google's director of Economic Policy, Adam Cohen, defended his 0:01:02.320 --> 0:01:05.760 company's tactics and, speaking to Bloomberg, we think this case 0:01:05.880 --> 0:01:09.720 is deeply fought and risks harming American consumers. We compete 0:01:09.840 --> 0:01:13.240 vigorously in the marketplace. Our industry, our sector is marked 0:01:13.240 --> 0:01:16.600 by prices that are free or falling and rapid innovation, 0:01:16.640 --> 0:01:19.480 and those are really hard hallmarks of a competitive industry. 0:01:19.680 --> 0:01:22.840 Joining me is antitrust law expert Harry First, a professor 0:01:22.880 --> 0:01:26.319 at m y U Law School. Let's start broadly, Harry, 0:01:26.400 --> 0:01:30.240 how would you characterize this lawsuit in terms of its significance? 0:01:30.880 --> 0:01:34.880 The lawsuit is very significant in this sense. It's been 0:01:35.440 --> 0:01:39.319 more than two decades since the Justice Department has filed 0:01:39.360 --> 0:01:43.240 a monopolization case, more than two decades since the Justice 0:01:43.240 --> 0:01:46.920 Department has taken on high tech, more than two decades 0:01:46.959 --> 0:01:50.480 since they've paid attention to this area. It's really quite extraordinary. 0:01:50.520 --> 0:01:53.640 So seeing them file a case I count as a 0:01:53.720 --> 0:01:59.400 real positive. Explain basically what the government's charges are of 0:01:59.400 --> 0:02:03.760 anti competitive conduct by Google. Well, the basic idea is 0:02:03.760 --> 0:02:07.440 that Google has monopolies. They are alleged three different markets, 0:02:07.480 --> 0:02:10.680 but basically in the market for search and the market 0:02:10.800 --> 0:02:16.160 for some aspects of digital or online advertising. So the 0:02:16.200 --> 0:02:18.840 complain alleges that they have a monopoly in those markets 0:02:18.840 --> 0:02:22.240 that have very high market shares, and that they've maintained 0:02:22.480 --> 0:02:29.559 these monopolies not through legitimate competition, but through exclusionary agreements 0:02:29.639 --> 0:02:34.200 that sends out any potential rivals any upstarts, and that 0:02:34.280 --> 0:02:39.280 they are continuing to do this as the technology evolves. 0:02:39.400 --> 0:02:42.000 And you know, we have the Internet of Things, and 0:02:42.040 --> 0:02:45.600 we have wired cars, and we have these personal assistants. 0:02:45.440 --> 0:02:48.680 That this is an effort just to keep control over 0:02:49.120 --> 0:02:52.120 and in some sense access to the Internet. It's not 0:02:52.200 --> 0:02:55.440 unlawful to be a monopoly in this country. And some 0:02:55.520 --> 0:02:57.720 people would say, well, Google is doing the things you 0:02:57.760 --> 0:03:00.440 can do as a monopolist, so what makes it illegal. 0:03:00.880 --> 0:03:06.240 So the law tries to distinguish between legitimate, even aggressive competition, 0:03:06.960 --> 0:03:11.320 and competition that isn't on the merits that tries to 0:03:11.400 --> 0:03:15.280 succeed by making sure competitors can't get to the market. 0:03:15.440 --> 0:03:19.519 So if you have a great product and consumers love 0:03:19.560 --> 0:03:23.639 it and everyone uses it, let's say that's not a problem, 0:03:23.680 --> 0:03:26.600 and you can continue to innovate and bring out better 0:03:26.680 --> 0:03:30.680 features and lower prices things like that. But if you 0:03:30.800 --> 0:03:35.680 take efforts to squeeze out your competitors by as this 0:03:35.840 --> 0:03:42.080 complain alleges, some kinds of exclusive agreements, which say, okay, Apple, 0:03:42.200 --> 0:03:46.120 for your iPhone, you have to make Google Search the default. 0:03:46.200 --> 0:03:50.560 And we know that consumers don't change their defaults, you know, 0:03:50.840 --> 0:03:53.640 they keep going with it. This means that other search 0:03:53.720 --> 0:03:58.280 engines can't get tractions, can't get enough people using their 0:03:58.280 --> 0:04:01.480 search engines to offer a good product, and that fences 0:04:01.520 --> 0:04:04.480 out competitive is not because you're better, but because you 0:04:04.520 --> 0:04:08.680 have this agreement with Apple. So now Google's response has 0:04:08.760 --> 0:04:13.360 been that its conduct doesn't raise prices for consumers. And 0:04:13.400 --> 0:04:17.320 he also compared its search engine distribution agreements to a 0:04:17.440 --> 0:04:20.960 serial brand paying a grocery store to be in the 0:04:21.000 --> 0:04:25.200 best position on the shelves. Is that a good response, Well, 0:04:25.240 --> 0:04:30.000 it's a response um search two consumers. Of course, is 0:04:30.040 --> 0:04:33.920 not priced in dollars. The complain alleges that it's priced 0:04:33.920 --> 0:04:37.000 in other ways. We'll see how that develops in the litigation. 0:04:37.560 --> 0:04:39.960 They get your data, of course, that's really what they want, 0:04:40.520 --> 0:04:43.560 and it's priced in terms of your attention. You know, 0:04:43.720 --> 0:04:46.920 your eyeballs, you pay attention to it. But in the end, 0:04:46.960 --> 0:04:51.919 it's monetized, as the complaint says, by prices for advertising. 0:04:52.320 --> 0:04:55.680 You know, if they control you and access, when they've 0:04:55.680 --> 0:05:00.839 got all these advertisements, monopoly share, they can charge prices 0:05:00.880 --> 0:05:04.640 for that. So that's one rejoinder to the Oh, but 0:05:04.760 --> 0:05:08.520 it's free, isn't that great for consumers? Maybe not so free? 0:05:09.240 --> 0:05:14.040 And what about Google's analogy to a cereal brand paying 0:05:14.040 --> 0:05:17.440 to get better placement on grocery store shelves. But as 0:05:17.480 --> 0:05:19.919 you were saying it, I was thinking, well, you know, 0:05:20.120 --> 0:05:23.839 usually the cereal maker doesn't own the whole store. Usually 0:05:23.920 --> 0:05:27.520 it's just a placement on a shelf. And if you've 0:05:27.560 --> 0:05:30.760 ever bought cereal, you know there's another brand right next 0:05:30.800 --> 0:05:33.200 to it. So it's true they do pay for that. 0:05:33.480 --> 0:05:37.120 But the argument here is, well, Google owns all the shelves, 0:05:37.320 --> 0:05:42.080 and by paying for the best spot, there aren't other spots. 0:05:42.440 --> 0:05:45.880 Nobody comes into this store for something else. You know, 0:05:46.160 --> 0:05:48.880 if you were going to have the analogy to say, okay, 0:05:49.000 --> 0:05:52.360 consumers can go to a different store, but it's not 0:05:52.440 --> 0:05:56.800 as convenient and they don't bother. So I've heard this analogy, 0:05:57.040 --> 0:05:59.960 I'm not sure how persuasive it's going to be legally. 0:06:00.520 --> 0:06:04.360 In the complaint, the Justice Department lawyers say that Google 0:06:04.440 --> 0:06:09.200 tapped the same playbook as Microsoft. How similar is this 0:06:09.279 --> 0:06:15.200 case to the Justice Department's suit against Microsoft decades ago. Well, 0:06:15.520 --> 0:06:18.359 the complaint itself says, as you say that it's governed 0:06:18.360 --> 0:06:21.320 by the principles for Microsoft, and they're talking about the 0:06:21.400 --> 0:06:24.680 legal principles I think that the Court of Appeals applied 0:06:24.960 --> 0:06:27.960 in that case. So in that sense, the government wants 0:06:28.000 --> 0:06:31.920 to align with Microsoft. But also in a broad sense, 0:06:32.080 --> 0:06:35.320 this is similar to the kinds of complaints that the 0:06:35.440 --> 0:06:40.440 government made. Microsoft had a monopoly on Windows, it was threatened, 0:06:40.640 --> 0:06:45.040 and it made efforts to extinguish the ability of rival 0:06:45.160 --> 0:06:49.560 browsers and an escape browser to reach consumers and get 0:06:49.600 --> 0:06:54.080 its product to consumers by forcing the people who bought browsers, 0:06:54.120 --> 0:06:59.960 which basically were makers of computers, to install Internet explo 0:07:00.000 --> 0:07:05.200 Lore rather than installing Netscape. So actually it's similar. One 0:07:05.240 --> 0:07:08.960 of the interesting issues is that it's not identical. So 0:07:09.240 --> 0:07:12.559 the world of mobile phones is different from the world 0:07:12.680 --> 0:07:18.160 of desktops in consumers may behave differently, the kinds of 0:07:18.200 --> 0:07:22.360 agreements are different. These are defaults, making Google Search the 0:07:22.480 --> 0:07:27.080 default but not the exclusive. So it's possible for consumers 0:07:27.080 --> 0:07:30.840 to have different search engines on their phones, and they'll 0:07:30.880 --> 0:07:33.800 be arguments about, you know, how do consumers behave and 0:07:33.960 --> 0:07:36.360 do they multi home, do they look at different search 0:07:36.400 --> 0:07:39.680 engines or they end up sticking with Google because that's 0:07:39.680 --> 0:07:41.680 what's from their phone and they assume that's what they 0:07:41.680 --> 0:07:45.080 should use. Some Lettle experts say that this is a 0:07:45.240 --> 0:07:49.160 pair down complaint. To make an easier case at trial, 0:07:49.520 --> 0:07:53.120 what would the Justice Department have to prove it trial? Well, 0:07:53.280 --> 0:07:55.640 the Jet Department has to show that Google in fact 0:07:55.680 --> 0:07:59.480 has a monopoly in the markets that the government alleges 0:07:59.520 --> 0:08:02.800 are shoe has to show that these really are markets. 0:08:02.960 --> 0:08:06.200 They talk about advertising, Well, you know, there's a lot 0:08:06.240 --> 0:08:09.120 of advertising in the world, and a lot of different 0:08:09.120 --> 0:08:13.080 ways to reach consumers, even on the Internet. I've heard 0:08:13.080 --> 0:08:17.040 there's something called Facebook. Facebook isn't mentioned in the complaint. 0:08:17.400 --> 0:08:21.440 There's advertising on Amazon, people do searches on Amazon. So 0:08:21.760 --> 0:08:24.800 there will be lots of arguments about whether Google really 0:08:24.920 --> 0:08:28.000 is a monopolis or whether consumers have choices. So that's 0:08:28.040 --> 0:08:30.520 the first part. Are they a monopolis? But as you 0:08:30.640 --> 0:08:33.280 pointed out, that's not the end of it, because it's 0:08:33.320 --> 0:08:36.240 not a violation of US any trust law to be 0:08:36.280 --> 0:08:39.839 a monopolis. So then the second part is, well, how 0:08:39.880 --> 0:08:43.360 do they maintain their monopoly position. Is it through anti 0:08:43.400 --> 0:08:47.680 competitive agreements that exclude competition, you know on some basis 0:08:47.760 --> 0:08:50.920 others and efficiency, or is it because as Google will 0:08:50.960 --> 0:08:54.800 certainly argue, it's got a great product, people like it 0:08:54.920 --> 0:08:58.640 because their search engine is really good. And their search 0:08:58.679 --> 0:09:01.200 engine is really good because there are a lot of 0:09:01.200 --> 0:09:04.360 people who use it and feed that into it. So this, 0:09:04.520 --> 0:09:07.320 if it ever gets the trial, this will be I think, 0:09:07.640 --> 0:09:10.199 also disputed and the government's going to have to show 0:09:10.600 --> 0:09:14.320 it's not competition on the mirth. In this complaint, the 0:09:14.440 --> 0:09:18.360 Justice Department hasn't said what remedies it would like if 0:09:18.400 --> 0:09:21.840 it wins the suit. In Microsoft, they sawt a breakup 0:09:21.880 --> 0:09:25.959 of the company. Is a breakup even on the table here, well, 0:09:26.160 --> 0:09:29.800 the table hasn't been set yet, so in the original 0:09:29.840 --> 0:09:33.800 complaint to the Justice Department file in Microsoft, there wasn't 0:09:33.800 --> 0:09:38.120 a specific remedy set out, and the Lidigans generally are 0:09:38.160 --> 0:09:41.120 pretty vague about what they want because they don't want 0:09:41.120 --> 0:09:43.839 to be confined by the time the trial ends to 0:09:44.000 --> 0:09:47.240 something they thought about before the trial started. So the 0:09:47.400 --> 0:09:51.280 complaint does mention the possibility of structural relief, which is 0:09:51.440 --> 0:09:56.000 somewhat unusual actually for government complaints to do. That's almost 0:09:56.000 --> 0:09:59.360 more specificity than I would have expected. So it is 0:09:59.400 --> 0:10:02.559 on the tab able. It's been reported that one possibility 0:10:02.720 --> 0:10:06.360 is making Google the best itself of the Chrome browser. 0:10:06.920 --> 0:10:09.520 I think that's yet to be seen, and it may 0:10:09.720 --> 0:10:12.560 very well be that the government has an idea but 0:10:12.880 --> 0:10:17.760 not a fully executed plan about the remedy at once, 0:10:17.880 --> 0:10:21.600 because to some extent it still needs to find out 0:10:21.600 --> 0:10:25.280 more information. They'll be discovery and there's an idea of 0:10:25.320 --> 0:10:29.160 what you want, but accomplishing it is another story. The 0:10:29.280 --> 0:10:33.240 state ages have been investigating as well. Is this going 0:10:33.320 --> 0:10:37.160 to set off a wave of other litigation from state 0:10:37.200 --> 0:10:44.040 ages and private complaints? Perhaps? Well, a number of states 0:10:44.160 --> 0:10:50.480 um joined this complaint. So um Uh the states which 0:10:50.720 --> 0:10:54.160 that have not UM lead I gather at this point 0:10:54.200 --> 0:10:57.080 by the Attorney General of Colorado was very good at 0:10:57.080 --> 0:11:02.200 any trust lawyer and former professor serve any trust. UM 0:11:02.679 --> 0:11:07.640 are still investigating and UM trying to decide whether they 0:11:07.679 --> 0:11:11.160 want to file their own case and what that case 0:11:11.280 --> 0:11:14.959 might look like. Though. UM. They did issue as I 0:11:15.000 --> 0:11:19.679 assume you saw press release yesterday, UM commending this litigation 0:11:19.920 --> 0:11:24.400 and the close working relationship they have with the Justice Department. 0:11:24.880 --> 0:11:29.280 But we will see what will happen, UM. The state 0:11:29.400 --> 0:11:32.480 federal partnership in these cases. Well, we haven't had a 0:11:32.480 --> 0:11:36.520 lot of monopoly cases. UM, so it's always a little 0:11:36.559 --> 0:11:43.560 touchy UM and uh this one apparently is as well. UM. 0:11:43.720 --> 0:11:47.960 But uh, yes, so I it will not surprise me 0:11:48.000 --> 0:11:51.600 at the states those other states do file UM their 0:11:51.679 --> 0:11:53.960 own case and then move to have a try together 0:11:54.080 --> 0:11:57.640 with the Justice Department's case. UM. That that gets to 0:11:57.640 --> 0:12:01.760 be seen whether UM that will be the case. As 0:12:01.760 --> 0:12:09.240 for private litigation, UM, I'm not sure taking on Google 0:12:09.440 --> 0:12:14.120 is a big deal. UM that some of the allegations 0:12:14.160 --> 0:12:18.880 are been well known for a while UM, and UM 0:12:19.200 --> 0:12:23.480 private cases have not been filed. So I'm actually not 0:12:23.600 --> 0:12:28.640 looking for private litigation to happen at this point. UM. 0:12:28.640 --> 0:12:33.679 Probably later if the Justice Department continues this suit and 0:12:33.679 --> 0:12:37.079 how it develops, and maybe we will see some private 0:12:37.120 --> 0:12:40.800 litigants jumping in. But UM, uh you know, and that 0:12:40.880 --> 0:12:43.200 did happen in the Microsoft litigation. There was a lot 0:12:43.240 --> 0:12:48.720 of private litigation UM that came about as a result 0:12:48.840 --> 0:12:54.640 of the government suits against Microsoft. Is this a test 0:12:54.800 --> 0:12:59.400 in any way of the current antitrust laws? Well, every 0:12:59.440 --> 0:13:04.200 case when in the a testment, UM, I don't so 0:13:04.600 --> 0:13:06.960 as I read the complaint, the government is not trying 0:13:07.000 --> 0:13:13.679 to push UM and USA any trust law in some 0:13:13.760 --> 0:13:17.440 sort of new direction. There. You know, lawyers are by 0:13:17.920 --> 0:13:22.120 nature and training somewhat conservative. They're trying to bring this 0:13:22.200 --> 0:13:27.640 case within the contours of current law. Um, and as 0:13:27.640 --> 0:13:32.920 they try to do in the Microsoft litigation. So um, 0:13:33.000 --> 0:13:37.160 you know, it may be a test of any trust institutions. 0:13:37.200 --> 0:13:39.720 It may be a test of what you can achieve 0:13:39.760 --> 0:13:43.760 in terms of remedy in any trust laws. But I 0:13:43.800 --> 0:13:48.040 think the basic structure is not um something that the 0:13:48.120 --> 0:13:51.160 government is attacking in in this case. So I don't 0:13:51.200 --> 0:13:53.880 think it's a challenge in that sense. We don't know 0:13:53.920 --> 0:13:56.000 how long this case will go on. But is this 0:13:56.080 --> 0:14:01.560 a case where the government is out matched by the 0:14:01.640 --> 0:14:06.280 resources of the defendant Google. Well, I haven't done the 0:14:06.320 --> 0:14:09.680 mass exactly, but if you if you figure out the 0:14:09.720 --> 0:14:12.240 budget of the any Trust Division and the budget of 0:14:12.280 --> 0:14:16.719 Google for litigation, half match might be you know, it 0:14:16.800 --> 0:14:20.360 might be a good word. Obviously, UM, in terms of 0:14:20.360 --> 0:14:23.240 a comparison of resources, You're not going to match Google. 0:14:23.280 --> 0:14:25.360 You're not going to match any of these tech giants 0:14:25.760 --> 0:14:30.640 the government. You know, historically that's always the case. And 0:14:30.760 --> 0:14:33.520 still the government managed to litigate against a T and C, 0:14:33.720 --> 0:14:37.320 against IBM and Standard Oil to the the beginning of any 0:14:37.320 --> 0:14:41.000 trust law. So I'm less worried about that. Where I 0:14:41.040 --> 0:14:44.480 think this matters is Google knows a lot more about 0:14:44.520 --> 0:14:47.960 its business and its technology than the government does. That's 0:14:48.000 --> 0:14:50.720 sort of the nature of things, and this is always 0:14:50.720 --> 0:14:54.080 a problem, but it's particular problem in the tech area. 0:14:54.520 --> 0:14:59.560 It's a problem for understanding how search engines are put together, 0:14:59.760 --> 0:15:04.440 how the advertising is done, how it's priced, all of 0:15:04.440 --> 0:15:07.680 these things. Google knows what it does. The government has 0:15:07.720 --> 0:15:11.720 to find out. So that's where the problem comes in. 0:15:11.720 --> 0:15:15.280 In terms of human capital. Well, the government here, unlike 0:15:15.280 --> 0:15:18.240 in Microsoft, hasn't hired outside council you know, I don't 0:15:18.240 --> 0:15:21.680 know where that's a plus for the professional staff, you know, 0:15:21.880 --> 0:15:25.480 show of support or some indication that there's a lack 0:15:25.520 --> 0:15:28.760 of seriousness in this litigation. I don't know which it is. 0:15:28.880 --> 0:15:33.080 They'll need outside economics experts, but you know, the government 0:15:33.080 --> 0:15:35.880 has been able to hire those in other cases that 0:15:35.920 --> 0:15:38.080 I'm sure there are plenty of economists who would love 0:15:38.120 --> 0:15:40.840 to help out on the government's side. So I think 0:15:40.840 --> 0:15:43.440 it's knowledge more than anything else. Thanks for being on 0:15:43.440 --> 0:15:46.640 the Bloomberg Law Show, Harry. That's Professor Harry First of 0:15:46.840 --> 0:15:49.480 n y U Law School, and that's for the edition 0:15:49.480 --> 0:15:52.040 of the Bloomberg Law Show. Remember you can always get 0:15:52.040 --> 0:15:54.840 the latest legal news on our Bloomberg Lawn podcast. You 0:15:54.880 --> 0:15:59.000 can find them on Apple Podcast or www dot Bloomberg 0:15:59.080 --> 0:16:03.760 dot com, Slash podcast, Slash Law. I'm June Grosso. Thanks 0:16:03.800 --> 0:16:06.040 so much for listening, and remember to tune to the 0:16:06.040 --> 0:16:09.280 Bloomberg Law Show every weeknight at Champion John right on 0:16:09.400 --> 0:16:17.840 the radio. Would you give the advantage to either side? 0:16:18.040 --> 0:16:20.760 Looking at the complaint? What is this way? The core 0:16:20.840 --> 0:16:25.000 of the government's case is hardly startling. The European Union 0:16:25.160 --> 0:16:27.640 has already done this case, and the government could have 0:16:27.640 --> 0:16:31.320 filed us three years ago. So I think they've pleaded 0:16:31.320 --> 0:16:34.520 a case that's not a laydown case, but it's a 0:16:34.680 --> 0:16:39.120 plausible case, strong case. Hard for Google to say in 0:16:39.160 --> 0:16:43.840 the end, oh, we're not a monopoly in search. Oh search, 0:16:43.920 --> 0:16:46.000 isn't the market. I mean, if that's the core of 0:16:46.000 --> 0:16:49.160 their argument, they don't win that way. Where they might 0:16:49.200 --> 0:16:52.360 win is convincing a judge that they've got a darn 0:16:52.440 --> 0:16:55.800 good product that consumers like And isn't that what the 0:16:55.800 --> 0:16:59.840 any trust laws and marketplace competition is all about? Thanks Harry. 0:17:00.080 --> 0:17:02.800 That's Professor Harry First of n y U Law School. 0:17:03.920 --> 0:17:07.280 The pandemic has affected every area of our life, bringing 0:17:07.320 --> 0:17:10.680 into stark contrast many areas of the law from bankruptcy 0:17:10.720 --> 0:17:14.600 to corporate governance. So how can law, governance and regulation 0:17:14.720 --> 0:17:17.439 be structured to bring about a more just and fair 0:17:17.520 --> 0:17:21.880 legal system. Columbia law professor Eric Talley addresses those questions 0:17:21.880 --> 0:17:26.240 in a new podcast series called Beyond Unprecedented the Post 0:17:26.240 --> 0:17:30.520 Pandemic Economy, and he joins me, now start by telling 0:17:30.600 --> 0:17:34.199 us about this podcast series and what you wanted to 0:17:34.240 --> 0:17:37.640 accomplish with it. Well, the podcast again again as sort 0:17:37.680 --> 0:17:40.720 of a brainchild between the mill Stein Center, which is 0:17:40.800 --> 0:17:43.840 a center that I co directed at Columbia, and our 0:17:43.840 --> 0:17:47.320 communications team and and and part of the idea was that, 0:17:47.720 --> 0:17:49.919 you know, everyone is so caught up in the dynamics 0:17:49.960 --> 0:17:52.760 of the current set of crises, but one of the 0:17:52.800 --> 0:17:54.720 things that seems to all of us that we need 0:17:54.760 --> 0:17:57.520 to be looking out for is how do we reimagine 0:17:57.520 --> 0:18:00.240 and reconfigure the way that you know, we organized laws 0:18:00.280 --> 0:18:02.879 and institutions and regulations as we come out of it. 0:18:03.000 --> 0:18:06.560 And so it was almost sort of an organic process 0:18:06.600 --> 0:18:09.040 by which we we really wanted to go beyond the 0:18:09.119 --> 0:18:12.119 current unprecedented events. And that's how we came up with 0:18:12.160 --> 0:18:15.640 the title Beyond Precedent. Let's start with One of your 0:18:15.680 --> 0:18:20.240 podcast was on income inequality, which certainly is more and 0:18:20.280 --> 0:18:24.639 more in our conversation lately, especially with the elections upcoming. 0:18:24.920 --> 0:18:28.919 How did the law contribute to income inequality? It's a 0:18:28.920 --> 0:18:30.880 great question, and there are a bunch of different ways 0:18:30.920 --> 0:18:33.600 that it has and you are exactly right to note that, 0:18:33.840 --> 0:18:35.960 you know, I think just about everyone would agree that 0:18:36.000 --> 0:18:39.720 wealth and income in equality has become almost one of 0:18:39.760 --> 0:18:43.480 the defining features of our time, whether you're an economist, 0:18:43.520 --> 0:18:47.199 a political scientist, or a lawyer. So one of the 0:18:47.240 --> 0:18:49.240 things that we end up spending a lot of time doing, 0:18:49.240 --> 0:18:51.960 and particularly myself I will say, is, you know, I 0:18:52.080 --> 0:18:55.080 teach business law, which on some level can be thought 0:18:55.080 --> 0:18:58.320 of as a very large, ornate field for trying to 0:18:58.400 --> 0:19:03.520 structure organizations and businesses in large part to create value, 0:19:03.560 --> 0:19:06.240 which from a business perspective is how do you minimize 0:19:06.240 --> 0:19:09.080 your tax liability? That's a big chunk of it. And 0:19:09.240 --> 0:19:12.159 just what it turns out that many of those structures 0:19:12.160 --> 0:19:16.399 that corporations are large, you know, limited partnerships or venture 0:19:16.440 --> 0:19:19.960 capital funds used for limiting their tax liability, they can 0:19:20.040 --> 0:19:24.760 carry over almost directly to family trusts, to family owned businesses, 0:19:25.040 --> 0:19:28.520 and if you are a person of considerable means it 0:19:28.560 --> 0:19:31.520 can be a vehicle by which to not only manage 0:19:31.560 --> 0:19:35.760 things like tax liability, but also protect those assets against 0:19:35.760 --> 0:19:40.080 any you know, problematic creditors or downturns that that one 0:19:40.119 --> 0:19:43.000 sees later on. So the well healed in the United 0:19:43.040 --> 0:19:45.760 States and across the world, This is not news to them. 0:19:45.800 --> 0:19:48.080 This has been a set of structures that have been 0:19:48.560 --> 0:19:54.399 routinely utilized by particularly wealthy individuals and businesses over the 0:19:54.440 --> 0:19:57.960 decades um and in fact, in some respects, many of 0:19:58.000 --> 0:20:01.880 the tax reforms and business reforms that took place starting 0:20:01.880 --> 0:20:04.840 in the late nineteen seventies and through pretty much two 0:20:04.880 --> 0:20:08.120 thousand added more fuel to the fire. It became possible 0:20:08.200 --> 0:20:10.800 not only to utilize some of these structures and tax 0:20:10.800 --> 0:20:14.639 protection devices as long as you're wealthy enough to make 0:20:14.720 --> 0:20:17.520 it worth while, but also to almost you know, almost 0:20:17.520 --> 0:20:20.560 weaponize it in some ways that that it it almost 0:20:20.600 --> 0:20:25.720 had an accelerating feature on on how you know, opportunity 0:20:25.840 --> 0:20:28.439 and wealth were distributed in a in a kind of 0:20:28.440 --> 0:20:31.000 a in a kind of a lopsided way within the 0:20:31.080 --> 0:20:33.679 United States as well as the world. And you know, 0:20:33.760 --> 0:20:36.199 it's it's a it's a hard issue to tackle in 0:20:36.280 --> 0:20:39.960 part because, um, you know, part of those wealth creation 0:20:40.119 --> 0:20:46.080 moments were probably also social value creation moments. They were innovations. 0:20:46.080 --> 0:20:48.680 There were new businesses that were being put into play 0:20:48.920 --> 0:20:51.159 that I think anyone would say, yes, this is added 0:20:51.200 --> 0:20:54.360 to the welfare of the United States and the world. 0:20:54.480 --> 0:20:57.639 But it but in the same moment that it did that, uh, 0:20:57.920 --> 0:21:02.879 that added productivity, that add growth also seemed to increasingly 0:21:02.960 --> 0:21:07.840 divide towards uh, towards the investor class. And uh and 0:21:07.960 --> 0:21:11.639 you know, we found ourselves even before this pandemic began, 0:21:12.160 --> 0:21:15.680 on the heels of a of a decade long migration 0:21:16.040 --> 0:21:18.960 that was often aided and assisted by some of these 0:21:19.040 --> 0:21:22.760 legal intax structures to put us ourselves in a position where, 0:21:22.960 --> 0:21:25.639 you know, we haven't seen this kind of uh of 0:21:26.080 --> 0:21:31.200 lopsided form of wealth and income distribution since the nineteen twenties. Uh. 0:21:31.200 --> 0:21:34.600 And it carries over not just into that context, but 0:21:34.680 --> 0:21:38.400 there are also many other sorts of follow on artifacts 0:21:38.400 --> 0:21:41.679 of it as well. UH. Education and schooling tends to 0:21:42.119 --> 0:21:46.119 tends to track some of these some of these features. UH. Nutrition, 0:21:46.400 --> 0:21:48.760 health tends attract some of these features as well. So 0:21:49.240 --> 0:21:51.879 UH it it in many respects, I think is is 0:21:52.040 --> 0:21:54.880 of all the all the episodes. One of the biggest 0:21:54.920 --> 0:21:59.000 and toughest eggs to crack. Speaking of cracking that egg, 0:21:59.359 --> 0:22:04.480 what can be done to address income inequality in our country. Well, 0:22:04.480 --> 0:22:06.280 one of the things that will come out when you 0:22:06.400 --> 0:22:08.720 listen to the to the episodes that there is not 0:22:08.840 --> 0:22:11.240 going to be a magic pill that we take it 0:22:11.359 --> 0:22:14.879 suddenly wealth and income into quality problems are going to 0:22:14.920 --> 0:22:17.320 be gone. I just don't think that that is, uh, 0:22:17.720 --> 0:22:21.040 neither of my guests in the podcast episode, and I 0:22:21.080 --> 0:22:25.119 don't think that that's a realistic possibility. That having been said, 0:22:25.680 --> 0:22:28.360 it seems to me that there's growing and coalescing support 0:22:28.440 --> 0:22:31.040 behind a couple of different things that might work. First, 0:22:31.200 --> 0:22:34.359 it turns out that even though many of these different 0:22:34.400 --> 0:22:37.960 types of business and tax structures have over the years 0:22:38.040 --> 0:22:41.800 systematically favored the well to do and the people who 0:22:41.800 --> 0:22:45.560 could sort of afford to engineer them, the once engineered, 0:22:45.600 --> 0:22:47.520 they're not that hard to copy it. So there are 0:22:47.560 --> 0:22:51.480 definitely some ways that that some of these structures can 0:22:51.520 --> 0:22:57.080 be incorporated into ordinary um individual finance, not at the 0:22:57.440 --> 0:22:59.919 you know, ten million dollar net worth level, but at 0:23:00.000 --> 0:23:03.199 a far at a far lower network level. So on 0:23:03.320 --> 0:23:06.360 some level, this is you know, access to reasonably good 0:23:06.440 --> 0:23:09.520 legal advice and how to navigate these very very same 0:23:09.560 --> 0:23:11.920 structures that the well to do have been able to 0:23:12.240 --> 0:23:15.440 navigate for years. Now, that's obviously only one, uh, one 0:23:15.520 --> 0:23:18.360 piece in the bucket. There is now, I think, growing 0:23:18.400 --> 0:23:21.399 impetus for trying to figure out how not only to 0:23:21.560 --> 0:23:25.200 engage in some sort of support of particularly of the 0:23:25.240 --> 0:23:28.119 lower middle class and the and the and the poor, 0:23:28.359 --> 0:23:30.280 but also to do so in a way that that 0:23:30.440 --> 0:23:33.199 is going to um allow them to to to be 0:23:33.359 --> 0:23:37.119 retrained for what is a you know, a changing workforce 0:23:37.240 --> 0:23:40.240 and and one that is probably changing, uh, you know, 0:23:40.400 --> 0:23:43.240 more dramatically than it has in my life, and I 0:23:43.280 --> 0:23:46.199 think the pandemic on some level. When you think about 0:23:46.560 --> 0:23:49.320 the the effects of the pandemic, it doesn't take too 0:23:49.359 --> 0:23:51.320 long for you to open up the Wall Street Journal 0:23:51.320 --> 0:23:53.480 and the Financial Times in the New York Times to 0:23:53.560 --> 0:23:56.240 read an article that says, yet another industry that has 0:23:56.320 --> 0:23:59.159 been focusing on, you know, an awful lot of a 0:23:59.280 --> 0:24:03.000 mix of of person power and an automation has decided 0:24:03.040 --> 0:24:06.720 to go fully automated because, uh, you know, slowdowns due 0:24:06.760 --> 0:24:10.920 to COVID make the economics of automating appropriate right now. 0:24:11.200 --> 0:24:13.720 So you know, my sense is that the crisis that 0:24:13.880 --> 0:24:17.000 the pandemic is going to send us even further into 0:24:17.680 --> 0:24:20.919 a type of a transition zone where even you know, 0:24:21.080 --> 0:24:24.000 jobs manufacturing, jobs that we thought were likely to be 0:24:24.040 --> 0:24:26.840 populated by humans for years to come are now going 0:24:26.880 --> 0:24:29.959 to be accelerated in that automated fashion. And and that 0:24:30.000 --> 0:24:33.320 doesn't mean that there won't be other employment opportunities in fact, 0:24:33.440 --> 0:24:35.920 nature of horrors of vacuum in this regard, but it 0:24:36.080 --> 0:24:38.320 will mean that the types of what employment opportunities are 0:24:38.320 --> 0:24:39.880 going to be different than the types that we saw 0:24:39.920 --> 0:24:43.440 even seven or eight years ago. If in fact, this 0:24:43.200 --> 0:24:47.399 this pandemic ends up visiting the types of transformation that 0:24:47.400 --> 0:24:48.919 that a lot of people think are going to happen. 0:24:49.480 --> 0:24:53.160