June 13, 2025 • 48 mins
This week, Former Treasury Secretary Lawrence H. Summers on how artificial intelligence is reshaping the way central banks understand, forecast, and manage the economy. And, President Trump’s call for $2 gas may please drivers, but in oil towns like Odessa, falling prices threaten jobs, investment, and the economic foundation of the U.S. energy heartland. Plus, an interview with Johnson & Johnson’s CEO on the golden age of medical innovation. Later, will flying cars soon be a reality?
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:19):
This is Wall Street Week. I'm David Weston, bringing you
stories of capitalism. President Trump has a dream of gas
falling below two dollars. Given recent developments in the Middle East,
that goal seems to be getting harder to achieve than ever.
Last week, we've brought you the story of what it
would take. This week, we turned to what it would
mean for places like Odessa, Texas if we could plus
(00:42):
the golden era of healthcare innovation. We go to Springhouse,
New Jersey to see where some of those wonder drugs
we hear about are coming from and why. The CEO
of Johnson and Johnson says the best is yet to
come and the future may be closer than we think.
When it comes to flying cars, go inside the world
of electric vertical takeoff and landing vehicles. But we start
(01:05):
with the big story of the week, continued strife in
the Middle East and what it means for the economy overall.
Richard has A's Centerview Partners takes us through it.
Speaker 3 (01:15):
We shouldn't assume that what's happened is all that's going
to happen. I don't know if it's the first inning
of a nine inning game, or the fifth inning. But
it's not the end of it.
Speaker 2 (01:23):
Why now, It's a good question.
Speaker 3 (01:25):
Bb Nets and Yaho hinted or intimated that there was
something new. We haven't seen it in the way of intelligence.
Either the Israelis had some new intelligence about where Iran
was or maybe put together an assessment that said something.
This is what I would call a preventive war. This
was a war that was launched or an attack launched
by Israel, not against an imminent threat, but against a
(01:46):
gathering threat. And what israel I believe owes to its
own population, to the region, to the United States and
the world is an explanation. What was it that motivated
Israel to act just now? Because we don't have an answer.
Speaker 2 (01:58):
There was a time not too long ago when nothing
happened in that part of the world without the US
having some major role. Do we have a role in this?
Israel paying attention to us? Are we encouraging them? Are
we discouraging? Where are we?
Speaker 4 (02:09):
Well?
Speaker 3 (02:09):
We clearly didn't put up a red light. We may
not even put up a yellow light. There was some
back and forth between the Israelis and the Americans. These
negotiations were going on. Five rounds had taken place, A
sixth round was scheduled for a few days from now.
If an American president goes to an Israeli Prime minister
and basically says, do not do this or it will
(02:30):
have tremendous adverse consequences for your relationship with me, for
your country's relationship with my country, and virtually any scenario
short of an existential threat to the Jewish state, the
Israelis would hold back. Clearly, Donald Trump did not do
that to bv Nets in Yahoo. But there may have
been a little bit more coordination diplomatically between the United
States and Israel than we understand.
Speaker 2 (02:51):
What restraints or constraints do we think might exist on
Israel and on a run quite apart from the US influence,
and for example, seen Israel go after oil fields in Iran.
We haven't seen Iran go after the straight at home moves.
It appears right now for the moment, they may be
a little restrained.
Speaker 3 (03:10):
I would argue that most of the restraints are on
the Iranian side something because Iran is so vulnerable. Go
back to last year. In April and October of last year,
Israel weakened Iranian air defenses. This is the third time
they've done it. Essentially, Israel's demonstrated the ability its ability
to operate over Iran with near impunity. Iran is vulnerable
to Israel or the United States, conceivably even to some
(03:32):
of its neighbors. One of the things I'm going to
watch closely because I think it's related to the Israeli attack.
This was not just an Israeli attack against nuclear installations.
It wasn't just an Israeli attack against bases, military basis. Clearly,
this was an attack aimed at disrupting, weakening, conceivably pushing
out the Iranian leadership. I think that's a tall order,
(03:53):
but I would think that one of the things all
observers want to watch is what the Iranians do and
their priority. I would think will not be tactically to
respond against Israel unless they believe that's necessary to hold
on to power.
Speaker 2 (04:06):
What do you expect the Israeli goal is here? What
is their mission? We knew when they went into Guys
that they said they wanted to defeat, if not destroy
Hamas entirely. We've talked in the past about really destroying
the nuclear facilities in Iran. That's a tall order, is
that their goal is that achievable.
Speaker 3 (04:23):
Probably of several goals, one is to again show Iran
as being so weak that directly and indirectly through its proxies,
it's got to be extraordinarily careful, and the Israelis has
simply reinforced that message what they've done several times. Secondly, yes,
to weaken the nuclear establishment. There's one big site, as
best I know, David, they haven't gone after yet, which
(04:44):
is Ford, Oh, which is one of the major enrichment sites.
It's also the one that's hardest to destroy, its most underground.
So the Israelis, what word do you want to reduce? Degraded?
The Iranian nuclear establishment killed some of its leading officials,
but they're still an Iranian nuclear establishment with various installations
known and unknown.
Speaker 2 (05:03):
Irani has said that if there are attacks against it,
it will sprint to actually develop nuclear weapons. Is that
a realistic threat? And what does this do to that?
Is there a danger here that they will actually do
that and get nuclear weapons faster? And they would have gone.
Speaker 3 (05:16):
Faster, but in a way that's more difficult to do
this again. I would think the Iranians can't sprint easily
to nuclear weapons. They've got to re establish their leadership,
but they would have to do it in ways that
future Israeli strikes couldn't get out deep deep, deep underground.
So my guess is that won't be, if you will,
a near term response, but could that be a medium
and long term response. Absolutely. I could also imagine the
(05:38):
Iranian saying we're not going to cooperate with international authorities
like we have. Where was the world coming to our defense?
We were still talking to the IAEA is real acted
against us. There will be people, I bet in Tehran
saying if we had had nuclear weapons, this never would
have happened. It's the fact that we don't have nuclear
weapons that the Israelis can act this way against us.
(06:00):
So I would think that's going to become an intense
debate in Iran.
Speaker 2 (06:04):
This is, of course, first and force a geopolitical issue.
There are armaments being deployed, There may well be lives lost.
They've already seen some of the leadership of Iran. It
also has potential economic ramifications in the United States and
around the world. I wonder if you could talk about
specifically one question, which is inflation.
Speaker 3 (06:25):
We've got new numbers soon. It won't affect those over time. Yes,
if oil prices were to stay considerably higher, but let's
take a step back. Oil prices have gone up, however,
many dollars, and we'll see where they settle out by
next week. Still, by historical terms, oil prices are relatively
modest once you factor in inflation. If you remember where
we've been at various times, So just say we're in
(06:48):
the low seventies, that's not that high. Out of all
the things that going to cause inflation, this would, I think,
simply be one of them. But could Now if oil
prices went up to ninety one hundred, one hundred and
ten and stayed there, big thing and stayed there, But
that would require probably there to be an open ended
series of exchanges, not just between Israel and Iran, but
(07:09):
Iran would have to decide that warwide thing made sense
for it a strategy and by that I mean going
after Saudia Ramco Go, having the houtis, do more things
to interrupt and so forth possible.
Speaker 5 (07:20):
Won't rule it out.
Speaker 3 (07:21):
And if that were to happen, it could have an
inflationary impact. But quite honestly, David. Stuff that we're likely
to do to ourselves in terms of our own policy
is going to have much more inflationary impact than I
think this crisis will.
Speaker 2 (07:32):
Exactly my question. We've had some economic policy on certainly
the United States since Donald Trump PRESUS, and there are
a lot of vocations potentially for the economy and that how,
if at all, does this confidence in Middle Is play
against the tariff threat?
Speaker 3 (07:47):
If you ask me, the bigger issues are still made
in America. I think the bigger sources of uncertainty tariff
policy is enormous questions about domestic political what if you
want to call it instability, rule of law, and so
forth in this country, renewed inflation from various sources and
(08:09):
so forth. I would think those raise bigger questions right now.
If you're worried about China and the US, it might
be export controls and what is the nature of those
mutual regimes like leg But I think this adds to it.
Anytime bad things happen, unexpected things happen, this is relatively
unexpected until the last few days. It just adds to
people's uncertainty and it adds to their sense maybe you
(08:31):
ought to keep our wallets in our pocket.
Speaker 2 (08:33):
A lot of uncertainty, geopolitical uncertainty is leading to more
defense spending in the United States, is proposed by Republicans
on the hill and in Europe. That's what we're seeing
right now. Will this be material with respect to that
or was that already that horse already out of the barn.
Speaker 3 (08:46):
I think that horse is already out of the barn.
In Europe, what's motivating it is uncertainty over the wisdom
of continued reliance on the United States and the fact
that the Europeans begin from such a relatively low base.
Speaker 5 (08:57):
Speaking about what.
Speaker 3 (08:58):
So do we look at the percentage of GDP that
the United States spends on defense compared to the Cold War.
We're not even half the average levels we were at
during the Cold War. And we now face uncertainty and
three geographies at least Asia, Pacific, Europe, and the Middle East.
This is a time that's extraordinarily stressful for American defense strategy,
(09:19):
for American force structure, which by the way, seems very outdated.
We've got a small number of very expensive platforms which
could be overwhelmed. I would think by these very inexpensive
systems like drones, or anti ship weapons, anti air missiles,
and the like. So yeah, American defense spending is seriously
(09:39):
below what it needs to be. Though, if I were
going to filibuster and make one more point, David, how
what's always more important than how much you spend is
how you spend it. And the problem with the American
defense spending is not simply the level, but it's the
content of it. We have what to borrow from Eisenhower,
we have a military industrial legislative complex. We've now got
(10:00):
three forces that are making it hard to come up
with a rational, optimal defense posture. That's our biggest problem.
Speaker 2 (10:07):
Final point, And it's not filibustering at all, because you
wrote a book, most recently Bill of Obligations, but before that,
you wrote a book about the connection between the economic
strength of the United States is in national security.
Speaker 3 (10:18):
Foreign policy begins at.
Speaker 2 (10:19):
Home exactly right as we are looking at the one
big beautiful Bill Act, what do you make of our
economic posture and what it means for our national security?
Speaker 3 (10:33):
Well, this questions of the bill, also questions of the
debt ceiling, the tariffs. What they've all added up to, David,
is they've raised questions about America's stewardship. The rest of
the world, like it or not, depends on the United States.
We're still a quarter of the world's economy. The dollar
has a pivotal role. I think the fact that this
is one of the first times we've seen the United
(10:53):
States in a crisis, whether we generated or not, no
longer be the safe haven. But we're beginning to see
other places emerge as alternatives to the United States. That
tells you all you need to know. Other leaders, other
central bankers around the world can no longer operate with
a confident set of assumptions and predictions about the United States,
(11:14):
and that in and of itself drives them, quite honestly,
to hedge their bets on the United States.
Speaker 2 (11:21):
Coming up, the President Trump's goal of two dollars a
gallon gasoline seems to be farther away than ever, But
what would it mean for the good people of West
Texas if he could get there? That's next on Wall
Street Week. This is the second chapter in our story
(11:42):
about setting goals. Last week, our colleague Alex Steele took
a look at how realistic President Trump's goal of two
dollars gasoline is. Something Israel's attack on Iran makes less
likely than ever. This week, Michael McKee continues the story,
traveling to Odessa, Texas to look at what achieving the
goal could mean for an important part of the US economy.
Speaker 6 (12:03):
Today, I will also declare a national energy emergency.
Speaker 7 (12:08):
We will drill, baby drill. The logic of drill, baby
drill seems to be drive down the price of oil,
which then pushes down the price of gasoline. Lower gas
prices mean happier consumers have more money to spend on
other things, but that's not actually happening. The President's contention
(12:30):
that you can buy gas for a dollar ninety eight
in some places is pure fantasy. Last week, Alex Steele
told us the story through the eyes of producers who
can't make the math work. I wish I had more
control over margins. I really don't. It's based on supply
and demand, and if margins are good, we really want
to run. If margines are bad, we still need to run.
Speaker 8 (12:49):
The problem is from twenty twenty seven on was if
you look at our refining kind of global landscape, it
only gets worse. We've got more closures coming because refining
is such a slow moving industry and years. It kind
of takes to build one and there on on new
bills in the West.
Speaker 7 (13:03):
Anyways, US oil production is one factor affecting prices at
the pump. Another, beyond the control of American policies and production,
is geopolitics. We went to Midland, Odessa, in the heart
of the Permean basin to see firsthand what happens when
oil prices fall.
Speaker 9 (13:20):
Never was going to be. It's not slogan, and people
like to talk about the prices of all getting so
low that you have a dollar fifty gasoline or whatever.
As a practical matter, why would some of the largest
and most sophisticated companies in the world drill themselves into bankruptcy.
Speaker 5 (13:35):
I mean, it just doesn't make sense.
Speaker 7 (13:36):
Ray Perriman is an economist who has seen enough cycles
in the oil market to know when the economy is
in trouble.
Speaker 9 (13:43):
If you go back and look kind of at the
century that we've had oil and gas production here from
nineteen twenty one up to about nineteen seventy four, pretty
steadily increased, I mean, down in the Great Depression after
the war, but pretty steadily increased and got to about
two point one million barrels a day. And then because
the fields were old, the production started declining, and it
(14:03):
declined dramatically, declined all the way from nineteen seventy four
to two thousand and eight. Every year went from two
point one million barrels a day to seven hundred thousand.
And people had written this place off. I mean, the
pipelines that you uhould take oil to the Gulf were
now taking gasoline here. I mean they reversed the pipelines,
and everyone they were calling the old rigs or tombstones
(14:23):
and things like that.
Speaker 7 (14:25):
This time around, it's a combination of President Trump's calls
for more drilling terraffs and an increasing foreign supply of oil,
depressing prices in the region in the US that produces it.
Speaker 9 (14:37):
It's definitely cyclical, not nearly as much as it was,
because again the cycles are not as pronounced as they
used to be, primarily because there's plentiful oil in the world.
I mean, at one point in time there were either
critical shortages are big surpluses all the time. That seems
to be leveled out more to some extent now. But
obviously if other producers decide to increase production, or if
(14:58):
something causes the world uncertainty to happen in the world
and demand to drop off those kinds of things. We're
going through some of that right now. Then you do
see the industry being somewhat cyclical, but now it's a
matter of, you know, more plus or minus five percent
in oil field employment, that sort of thing, not how
it used to be. What was just literally all in
(15:19):
or all out.
Speaker 7 (15:20):
It happened during the oil blood of the nineteen eighties,
which led to a collapse in prices, and again in
twenty fourteen when Brent crude fell from around one hundred
and twelve dollars a barrow in June twenty fourteen to
a low of thirty one dollars in January twenty sixteen.
Speaker 9 (15:37):
There's no question about again, it's not like it's not
like the eighties where things become you know, basically during
that period of time, it came almost ghost towns out here.
In one statistic I was often fond of was for
a thirteen year period during that oil bus there were
two multi family housing permits in Middland, Texas. And I
don't mean two apartment complexes, I mean one duplex. I
(15:57):
mean literally to multi family houses. We're now seeing a
steady stream of new housing coming online, even in the
midst of some of these things that are happening, and
certainly it slows down, it slows down significantly, but we're
no longer in that cycle where the place kind of
drives up and blows away.
Speaker 7 (16:14):
Both times when oil prices crashed, oil companies shut down
drilling and reduced production. The ripple effect of that pullback
reduced GDP growth to less than one percent in the
fourth quarter of the year. In twenty fourteen fifteen, we
had what economists call a silent recession in the US.
We didn't see growth contract for the whole country, but
(16:35):
in this area and other manufacturing areas there was a
big downturn.
Speaker 5 (16:41):
What was it like here? It was bad. People have adapted.
Speaker 10 (16:45):
I think the frenzy that went on after we're coming
into fourteen were especially the oil companies, the big independence
that were drilling just to drill as much as they could,
just to get as much oil as they could, learned
a lesson in that time. They stopped drilling and started
drilling out of cash flow. So people nowadays don't get
(17:07):
over extended. Like the banks are smarter. They don't allow
people to get over extended. Like they used to in
the past too, and so it's made for an interesting
paradigm right now. The companies, the service companies are healthy
to get through another year of this, but they can't
with their employees, so they just they'll have to lay
them off. And that's what's SATs. You're using incredible brain
(17:30):
trust in these people.
Speaker 7 (17:31):
There's a danger that's happening again. With prices below the
cost of exploring and developing new wells, oil companies are
in the process of shutting down again.
Speaker 10 (17:41):
The travels getting cheaper again. It is a great tax
break for the country, there's no doubt about it. I
think that's why Trump was wanting the lower prices to
spur on things like that in the.
Speaker 5 (17:50):
Country as a whole.
Speaker 10 (17:52):
But it's very detrimental to our industry here in the
United States. And you can't have more of an American
industry than the Texas oil and gas industry and employs
people here.
Speaker 7 (18:03):
Kirk Edwards runs Latigo Petroleum, an independent exploration and production
company in the Permian Basin. Last week he canceled the
contract to drill five more wells. He won't start up
again until oil is at least seventy dollars, and on
top of falling prices, he also has to deal with
the Trump import taxes.
Speaker 10 (18:23):
So the tariffs have hurt us also because of steel process.
So you've got the process of steel, which was a
very big component of our wells, going up twenty percent,
which makes our weals more expensive than we have had
him in the past, and yet our oil process down
twenty two percent.
Speaker 7 (18:40):
Over the past four months. West Texas Intermediate, the benchmark
American oil price, fell by about ten dollars a barrel.
Israel's attack on Iran has pushed WTI off its lows,
climbing above seventy dollars a barrel. Analysts warned it could
go higher, but it will take some time to show
up in gasoline prices. Most people in America I think
(19:00):
of gasoline when they think of inflation, and they think
of oil prices. Oil prices have come down a lot,
but gasoline prices haven't come down as much. Has the
relationship between oil and gas prices changed?
Speaker 10 (19:12):
So no, And so when Trump talks about two dollars gasoline,
literally it's two dollars coming out of the refinery. And
so today it's probably two five two dollars and ten
cents something like that. But from there it gets marked
up by other people that buide at the refinery, bring
it to the gas stations, and you know, they do
their deal about making profits. So we've always seen when
(19:34):
oil prices go down, the gasoline prices are slow to react.
Speaker 5 (19:39):
But they should be coming down.
Speaker 10 (19:40):
And you know, most towns have a salms you know,
the probably the cheapest gasoline, and it's at two forty
right now here in Odessa, but you'll see most of
the service stations are at two sixty. California's still going
to see four and five dollar gasoline.
Speaker 7 (19:53):
Yet, as of June ninth, the national average price per
gallon is six cents higher than at the first of
the year, well down from and it's early April peak.
We're still not back to pre tariff levels and it's
not clear when or if we will be an expected
tailwind for the economy may turn out to be just
a slight breeze.
Speaker 10 (20:12):
It's the rest of the country that benefits from the
gasoline prices. Again, people in middle of Odessa. We would
rather see higher gasoling process because it means the wh
process good and the economy is going to be good.
But It is a side effect for everybody because everybody
has to use gasoline in their cars right now to
go to work and fly and do things like that.
Speaker 7 (20:33):
Odessa, Texas provides an early warning the White House Drill
Baby drill promise is seen here as a threat. Odessa
and its neighboring town of Midland are the beating heart
of the oil shale revolution that helped the US regain
energy dominance. But rigs are coming down and jobs are
going away. Chevron this month announced it would lay off
(20:53):
eight hundred workers in the Odessa Midland area.
Speaker 10 (20:57):
You can tell we're down probably thirty three hundred people
without jobs right now. But the huge part of that
is each one of these wells cost about twelve million
dollars give or take to drill. And you put, you know,
thirty rigs times twelve billion dollars, it's about four hundred
million dollars a month that was coming into this economy
(21:18):
and paying for people and buying equipment and things like that.
It's over four billion a year that's being taken out
of our market here just in the Permian alone, and
so it's significant.
Speaker 7 (21:28):
Well what's the economic impact on Odessa.
Speaker 5 (21:31):
Well, we're diversified.
Speaker 10 (21:32):
So we've learned after a little six times, Odessa and
Midland have learned to diversify. We've got a University of
Texas system branch here, University Texas Permian Basin that's growing.
And so it's just like Texas Tech and Lubbock or
Baylor and Waco. We're seeing that these colleges make a
difference and good times and bad And also we've recruited
(21:54):
in different companies to come in here. A lot of
powers getting generated here because of natural gas is so
cheap in the Vermion. And we're also seeing an uptick
right now in data centers. So these data centers want
to come locate where the energy is cheap, and so
we're seeing some of that. So some of that is
offsetting the shock that we get normally from the oil times,
(22:15):
because we've done a good job helping to diversify the economy.
But still the oil sector is what pays all the
bills around town, and people are more affected by that.
Speaker 7 (22:25):
For sure, the bet is less drilling, less oil will
push prices up, the opposite of the President's goal. And
at this point it's too early to say whether higher
oil prices will lead to more drilling. Oil companies don't
know how long prices will remain elevated. In the meantime.
For a town where almost everyone drives a gas hungry
pickup truck, a fall in oil prices means cheaper gasoline,
(22:49):
which doesn't do you much good if you've lost your job.
Speaker 10 (22:53):
We've turned drill, baby, drill nine to wait baby, wait.
It's something that again we're pausing, and we know the
effect of lower oil process. It will slow down things
in this country. We've seen it six times now, and
I just I don't understand the side effect because you're
in a county voted eighty percent for Donald Trump.
Speaker 9 (23:14):
If you see the global economy, relax a little bit.
Right now, there's a lot of uncertainty. The most typical
economic reaction to uncertainty is to do nothing. You don't
buy that car, don't buy that house, don't bring out
that new product, don't make that investment. All of those things.
We tend to just lay back and do nothing.
Speaker 7 (23:31):
One way Ray Perrman takes the pulse of oil production
in the Permian Basin is to look at oil rigs
that are in storage. We drove fast one by the
railroad station in Odessa, and if it's any indication of
the slow progress on drill baby drill. There we're eight
rigs in storage doing the weight baby.
Speaker 2 (23:49):
Weight coming up. Every day we hear about a new
wonder drug to help us live longer or improve our lives.
But where do they all come from? And can we
keep up the pace of innovation? That's next on Wall
Street read this is a story about origins, the origins
(24:15):
of all those new medicines we hear about every day,
whether to deal with diabetes.
Speaker 11 (24:20):
I have Type two diabetes, but I manage it well.
Speaker 5 (24:23):
Or with cancer.
Speaker 2 (24:24):
This time we're taking the battle to cancer. Did you
ever wonder where they all come from? We went on
one of the sources outside Trenton, New Jersey.
Speaker 4 (24:39):
The Center of the action of our Research of Development organization,
which is the lifelood of a company like Johnson and Johnson.
So here we have about twenty five hundred scientists and
researchers that are connected with the risk of our around
the organization.
Speaker 2 (24:54):
Joaquin Duato is chairman and CEO of Johnson and Johnson,
one of the largest drugmakers in the world. We met
with him at his firm's research center in Springhouse, New
Jersey to learn how a major pharmaceutical company develops cutting
edge drugs.
Speaker 4 (25:09):
It started with smaller campus and gradually we have expanded it,
as you can see, into a large campus a very
beautiful location too.
Speaker 2 (25:18):
For Duato, there has never been a better time to
be in the business of health science innovation.
Speaker 4 (25:24):
We are in a golden era of life science innovation,
of medical innovation, and that's the convergence of two forces.
On one side, we have a better understanding of the
biology of diseases, of the underpinions of disease, and on
the other half, we have technology AI machine learning that
gives us the opportunity to manage large amounts of data
(25:46):
and gain insights for that. So all these factors combine
create the type of progress that we see. And the
US is the country that today has a lead over
the rest of the world in life science innovation.
Speaker 2 (26:00):
It is no coincidence that the US leads the world
in biotech innovation. In twenty twenty one, a Congressional Budget
Office study reported that the industry was investing over eighty
billion dollars a year, up by a factor of ten
over ten years, amounting to some twenty five percent of
farmer companies revenues a much larger portion than for other industries.
(26:22):
It's not just the money being spent in the United States,
it's also the way the government, academia, and the private
sector have worked together.
Speaker 4 (26:30):
You don't have places which are perhaps of life science
innovation like Boston or San Francisco anywhere else in the world.
Everybody is looking with mb to the type of ecosystem
that we have in the US. Great invested in basic
research through academic institutions and hospitals, venture capital that flows
(26:50):
into the life science sector. Great companies that are able
to develop those technologies, manufacture them and bring them to patients,
protection of intel, actual property, a market that rewards innovation.
That combination, it's a uniquely American combination.
Speaker 2 (27:07):
Individual companies like Jay and Jay have also created their
own complex structures to seek out innovation wherever it is
and develop it.
Speaker 4 (27:16):
We work very hard in order to work and scout
the world to see when and where are innovations and
technology that are promising that could eventually benefiting of our
scale in research, in development, in manufacturing, and in commercialization.
And that's how we have been able to encounter to
(27:37):
find significant innovations that were at an emerging state, still
far from getting into patients and ultimately get them into patients.
Speaker 2 (27:47):
An example is Icotrokinra, an oral medicine Johnson and Johnson
is developing to treat the skin disease plaque psoriasis.
Speaker 4 (27:55):
So whether I you mean this is in which your
own immune system turns against you, having an oral therapy
was going to expand the pull of patients that were
going to be able to treat it with this medication.
So we work and we scout the world to see
are there any company out there that is going to
have an oral medication with comparable safety and efficacy to
(28:17):
these injectible biologics. And we identify one company and if
they had a molecule that there still was pretty clinical,
meaning it had not been yet using patients. So we
brought it here to spring House, and the spring House
we work in making sure that the drug was a
stable in the digestive trug, that it had the right potency,
(28:38):
and we actually build a medicine that is an oral
medicine with similar efficacy to biologics that went to the clinic.
We had the clinical trials very successful. So in this
comparable efficacy and pretty soon in the second half of
the year, we're going to be able to file it
for the FDA in shuriasis and get to patients next year.
Speaker 5 (29:00):
How big could this be?
Speaker 4 (29:01):
But this is going to be one of our biggest
breakthroughs for Johnson and Johnson and for our growth in
the second half of the decade.
Speaker 2 (29:09):
Big pharmaceutical companies like Johnson and Johnson are spending record
amounts of money to discover and develop new medicines. It
has invested some fifty billion dollars in R and D
and M and A since the beginning of last year,
but they're far from the only ones. Zaramradali represents venture
capital firms in biotech as head of Grant Thornton's Life
(29:30):
Sciences industry Practice.
Speaker 12 (29:32):
So when you think about big pharma and you look
at data from twenty fifteen to twenty twenty one, the
drugs that were developed internally an FDA approved was less
than thirty percent by big forma and the rest of
it was external. For some companies that percentage was eighty
percent and for others it was zero.
Speaker 2 (29:55):
In looking for those opportunities to invest in the innovative
culture found in the labs where a dalar looks for
three things, the people, the science, and patience.
Speaker 12 (30:05):
When you think about science is challenging, it's it's hard.
And you know, when you think about the failures in
R and D, I mean that's to be expected, and
any investors should should be patient and they should they
should have a time arison of like ten to fifteen
years to see a drug from discovery to commercialization. It is.
Speaker 5 (30:27):
It's not easy.
Speaker 12 (30:28):
Science is difficult.
Speaker 2 (30:30):
Duato respects how difficult the discipline is, regardless of size
or scale. And of course we can't talk about innovation
in just about any part of the economy without turning
to artificial intelligence and what it will mean for scientific discovery.
We saw it firsthand Jay and Jay as they used
it to screen millions of compounds.
Speaker 13 (30:50):
How long does it take you to screen the whole
one point seven We.
Speaker 14 (30:53):
Can screen one compound every two to three seconds, So
we can screen this whole fire one point seven million
compounds in rap five to ten days, depending on the target.
Speaker 7 (31:02):
Wow, so very.
Speaker 2 (31:03):
One point seven million compounds in five to ten Pacisco
twenty four hours a day, seven ex week.
Speaker 5 (31:09):
As again, so what used to.
Speaker 13 (31:11):
Take us months? That take us days?
Speaker 12 (31:13):
Yes?
Speaker 13 (31:14):
So This is a way of you know, accelerating the
nature of compounds and also the time it take.
Speaker 5 (31:21):
Us to have lead compounds.
Speaker 13 (31:23):
And then we have other platforms that access to what
extent they are going to be viable? Are they going
to have any toxicities?
Speaker 5 (31:29):
What is the biological effect?
Speaker 2 (31:31):
What form is the output of this happen? I mean
is it data? Is it?
Speaker 5 (31:36):
The data?
Speaker 15 (31:36):
Is the data?
Speaker 13 (31:37):
So in the past, analyzing all these millions of data
points would have been very difficult for researchers. Now they
have the underlying models that are going to drive the
insights for them, So we accelerate the screening and also
the analytical part. So the AA is a tool, the
data is probably daring and then also the interpretation of
the insights coming from the AI.
Speaker 5 (31:59):
It's what our signing is our rehould just do.
Speaker 13 (32:01):
So while yes, technology is important, ultimately it comes down
to our data and to our researches to what extent
we can accelerate progress.
Speaker 2 (32:09):
Handling all the data is a big opportunity but also
a big challenge, particularly for early stage biotech firms, leading
some to partner up. Does that all things being equal
over time give big pharma something of an edge because
it typically has access to more data.
Speaker 12 (32:27):
I mean, it might be if and that is where
we're seeing collaboration agreements with the companies that are AI
first companies with big pharma, and you're seeing activities in
that space as well. You've got this right, I mean,
that's where that's where the flow of money in the
future will be.
Speaker 2 (32:44):
And then there's the role of the government in giving
incentives for biotech innovation and in creating the overall environment
where it can thrive. Tim Sullivan is CEO of the
New Jersey Economic Development Authority.
Speaker 16 (32:58):
It's a crowded field, but New Jersey and th extent
toward the top of that field, largely because of the
investments that Governor Murphy has made in growing that innovation ecosystem.
So we have an R and D tax credit for example,
that you know, all the big farmer companies take advantage of.
We have really focused on trying to grow again that
early stage pipeline of companies that might get acquired by
big pharma or turn into big farmer companies themselves. So
(33:21):
you know, for example, Gilliad made New Jersey It's East
Coast headquarters three or four years ago because they bought
a company in Mars County and like the talent so
much that in New Jersey that they decided to plant
their East Coast flag here. So, for example, we have
a program, we think it's the only program like this
in the country that lets early stage life sciences and
technology companies sell or monetize their net operating losses and
(33:46):
sell them to profitable companies in exchange for non dilutive
essentially equity, which a number of companies that have grown
and scaled have taken advantage of.
Speaker 2 (33:53):
This may be the golden era of medical innovation, as
Joaquin Duato believes, but when you ask about the origin
of all those wonder drugs, there's no single answer. They
come from a unique combination of private enterprise, big and
small capital from a range of sources, the research being
pursued by gifted scientists, and the support of federal and
(34:15):
state governments. But the results of that network have only
one real destination for all their work, the patients. They serve.
Speaker 12 (34:23):
One thing that you want to leave the group here
is all about the patient. Science is hard. You know,
have the patients, and let's support the community and innovation
to get it to where we need it.
Speaker 5 (34:35):
To be.
Speaker 4 (34:37):
We measure success in terms of how many patients we
can serve. If we are able to address significant patient
needs as we are doing, then we can certainly translate
that into an economic return. This is part of the
principles of our credo. We are a company with Andred
and four years of history. Our founders establish what we
(34:59):
ca eighty five years ago, creating a very clear yerkey
of decisie making. First we serve the patients, thened employees,
then the communities, and if we do well for those stakeholders,
then you'll have a fair return for your shareholders.
Speaker 2 (35:16):
Coming up tired of all those traffic jams, are rapidly
developing industry of electric vehicles aims to take to the
air to reinvent the world of transportation. This is a
(35:38):
story where the sky is not the limit, it's the goal.
Automobiles have come a long way since Henry Ford introduced
the world to the Model T in nineteen oh eight,
and several companies are now even trying to get them
off the ground. But will flying cars change our world
the way the first car did? Ed Ludlow brings us
that story from San Francisco.
Speaker 17 (36:01):
Flying cars have been imagined time and time again, but
they've taken a while to come to fruition. Now, as
President Trump sciences executive Order on accelerating flying car programs,
are they finally a reality. Morgan Stanley estimates the EV
TOEL industry could be a nine trillion dollar market by
twenty to fifty.
Speaker 14 (36:19):
EV tools are by definition, electric vertical takeoff and landing vehicles,
which is a whole new breed of flying vehicles that
effectively give us flying cars as we will promised as
little kids, but using completely new forms of propulsion and
flight configurations.
Speaker 5 (36:35):
That are very new for the industry.
Speaker 14 (36:37):
This is supposed to be, by virtue of many analysts,
a significant new market that hasn't really existed before. Over
the next five to ten twenty years, it's going to
change very dramatically as we start to unlock some of
the biggest barriers for taking advantage of the sky in
ways that we haven't done before. In the United States,
there's somewhere on the order of about fifty companies that
are developing some sort of flying car companies that people
(36:59):
are starting to see almost daily, from Jobe Technologies to
Beta Technologies to Pivotal to Archer.
Speaker 15 (37:06):
When I started on this more than fifteen years ago.
It was a fringe idea, and today there is an
incredible vibrant industry that is building up.
Speaker 17 (37:19):
Joe ben Bevitz is the founder and CEO of job
The company focuses on air taxi services. It as a
market cap of nearly six point seven billion dollars, which
is almost fifteen percent of the market cap of general motors.
Speaker 15 (37:32):
With a vertical take off and lining aircraft, you can
move from point A to point B, and you can
build networks of air traffic routes in and around cities.
And we're working at building best in class vertiport infrastructure
at JFK and at LaGuardia so that you can go
(37:53):
seamlessly from a Joby flight onto your delta flight. The
goal is to do this in a very step wise
progressive way. One day, we hope that there will be
a take off and landing location is conveniently located as
a subway stop in a major city.
Speaker 17 (38:09):
Joby's version of a flying car is technically considered an aircraft.
That's where the regulation of the technology gets tricky. The
big moment that Wall Street in particular is waiting for
is FAA certification. What is it that the FAA needs
to sign off on and when does that happen?
Speaker 15 (38:27):
To your mind, we have the first company to achieve
the Stage one certification, the first company to shave stage
two of the certification, first company to complete stage three,
and now we're making phenomenal progress through stage four and
when we submit the test plans and then that opens
the door for us to begin the testing. And then
stage five is when we submit the test reports and
(38:48):
then the FA signs off.
Speaker 17 (38:50):
It's a small market that there are many players, each
has different tech and progress varies. SMP Global says Joby's
expected to go from six to fifty six units by
twenty thirty, generating three point five billion dollars in revenue,
but that's all contingent on FAA certification. The company's testing
with no one in the cockpit, but the world's watching closely.
Speaker 18 (39:14):
Overall, the battery capacity for this aircraft is something like
one and a half Model X Teslas, just to kind
of put it in a ground vehicle reference. The idea
is to sell this by the seat, so when you
open the app, you'll be able to select the ride.
A car will come and get you to whoever you are,
take you to the nearest take up on landing spot,
and then other people will be kind of brought just
in time at the same time to fill the other
(39:35):
seats within the aircraft.
Speaker 15 (39:36):
It's one of the things we I probably haven't focused
on enough is the incredible acoustic signature. There are a
significant challenge for people who live close to the takeoff
and landing locations. I've told the team, let's try to
make this like the wind in the trees. When you
hear it, what fly over you. Everybody has to stop
(39:58):
and be really quiet because.
Speaker 7 (40:00):
You sh.
Speaker 5 (40:03):
And that's magic.
Speaker 17 (40:05):
Job expects to see their first passenger operations in early
twenty twenty six in Dubai, operating full steam ahead on
production in their California based manufacturing facility, using locals to
craft their creations.
Speaker 15 (40:17):
One of the cool things is about another element of
the flybarre that's incredible is how easy it makes it
to fly. So you can take somebody who's never flown
an airplane before and never flown a helicopter before, you
put them in the simulator and they'll fly you perfectly
from Wall Streight to the Delta Terminal four at JFK
and that is really spectacular in terms of how intuitive
(40:40):
it is.
Speaker 17 (40:41):
But can anyone really fly one of these crafts?
Speaker 12 (40:45):
Shakov.
Speaker 17 (40:47):
One of the other players in the space is a
company called Pivotal. Pivostal's ev toll is taking a very
different approach.
Speaker 6 (40:55):
Pivotal has been in the development of novel architecture aircraft
for thirteen years. Our mission is nothing short of just
changing the way humanity moves through the air, and that's
going to happen in small steps.
Speaker 17 (41:09):
Ken coughlan is the CEO of Pivotal, an evtel company
with a unique design and a very different mission.
Speaker 6 (41:15):
In your term, we want to deliver on this promise
of personal aviation and be able to deliver to you
individual private owners who can take to the sky and
enjoy the freedom of personal flight on their own terms.
Speaker 11 (41:29):
So Pivotal has three screens of customers. One are direct
consumers in the personal area vehicle Martin. The second pillar
of our strategy is to the defense unit, and then
the third is actually from public service.
Speaker 6 (41:42):
There's over hundreds of thousands and nine one one calls
in the United States alone every single year. Many of
those something in the order one in ten are time
sensitive medical calls. We're having a qualified emergency medical technician
or paramedic there on site. In four minutes versus nine
minutes or twelve minutes or even fifteen minutes could make
(42:05):
the difference between life and death. We actually hoped to
be in a pilot operations in at least two locations
in the United States really in the next six months,
so before years end, we hope to be up and
saving lives and training other paramedics to actually be pilots
of this aircraft.
Speaker 17 (42:23):
It's considered an aircraft, but its operates as not FAA
certified pilots. Pivotal claims is still safer than driving.
Speaker 6 (42:31):
It's actually like three or four orders of magnitude safer
than driving your car on a freeway on a per
mile basis might be better than that.
Speaker 5 (42:40):
It's very close to zero risk.
Speaker 6 (42:42):
That may contribute to a culture of zero risk within FAA,
and that would certainly slow down innovation because there always
has to be at least the tiniest acceptance of risk
for everybody involved in delivering a new technology that involves
transport to it off.
Speaker 11 (43:01):
So the flight program is designed at Pivotal, it is
not FAA certified, so you are not an FAA pilot,
but we require everyone to be certified by Pivotal to
be able to fly the aircraft, and that goes in
three stages. So there's an at home study to be
able to understand airspace and atmosphere so that you can
integrate into the airspace around you. Then there's simulator training
(43:23):
where you're in a full flight simulator which is able
to go through all the standard flight dynamics as well
as emergency procedures, and that usually just takes a couple
of days. And then after that you do flight training
with us. You hop in the real aircraft and you
pay to the sky with the trainer on the ground
just communicating to you, and it typically is about eight
flights to be able to get through all the different
areas of flight within our flight training program.
Speaker 6 (43:45):
We did not set out to immediately change the world
in a tight schedule by somehow filling the sky with
the air taxis now.
Speaker 5 (43:54):
Don't get you wrong.
Speaker 6 (43:55):
I can't wait until I've been down in San Francisco
and I'm ready to go home, and I can pull
out my smartphone app and you get a fifty dollars
ride home to Sian Jose and raising capital based upon
that premise is also it's a challenge because a lot
of things have to go right for that to happen
on a certain schedule. So we decided fundamentally we're going
(44:19):
to stay away from air taxi and focus on privately
owned assets, assets for public safety, and assets for defense.
Speaker 17 (44:28):
According to reports, the companies back by Larry Page. Pivotal
did not comment on its investors to Bloomberg, both privately
held Pivotal and publicly held job You have taken over
ten years to launch job raising over two point six
billion dollars. Progress has been slow.
Speaker 14 (44:43):
I'd say that it's taking a lot of time in
the West, primarily because of the regulatory pathway. It is very,
very difficult to certify something through the FAA, be it
a small little single engine Sessna, up to something that's
completely novel or new, like a flying car, and we're
having to create the regulations real time as we're developing
(45:04):
the technologies, the good analogies, you're putting the engine on
the airplane while you're flying at the same time. Now,
we'll say there's a lot of interest and support from
the current administration to accelerate these technologies and to reduce
the barriers for companies to be able to test, validate,
and take these products into a commercial operation. But it
still takes a lot of time.
Speaker 11 (45:25):
The world saw these things in TV shows and movies
decades ago, and I think what you're asking is, why
didn't we just make them decades ago? Well, really, we
didn't have the battery technology, so to have the energy
density in the batteries and also the power density to
be able to take off and sustain flight wasn't in
previous battery technologies, and even today we're operating at just
(45:48):
the limits of the battery technology today to be able
to have twenty minutes time miles.
Speaker 17 (45:53):
Scalability is the big question for this technology. When automobiles
were first introduced, it took five more years to bring
down by fifty percent with the introduction of the assembly line.
Cost efficiencies are still many years away for ev toll.
Speaker 14 (46:08):
There a few things that have to happen for scale
to happen. Ground infrastructure is a key area, much like
Tesla with their superchargers, the regulatory environment, getting those put
in place, and then actually demonstrating to customers that this
is cheaper and safer and once you are able to
do that with real paying people flying on these things.
I expect the scale to only be limited about how
(46:29):
quickly you can build them.
Speaker 6 (46:31):
We only want to use our architecture to go after
applications we know we can do better than anyone else can,
So that does not include flying really fast.
Speaker 5 (46:42):
Efficiency is the name of our game.
Speaker 6 (46:44):
Cost effectiveness is the name of our game. But again
we're focusing on privately owned aircraft, privately owned assets today
only in the ultra light single seater capability, tomorrow something
much larger.
Speaker 18 (46:58):
So the idea is that we can sell this by
the seats, and that we can make it more accessible
and then actually drive the overall kind of like flywheel
of demand and utilization and load factor for these aircraft
and make a really economically viable service, not just one
that's an incredibly better way to get to where you.
Speaker 5 (47:13):
Want to go.
Speaker 15 (47:13):
What gets me really excited is if we can move
to where automotive got to as we moved into the
early nineteen hundreds, where we're starting to produce thousands and
then tens of thousands of aircraft a year, and we
drive the unit prices down to the point where this
becomes asfordable, as affordable as driving your own car, where
we hope to launch at prices around where an Umber
(47:34):
Black Fair would cost you, down to the price where
millions of people can afford to do this every day.
That's when I feel like my dream will have been realized.
Speaker 2 (47:47):
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 (00:19):
This is Wall Street Week. I'm David Weston, bringing you
stories of capitalism. President Trump has a dream of gas
falling below two dollars. Given recent developments in the Middle East,
that goal seems to be getting harder to achieve than ever.
Last week, we've brought you the story of what it
would take. This week, we turned to what it would
mean for places like Odessa, Texas if we could plus
(00:42):
the golden era of healthcare innovation. We go to Springhouse,
New Jersey to see where some of those wonder drugs
we hear about are coming from and why. The CEO
of Johnson and Johnson says the best is yet to
come and the future may be closer than we think.
When it comes to flying cars, go inside the world
of electric vertical takeoff and landing vehicles. But we start
(01:05):
with the big story of the week, continued strife in
the Middle East and what it means for the economy overall.
Richard has A's Centerview Partners takes us through it.
Speaker 3 (01:15):
We shouldn't assume that what's happened is all that's going
to happen. I don't know if it's the first inning
of a nine inning game, or the fifth inning. But
it's not the end of it.
Speaker 2 (01:23):
Why now, It's a good question.
Speaker 3 (01:25):
Bb Nets and Yaho hinted or intimated that there was
something new. We haven't seen it in the way of intelligence.
Either the Israelis had some new intelligence about where Iran
was or maybe put together an assessment that said something.
This is what I would call a preventive war. This
was a war that was launched or an attack launched
by Israel, not against an imminent threat, but against a
(01:46):
gathering threat. And what israel I believe owes to its
own population, to the region, to the United States and
the world is an explanation. What was it that motivated
Israel to act just now? Because we don't have an answer.
Speaker 2 (01:58):
There was a time not too long ago when nothing
happened in that part of the world without the US
having some major role. Do we have a role in this?
Israel paying attention to us? Are we encouraging them? Are
we discouraging? Where are we?
Speaker 4 (02:09):
Well?
Speaker 3 (02:09):
We clearly didn't put up a red light. We may
not even put up a yellow light. There was some
back and forth between the Israelis and the Americans. These
negotiations were going on. Five rounds had taken place, A
sixth round was scheduled for a few days from now.
If an American president goes to an Israeli Prime minister
and basically says, do not do this or it will
(02:30):
have tremendous adverse consequences for your relationship with me, for
your country's relationship with my country, and virtually any scenario
short of an existential threat to the Jewish state, the
Israelis would hold back. Clearly, Donald Trump did not do
that to bv Nets in Yahoo. But there may have
been a little bit more coordination diplomatically between the United
States and Israel than we understand.
Speaker 2 (02:51):
What restraints or constraints do we think might exist on
Israel and on a run quite apart from the US influence,
and for example, seen Israel go after oil fields in Iran.
We haven't seen Iran go after the straight at home moves.
It appears right now for the moment, they may be
a little restrained.
Speaker 3 (03:10):
I would argue that most of the restraints are on
the Iranian side something because Iran is so vulnerable. Go
back to last year. In April and October of last year,
Israel weakened Iranian air defenses. This is the third time
they've done it. Essentially, Israel's demonstrated the ability its ability
to operate over Iran with near impunity. Iran is vulnerable
to Israel or the United States, conceivably even to some
(03:32):
of its neighbors. One of the things I'm going to
watch closely because I think it's related to the Israeli attack.
This was not just an Israeli attack against nuclear installations.
It wasn't just an Israeli attack against bases, military basis. Clearly,
this was an attack aimed at disrupting, weakening, conceivably pushing
out the Iranian leadership. I think that's a tall order,
(03:53):
but I would think that one of the things all
observers want to watch is what the Iranians do and
their priority. I would think will not be tactically to
respond against Israel unless they believe that's necessary to hold
on to power.
Speaker 2 (04:06):
What do you expect the Israeli goal is here? What
is their mission? We knew when they went into Guys
that they said they wanted to defeat, if not destroy
Hamas entirely. We've talked in the past about really destroying
the nuclear facilities in Iran. That's a tall order, is
that their goal is that achievable.
Speaker 3 (04:23):
Probably of several goals, one is to again show Iran
as being so weak that directly and indirectly through its proxies,
it's got to be extraordinarily careful, and the Israelis has
simply reinforced that message what they've done several times. Secondly, yes,
to weaken the nuclear establishment. There's one big site, as
best I know, David, they haven't gone after yet, which
(04:44):
is Ford, Oh, which is one of the major enrichment sites.
It's also the one that's hardest to destroy, its most underground.
So the Israelis, what word do you want to reduce? Degraded?
The Iranian nuclear establishment killed some of its leading officials,
but they're still an Iranian nuclear establishment with various installations
known and unknown.
Speaker 2 (05:03):
Irani has said that if there are attacks against it,
it will sprint to actually develop nuclear weapons. Is that
a realistic threat? And what does this do to that?
Is there a danger here that they will actually do
that and get nuclear weapons faster? And they would have gone.
Speaker 3 (05:16):
Faster, but in a way that's more difficult to do
this again. I would think the Iranians can't sprint easily
to nuclear weapons. They've got to re establish their leadership,
but they would have to do it in ways that
future Israeli strikes couldn't get out deep deep, deep underground.
So my guess is that won't be, if you will,
a near term response, but could that be a medium
and long term response. Absolutely. I could also imagine the
(05:38):
Iranian saying we're not going to cooperate with international authorities
like we have. Where was the world coming to our defense?
We were still talking to the IAEA is real acted
against us. There will be people, I bet in Tehran
saying if we had had nuclear weapons, this never would
have happened. It's the fact that we don't have nuclear
weapons that the Israelis can act this way against us.
(06:00):
So I would think that's going to become an intense
debate in Iran.
Speaker 2 (06:04):
This is, of course, first and force a geopolitical issue.
There are armaments being deployed, There may well be lives lost.
They've already seen some of the leadership of Iran. It
also has potential economic ramifications in the United States and
around the world. I wonder if you could talk about
specifically one question, which is inflation.
Speaker 3 (06:25):
We've got new numbers soon. It won't affect those over time. Yes,
if oil prices were to stay considerably higher, but let's
take a step back. Oil prices have gone up, however,
many dollars, and we'll see where they settle out by
next week. Still, by historical terms, oil prices are relatively
modest once you factor in inflation. If you remember where
we've been at various times, So just say we're in
(06:48):
the low seventies, that's not that high. Out of all
the things that going to cause inflation, this would, I think,
simply be one of them. But could Now if oil
prices went up to ninety one hundred, one hundred and
ten and stayed there, big thing and stayed there, But
that would require probably there to be an open ended
series of exchanges, not just between Israel and Iran, but
(07:09):
Iran would have to decide that warwide thing made sense
for it a strategy and by that I mean going
after Saudia Ramco Go, having the houtis, do more things
to interrupt and so forth possible.
Speaker 5 (07:20):
Won't rule it out.
Speaker 3 (07:21):
And if that were to happen, it could have an
inflationary impact. But quite honestly, David. Stuff that we're likely
to do to ourselves in terms of our own policy
is going to have much more inflationary impact than I
think this crisis will.
Speaker 2 (07:32):
Exactly my question. We've had some economic policy on certainly
the United States since Donald Trump PRESUS, and there are
a lot of vocations potentially for the economy and that how,
if at all, does this confidence in Middle Is play
against the tariff threat?
Speaker 3 (07:47):
If you ask me, the bigger issues are still made
in America. I think the bigger sources of uncertainty tariff
policy is enormous questions about domestic political what if you
want to call it instability, rule of law, and so
forth in this country, renewed inflation from various sources and
(08:09):
so forth. I would think those raise bigger questions right now.
If you're worried about China and the US, it might
be export controls and what is the nature of those
mutual regimes like leg But I think this adds to it.
Anytime bad things happen, unexpected things happen, this is relatively
unexpected until the last few days. It just adds to
people's uncertainty and it adds to their sense maybe you
(08:31):
ought to keep our wallets in our pocket.
Speaker 2 (08:33):
A lot of uncertainty, geopolitical uncertainty is leading to more
defense spending in the United States, is proposed by Republicans
on the hill and in Europe. That's what we're seeing
right now. Will this be material with respect to that
or was that already that horse already out of the barn.
Speaker 3 (08:46):
I think that horse is already out of the barn.
In Europe, what's motivating it is uncertainty over the wisdom
of continued reliance on the United States and the fact
that the Europeans begin from such a relatively low base.
Speaker 5 (08:57):
Speaking about what.
Speaker 3 (08:58):
So do we look at the percentage of GDP that
the United States spends on defense compared to the Cold War.
We're not even half the average levels we were at
during the Cold War. And we now face uncertainty and
three geographies at least Asia, Pacific, Europe, and the Middle East.
This is a time that's extraordinarily stressful for American defense strategy,
(09:19):
for American force structure, which by the way, seems very outdated.
We've got a small number of very expensive platforms which
could be overwhelmed. I would think by these very inexpensive
systems like drones, or anti ship weapons, anti air missiles,
and the like. So yeah, American defense spending is seriously
(09:39):
below what it needs to be. Though, if I were
going to filibuster and make one more point, David, how
what's always more important than how much you spend is
how you spend it. And the problem with the American
defense spending is not simply the level, but it's the
content of it. We have what to borrow from Eisenhower,
we have a military industrial legislative complex. We've now got
(10:00):
three forces that are making it hard to come up
with a rational, optimal defense posture. That's our biggest problem.
Speaker 2 (10:07):
Final point, And it's not filibustering at all, because you
wrote a book, most recently Bill of Obligations, but before that,
you wrote a book about the connection between the economic
strength of the United States is in national security.
Speaker 3 (10:18):
Foreign policy begins at.
Speaker 2 (10:19):
Home exactly right as we are looking at the one
big beautiful Bill Act, what do you make of our
economic posture and what it means for our national security?
Speaker 3 (10:33):
Well, this questions of the bill, also questions of the
debt ceiling, the tariffs. What they've all added up to, David,
is they've raised questions about America's stewardship. The rest of
the world, like it or not, depends on the United States.
We're still a quarter of the world's economy. The dollar
has a pivotal role. I think the fact that this
is one of the first times we've seen the United
(10:53):
States in a crisis, whether we generated or not, no
longer be the safe haven. But we're beginning to see
other places emerge as alternatives to the United States. That
tells you all you need to know. Other leaders, other
central bankers around the world can no longer operate with
a confident set of assumptions and predictions about the United States,
(11:14):
and that in and of itself drives them, quite honestly,
to hedge their bets on the United States.
Speaker 2 (11:21):
Coming up, the President Trump's goal of two dollars a
gallon gasoline seems to be farther away than ever, But
what would it mean for the good people of West
Texas if he could get there? That's next on Wall
Street Week. This is the second chapter in our story
(11:42):
about setting goals. Last week, our colleague Alex Steele took
a look at how realistic President Trump's goal of two
dollars gasoline is. Something Israel's attack on Iran makes less
likely than ever. This week, Michael McKee continues the story,
traveling to Odessa, Texas to look at what achieving the
goal could mean for an important part of the US economy.
Speaker 6 (12:03):
Today, I will also declare a national energy emergency.
Speaker 7 (12:08):
We will drill, baby drill. The logic of drill, baby
drill seems to be drive down the price of oil,
which then pushes down the price of gasoline. Lower gas
prices mean happier consumers have more money to spend on
other things, but that's not actually happening. The President's contention
(12:30):
that you can buy gas for a dollar ninety eight
in some places is pure fantasy. Last week, Alex Steele
told us the story through the eyes of producers who
can't make the math work. I wish I had more
control over margins. I really don't. It's based on supply
and demand, and if margins are good, we really want
to run. If margines are bad, we still need to run.
Speaker 8 (12:49):
The problem is from twenty twenty seven on was if
you look at our refining kind of global landscape, it
only gets worse. We've got more closures coming because refining
is such a slow moving industry and years. It kind
of takes to build one and there on on new
bills in the West.
Speaker 7 (13:03):
Anyways, US oil production is one factor affecting prices at
the pump. Another, beyond the control of American policies and production,
is geopolitics. We went to Midland, Odessa, in the heart
of the Permean basin to see firsthand what happens when
oil prices fall.
Speaker 9 (13:20):
Never was going to be. It's not slogan, and people
like to talk about the prices of all getting so
low that you have a dollar fifty gasoline or whatever.
As a practical matter, why would some of the largest
and most sophisticated companies in the world drill themselves into bankruptcy.
Speaker 5 (13:35):
I mean, it just doesn't make sense.
Speaker 7 (13:36):
Ray Perriman is an economist who has seen enough cycles
in the oil market to know when the economy is
in trouble.
Speaker 9 (13:43):
If you go back and look kind of at the
century that we've had oil and gas production here from
nineteen twenty one up to about nineteen seventy four, pretty
steadily increased, I mean, down in the Great Depression after
the war, but pretty steadily increased and got to about
two point one million barrels a day. And then because
the fields were old, the production started declining, and it
(14:03):
declined dramatically, declined all the way from nineteen seventy four
to two thousand and eight. Every year went from two
point one million barrels a day to seven hundred thousand.
And people had written this place off. I mean, the
pipelines that you uhould take oil to the Gulf were
now taking gasoline here. I mean they reversed the pipelines,
and everyone they were calling the old rigs or tombstones
(14:23):
and things like that.
Speaker 7 (14:25):
This time around, it's a combination of President Trump's calls
for more drilling terraffs and an increasing foreign supply of oil,
depressing prices in the region in the US that produces it.
Speaker 9 (14:37):
It's definitely cyclical, not nearly as much as it was,
because again the cycles are not as pronounced as they
used to be, primarily because there's plentiful oil in the world.
I mean, at one point in time there were either
critical shortages are big surpluses all the time. That seems
to be leveled out more to some extent now. But
obviously if other producers decide to increase production, or if
(14:58):
something causes the world uncertainty to happen in the world
and demand to drop off those kinds of things. We're
going through some of that right now. Then you do
see the industry being somewhat cyclical, but now it's a
matter of, you know, more plus or minus five percent
in oil field employment, that sort of thing, not how
it used to be. What was just literally all in
(15:19):
or all out.
Speaker 7 (15:20):
It happened during the oil blood of the nineteen eighties,
which led to a collapse in prices, and again in
twenty fourteen when Brent crude fell from around one hundred
and twelve dollars a barrow in June twenty fourteen to
a low of thirty one dollars in January twenty sixteen.
Speaker 9 (15:37):
There's no question about again, it's not like it's not
like the eighties where things become you know, basically during
that period of time, it came almost ghost towns out here.
In one statistic I was often fond of was for
a thirteen year period during that oil bus there were
two multi family housing permits in Middland, Texas. And I
don't mean two apartment complexes, I mean one duplex. I
(15:57):
mean literally to multi family houses. We're now seeing a
steady stream of new housing coming online, even in the
midst of some of these things that are happening, and
certainly it slows down, it slows down significantly, but we're
no longer in that cycle where the place kind of
drives up and blows away.
Speaker 7 (16:14):
Both times when oil prices crashed, oil companies shut down
drilling and reduced production. The ripple effect of that pullback
reduced GDP growth to less than one percent in the
fourth quarter of the year. In twenty fourteen fifteen, we
had what economists call a silent recession in the US.
We didn't see growth contract for the whole country, but
(16:35):
in this area and other manufacturing areas there was a
big downturn.
Speaker 5 (16:41):
What was it like here? It was bad. People have adapted.
Speaker 10 (16:45):
I think the frenzy that went on after we're coming
into fourteen were especially the oil companies, the big independence
that were drilling just to drill as much as they could,
just to get as much oil as they could, learned
a lesson in that time. They stopped drilling and started
drilling out of cash flow. So people nowadays don't get
(17:07):
over extended. Like the banks are smarter. They don't allow
people to get over extended. Like they used to in
the past too, and so it's made for an interesting
paradigm right now. The companies, the service companies are healthy
to get through another year of this, but they can't
with their employees, so they just they'll have to lay
them off. And that's what's SATs. You're using incredible brain
(17:30):
trust in these people.
Speaker 7 (17:31):
There's a danger that's happening again. With prices below the
cost of exploring and developing new wells, oil companies are
in the process of shutting down again.
Speaker 10 (17:41):
The travels getting cheaper again. It is a great tax
break for the country, there's no doubt about it. I
think that's why Trump was wanting the lower prices to
spur on things like that in the.
Speaker 5 (17:50):
Country as a whole.
Speaker 10 (17:52):
But it's very detrimental to our industry here in the
United States. And you can't have more of an American
industry than the Texas oil and gas industry and employs
people here.
Speaker 7 (18:03):
Kirk Edwards runs Latigo Petroleum, an independent exploration and production
company in the Permian Basin. Last week he canceled the
contract to drill five more wells. He won't start up
again until oil is at least seventy dollars, and on
top of falling prices, he also has to deal with
the Trump import taxes.
Speaker 10 (18:23):
So the tariffs have hurt us also because of steel process.
So you've got the process of steel, which was a
very big component of our wells, going up twenty percent,
which makes our weals more expensive than we have had
him in the past, and yet our oil process down
twenty two percent.
Speaker 7 (18:40):
Over the past four months. West Texas Intermediate, the benchmark
American oil price, fell by about ten dollars a barrel.
Israel's attack on Iran has pushed WTI off its lows,
climbing above seventy dollars a barrel. Analysts warned it could
go higher, but it will take some time to show
up in gasoline prices. Most people in America I think
(19:00):
of gasoline when they think of inflation, and they think
of oil prices. Oil prices have come down a lot,
but gasoline prices haven't come down as much. Has the
relationship between oil and gas prices changed?
Speaker 10 (19:12):
So no, And so when Trump talks about two dollars gasoline,
literally it's two dollars coming out of the refinery. And
so today it's probably two five two dollars and ten
cents something like that. But from there it gets marked
up by other people that buide at the refinery, bring
it to the gas stations, and you know, they do
their deal about making profits. So we've always seen when
(19:34):
oil prices go down, the gasoline prices are slow to react.
Speaker 5 (19:39):
But they should be coming down.
Speaker 10 (19:40):
And you know, most towns have a salms you know,
the probably the cheapest gasoline, and it's at two forty
right now here in Odessa, but you'll see most of
the service stations are at two sixty. California's still going
to see four and five dollar gasoline.
Speaker 7 (19:53):
Yet, as of June ninth, the national average price per
gallon is six cents higher than at the first of
the year, well down from and it's early April peak.
We're still not back to pre tariff levels and it's
not clear when or if we will be an expected
tailwind for the economy may turn out to be just
a slight breeze.
Speaker 10 (20:12):
It's the rest of the country that benefits from the
gasoline prices. Again, people in middle of Odessa. We would
rather see higher gasoling process because it means the wh
process good and the economy is going to be good.
But It is a side effect for everybody because everybody
has to use gasoline in their cars right now to
go to work and fly and do things like that.
Speaker 7 (20:33):
Odessa, Texas provides an early warning the White House Drill
Baby drill promise is seen here as a threat. Odessa
and its neighboring town of Midland are the beating heart
of the oil shale revolution that helped the US regain
energy dominance. But rigs are coming down and jobs are
going away. Chevron this month announced it would lay off
(20:53):
eight hundred workers in the Odessa Midland area.
Speaker 10 (20:57):
You can tell we're down probably thirty three hundred people
without jobs right now. But the huge part of that
is each one of these wells cost about twelve million
dollars give or take to drill. And you put, you know,
thirty rigs times twelve billion dollars, it's about four hundred
million dollars a month that was coming into this economy
(21:18):
and paying for people and buying equipment and things like that.
It's over four billion a year that's being taken out
of our market here just in the Permian alone, and
so it's significant.
Speaker 7 (21:28):
Well what's the economic impact on Odessa.
Speaker 5 (21:31):
Well, we're diversified.
Speaker 10 (21:32):
So we've learned after a little six times, Odessa and
Midland have learned to diversify. We've got a University of
Texas system branch here, University Texas Permian Basin that's growing.
And so it's just like Texas Tech and Lubbock or
Baylor and Waco. We're seeing that these colleges make a
difference and good times and bad And also we've recruited
(21:54):
in different companies to come in here. A lot of
powers getting generated here because of natural gas is so
cheap in the Vermion. And we're also seeing an uptick
right now in data centers. So these data centers want
to come locate where the energy is cheap, and so
we're seeing some of that. So some of that is
offsetting the shock that we get normally from the oil times,
(22:15):
because we've done a good job helping to diversify the economy.
But still the oil sector is what pays all the
bills around town, and people are more affected by that.
Speaker 7 (22:25):
For sure, the bet is less drilling, less oil will
push prices up, the opposite of the President's goal. And
at this point it's too early to say whether higher
oil prices will lead to more drilling. Oil companies don't
know how long prices will remain elevated. In the meantime.
For a town where almost everyone drives a gas hungry
pickup truck, a fall in oil prices means cheaper gasoline,
(22:49):
which doesn't do you much good if you've lost your job.
Speaker 10 (22:53):
We've turned drill, baby, drill nine to wait baby, wait.
It's something that again we're pausing, and we know the
effect of lower oil process. It will slow down things
in this country. We've seen it six times now, and
I just I don't understand the side effect because you're
in a county voted eighty percent for Donald Trump.
Speaker 9 (23:14):
If you see the global economy, relax a little bit.
Right now, there's a lot of uncertainty. The most typical
economic reaction to uncertainty is to do nothing. You don't
buy that car, don't buy that house, don't bring out
that new product, don't make that investment. All of those things.
We tend to just lay back and do nothing.
Speaker 7 (23:31):
One way Ray Perrman takes the pulse of oil production
in the Permian Basin is to look at oil rigs
that are in storage. We drove fast one by the
railroad station in Odessa, and if it's any indication of
the slow progress on drill baby drill. There we're eight
rigs in storage doing the weight baby.
Speaker 2 (23:49):
Weight coming up. Every day we hear about a new
wonder drug to help us live longer or improve our lives.
But where do they all come from? And can we
keep up the pace of innovation? That's next on Wall
Street read this is a story about origins, the origins
(24:15):
of all those new medicines we hear about every day,
whether to deal with diabetes.
Speaker 11 (24:20):
I have Type two diabetes, but I manage it well.
Speaker 5 (24:23):
Or with cancer.
Speaker 2 (24:24):
This time we're taking the battle to cancer. Did you
ever wonder where they all come from? We went on
one of the sources outside Trenton, New Jersey.
Speaker 4 (24:39):
The Center of the action of our Research of Development organization,
which is the lifelood of a company like Johnson and Johnson.
So here we have about twenty five hundred scientists and
researchers that are connected with the risk of our around
the organization.
Speaker 2 (24:54):
Joaquin Duato is chairman and CEO of Johnson and Johnson,
one of the largest drugmakers in the world. We met
with him at his firm's research center in Springhouse, New
Jersey to learn how a major pharmaceutical company develops cutting
edge drugs.
Speaker 4 (25:09):
It started with smaller campus and gradually we have expanded it,
as you can see, into a large campus a very
beautiful location too.
Speaker 2 (25:18):
For Duato, there has never been a better time to
be in the business of health science innovation.
Speaker 4 (25:24):
We are in a golden era of life science innovation,
of medical innovation, and that's the convergence of two forces.
On one side, we have a better understanding of the
biology of diseases, of the underpinions of disease, and on
the other half, we have technology AI machine learning that
gives us the opportunity to manage large amounts of data
(25:46):
and gain insights for that. So all these factors combine
create the type of progress that we see. And the
US is the country that today has a lead over
the rest of the world in life science innovation.
Speaker 2 (26:00):
It is no coincidence that the US leads the world
in biotech innovation. In twenty twenty one, a Congressional Budget
Office study reported that the industry was investing over eighty
billion dollars a year, up by a factor of ten
over ten years, amounting to some twenty five percent of
farmer companies revenues a much larger portion than for other industries.
(26:22):
It's not just the money being spent in the United States,
it's also the way the government, academia, and the private
sector have worked together.
Speaker 4 (26:30):
You don't have places which are perhaps of life science
innovation like Boston or San Francisco anywhere else in the world.
Everybody is looking with mb to the type of ecosystem
that we have in the US. Great invested in basic
research through academic institutions and hospitals, venture capital that flows
(26:50):
into the life science sector. Great companies that are able
to develop those technologies, manufacture them and bring them to patients,
protection of intel, actual property, a market that rewards innovation.
That combination, it's a uniquely American combination.
Speaker 2 (27:07):
Individual companies like Jay and Jay have also created their
own complex structures to seek out innovation wherever it is
and develop it.
Speaker 4 (27:16):
We work very hard in order to work and scout
the world to see when and where are innovations and
technology that are promising that could eventually benefiting of our
scale in research, in development, in manufacturing, and in commercialization.
And that's how we have been able to encounter to
(27:37):
find significant innovations that were at an emerging state, still
far from getting into patients and ultimately get them into patients.
Speaker 2 (27:47):
An example is Icotrokinra, an oral medicine Johnson and Johnson
is developing to treat the skin disease plaque psoriasis.
Speaker 4 (27:55):
So whether I you mean this is in which your
own immune system turns against you, having an oral therapy
was going to expand the pull of patients that were
going to be able to treat it with this medication.
So we work and we scout the world to see
are there any company out there that is going to
have an oral medication with comparable safety and efficacy to
(28:17):
these injectible biologics. And we identify one company and if
they had a molecule that there still was pretty clinical,
meaning it had not been yet using patients. So we
brought it here to spring House, and the spring House
we work in making sure that the drug was a
stable in the digestive trug, that it had the right potency,
(28:38):
and we actually build a medicine that is an oral
medicine with similar efficacy to biologics that went to the clinic.
We had the clinical trials very successful. So in this
comparable efficacy and pretty soon in the second half of
the year, we're going to be able to file it
for the FDA in shuriasis and get to patients next year.
Speaker 5 (29:00):
How big could this be?
Speaker 4 (29:01):
But this is going to be one of our biggest
breakthroughs for Johnson and Johnson and for our growth in
the second half of the decade.
Speaker 2 (29:09):
Big pharmaceutical companies like Johnson and Johnson are spending record
amounts of money to discover and develop new medicines. It
has invested some fifty billion dollars in R and D
and M and A since the beginning of last year,
but they're far from the only ones. Zaramradali represents venture
capital firms in biotech as head of Grant Thornton's Life
(29:30):
Sciences industry Practice.
Speaker 12 (29:32):
So when you think about big pharma and you look
at data from twenty fifteen to twenty twenty one, the
drugs that were developed internally an FDA approved was less
than thirty percent by big forma and the rest of
it was external. For some companies that percentage was eighty
percent and for others it was zero.
Speaker 2 (29:55):
In looking for those opportunities to invest in the innovative
culture found in the labs where a dalar looks for
three things, the people, the science, and patience.
Speaker 12 (30:05):
When you think about science is challenging, it's it's hard.
And you know, when you think about the failures in
R and D, I mean that's to be expected, and
any investors should should be patient and they should they
should have a time arison of like ten to fifteen
years to see a drug from discovery to commercialization. It is.
Speaker 5 (30:27):
It's not easy.
Speaker 12 (30:28):
Science is difficult.
Speaker 2 (30:30):
Duato respects how difficult the discipline is, regardless of size
or scale. And of course we can't talk about innovation
in just about any part of the economy without turning
to artificial intelligence and what it will mean for scientific discovery.
We saw it firsthand Jay and Jay as they used
it to screen millions of compounds.
Speaker 13 (30:50):
How long does it take you to screen the whole
one point seven We.
Speaker 14 (30:53):
Can screen one compound every two to three seconds, So
we can screen this whole fire one point seven million
compounds in rap five to ten days, depending on the target.
Speaker 7 (31:02):
Wow, so very.
Speaker 2 (31:03):
One point seven million compounds in five to ten Pacisco
twenty four hours a day, seven ex week.
Speaker 5 (31:09):
As again, so what used to.
Speaker 13 (31:11):
Take us months? That take us days?
Speaker 12 (31:13):
Yes?
Speaker 13 (31:14):
So This is a way of you know, accelerating the
nature of compounds and also the time it take.
Speaker 5 (31:21):
Us to have lead compounds.
Speaker 13 (31:23):
And then we have other platforms that access to what
extent they are going to be viable? Are they going
to have any toxicities?
Speaker 5 (31:29):
What is the biological effect?
Speaker 2 (31:31):
What form is the output of this happen? I mean
is it data? Is it?
Speaker 5 (31:36):
The data?
Speaker 15 (31:36):
Is the data?
Speaker 13 (31:37):
So in the past, analyzing all these millions of data
points would have been very difficult for researchers. Now they
have the underlying models that are going to drive the
insights for them, So we accelerate the screening and also
the analytical part. So the AA is a tool, the
data is probably daring and then also the interpretation of
the insights coming from the AI.
Speaker 5 (31:59):
It's what our signing is our rehould just do.
Speaker 13 (32:01):
So while yes, technology is important, ultimately it comes down
to our data and to our researches to what extent
we can accelerate progress.
Speaker 2 (32:09):
Handling all the data is a big opportunity but also
a big challenge, particularly for early stage biotech firms, leading
some to partner up. Does that all things being equal
over time give big pharma something of an edge because
it typically has access to more data.
Speaker 12 (32:27):
I mean, it might be if and that is where
we're seeing collaboration agreements with the companies that are AI
first companies with big pharma, and you're seeing activities in
that space as well. You've got this right, I mean,
that's where that's where the flow of money in the
future will be.
Speaker 2 (32:44):
And then there's the role of the government in giving
incentives for biotech innovation and in creating the overall environment
where it can thrive. Tim Sullivan is CEO of the
New Jersey Economic Development Authority.
Speaker 16 (32:58):
It's a crowded field, but New Jersey and th extent
toward the top of that field, largely because of the
investments that Governor Murphy has made in growing that innovation ecosystem.
So we have an R and D tax credit for example,
that you know, all the big farmer companies take advantage of.
We have really focused on trying to grow again that
early stage pipeline of companies that might get acquired by
big pharma or turn into big farmer companies themselves. So
(33:21):
you know, for example, Gilliad made New Jersey It's East
Coast headquarters three or four years ago because they bought
a company in Mars County and like the talent so
much that in New Jersey that they decided to plant
their East Coast flag here. So, for example, we have
a program, we think it's the only program like this
in the country that lets early stage life sciences and
technology companies sell or monetize their net operating losses and
(33:46):
sell them to profitable companies in exchange for non dilutive
essentially equity, which a number of companies that have grown
and scaled have taken advantage of.
Speaker 2 (33:53):
This may be the golden era of medical innovation, as
Joaquin Duato believes, but when you ask about the origin
of all those wonder drugs, there's no single answer. They
come from a unique combination of private enterprise, big and
small capital from a range of sources, the research being
pursued by gifted scientists, and the support of federal and
(34:15):
state governments. But the results of that network have only
one real destination for all their work, the patients. They serve.
Speaker 12 (34:23):
One thing that you want to leave the group here
is all about the patient. Science is hard. You know,
have the patients, and let's support the community and innovation
to get it to where we need it.
Speaker 5 (34:35):
To be.
Speaker 4 (34:37):
We measure success in terms of how many patients we
can serve. If we are able to address significant patient
needs as we are doing, then we can certainly translate
that into an economic return. This is part of the
principles of our credo. We are a company with Andred
and four years of history. Our founders establish what we
(34:59):
ca eighty five years ago, creating a very clear yerkey
of decisie making. First we serve the patients, thened employees,
then the communities, and if we do well for those stakeholders,
then you'll have a fair return for your shareholders.
Speaker 2 (35:16):
Coming up tired of all those traffic jams, are rapidly
developing industry of electric vehicles aims to take to the
air to reinvent the world of transportation. This is a
(35:38):
story where the sky is not the limit, it's the goal.
Automobiles have come a long way since Henry Ford introduced
the world to the Model T in nineteen oh eight,
and several companies are now even trying to get them
off the ground. But will flying cars change our world
the way the first car did? Ed Ludlow brings us
that story from San Francisco.
Speaker 17 (36:01):
Flying cars have been imagined time and time again, but
they've taken a while to come to fruition. Now, as
President Trump sciences executive Order on accelerating flying car programs,
are they finally a reality. Morgan Stanley estimates the EV
TOEL industry could be a nine trillion dollar market by
twenty to fifty.
Speaker 14 (36:19):
EV tools are by definition, electric vertical takeoff and landing vehicles,
which is a whole new breed of flying vehicles that
effectively give us flying cars as we will promised as
little kids, but using completely new forms of propulsion and
flight configurations.
Speaker 5 (36:35):
That are very new for the industry.
Speaker 14 (36:37):
This is supposed to be, by virtue of many analysts,
a significant new market that hasn't really existed before. Over
the next five to ten twenty years, it's going to
change very dramatically as we start to unlock some of
the biggest barriers for taking advantage of the sky in
ways that we haven't done before. In the United States,
there's somewhere on the order of about fifty companies that
are developing some sort of flying car companies that people
(36:59):
are starting to see almost daily, from Jobe Technologies to
Beta Technologies to Pivotal to Archer.
Speaker 15 (37:06):
When I started on this more than fifteen years ago.
It was a fringe idea, and today there is an
incredible vibrant industry that is building up.
Speaker 17 (37:19):
Joe ben Bevitz is the founder and CEO of job
The company focuses on air taxi services. It as a
market cap of nearly six point seven billion dollars, which
is almost fifteen percent of the market cap of general motors.
Speaker 15 (37:32):
With a vertical take off and lining aircraft, you can
move from point A to point B, and you can
build networks of air traffic routes in and around cities.
And we're working at building best in class vertiport infrastructure
at JFK and at LaGuardia so that you can go
(37:53):
seamlessly from a Joby flight onto your delta flight. The
goal is to do this in a very step wise
progressive way. One day, we hope that there will be
a take off and landing location is conveniently located as
a subway stop in a major city.
Speaker 17 (38:09):
Joby's version of a flying car is technically considered an aircraft.
That's where the regulation of the technology gets tricky. The
big moment that Wall Street in particular is waiting for
is FAA certification. What is it that the FAA needs
to sign off on and when does that happen?
Speaker 15 (38:27):
To your mind, we have the first company to achieve
the Stage one certification, the first company to shave stage
two of the certification, first company to complete stage three,
and now we're making phenomenal progress through stage four and
when we submit the test plans and then that opens
the door for us to begin the testing. And then
stage five is when we submit the test reports and
(38:48):
then the FA signs off.
Speaker 17 (38:50):
It's a small market that there are many players, each
has different tech and progress varies. SMP Global says Joby's
expected to go from six to fifty six units by
twenty thirty, generating three point five billion dollars in revenue,
but that's all contingent on FAA certification. The company's testing
with no one in the cockpit, but the world's watching closely.
Speaker 18 (39:14):
Overall, the battery capacity for this aircraft is something like
one and a half Model X Teslas, just to kind
of put it in a ground vehicle reference. The idea
is to sell this by the seat, so when you
open the app, you'll be able to select the ride.
A car will come and get you to whoever you are,
take you to the nearest take up on landing spot,
and then other people will be kind of brought just
in time at the same time to fill the other
(39:35):
seats within the aircraft.
Speaker 15 (39:36):
It's one of the things we I probably haven't focused
on enough is the incredible acoustic signature. There are a
significant challenge for people who live close to the takeoff
and landing locations. I've told the team, let's try to
make this like the wind in the trees. When you
hear it, what fly over you. Everybody has to stop
(39:58):
and be really quiet because.
Speaker 7 (40:00):
You sh.
Speaker 5 (40:03):
And that's magic.
Speaker 17 (40:05):
Job expects to see their first passenger operations in early
twenty twenty six in Dubai, operating full steam ahead on
production in their California based manufacturing facility, using locals to
craft their creations.
Speaker 15 (40:17):
One of the cool things is about another element of
the flybarre that's incredible is how easy it makes it
to fly. So you can take somebody who's never flown
an airplane before and never flown a helicopter before, you
put them in the simulator and they'll fly you perfectly
from Wall Streight to the Delta Terminal four at JFK
and that is really spectacular in terms of how intuitive
(40:40):
it is.
Speaker 17 (40:41):
But can anyone really fly one of these crafts?
Speaker 12 (40:45):
Shakov.
Speaker 17 (40:47):
One of the other players in the space is a
company called Pivotal. Pivostal's ev toll is taking a very
different approach.
Speaker 6 (40:55):
Pivotal has been in the development of novel architecture aircraft
for thirteen years. Our mission is nothing short of just
changing the way humanity moves through the air, and that's
going to happen in small steps.
Speaker 17 (41:09):
Ken coughlan is the CEO of Pivotal, an evtel company
with a unique design and a very different mission.
Speaker 6 (41:15):
In your term, we want to deliver on this promise
of personal aviation and be able to deliver to you
individual private owners who can take to the sky and
enjoy the freedom of personal flight on their own terms.
Speaker 11 (41:29):
So Pivotal has three screens of customers. One are direct
consumers in the personal area vehicle Martin. The second pillar
of our strategy is to the defense unit, and then
the third is actually from public service.
Speaker 6 (41:42):
There's over hundreds of thousands and nine one one calls
in the United States alone every single year. Many of
those something in the order one in ten are time
sensitive medical calls. We're having a qualified emergency medical technician
or paramedic there on site. In four minutes versus nine
minutes or twelve minutes or even fifteen minutes could make
(42:05):
the difference between life and death. We actually hoped to
be in a pilot operations in at least two locations
in the United States really in the next six months,
so before years end, we hope to be up and
saving lives and training other paramedics to actually be pilots
of this aircraft.
Speaker 17 (42:23):
It's considered an aircraft, but its operates as not FAA
certified pilots. Pivotal claims is still safer than driving.
Speaker 6 (42:31):
It's actually like three or four orders of magnitude safer
than driving your car on a freeway on a per
mile basis might be better than that.
Speaker 5 (42:40):
It's very close to zero risk.
Speaker 6 (42:42):
That may contribute to a culture of zero risk within FAA,
and that would certainly slow down innovation because there always
has to be at least the tiniest acceptance of risk
for everybody involved in delivering a new technology that involves
transport to it off.
Speaker 11 (43:01):
So the flight program is designed at Pivotal, it is
not FAA certified, so you are not an FAA pilot,
but we require everyone to be certified by Pivotal to
be able to fly the aircraft, and that goes in
three stages. So there's an at home study to be
able to understand airspace and atmosphere so that you can
integrate into the airspace around you. Then there's simulator training
(43:23):
where you're in a full flight simulator which is able
to go through all the standard flight dynamics as well
as emergency procedures, and that usually just takes a couple
of days. And then after that you do flight training
with us. You hop in the real aircraft and you
pay to the sky with the trainer on the ground
just communicating to you, and it typically is about eight
flights to be able to get through all the different
areas of flight within our flight training program.
Speaker 6 (43:45):
We did not set out to immediately change the world
in a tight schedule by somehow filling the sky with
the air taxis now.
Speaker 5 (43:54):
Don't get you wrong.
Speaker 6 (43:55):
I can't wait until I've been down in San Francisco
and I'm ready to go home, and I can pull
out my smartphone app and you get a fifty dollars
ride home to Sian Jose and raising capital based upon
that premise is also it's a challenge because a lot
of things have to go right for that to happen
on a certain schedule. So we decided fundamentally we're going
(44:19):
to stay away from air taxi and focus on privately
owned assets, assets for public safety, and assets for defense.
Speaker 17 (44:28):
According to reports, the companies back by Larry Page. Pivotal
did not comment on its investors to Bloomberg, both privately
held Pivotal and publicly held job You have taken over
ten years to launch job raising over two point six
billion dollars. Progress has been slow.
Speaker 14 (44:43):
I'd say that it's taking a lot of time in
the West, primarily because of the regulatory pathway. It is very,
very difficult to certify something through the FAA, be it
a small little single engine Sessna, up to something that's
completely novel or new, like a flying car, and we're
having to create the regulations real time as we're developing
(45:04):
the technologies, the good analogies, you're putting the engine on
the airplane while you're flying at the same time. Now,
we'll say there's a lot of interest and support from
the current administration to accelerate these technologies and to reduce
the barriers for companies to be able to test, validate,
and take these products into a commercial operation. But it
still takes a lot of time.
Speaker 11 (45:25):
The world saw these things in TV shows and movies
decades ago, and I think what you're asking is, why
didn't we just make them decades ago? Well, really, we
didn't have the battery technology, so to have the energy
density in the batteries and also the power density to
be able to take off and sustain flight wasn't in
previous battery technologies, and even today we're operating at just
(45:48):
the limits of the battery technology today to be able
to have twenty minutes time miles.
Speaker 17 (45:53):
Scalability is the big question for this technology. When automobiles
were first introduced, it took five more years to bring
down by fifty percent with the introduction of the assembly line.
Cost efficiencies are still many years away for ev toll.
Speaker 14 (46:08):
There a few things that have to happen for scale
to happen. Ground infrastructure is a key area, much like
Tesla with their superchargers, the regulatory environment, getting those put
in place, and then actually demonstrating to customers that this
is cheaper and safer and once you are able to
do that with real paying people flying on these things.
I expect the scale to only be limited about how
(46:29):
quickly you can build them.
Speaker 6 (46:31):
We only want to use our architecture to go after
applications we know we can do better than anyone else can,
So that does not include flying really fast.
Speaker 5 (46:42):
Efficiency is the name of our game.
Speaker 6 (46:44):
Cost effectiveness is the name of our game. But again
we're focusing on privately owned aircraft, privately owned assets today
only in the ultra light single seater capability, tomorrow something
much larger.
Speaker 18 (46:58):
So the idea is that we can sell this by
the seats, and that we can make it more accessible
and then actually drive the overall kind of like flywheel
of demand and utilization and load factor for these aircraft
and make a really economically viable service, not just one
that's an incredibly better way to get to where you.
Speaker 5 (47:13):
Want to go.
Speaker 15 (47:13):
What gets me really excited is if we can move
to where automotive got to as we moved into the
early nineteen hundreds, where we're starting to produce thousands and
then tens of thousands of aircraft a year, and we
drive the unit prices down to the point where this
becomes asfordable, as affordable as driving your own car, where
we hope to launch at prices around where an Umber
(47:34):
Black Fair would cost you, down to the price where
millions of people can afford to do this every day.
That's when I feel like my dream will have been realized.
Speaker 2 (47:47):
That does it for us here at Wall Street Week,
I'm David Weston. See you next week for more stories
of capitalism.
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