July 11, 2025 • 48 mins
This week, the FDA’s new commissioner Dr. Marty Makary outlines a new approach to the department, hoping to restore public trust. Plus, checking in on the heartland of the US - we travel to Iowa to see how much American farmers rely on export markets. Later, a look at the ever-evolving media landscape and whether mergers and breakups have actually helped the challenged industry.
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 (00:20):
This is Wall Street Week. I'm David Weston, bringing you
stories of capitalism. The saga of Paramount Global continues as
President Trump moves to settle his lawsuit over a CBS
News interview, opening the way for yet another restructuring of
the company. It's a movie we have seen before three
times actually, plus American farmers may be the victims of
(00:42):
their own success. They produce more efficiently than ever, but
demand can't keep up with supply. We go to Central
Iowa to hear from the farmers themselves about what they
need to make farming a good business. But we start
with the news story being told that the food and druggedness.
As President Trump's FDA commissioner sets a different course for
(01:04):
the agency amid big changes in personnel, we traveled to
White Oak, Maryland to see for ourselves what the new
FDA head, doctor Marty McCarey, is up to and why
he believes it will help make America healthy again. Talk
to us about opioid. Did the FDA fail?
Speaker 3 (01:22):
The FDA did fail. There were many.
Speaker 4 (01:26):
Parts of our healthcare system that failed. Look, I feel
terrible about the opioid epidemic. I personally prescribed opioids with misinformation.
It was taught to me by my chief resident in
my surgical residency. And we sort of woke up to
this problem around twenty fourteen, twenty fifteen and thought, oh
my god, what have we done? What information did we
(01:49):
not have? I think was regulatory capture at the agency.
Now we can't prove that. But when the reviewer immediately
goes to work for Purdue Pharma after approving OxyContin for
chronic pain, and the approval for chronic pain was based
on a fourteen day study, have we seen the last
chapter of that No, We're going to look at the
label for OxyContin and that class of medications and ask,
(02:12):
how can we ensure that it's accurate and consistent with
the science.
Speaker 2 (02:16):
How does your approach to science and common sense avoid
the next OxyContin?
Speaker 4 (02:20):
One of the first actions I took was to remove
all industry members of FDA advisory committees wherever statutorily possible.
And so we've got to preserve that scientific process, and
we've got great scientists that are doing that right now.
The second thing is that we need to have eyes
on a drug and device the second it's approved and
(02:41):
keep eyes on those drugs. We shouldn't be learning nineteen
years after OxyContin was approved that it may have killed
nearly a million Americans in its downstream effects with other drugs.
We should be able to approve a drug and with
big data, go into big data, with our eyes, with
our epidemiologists, and watch a drug to see if there
(03:05):
are safety.
Speaker 3 (03:06):
Signals that emerge.
Speaker 4 (03:07):
One of the broken things about the FDA that I
learned just last week was that bureaucrats at the FDA
had the ability small group had the ability to block
a safety epidemiology study by our own safety epidemiology team.
Speaker 3 (03:25):
And so we are announcing.
Speaker 4 (03:27):
We're getting rid of that ability to block a safety
evaluation and we want that safety team to work freely
without any barriers. There's a bit of a conflict of
interest if you're the team that approved a drug, you
may not want to be embarrassed to learn that there's
a safety signal down the road.
Speaker 2 (03:45):
What can the FDA do about reducing childhood abucity?
Speaker 4 (03:49):
So we're doing an inventory of all the chemicals in
the US food supply that children eat that are banned
in Europe. We're going through them one by one we're
doing an inventory. We have a new office for post
marketing assessment, challenging this old notion, this old regulatory process
that was called grass, that is that some foods were
(04:10):
generally safe. Well, this has become now applied to novel
chemicals in the food supply where people do have significant
safety concerns.
Speaker 2 (04:20):
One of the most controversial issues raised by Secretary Kennedy's
new leadership at HHS has involved vaccines, with a group
of medical associations suing this week over the withdrawal of
some recommendations about coronavirus vaccines. Looking back now on COVID
and deveilt of vaccines for COVID, was it that a
success story? Was WORP speed a success story or not?
Speaker 3 (04:42):
I think it was a success story.
Speaker 4 (04:43):
Remember when the initial vaccines were released, they were a
very good match for the circulating strain. At the time,
there was low levels of population natural immunity, and we
clearly saw a reduction in the severity of illness. But
now we're four years out from those initial randomized control
trials and parents are appropriately asking does my six year old,
(05:08):
healthy daughter need sixty five more COVID shots in her
annual lifespan? That is one each year or not, and
that is a scientific unknown. We'd like to see a
clinical trial.
Speaker 2 (05:21):
What about measles? Are you worried about chilling effect of
the government really raising questions about some of these vaccines
that cause people not to get vaccines they ought to.
Speaker 4 (05:30):
Be getting vaccines save lives. Let me be very clear
about that. But we at the same time have seen
a loss in public trust in doctors and hospitals.
Speaker 3 (05:40):
Why was that?
Speaker 4 (05:42):
In my opinion, it was because public health officials did
one of the worst things you can do with the
authority and power you have as a physician, and that
is demand that people do something when you're not really
sure and you're not honest with them that you're not sure.
Speaker 2 (06:01):
Many of us think about the FDA, for the d
in the FDA, which is drugs and particularly approval of
new drugs, what parts maybe aren't working or you think
you might beable to help fix.
Speaker 5 (06:11):
So.
Speaker 4 (06:11):
Not only have we spent a lot of time with
individual reviewers, pulling them aside without their bosses and asking them,
what have you always wanted to do here? What do
you think could work better? We've done a national CEO
listening tour now in seven cities around the country where
we're in the middle of it, where we're asking CEOs,
what ideas do you have for a better FDA. We
(06:33):
need an FDA that is user friendly. Drug developers and
inventors of new drugs are trying to figure out how
do they get through this long, gnarly regulatory process. Well,
we can be more transparent, we can provide better communications,
we can provide guidance, we can answer questions on demand,
(06:54):
and we are announcing that we're going to make our
decision letters public so that drug developers can see why
drugs are not accepted.
Speaker 3 (07:05):
At the FDA.
Speaker 2 (07:06):
Why weren't they public.
Speaker 4 (07:07):
Some of the drug companies don't want them public. We
learned that most companies will spin the results from the FDA.
The company will not even say that the FDA is
asking for a new clinical trial when we've asked for
a new clinical trial in our decision letter. So there's
an opportunity for companies to sort of spin the results,
(07:28):
make it sound like, oh, the FDA got back to
us and they just want to see one small tweak.
Speaker 2 (07:33):
If in fact, there's more disclosure about letters that say
we're not approving your drug, could that help the rest
of the industry make progress faster on developing the right drug.
Speaker 4 (07:44):
Absolutely, Look, we need more transparency. The FDA has been
a black box and companies have scratched their heads to
try to figure out.
Speaker 3 (07:52):
What do the reviewers want? Why are they rejecting a drug?
Speaker 4 (07:56):
Did they actually reject it with a big rejection or
just ask for a small modification. Well, no one's known
because none of this has been public information. Well that's
going to change.
Speaker 2 (08:06):
How do you make sure the FDA is up with
the most recent technological development.
Speaker 3 (08:11):
Yeah, so we've got to modernize.
Speaker 4 (08:12):
We've got to keep the best people here, we've got
to listen to what's happening in the field.
Speaker 3 (08:17):
And AI is a good example of that.
Speaker 4 (08:19):
We're using AI to organize these gigantic applications, applications that
can be one hundred thousand pages, and we now have
thousands of scientists at the FDA using it every day
on their own volition. That is, it's an optional feature,
they find value in it, they're using it. And so
all of these things are designed to modernize the FDA
(08:43):
to ask the big question, why does it take over
ten years for a drug to come to market? We
introduced a pilot with a new priority voucher where if
a drug or a company's priority is in our.
Speaker 3 (08:59):
US now sational priority.
Speaker 4 (09:02):
We have vouchers now in a pilot program to give
companies a decision in one or two months instead of
nearly a year.
Speaker 2 (09:09):
Can you increase the speed without taking a risk on
the safety?
Speaker 3 (09:12):
I think you can.
Speaker 2 (09:13):
Commissioner McCarey admits to a good deal of change at
the FDA. Change that has led to the departure of
some very senior, longtime leaders and the loss of a
good number of positions altogether.
Speaker 4 (09:26):
So the FDA doubled in its number of employees since
two thousand and seven. Now there were massive redundancies with
twelve travel offices over two thousand HR, and budget procurement
and personnel.
Speaker 3 (09:41):
There were duplications of services.
Speaker 4 (09:43):
There were clunky adverse event reporting databases that were all
built from scratch. So we can benefit from a lot
of great consolidation in IT and communications and so many
other areas, but we have to make sure our scientific
reviewers and inspectors have everything they need.
Speaker 2 (09:59):
At Bloomberg, we focus investors often and capital counts when
it comes to biotech. Change is not something investors usually like,
how do you think you're changing in the FDA may
affect investment.
Speaker 4 (10:12):
I want investors to know that we are in a
deregulatory mindset. We're cutting red tape. We're going to speed
up the approval process without cutting any corners on safety.
We're going to continue to invest in our scientists and
inspectors and all the core staff central to their function,
and we're going to create predictability with clear guidance. We
(10:33):
are talking to industry constantly to figure out how we
can be helpful, which of their products being proposed or
in line with our national priorities. That is, meeting a
large unmet public health need, domesticating manufacturing as a national
security issue, increasing the affordability of drugs, which is an
(10:54):
access problem. This president does not like to see Americans
getting ripped off. And we've been paid more for drugs
than in many wealthy countries.
Speaker 3 (11:02):
Around the world.
Speaker 2 (11:03):
Can you do anything about that.
Speaker 4 (11:04):
We can issue a National Priority Review voucher for companies
that are promising to equalize the price between other OECD
countries and the United States, even with other products that
they currently have. And so we want to incentivize good
behavior in the marketplace.
Speaker 2 (11:23):
Coming up, battle lines are being drawn in the trade war.
Right through the cornfields of rural Iowa. We bring you
the story from the heartland of high tech, driving high
productivity and a desperate need for export markets to ramp
up demand. That's next on Wall Street Week. This is
(11:53):
a story about abundance and abundance of food and whether
we can ever have too much of a good thing.
The United States has the most productive agricultural sector in
the world, something every president, Republican and Democrat embraces since
nineteen thirty three. The government, your government has been a
(12:14):
friend of the farmer, farmers.
Speaker 3 (12:16):
Farmers, US farmers, America's farmers, and I love.
Speaker 4 (12:19):
Them and I'm never going to do anything to hurt
off farmers.
Speaker 2 (12:24):
Welcome to Iowa, where dusty roads pierced through over twenty
million acres of corn and soybeans. The towns are small,
and the skyscrapers dotting the horizon aren't office buildings but
grain elevators. This is America's heartland, and farming runs in
the blood.
Speaker 6 (12:41):
I am the third generation. My grandfather started farming in
Nebraska for generation one, and in the mid fifties moved
here to Central Iowa, and my father continued and then
now me after.
Speaker 2 (12:56):
What brought your grandfather to Iowa.
Speaker 6 (12:58):
The situation in Nebraska was three brothers farming together. They
weren't able to accumulate enough acres, and then drought situations
in Nebraska decided that they should split up. My grandfather
moved to Sioux City, Iowa originally and farmed there for
a couple of years, started a dairy herd that didn't
work out, so then there was an opportunity to rent
(13:21):
and buy this farm.
Speaker 2 (13:23):
Are you hoping your children will continue in the farming
business in some way?
Speaker 6 (13:26):
I certainly do, and I think that that was something
that I'm very proud of to pass on that tradition,
that appreciation for agriculture to all of my kids.
Speaker 2 (13:37):
This have not done. That's Stu Swanson. His farming family
has seen dramatic changes in the business of agriculture since
his grandfather came from Nebraska seventy five years ago.
Speaker 6 (13:48):
So each acre of corn will cover three times with
this machine.
Speaker 2 (13:53):
Over that time, US farm productivity and output has nearly tripled,
helped by technological innovations. With that explosion in productivity has
come larger and larger farms, including for Swanson, who now
farms about nineteen hundred acres, a third of which he owns,
with the rest owned by investors from as far away
as Norway.
Speaker 6 (14:14):
Yeah, I think for this time of the year in
mid June, the corn looks about as good as any
I farm for thirty three years. So this is my
thirty third crop that you're walking through today. Other than
a little excess water that we've.
Speaker 2 (14:26):
Had, boots are sinking down here as we walk through it.
But also look at the color of the soil. Why
is this so rich.
Speaker 6 (14:35):
We're lucky that the glaciers moved the top soil here.
We also are in an area of Iowa and of
the country that is called the Prairie Pothole region. So
we have really rich organic soils from the previous plants
and things that were grown here, and so that high
organic matter gives that black color that we are very
(14:58):
proud of here in Wright County.
Speaker 2 (15:02):
That might all sound like good news, but as president
of the Iowa Corn Growers Association, Swanson knows all too
well the challenges facing America's row crop farmers.
Speaker 3 (15:13):
A lot of.
Speaker 2 (15:13):
Farms I understand are actually cash negative. Are you cash positive.
Speaker 6 (15:19):
I haven't ran a number to tell you today. Certainly
we know that over the last three years we've seen
about a thirty percent decline in commodity prices. I think
over that same time we've seen the nine major crops
all be underwater, so we are producing at a loss
on the nine major crops.
Speaker 2 (15:41):
Gold Eagle Cooperative is an intermediary for farmers in the
markets they serve. It is located on the outskirts of
Eagle Grove, a short twenty minute drive up the road
from Swanson's farm. We sat down there with Tom Haverson,
an Iowa native himself.
Speaker 7 (15:56):
I remember when my grandfather started when I was a
little kid. He had a little tractor with a harvester
that would do one on each side. He'd be going
back and forth field like this for a couple of days.
Speaker 2 (16:10):
After working around the world for Goldman Sachs, he's now
CEO of Cobank, which operates as a farm credit bank.
Counting his clients both Swanson's Farm and Gold Eagle, Halverson
has a front row seat for the storm brewing over
America's crop farms.
Speaker 7 (16:26):
Corn, soybean, and wheat prices are meaningfully lower than they
were a couple of years ago. That translates into lower
cash flows for the producers themselves. At the same time,
rural Americans in general and farmers in particular, that are
not immune from macroeconomic conditions, including inflation, for example, they
(16:48):
are incredibly exposed to trade buying and selling internationally. Producers
have been squeezed quite dramatically over the last twelve, eighteen,
twenty four monthsamminational lower commodity prices for what they sell
on the one hand, and significantly higher prices for the inputs.
Speaker 2 (17:07):
Once seen as the supermarket of the world, America is
instead finding out the hard way that the world is
doing its grocery shopping elsewhere and has been for some time.
This year, the US is expected to record its third
consecutive annual trade deficit in agriculture, something that hasn't happened
in seventy years. Javier Blass covers commodities for Bloomberg Opinion.
Speaker 8 (17:30):
I think that the reverse aal on the agricultural trade
in the United States is a structural feature. I don't
think it's going to go away. There are two elements
there that they are very important. One is that the
United States is important more agricultural commodities that they used to.
And the reason for that is that we like to
have green beans and strawberries and other agricultural crops the
(17:52):
whole year. We don't really want to buy them when
they're in season. The other problem is that the United
States is starting to esport agricultural commodities that is a
lot in part due to mister Trump's trade policies. You
are hurting one of your largest buyers, one of the
largest importants, one of the largest customers of American food industry.
(18:15):
That's China. The big problem for the United States agricultural
sector right now is that in the past, if a
country was having a big disagreement on trade policy with
the United States, it still needed to continue buying corn
and solbing and wit from America because it didn't have
any other options. Today, there are many other options, and
(18:38):
particularly one, and it's Brazil. Brazil over the last forty
years have transformed itself into the supermarket of the world.
That is a role that the United States used to
play in the sixties, seventies and all the way into
the eighties. The damage is done. Every time that you
scare buyers. The buyers are looking for an alternative, and
(18:59):
they will have very memories. Japanese important still remember the
very brief trade embargo imposed by the United States more
than fifty years ago on soybeans, and that is half
a century later. The buyers still remember that once you
opened that door, you cannot put it back. It has
(19:19):
been done, and I think that the damage is done.
Speaker 7 (19:22):
As far into the future as we can foresee, the
agricultural economy of the United States is very, very dependent
on access to overseas export markets. My uncle, who lived
about a mile from where we're right now sitting, was
one of the first American farmers to go on a
trade mission to China in the late nineteen seventies, and
(19:43):
back then we didn't sell any soybeans to China.
Speaker 3 (19:47):
And since that time.
Speaker 7 (19:49):
We've grown our export market to China from zero to
being the biggest export market, and until our recent trade
disagreements with China, we got up to the point where
it wasn't yet fifty percent, but it was close closing
on fifty percent of all US soybeans got exported to China,
which is an inconceivably large amount of soybeans that are
(20:11):
being grown in this part of the world, put on trains,
ship to the West coast, put on ships and sent
to China, and so you know, we now have a
very significant vulnerability to the need to sell our soybeans
internationally because we produce way more soybeans now than we
(20:32):
possibly consume in this country.
Speaker 2 (20:34):
With China and others now looking elsewhere, the US is
finding ways to drum up domestic demand. Part of the
answer lies in alternative uses, and that's where Chris Bochart,
the CEO of Gold Eagle, comes in.
Speaker 9 (20:46):
We're about a three thousand member owned cooperative. We provide
goods and services to farmers. So we provide a lot
of agronomy services where we'll sell farmers seed, fertilizers, crop
protection products to help their crops grow. Our feed group
will take farmer corn and grind that, blend that and
feed that back out to livestock, you know. And then
our grain division we take the farmer's corn in the
(21:09):
fall or whenever they need us to be there to
deliver it. We try to help them find the best markets.
We do have a partnership with an ethanol plant, so
we manage an ethanol plant that's just right out the
back door here. We grind about thirty million bushels of
corn a year. We're making about ninety million gallons of
ethanol out of that corn, shipping it all all over
the country for into the you know, our liquid fuel supply.
Speaker 2 (21:31):
When you and I think of corn, we may think
of corn on the cob, corn chips, corn starch, or
even popcorn. But only about eight percent of the corn
America producers is eaten by humans. The majority is crushed
and turned into livestock feed or processed into ethanol and
used in gasoline.
Speaker 9 (21:50):
We think that, you know, the ethanol policy hits debated
around from time to time. You know, the current administration
talks a lot about you know, domestic energy production and
has been really good for bile fuels. And we've seen
biofuels be a real bipartisan solution over our history and
it's barely been good. And so as far as you know,
corn demand today and where corn dan can grow into
(22:12):
the future, yeah, we really think that there's a huge
potential for ethanol to continue to be a bigger and
bigger part of that local demand.
Speaker 2 (22:22):
The same transition from food to fuel is happening for soy.
Speaker 10 (22:26):
Now.
Speaker 7 (22:27):
We're trying to find alternative uses, for example, to those soybeans,
some of which can be turned into alternative sources of fuel. So,
for example, the government announced some changes to the renewable
fuel standards and so forth that have been very very
good for the soybean market.
Speaker 2 (22:42):
But that may be only half the story. As farmers
real from a challenging export market. Higher interest rates have
delivered a second blow in what turns out to be
a pretty capital intensive business.
Speaker 6 (22:53):
The high horsepower tractors in new situation is probably six
to seven hundred thousand dollars. This machine was actually built
in two thousand and nine, probably the oldest piece of
equipment that we utilize in a regular basis. So its
value as it sits today probably one hundred and fifty
to one hundred and seventy five thousand.
Speaker 2 (23:14):
So how fast do.
Speaker 3 (23:15):
They depreciate it?
Speaker 6 (23:16):
Yeah? Really fast.
Speaker 9 (23:19):
Farming is such a capital intensive endeavor, whether it's the
cost to finance their land acquisitions, just their interest rate
to put the operating loan in, you know, to put
a crop in. They're investing in hundreds of dollars in
acres just in the input side to put the crop in,
and then their machinery and equipment purchases have just really
(23:41):
skyrocketed in the last three years.
Speaker 2 (23:44):
Rising costs and falling prices do not add up to
a successful business. So what do America's row crop farmers
do to make ends meet? And how much of it
depends on the federal government. That's where we turn next.
Speaker 6 (23:57):
We don't want to rely on government payments. That's the
last thing that we want to do.
Speaker 2 (24:14):
In the cornfields of Iowa. Farming is more than just
a business. It's a way of life passed down from
generation to generation. So do you come from a family
of farmers.
Speaker 7 (24:24):
I do.
Speaker 6 (24:25):
I am the third generation.
Speaker 9 (24:27):
I was born on a farm in southeast Iowa.
Speaker 7 (24:29):
Well, my grandfather came here. You couldn't farm very much
in this part of the state because it was all water.
Speaker 3 (24:34):
It was wetlands.
Speaker 1 (24:36):
This is where I grew up. Man, I'm the fifth generation.
So we're raising the sixth generation here on this farm.
So back in the late eighteen hundreds, my great great
grandparents would have came here and started the farm.
Speaker 2 (24:50):
JD. Myers Farm lies a short drive from Stu Swanson's.
Speaker 1 (24:55):
You'll start seeing I don't know if we can see
it yet, but you'll start seeing an earshoot.
Speaker 2 (25:00):
And he too farms corn and soybeans. But where Swanson
is the third generation in his family growing row crops, JD.
Myers is fifth generation and plans on passing it along
to his own son.
Speaker 1 (25:13):
Grander bushel on the botom of that ben that's left.
So take a few loads to get up there, but
other than that will be done and then we can
grease the shivers and get it, get it ready to go.
Speaker 2 (25:26):
For decades, passing it on to the next generation has
been thus story of American farms, but the agricultural workforce
has been in steady decline, from eight million in nineteen
forty nine to just over two millions today. Technological innovation
has certainly made farming more efficient, but urbanization has also contributed.
Speaker 9 (25:46):
As folks have moved into the cities, and we even
see that here in Iowa. You know, there's definitely an
urbanization trend. And that's all good. I mean, that's all
good and well, but I think that the value of
folks really truly understanding where their food and fuel come from.
There's just tremendous value there, and we got it. We
need to keep doing that as ag leaders, to keep
(26:07):
telling that story.
Speaker 2 (26:10):
But if Iowa, as farming families hope to pass their
way of life onto the next generation, it has to
be a sound business as well as a way of life,
and the combination of low prices and higher costs has
meant that farm income has plummeted over the past few years,
meaning that sometimes financial institutions like Cobank have to make
up the difference through loans.
Speaker 6 (26:31):
We rely not only on co Bank but local banks
to help provide financing. The cost of production is at
such a high level and it just keeps increasing that
we need that backstop to know that we can average
cash flows out.
Speaker 7 (26:50):
One of the most important indicators of credit quality for
the farm credits system and indirectly for farmers as well,
is farmland value. Right, so we watch very carefully what's
happening to farmland value. My family owns some, so we
watch it too, And farmland values are always a massively
(27:11):
lagging indicator. Commodity prices have come down a lot, right,
Corns down, beans down, wheats down, since you know, the
peak two years ago, but farmland value is still like this.
Speaker 3 (27:22):
It has sort of stopped.
Speaker 7 (27:25):
Rising in the way that it had been rising for
a long time. But as you can imagine if prices
stay low and cash flows are negative for a lot
of producers, they don't have free cash flow in working
capital and they have to you know, draw down because
farmers tend to be asset rich and cash poor. Right
they own land and physical assets and machinery and stuff
that's worth things, but it's not liquid. So credit quality
(27:49):
is actually pretty good. Balance sheets of most farmers were
in good shape, you know, until until the last twelve
to eighteen months. But this this stress period we're now
in is going to manifest overcoming you know, six twelve
eighteen months, and I'll show up in tougher cash flows,
people needing to raise liquidity in other ways.
Speaker 2 (28:14):
Farmers can't keep borrowing forever to make up shortfalls. But
there are signs that things could turn around, not because
of higher prices or lower costs, but because of the
government something. Farmers like JD would rather not rely on
big thing.
Speaker 7 (28:30):
You know.
Speaker 1 (28:30):
I guess for me as a farmers, I want to
make sure we have markets. I don't want direct payments.
I would rather not have direct payments from the government.
If we have markets that will buy the grain and
stuff from us, not have to depend on the government
and develop those markets.
Speaker 6 (28:48):
We don't want to rely on government payments. That's the
last thing that we want to do. We've worked to
try to eliminate that, and we want to try to
create demand through domestic markets through exports to offset that.
Speaker 2 (29:02):
Last year, the US government paid out roughly nine billion
dollars to farmers. This year, that figure is set to
surge to an estimated forty two billion dollars, much of
it aimed at weather related disaster relief and support for
those in financial distress. Still, the role of subsidies raises
tough questions. After all, the US didn't bail out DVD
(29:23):
manufacturers when streaming up ended the industry. But then again,
DVDs are a luxury while food is a necessity.
Speaker 7 (29:30):
Now, your viewers who are not close to this will
probably say, well, why do we do that and how
much do we do that, and what's the explanation for that,
and to which the answer is, if you travel around
the world as I have in my career, you'll realize
and know that feeding your population is a national security
consideration for everyone on earth, right, and we kind of
(29:52):
take that for granted here because we're so productive in
our agricultural economy. We don't just feed ourselves, We feed
a lot of other people all around the world. But
being able to have a food self sufficiency and a comprehensive, productive, safe,
secure sources on a through the cycle basis of food
(30:12):
and fiber for the United States of America is frankly
a matter of fundamental and vital national security interest. And
in order to safeguard that we have put in place
over many decades in this country a whole bunch of
support infrastructure to ensure that we will be able to
feed our population under any and all circumstances. And that
(30:34):
infrastructure has been enormously successful for so long that almost
all Americans take it for granted.
Speaker 2 (30:40):
Is there also a risk in terms of business in
the economy and ongoing subsidies to farmers.
Speaker 3 (30:48):
It's a very important question.
Speaker 7 (30:50):
Now, I never met a farmer that wants to make
a living at the expense of their fellow tax paying citizens.
That is a true statement. On the other hand, just
like every other advanced industrialized country in our peer groups,
so I think Japan, France, UK, Germany or whatever, because
of the national security implications and so forth, you've got
(31:10):
to have a good stable food supply. You've got to
make sure that that's taken care of. So you can't
leave that one to the to the vagaries of the marketplace.
And and so it's not a surprise therefore, that all
of our peer countries have a similar kinds of mechanisms
in place to ensure that and to ensure the the
(31:33):
the care and well and well being of the of
the of the rural you know land. But having said
all of that, it is a risk that that if you,
if you take too much too often and and get
your significant risks taken off the table for you whenever
(31:54):
they manifest by the government, that you become your subject
to the risk of the complacency of thinking that that's
always going to happen. And you know, that can be
true in a variety of ways. And I think in
our country and on our society these days, there is
a tendency for the population to want the government to
(32:16):
de risk things when they go wrong. All those things
are legitimate and reasonable, but they also over long periods
of time, change people's behavior in the marketplace, and they
start that the market starts to take risks that end
up becoming mispriced. You know what, I mean, and they
end up that the people who are having to provide
(32:36):
that support are going to have to provide more of
it more often than would otherwise be the case, and
that is a risk for the agricultural economy. The Congress,
i know, grapples with this on a consistent basis to
try and determine the appropriate and most effective place level
for this right. It needs to be enough to ensure
(32:57):
that we safeguard to stuff that we think we need
to say safeguard for the best interests of the country,
but not so much as to create bad risk taking
behavior or unsustainable subsidies, or to stimulate overproduction that we
don't or don't want her need.
Speaker 11 (33:17):
If we don't have a strong agriculture sector, if we
can't feed ourselves, we are no longer the superpower in
the world. And so all of this it's a complicated
sort of balance that we're striking that we're working to achieve.
Speaker 2 (33:30):
President Trump's Secretary of Agriculture, Brook Rollins, has a packed
travel agenda, visiting the likes of the UK and Italy
and scheduling trips to India, Brazil, and Peru, all in
an effort to drum up overseas interest in US agriculture.
Speaker 11 (33:45):
Specific to soybean corn. Really are roa croppers. That's really
a very direct result of China. And I know we're
making progress on China, will continue to make progress hopefully,
but if we don't opening up markets all over the world, Listen,
thank you. For example, charges a ten percent tariff on
average on American products, and vice versa, we only charge
(34:06):
five percent. That's two x The average tariff charge around
the world is about fifteen percent on American products. When
we charge on average five percent, we've been taken advantage
of over and over and over again. So as we
are realigning, we're also opening up these markets with the
trade deal. So you'll continue to see this moving forward. Now,
if around harvest time into the summer beginning of the fall,
(34:29):
we see some real economic harm with our farmers, our
president has been unequivocal, unequivocal in saying that he's got
the farmers back, and if there is short term consequences,
we'll make sure to do everything we can to mitigate that.
Speaker 2 (34:44):
Yet mitigation through subsidies could be detrimental to the farmers
of today and the generations to come.
Speaker 7 (34:51):
I'm a big believer that Ultimately, market forces are the
most important thing. But government policy can become can be
either tailwind or a headwind, or it can be sometimes
it's confused, and it's both at the same time.
Speaker 2 (35:03):
And right now, the market forces have swung against farmers.
Speaker 8 (35:07):
So you put that all together, it's not good business
to be a farmer in America today. And what the
business is not good? What you see is that ultimately
some farmers will call the day. But more importantly, and
I think that here is the big problem, is that
we are going to see the children of those farmers
deciding that farming is not their way of living.
Speaker 1 (35:28):
Right now, I'm going to I say, I hope to
come back and you know, try some new things on
the farm and continue to grow it.
Speaker 2 (35:35):
America's history is rooted in agriculture. For JD. Myers and
Stuve Swanson, it's running the family for generations and their
children are set to continue the tradition. But for the
tradition to continue, they will need robust export markets for
what they produce. The technology is there, the land is fertile,
but ultimately there has to be a solid business to
(35:56):
make sure someone's around to farm it. Coming up breaking
up may not be hard to do after all, As
Discovery moves to break up with Warner Brothers, even as
Paramount Global tries to get together with sky Dance. That's
next on Wall Street Week. This is a story about
(36:29):
the company we keep and the company we lose. Sometimes
the world of corporate restructuring seems like an episode of
The Bachelor, what with all the theatrics of getting together
and then very publicly breaking up when the partnership doesn't
go as planned.
Speaker 9 (36:44):
Warner Brothers Discovery announcing that they would be splitting into
two different companies. Changes are coming to comcasts, the Media
Giant announcing it will spin off its cable TV channels,
including MSNBC, a.
Speaker 2 (36:57):
Deal finally between CBS and Ycom. The media world has
been particularly eager to break up and get back together again.
CBS merged with Vicom in nineteen ninety nine, split in
two thousand and five, and came back together in twenty nineteen.
Now renamed Paramount Global. It's on its way to merging
(37:19):
with sky Dance, and the saga of Warner Brothers is
almost as complicated.
Speaker 10 (37:24):
It's kind of the trend, I think, and it's a
cycle that seems to happen over and over again, and
people don't really learn their lessons. You know, a well,
Time Warner was not that much different than Time Warner,
you know then versus how you look at Warner Discovery
today and how they saw aol.
Speaker 2 (37:41):
Mark Patrikoff has spent a career as an investment banker
and technology investor, specializing in media and entertainment deals. He
now heads Patrikoff Company, working with athletes on their private investments.
Speaker 10 (37:54):
Content's always going to be the most important thing. It's
one continuous part of our industry, and we know you
can't really change radically. It's about talent and creativity and
it continues to hold value, and distribution will catch up
and recreate itself, and new technologies will coome. But the
contents the constant.
Speaker 2 (38:12):
With all the back and forth. When does it make
sense to merge companies or break them up? And most importantly,
when does it work for shareholders? And when does it not?
Speaker 12 (38:23):
We see every year add half a dozen to a
dozen of these spin offs and breakups of S and
P five hundred companies. The long history of that is
that on average, they perform average and they end up
essentially receding to S and P. Five hundred kinds of returns.
Speaker 2 (38:43):
Greg Taxon is the managing member of Spotlight Advisors, consulting
with corporate boards on activist shareholder campaigns, shareholder proposals, and
capital structure debates.
Speaker 12 (38:55):
There are outliers where splitting a business makes a lot
of sense and can actually add value, both on a
valuation perspective or a growth and opportunity perspective, But by
and large, these things don't really create value. I think
when you look at those indices which which basically buy
the spun out entities and hold them, they tend to
(39:17):
perform in line or under the S and P. Five hundred,
So on average, these things don't really create value. There
are times when a spin out or a sale can
enable something different, but it's only really when the spin
out enables the two businesses to engage in some activity
or attract people or investors that are different than the
(39:39):
conglomerate that these things really work.
Speaker 2 (39:42):
The fact that a company has different business lines growing
at different rates doesn't necessarily mean it needs to break
itself up.
Speaker 12 (39:49):
The fact is that the people who are running every
division inside a business are pretty focused on that business,
and it's unclear to me at least how separating it
into either a separate public company or selling it creates
more focus out of the people whose job it is
to run that business. There are very complex businesses that
(40:09):
perform incredibly well. Think Amazon, which has two very disparate businesses,
with Amazon Web Services and all of their retail and
even within retail, an advertising business, of physical business, with
Whole Foods and online business. They've got lots of things.
They seem pretty focused on creating profit and growth and value,
and it's unclear to me that separating any one of
(40:31):
those putting Whole Foods back out as a public company
would actually create more focus on the part of the
people that run that business.
Speaker 2 (40:38):
Julia Sneehor is a professor at the University of Navara.
Professor Sneehorr's study of spinoffs like Hewlett Packard splitting from
Hewlett Packard Enterprises has led her to conclude that there
is what she calls an ecosystem that can trigger corporate splits,
one driven by the balance between complexity and complementarity.
Speaker 5 (40:57):
A recent split off eBay from PayPal, where the digital
payment the fintech started to evolve much faster than the
secondhand marketplaces where the eBay, the corporate parent, was competing,
and so this difference in growth between the payment business
(41:18):
model where PayPal was looking at serving many different customers
in addition to eBay at a much quicker pace with
a much higher complexity, was very different from the marketplace,
more mature business model of eBay, and this divergence over time,
this increasing difference between the two business models within the
(41:41):
same company led to a split in this case in
the case of HP, where HP was originally selling computers
selling printers with the razor and blade business model, but
it got also into software, particularly cloud, that started to
grow at a very different pace in the twenty tens
compared to what was happening in the computer commoditizing ecosystem.
(42:03):
We saw in nineteen eighties a lot of conglomerates building up,
and in the last twenty years we saw the vce
G simen several companies in this wave of the conglomerization
becoming much more focused and investors looking for pure place
out there. In the last ten twenty years, we see
the separation between investors who want growth and investors who
(42:25):
want value, and for a company that pursues both that
has a cash caou business that is delivering high dividends
to investors and has another business that is growing a
lot and needs a lot of investment. It's very hard
to balance these two businesses. It's like riding a skateboard
with one foot and writing a scooter or formula one
car on the other foot.
Speaker 2 (42:46):
When it comes to the media sector, Patrokov's experience is
that these spin offs and consolidations are all about the
relationship between distribution and content.
Speaker 10 (42:55):
It seems like these companies merge when they feel afraid
of the distribution and they need to own the distribution.
But then when a better distribution product where technology enters,
they of course want to move to that, and that
devalues the deal that.
Speaker 5 (43:11):
They did when they merged.
Speaker 10 (43:12):
It's like cells coming together and cell separating and cells
coming together again. Discovery with all these networks really is
a legacy of the cable industry. So cable was distribution,
content build distribution, and as soon as that distribution channel
seem less interesting late nineties, you had AOL convincing the
(43:32):
media giants that they were the future of distribution.
Speaker 2 (43:36):
Cells may come together and separate regularly in the media sector,
but when it comes to the particular area of sports entertainment,
to get together, break up, and get back together trend
doesn't apply.
Speaker 10 (43:49):
Ninety eight of the one hundred most watched television shows
in the last twelve months for sports programming, I mean
appointment based programming, live entertainment. It's all tobit nonscripted of course,
because you don't know the outcome.
Speaker 2 (44:03):
Why isn't there delution and a lot of entertainment, You
get delution over time as you add more and more.
So far in sports, I can't see it.
Speaker 10 (44:10):
Because I think the cream rises to the top. And
it's the same argument that people have with women's sports.
Ever generate significant amounts of value and our antlery sports,
whether it's volleyball or you know, men's or women's or
the Olympics. But basically there's so much value in these
few assets that are out there, and they put so
much money and energy into marketing them and maintaining them
(44:34):
that the consumer only has so many hours in the day,
and if you are a fanatic of football or basketball,
there's enough to satiate you over the course of a
twelve month calendar year that you're not really going to
take a lot of time to put it to other sports.
Speaker 2 (44:48):
Unlike the rest of the media world, sports investors are
looking to get in rather than looking to get out
of slower growing business lines. So what does that mean
for potential investors.
Speaker 10 (44:59):
There are plenty of funds out there now that have
raised a large amount of money to take minority stakes
in NFL teams, MLB teams, NBA teams. I think it's
an interesting idea. I think it helps professionalize the sport.
It's certainly driven up the valuations. I'm just not sure
how those limited investors, those small investors buying three percent
(45:19):
of the Spurs or five percent of the Giants, or
three percent of Dolphins, without a path to control, without
a path to exit, without information rights, it's probably inevitable.
I think the teams are going to have to be
public entities at some point down the road. The valuations
are getting too high. There won't be enough billionaires to
buy them. It will require board of directors to run
(45:40):
businesses of that scale. Community representation. Minorities are not represented
at the ownership level the way they should be, so
you need racial diversity at the ownership level. There's a
lot of things that are going to come into play now,
as these are no longer family businesses run by patriarchs
of family run companies from the fifties.
Speaker 2 (46:00):
Whether it's traditional media coming to terms with the changing
world of distribution, or sports leagues and teams basking in
the glow of ever increasing interest. The one constant is
the quality of content on offer.
Speaker 10 (46:13):
Content is king. I think content is the one constant.
There will be content. Consumers will want to experience a
regional content, nonscripted content, sports content. What I do for
a living. I think that that's something you could always
count on as having value. And then the question is
how has that value achieved? How do you monetize that value?
Speaker 2 (46:35):
And there is ultimately one source for that high quality,
compelling content and one rule that has stood the test
of time. I work for a manner in cap cities ABC.
He used to say, sooner or later, all the money
goes to the talent. He was talking about shortstops back then,
I Kevin, is that true?
Speaker 10 (46:51):
Sure? Look how much money the NFL quarterbacks are making.
There's going to be a separate salary cap for quarterbacks
for the next two or three years. I'll also give
you a prediction and hopefully we'll sit down again in
five years. It's inconceivable me to think that NFL quarterbacks
and other prime positions, and then we'll go to the
NBA and other sports won't be owners of the teams
they play on, and they'll be part of their contracts.
(47:12):
Why would a chief technology officer at a Facebook or
Google get equity in that business, But Joe Burrow doesn't
get equity in the Cincinnati Bengals. So the talent is
driving the value. They are part of the ecosystem that
historically had been undervalued while the owners and the media
rights holders and the people building stadiums were creating all
the wealth. But that pendulum has shifted, and that's part
(47:35):
of our business model. But more importantly, it's appropriate because
they are the ones who are doing the work.
Speaker 2 (47:41):
In the end, it turns out that the company we
need to keep isn't so much the corporate form or name.
It's the company of outstanding talent. Talent that can create
the content that he is king that does it for us.
Here at Wall Street Week, I'm David Weston. See you
next week for more stories of capitalism.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:20):
This is Wall Street Week. I'm David Weston, bringing you
stories of capitalism. The saga of Paramount Global continues as
President Trump moves to settle his lawsuit over a CBS
News interview, opening the way for yet another restructuring of
the company. It's a movie we have seen before three
times actually, plus American farmers may be the victims of
(00:42):
their own success. They produce more efficiently than ever, but
demand can't keep up with supply. We go to Central
Iowa to hear from the farmers themselves about what they
need to make farming a good business. But we start
with the news story being told that the food and druggedness.
As President Trump's FDA commissioner sets a different course for
(01:04):
the agency amid big changes in personnel, we traveled to
White Oak, Maryland to see for ourselves what the new
FDA head, doctor Marty McCarey, is up to and why
he believes it will help make America healthy again. Talk
to us about opioid. Did the FDA fail?
Speaker 3 (01:22):
The FDA did fail. There were many.
Speaker 4 (01:26):
Parts of our healthcare system that failed. Look, I feel
terrible about the opioid epidemic. I personally prescribed opioids with misinformation.
It was taught to me by my chief resident in
my surgical residency. And we sort of woke up to
this problem around twenty fourteen, twenty fifteen and thought, oh
my god, what have we done? What information did we
(01:49):
not have? I think was regulatory capture at the agency.
Now we can't prove that. But when the reviewer immediately
goes to work for Purdue Pharma after approving OxyContin for
chronic pain, and the approval for chronic pain was based
on a fourteen day study, have we seen the last
chapter of that No, We're going to look at the
label for OxyContin and that class of medications and ask,
(02:12):
how can we ensure that it's accurate and consistent with
the science.
Speaker 2 (02:16):
How does your approach to science and common sense avoid
the next OxyContin?
Speaker 4 (02:20):
One of the first actions I took was to remove
all industry members of FDA advisory committees wherever statutorily possible.
And so we've got to preserve that scientific process, and
we've got great scientists that are doing that right now.
The second thing is that we need to have eyes
on a drug and device the second it's approved and
(02:41):
keep eyes on those drugs. We shouldn't be learning nineteen
years after OxyContin was approved that it may have killed
nearly a million Americans in its downstream effects with other drugs.
We should be able to approve a drug and with
big data, go into big data, with our eyes, with
our epidemiologists, and watch a drug to see if there
(03:05):
are safety.
Speaker 3 (03:06):
Signals that emerge.
Speaker 4 (03:07):
One of the broken things about the FDA that I
learned just last week was that bureaucrats at the FDA
had the ability small group had the ability to block
a safety epidemiology study by our own safety epidemiology team.
Speaker 3 (03:25):
And so we are announcing.
Speaker 4 (03:27):
We're getting rid of that ability to block a safety
evaluation and we want that safety team to work freely
without any barriers. There's a bit of a conflict of
interest if you're the team that approved a drug, you
may not want to be embarrassed to learn that there's
a safety signal down the road.
Speaker 2 (03:45):
What can the FDA do about reducing childhood abucity?
Speaker 4 (03:49):
So we're doing an inventory of all the chemicals in
the US food supply that children eat that are banned
in Europe. We're going through them one by one we're
doing an inventory. We have a new office for post
marketing assessment, challenging this old notion, this old regulatory process
that was called grass, that is that some foods were
(04:10):
generally safe. Well, this has become now applied to novel
chemicals in the food supply where people do have significant
safety concerns.
Speaker 2 (04:20):
One of the most controversial issues raised by Secretary Kennedy's
new leadership at HHS has involved vaccines, with a group
of medical associations suing this week over the withdrawal of
some recommendations about coronavirus vaccines. Looking back now on COVID
and deveilt of vaccines for COVID, was it that a
success story? Was WORP speed a success story or not?
Speaker 3 (04:42):
I think it was a success story.
Speaker 4 (04:43):
Remember when the initial vaccines were released, they were a
very good match for the circulating strain. At the time,
there was low levels of population natural immunity, and we
clearly saw a reduction in the severity of illness. But
now we're four years out from those initial randomized control
trials and parents are appropriately asking does my six year old,
(05:08):
healthy daughter need sixty five more COVID shots in her
annual lifespan? That is one each year or not, and
that is a scientific unknown. We'd like to see a
clinical trial.
Speaker 2 (05:21):
What about measles? Are you worried about chilling effect of
the government really raising questions about some of these vaccines
that cause people not to get vaccines they ought to.
Speaker 4 (05:30):
Be getting vaccines save lives. Let me be very clear
about that. But we at the same time have seen
a loss in public trust in doctors and hospitals.
Speaker 3 (05:40):
Why was that?
Speaker 4 (05:42):
In my opinion, it was because public health officials did
one of the worst things you can do with the
authority and power you have as a physician, and that
is demand that people do something when you're not really
sure and you're not honest with them that you're not sure.
Speaker 2 (06:01):
Many of us think about the FDA, for the d
in the FDA, which is drugs and particularly approval of
new drugs, what parts maybe aren't working or you think
you might beable to help fix.
Speaker 5 (06:11):
So.
Speaker 4 (06:11):
Not only have we spent a lot of time with
individual reviewers, pulling them aside without their bosses and asking them,
what have you always wanted to do here? What do
you think could work better? We've done a national CEO
listening tour now in seven cities around the country where
we're in the middle of it, where we're asking CEOs,
what ideas do you have for a better FDA. We
(06:33):
need an FDA that is user friendly. Drug developers and
inventors of new drugs are trying to figure out how
do they get through this long, gnarly regulatory process. Well,
we can be more transparent, we can provide better communications,
we can provide guidance, we can answer questions on demand,
(06:54):
and we are announcing that we're going to make our
decision letters public so that drug developers can see why
drugs are not accepted.
Speaker 3 (07:05):
At the FDA.
Speaker 2 (07:06):
Why weren't they public.
Speaker 4 (07:07):
Some of the drug companies don't want them public. We
learned that most companies will spin the results from the FDA.
The company will not even say that the FDA is
asking for a new clinical trial when we've asked for
a new clinical trial in our decision letter. So there's
an opportunity for companies to sort of spin the results,
(07:28):
make it sound like, oh, the FDA got back to
us and they just want to see one small tweak.
Speaker 2 (07:33):
If in fact, there's more disclosure about letters that say
we're not approving your drug, could that help the rest
of the industry make progress faster on developing the right drug.
Speaker 4 (07:44):
Absolutely, Look, we need more transparency. The FDA has been
a black box and companies have scratched their heads to
try to figure out.
Speaker 3 (07:52):
What do the reviewers want? Why are they rejecting a drug?
Speaker 4 (07:56):
Did they actually reject it with a big rejection or
just ask for a small modification. Well, no one's known
because none of this has been public information. Well that's
going to change.
Speaker 2 (08:06):
How do you make sure the FDA is up with
the most recent technological development.
Speaker 3 (08:11):
Yeah, so we've got to modernize.
Speaker 4 (08:12):
We've got to keep the best people here, we've got
to listen to what's happening in the field.
Speaker 3 (08:17):
And AI is a good example of that.
Speaker 4 (08:19):
We're using AI to organize these gigantic applications, applications that
can be one hundred thousand pages, and we now have
thousands of scientists at the FDA using it every day
on their own volition. That is, it's an optional feature,
they find value in it, they're using it. And so
all of these things are designed to modernize the FDA
(08:43):
to ask the big question, why does it take over
ten years for a drug to come to market? We
introduced a pilot with a new priority voucher where if
a drug or a company's priority is in our.
Speaker 3 (08:59):
US now sational priority.
Speaker 4 (09:02):
We have vouchers now in a pilot program to give
companies a decision in one or two months instead of
nearly a year.
Speaker 2 (09:09):
Can you increase the speed without taking a risk on
the safety?
Speaker 3 (09:12):
I think you can.
Speaker 2 (09:13):
Commissioner McCarey admits to a good deal of change at
the FDA. Change that has led to the departure of
some very senior, longtime leaders and the loss of a
good number of positions altogether.
Speaker 4 (09:26):
So the FDA doubled in its number of employees since
two thousand and seven. Now there were massive redundancies with
twelve travel offices over two thousand HR, and budget procurement
and personnel.
Speaker 3 (09:41):
There were duplications of services.
Speaker 4 (09:43):
There were clunky adverse event reporting databases that were all
built from scratch. So we can benefit from a lot
of great consolidation in IT and communications and so many
other areas, but we have to make sure our scientific
reviewers and inspectors have everything they need.
Speaker 2 (09:59):
At Bloomberg, we focus investors often and capital counts when
it comes to biotech. Change is not something investors usually like,
how do you think you're changing in the FDA may
affect investment.
Speaker 4 (10:12):
I want investors to know that we are in a
deregulatory mindset. We're cutting red tape. We're going to speed
up the approval process without cutting any corners on safety.
We're going to continue to invest in our scientists and
inspectors and all the core staff central to their function,
and we're going to create predictability with clear guidance. We
(10:33):
are talking to industry constantly to figure out how we
can be helpful, which of their products being proposed or
in line with our national priorities. That is, meeting a
large unmet public health need, domesticating manufacturing as a national
security issue, increasing the affordability of drugs, which is an
(10:54):
access problem. This president does not like to see Americans
getting ripped off. And we've been paid more for drugs
than in many wealthy countries.
Speaker 3 (11:02):
Around the world.
Speaker 2 (11:03):
Can you do anything about that.
Speaker 4 (11:04):
We can issue a National Priority Review voucher for companies
that are promising to equalize the price between other OECD
countries and the United States, even with other products that
they currently have. And so we want to incentivize good
behavior in the marketplace.
Speaker 2 (11:23):
Coming up, battle lines are being drawn in the trade war.
Right through the cornfields of rural Iowa. We bring you
the story from the heartland of high tech, driving high
productivity and a desperate need for export markets to ramp
up demand. That's next on Wall Street Week. This is
(11:53):
a story about abundance and abundance of food and whether
we can ever have too much of a good thing.
The United States has the most productive agricultural sector in
the world, something every president, Republican and Democrat embraces since
nineteen thirty three. The government, your government has been a
(12:14):
friend of the farmer, farmers.
Speaker 3 (12:16):
Farmers, US farmers, America's farmers, and I love.
Speaker 4 (12:19):
Them and I'm never going to do anything to hurt
off farmers.
Speaker 2 (12:24):
Welcome to Iowa, where dusty roads pierced through over twenty
million acres of corn and soybeans. The towns are small,
and the skyscrapers dotting the horizon aren't office buildings but
grain elevators. This is America's heartland, and farming runs in
the blood.
Speaker 6 (12:41):
I am the third generation. My grandfather started farming in
Nebraska for generation one, and in the mid fifties moved
here to Central Iowa, and my father continued and then
now me after.
Speaker 2 (12:56):
What brought your grandfather to Iowa.
Speaker 6 (12:58):
The situation in Nebraska was three brothers farming together. They
weren't able to accumulate enough acres, and then drought situations
in Nebraska decided that they should split up. My grandfather
moved to Sioux City, Iowa originally and farmed there for
a couple of years, started a dairy herd that didn't
work out, so then there was an opportunity to rent
(13:21):
and buy this farm.
Speaker 2 (13:23):
Are you hoping your children will continue in the farming
business in some way?
Speaker 6 (13:26):
I certainly do, and I think that that was something
that I'm very proud of to pass on that tradition,
that appreciation for agriculture to all of my kids.
Speaker 2 (13:37):
This have not done. That's Stu Swanson. His farming family
has seen dramatic changes in the business of agriculture since
his grandfather came from Nebraska seventy five years ago.
Speaker 6 (13:48):
So each acre of corn will cover three times with
this machine.
Speaker 2 (13:53):
Over that time, US farm productivity and output has nearly tripled,
helped by technological innovations. With that explosion in productivity has
come larger and larger farms, including for Swanson, who now
farms about nineteen hundred acres, a third of which he owns,
with the rest owned by investors from as far away
as Norway.
Speaker 6 (14:14):
Yeah, I think for this time of the year in
mid June, the corn looks about as good as any
I farm for thirty three years. So this is my
thirty third crop that you're walking through today. Other than
a little excess water that we've.
Speaker 2 (14:26):
Had, boots are sinking down here as we walk through it.
But also look at the color of the soil. Why
is this so rich.
Speaker 6 (14:35):
We're lucky that the glaciers moved the top soil here.
We also are in an area of Iowa and of
the country that is called the Prairie Pothole region. So
we have really rich organic soils from the previous plants
and things that were grown here, and so that high
organic matter gives that black color that we are very
(14:58):
proud of here in Wright County.
Speaker 2 (15:02):
That might all sound like good news, but as president
of the Iowa Corn Growers Association, Swanson knows all too
well the challenges facing America's row crop farmers.
Speaker 3 (15:13):
A lot of.
Speaker 2 (15:13):
Farms I understand are actually cash negative. Are you cash positive.
Speaker 6 (15:19):
I haven't ran a number to tell you today. Certainly
we know that over the last three years we've seen
about a thirty percent decline in commodity prices. I think
over that same time we've seen the nine major crops
all be underwater, so we are producing at a loss
on the nine major crops.
Speaker 2 (15:41):
Gold Eagle Cooperative is an intermediary for farmers in the
markets they serve. It is located on the outskirts of
Eagle Grove, a short twenty minute drive up the road
from Swanson's farm. We sat down there with Tom Haverson,
an Iowa native himself.
Speaker 7 (15:56):
I remember when my grandfather started when I was a
little kid. He had a little tractor with a harvester
that would do one on each side. He'd be going
back and forth field like this for a couple of days.
Speaker 2 (16:10):
After working around the world for Goldman Sachs, he's now
CEO of Cobank, which operates as a farm credit bank.
Counting his clients both Swanson's Farm and Gold Eagle, Halverson
has a front row seat for the storm brewing over
America's crop farms.
Speaker 7 (16:26):
Corn, soybean, and wheat prices are meaningfully lower than they
were a couple of years ago. That translates into lower
cash flows for the producers themselves. At the same time,
rural Americans in general and farmers in particular, that are
not immune from macroeconomic conditions, including inflation, for example, they
(16:48):
are incredibly exposed to trade buying and selling internationally. Producers
have been squeezed quite dramatically over the last twelve, eighteen,
twenty four monthsamminational lower commodity prices for what they sell
on the one hand, and significantly higher prices for the inputs.
Speaker 2 (17:07):
Once seen as the supermarket of the world, America is
instead finding out the hard way that the world is
doing its grocery shopping elsewhere and has been for some time.
This year, the US is expected to record its third
consecutive annual trade deficit in agriculture, something that hasn't happened
in seventy years. Javier Blass covers commodities for Bloomberg Opinion.
Speaker 8 (17:30):
I think that the reverse aal on the agricultural trade
in the United States is a structural feature. I don't
think it's going to go away. There are two elements
there that they are very important. One is that the
United States is important more agricultural commodities that they used to.
And the reason for that is that we like to
have green beans and strawberries and other agricultural crops the
(17:52):
whole year. We don't really want to buy them when
they're in season. The other problem is that the United
States is starting to esport agricultural commodities that is a
lot in part due to mister Trump's trade policies. You
are hurting one of your largest buyers, one of the
largest importants, one of the largest customers of American food industry.
(18:15):
That's China. The big problem for the United States agricultural
sector right now is that in the past, if a
country was having a big disagreement on trade policy with
the United States, it still needed to continue buying corn
and solbing and wit from America because it didn't have
any other options. Today, there are many other options, and
(18:38):
particularly one, and it's Brazil. Brazil over the last forty
years have transformed itself into the supermarket of the world.
That is a role that the United States used to
play in the sixties, seventies and all the way into
the eighties. The damage is done. Every time that you
scare buyers. The buyers are looking for an alternative, and
(18:59):
they will have very memories. Japanese important still remember the
very brief trade embargo imposed by the United States more
than fifty years ago on soybeans, and that is half
a century later. The buyers still remember that once you
opened that door, you cannot put it back. It has
(19:19):
been done, and I think that the damage is done.
Speaker 7 (19:22):
As far into the future as we can foresee, the
agricultural economy of the United States is very, very dependent
on access to overseas export markets. My uncle, who lived
about a mile from where we're right now sitting, was
one of the first American farmers to go on a
trade mission to China in the late nineteen seventies, and
(19:43):
back then we didn't sell any soybeans to China.
Speaker 3 (19:47):
And since that time.
Speaker 7 (19:49):
We've grown our export market to China from zero to
being the biggest export market, and until our recent trade
disagreements with China, we got up to the point where
it wasn't yet fifty percent, but it was close closing
on fifty percent of all US soybeans got exported to China,
which is an inconceivably large amount of soybeans that are
(20:11):
being grown in this part of the world, put on trains,
ship to the West coast, put on ships and sent
to China, and so you know, we now have a
very significant vulnerability to the need to sell our soybeans
internationally because we produce way more soybeans now than we
(20:32):
possibly consume in this country.
Speaker 2 (20:34):
With China and others now looking elsewhere, the US is
finding ways to drum up domestic demand. Part of the
answer lies in alternative uses, and that's where Chris Bochart,
the CEO of Gold Eagle, comes in.
Speaker 9 (20:46):
We're about a three thousand member owned cooperative. We provide
goods and services to farmers. So we provide a lot
of agronomy services where we'll sell farmers seed, fertilizers, crop
protection products to help their crops grow. Our feed group
will take farmer corn and grind that, blend that and
feed that back out to livestock, you know. And then
our grain division we take the farmer's corn in the
(21:09):
fall or whenever they need us to be there to
deliver it. We try to help them find the best markets.
We do have a partnership with an ethanol plant, so
we manage an ethanol plant that's just right out the
back door here. We grind about thirty million bushels of
corn a year. We're making about ninety million gallons of
ethanol out of that corn, shipping it all all over
the country for into the you know, our liquid fuel supply.
Speaker 2 (21:31):
When you and I think of corn, we may think
of corn on the cob, corn chips, corn starch, or
even popcorn. But only about eight percent of the corn
America producers is eaten by humans. The majority is crushed
and turned into livestock feed or processed into ethanol and
used in gasoline.
Speaker 9 (21:50):
We think that, you know, the ethanol policy hits debated
around from time to time. You know, the current administration
talks a lot about you know, domestic energy production and
has been really good for bile fuels. And we've seen
biofuels be a real bipartisan solution over our history and
it's barely been good. And so as far as you know,
corn demand today and where corn dan can grow into
(22:12):
the future, yeah, we really think that there's a huge
potential for ethanol to continue to be a bigger and
bigger part of that local demand.
Speaker 2 (22:22):
The same transition from food to fuel is happening for soy.
Speaker 10 (22:26):
Now.
Speaker 7 (22:27):
We're trying to find alternative uses, for example, to those soybeans,
some of which can be turned into alternative sources of fuel. So,
for example, the government announced some changes to the renewable
fuel standards and so forth that have been very very
good for the soybean market.
Speaker 2 (22:42):
But that may be only half the story. As farmers
real from a challenging export market. Higher interest rates have
delivered a second blow in what turns out to be
a pretty capital intensive business.
Speaker 6 (22:53):
The high horsepower tractors in new situation is probably six
to seven hundred thousand dollars. This machine was actually built
in two thousand and nine, probably the oldest piece of
equipment that we utilize in a regular basis. So its
value as it sits today probably one hundred and fifty
to one hundred and seventy five thousand.
Speaker 2 (23:14):
So how fast do.
Speaker 3 (23:15):
They depreciate it?
Speaker 6 (23:16):
Yeah? Really fast.
Speaker 9 (23:19):
Farming is such a capital intensive endeavor, whether it's the
cost to finance their land acquisitions, just their interest rate
to put the operating loan in, you know, to put
a crop in. They're investing in hundreds of dollars in
acres just in the input side to put the crop in,
and then their machinery and equipment purchases have just really
(23:41):
skyrocketed in the last three years.
Speaker 2 (23:44):
Rising costs and falling prices do not add up to
a successful business. So what do America's row crop farmers
do to make ends meet? And how much of it
depends on the federal government. That's where we turn next.
Speaker 6 (23:57):
We don't want to rely on government payments. That's the
last thing that we want to do.
Speaker 2 (24:14):
In the cornfields of Iowa. Farming is more than just
a business. It's a way of life passed down from
generation to generation. So do you come from a family
of farmers.
Speaker 7 (24:24):
I do.
Speaker 6 (24:25):
I am the third generation.
Speaker 9 (24:27):
I was born on a farm in southeast Iowa.
Speaker 7 (24:29):
Well, my grandfather came here. You couldn't farm very much
in this part of the state because it was all water.
Speaker 3 (24:34):
It was wetlands.
Speaker 1 (24:36):
This is where I grew up. Man, I'm the fifth generation.
So we're raising the sixth generation here on this farm.
So back in the late eighteen hundreds, my great great
grandparents would have came here and started the farm.
Speaker 2 (24:50):
JD. Myers Farm lies a short drive from Stu Swanson's.
Speaker 1 (24:55):
You'll start seeing I don't know if we can see
it yet, but you'll start seeing an earshoot.
Speaker 2 (25:00):
And he too farms corn and soybeans. But where Swanson
is the third generation in his family growing row crops, JD.
Myers is fifth generation and plans on passing it along
to his own son.
Speaker 1 (25:13):
Grander bushel on the botom of that ben that's left.
So take a few loads to get up there, but
other than that will be done and then we can
grease the shivers and get it, get it ready to go.
Speaker 2 (25:26):
For decades, passing it on to the next generation has
been thus story of American farms, but the agricultural workforce
has been in steady decline, from eight million in nineteen
forty nine to just over two millions today. Technological innovation
has certainly made farming more efficient, but urbanization has also contributed.
Speaker 9 (25:46):
As folks have moved into the cities, and we even
see that here in Iowa. You know, there's definitely an
urbanization trend. And that's all good. I mean, that's all
good and well, but I think that the value of
folks really truly understanding where their food and fuel come from.
There's just tremendous value there, and we got it. We
need to keep doing that as ag leaders, to keep
(26:07):
telling that story.
Speaker 2 (26:10):
But if Iowa, as farming families hope to pass their
way of life onto the next generation, it has to
be a sound business as well as a way of life,
and the combination of low prices and higher costs has
meant that farm income has plummeted over the past few years,
meaning that sometimes financial institutions like Cobank have to make
up the difference through loans.
Speaker 6 (26:31):
We rely not only on co Bank but local banks
to help provide financing. The cost of production is at
such a high level and it just keeps increasing that
we need that backstop to know that we can average
cash flows out.
Speaker 7 (26:50):
One of the most important indicators of credit quality for
the farm credits system and indirectly for farmers as well,
is farmland value. Right, so we watch very carefully what's
happening to farmland value. My family owns some, so we
watch it too, And farmland values are always a massively
(27:11):
lagging indicator. Commodity prices have come down a lot, right,
Corns down, beans down, wheats down, since you know, the
peak two years ago, but farmland value is still like this.
Speaker 3 (27:22):
It has sort of stopped.
Speaker 7 (27:25):
Rising in the way that it had been rising for
a long time. But as you can imagine if prices
stay low and cash flows are negative for a lot
of producers, they don't have free cash flow in working
capital and they have to you know, draw down because
farmers tend to be asset rich and cash poor. Right
they own land and physical assets and machinery and stuff
that's worth things, but it's not liquid. So credit quality
(27:49):
is actually pretty good. Balance sheets of most farmers were
in good shape, you know, until until the last twelve
to eighteen months. But this this stress period we're now
in is going to manifest overcoming you know, six twelve
eighteen months, and I'll show up in tougher cash flows,
people needing to raise liquidity in other ways.
Speaker 2 (28:14):
Farmers can't keep borrowing forever to make up shortfalls. But
there are signs that things could turn around, not because
of higher prices or lower costs, but because of the
government something. Farmers like JD would rather not rely on
big thing.
Speaker 7 (28:30):
You know.
Speaker 1 (28:30):
I guess for me as a farmers, I want to
make sure we have markets. I don't want direct payments.
I would rather not have direct payments from the government.
If we have markets that will buy the grain and
stuff from us, not have to depend on the government
and develop those markets.
Speaker 6 (28:48):
We don't want to rely on government payments. That's the
last thing that we want to do. We've worked to
try to eliminate that, and we want to try to
create demand through domestic markets through exports to offset that.
Speaker 2 (29:02):
Last year, the US government paid out roughly nine billion
dollars to farmers. This year, that figure is set to
surge to an estimated forty two billion dollars, much of
it aimed at weather related disaster relief and support for
those in financial distress. Still, the role of subsidies raises
tough questions. After all, the US didn't bail out DVD
(29:23):
manufacturers when streaming up ended the industry. But then again,
DVDs are a luxury while food is a necessity.
Speaker 7 (29:30):
Now, your viewers who are not close to this will
probably say, well, why do we do that and how
much do we do that, and what's the explanation for that,
and to which the answer is, if you travel around
the world as I have in my career, you'll realize
and know that feeding your population is a national security
consideration for everyone on earth, right, and we kind of
(29:52):
take that for granted here because we're so productive in
our agricultural economy. We don't just feed ourselves, We feed
a lot of other people all around the world. But
being able to have a food self sufficiency and a comprehensive, productive, safe,
secure sources on a through the cycle basis of food
(30:12):
and fiber for the United States of America is frankly
a matter of fundamental and vital national security interest. And
in order to safeguard that we have put in place
over many decades in this country a whole bunch of
support infrastructure to ensure that we will be able to
feed our population under any and all circumstances. And that
(30:34):
infrastructure has been enormously successful for so long that almost
all Americans take it for granted.
Speaker 2 (30:40):
Is there also a risk in terms of business in
the economy and ongoing subsidies to farmers.
Speaker 3 (30:48):
It's a very important question.
Speaker 7 (30:50):
Now, I never met a farmer that wants to make
a living at the expense of their fellow tax paying citizens.
That is a true statement. On the other hand, just
like every other advanced industrialized country in our peer groups,
so I think Japan, France, UK, Germany or whatever, because
of the national security implications and so forth, you've got
(31:10):
to have a good stable food supply. You've got to
make sure that that's taken care of. So you can't
leave that one to the to the vagaries of the marketplace.
And and so it's not a surprise therefore, that all
of our peer countries have a similar kinds of mechanisms
in place to ensure that and to ensure the the
(31:33):
the care and well and well being of the of
the of the rural you know land. But having said
all of that, it is a risk that that if you,
if you take too much too often and and get
your significant risks taken off the table for you whenever
(31:54):
they manifest by the government, that you become your subject
to the risk of the complacency of thinking that that's
always going to happen. And you know, that can be
true in a variety of ways. And I think in
our country and on our society these days, there is
a tendency for the population to want the government to
(32:16):
de risk things when they go wrong. All those things
are legitimate and reasonable, but they also over long periods
of time, change people's behavior in the marketplace, and they
start that the market starts to take risks that end
up becoming mispriced. You know what, I mean, and they
end up that the people who are having to provide
(32:36):
that support are going to have to provide more of
it more often than would otherwise be the case, and
that is a risk for the agricultural economy. The Congress,
i know, grapples with this on a consistent basis to
try and determine the appropriate and most effective place level
for this right. It needs to be enough to ensure
(32:57):
that we safeguard to stuff that we think we need
to say safeguard for the best interests of the country,
but not so much as to create bad risk taking
behavior or unsustainable subsidies, or to stimulate overproduction that we
don't or don't want her need.
Speaker 11 (33:17):
If we don't have a strong agriculture sector, if we
can't feed ourselves, we are no longer the superpower in
the world. And so all of this it's a complicated
sort of balance that we're striking that we're working to achieve.
Speaker 2 (33:30):
President Trump's Secretary of Agriculture, Brook Rollins, has a packed
travel agenda, visiting the likes of the UK and Italy
and scheduling trips to India, Brazil, and Peru, all in
an effort to drum up overseas interest in US agriculture.
Speaker 11 (33:45):
Specific to soybean corn. Really are roa croppers. That's really
a very direct result of China. And I know we're
making progress on China, will continue to make progress hopefully,
but if we don't opening up markets all over the world, Listen,
thank you. For example, charges a ten percent tariff on
average on American products, and vice versa, we only charge
(34:06):
five percent. That's two x The average tariff charge around
the world is about fifteen percent on American products. When
we charge on average five percent, we've been taken advantage
of over and over and over again. So as we
are realigning, we're also opening up these markets with the
trade deal. So you'll continue to see this moving forward. Now,
if around harvest time into the summer beginning of the fall,
(34:29):
we see some real economic harm with our farmers, our
president has been unequivocal, unequivocal in saying that he's got
the farmers back, and if there is short term consequences,
we'll make sure to do everything we can to mitigate that.
Speaker 2 (34:44):
Yet mitigation through subsidies could be detrimental to the farmers
of today and the generations to come.
Speaker 7 (34:51):
I'm a big believer that Ultimately, market forces are the
most important thing. But government policy can become can be
either tailwind or a headwind, or it can be sometimes
it's confused, and it's both at the same time.
Speaker 2 (35:03):
And right now, the market forces have swung against farmers.
Speaker 8 (35:07):
So you put that all together, it's not good business
to be a farmer in America today. And what the
business is not good? What you see is that ultimately
some farmers will call the day. But more importantly, and
I think that here is the big problem, is that
we are going to see the children of those farmers
deciding that farming is not their way of living.
Speaker 1 (35:28):
Right now, I'm going to I say, I hope to
come back and you know, try some new things on
the farm and continue to grow it.
Speaker 2 (35:35):
America's history is rooted in agriculture. For JD. Myers and
Stuve Swanson, it's running the family for generations and their
children are set to continue the tradition. But for the
tradition to continue, they will need robust export markets for
what they produce. The technology is there, the land is fertile,
but ultimately there has to be a solid business to
(35:56):
make sure someone's around to farm it. Coming up breaking
up may not be hard to do after all, As
Discovery moves to break up with Warner Brothers, even as
Paramount Global tries to get together with sky Dance. That's
next on Wall Street Week. This is a story about
(36:29):
the company we keep and the company we lose. Sometimes
the world of corporate restructuring seems like an episode of
The Bachelor, what with all the theatrics of getting together
and then very publicly breaking up when the partnership doesn't
go as planned.
Speaker 9 (36:44):
Warner Brothers Discovery announcing that they would be splitting into
two different companies. Changes are coming to comcasts, the Media
Giant announcing it will spin off its cable TV channels,
including MSNBC, a.
Speaker 2 (36:57):
Deal finally between CBS and Ycom. The media world has
been particularly eager to break up and get back together again.
CBS merged with Vicom in nineteen ninety nine, split in
two thousand and five, and came back together in twenty nineteen.
Now renamed Paramount Global. It's on its way to merging
(37:19):
with sky Dance, and the saga of Warner Brothers is
almost as complicated.
Speaker 10 (37:24):
It's kind of the trend, I think, and it's a
cycle that seems to happen over and over again, and
people don't really learn their lessons. You know, a well,
Time Warner was not that much different than Time Warner,
you know then versus how you look at Warner Discovery
today and how they saw aol.
Speaker 2 (37:41):
Mark Patrikoff has spent a career as an investment banker
and technology investor, specializing in media and entertainment deals. He
now heads Patrikoff Company, working with athletes on their private investments.
Speaker 10 (37:54):
Content's always going to be the most important thing. It's
one continuous part of our industry, and we know you
can't really change radically. It's about talent and creativity and
it continues to hold value, and distribution will catch up
and recreate itself, and new technologies will coome. But the
contents the constant.
Speaker 2 (38:12):
With all the back and forth. When does it make
sense to merge companies or break them up? And most importantly,
when does it work for shareholders? And when does it not?
Speaker 12 (38:23):
We see every year add half a dozen to a
dozen of these spin offs and breakups of S and
P five hundred companies. The long history of that is
that on average, they perform average and they end up
essentially receding to S and P. Five hundred kinds of returns.
Speaker 2 (38:43):
Greg Taxon is the managing member of Spotlight Advisors, consulting
with corporate boards on activist shareholder campaigns, shareholder proposals, and
capital structure debates.
Speaker 12 (38:55):
There are outliers where splitting a business makes a lot
of sense and can actually add value, both on a
valuation perspective or a growth and opportunity perspective, But by
and large, these things don't really create value. I think
when you look at those indices which which basically buy
the spun out entities and hold them, they tend to
(39:17):
perform in line or under the S and P. Five hundred,
So on average, these things don't really create value. There
are times when a spin out or a sale can
enable something different, but it's only really when the spin
out enables the two businesses to engage in some activity
or attract people or investors that are different than the
(39:39):
conglomerate that these things really work.
Speaker 2 (39:42):
The fact that a company has different business lines growing
at different rates doesn't necessarily mean it needs to break
itself up.
Speaker 12 (39:49):
The fact is that the people who are running every
division inside a business are pretty focused on that business,
and it's unclear to me at least how separating it
into either a separate public company or selling it creates
more focus out of the people whose job it is
to run that business. There are very complex businesses that
(40:09):
perform incredibly well. Think Amazon, which has two very disparate businesses,
with Amazon Web Services and all of their retail and
even within retail, an advertising business, of physical business, with
Whole Foods and online business. They've got lots of things.
They seem pretty focused on creating profit and growth and value,
and it's unclear to me that separating any one of
(40:31):
those putting Whole Foods back out as a public company
would actually create more focus on the part of the
people that run that business.
Speaker 2 (40:38):
Julia Sneehor is a professor at the University of Navara.
Professor Sneehorr's study of spinoffs like Hewlett Packard splitting from
Hewlett Packard Enterprises has led her to conclude that there
is what she calls an ecosystem that can trigger corporate splits,
one driven by the balance between complexity and complementarity.
Speaker 5 (40:57):
A recent split off eBay from PayPal, where the digital
payment the fintech started to evolve much faster than the
secondhand marketplaces where the eBay, the corporate parent, was competing,
and so this difference in growth between the payment business
(41:18):
model where PayPal was looking at serving many different customers
in addition to eBay at a much quicker pace with
a much higher complexity, was very different from the marketplace,
more mature business model of eBay, and this divergence over time,
this increasing difference between the two business models within the
(41:41):
same company led to a split in this case in
the case of HP, where HP was originally selling computers
selling printers with the razor and blade business model, but
it got also into software, particularly cloud, that started to
grow at a very different pace in the twenty tens
compared to what was happening in the computer commoditizing ecosystem.
(42:03):
We saw in nineteen eighties a lot of conglomerates building up,
and in the last twenty years we saw the vce
G simen several companies in this wave of the conglomerization
becoming much more focused and investors looking for pure place
out there. In the last ten twenty years, we see
the separation between investors who want growth and investors who
(42:25):
want value, and for a company that pursues both that
has a cash caou business that is delivering high dividends
to investors and has another business that is growing a
lot and needs a lot of investment. It's very hard
to balance these two businesses. It's like riding a skateboard
with one foot and writing a scooter or formula one
car on the other foot.
Speaker 2 (42:46):
When it comes to the media sector, Patrokov's experience is
that these spin offs and consolidations are all about the
relationship between distribution and content.
Speaker 10 (42:55):
It seems like these companies merge when they feel afraid
of the distribution and they need to own the distribution.
But then when a better distribution product where technology enters,
they of course want to move to that, and that
devalues the deal that.
Speaker 5 (43:11):
They did when they merged.
Speaker 10 (43:12):
It's like cells coming together and cell separating and cells
coming together again. Discovery with all these networks really is
a legacy of the cable industry. So cable was distribution,
content build distribution, and as soon as that distribution channel
seem less interesting late nineties, you had AOL convincing the
(43:32):
media giants that they were the future of distribution.
Speaker 2 (43:36):
Cells may come together and separate regularly in the media sector,
but when it comes to the particular area of sports entertainment,
to get together, break up, and get back together trend
doesn't apply.
Speaker 10 (43:49):
Ninety eight of the one hundred most watched television shows
in the last twelve months for sports programming, I mean
appointment based programming, live entertainment. It's all tobit nonscripted of course,
because you don't know the outcome.
Speaker 2 (44:03):
Why isn't there delution and a lot of entertainment, You
get delution over time as you add more and more.
So far in sports, I can't see it.
Speaker 10 (44:10):
Because I think the cream rises to the top. And
it's the same argument that people have with women's sports.
Ever generate significant amounts of value and our antlery sports,
whether it's volleyball or you know, men's or women's or
the Olympics. But basically there's so much value in these
few assets that are out there, and they put so
much money and energy into marketing them and maintaining them
(44:34):
that the consumer only has so many hours in the day,
and if you are a fanatic of football or basketball,
there's enough to satiate you over the course of a
twelve month calendar year that you're not really going to
take a lot of time to put it to other sports.
Speaker 2 (44:48):
Unlike the rest of the media world, sports investors are
looking to get in rather than looking to get out
of slower growing business lines. So what does that mean
for potential investors.
Speaker 10 (44:59):
There are plenty of funds out there now that have
raised a large amount of money to take minority stakes
in NFL teams, MLB teams, NBA teams. I think it's
an interesting idea. I think it helps professionalize the sport.
It's certainly driven up the valuations. I'm just not sure
how those limited investors, those small investors buying three percent
(45:19):
of the Spurs or five percent of the Giants, or
three percent of Dolphins, without a path to control, without
a path to exit, without information rights, it's probably inevitable.
I think the teams are going to have to be
public entities at some point down the road. The valuations
are getting too high. There won't be enough billionaires to
buy them. It will require board of directors to run
(45:40):
businesses of that scale. Community representation. Minorities are not represented
at the ownership level the way they should be, so
you need racial diversity at the ownership level. There's a
lot of things that are going to come into play now,
as these are no longer family businesses run by patriarchs
of family run companies from the fifties.
Speaker 2 (46:00):
Whether it's traditional media coming to terms with the changing
world of distribution, or sports leagues and teams basking in
the glow of ever increasing interest. The one constant is
the quality of content on offer.
Speaker 10 (46:13):
Content is king. I think content is the one constant.
There will be content. Consumers will want to experience a
regional content, nonscripted content, sports content. What I do for
a living. I think that that's something you could always
count on as having value. And then the question is
how has that value achieved? How do you monetize that value?
Speaker 2 (46:35):
And there is ultimately one source for that high quality,
compelling content and one rule that has stood the test
of time. I work for a manner in cap cities ABC.
He used to say, sooner or later, all the money
goes to the talent. He was talking about shortstops back then,
I Kevin, is that true?
Speaker 10 (46:51):
Sure? Look how much money the NFL quarterbacks are making.
There's going to be a separate salary cap for quarterbacks
for the next two or three years. I'll also give
you a prediction and hopefully we'll sit down again in
five years. It's inconceivable me to think that NFL quarterbacks
and other prime positions, and then we'll go to the
NBA and other sports won't be owners of the teams
they play on, and they'll be part of their contracts.
(47:12):
Why would a chief technology officer at a Facebook or
Google get equity in that business, But Joe Burrow doesn't
get equity in the Cincinnati Bengals. So the talent is
driving the value. They are part of the ecosystem that
historically had been undervalued while the owners and the media
rights holders and the people building stadiums were creating all
the wealth. But that pendulum has shifted, and that's part
(47:35):
of our business model. But more importantly, it's appropriate because
they are the ones who are doing the work.
Speaker 2 (47:41):
In the end, it turns out that the company we
need to keep isn't so much the corporate form or name.
It's the company of outstanding talent. Talent that can create
the content that he is king that does it for us.
Here at Wall Street Week, I'm David Weston. See you
next week for more stories of capitalism.
Popular Podcasts
New Heights with Jason & Travis Kelce
Football’s funniest family duo — Jason Kelce of the Philadelphia Eagles and Travis Kelce of the Kansas City Chiefs — team up to provide next-level access to life in the league as it unfolds. The two brothers and Super Bowl champions drop weekly insights about the weekly slate of games and share their INSIDE perspectives on trending NFL news and sports headlines. They also endlessly rag on each other as brothers do, chat the latest in pop culture and welcome some very popular and well-known friends to chat with them. Check out new episodes every Wednesday. Follow New Heights on the Wondery App, YouTube or wherever you get your podcasts. You can listen to new episodes early and ad-free, and get exclusive content on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. And join our new membership for a unique fan experience by going to the New Heights YouTube channel now!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.