July 25, 2025 • 38 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
European Commission President Ursula von der Leyen said she will travel to Scotland this weekend to meet with US President Donald Trump, as the two sides aim to conclude a trade deal ahead of an Aug. 1 deadline when 30% tariffs on the bloc’s exports are otherwise due to kick in.
After months of talks and shuttle diplomacy between Brussels and Washington DC, the two sides have been zeroing in on an agreement this past week that would see the EU face 15% tariffs on most of its trade. Limited exemptions are expected for aviation, some medical devices and generic medicines, several spirits, and a specific set of manufacturing equipment that the US needs, Bloomberg previously reported.
Steel and aluminum imports would likely benefit from a quota under the arrangements under discussion but above that threshold they would face a higher tariff of 50%.
“We’ll see if we make a deal,” Trump said as he arrived in Scotland on Friday. “Ursula will be here, highly respected woman. So we look forward to that.”
Trump reiterated that he believed there was “a 50-50 chance” of a deal with the EU, saying there were sticking points on “maybe 20 different things” that he did not want to detail publicly.
Today's show features:
- Bloomberg TV and Radio International Economics & Policy Correspondent Mike McKee on Friday’s economic data and reaction to President Donald Trump’s visit to the Federal Reserve
- Kathryn Judge, Harvey J. Goldschmid Professor of Law at Columbia Law School on the Trump vs. Powell saga
- Christina Padgett, Associate Managing Director, Head of Leveraged Finance Research and Analytics with Moody’s, on the private credit market
- Francis deSouza, Chief Operating Officer at Google Cloud on the business unit’s next wave of growth and AI product strategy
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business, finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
Okay, so, as we said, Trey definitely on the minds
of investors. So to is next wet week's FED meeting.
I'm ad a FED show that is continuing to be
in the crosshairs of President Trump. Let's get into today's
macro All that's coming at us, all that's coming at
the FED. Share we've got with us Bloomberg TV and
Radio International Economics and Policy correspondent Michael McKee. Mike, first
(00:53):
of all, are we getting more certainty about the US
economic outlook because of what we're seeing in the data points,
because we're starting to get movement on trade agreements, any
signs that things are settling into a clear economic trend
here in the United.
Speaker 4 (01:06):
States, I disappoint you, but no, we've had indications that
we're getting some tariff passed through into inflation from the
CPI and PPI not a lot yet. But the biggest
problem is Donald Trump's tariffs for the most part, have
not gone into effect. August first, in theory is the deadline.
(01:27):
We don't know if there'll be a tackle on that,
some sort of delay. He's suggesting that that could happen
if they're negotiating with the European Union at that time.
But if and when the tariffs do come in, it's
obviously going to put pressure on companies and company margins,
and so we will then start to see who passes through,
(01:49):
how much, and what kind of impact on inflation and
consumer psychology there is from all this.
Speaker 1 (01:55):
The president Earlier today, Mike was asked about the money
that the US has brought in or is bringing in
when it comes to tariffs. He was asked by reporters
before he made his way to Scotland, and he did
say that we could use the tariff money for rebates
to Americans. Help me out with that from the perspective
of something inflationary, but also less on the inflation side
(02:17):
and more on how much money has the US brought
in when it comes to tariffs.
Speaker 4 (02:22):
They've brought in about one hundred billion dollars so far.
But bringing in the money is kind of a misnomer.
Somebody's got to pay that, right, is that we're not
printing money here. This is not coming as a gift
from the clouds, nor are the foreign companies countries paying it.
Some of the costs may be absorbed by foreign companies,
(02:47):
foreign exporters lowering prices, but most of this is at
the moment either coming out of consumers pockets or coming
out of corporate pockets, say compression of margins. Now that
still means somebody's paying it, because that comes then out
of shareholders pockets. So there is an effect on the economy.
We just haven't seen a huge impact yet because there
(03:08):
haven't been a huge amount.
Speaker 5 (03:09):
Of tariffs in place.
Speaker 4 (03:11):
But we are seeing higher prices for cars, We are
seeing higher prices for appliances, things made out of steel.
Speaker 5 (03:18):
So we are going to have an effect.
Speaker 4 (03:21):
The question is how much and who's going to directly
affect whether he gives people money back or not. That
seems like a weird idea to me because he's campaigned
so much and people have campaigned so much on the deficit,
and he's argued that his big, beautiful plan is not
going to increase the deficit. Well, if I get some
(03:42):
revenue that is supposed to offset the deficit and then
I start handing it out to people, I'm not going
to reduce the deficit.
Speaker 6 (03:48):
All right.
Speaker 3 (03:49):
Really good to keep kind of all of these things
in mind. One of the things I'm thinking too, though,
is about the trade deals yet to come China, EU.
Speaker 7 (03:55):
These are some of the big ones, right.
Speaker 4 (03:57):
And the question is what are these deals actually going
to be. So far, we don't have any signed, actual
point by point agreements. The British are still working out
the details with the United States, and so you can
imagine for China it's going to be very complicated. For Japan,
it's going to be very complicated. And then the most
(04:17):
complicated of all is going to be the EU, because
the EU, while it negotiates as a block on trade,
is twenty eight different twenty nine different countries, and some
of them aren't going to like parts of this.
Speaker 1 (04:28):
The President also today saying that on trade deals, most
of the deals are letters instructing tariff rate. So those
letters we got a couple of weeks ago, that's say
ten to fifteen percent tariff rate, some high or some lower,
depending on your country of choice.
Speaker 8 (04:41):
He's calling those deals.
Speaker 4 (04:43):
He's calling those deals because he's trying to make this
all look look good, and to the extent that he's
allowed to put tariffs on and that's an open legal question.
And next week on August first, they're also hearing this
case at the Appeals Court on whether or not he
can impose the tariffs under the International Economic Emergency Act
(05:06):
that he has cited. If he can't, then all this
falls apart. If he can, then the question is how
legal are these agreements in terms of both sides living
up to them.
Speaker 5 (05:20):
He made a deal with China.
Speaker 4 (05:22):
In theory in the first term, which they didn't live
up to, and any kind of real trade agreement has
to be ratified by Congress.
Speaker 5 (05:31):
So we don't quite know where this is all going
to end up.
Speaker 4 (05:36):
And this is just sort of the ongoing chaos that
we have been seeing.
Speaker 3 (05:39):
Mike, the assumption that we're going to have all this
investment going on in the United States, building a factories,
manufacturing happening here.
Speaker 7 (05:45):
I keep going back to this.
Speaker 3 (05:46):
Quote from a story I read, I think it was
on Monday, and this was a senior economist for Emerging
Asia in Texas and person. The individual said, at a
fifteen to twenty percent tariff level, it's still profitable for
US companies to import from broad rather than produce similar
goods at home. So she said this in a business
in a Bloomberg story. So if we are thinking that
(06:08):
there's going to be a lot of economic momentum out
of all of this investment, that's not something we should
assume or I don't know, how.
Speaker 9 (06:14):
Do you know?
Speaker 5 (06:14):
You can't assume it.
Speaker 4 (06:16):
And it's one of the interesting things about the Japan
deal is they said they were going to invest five
hundred and fifty billion dollars. Well, was that five hundred
and fifty billion new dollars over what period? Or does
this include factories that are already under construction. It's really
hard to tell what any of this means. There was
a lot of money lined up to build factories under
(06:40):
the Inflation Reduction Act, the kind of misnamed one from
Joe Biden, And are they counting that? We just don't know,
and we don't know whether companies are going to follow through.
Speaker 5 (06:54):
We've had a lot.
Speaker 4 (06:54):
Of a lot of cases where we've seen promises made
it were not kept in the long run, so it's
all kind of a morphous at this point. The only
thing we know for sure is if the tariffs do
go on, we will see inflation, even if we don't
know how much.
Speaker 8 (07:13):
You weren't here with us yesterday.
Speaker 5 (07:14):
I'm sorry, I apologize.
Speaker 8 (07:16):
We could have used you.
Speaker 1 (07:18):
I wanted to get your reaction to what happened at
the Federal Reserve yesterday afternoon. That back and forth between
the President and the FED chair, the tensions kind of
actually seeming to dissipate a little bit.
Speaker 4 (07:30):
Yeah, I think both sides kind of wanted that. As
I've been saying on this program for a long time,
and now I'm copying on other programs.
Speaker 5 (07:39):
You know, Trump is a master of the squirrel, and he.
Speaker 9 (07:45):
Was.
Speaker 4 (07:46):
He's been using this these FED attacks lately to distract
from Epstein, and that's pretty obvious.
Speaker 5 (07:54):
But also he set up a fall guy.
Speaker 4 (07:58):
If the economy, if we do get a lot of inflation,
or if we do see the economy start to weaken,
then it's Jay Pal's fall. It's definitely not going to
be President Trump's fault, according to President Trump. So you've
got that going on. But then you had the President
after yesterday's meeting saying it was an honor to go
to the FED, and the FED today saying it was
(08:19):
an honor to host the President. I think both sides
want to back off a little bit from this. Trump's
decided probably not worth it to try to fire him
and go through all that.
Speaker 5 (08:28):
And the Fed's going to just say we're going to
do our job and stick to our needing.
Speaker 4 (08:33):
We'll still get a tweet on Wednesday or Thursday after
the FED decision and they don't cut.
Speaker 5 (08:38):
Rates, But I don't think we have to take it
too seriously anymore.
Speaker 3 (08:42):
All Right, all right, that's good to know, but certainly
keeps us on our toes. Mike, thank you, have a
great weekend. Bliveburg TV and Radio International Economics and Policy Correspondent,
our own Michael McKeith.
Speaker 2 (08:52):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern on
Apple CarPlay and the Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (09:06):
All right, now, we want to get back to talking
a little bit about the FED.
Speaker 7 (09:10):
That has certainly been top of mind.
Speaker 3 (09:11):
I want to stay over the past week or two
easily and certainly in the last twenty four hours.
Speaker 1 (09:16):
As we saw it with President Trump yesterday, who's unprecedented
walkthrough at the fed's now controversial building renovation project with
fedhair J. Powell ultimately ended with a sign of relief
for the FED chair, who's been under pressure for months
to slash interest rates.
Speaker 6 (09:31):
I have one dispute, and the dispute there could be
some things with money, and you know where it comes from,
how it's come from, how it's printed, where it's printed,
all of the standard things with the FED. But I
just want to see one thing happen. Very simple. Interest
rates have to come down. I just don't think it's necessary.
And I believe that he's going to do the right thing.
(09:54):
I believe that the chairman is going to do the
right thing. I mean, it may be a little too late,
as the expression goes, I believe he's going to do
the right thing.
Speaker 1 (10:02):
That's President Trump yesterday after he toward the construction project
at the FED with Fedchair Jay Powell. I'm in the
continued presidential criticism of the FED chair. We continue to
wonder in these unprecedented times, whether or not legally the
President can actually get rid of the FED. Head with
US is Catherine Judge Harvey J. Goldschmidt, Professor of Law
at Columbia Law School, also the author of Direct The
(10:24):
Rise of the middle Man Economy and the Power of
Going to the Source. Her research focuses on banking, financial crises,
regulatory architecture, and intermediation design beyond finance. She joins US
from New Jersey Professor Judge simple question, can the President
fire fedchair J Powell?
Speaker 6 (10:42):
Not?
Speaker 9 (10:42):
Based on what we've seen so far, he does have
the ability if there's causal reason.
Speaker 10 (10:47):
To fire J. Powell, to fire J. Powell.
Speaker 9 (10:49):
But I think what yesterday's visit may clear is he
is nowhere close to satisfying that legal standard. The very
fact that we saw him try to trump up an
inflated cost estimate based on trying to bring in a
third building was in many ways of concession by the
President that he really didn't have the case that he
needed for removal. So I think right now Powell and
(11:09):
the FEED should feel very good.
Speaker 7 (11:11):
All right, So maybe he can't fire FITCHO J.
Speaker 3 (11:14):
Powell, but you can still do some damage right by
the constant criticism.
Speaker 10 (11:19):
He can do damage. He can do damage, and I'm
really it's hard there is.
Speaker 9 (11:22):
It's damage not just to Powell, it's damage to the
Federal Reserve as an institution.
Speaker 10 (11:27):
And I would actually say a lot.
Speaker 9 (11:28):
Of damage has been done and more likely to still come.
I mean, one of the challenges is that right now
the markets really trust Jay Powell, and for a very
good reason. He has been an incredible Freed Chair. He's
been clear about what he's trying to achieve and how
he plans to achieve it. And both during President Trump's
first term and during this term, when he has faced
(11:50):
pressure that he feels like is not warranted given economic conditions,
he has focused on serving the long term names of
you know, keeping inflation in check while also promoting employment.
And so the real challenge that the president is creating
is he's creating an environment where it's going to be
very hard for the next FED chair to come in
and build up that same type of credibility.
Speaker 1 (12:11):
Talk a little bit about that and the potential response,
and I know you focus on this from the law perspective,
but what would that mean if the FED chair doesn't
necessarily have credibility the next FED.
Speaker 10 (12:21):
Chair, it could mean a lot of different things.
Speaker 9 (12:23):
I mean, so first, one of the challenges is that
the president wants lower rates, a FED chair can't necessarily
deliver lower rates. A FED chair is one vote of
twelve votes on the Federal Open Market Committee, the FOMC,
the determines monetary policy. So one of the first challenges
that a new FED chair is going to face is
how to get seven votes, how to get the support
(12:45):
that he needs in order to drive through the agenda
that it seems like the President clearly wants to see
longer term. The challenge is not just as the president
but to the country. I mean, at this point, we
have an incredible deficit. One of the easiest ways for
any country to reduce the effective burden of its deficit
is just inflateish a way. And so our creditors are
going to be looking very carefully at whether or not
(13:05):
we're willing to maintain a central bank that has the
independence needed to be able to assure creditors that we're
not going to try to use that technique. And I
think without that credibility, there's going to be significant costs
in terms of financing.
Speaker 7 (13:18):
Professor Judge.
Speaker 3 (13:19):
One last question, we are next talking with Rob Kaplan,
he's former president of the Dallas FED.
Speaker 7 (13:23):
Curious what you might ask him when it comes to j.
Speaker 3 (13:25):
Powell and that presidential pressure and anything else related to
the Fed.
Speaker 9 (13:30):
Yeah, I mean, actually, I think happens a wonderful person
to talk to, because the reserve banks are an underappreciated
element of how the FED estade independent. I mean, if
you actually go back to the nineteen thirty five Act,
a lot of the question was how much power are
we going to give for the board in the centralized position,
how much gentle influence is it going to be with
the board, and how much are we actually going to
(13:51):
reduce the capacity of any administration to shape policy. We're
putting meaningful authority in the hands of the twelve reserve
banks across the country, which and five of the twelve.
Speaker 10 (14:01):
Seats on the FMC.
Speaker 9 (14:03):
So I think one of the things to really focus
on with Kaplan, and that we should be looking at generally,
is one of the threats going beyond the chair, because
we've seen tussles between presidents and chairs in the past,
and when might the president take steps the really endanger
or threaten the broader institution, including the reserve banks?
Speaker 7 (14:22):
All Right, You're a.
Speaker 3 (14:23):
Gem and you set us up so well. I'm so
glad we could get some time with you. Catherine Judge,
She's Harvey J. Goldschmid, Professor of lat Columbia Law School,
author of Direct, The Rise of the Middleman Economy, and
the Power of Going to the Source.
Speaker 2 (14:37):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting a two pm Eastern up on Apple
car Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 1 (14:55):
It's not just buyout firms that want to slice of
the twelve trillion dollar pool of retirement savings and four
oh one k another defined contribution plans.
Speaker 8 (15:03):
Their private credit brethren wanting too.
Speaker 7 (15:06):
I bet they do.
Speaker 9 (15:07):
Yeah.
Speaker 8 (15:07):
So yeah.
Speaker 3 (15:08):
When we're spread last week that President Trump is came
to spare more private assets into retirement funds, the biggest
direct lenders team were more than prepared. I mean this
has been I feel like in the works a lot
of conversations over the last couple of years.
Speaker 8 (15:20):
I mean, how could they not want it?
Speaker 7 (15:23):
Yeah, everybody's been talking opportunity.
Speaker 1 (15:25):
For money to go into these funds, so we're talking KKR, Blackstone,
Blue Owl already set up partnerships with four oh one
K managers, trade groups and industry executives also been lobbing
officials in Washington and making their case to the public.
It's all part of a long running effort to expand
private credits. Reach back with us for a check on
this and more. When it comes to private credit is
Christina Paget, Associate Managing Director, Head of Leverage Finance, Research
(15:49):
and Analytics over at moody She joins us from the
cat Skills. From your perch at Moody's, where you look
at research when it comes to leverage finance and analytics,
how do you look at the possibility of private credit
becoming available to for one.
Speaker 8 (16:03):
Ken other defined contribution plans? What would that do well?
Speaker 11 (16:06):
It depends how it's done right, and so from.
Speaker 12 (16:09):
The perspective of the retail investor, you want to make
sure that there's broader reporting, that there's more transparency. Some
of the things that haven't been necessarily incredibly consistent with
the way private credit operates. So private credit will probably
have to change somewhat if it becomes more available to
(16:30):
a to a retail investor. Some of the other concerns
that we have are on the other side of the coin,
where if you actually get all this additional capital, do
you have sufficient assets to apply that capital to in
the right time horizon. So there's finding the right assets,
(16:51):
and then there is educating the new consumer of private credit,
the retail investor, which is tend to be a much
less sophisticated investor and one that is has different needs
than an institutional investor, particularly insurance. Right there's a big
difference between an insurance company that's a long term investor
(17:12):
and a retail investor that thinks retirement but then has
other events in their life that may interfere with that goal.
Speaker 1 (17:19):
I'm getting some very heated instant messages IBS on the
Blueberg terminal from a listener right now about this. He
argues that it's terrible for four one ks, and he
says he's curious why you think private credit is so
excited to get retail involved.
Speaker 12 (17:38):
I would say it's pretty clear why private.
Speaker 11 (17:42):
Credit would be interested. They have.
Speaker 12 (17:46):
Been seen as sort of a slow down in their
ability to raise capital on the institutional side. They're growing
bigger all the time they see opportunities. So this is another,
for lack of a better word, bundle of cash to invest.
And if you think for a moment about why there's
this need for capital, there are some tailwinds to the industry,
(18:07):
meaning that both Europe and the US is looking to
grow capital formation, there's deglobalization, which actually encourages some on
shoring and investing in on shoring, and then in Europe
you'll have additional defense spending. So there are reasons why
there's additional capital that needs to be deployed. The difference
(18:29):
is how private credit operates for institutional investors versus how
they might operate within a four or one K kind
of dynamic, and.
Speaker 1 (18:39):
Not only how they operate, but also what products, what
private credit products become available to that I'll just go
ahead and say it like a less sophisticated audience group
of people a clientele, like, how do you how do
how do you protect that mom and pop investor who's
trying to save for retirement in from something that might
(19:02):
not necessarily be as I guess the financial advisor might
say prudent as a low cost index fund.
Speaker 12 (19:12):
Well, certainly it may not be as conservative as a
low index fund, but and it will be more pricey
probably right, Your fees will be higher, the offer is
that returns will be higher as well. The things that
we'll have to change for this to sort of happen
(19:33):
smoothly is that you will need to do.
Speaker 11 (19:37):
Some more educating.
Speaker 12 (19:39):
And it doesn't mean that every four oh and k
investor will be engaged with this. But you also will
probably see changing in reporting requirements you know general, I mean,
regulatory environment has been looser lately, but in general we
expect to see better reporting, more transparency when you offer
(19:59):
something to the retail investor. And it's hard to just
that in advance. Christy, haven't seen what that looks.
Speaker 7 (20:07):
Like, Christina, what would you like to see?
Speaker 3 (20:09):
You know, Moody's right, like you're rating you guys, you know,
have to determine the security the risk aspects of various
you know, financial instruments. So how do you what do
you need to see? What would you want to see
to give it more transparency and so that there are
maybe some more assurances or insurances for retail investors. But
(20:34):
at the same time, it's a different marketplace.
Speaker 11 (20:39):
Yeah, and I and I don't really know that we're entirely.
Speaker 12 (20:42):
Sure how how it will evolve. For example, you know,
one of the things that private credit experienced advantageously was
the illiquidity of the product and the complexity, right that
that gave them an opportunity for premiums. And some of
those companies actually prefer to be in a private market,
(21:02):
So those dynamics are going to inevitably have to change
if it's an offer to a retail investor. So you
might find something that's in between what we're looking at today.
Maybe the returns won't be as high, and maybe the
complexity won't be as significant, and maybe you'll be able
(21:24):
to have clearer reporting guidelines. That being said, you know,
none of this has really emerged yet, so we are
still watching it pretty closely, and from our perspective, you know,
one of our fundamental assessments of private credit that gives
us concern is the opacity in the sector. So that's
(21:45):
some and also maybe you know the fact that it
hasn't been tested, but there are advantages to the sector,
and that has been the patient capital story, right you'd
rather have long term capital invested in some of these projects.
If the four to one k investor understands that this
is a longer term investment and that it isn't something
(22:07):
that they can take in and out.
Speaker 11 (22:09):
It may be actually it may work for them as well.
Speaker 7 (22:13):
Yeah, no, I totally get that.
Speaker 3 (22:15):
Hey, you know, one of the things that I think
about people who are listening and forgive me, and this
is with all due respect, but I mean, you know,
your credit rating agency, and we think about the financial
crisis and things that were missed by the rating agencies.
Speaker 7 (22:30):
How do we make sure ensure that you.
Speaker 3 (22:33):
Guys and everybody else get it right if indeed there
is more oversight and that you are able to have,
you know, some way of really tracking risk when it
comes to private credit investments.
Speaker 12 (22:47):
Well, you know, I think we're doing our best to
highlight the various concerns as we see them. We have
insight into many of the institutions from different angles. So
our team that is following the insurance companies, they can
look at an insurance company see their exposure to private credit.
(23:07):
Alongside that's the asset management team that's looking at Apollo
and what Apollo is actually doing. So we have ways
of sort of triangulating hopefully what's going on in this market.
And you know, I think everybody in this business is
sensitive to reputation risk. That being said, being able to
(23:30):
call the next bubble, you know that that's not something
that most of us are confident we're going to be
able to do in advance, right.
Speaker 3 (23:39):
You know, it's interesting and when you say that that
everybody has some responsibility. Anytime we talk to anybody in
the world of private credit, they basically say, hey, listen,
if we're doing a bad job, we're not going to
get funds, and we're not going to get you know,
we can't raise another fund or get more money to invest.
Having said that, our own Sinallli boss Hat caught up
with Harvey Schwartz, the chief executive of the Carlisle Group,
(24:01):
and she asked him about, you know, risk in the cycle.
Do you worry maybe that this industry could fly away
a little bit if there isn't a bigger set of
eyes on it, you know, And so he said, do
I think we could have a bad credit cycle?
Speaker 6 (24:15):
Sure?
Speaker 3 (24:15):
The question is is it systemic in that it actually
triggers a broader crisis. Banks have failed, but we haven't
seen credit funds fail. And I guess we would all
add yet is there an assumption on your part and
your team's part that at some point there's going to
be something where we see some problems or not necessarily.
Speaker 12 (24:36):
Well, I think it would be hard to imagine that
we're going to We're not going to see future challenges
in the space. You know that if you think about
the strategy here, they are adding leverage, right, and that
makes businesses more fragile in a downturn. So the downturn
can happen for any number of reasons, right. We've seen
(24:58):
it as a consequence of a health crisis, meaning the pandemic,
or you more sort of financially oriented crisis crises. One
of the things that we thought was beneficial about private
credit was that insurance companies, institutional investors, they tend to
be more patient, and so that reduces the volatility during
(25:20):
the period of a downturn. Some of this locked up
capital is beneficial, and I think that's why perhaps your
Bloomberg Texter is saying this doesn't feel like that, and
so that's something that we are watching quite closely because
asset liability mismatch is probably one of the major concerns
(25:43):
that we have around this market as it evolves.
Speaker 11 (25:46):
It's actually been a benefit today.
Speaker 3 (25:49):
Great to get some time with you. It's a space
that we love talking about. We cover it, we keep increasing.
I think our coverage of the private markets here at
Bloomberg as kind of the rest of the world does
as well.
Speaker 7 (25:58):
Christina, Thank you so much. Christina Padje.
Speaker 3 (26:00):
She is Associate Managing Director, Head of Leverage, Finance, Research
and Analytics at Moodies.
Speaker 2 (26:05):
You are listening to the Bloomberg Business Weekdaily podcast. Catch
us live weekday afternoons from two to five pm Eastern.
Listen on Apple CarPlay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (26:19):
Sour shares at Alphabet are up for our second day
following earnings late Wednesday, the company, as you know said,
demand for AI products boosted quarterly sales and now requires
an extreme increasing capital expending, heightening pressure on the company
to justify the cost of keeping up in the AI race.
That's kind of the big picture Google Cloud revenue and
that's something we want to focus on and operating income.
Top analyst projections. Our own Bloomberg Intelligence is man Deep
(26:43):
Seeing writing after earnings that Google's increase capex view by
ten billion dollars for the full year, suggests that cloud
segment growth is likely to remain above thirty percent through
the second half.
Speaker 12 (26:53):
Well.
Speaker 3 (26:53):
Our next guest is the chief operating officer of Google Cloud.
In fact, it's first COO. Great to have with us
as friends to SUSA. He joins us from the Bloomberg
News bureau out in San Francisco. Francis, welcome, So nice
to have you here with Tim and myself.
Speaker 13 (27:06):
Great to be here, Thanks for having me.
Speaker 3 (27:08):
I want to start with AI and cloud demand. As
you know, it feels like so many conversations start with AI.
AI contributions to Google Cloud growth thirty two percent.
Speaker 7 (27:17):
What are you.
Speaker 3 (27:17):
Seeing currently and continuously when it comes to AI and
cloud demand?
Speaker 13 (27:23):
Yeah, right now, it feels like there are two powerful
mega trends that are playing out in the enterprise market.
The first is, you know, the continued move by companies
of their workloads to the cloud, of their applications to
the cloud. And the second much bigger trend that's playing
at right now is the adoption of AI by companies.
And those two powerful mega trends are driving our business
(27:44):
and fueling the growth that you saw in the quarter.
And so what we're seeing on the AI side is
you know, this is the fastest in my career that
I've seen a technology move from pilots to production. And
so what we're in talking to customers, what they're telling
is is they're recognizing the benefits that AI can bring
into their company across the board. You know, we have
(28:04):
companies that like Verizon that are using AI to help
do customers support. We work at Seattle Children's Hospital that's
using AI to inform physicians in their communications with patients.
We also have companies like Papa John's or McDonald's that
are using AI in the franchises, and so we're seeing
broad adoption by enterprises across a number of places where
(28:27):
they can see the benefits from AI.
Speaker 1 (28:29):
You just mentioned a few examples of companies that you
work with. There are a lot of small businesses, though,
and even large businesses that I think it's fair to
say haven't fully harnessed what you view as the opportunity
when it comes to AI. How big of an opportunity
is it for Google Cloud? What's a number? How can
you quantify this?
Speaker 13 (28:47):
Yeah, I think you're absolutely right in that we're the
very early stages of what is a very large sort
of adoption market in front of us.
Speaker 5 (28:54):
Now.
Speaker 13 (28:54):
You know, you look at the numbers we delivered, you know,
last quarter in Google Cloud, we delivered thirty zo point
six billion dollars in revenue, and as you said, that's
up thirty two percent year over year. So although the
numbers are already big, we're still just at the very
very beginning of AI adoption by companies. And that's true
whether you look at small companies who are starting to
use it in terms of their outreach to customers to
(29:16):
scale up their presence from a marketing perspective, all the
way to large enterprises. We're just at the very beginning
of this big wave.
Speaker 8 (29:23):
You know.
Speaker 3 (29:23):
One of the things Francis said, I'm so glad we
could get some time with you, is that, you know,
everybody kind of throws out AI and large language models generally,
and we're just trying to get more of an understanding
of how this all impacts our world.
Speaker 7 (29:35):
Drilled down a little bit further in.
Speaker 3 (29:37):
Terms of the customers that you are working with, big,
medium and small, and how they are using.
Speaker 7 (29:42):
AI and how it's going to impact our lives.
Speaker 13 (29:46):
Yeah, we're seeing it show up in enterprises in a
whole bunch of different ways, and so let me give
you some examples. You know, some large manufacturers like Toyota,
for example, or Honeywell are using AI on the factory
floor to provide information to people working on the factory
floor to improve their operational ability, and also to provide
access for their customers to engineering and technical support documents
(30:10):
around the product, so make it easier for customers to
navigate and find the information they need. We're seeing some hospitals,
as I talked about, helping, using AI to help write
physicians access to whether it's guidelines or any background information.
In addition, we're seeing hospitals use AI to automatically transcribe
(30:33):
the communications with their patients. So what AI will do
is actually take the notes automatically and then upload it
into the systems that.
Speaker 5 (30:41):
It needs to.
Speaker 13 (30:41):
What that does is it frees up time for the
medical professionals to do what they do best, which is
deal with patients. We're seeing small businesses they're using AI
to create marketing materials and do that much more efficiently.
We're seeing large retailers like Wayfair that are using AI
to create more personalized experiences for their customers. When you
(31:03):
come to the website, so you can imagine as you're
using Wayfair, you can imagine how the furniture items will
look in your environment, and that provides a better shopping
experience for customers. So we're seeing a wide swath of
ways that AI is being used in companies.
Speaker 3 (31:18):
I'm so glad you mentioned kind of the medical area
and what they're doing, because I think a lot of
folks come on our air and talk to the Bloomberg
audience and talk about how AI might significantly impact not
just hospitals, but just how we get medical care. You
are the former CEO of Alumina, and I think about
DNA sequencing and all of the information and data that
(31:40):
could potentially improve how we are treated when it comes
to healthcare. How are you thinking about that space and
what it might mean for Google Cloud and demand there.
Speaker 13 (31:50):
Yeah, I think AI is going to have a very
big impact in a number of ways across healthcare. Right,
So if we talked about some ways where it's helping
in the delivery of care by bring up medical professionals
from administrative tasks and using more of their time to
actually interact with patients. In addition, it's also helping medical professionals,
you know, get access to the information they need across
(32:13):
a whole swath of information, so you know, they need
to be able to stay on top of guidelines as
they emerge, new research that's being published, as well as
all the information on the patient, and increasingly, you know,
we're getting more and more personalized information on a patient.
You talked about genomics, there are a lot of images
as well as previous lab tests, and so what AI
can do is sort of take all that information and
(32:35):
present it in a more digestible way so that you
can make better decisions. In addition, AI can also help
you know earlier in the process of drug development. We've
seen fantastic advances with tools like alpha fold, which allows
you to you know, deduce a three D protein structure
across hundreds of millions of protein types. What that does,
(32:57):
then is that allows you to identify maybe a new
druggable targets that allow you to treat diseases. And I
can also help bring information together, you know, the genomic information,
the phenotypic information, you know, the the imaging information and
help us get better understanding of what causes diseases and
how they develop.
Speaker 5 (33:17):
And that could give us.
Speaker 13 (33:18):
New insights that allow us to think about how we
can treat those diseases better. So in almost every part
of the healthcare industry, you can see how AI can
help improve that industry.
Speaker 1 (33:29):
We're speaking with Francis desu'sa chief operating officer over at
Google Cloud. Francis, I want to talk a little bit
about competition. For years, Amazon has been number one. According
to our Bloomberg Intelligence team and data from IDC. In
twenty twenty three, EDWS had about forty seven percent of
the infrastructure as a service market share, Microsoft in second
place with sixteen percent, and then Google coming in with
(33:51):
about six percent. How do you get to number two
and then number one?
Speaker 13 (33:56):
What's really interesting is that is as I talk to customers,
there are things as a convergence of two really big
important spaces. One is the cloud spaces you talked about,
and two AI. So nearly every customer conversation I have
now in prospect conversation I have is really all about
AI and how it will impact businesses. And we are
the only hyperscaler that actually has our own AI stack.
(34:20):
So if you think about every part of the AI
technology stack, Google has leading technology.
Speaker 5 (34:26):
So for example, on the chip side, we're one of
the largest partners in the world.
Speaker 13 (34:30):
With Nvidia on GPUs, but we also have our own
technology TPUs that are very highly performant and we run
them in our data centers. In terms of the models,
we work with a number of other model providers, so
if you go into our model garden, you can access
models from companies like Anthropic and deep Seek, but we
also have the world's leading model with Gemini two dot five,
(34:53):
which is performing really well on the top of the
leaderboards in almost every part of AI. And so here too,
we provide our own leading technologies, and it's Gemini, but
it's also our image models, our video models, our time
series models, our weather models, and then we also provide
our own applications on top of that, like Agent Space
(35:13):
that allow companies to easily develop their own agents. And
then we have a leading cybersecurity portfolio. And so where
we are differentiated in the market is that as we
talk to customers, we're really the only hyperscaler that can
talk about our own native AI stack that's leading technologies
in each part of the stack, as well as our cloud,
and that's playing really well, and that's driving a lot
(35:34):
of the results that you are seeing, including the results
we just published yesterday on the earnings call.
Speaker 3 (35:39):
I got to say, it's the thinking models the Gemini
two point five that really kind of are blowing everybody's minds. Hey,
one thing I want to ask you, speaking of customers,
Tim and I full disclosure, we talk about it a lot.
Are a little bit obsessed with Weimo. How much is
weimo using Google Cloud. I'm just curious in terms of
keeping that all going and running.
Speaker 13 (36:00):
Yeah, I totally understand why you love Weimo. I love
Weimo too. Living in San Francisco, I've been using it
for a few years and my daughters and I love
it as you can imagine, you know, being sister, you
know parts of Google we leverage technologies that Google Cloud
is building as well as Deep Mind is building, and
so you as you could imagine, you know, there's really
close interactions from a technology perspective across these different parts
(36:23):
of Google.
Speaker 7 (36:24):
Hey, just thirty seconds left. Security.
Speaker 3 (36:26):
As we know your former background semantech, you understand the
importance of security specifically, and I'm just curious what do
you keep top of mind when you think about the
security of Google Cloud and keeping it secure.
Speaker 13 (36:41):
Yeah, As you point out, security is a really important
area for us to focus on and it's a core
part of the value that we deliver to our customers
in terms of providing a very resilient protected cloud. There
are a number of things that you know that are
top of mind for us and for our customers as
we talk about security, especially in world of AI. One
is it's important that security companies are leaning deep into
(37:05):
leveraging AI to improve their security capabilities. So we offer agents,
for example, that customers can deploy as part of their
security operations center as part of their threat intelligence gathering,
and so we're also doing research on how AI can
be leveraged by the bad actors and think about how
you can stay on top of providing defenses for things
(37:27):
like you know, altered images and videos and deep fakes.
It's also important to our customers that the security we
provide works multi clouds, so not just for Google Cloud,
but that they can have the same security posture for
workloads that they have on other clouds as well, and
so that's an important part of the conversation too. So
provide leading edge technologies stay on top of AI and
(37:49):
the expanding sort of threat landscape that opens up. And
then also make sure that whatever you give us, you know,
works across clouds.
Speaker 7 (37:57):
So glad we could get some time with you. Francis Desuzah.
Speaker 3 (37:59):
He's the Chief Writing Officer at Google Cloud, former CEO
of Alumina, and also former president at Samantech, where he
oversaw the security and data management portfolio.
Speaker 2 (38:08):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
(38:28):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business, finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
Okay, so, as we said, Trey definitely on the minds
of investors. So to is next wet week's FED meeting.
I'm ad a FED show that is continuing to be
in the crosshairs of President Trump. Let's get into today's
macro All that's coming at us, all that's coming at
the FED. Share we've got with us Bloomberg TV and
Radio International Economics and Policy correspondent Michael McKee. Mike, first
(00:53):
of all, are we getting more certainty about the US
economic outlook because of what we're seeing in the data points,
because we're starting to get movement on trade agreements, any
signs that things are settling into a clear economic trend
here in the United.
Speaker 4 (01:06):
States, I disappoint you, but no, we've had indications that
we're getting some tariff passed through into inflation from the
CPI and PPI not a lot yet. But the biggest
problem is Donald Trump's tariffs for the most part, have
not gone into effect. August first, in theory is the deadline.
(01:27):
We don't know if there'll be a tackle on that,
some sort of delay. He's suggesting that that could happen
if they're negotiating with the European Union at that time.
But if and when the tariffs do come in, it's
obviously going to put pressure on companies and company margins,
and so we will then start to see who passes through,
(01:49):
how much, and what kind of impact on inflation and
consumer psychology there is from all this.
Speaker 1 (01:55):
The president Earlier today, Mike was asked about the money
that the US has brought in or is bringing in
when it comes to tariffs. He was asked by reporters
before he made his way to Scotland, and he did
say that we could use the tariff money for rebates
to Americans. Help me out with that from the perspective
of something inflationary, but also less on the inflation side
(02:17):
and more on how much money has the US brought
in when it comes to tariffs.
Speaker 4 (02:22):
They've brought in about one hundred billion dollars so far.
But bringing in the money is kind of a misnomer.
Somebody's got to pay that, right, is that we're not
printing money here. This is not coming as a gift
from the clouds, nor are the foreign companies countries paying it.
Some of the costs may be absorbed by foreign companies,
(02:47):
foreign exporters lowering prices, but most of this is at
the moment either coming out of consumers pockets or coming
out of corporate pockets, say compression of margins. Now that
still means somebody's paying it, because that comes then out
of shareholders pockets. So there is an effect on the economy.
We just haven't seen a huge impact yet because there
(03:08):
haven't been a huge amount.
Speaker 5 (03:09):
Of tariffs in place.
Speaker 4 (03:11):
But we are seeing higher prices for cars, We are
seeing higher prices for appliances, things made out of steel.
Speaker 5 (03:18):
So we are going to have an effect.
Speaker 4 (03:21):
The question is how much and who's going to directly
affect whether he gives people money back or not. That
seems like a weird idea to me because he's campaigned
so much and people have campaigned so much on the deficit,
and he's argued that his big, beautiful plan is not
going to increase the deficit. Well, if I get some
(03:42):
revenue that is supposed to offset the deficit and then
I start handing it out to people, I'm not going
to reduce the deficit.
Speaker 6 (03:48):
All right.
Speaker 3 (03:49):
Really good to keep kind of all of these things
in mind. One of the things I'm thinking too, though,
is about the trade deals yet to come China, EU.
Speaker 7 (03:55):
These are some of the big ones, right.
Speaker 4 (03:57):
And the question is what are these deals actually going
to be. So far, we don't have any signed, actual
point by point agreements. The British are still working out
the details with the United States, and so you can
imagine for China it's going to be very complicated. For Japan,
it's going to be very complicated. And then the most
(04:17):
complicated of all is going to be the EU, because
the EU, while it negotiates as a block on trade,
is twenty eight different twenty nine different countries, and some
of them aren't going to like parts of this.
Speaker 1 (04:28):
The President also today saying that on trade deals, most
of the deals are letters instructing tariff rate. So those
letters we got a couple of weeks ago, that's say
ten to fifteen percent tariff rate, some high or some lower,
depending on your country of choice.
Speaker 8 (04:41):
He's calling those deals.
Speaker 4 (04:43):
He's calling those deals because he's trying to make this
all look look good, and to the extent that he's
allowed to put tariffs on and that's an open legal question.
And next week on August first, they're also hearing this
case at the Appeals Court on whether or not he
can impose the tariffs under the International Economic Emergency Act
(05:06):
that he has cited. If he can't, then all this
falls apart. If he can, then the question is how
legal are these agreements in terms of both sides living
up to them.
Speaker 5 (05:20):
He made a deal with China.
Speaker 4 (05:22):
In theory in the first term, which they didn't live
up to, and any kind of real trade agreement has
to be ratified by Congress.
Speaker 5 (05:31):
So we don't quite know where this is all going
to end up.
Speaker 4 (05:36):
And this is just sort of the ongoing chaos that
we have been seeing.
Speaker 3 (05:39):
Mike, the assumption that we're going to have all this
investment going on in the United States, building a factories,
manufacturing happening here.
Speaker 7 (05:45):
I keep going back to this.
Speaker 3 (05:46):
Quote from a story I read, I think it was
on Monday, and this was a senior economist for Emerging
Asia in Texas and person. The individual said, at a
fifteen to twenty percent tariff level, it's still profitable for
US companies to import from broad rather than produce similar
goods at home. So she said this in a business
in a Bloomberg story. So if we are thinking that
(06:08):
there's going to be a lot of economic momentum out
of all of this investment, that's not something we should
assume or I don't know, how.
Speaker 9 (06:14):
Do you know?
Speaker 5 (06:14):
You can't assume it.
Speaker 4 (06:16):
And it's one of the interesting things about the Japan
deal is they said they were going to invest five
hundred and fifty billion dollars. Well, was that five hundred
and fifty billion new dollars over what period? Or does
this include factories that are already under construction. It's really
hard to tell what any of this means. There was
a lot of money lined up to build factories under
(06:40):
the Inflation Reduction Act, the kind of misnamed one from
Joe Biden, And are they counting that? We just don't know,
and we don't know whether companies are going to follow through.
Speaker 5 (06:54):
We've had a lot.
Speaker 4 (06:54):
Of a lot of cases where we've seen promises made
it were not kept in the long run, so it's
all kind of a morphous at this point. The only
thing we know for sure is if the tariffs do
go on, we will see inflation, even if we don't
know how much.
Speaker 8 (07:13):
You weren't here with us yesterday.
Speaker 5 (07:14):
I'm sorry, I apologize.
Speaker 8 (07:16):
We could have used you.
Speaker 1 (07:18):
I wanted to get your reaction to what happened at
the Federal Reserve yesterday afternoon. That back and forth between
the President and the FED chair, the tensions kind of
actually seeming to dissipate a little bit.
Speaker 4 (07:30):
Yeah, I think both sides kind of wanted that. As
I've been saying on this program for a long time,
and now I'm copying on other programs.
Speaker 5 (07:39):
You know, Trump is a master of the squirrel, and he.
Speaker 9 (07:45):
Was.
Speaker 4 (07:46):
He's been using this these FED attacks lately to distract
from Epstein, and that's pretty obvious.
Speaker 5 (07:54):
But also he set up a fall guy.
Speaker 4 (07:58):
If the economy, if we do get a lot of inflation,
or if we do see the economy start to weaken,
then it's Jay Pal's fall. It's definitely not going to
be President Trump's fault, according to President Trump. So you've
got that going on. But then you had the President
after yesterday's meeting saying it was an honor to go
to the FED, and the FED today saying it was
(08:19):
an honor to host the President. I think both sides
want to back off a little bit from this. Trump's
decided probably not worth it to try to fire him
and go through all that.
Speaker 5 (08:28):
And the Fed's going to just say we're going to
do our job and stick to our needing.
Speaker 4 (08:33):
We'll still get a tweet on Wednesday or Thursday after
the FED decision and they don't cut.
Speaker 5 (08:38):
Rates, But I don't think we have to take it
too seriously anymore.
Speaker 3 (08:42):
All Right, all right, that's good to know, but certainly
keeps us on our toes. Mike, thank you, have a
great weekend. Bliveburg TV and Radio International Economics and Policy Correspondent,
our own Michael McKeith.
Speaker 2 (08:52):
You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
live weekday afternoons from two to five pm Eastern on
Apple CarPlay and the Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (09:06):
All right, now, we want to get back to talking
a little bit about the FED.
Speaker 7 (09:10):
That has certainly been top of mind.
Speaker 3 (09:11):
I want to stay over the past week or two
easily and certainly in the last twenty four hours.
Speaker 1 (09:16):
As we saw it with President Trump yesterday, who's unprecedented
walkthrough at the fed's now controversial building renovation project with
fedhair J. Powell ultimately ended with a sign of relief
for the FED chair, who's been under pressure for months
to slash interest rates.
Speaker 6 (09:31):
I have one dispute, and the dispute there could be
some things with money, and you know where it comes from,
how it's come from, how it's printed, where it's printed,
all of the standard things with the FED. But I
just want to see one thing happen. Very simple. Interest
rates have to come down. I just don't think it's necessary.
And I believe that he's going to do the right thing.
(09:54):
I believe that the chairman is going to do the
right thing. I mean, it may be a little too late,
as the expression goes, I believe he's going to do
the right thing.
Speaker 1 (10:02):
That's President Trump yesterday after he toward the construction project
at the FED with Fedchair Jay Powell. I'm in the
continued presidential criticism of the FED chair. We continue to
wonder in these unprecedented times, whether or not legally the
President can actually get rid of the FED. Head with
US is Catherine Judge Harvey J. Goldschmidt, Professor of Law
at Columbia Law School, also the author of Direct The
(10:24):
Rise of the middle Man Economy and the Power of
Going to the Source. Her research focuses on banking, financial crises,
regulatory architecture, and intermediation design beyond finance. She joins US
from New Jersey Professor Judge simple question, can the President
fire fedchair J Powell?
Speaker 6 (10:42):
Not?
Speaker 9 (10:42):
Based on what we've seen so far, he does have
the ability if there's causal reason.
Speaker 10 (10:47):
To fire J. Powell, to fire J. Powell.
Speaker 9 (10:49):
But I think what yesterday's visit may clear is he
is nowhere close to satisfying that legal standard. The very
fact that we saw him try to trump up an
inflated cost estimate based on trying to bring in a
third building was in many ways of concession by the
President that he really didn't have the case that he
needed for removal. So I think right now Powell and
(11:09):
the FEED should feel very good.
Speaker 7 (11:11):
All right, So maybe he can't fire FITCHO J.
Speaker 3 (11:14):
Powell, but you can still do some damage right by
the constant criticism.
Speaker 10 (11:19):
He can do damage. He can do damage, and I'm
really it's hard there is.
Speaker 9 (11:22):
It's damage not just to Powell, it's damage to the
Federal Reserve as an institution.
Speaker 10 (11:27):
And I would actually say a lot.
Speaker 9 (11:28):
Of damage has been done and more likely to still come.
I mean, one of the challenges is that right now
the markets really trust Jay Powell, and for a very
good reason. He has been an incredible Freed Chair. He's
been clear about what he's trying to achieve and how
he plans to achieve it. And both during President Trump's
first term and during this term, when he has faced
(11:50):
pressure that he feels like is not warranted given economic conditions,
he has focused on serving the long term names of
you know, keeping inflation in check while also promoting employment.
And so the real challenge that the president is creating
is he's creating an environment where it's going to be
very hard for the next FED chair to come in
and build up that same type of credibility.
Speaker 1 (12:11):
Talk a little bit about that and the potential response,
and I know you focus on this from the law perspective,
but what would that mean if the FED chair doesn't
necessarily have credibility the next FED.
Speaker 10 (12:21):
Chair, it could mean a lot of different things.
Speaker 9 (12:23):
I mean, so first, one of the challenges is that
the president wants lower rates, a FED chair can't necessarily
deliver lower rates. A FED chair is one vote of
twelve votes on the Federal Open Market Committee, the FOMC,
the determines monetary policy. So one of the first challenges
that a new FED chair is going to face is
how to get seven votes, how to get the support
(12:45):
that he needs in order to drive through the agenda
that it seems like the President clearly wants to see
longer term. The challenge is not just as the president
but to the country. I mean, at this point, we
have an incredible deficit. One of the easiest ways for
any country to reduce the effective burden of its deficit
is just inflateish a way. And so our creditors are
going to be looking very carefully at whether or not
(13:05):
we're willing to maintain a central bank that has the
independence needed to be able to assure creditors that we're
not going to try to use that technique. And I
think without that credibility, there's going to be significant costs
in terms of financing.
Speaker 7 (13:18):
Professor Judge.
Speaker 3 (13:19):
One last question, we are next talking with Rob Kaplan,
he's former president of the Dallas FED.
Speaker 7 (13:23):
Curious what you might ask him when it comes to j.
Speaker 3 (13:25):
Powell and that presidential pressure and anything else related to
the Fed.
Speaker 9 (13:30):
Yeah, I mean, actually, I think happens a wonderful person
to talk to, because the reserve banks are an underappreciated
element of how the FED estade independent. I mean, if
you actually go back to the nineteen thirty five Act,
a lot of the question was how much power are
we going to give for the board in the centralized position,
how much gentle influence is it going to be with
the board, and how much are we actually going to
(13:51):
reduce the capacity of any administration to shape policy. We're
putting meaningful authority in the hands of the twelve reserve
banks across the country, which and five of the twelve.
Speaker 10 (14:01):
Seats on the FMC.
Speaker 9 (14:03):
So I think one of the things to really focus
on with Kaplan, and that we should be looking at generally,
is one of the threats going beyond the chair, because
we've seen tussles between presidents and chairs in the past,
and when might the president take steps the really endanger
or threaten the broader institution, including the reserve banks?
Speaker 7 (14:22):
All Right, You're a.
Speaker 3 (14:23):
Gem and you set us up so well. I'm so
glad we could get some time with you. Catherine Judge,
She's Harvey J. Goldschmid, Professor of lat Columbia Law School,
author of Direct, The Rise of the Middleman Economy, and
the Power of Going to the Source.
Speaker 2 (14:37):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting a two pm Eastern up on Apple
car Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 1 (14:55):
It's not just buyout firms that want to slice of
the twelve trillion dollar pool of retirement savings and four
oh one k another defined contribution plans.
Speaker 8 (15:03):
Their private credit brethren wanting too.
Speaker 7 (15:06):
I bet they do.
Speaker 9 (15:07):
Yeah.
Speaker 8 (15:07):
So yeah.
Speaker 3 (15:08):
When we're spread last week that President Trump is came
to spare more private assets into retirement funds, the biggest
direct lenders team were more than prepared. I mean this
has been I feel like in the works a lot
of conversations over the last couple of years.
Speaker 8 (15:20):
I mean, how could they not want it?
Speaker 7 (15:23):
Yeah, everybody's been talking opportunity.
Speaker 1 (15:25):
For money to go into these funds, so we're talking KKR, Blackstone,
Blue Owl already set up partnerships with four oh one
K managers, trade groups and industry executives also been lobbing
officials in Washington and making their case to the public.
It's all part of a long running effort to expand
private credits. Reach back with us for a check on
this and more. When it comes to private credit is
Christina Paget, Associate Managing Director, Head of Leverage Finance, Research
(15:49):
and Analytics over at moody She joins us from the
cat Skills. From your perch at Moody's, where you look
at research when it comes to leverage finance and analytics,
how do you look at the possibility of private credit
becoming available to for one.
Speaker 8 (16:03):
Ken other defined contribution plans? What would that do well?
Speaker 11 (16:06):
It depends how it's done right, and so from.
Speaker 12 (16:09):
The perspective of the retail investor, you want to make
sure that there's broader reporting, that there's more transparency. Some
of the things that haven't been necessarily incredibly consistent with
the way private credit operates. So private credit will probably
have to change somewhat if it becomes more available to
(16:30):
a to a retail investor. Some of the other concerns
that we have are on the other side of the coin,
where if you actually get all this additional capital, do
you have sufficient assets to apply that capital to in
the right time horizon. So there's finding the right assets,
(16:51):
and then there is educating the new consumer of private credit,
the retail investor, which is tend to be a much
less sophisticated investor and one that is has different needs
than an institutional investor, particularly insurance. Right there's a big
difference between an insurance company that's a long term investor
(17:12):
and a retail investor that thinks retirement but then has
other events in their life that may interfere with that goal.
Speaker 1 (17:19):
I'm getting some very heated instant messages IBS on the
Blueberg terminal from a listener right now about this. He
argues that it's terrible for four one ks, and he
says he's curious why you think private credit is so
excited to get retail involved.
Speaker 12 (17:38):
I would say it's pretty clear why private.
Speaker 11 (17:42):
Credit would be interested. They have.
Speaker 12 (17:46):
Been seen as sort of a slow down in their
ability to raise capital on the institutional side. They're growing
bigger all the time they see opportunities. So this is another,
for lack of a better word, bundle of cash to invest.
And if you think for a moment about why there's
this need for capital, there are some tailwinds to the industry,
(18:07):
meaning that both Europe and the US is looking to
grow capital formation, there's deglobalization, which actually encourages some on
shoring and investing in on shoring, and then in Europe
you'll have additional defense spending. So there are reasons why
there's additional capital that needs to be deployed. The difference
(18:29):
is how private credit operates for institutional investors versus how
they might operate within a four or one K kind
of dynamic, and.
Speaker 1 (18:39):
Not only how they operate, but also what products, what
private credit products become available to that I'll just go
ahead and say it like a less sophisticated audience group
of people a clientele, like, how do you how do
how do you protect that mom and pop investor who's
trying to save for retirement in from something that might
(19:02):
not necessarily be as I guess the financial advisor might
say prudent as a low cost index fund.
Speaker 12 (19:12):
Well, certainly it may not be as conservative as a
low index fund, but and it will be more pricey
probably right, Your fees will be higher, the offer is
that returns will be higher as well. The things that
we'll have to change for this to sort of happen
(19:33):
smoothly is that you will need to do.
Speaker 11 (19:37):
Some more educating.
Speaker 12 (19:39):
And it doesn't mean that every four oh and k
investor will be engaged with this. But you also will
probably see changing in reporting requirements you know general, I mean,
regulatory environment has been looser lately, but in general we
expect to see better reporting, more transparency when you offer
(19:59):
something to the retail investor. And it's hard to just
that in advance. Christy, haven't seen what that looks.
Speaker 7 (20:07):
Like, Christina, what would you like to see?
Speaker 3 (20:09):
You know, Moody's right, like you're rating you guys, you know,
have to determine the security the risk aspects of various
you know, financial instruments. So how do you what do
you need to see? What would you want to see
to give it more transparency and so that there are
maybe some more assurances or insurances for retail investors. But
(20:34):
at the same time, it's a different marketplace.
Speaker 11 (20:39):
Yeah, and I and I don't really know that we're entirely.
Speaker 12 (20:42):
Sure how how it will evolve. For example, you know,
one of the things that private credit experienced advantageously was
the illiquidity of the product and the complexity, right that
that gave them an opportunity for premiums. And some of
those companies actually prefer to be in a private market,
(21:02):
So those dynamics are going to inevitably have to change
if it's an offer to a retail investor. So you
might find something that's in between what we're looking at today.
Maybe the returns won't be as high, and maybe the
complexity won't be as significant, and maybe you'll be able
(21:24):
to have clearer reporting guidelines. That being said, you know,
none of this has really emerged yet, so we are
still watching it pretty closely, and from our perspective, you know,
one of our fundamental assessments of private credit that gives
us concern is the opacity in the sector. So that's
(21:45):
some and also maybe you know the fact that it
hasn't been tested, but there are advantages to the sector,
and that has been the patient capital story, right you'd
rather have long term capital invested in some of these projects.
If the four to one k investor understands that this
is a longer term investment and that it isn't something
(22:07):
that they can take in and out.
Speaker 11 (22:09):
It may be actually it may work for them as well.
Speaker 7 (22:13):
Yeah, no, I totally get that.
Speaker 3 (22:15):
Hey, you know, one of the things that I think
about people who are listening and forgive me, and this
is with all due respect, but I mean, you know,
your credit rating agency, and we think about the financial
crisis and things that were missed by the rating agencies.
Speaker 7 (22:30):
How do we make sure ensure that you.
Speaker 3 (22:33):
Guys and everybody else get it right if indeed there
is more oversight and that you are able to have,
you know, some way of really tracking risk when it
comes to private credit investments.
Speaker 12 (22:47):
Well, you know, I think we're doing our best to
highlight the various concerns as we see them. We have
insight into many of the institutions from different angles. So
our team that is following the insurance companies, they can
look at an insurance company see their exposure to private credit.
(23:07):
Alongside that's the asset management team that's looking at Apollo
and what Apollo is actually doing. So we have ways
of sort of triangulating hopefully what's going on in this market.
And you know, I think everybody in this business is
sensitive to reputation risk. That being said, being able to
(23:30):
call the next bubble, you know that that's not something
that most of us are confident we're going to be
able to do in advance, right.
Speaker 3 (23:39):
You know, it's interesting and when you say that that
everybody has some responsibility. Anytime we talk to anybody in
the world of private credit, they basically say, hey, listen,
if we're doing a bad job, we're not going to
get funds, and we're not going to get you know,
we can't raise another fund or get more money to invest.
Having said that, our own Sinallli boss Hat caught up
with Harvey Schwartz, the chief executive of the Carlisle Group,
(24:01):
and she asked him about, you know, risk in the cycle.
Do you worry maybe that this industry could fly away
a little bit if there isn't a bigger set of
eyes on it, you know, And so he said, do
I think we could have a bad credit cycle?
Speaker 6 (24:15):
Sure?
Speaker 3 (24:15):
The question is is it systemic in that it actually
triggers a broader crisis. Banks have failed, but we haven't
seen credit funds fail. And I guess we would all
add yet is there an assumption on your part and
your team's part that at some point there's going to
be something where we see some problems or not necessarily.
Speaker 12 (24:36):
Well, I think it would be hard to imagine that
we're going to We're not going to see future challenges
in the space. You know that if you think about
the strategy here, they are adding leverage, right, and that
makes businesses more fragile in a downturn. So the downturn
can happen for any number of reasons, right. We've seen
(24:58):
it as a consequence of a health crisis, meaning the pandemic,
or you more sort of financially oriented crisis crises. One
of the things that we thought was beneficial about private
credit was that insurance companies, institutional investors, they tend to
be more patient, and so that reduces the volatility during
(25:20):
the period of a downturn. Some of this locked up
capital is beneficial, and I think that's why perhaps your
Bloomberg Texter is saying this doesn't feel like that, and
so that's something that we are watching quite closely because
asset liability mismatch is probably one of the major concerns
(25:43):
that we have around this market as it evolves.
Speaker 11 (25:46):
It's actually been a benefit today.
Speaker 3 (25:49):
Great to get some time with you. It's a space
that we love talking about. We cover it, we keep increasing.
I think our coverage of the private markets here at
Bloomberg as kind of the rest of the world does
as well.
Speaker 7 (25:58):
Christina, Thank you so much. Christina Padje.
Speaker 3 (26:00):
She is Associate Managing Director, Head of Leverage, Finance, Research
and Analytics at Moodies.
Speaker 2 (26:05):
You are listening to the Bloomberg Business Weekdaily podcast. Catch
us live weekday afternoons from two to five pm Eastern.
Listen on Apple CarPlay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (26:19):
Sour shares at Alphabet are up for our second day
following earnings late Wednesday, the company, as you know said,
demand for AI products boosted quarterly sales and now requires
an extreme increasing capital expending, heightening pressure on the company
to justify the cost of keeping up in the AI race.
That's kind of the big picture Google Cloud revenue and
that's something we want to focus on and operating income.
Top analyst projections. Our own Bloomberg Intelligence is man Deep
(26:43):
Seeing writing after earnings that Google's increase capex view by
ten billion dollars for the full year, suggests that cloud
segment growth is likely to remain above thirty percent through
the second half.
Speaker 12 (26:53):
Well.
Speaker 3 (26:53):
Our next guest is the chief operating officer of Google Cloud.
In fact, it's first COO. Great to have with us
as friends to SUSA. He joins us from the Bloomberg
News bureau out in San Francisco. Francis, welcome, So nice
to have you here with Tim and myself.
Speaker 13 (27:06):
Great to be here, Thanks for having me.
Speaker 3 (27:08):
I want to start with AI and cloud demand. As
you know, it feels like so many conversations start with AI.
AI contributions to Google Cloud growth thirty two percent.
Speaker 7 (27:17):
What are you.
Speaker 3 (27:17):
Seeing currently and continuously when it comes to AI and
cloud demand?
Speaker 13 (27:23):
Yeah, right now, it feels like there are two powerful
mega trends that are playing out in the enterprise market.
The first is, you know, the continued move by companies
of their workloads to the cloud, of their applications to
the cloud. And the second much bigger trend that's playing
at right now is the adoption of AI by companies.
And those two powerful mega trends are driving our business
(27:44):
and fueling the growth that you saw in the quarter.
And so what we're seeing on the AI side is
you know, this is the fastest in my career that
I've seen a technology move from pilots to production. And
so what we're in talking to customers, what they're telling
is is they're recognizing the benefits that AI can bring
into their company across the board. You know, we have
(28:04):
companies that like Verizon that are using AI to help
do customers support. We work at Seattle Children's Hospital that's
using AI to inform physicians in their communications with patients.
We also have companies like Papa John's or McDonald's that
are using AI in the franchises, and so we're seeing
broad adoption by enterprises across a number of places where
(28:27):
they can see the benefits from AI.
Speaker 1 (28:29):
You just mentioned a few examples of companies that you
work with. There are a lot of small businesses, though,
and even large businesses that I think it's fair to
say haven't fully harnessed what you view as the opportunity
when it comes to AI. How big of an opportunity
is it for Google Cloud? What's a number? How can
you quantify this?
Speaker 13 (28:47):
Yeah, I think you're absolutely right in that we're the
very early stages of what is a very large sort
of adoption market in front of us.
Speaker 5 (28:54):
Now.
Speaker 13 (28:54):
You know, you look at the numbers we delivered, you know,
last quarter in Google Cloud, we delivered thirty zo point
six billion dollars in revenue, and as you said, that's
up thirty two percent year over year. So although the
numbers are already big, we're still just at the very
very beginning of AI adoption by companies. And that's true
whether you look at small companies who are starting to
use it in terms of their outreach to customers to
(29:16):
scale up their presence from a marketing perspective, all the
way to large enterprises. We're just at the very beginning
of this big wave.
Speaker 8 (29:23):
You know.
Speaker 3 (29:23):
One of the things Francis said, I'm so glad we
could get some time with you, is that, you know,
everybody kind of throws out AI and large language models generally,
and we're just trying to get more of an understanding
of how this all impacts our world.
Speaker 7 (29:35):
Drilled down a little bit further in.
Speaker 3 (29:37):
Terms of the customers that you are working with, big,
medium and small, and how they are using.
Speaker 7 (29:42):
AI and how it's going to impact our lives.
Speaker 13 (29:46):
Yeah, we're seeing it show up in enterprises in a
whole bunch of different ways, and so let me give
you some examples. You know, some large manufacturers like Toyota,
for example, or Honeywell are using AI on the factory
floor to provide information to people working on the factory
floor to improve their operational ability, and also to provide
access for their customers to engineering and technical support documents
(30:10):
around the product, so make it easier for customers to
navigate and find the information they need. We're seeing some hospitals,
as I talked about, helping, using AI to help write
physicians access to whether it's guidelines or any background information.
In addition, we're seeing hospitals use AI to automatically transcribe
(30:33):
the communications with their patients. So what AI will do
is actually take the notes automatically and then upload it
into the systems that.
Speaker 5 (30:41):
It needs to.
Speaker 13 (30:41):
What that does is it frees up time for the
medical professionals to do what they do best, which is
deal with patients. We're seeing small businesses they're using AI
to create marketing materials and do that much more efficiently.
We're seeing large retailers like Wayfair that are using AI
to create more personalized experiences for their customers. When you
(31:03):
come to the website, so you can imagine as you're
using Wayfair, you can imagine how the furniture items will
look in your environment, and that provides a better shopping
experience for customers. So we're seeing a wide swath of
ways that AI is being used in companies.
Speaker 3 (31:18):
I'm so glad you mentioned kind of the medical area
and what they're doing, because I think a lot of
folks come on our air and talk to the Bloomberg
audience and talk about how AI might significantly impact not
just hospitals, but just how we get medical care. You
are the former CEO of Alumina, and I think about
DNA sequencing and all of the information and data that
(31:40):
could potentially improve how we are treated when it comes
to healthcare. How are you thinking about that space and
what it might mean for Google Cloud and demand there.
Speaker 13 (31:50):
Yeah, I think AI is going to have a very
big impact in a number of ways across healthcare. Right,
So if we talked about some ways where it's helping
in the delivery of care by bring up medical professionals
from administrative tasks and using more of their time to
actually interact with patients. In addition, it's also helping medical professionals,
you know, get access to the information they need across
(32:13):
a whole swath of information, so you know, they need
to be able to stay on top of guidelines as
they emerge, new research that's being published, as well as
all the information on the patient, and increasingly, you know,
we're getting more and more personalized information on a patient.
You talked about genomics, there are a lot of images
as well as previous lab tests, and so what AI
can do is sort of take all that information and
(32:35):
present it in a more digestible way so that you
can make better decisions. In addition, AI can also help
you know earlier in the process of drug development. We've
seen fantastic advances with tools like alpha fold, which allows
you to you know, deduce a three D protein structure
across hundreds of millions of protein types. What that does,
(32:57):
then is that allows you to identify maybe a new
druggable targets that allow you to treat diseases. And I
can also help bring information together, you know, the genomic information,
the phenotypic information, you know, the the imaging information and
help us get better understanding of what causes diseases and
how they develop.
Speaker 5 (33:17):
And that could give us.
Speaker 13 (33:18):
New insights that allow us to think about how we
can treat those diseases better. So in almost every part
of the healthcare industry, you can see how AI can
help improve that industry.
Speaker 1 (33:29):
We're speaking with Francis desu'sa chief operating officer over at
Google Cloud. Francis, I want to talk a little bit
about competition. For years, Amazon has been number one. According
to our Bloomberg Intelligence team and data from IDC. In
twenty twenty three, EDWS had about forty seven percent of
the infrastructure as a service market share, Microsoft in second
place with sixteen percent, and then Google coming in with
(33:51):
about six percent. How do you get to number two
and then number one?
Speaker 13 (33:56):
What's really interesting is that is as I talk to customers,
there are things as a convergence of two really big
important spaces. One is the cloud spaces you talked about,
and two AI. So nearly every customer conversation I have
now in prospect conversation I have is really all about
AI and how it will impact businesses. And we are
the only hyperscaler that actually has our own AI stack.
(34:20):
So if you think about every part of the AI
technology stack, Google has leading technology.
Speaker 5 (34:26):
So for example, on the chip side, we're one of
the largest partners in the world.
Speaker 13 (34:30):
With Nvidia on GPUs, but we also have our own
technology TPUs that are very highly performant and we run
them in our data centers. In terms of the models,
we work with a number of other model providers, so
if you go into our model garden, you can access
models from companies like Anthropic and deep Seek, but we
also have the world's leading model with Gemini two dot five,
(34:53):
which is performing really well on the top of the
leaderboards in almost every part of AI. And so here too,
we provide our own leading technologies, and it's Gemini, but
it's also our image models, our video models, our time
series models, our weather models, and then we also provide
our own applications on top of that, like Agent Space
(35:13):
that allow companies to easily develop their own agents. And
then we have a leading cybersecurity portfolio. And so where
we are differentiated in the market is that as we
talk to customers, we're really the only hyperscaler that can
talk about our own native AI stack that's leading technologies
in each part of the stack, as well as our cloud,
and that's playing really well, and that's driving a lot
(35:34):
of the results that you are seeing, including the results
we just published yesterday on the earnings call.
Speaker 3 (35:39):
I got to say, it's the thinking models the Gemini
two point five that really kind of are blowing everybody's minds. Hey,
one thing I want to ask you, speaking of customers,
Tim and I full disclosure, we talk about it a lot.
Are a little bit obsessed with Weimo. How much is
weimo using Google Cloud. I'm just curious in terms of
keeping that all going and running.
Speaker 13 (36:00):
Yeah, I totally understand why you love Weimo. I love
Weimo too. Living in San Francisco, I've been using it
for a few years and my daughters and I love
it as you can imagine, you know, being sister, you
know parts of Google we leverage technologies that Google Cloud
is building as well as Deep Mind is building, and
so you as you could imagine, you know, there's really
close interactions from a technology perspective across these different parts
(36:23):
of Google.
Speaker 7 (36:24):
Hey, just thirty seconds left. Security.
Speaker 3 (36:26):
As we know your former background semantech, you understand the
importance of security specifically, and I'm just curious what do
you keep top of mind when you think about the
security of Google Cloud and keeping it secure.
Speaker 13 (36:41):
Yeah, As you point out, security is a really important
area for us to focus on and it's a core
part of the value that we deliver to our customers
in terms of providing a very resilient protected cloud. There
are a number of things that you know that are
top of mind for us and for our customers as
we talk about security, especially in world of AI. One
is it's important that security companies are leaning deep into
(37:05):
leveraging AI to improve their security capabilities. So we offer agents,
for example, that customers can deploy as part of their
security operations center as part of their threat intelligence gathering,
and so we're also doing research on how AI can
be leveraged by the bad actors and think about how
you can stay on top of providing defenses for things
(37:27):
like you know, altered images and videos and deep fakes.
It's also important to our customers that the security we
provide works multi clouds, so not just for Google Cloud,
but that they can have the same security posture for
workloads that they have on other clouds as well, and
so that's an important part of the conversation too. So
provide leading edge technologies stay on top of AI and
(37:49):
the expanding sort of threat landscape that opens up. And
then also make sure that whatever you give us, you know,
works across clouds.
Speaker 7 (37:57):
So glad we could get some time with you. Francis Desuzah.
Speaker 3 (37:59):
He's the Chief Writing Officer at Google Cloud, former CEO
of Alumina, and also former president at Samantech, where he
oversaw the security and data management portfolio.
Speaker 2 (38:08):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
(38:28):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.