1 00:00:00,080 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,160 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Yeah. 5 00:00:33,920 --> 00:00:37,120 Speaker 1: Of course. The World Economic Forum underway in Devo, Switzerland. 6 00:00:37,320 --> 00:00:39,680 Speaker 1: We'll be bringing you interviews from the event all week 7 00:00:39,760 --> 00:00:43,120 Speaker 1: with Tom Keane live from Davos. This morning, the Bloomberg 8 00:00:43,200 --> 00:00:45,519 Speaker 1: Editor in Chief John michaels Waite sat down at the 9 00:00:45,560 --> 00:00:48,080 Speaker 1: event for an interview with the new CEO of Uber, 10 00:00:48,479 --> 00:00:50,920 Speaker 1: dar Across Rashahi. Let's take a listen to what he 11 00:00:50,960 --> 00:00:53,319 Speaker 1: had to say in that conversation. Right now, you are 12 00:00:53,520 --> 00:00:57,080 Speaker 1: close to six months into the job, and I wondered 13 00:00:57,120 --> 00:00:59,480 Speaker 1: what you saw in terms of the year ahead of 14 00:00:59,560 --> 00:01:02,840 Speaker 1: Uber as your biggest challenge. What's the thing that you 15 00:01:02,880 --> 00:01:06,800 Speaker 1: think about most when it comes to two. We uh, 16 00:01:06,840 --> 00:01:10,160 Speaker 1: We definitely have our share of challenges at Uber. Uh 17 00:01:10,200 --> 00:01:13,000 Speaker 1: and for me, where I want to get to Uber 18 00:01:13,080 --> 00:01:15,560 Speaker 1: two of the year head is is a year of normalcy. 19 00:01:16,160 --> 00:01:18,680 Speaker 1: You know, two thousand seventeen was I think we'll go 20 00:01:18,720 --> 00:01:22,280 Speaker 1: down as one of the most difficult years for any 21 00:01:22,360 --> 00:01:24,039 Speaker 1: company out there. And I have to and I have 22 00:01:24,120 --> 00:01:28,160 Speaker 1: to give credit to the Uber team and the employees there. 23 00:01:28,280 --> 00:01:32,280 Speaker 1: It is a group of true believers who believe in 24 00:01:32,280 --> 00:01:35,080 Speaker 1: our mission, who believe in mobility as a service being 25 00:01:35,120 --> 00:01:40,959 Speaker 1: available to consumers everywhere UH at a reasonable cost. And 26 00:01:41,800 --> 00:01:45,640 Speaker 1: what my job in two thousand eighteen is too is 27 00:01:45,640 --> 00:01:49,080 Speaker 1: to get rid of the distractions and get the company 28 00:01:49,120 --> 00:01:52,440 Speaker 1: back to business, get the company back to normalcy. There's 29 00:01:52,440 --> 00:01:55,000 Speaker 1: a lot that we've done in the past six months 30 00:01:55,000 --> 00:01:58,640 Speaker 1: as far as bringing the new investors, driving a new 31 00:01:58,680 --> 00:02:02,840 Speaker 1: culture and norms where doing the right thing period comes first, 32 00:02:03,600 --> 00:02:05,800 Speaker 1: bringing a new management team, etcetera. There's a lot that 33 00:02:05,840 --> 00:02:09,320 Speaker 1: we've gotten done. But this is a company that knows 34 00:02:09,360 --> 00:02:13,040 Speaker 1: how to execute this is a service. Mobility as a 35 00:02:13,120 --> 00:02:17,000 Speaker 1: services something that's universal that's needed in the world. And 36 00:02:17,040 --> 00:02:18,600 Speaker 1: I want and I just want to get back to 37 00:02:18,639 --> 00:02:21,280 Speaker 1: doing this. And you said true believe, true believers, not 38 00:02:21,400 --> 00:02:24,520 Speaker 1: normally true believers are the last possible people where it's 39 00:02:24,639 --> 00:02:27,400 Speaker 1: you're able to change a culture. Can you explain a 40 00:02:27,400 --> 00:02:30,280 Speaker 1: bit about that. Well, I think that they are. They 41 00:02:30,440 --> 00:02:36,520 Speaker 1: understand that UM mobility is a service, bringing the cost 42 00:02:36,639 --> 00:02:41,720 Speaker 1: of transportation down UH, making transportation services available to anyone 43 00:02:41,760 --> 00:02:45,280 Speaker 1: and everyone on a local basis, and partnering with cities 44 00:02:45,320 --> 00:02:50,680 Speaker 1: to be a solution to traffic, to pollution, etcetera. That 45 00:02:50,880 --> 00:02:54,080 Speaker 1: is a mission that they all believe in UH, and 46 00:02:54,560 --> 00:02:57,799 Speaker 1: I think that they having seen what happened in two 47 00:02:57,800 --> 00:03:00,960 Speaker 1: thousand seventeen to some extent, the crisis, enormous crisis that 48 00:03:01,000 --> 00:03:04,560 Speaker 1: the company has gone through, is a benefit because everybody 49 00:03:04,600 --> 00:03:07,200 Speaker 1: at the company knows now that we need to change, 50 00:03:07,200 --> 00:03:08,960 Speaker 1: that we need to break with the past as far 51 00:03:09,000 --> 00:03:11,240 Speaker 1: as the way the company was run. We need to 52 00:03:11,280 --> 00:03:15,720 Speaker 1: go from growth in any cost to responsible growth and 53 00:03:15,720 --> 00:03:19,639 Speaker 1: and growth in partnership with other players out there. That's clear. 54 00:03:20,160 --> 00:03:23,400 Speaker 1: But now I've got to kind of get the company 55 00:03:23,600 --> 00:03:27,519 Speaker 1: down to the normalcy of execution of building great technology, 56 00:03:27,760 --> 00:03:29,359 Speaker 1: and I think we're going to get there. It's still 57 00:03:29,400 --> 00:03:32,280 Speaker 1: some tough sledding early on, but I absolutely think we're 58 00:03:32,280 --> 00:03:34,360 Speaker 1: going to get there. When you talk about execution is 59 00:03:34,440 --> 00:03:36,480 Speaker 1: profits one of the things you want to get. I 60 00:03:36,520 --> 00:03:39,960 Speaker 1: think you lost four billion dollars last year by the 61 00:03:40,040 --> 00:03:44,040 Speaker 1: standards of profits will health. So at some point we 62 00:03:44,080 --> 00:03:46,880 Speaker 1: absolutely have to become profitable, and that's part of the picture. 63 00:03:46,920 --> 00:03:47,960 Speaker 1: You have a good do you have a kind of 64 00:03:48,000 --> 00:03:49,960 Speaker 1: goal for that? Do you think you should be profitable 65 00:03:49,960 --> 00:03:56,720 Speaker 1: by two by? Uh? This is the business itself. You 66 00:03:56,760 --> 00:03:59,560 Speaker 1: want to come back a bit closer. Yeah, listen up 67 00:04:00,000 --> 00:04:03,280 Speaker 1: of I don't want to name a specific year, but 68 00:04:03,520 --> 00:04:07,040 Speaker 1: this is a business that UM, the core business, the 69 00:04:07,120 --> 00:04:11,640 Speaker 1: ride sharing business, can be profitable within three years. We 70 00:04:11,680 --> 00:04:14,840 Speaker 1: will continue to make very bad investments in building out 71 00:04:14,880 --> 00:04:18,400 Speaker 1: autonomy because we think that's a terrific opportunity, UH, for 72 00:04:18,640 --> 00:04:23,400 Speaker 1: building out new technologies such as Uber elevate, where near 73 00:04:23,600 --> 00:04:28,120 Speaker 1: term profitability is not a is not a goal, but 74 00:04:28,240 --> 00:04:30,719 Speaker 1: long term growth is. So we will look to balance 75 00:04:30,760 --> 00:04:33,880 Speaker 1: near term profitability. But as a company, we will always 76 00:04:33,880 --> 00:04:36,040 Speaker 1: be a company that makes big boat beats and takes 77 00:04:36,080 --> 00:04:38,360 Speaker 1: big risks. To what extent there do you think that 78 00:04:38,440 --> 00:04:41,680 Speaker 1: drive to become profitable fights against a little bit of 79 00:04:41,720 --> 00:04:44,800 Speaker 1: this culture change if you want to make you talked 80 00:04:44,839 --> 00:04:47,880 Speaker 1: about making money but not at all costs. Do those 81 00:04:47,880 --> 00:04:52,960 Speaker 1: two things? Well? I don't think that profitability and culture 82 00:04:53,040 --> 00:04:56,960 Speaker 1: are their issue. And it's UM the company in the 83 00:04:57,080 --> 00:05:01,840 Speaker 1: past was willing to make tradeoffs as it related to 84 00:05:02,520 --> 00:05:06,440 Speaker 1: how it did business. UH, and I think was was 85 00:05:06,440 --> 00:05:10,720 Speaker 1: was guilty of hubris, was guilty of of thinking that 86 00:05:10,760 --> 00:05:14,240 Speaker 1: they knew better than others. And and I think that 87 00:05:14,320 --> 00:05:19,840 Speaker 1: what we know now clearly is that breakneck growth can 88 00:05:20,080 --> 00:05:26,200 Speaker 1: hide uh cultural issues. UH, that there are no excuses 89 00:05:26,279 --> 00:05:29,320 Speaker 1: for not doing the right thing, and that you do 90 00:05:29,440 --> 00:05:32,520 Speaker 1: have to make trade offs. And and as a management team, 91 00:05:32,560 --> 00:05:35,840 Speaker 1: we're specifically talking about those tradeoffs that you have to make. 92 00:05:36,520 --> 00:05:38,719 Speaker 1: We have to be a little more patient sometimes because 93 00:05:38,880 --> 00:05:43,320 Speaker 1: working with government, regulators, etcetera sometimes takes longer. But in 94 00:05:43,440 --> 00:05:46,480 Speaker 1: the end you build a more lasting business. Uh. And 95 00:05:46,600 --> 00:05:50,839 Speaker 1: so we maybe what we went through was necessary, but 96 00:05:50,960 --> 00:05:54,839 Speaker 1: we're here. We can control our actions from this moment onwards. 97 00:05:55,360 --> 00:05:59,640 Speaker 1: And and I think everyone at uber from this moment 98 00:06:00,080 --> 00:06:02,440 Speaker 1: words wants to build a great company, not only in 99 00:06:02,520 --> 00:06:04,640 Speaker 1: terms of growth, but in terms of the kind of 100 00:06:04,680 --> 00:06:07,360 Speaker 1: company anyone would want to work at. Can I ask 101 00:06:07,400 --> 00:06:08,800 Speaker 1: you one thing which you have got to sort of 102 00:06:08,800 --> 00:06:12,159 Speaker 1: hangover from last year, which is the all the all 103 00:06:12,200 --> 00:06:15,520 Speaker 1: the regulatory problems and particularly all the all the cases 104 00:06:15,560 --> 00:06:18,400 Speaker 1: against you. I think there are six criminal probes or 105 00:06:18,400 --> 00:06:21,160 Speaker 1: whatever going on, But wisers are lining up outside to 106 00:06:21,279 --> 00:06:24,360 Speaker 1: which which one, Which one do you sort of think? 107 00:06:24,400 --> 00:06:28,880 Speaker 1: Which one do you fear most I suppose different things. Listen, 108 00:06:28,920 --> 00:06:31,919 Speaker 1: I think I think that all of them are serious issues, 109 00:06:32,000 --> 00:06:35,520 Speaker 1: and and my responses that we're going to be transparent 110 00:06:35,520 --> 00:06:38,120 Speaker 1: and we're gonna we're going to take responsibility for our 111 00:06:38,160 --> 00:06:43,200 Speaker 1: actions in the past. Um. I do think that the uh, 112 00:06:43,240 --> 00:06:47,520 Speaker 1: there are certain circumstances where uh there was smoke but 113 00:06:47,600 --> 00:06:50,760 Speaker 1: no fire. Uh. And I think as a company, we 114 00:06:50,839 --> 00:06:53,960 Speaker 1: have to defend ourselves and and and work with the 115 00:06:54,160 --> 00:06:56,960 Speaker 1: kind of the appropriate frameworks. And my goal is just 116 00:06:57,040 --> 00:06:58,760 Speaker 1: to get beyond the stuff. Some of these things like 117 00:06:58,800 --> 00:07:01,560 Speaker 1: pricing policies show they go right to the heart of 118 00:07:01,600 --> 00:07:04,120 Speaker 1: what Hooper is or Am I wrong about that? Yeah? 119 00:07:04,160 --> 00:07:06,120 Speaker 1: I think they do. But but I think that there's 120 00:07:06,160 --> 00:07:09,880 Speaker 1: a way of of being smart but transparent at the 121 00:07:09,880 --> 00:07:12,200 Speaker 1: same time. Uh. And that's where we've got to take 122 00:07:12,200 --> 00:07:14,800 Speaker 1: the company. Take me through governments. When when you talk 123 00:07:14,840 --> 00:07:18,800 Speaker 1: to governments privately, do they talk any differently than they 124 00:07:18,840 --> 00:07:24,320 Speaker 1: do publicly? Governments governments, Um, I think that they are 125 00:07:24,360 --> 00:07:29,880 Speaker 1: honestly a bit relieved with how we are engaging with 126 00:07:29,960 --> 00:07:32,200 Speaker 1: them because I think I think that the engagement is 127 00:07:32,600 --> 00:07:35,720 Speaker 1: now real. I think they feel like, uh, we're out there, 128 00:07:35,920 --> 00:07:39,720 Speaker 1: We're we're genuine because we've learned our lessons of the past. Uh. 129 00:07:39,760 --> 00:07:43,200 Speaker 1: And and I do think that we can take, for example, 130 00:07:43,280 --> 00:07:46,840 Speaker 1: the data that we have in terms of traffic and 131 00:07:46,920 --> 00:07:51,480 Speaker 1: in terms of movement of our drivers and riders, and 132 00:07:51,520 --> 00:07:55,200 Speaker 1: we can use that data to partner up with cities, uh, 133 00:07:55,240 --> 00:07:58,680 Speaker 1: in order to solve congestion issues, because congestion doesn't help 134 00:07:58,720 --> 00:08:02,679 Speaker 1: anyone to waste enormous amounts of time for consumers, UH, 135 00:08:03,040 --> 00:08:05,800 Speaker 1: it hurts the environment. UH. And I think that we 136 00:08:05,840 --> 00:08:08,480 Speaker 1: are aligned with cities, for example, to partner with them 137 00:08:08,480 --> 00:08:11,480 Speaker 1: in a fundamental way to solve these problems. And I 138 00:08:11,520 --> 00:08:15,360 Speaker 1: do think that when these are conversations that a number 139 00:08:15,400 --> 00:08:18,160 Speaker 1: of regulators and cities have wanted to have with us 140 00:08:18,680 --> 00:08:22,200 Speaker 1: for for many years, and I think we are really 141 00:08:22,240 --> 00:08:26,520 Speaker 1: engaging with them at a depth UH that that I 142 00:08:26,560 --> 00:08:29,960 Speaker 1: think is going to create a real win win going forward. 143 00:08:30,000 --> 00:08:33,360 Speaker 1: Do you think you were too confrontational on this before? Yeah? 144 00:08:33,400 --> 00:08:37,520 Speaker 1: I do. That was the Uber CEO Dara cost Rochelle. 145 00:08:37,559 --> 00:08:39,959 Speaker 1: He's sitting down with Bloomberg's editor in chief John Michael 146 00:08:39,960 --> 00:08:43,720 Speaker 1: Thwaite at a conversation in the Bloomberg Year Ahead Forum 147 00:08:43,720 --> 00:08:47,200 Speaker 1: at the World Economic Forum underway in Davos, Switzerland. Tom 148 00:08:47,240 --> 00:08:50,360 Speaker 1: he used those words breakneck growth, and breakneck growth can 149 00:08:50,440 --> 00:08:53,559 Speaker 1: hide cultural issues, it can also exacerbate them as well 150 00:08:53,600 --> 00:08:56,959 Speaker 1: without significant discipline coming down from leadership. And what we 151 00:08:57,040 --> 00:09:00,079 Speaker 1: found in Travis Kallinik is that leadership that's discipline and 152 00:09:00,480 --> 00:09:02,440 Speaker 1: was certainly absent. The question is whether down at Coast 153 00:09:02,480 --> 00:09:05,280 Speaker 1: Roschale he can really turn around what is a massive 154 00:09:05,440 --> 00:09:09,280 Speaker 1: tanker of a company. Well, it's a secondary tone here, 155 00:09:09,400 --> 00:09:14,080 Speaker 1: but it is tangible that social media and frankly the 156 00:09:14,160 --> 00:09:19,280 Speaker 1: modern Silicon Valley tech will be a changed tone, a 157 00:09:19,440 --> 00:09:22,360 Speaker 1: changed culture over the next two to five years. Ken 158 00:09:22,440 --> 00:09:27,800 Speaker 1: Rogoff today was heated with David Rubinstein about the death 159 00:09:27,960 --> 00:09:31,959 Speaker 1: of unicorn companies and particularly the extrapolation of their value 160 00:09:32,640 --> 00:09:36,760 Speaker 1: based off small, tangible transactions in private markets and and 161 00:09:36,800 --> 00:09:38,640 Speaker 1: none of them tell them have really come public in 162 00:09:38,679 --> 00:09:40,760 Speaker 1: a significant way. Was still waiting for at BMBA, was 163 00:09:40,800 --> 00:09:43,160 Speaker 1: still waiting for ru but to make that move. David 164 00:09:43,240 --> 00:09:46,480 Speaker 1: Rubinstein was really heated about not that they've you know, 165 00:09:46,640 --> 00:09:50,040 Speaker 1: proverbally jumped the shark, but that there's just a change 166 00:09:50,440 --> 00:09:53,440 Speaker 1: in tone that you witnessed there. With the interview with 167 00:09:53,640 --> 00:10:10,040 Speaker 1: Mr Michael Swaite, to get to our guest. I want 168 00:10:10,160 --> 00:10:14,439 Speaker 1: John Pharaoh to review sort of his take on Europe, 169 00:10:14,960 --> 00:10:19,600 Speaker 1: Italy and politics. John Mr drag is a meeting tomorrow. 170 00:10:20,080 --> 00:10:22,600 Speaker 1: Does he meant does he care about the March fourth 171 00:10:22,640 --> 00:10:25,199 Speaker 1: elections in Italy? I think he does, but I think 172 00:10:25,200 --> 00:10:27,080 Speaker 1: he's less worried than he otherwise was. I think we 173 00:10:27,120 --> 00:10:29,240 Speaker 1: came through the French election last year unscathed, and I 174 00:10:29,240 --> 00:10:31,400 Speaker 1: think we came through that election unscathed because there was 175 00:10:31,440 --> 00:10:34,440 Speaker 1: a realization that in many of these countries, leaving the 176 00:10:34,480 --> 00:10:37,720 Speaker 1: monetary Union, even if you are anti Europe, leaving the 177 00:10:37,840 --> 00:10:40,760 Speaker 1: monetary Union is something the electorate will not go for. 178 00:10:40,840 --> 00:10:43,840 Speaker 1: And I hear less about that in Italy than maybe 179 00:10:43,920 --> 00:10:45,959 Speaker 1: we would have heard a couple of years ago. So 180 00:10:46,000 --> 00:10:48,480 Speaker 1: I'd say President Draggy, less worried about the politics, may 181 00:10:48,480 --> 00:10:50,960 Speaker 1: be much more worried, and it's a high class problem 182 00:10:50,960 --> 00:10:52,640 Speaker 1: to have. I think, in his words, much more worried 183 00:10:52,679 --> 00:10:55,360 Speaker 1: about this uptick and growth and maybe inflation around the corner, 184 00:10:55,559 --> 00:10:57,960 Speaker 1: and how he's going to move monetary policy without shaking 185 00:10:58,000 --> 00:11:01,680 Speaker 1: this market reviews Mr Drug this morning at my panel 186 00:11:01,720 --> 00:11:05,160 Speaker 1: and now joining us Paul sheared Uh at SMP Global. 187 00:11:05,200 --> 00:11:07,959 Speaker 1: They're Vice chairman and truly one of our claimed experts 188 00:11:08,000 --> 00:11:11,959 Speaker 1: on Japan. But to move away from Japan, Paul to Europe. 189 00:11:12,000 --> 00:11:14,880 Speaker 1: The surprise of our panel are better than good Europe 190 00:11:15,200 --> 00:11:20,120 Speaker 1: and even laggered Italy puts it out and does better. Yeah, Tom, 191 00:11:20,120 --> 00:11:22,720 Speaker 1: it's great to be with you here in Davos. Um Europe, 192 00:11:22,760 --> 00:11:26,000 Speaker 1: I think is is two distinct stories which obviously sort 193 00:11:26,000 --> 00:11:28,520 Speaker 1: of intersect. But one is the more cyclical what's happening 194 00:11:28,559 --> 00:11:31,199 Speaker 1: in terms of the economic expansion, and that's a pretty 195 00:11:31,200 --> 00:11:34,040 Speaker 1: good story. But um, the other story, of course is 196 00:11:34,120 --> 00:11:37,160 Speaker 1: the whole set of issues, not just around Brexit, but 197 00:11:37,240 --> 00:11:40,600 Speaker 1: around the whole architecture of the Eurozone and the architecture 198 00:11:40,600 --> 00:11:43,520 Speaker 1: of the European Union. That's a conversation that's playing out 199 00:11:43,559 --> 00:11:46,480 Speaker 1: in slow emotion, but I think that's really going to 200 00:11:46,520 --> 00:11:50,440 Speaker 1: be a big potential story for two thousand and eighteen. Again, 201 00:11:50,520 --> 00:11:53,040 Speaker 1: I don't know how closely the audience is following this, 202 00:11:53,120 --> 00:11:55,920 Speaker 1: but um, you know, the President of the European Commission 203 00:11:56,480 --> 00:11:58,760 Speaker 1: has been coming up with reports and that there's a 204 00:11:58,760 --> 00:12:01,600 Speaker 1: whole kind of political dialog which is going to take place, 205 00:12:02,160 --> 00:12:06,480 Speaker 1: particularly after this third major election. The election in Italy 206 00:12:06,600 --> 00:12:08,679 Speaker 1: is out of the way, in early March Pool. Anyone 207 00:12:08,720 --> 00:12:11,360 Speaker 1: who's anyone on the international stage needs to be or 208 00:12:11,400 --> 00:12:14,120 Speaker 1: wants to be around President Emmanuel Macron. It seems to 209 00:12:14,160 --> 00:12:16,640 Speaker 1: give them some kind of pr positive pr just being 210 00:12:16,679 --> 00:12:20,360 Speaker 1: next to this guy. He wants more European integration, he 211 00:12:20,400 --> 00:12:24,200 Speaker 1: wants a separate Eurozone finance budget. He wants a separate 212 00:12:24,200 --> 00:12:27,840 Speaker 1: europe Zone finance minister. Does Chancellor Angela Merkel have the 213 00:12:27,840 --> 00:12:30,679 Speaker 1: political capital at home to drive through the vision or 214 00:12:30,679 --> 00:12:33,720 Speaker 1: at least help Emmanuel Macron drive through his vision for 215 00:12:33,840 --> 00:12:37,719 Speaker 1: a more integrated Europe. Well, we'll have to see how 216 00:12:37,760 --> 00:12:40,880 Speaker 1: the coalition talks, you know, finally play out. But the 217 00:12:41,000 --> 00:12:44,440 Speaker 1: encouraging thing there is that, you know, the coalition between 218 00:12:44,920 --> 00:12:47,640 Speaker 1: Bengo Mercle's party at the CDU. But then on the 219 00:12:47,679 --> 00:12:50,959 Speaker 1: other side of the table, of course, is Martin Schortz 220 00:12:50,960 --> 00:12:53,800 Speaker 1: and the SDP. Martin Schortz having descended in from the 221 00:12:53,880 --> 00:12:56,800 Speaker 1: European Parliament where he'd been speaker and a very strong 222 00:12:56,880 --> 00:13:00,800 Speaker 1: advocate of more europe Um. I in that sense, the 223 00:13:00,880 --> 00:13:04,920 Speaker 1: Ducks are potentially lining up here. Um, it's not just Makron, 224 00:13:05,000 --> 00:13:08,120 Speaker 1: it's as I mentioned, the Commission, the European Council UH 225 00:13:08,200 --> 00:13:10,160 Speaker 1: and if the Germans come on board, and if we 226 00:13:10,200 --> 00:13:13,280 Speaker 1: don't get some kind of uh something from left field 227 00:13:13,559 --> 00:13:16,400 Speaker 1: politically in the in the attendant election. You know, if this, 228 00:13:16,520 --> 00:13:19,320 Speaker 1: if it's not going to happen now it being moves 229 00:13:19,360 --> 00:13:23,320 Speaker 1: towards greater integration, particularly as the Europeans, but it completing 230 00:13:23,640 --> 00:13:27,079 Speaker 1: the economic and monetary union, had how to understand when 231 00:13:27,080 --> 00:13:29,440 Speaker 1: it would have actually happened? Well shared where this folks 232 00:13:29,640 --> 00:13:32,920 Speaker 1: SMP Global uh this morning their vice chairman and of 233 00:13:32,960 --> 00:13:35,640 Speaker 1: course and acclaimed economists with decades in Japan. I want 234 00:13:35,640 --> 00:13:38,160 Speaker 1: to get to Japan in a bit, Paul. But right 235 00:13:38,200 --> 00:13:41,960 Speaker 1: now something really really quite important, and that is the 236 00:13:42,040 --> 00:13:45,120 Speaker 1: i m F study yesterday and Maurice Hobbs felt you 237 00:13:45,280 --> 00:13:51,280 Speaker 1: claimed academic made clear they're looking at short term optimism. 238 00:13:51,280 --> 00:13:54,200 Speaker 1: Explain for audience the millier you live in, which is 239 00:13:54,800 --> 00:13:59,040 Speaker 1: the short term, the medium term whatever that is, and 240 00:13:59,120 --> 00:14:04,679 Speaker 1: the long term I m F was short term opposite optimism. 241 00:14:04,720 --> 00:14:07,400 Speaker 1: There was a big butt, there wasn't there. Well. I 242 00:14:07,480 --> 00:14:09,840 Speaker 1: suspect that the I m F for being good economists, 243 00:14:09,880 --> 00:14:12,680 Speaker 1: which is not to get too absorbed by the short 244 00:14:12,800 --> 00:14:15,560 Speaker 1: term cyclical movements which the markets tend to focus on 245 00:14:15,600 --> 00:14:18,400 Speaker 1: more and you know, wherever you look, whether it's the US, 246 00:14:18,440 --> 00:14:21,400 Speaker 1: whether it's Japan, whether it's Europe we just discussed, or 247 00:14:21,440 --> 00:14:25,000 Speaker 1: whether it's China with the challenges that they have. Um, 248 00:14:25,120 --> 00:14:28,640 Speaker 1: you know, there are underlying structural issues in these economies. 249 00:14:28,640 --> 00:14:31,520 Speaker 1: So the you know, the expansions that we've had since 250 00:14:31,560 --> 00:14:34,280 Speaker 1: the financial crisis to a large extent that you have 251 00:14:34,400 --> 00:14:37,560 Speaker 1: been you know, credit to the central banks in particular 252 00:14:37,600 --> 00:14:41,520 Speaker 1: the policy authorities. But you know, a cyclical expansion driven 253 00:14:41,520 --> 00:14:47,000 Speaker 1: my monetary policy doesn't cure the underlying structural challenges in 254 00:14:47,160 --> 00:14:50,280 Speaker 1: the economies. And I think the you mentioned Japan, it's 255 00:14:50,320 --> 00:14:52,000 Speaker 1: been a long time there that one of the big 256 00:14:52,080 --> 00:14:54,920 Speaker 1: lessons from Japan of the ninety nineties is that when 257 00:14:55,000 --> 00:14:57,680 Speaker 1: you have deep structural problems, in that case it was 258 00:14:57,720 --> 00:15:00,400 Speaker 1: in the banking system, um, you know, you do have 259 00:15:00,480 --> 00:15:04,400 Speaker 1: to tackle them head on, don't rely on signical expansion 260 00:15:04,440 --> 00:15:06,320 Speaker 1: to somehow bail you out. And as I would with 261 00:15:06,400 --> 00:15:08,480 Speaker 1: Robert Phelbin and Morgan Stanley and John I want to 262 00:15:08,520 --> 00:15:10,640 Speaker 1: dive into the Japan discussion here just because it's such 263 00:15:10,640 --> 00:15:14,600 Speaker 1: a treaty of Paul Sherd with us. The Emperor, I 264 00:15:14,600 --> 00:15:19,920 Speaker 1: guess abdicates is the proper phrase that signals a generational change. 265 00:15:20,240 --> 00:15:23,880 Speaker 1: Is that over played or is it really a generational change? 266 00:15:23,920 --> 00:15:27,880 Speaker 1: Time has moved on in deflationary Japan, hasn't it. Well? 267 00:15:28,080 --> 00:15:29,880 Speaker 1: You know, I used to is tom the the analogy 268 00:15:29,920 --> 00:15:31,920 Speaker 1: of of a of a duck on a pond. We 269 00:15:31,960 --> 00:15:35,080 Speaker 1: all talked about the lost decades in Japan, But you 270 00:15:35,120 --> 00:15:37,080 Speaker 1: know that is misleading in the sense that there's been 271 00:15:37,120 --> 00:15:40,200 Speaker 1: tremendous change beneath the surface. The duck on the pond, 272 00:15:40,480 --> 00:15:42,400 Speaker 1: before you know it has moved right across the pond. 273 00:15:42,440 --> 00:15:45,800 Speaker 1: Because it's you know, paddling frenetically under the surface. You 274 00:15:45,840 --> 00:15:49,120 Speaker 1: don't really see that. So it is a significant event. Um. 275 00:15:49,600 --> 00:15:52,520 Speaker 1: You know, I think the fact that you know, he 276 00:15:52,640 --> 00:15:55,520 Speaker 1: stepped down and handed over the reins, you know, is 277 00:15:55,560 --> 00:15:58,520 Speaker 1: a change to the normal practice in Japan. So it's 278 00:15:58,600 --> 00:16:01,040 Speaker 1: it's it's a sign of Japanese breaking with some of 279 00:16:01,080 --> 00:16:04,320 Speaker 1: the traditions, the cultural traditions, which are deeply held um 280 00:16:04,440 --> 00:16:07,360 Speaker 1: and doing something a little bit different. Paul, you mentioned 281 00:16:07,360 --> 00:16:10,080 Speaker 1: demographics front and center. The elephant in the room in 282 00:16:10,160 --> 00:16:13,280 Speaker 1: Japan is demographics, and I wonder why we still have 283 00:16:13,320 --> 00:16:17,880 Speaker 1: this structural issue in Japan, which is an older population 284 00:16:18,120 --> 00:16:21,320 Speaker 1: you've heard the stats. More geriatric diapers sold in Japan 285 00:16:21,760 --> 00:16:25,600 Speaker 1: than baby diapers. That's how dire the situation is as 286 00:16:25,800 --> 00:16:28,160 Speaker 1: as far as the demographic situation is concerned. Yet the 287 00:16:28,200 --> 00:16:31,280 Speaker 1: Bank of Japan is sat there involved in trying to 288 00:16:31,360 --> 00:16:34,760 Speaker 1: stimulate demand through lower interest rates and an expansion of 289 00:16:34,760 --> 00:16:38,320 Speaker 1: its balance sheet. That doesn't make sense when the issues 290 00:16:38,320 --> 00:16:42,000 Speaker 1: are structure. The issues are demographics. You can't print people. 291 00:16:42,320 --> 00:16:46,080 Speaker 1: So what is the bo J trying to address here? Well, 292 00:16:46,120 --> 00:16:49,280 Speaker 1: I would make a distinction John, between the sort of 293 00:16:49,320 --> 00:16:51,480 Speaker 1: the supply side of the economy of the structural side, 294 00:16:51,520 --> 00:16:54,440 Speaker 1: which is really one of the important drivers is demographics. 295 00:16:54,440 --> 00:16:58,960 Speaker 1: Obviously that leads into GDP growth from the question of 296 00:16:59,080 --> 00:17:02,680 Speaker 1: macro economy or demand management, and that's really the job 297 00:17:02,720 --> 00:17:05,560 Speaker 1: of the central bank. So I would sort of argue 298 00:17:05,600 --> 00:17:09,080 Speaker 1: that the two issues are a little bit orthogonal. Sorry 299 00:17:09,119 --> 00:17:15,520 Speaker 1: to be um used some jargon there, but not in Switzerland. Yeah, 300 00:17:15,520 --> 00:17:19,439 Speaker 1: he's given thumbs up, okay, And in the sense that 301 00:17:19,480 --> 00:17:21,400 Speaker 1: what the Bank of Japan has focused on is saying 302 00:17:21,400 --> 00:17:23,639 Speaker 1: that we want to get the rate of inflation to 303 00:17:24,040 --> 00:17:27,560 Speaker 1: two percent. That's our job, keeping the un the economy 304 00:17:27,600 --> 00:17:32,000 Speaker 1: at full employment. What real potential growth level, growth rate 305 00:17:32,119 --> 00:17:34,840 Speaker 1: is associated with that being at full employment and having 306 00:17:34,880 --> 00:17:37,880 Speaker 1: low stable inflation. Is this is a sort of separate question. Now, 307 00:17:37,920 --> 00:17:40,639 Speaker 1: what I just said is standard economic analysis, but it 308 00:17:40,760 --> 00:17:42,960 Speaker 1: is been it has been contested, and in fact the 309 00:17:43,000 --> 00:17:47,119 Speaker 1: prior governor, Governor Shirakawa um his view of the world was, 310 00:17:47,760 --> 00:17:51,920 Speaker 1: as you intimated, perhaps the demographics drive deflation and there's 311 00:17:51,920 --> 00:17:55,399 Speaker 1: nothing much monetary policy can do about it. Governor Groda 312 00:17:55,400 --> 00:17:58,520 Speaker 1: obviously has taken a different view, right, Johnny, just to jargon, 313 00:17:58,600 --> 00:18:00,320 Speaker 1: I want you to get one more question. You're John 314 00:18:00,400 --> 00:18:02,879 Speaker 1: with a doctor shared, but we do do a jargon 315 00:18:02,920 --> 00:18:08,480 Speaker 1: alert here. Orthogonal, John is a perpendicular philosophy, sort of 316 00:18:08,560 --> 00:18:11,200 Speaker 1: like looking at the New England patriots and comparing them 317 00:18:11,240 --> 00:18:16,120 Speaker 1: to Milan that that would be certainly, Paul, My final 318 00:18:16,200 --> 00:18:17,600 Speaker 1: question to you in the in the short period of 319 00:18:17,600 --> 00:18:19,320 Speaker 1: time that we do have is whether what the Bank 320 00:18:19,320 --> 00:18:21,360 Speaker 1: of Japan is doing is the right thing to do. 321 00:18:21,720 --> 00:18:25,600 Speaker 1: Whether we should have this obsession with inflation targets when 322 00:18:25,640 --> 00:18:28,360 Speaker 1: GDP per capita in Japan is so strong, when by 323 00:18:28,359 --> 00:18:32,880 Speaker 1: all metrics we're pretty much a full employment Why do this? Um? 324 00:18:33,160 --> 00:18:36,359 Speaker 1: Big question? A short answer is that I do think 325 00:18:36,400 --> 00:18:38,040 Speaker 1: they're doing the right thing. I do think there's too 326 00:18:38,119 --> 00:18:42,080 Speaker 1: much obsession about decimal points in inflation targeting, and I 327 00:18:42,119 --> 00:18:45,520 Speaker 1: do think that central banks uh a little bit too isolated. 328 00:18:45,560 --> 00:18:47,840 Speaker 1: I think we should be looking at demand management being 329 00:18:47,840 --> 00:18:51,200 Speaker 1: the joint responsibility of the monetary and the fiscal authorities. 330 00:18:51,440 --> 00:18:53,680 Speaker 1: But having said all of that, I'm a great supporter 331 00:18:53,760 --> 00:18:55,919 Speaker 1: of what Governor Coroda has done. I have to be 332 00:18:56,040 --> 00:18:58,119 Speaker 1: for consistency because I was a great critic of the 333 00:18:58,119 --> 00:19:01,160 Speaker 1: previous regimes of the Bank. Jo Bullshit has been great 334 00:19:01,160 --> 00:19:03,240 Speaker 1: to catch up with you, very insightful on on Europe 335 00:19:03,240 --> 00:19:07,280 Speaker 1: and Japan. SMP Chief Global Economists and Executive Vice President. 336 00:19:07,359 --> 00:19:10,080 Speaker 1: Joining Tom Kenney, Davis Switz into myself Jonathan Faraoh here 337 00:19:10,119 --> 00:19:23,239 Speaker 1: in New York, we now have an important conversation an 338 00:19:23,280 --> 00:19:27,240 Speaker 1: individual who frequently advises banks, investment banks, accounting firms, hedge funds, 339 00:19:27,520 --> 00:19:31,520 Speaker 1: and other major financial players on fiscal policy, the federal 340 00:19:31,600 --> 00:19:36,800 Speaker 1: budget and developments of the likely deliberations in Washington, d C. 341 00:19:37,000 --> 00:19:40,800 Speaker 1: He literally wrote the book on the budget. The Guide 342 00:19:40,880 --> 00:19:44,479 Speaker 1: to the Federal Budget is Stan Collinder the corpus MSL 343 00:19:44,560 --> 00:19:47,159 Speaker 1: Group join us now, Stan is great to have you 344 00:19:47,200 --> 00:19:49,760 Speaker 1: with us. My question as a bridge. A guest in 345 00:19:49,960 --> 00:19:52,159 Speaker 1: your great country is why do we still do this 346 00:19:52,280 --> 00:19:57,280 Speaker 1: in the United States of America? Still do budgets studio 347 00:19:57,359 --> 00:20:00,439 Speaker 1: government shutdowns, still do debt ceiling debate. I mean, this 348 00:20:00,440 --> 00:20:03,000 Speaker 1: isn't kinda way anytime soon as it stand. No. In 349 00:20:03,040 --> 00:20:04,720 Speaker 1: fact that not only is it not going away, but 350 00:20:04,760 --> 00:20:06,600 Speaker 1: I wrote an article in Forbes over the weekend that 351 00:20:06,680 --> 00:20:09,760 Speaker 1: said that, uh, these are now the new normal, that 352 00:20:09,880 --> 00:20:12,439 Speaker 1: is shutdowns. You're likely to see them more because and 353 00:20:12,520 --> 00:20:16,919 Speaker 1: more often simply because all the sides on on no 354 00:20:16,960 --> 00:20:18,840 Speaker 1: one sees any downside to it. They see it the 355 00:20:18,880 --> 00:20:22,920 Speaker 1: way is showing their respective constituencies base voters that it's 356 00:20:22,920 --> 00:20:28,200 Speaker 1: good for them. Stan John McCain, when he was less sick, 357 00:20:28,480 --> 00:20:32,760 Speaker 1: wrote an important essay begging for us to get back 358 00:20:32,760 --> 00:20:35,560 Speaker 1: to the budget process of our You, the budget process 359 00:20:35,600 --> 00:20:38,800 Speaker 1: that you helped invent. Why just a question I've had 360 00:20:38,840 --> 00:20:42,359 Speaker 1: three times in Davos. Why can't we get back to 361 00:20:42,640 --> 00:20:47,680 Speaker 1: a normal process. Comm It's real simple. They don't want to. 362 00:20:48,520 --> 00:20:51,800 Speaker 1: It's not that it's not doable. Um, it certainly is. 363 00:20:51,840 --> 00:20:55,440 Speaker 1: But the most most members of Congress, Republicans and Democrats, 364 00:20:55,440 --> 00:20:58,639 Speaker 1: but mostly Republicans, see the budget process is something to 365 00:20:58,680 --> 00:21:01,800 Speaker 1: be used for their own device is rather than UH 366 00:21:02,760 --> 00:21:06,240 Speaker 1: as a as a basic function of the government. So shutdowns, 367 00:21:06,359 --> 00:21:10,560 Speaker 1: debt ceiling debacles, uh, you know, fiscal cliffs are things 368 00:21:10,600 --> 00:21:14,040 Speaker 1: you've got to expect simply because they act as campaign rallies. 369 00:21:14,320 --> 00:21:15,959 Speaker 1: I think of how many members are going to go 370 00:21:16,040 --> 00:21:18,680 Speaker 1: members of the Houses and are going to go home 371 00:21:18,680 --> 00:21:20,560 Speaker 1: this weekend to their constituents and say, look what I 372 00:21:20,600 --> 00:21:23,080 Speaker 1: was willing to do for you, And so these things 373 00:21:23,160 --> 00:21:27,720 Speaker 1: act as reelection events rather than as good government. Well, 374 00:21:27,880 --> 00:21:31,000 Speaker 1: and into a conversation I had with Jane Harman, the 375 00:21:31,080 --> 00:21:35,399 Speaker 1: former at Liberal and Democrat congresswoman from California, but someone 376 00:21:35,720 --> 00:21:39,080 Speaker 1: who's been a hawk on defense and very knowledgeable about 377 00:21:39,080 --> 00:21:42,679 Speaker 1: how your capitol runs. What do the Democrats need to 378 00:21:42,720 --> 00:21:45,879 Speaker 1: do to respond? Do they go to the middle maybe 379 00:21:45,880 --> 00:21:48,480 Speaker 1: where Mr Schumer is or do they need to stay 380 00:21:48,480 --> 00:21:52,400 Speaker 1: out on the progressive left of our budget debate? Well, 381 00:21:52,480 --> 00:21:55,320 Speaker 1: going to the middle doesn't seem like it's Look, let's 382 00:21:55,320 --> 00:21:58,359 Speaker 1: think about the ultimate goal here for both sides, Republicans 383 00:21:58,400 --> 00:22:02,520 Speaker 1: and Democrats. That's re election and perhaps increasing your numbers 384 00:22:02,520 --> 00:22:05,080 Speaker 1: at the next election. Good legislating is not the plan 385 00:22:05,720 --> 00:22:08,840 Speaker 1: and is not their goal under those circumstances going towards 386 00:22:08,840 --> 00:22:12,520 Speaker 1: the middle is not going to satisfy on the Democratic side. Certainly, 387 00:22:13,600 --> 00:22:15,840 Speaker 1: the rapidness of the voters who are trying to get 388 00:22:15,880 --> 00:22:18,320 Speaker 1: back at Trump. I mean, they're they're looking at this 389 00:22:18,760 --> 00:22:21,320 Speaker 1: as a re election fight, part of a re election fight, 390 00:22:21,400 --> 00:22:26,080 Speaker 1: residents as something keeping the government the lights opens. So um, 391 00:22:26,119 --> 00:22:29,000 Speaker 1: I think what the What the Democratic leadership would tell you, 392 00:22:29,720 --> 00:22:33,280 Speaker 1: what groups like Indivisible and Resistance and things like that 393 00:22:33,560 --> 00:22:36,400 Speaker 1: would tell you, is we're going to resist the Republicans 394 00:22:36,440 --> 00:22:38,600 Speaker 1: at all times because it increases the motivation of our 395 00:22:38,680 --> 00:22:40,280 Speaker 1: voters to get out and vote, and that's how we 396 00:22:40,320 --> 00:22:43,400 Speaker 1: win in November two thousand eighteen. So stand this kind 397 00:22:43,400 --> 00:22:48,399 Speaker 1: of feeds into shutdown politics. Death sailing politics is very, 398 00:22:48,520 --> 00:22:53,200 Speaker 1: very different. There are real consequences in that situation. How 399 00:22:53,200 --> 00:22:55,200 Speaker 1: does this bleed out, if at all, to the death 400 00:22:55,240 --> 00:22:57,600 Speaker 1: sailing debate that were sets confront really in the next 401 00:22:57,640 --> 00:23:00,480 Speaker 1: couple of months, well not not only the next couple 402 00:23:00,480 --> 00:23:02,440 Speaker 1: of months, but maybe the next couple of weeks. Jonathan, 403 00:23:02,560 --> 00:23:05,280 Speaker 1: it looks like the debt ceiling is gonna well it's 404 00:23:05,280 --> 00:23:07,120 Speaker 1: already expired, but it looks like it's going to start 405 00:23:07,160 --> 00:23:09,600 Speaker 1: to get critical with the so called extreme measures that 406 00:23:09,840 --> 00:23:12,640 Speaker 1: if the treasury can use running out about mid March, 407 00:23:12,680 --> 00:23:14,480 Speaker 1: so it's gonna have to be raised. The debt ceiling 408 00:23:14,480 --> 00:23:16,560 Speaker 1: is gonna have to be raised by then. Um. I 409 00:23:16,600 --> 00:23:18,800 Speaker 1: don't think there's any doubt that there will be some 410 00:23:18,880 --> 00:23:22,360 Speaker 1: who threatened not to raise the debt ceiling. Um, if 411 00:23:22,359 --> 00:23:25,000 Speaker 1: they don't get what they want. Remember the Freedom Caucus 412 00:23:25,040 --> 00:23:28,120 Speaker 1: now Freedom Claucus. The ultra conservatives have done that, uh 413 00:23:28,240 --> 00:23:30,080 Speaker 1: a number of times over the last couple of years, 414 00:23:30,160 --> 00:23:32,800 Speaker 1: saying they they'll lie down on the tracks and let 415 00:23:32,840 --> 00:23:34,960 Speaker 1: the train run over them before they'll raise the debt ceiling. 416 00:23:35,440 --> 00:23:37,920 Speaker 1: Now that's a tough position for them to take this year, 417 00:23:38,760 --> 00:23:41,720 Speaker 1: given that they just voted to increased government debt by 418 00:23:41,920 --> 00:23:44,480 Speaker 1: one and a half trillion dollars with the with with 419 00:23:44,560 --> 00:23:47,920 Speaker 1: the tax bill. But um, I think that's that's I've 420 00:23:47,920 --> 00:23:49,880 Speaker 1: been saying this for weeks. That's what the markets really 421 00:23:49,920 --> 00:23:52,320 Speaker 1: need to be worried about, which is if they're if 422 00:23:52,359 --> 00:23:54,919 Speaker 1: Congress in the president are having trouble with nuts and 423 00:23:54,920 --> 00:23:58,000 Speaker 1: bolts bills like appropriations and and the budget, and what 424 00:23:58,080 --> 00:24:00,520 Speaker 1: happens when you get to the debt ceiling and there's 425 00:24:00,600 --> 00:24:02,800 Speaker 1: just there's a dislike of the bill to begin with. 426 00:24:03,000 --> 00:24:06,400 Speaker 1: So um, I think we need to expect some sort 427 00:24:06,400 --> 00:24:09,360 Speaker 1: of cliffhanger type situation with the death ceiling that will 428 00:24:09,359 --> 00:24:11,800 Speaker 1: be even worse than it was with this, this first 429 00:24:11,800 --> 00:24:14,920 Speaker 1: shutdown of what there could be many The economy is better, 430 00:24:15,160 --> 00:24:19,840 Speaker 1: Our tax revenue is going up compared to what Tom 431 00:24:19,920 --> 00:24:23,520 Speaker 1: is is you know is the logical question. Um, Look, 432 00:24:23,520 --> 00:24:27,680 Speaker 1: we just voted to lower revenues. Economic growth is economic 433 00:24:27,720 --> 00:24:30,080 Speaker 1: growth is not that much higher than we had anticipated 434 00:24:30,119 --> 00:24:33,720 Speaker 1: before the tax cut. Um. So under those circumstances, where 435 00:24:33,720 --> 00:24:36,040 Speaker 1: are the higher revenues coming from? And in fact, the 436 00:24:36,080 --> 00:24:39,200 Speaker 1: deal yesterday cut taxes further by another thirty one billion 437 00:24:39,240 --> 00:24:48,080 Speaker 1: dollars for several muscle Um Yeah that yeah, so um, 438 00:24:48,359 --> 00:24:50,600 Speaker 1: our revenues are not going up, and it's almost certainly 439 00:24:50,600 --> 00:24:53,640 Speaker 1: going to increase the deficit, not the depth of the deficit, 440 00:24:53,760 --> 00:24:57,280 Speaker 1: to over a trillion dollars a year starting now, starting 441 00:24:57,720 --> 00:25:01,040 Speaker 1: um and through every year through the Trump administration. However 442 00:25:01,119 --> 00:25:04,159 Speaker 1: long unreal. I did not know that. That's why we 443 00:25:04,200 --> 00:25:07,000 Speaker 1: love having you on a tidbit from the new slow 444 00:25:07,440 --> 00:25:12,000 Speaker 1: thirty one billion large disappears in tax revenue. Si Holender, 445 00:25:12,040 --> 00:25:14,040 Speaker 1: Thank you, so much. He is at the budget guy 446 00:25:14,080 --> 00:25:16,400 Speaker 1: out on Twitter and of course the cour of his communication, 447 00:25:31,119 --> 00:25:34,439 Speaker 1: I'm Tim Keenan Davos, and now you'll hear me say, folks, 448 00:25:34,480 --> 00:25:36,560 Speaker 1: this is the most important interview of the day and 449 00:25:37,000 --> 00:25:40,600 Speaker 1: investment management or foreign exchange, this is the most important 450 00:25:40,600 --> 00:25:45,280 Speaker 1: interview of the year for Tom Keene. The foundation of 451 00:25:45,400 --> 00:25:49,800 Speaker 1: our analysis of you, our audience is founded and the 452 00:25:49,960 --> 00:25:54,120 Speaker 1: Edelman Trust Barometer. It is an extraordinary document. I'll put 453 00:25:54,160 --> 00:25:57,120 Speaker 1: it out on social thanks to Mike Allen of Axioso 454 00:25:57,160 --> 00:26:00,520 Speaker 1: wrote it up big yesterday and joining us. The founder 455 00:26:00,640 --> 00:26:04,520 Speaker 1: of this seminal document for Tom Keenan Bloomberg Surveillance is 456 00:26:04,600 --> 00:26:08,640 Speaker 1: Richard Edelman, of course, the leader of Edelman and Edelman Digital. 457 00:26:08,960 --> 00:26:13,880 Speaker 1: This year, your Edelman Trust Barometer is not a pretty picture. 458 00:26:14,200 --> 00:26:17,520 Speaker 1: It's in America in chaos. Well, Tom, we see that 459 00:26:17,960 --> 00:26:20,800 Speaker 1: America has fallen to be the lowest of the twenty 460 00:26:20,800 --> 00:26:24,920 Speaker 1: eight countries that we survey in trust. Uh, that trust 461 00:26:25,000 --> 00:26:29,120 Speaker 1: and government has imploded thirty points drop and fourteen points 462 00:26:29,119 --> 00:26:32,960 Speaker 1: in the general population. And what we observe is that 463 00:26:33,040 --> 00:26:38,480 Speaker 1: the rest of the institutions have followed government downward. And uh, 464 00:26:38,480 --> 00:26:42,280 Speaker 1: it's it's actually a sort of lack of common facts 465 00:26:42,320 --> 00:26:46,800 Speaker 1: and and the lack of rational discourse, and completely unusual 466 00:26:46,920 --> 00:26:49,879 Speaker 1: in that it wasn't based on a big economic downturn 467 00:26:50,160 --> 00:26:53,919 Speaker 1: or a calamity like Fukushima. The heart of the Edelman 468 00:26:53,960 --> 00:26:57,240 Speaker 1: trust barometer is it ain't pretty. You people have had 469 00:26:57,240 --> 00:26:59,880 Speaker 1: the courage to go in over the years and parce 470 00:27:00,040 --> 00:27:03,320 Speaker 1: out society, and you do it as a general statement 471 00:27:03,400 --> 00:27:07,919 Speaker 1: of the informed public and the uninformed public. Richard, Is 472 00:27:07,920 --> 00:27:10,600 Speaker 1: it just as simple as President Trump has a trust 473 00:27:10,640 --> 00:27:14,320 Speaker 1: of the uninformed public and everybody else is informed. That's 474 00:27:14,320 --> 00:27:19,040 Speaker 1: too simplistic an analysis, isn't it? Well, really, it's polarized, 475 00:27:19,160 --> 00:27:23,840 Speaker 1: And um it's best evidence by um a look at 476 00:27:23,840 --> 00:27:27,159 Speaker 1: trust in the media. The Clinton voter actually has rising 477 00:27:27,160 --> 00:27:30,399 Speaker 1: trust and media to sixty one points and the Trump 478 00:27:30,520 --> 00:27:33,520 Speaker 1: voter is at thirty points or so for for trust 479 00:27:33,600 --> 00:27:36,800 Speaker 1: in media. And so at the base of all of 480 00:27:36,840 --> 00:27:40,800 Speaker 1: this is a different view of the world, different facts, 481 00:27:40,960 --> 00:27:46,720 Speaker 1: different thought bubbles. And um, actually it's it's not sustainable, Tom, 482 00:27:46,800 --> 00:27:51,440 Speaker 1: because we now see that there's a desire for facts, 483 00:27:51,520 --> 00:27:55,840 Speaker 1: for knowledge, for for authoritative sources. Um, it's a drop 484 00:27:55,880 --> 00:27:59,119 Speaker 1: in a person like yourself and a rise in academics 485 00:27:59,320 --> 00:28:03,240 Speaker 1: technical perts and yes, even CEOs this year experts are 486 00:28:03,320 --> 00:28:06,679 Speaker 1: doing better. Yes, because we want to have facts. We 487 00:28:06,760 --> 00:28:09,520 Speaker 1: want to know that what we're hearing is correct and 488 00:28:09,720 --> 00:28:14,400 Speaker 1: unbiased and and has truth. Cause your job, I mean, 489 00:28:14,560 --> 00:28:16,639 Speaker 1: your day job is to go around and tell CEO 490 00:28:16,760 --> 00:28:18,920 Speaker 1: is what to do, particularly those in crisis. That's the 491 00:28:18,960 --> 00:28:21,760 Speaker 1: acclaim of of the edlement of your father and the 492 00:28:21,840 --> 00:28:25,720 Speaker 1: edlement of Richard Edelement. That's great. What do you advise 493 00:28:25,800 --> 00:28:29,320 Speaker 1: the media people to get respect back? Or do you say, 494 00:28:29,400 --> 00:28:32,960 Speaker 1: don't worry about it, this will go away. Look of 495 00:28:32,960 --> 00:28:36,440 Speaker 1: the people we surveyed said that they have turned off 496 00:28:36,440 --> 00:28:39,440 Speaker 1: altogether on mainstream media. Some part of it is um 497 00:28:39,800 --> 00:28:42,400 Speaker 1: they say media is too disturbing. Some part of it 498 00:28:42,440 --> 00:28:44,880 Speaker 1: is I get everything I need from social in search. 499 00:28:45,760 --> 00:28:48,680 Speaker 1: That group is differently informed from the other half who 500 00:28:48,720 --> 00:28:52,520 Speaker 1: are very mainstream oriented. But the problem with it is 501 00:28:52,680 --> 00:28:55,840 Speaker 1: tom we're not having common facts, and so I think 502 00:28:55,840 --> 00:28:59,680 Speaker 1: it's really up to business in particular to speak to it. 503 00:28:59,840 --> 00:29:05,000 Speaker 1: Some ploice people trust their employer, and that's a real 504 00:29:05,080 --> 00:29:07,600 Speaker 1: window into the employee group, who then can share the 505 00:29:07,640 --> 00:29:10,720 Speaker 1: information And how do you synthesize and if you don't 506 00:29:10,720 --> 00:29:13,840 Speaker 1: want to talk specifically about the property Jeff Bezos is 507 00:29:13,920 --> 00:29:17,400 Speaker 1: success with the Washington Post. I'm assuming that's an evil 508 00:29:17,480 --> 00:29:21,400 Speaker 1: media to Trump supporters. And I'm just making a generalization there. 509 00:29:21,800 --> 00:29:25,040 Speaker 1: But what does the Edelman Trust parometers say about a 510 00:29:25,120 --> 00:29:27,880 Speaker 1: media success like axehost or a media success like the 511 00:29:27,920 --> 00:29:31,600 Speaker 1: Washington Post. There's a twelve point rise and trust and 512 00:29:31,680 --> 00:29:36,520 Speaker 1: journalists this year. People want credentialized folks writing their content 513 00:29:37,000 --> 00:29:39,800 Speaker 1: for that half that is reading mainstream for the informed 514 00:29:39,800 --> 00:29:42,960 Speaker 1: half not but you can't claim that it's the informed half. 515 00:29:43,000 --> 00:29:46,440 Speaker 1: Actually it is some part of the general population as well. 516 00:29:46,720 --> 00:29:51,080 Speaker 1: Those people unfortunately are in thought bubbles. Uh. And there 517 00:29:52,360 --> 00:29:54,320 Speaker 1: people say they can no longer tell the difference between 518 00:29:54,360 --> 00:29:57,520 Speaker 1: fake news and real news, and more than half say therefore, 519 00:29:57,800 --> 00:30:00,680 Speaker 1: I can't even judge a government of show, and I 520 00:30:00,720 --> 00:30:03,880 Speaker 1: can't judge a CEO as to how well they're doing. 521 00:30:04,520 --> 00:30:07,560 Speaker 1: So it has consequences. Just joining us Richard Edelman here 522 00:30:07,600 --> 00:30:10,800 Speaker 1: an annual visit with his magnificent Edelman Trust parameter. I 523 00:30:10,800 --> 00:30:16,040 Speaker 1: will put it out on social media and on Twitter. Uh. 524 00:30:16,080 --> 00:30:18,560 Speaker 1: It's made quite a splash in Davas, as it does 525 00:30:18,640 --> 00:30:22,120 Speaker 1: every year, particularly with the Financial Times Breakfast. You didn't 526 00:30:22,120 --> 00:30:24,240 Speaker 1: need to throw anybody throw a breakfast muffin at you 527 00:30:24,280 --> 00:30:28,000 Speaker 1: at the ft breakfast? No, but there used to be 528 00:30:28,040 --> 00:30:31,800 Speaker 1: not funny, and that CEOs are getting beaten up and 529 00:30:32,120 --> 00:30:34,440 Speaker 1: media types are getting beaten up. The CEOs are doing 530 00:30:34,480 --> 00:30:37,640 Speaker 1: better within the trust parameter. Right. Well, I think CEOs 531 00:30:37,680 --> 00:30:41,080 Speaker 1: have benefited this year from standing up on issues like 532 00:30:41,200 --> 00:30:45,360 Speaker 1: LGBT or the Me Too movement and and uh you know, 533 00:30:45,360 --> 00:30:49,680 Speaker 1: whether it's Mark Bannioff or Tim Cook or um Howard Scholtz, 534 00:30:49,760 --> 00:30:53,760 Speaker 1: any of them, they are showing leadership. But the next 535 00:30:53,800 --> 00:30:56,440 Speaker 1: phase has to be that they have to get their 536 00:30:56,520 --> 00:31:00,920 Speaker 1: companies to speak into that information void and allow us 537 00:31:01,200 --> 00:31:05,800 Speaker 1: to actually understand these issues better in the time that 538 00:31:05,840 --> 00:31:07,920 Speaker 1: we have left. Let's switch geared to an application. Do 539 00:31:07,960 --> 00:31:09,880 Speaker 1: you represent Uber? And I am I am going to 540 00:31:09,960 --> 00:31:12,920 Speaker 1: get into trouble and then our John mchlitwait today talk 541 00:31:13,000 --> 00:31:15,680 Speaker 1: to the new leadership at Uber. Come on, they need 542 00:31:15,680 --> 00:31:18,760 Speaker 1: to parachute in Edelman for you to do your pixie 543 00:31:18,800 --> 00:31:22,480 Speaker 1: dust on Uber? What would you recommend to Uber to 544 00:31:22,560 --> 00:31:24,880 Speaker 1: write what seems to be a set not not a 545 00:31:24,920 --> 00:31:27,640 Speaker 1: big like Thailand all train wreck, but you know, a 546 00:31:27,720 --> 00:31:32,280 Speaker 1: set of issues. How does Edelman handle that well? For Uber? 547 00:31:32,480 --> 00:31:36,440 Speaker 1: Which is a great brand, well known. Um. The uh, 548 00:31:37,440 --> 00:31:40,120 Speaker 1: most important thing is to make their drivers feel as 549 00:31:40,120 --> 00:31:42,080 Speaker 1: if they're part of the company. Give them equity in 550 00:31:42,120 --> 00:31:45,080 Speaker 1: the company, give them some share in the future, as 551 00:31:45,080 --> 00:31:50,440 Speaker 1: opposed to making freelancers and and otherwise distinct. I mean, 552 00:31:50,480 --> 00:31:53,000 Speaker 1: but that's a brilliant idea. I mean not, you know, 553 00:31:53,160 --> 00:31:56,400 Speaker 1: I just haven't heard that. To take the gig economy 554 00:31:56,440 --> 00:31:58,280 Speaker 1: if you will, and give it equity. It means what 555 00:31:58,360 --> 00:32:00,480 Speaker 1: it comes down to. But it's the same deal that 556 00:32:00,800 --> 00:32:03,680 Speaker 1: Oscar Immuniz has done at United Airlines. Pay people a 557 00:32:03,720 --> 00:32:07,080 Speaker 1: good wage, give them a sense of the future, uh, 558 00:32:07,120 --> 00:32:09,720 Speaker 1: and then they'll serve their customers better. I think this 559 00:32:09,920 --> 00:32:15,160 Speaker 1: idea of better wages, better benefits, but expect better work 560 00:32:15,400 --> 00:32:19,880 Speaker 1: is the next big idea. What does Edelman Digital and 561 00:32:19,920 --> 00:32:23,760 Speaker 1: there two separate companies right essentially, what does Edelman Digital 562 00:32:23,880 --> 00:32:26,480 Speaker 1: say about video? It's really front and center right now. 563 00:32:26,840 --> 00:32:31,640 Speaker 1: Facebook is challenged by it. My observation is, as a generalization, 564 00:32:32,000 --> 00:32:34,240 Speaker 1: adults don't want to see video. They don't have time 565 00:32:34,280 --> 00:32:36,520 Speaker 1: for it, they can't get through it. But what have 566 00:32:36,600 --> 00:32:41,160 Speaker 1: you learned in your research on video? People want who 567 00:32:41,160 --> 00:32:44,600 Speaker 1: are young, uh to see it, not read it and 568 00:32:44,720 --> 00:32:48,080 Speaker 1: they want to witness it in a way, and they 569 00:32:48,080 --> 00:32:50,920 Speaker 1: also want to produce it and they want to feel 570 00:32:50,960 --> 00:32:54,600 Speaker 1: as if, um, they're part of the content creation crowd. 571 00:32:54,680 --> 00:32:59,360 Speaker 1: So in Edelman Digital, we're creating communities where it's respectful 572 00:32:59,560 --> 00:33:03,000 Speaker 1: and shared content and shared experience within that is a 573 00:33:03,040 --> 00:33:06,640 Speaker 1: phrase you said, who are young when they get older? 574 00:33:06,720 --> 00:33:09,320 Speaker 1: Do they switch to act like you and me? Or 575 00:33:09,360 --> 00:33:11,400 Speaker 1: do you think it's a game change? Where we mean 576 00:33:11,400 --> 00:33:15,080 Speaker 1: the answers, we don't know. We don't know. But here's 577 00:33:15,080 --> 00:33:18,640 Speaker 1: the thing. The big goal for me for media in 578 00:33:18,680 --> 00:33:20,760 Speaker 1: the next year has to be to move from being 579 00:33:20,840 --> 00:33:24,520 Speaker 1: advocates to being people who inform. I think that the 580 00:33:24,600 --> 00:33:28,480 Speaker 1: degree to which media has become opinionated actually is taking 581 00:33:28,520 --> 00:33:31,239 Speaker 1: away the middle in the United States, and we have 582 00:33:31,320 --> 00:33:34,280 Speaker 1: to get to a place where there is a common 583 00:33:34,280 --> 00:33:37,760 Speaker 1: ground where people can actually debate. But the audience wants 584 00:33:38,000 --> 00:33:42,040 Speaker 1: the angle. I mean, certainly within cable TV News, they've 585 00:33:42,080 --> 00:33:46,240 Speaker 1: delivered a product with Mr Ale's Revolution, They've delivered a 586 00:33:46,320 --> 00:33:48,959 Speaker 1: product that the audience wants, which is they want to 587 00:33:49,000 --> 00:33:52,600 Speaker 1: hear what their side says. But you see, I think 588 00:33:52,640 --> 00:33:54,920 Speaker 1: that's just the people on the edges and and the 589 00:33:55,000 --> 00:33:58,720 Speaker 1: ones who want to be loud um. There's this again 590 00:33:59,440 --> 00:34:02,560 Speaker 1: of people who turned off on mainstream media partly because 591 00:34:02,600 --> 00:34:06,760 Speaker 1: of the tone and the polarization doesn't suit anybody except 592 00:34:06,760 --> 00:34:10,040 Speaker 1: for the I can't imagine your survey could be more 593 00:34:10,120 --> 00:34:13,399 Speaker 1: interesting next year. This is just extraordinary. This year, the 594 00:34:13,400 --> 00:34:18,160 Speaker 1: divisible folks polarization witnessed in the edible and trust parameter 595 00:34:18,280 --> 00:34:21,440 Speaker 1: of a number of countries and particularly the United States 596 00:34:22,000 --> 00:34:32,239 Speaker 1: of America. Thanks for listening to the Bloomberg Surveillance podcast. 597 00:34:32,600 --> 00:34:37,560 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 598 00:34:37,680 --> 00:34:42,000 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 599 00:34:42,120 --> 00:34:46,000 Speaker 1: Keane before the podcast. You can always catch us worldwide. 600 00:34:46,440 --> 00:35:00,520 Speaker 1: I'm Bloomberg Radio.