Bloomberg Businessweek Weekend – September 22nd, 2023 - Bloomberg Businessweek

Episode Transcript
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Speaker 1 (00:01):
This is Bloomberg business Week Inside from the reporters and
editors who bring you America's most trusted business magazine, plus
global business, finance and tech news. The Bloomberg Business Week
Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.

Speaker 2 (00:20):
Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Guess another FED meeting that went as expected with the
Central Bank holding firm for now in terms of interest rates,
but they did tim ratchet down expectations for rate cuts.
We also had the UN General Assembly in session, coinciding
with New York City's annual Climate Week summit, and that
gave us a really great chance to tap into some

(00:42):
unique leaders on sustainability, including Energy Impact Partners founder Hans
Koebler and Cisco's Chief People, Policy and Purpose Officer Franksutis.
We'll hear more from both this hour.

Speaker 3 (00:53):
We mentioned Anga in session this week. That's the UN
General Assembly. A notable absence was Chinese President Shijin Ping.
China continues to dominate the headlines in twenty twenty three,
with concerns about its economy, its outsized contribution to global emissions,
and those lingering tensions with the us.

Speaker 2 (01:08):
First up on our program legendary short seller and longtime
China bear Jim Chenos. He is someone who raised concerns
about China's ghost cities years ago. We were always talking
to him about it, and even as the country's central
bank says it has sufficient policy space to support an
economic recovery, Cheno's remains a bit skeptical.

Speaker 3 (01:27):
Bloomberg, Simone Foxman and I welcome Chenos to our studios
a bit earlier this month, and we began with his
apprehension over the world's second largest economy.

Speaker 4 (01:35):
Please to bring in our next guest, Jim Chanos. He's
the founder of Chenos and Company. Thanks so much for
joining us. He's in studio or Intero Interactive Broker's studio.
He says China's on a treadmill to hell and shared
those concerns with the House of Representative Select Committee on
the Chinese Communist Party this week. Talk to me about

(01:55):
the hearing, you know, were you able to kind of
get a sense of whether or not and I know
you weren't there physically in person, but you did.

Speaker 5 (02:02):
Offer your insight.

Speaker 4 (02:03):
Were you able to get it a sense on what
the committee's doing? Are they going to be successful. Are
they going to do anything?

Speaker 3 (02:09):
In fact that's.

Speaker 6 (02:11):
Above my pay grade? And thanks for having me as
to the politics in Washington, And I do think that
the Committee is doing good work in calling attention to
these issues. And you know, we've been we've been pretty
negative on China now for a better part of thirteen years.

(02:32):
And I think that the risks that China poses have
morphed from purely financial to now beyond that into the
political realm and the national security realm, and I think
that makes this a bigger story. And the economic model
risks as to how China sort of deals with those

(02:56):
may in fact affect the politics.

Speaker 4 (02:58):
Yeah, does the contagens spread beyond what I think most
people are expecting at this point.

Speaker 6 (03:04):
The good news is is that the risks to the
real estate market and the economic model do not have
a lot of direct contagent risks to Western banks and
particularly American banks. Where the risks are are in our
equity and debt investments that various funds hold, pension funds hold,

(03:28):
retail investors hold, and I think that's the bigger issue
as opposed to a two thousand and eight type transmission
from their real estate bubble. Bursting to everyone's real estate
bubble bursting. They can keep that internal, but it's a
big problem.

Speaker 3 (03:46):
What are the threats beyond an economic collapse or a
property collapse in China, I'm talking geopolitical threats, national security threats.
What's the stuff that keeps you up at night?

Speaker 6 (03:56):
Well, the morphing from spending on the additional high speed
rail link that's unprofitable, or the next apartment building and
putting up and basically building another aircraft carrier. You know,
the classic nineteen thirty scenario where a number of countries
you know, ramped up their defense spending as a way
to stimulate and we know how that ended. And so

(04:18):
I think that that we saw reports even today. I
mentioned it earlier that Chinese defense spending may be a
lot greater than we think, you know, as high as
four percent of GDP. The US is three percent of GDP.
So they are spending more money. It used to be
directed internally with internal security systems and that, but increasingly

(04:43):
now it's hard to miss that it's also external with
the Blue Water Navy and increased tensions around Taiwan.

Speaker 3 (04:51):
Well, let's talk about that. I mean, how much of
a concern do you think that is right now, an
invasion of Taiwan.

Speaker 6 (04:59):
Well, as I said earlier, I think the real risk
is something something happens, right, an incident, that's that's unexpected, right.
You have now ships transversing, crossing each other's bios, you
have a lot of aircraft in the area, and all
we need is someone you know, a pilot to make
a mistake or get scared, or you know, a mishap

(05:20):
of someone, and then you have an you have an
international incident, and and that's I think as the temperature
kind of rises in the in South China Sea, I
think that's the real risk as opposed to a premeditated
you know, attack on a Western country or Western ally.

Speaker 4 (05:39):
So you want to short China potentially, We've been short.

Speaker 6 (05:42):
We've been short China for for years. You know, paradoxically,
we're less short China now than we were ten twelve
years ago because China has gone nowhere. I mean, the
stock market has basically been flat for twelve years, and
as every other stock market is.

Speaker 3 (06:00):
Tripled or quadrupled.

Speaker 6 (06:02):
So it's been a very poor place for Western investors
to part their money for years, not just the last
twelve years, but really for the last twenty years, and
I think that's going to continue to be the case.
Broadly speaking, China does not treat Western capital very well.

Speaker 3 (06:19):
How are you betting against China right now?

Speaker 6 (06:22):
We have some direct shorts in the financial area, We
have some indirect shorts that depend on China for a
fair amount of their revenues. But as I said, our
direct shorts are probably no more than four or five
six percent of our portfolio. In twenty ten eleven it

(06:42):
was above twenty percent.

Speaker 3 (06:43):
We've spent a lot of time over the past few
months talking about the struggles of the Chinese economy and
the data that we get, or the lack thereof of
data that we get. Jim, what evidence do you have
that the Chinese economy is actually worse than what Beijing
says or what markets already believe.

Speaker 6 (06:59):
The funny thing is is that if you have an
investment driven economic model, which they do, the GDP is
actually accurate. I noticed something over the weekend that Michael
Pettis pointed out that in an investment driven model GDP,
growth is actually an input, it's not the residual, which

(07:19):
I think is a really interesting observation. That is I've
always joked that China's the only major developed economy that
knows its annual GDP on January one of that year. Yeah,
and so you know, whatever the numbers needs to be,
they will put enough stimulus in terms of new investment
to hit that number, give or take. So I don't

(07:41):
quibble with the quality with the actual numbers they're putting out,
but it's the quality of the numbers, if you will,
that if you never write off bad investments, the actual
costs to GDP are sitting in your banking system in
terms of bad deaths, and you have to either inflate
that away or recapitalize your banking system. And so that's

(08:01):
the nexus of this economic model with economic growth, and
it's a banking issue ultimately. And so I think that
that that's where I worry that as long as the
bank's never write off the bad debts, that's where the quality,
if you will, of disclosure is poor.

Speaker 4 (08:21):
The rm IPO your thoughts on the valuation.

Speaker 3 (08:24):
It seems a bit high, are you?

Speaker 4 (08:27):
Are you not convinced by the Aihi?

Speaker 6 (08:30):
I think it's what one hundred and twenty times earnings
and fifth, I think revenues are two and a half
billion and went out at a sixty billion.

Speaker 3 (08:38):
Dollar evaluation, and twenty five percent of its revenues come
from China.

Speaker 6 (08:42):
Yeah, so so twenty five twenty almost twenty five times
revenue seems a little steep. But what do I know?

Speaker 3 (08:48):
Are you going to shorten it?

Speaker 6 (08:49):
Well, you can't yet, so it's a limited float, but
I'm sure at some point we'll we'll crack open the perspectus.

Speaker 4 (08:58):
Have you been thinking about shorting in Nvidia? No, no, no,
don't get in the way of that.

Speaker 6 (09:03):
We have we have things that are that are perceived
as AI plays, that are that are trading much more
expensive than in video does so it's so no need
to go after the OG.

Speaker 4 (09:13):
What kind of opportunities has this opened up? As someone
who looks at the market with a very critical eye.

Speaker 6 (09:20):
Well, I think anytime we see one of these these
tectonic shifts in new technology, like the Internet in the nineties,
people at first embrace everything, everything is going to benefit.
But what you find out, of course, is that when
it's truly truly a major shift, is that those technologies

(09:41):
end up harming as many businesses as they create. And
so if you think about the companies that were in
the business of distributing analog physical products that became digitized.
They went away, Blockbuster Video, Eastern Kodak, I mean, companies
like that, record stores.

Speaker 5 (09:58):
I mean, and I.

Speaker 6 (10:00):
Suspect that if AI is as big as most people
think it will be, you will see lots of businesses
that had moats find out that the motes have been breached.
So your software as a service, What prevents a corporation
from having AI design its own software for various different applications, right,
and and there's lots of things that suddenly you don't

(10:25):
think about. I kind of joked a little bit a
few months ago when IBM CEO came out and said
that that AI might may make some of the IBM
workforce redundant, and I joked, well, what happens when the
clients find that same thing out?

Speaker 3 (10:42):
Yeah, I mean, that's that's a really good point. I
want to shift gears a little bit and talk about
your strategy around shorting and what you're seeing in the
market today. I think a lot of people, of course,
understand your history with being a fraud hunter and going
after companies like Enron in the past. Wondering if over
the last few decades with regulatory changes, you've seen fraud

(11:05):
reduced or are there increased instances of potential fraud out there?

Speaker 6 (11:09):
I've called this the golden Age of fraud. I think
there's more fraud in the financial markets now than there
has ever been. Why And I teach a course in
the history of financial market fraud, So the cycles go
back to the late seventeenth century.

Speaker 1 (11:25):
I think that.

Speaker 3 (11:27):
It always changes.

Speaker 6 (11:28):
But what really has me bothered now is that a
lot of it hides in plain sight in the way
in which companies report their business and their metrics. So
prior to say, ten years ago, you really had to
sort of if a company was making unusual changes to

(11:50):
its earning statements, you know, they would have to explain
it away. And nowadays, adjusted earnings are basically the norm,
and companies add back all kinds of things that they
don't don't really a little expense. Oh it's amazing. Coinbase
in the fourth quarter of last year, I think share
based comp was almost eighty percent of revenues, and they

(12:10):
just added it.

Speaker 3 (12:11):
Back, I mean, and so yeah, we go back to
the we work. Why we work didn't go public the
first time community adjusted ebit, Yeah, that was at this
point it's a joke. But then it wasn't a joke.

Speaker 6 (12:21):
I know, and investors lost a lot of money. And
the sec you know, promised kind of a crackdown on
this a number of years ago. They admonished companies as
are called to not lead with these kinds of results.
But I mean, you know, for god's sakes, General Electric
in the first quarter had sixteen pages of adjustments and
its earnings release. I mean it's really you know, and

(12:44):
companies that just take restructuring charges annually. Every year they
take a restructuring charge. Well, if you take it every year,
it's it's recurring. And I think that that in Silicon
Valley is in particular, you know, pretty bad at this
where companies that lose hundred millions of dollars every quarter
are reporting you know, break even adjusted profits and so

(13:06):
you just wonder if they're really businesses or are they
executive enrichment.

Speaker 4 (13:10):
Schemes question mark for you, you know, Although this is
the gold nag of fraud, activist activity is dropped by
eighty five percent since it hit a peak in twenty fifteen.
These are numbers from Direct Market Intelligence. Yeah, answered the
question I posed just before the break I mean is
the error of the short seller behind us.

Speaker 6 (13:32):
I think everybody asks that during every bull market, you know,
nineteen ninety nine and early two thousand and it was
the same sort of question, you know, will short selling
ever work? And it's sort of the corollary, does value
investing ever work? Again? You know, when people pay higher
and higher prices for questionable corporate assets, and the question
is is yeah, generally, yeah, it comes back and businesses

(13:55):
generally find their true value over time. I mean, just
look at the Meme stock you know, run up and
now disaster from twenty twenty one to today, and there
was no price too high to pay for some of
these stocks because they had a short position, and ultimately
most of them have come crashing down to earth.

Speaker 4 (14:16):
Well we'll get back to that specific one in a second,
but first I want to ask about the I guess
rising short seller in the market right now, Nate Anderson
and Hindenburg. He's been big bets against a Donnie or
rather he's said very public negative things about a Donnie
Icon enterprises. You know, do you see eye to eye

(14:36):
with some of the calls that he's made.

Speaker 6 (14:38):
Look, I think Nate and Hindenberg have done great work
on a number of names, Nicola and others, and you'd
be wise to at least hear what they have to say,
even if you don't agree with it, if it's well
researched and like anything, you know, stock prices are are
opinions based on facts, and so at the end of

(15:01):
the day, it's essential for a marketplace, whether they're positive facts.

Speaker 3 (15:05):
Or negative facts.

Speaker 6 (15:06):
And if you're a good investor, you know it behooves
you to to basically hear both sides of any story.

Speaker 3 (15:12):
We'd be remiss if I didn't ask for an update
from you on Tesla shares up one hundred and twenty
four percent this year.

Speaker 6 (15:17):
Yeah, we are short Tesla. We remained short. It's one
of our one of our forty four positions that we
have look Tesla is in many ways, I think epitomizes
this bull market. It's a hopes and dream stock. It's
trading at seventy five times earnings, which aren't growing anymore.

(15:43):
It looks like revenues are going to be challenged in
terms of growth. So it's now again an AI story
or Robotaxi story, or a battery story, or a robotics story.
It's it's whatever you want it to be, and it
reminds me a lot of Cisco back in nineteen ninety
nine and two thousand, where Cisco was a networking company.
Tesla is a car company, but Cisco was going to

(16:06):
get into everything else that had anything to do with
the Internet, and people put a higher and hire multiple
on it, and ultimately Cisco did okay, but the stock
price dropped ninety percent.

Speaker 4 (16:19):
I'm going to do a quick lightning round of some
stuff that has been reported that you are are have
been short recently. Just have me yes or nos. If
you're still short digital realty Trust, we are short the
data centers sl Green real.

Speaker 6 (16:35):
Too, sl Green is. We are short commercial real estate.

Speaker 4 (16:38):
Okay, Tesla, you said Sun Run, you said the.

Speaker 6 (16:44):
Solar leasing companies. I've called them science projects. They're absolutely hysterical.
They lose hundreds of millions of dollars, huge negative free
cash flow. And getting back to our early conversation about metrics,
they report rather than on a regular P and L,
which would be embarrassing, they report these net present value

(17:05):
calculations based on the panels they put up on people's
roofs and It's absolutely hilarious the way they do it,
and I think investors are going to, you know, find
out the hard way about it.

Speaker 3 (17:15):
All right, Jim, We're gonna spend the last forty seconds
with you getting your thoughts on what you're watching, what
you're streaming, what you're doing, and what you're seeing at
the movie theater. New movie out, Dumb Money. It's got
me Davidson in it, It's got Seth.

Speaker 1 (17:26):
Rogan in it.

Speaker 3 (17:29):
Are you going to see it? Have you seen it?
It's all about memestocks.

Speaker 6 (17:31):
I told one of your colleagues earlier, I don't see
the need since I lived done money five days a
week in the marketplace. So at some point I'm sure
I'll see it. I you know, I think it celebrates
the memestock investors winning over you know, Wall Street and
the evil hedge funds. The sad thing is is that

(17:53):
most of those memestock investors have lost large amounts of money,
you know, chasing these ideas, because, as we pointed out,
a lot of these companies came crashing down to earth
and in some cases have already gone bankrupt.

Speaker 3 (18:06):
Hey, Jim, really appreciate you taking the time and joining us,
especially for such a long period of time. Jim Chanos,
the founder of Chenos and Company, legendary short seller. Here
in our Bloomberg Interactive Broker Studio.

Speaker 1 (18:16):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from three to six Eastern Listen on
Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App,
or watch us live on YouTube.

Speaker 2 (18:31):
You and Week Climate Week Global Citizen coming up this weekend.
There is a lot going on in and around New
York City right now. There's a lot going on for
companies too, which with the un and all of this,
though here in New York City specifically, it means a
lot of global leaders come here and we get to
check in with them. Among them Franco Sudas. She's executive
vice president and chief People Policy Purpose Officer at Cisco Systems.

(18:54):
Delighted to have her back here in our Bloomberg Interactive
Broker Studio. Hello, how are you good?

Speaker 7 (18:58):
It's great to be with you again.

Speaker 2 (19:00):
It's great to have you here. We have a nice
tonk of time. But I want to start with because
I always like to do, because you are, you know,
front seat with what's going on at the company, and
what's going on in the environment. How would you describe
You've seen what you've been at Cisco twenty seven years.
That's correct, Yeah, it's amazing. You've seen a lot of
different business cycles, and you've seen the technology world change
in different cycles there. How would you describe today's environment?

Speaker 7 (19:22):
I would say it's incredibly dynamic. I think that our
customers view technology a little differently than they did I
would say even three or four years ago. I think
there's an understanding that digitization and technology is an enabler
for their success, and as a result of that, I
think it changes a lot of the conversations that we're
having with our customers. Even a good example of that

(19:44):
is on the sustainability front. Whereas I think I would
say five years ago, our customers were looking at the
checklist like what do they need to do from a
regulation perspective and what they believed was coming, I think
now there's some really good discussions around how to sustainability
intersect either with their business, their technology, what they're doing,

(20:04):
what is the opportunity in that? And I think as
a result of that, a lot of the conversations that
we're having about whether it's modernizing infrastructure or security, has
a little bit of a longer tail than it did
once before.

Speaker 2 (20:15):
That's interesting. Is it a good business environment?

Speaker 8 (20:17):
Though? I think it.

Speaker 2 (20:18):
What's the right word, what's the right adjective to use?

Speaker 7 (20:21):
I think dynamic to be honest, I think.

Speaker 2 (20:23):
What is dynamicase dynamics to me sounds upbeat.

Speaker 7 (20:25):
Yeah, you know, I think it is upbeat in that
technology is front and center. I think our customers are
coming to us and we're coming to them to figure
out solutions, and I think as long as we're having
those conversations, it makes us better. I think there are
a lot of dynamics that businesses are responding to that

(20:46):
I wouldn't put in the positive category.

Speaker 3 (20:48):
What are some of those?

Speaker 8 (20:49):
So?

Speaker 7 (20:49):
I mean, it's everything from the fact that we still
have a war on the ground in Europe. I think
leaders are still trying to figure out how they want
to work. In a meeting earlier today, and I will
tell you there was not a lot of love for
what I would consider hybrid work. I think leaders are
trying to figure out what's the right way to work.
My people want something a little bit different than I do.

(21:11):
That's an interesting dynamic as well.

Speaker 3 (21:13):
Describe that when you say there's not a lot of
love and what were you hearing?

Speaker 7 (21:17):
I think what I hear, and it's understandable is that
in some cases, I think leaders want to go back
to something that was a bit more predictable. Right, so
you know we would all come in three or four
days a week, and you know we would do our
jobs five.

Speaker 3 (21:33):
Or six days absolute twenty nineteen's.

Speaker 7 (21:37):
And what's interesting is that I think from a business perspective,
it would be so much easier if there was a
one size fits all. But the truth of the matter
with work is that depending on your job, depending on
where you work, who you work with, there's so many
different flavors. And I think that's an example of a
dynamic that leaders are having to deal with and really

(21:58):
think through what makes the most sense.

Speaker 2 (21:59):
What would you tell leaders because and correct me if
I'm wrong, but Cisco has been doing hybrid and make
depend you know, people have a lot of flexibility for
pre pandemic for years. So what would you tell leaders
about what works, what doesn't, why it makes sense?

Speaker 5 (22:14):
Why?

Speaker 8 (22:15):
What?

Speaker 2 (22:15):
What would you say?

Speaker 7 (22:16):
I would tell leaders to focus on the work, because
I think work will guide on how we need to
come together. But I would also tell leaders that I
think all of us are now event planners because I
think we have to think about the events that bring
our teams together, that build the culture that we need
to have to ensure that we have the connections that
we need. But I don't think it's a one size

(22:38):
fits all. I actually don't think that whatever we create
this month may be applicable next month. I think there's
just a tad bit more agility in how we work,
and as leaders, I think we have to work hard
to really understand what does success look like? And do
I have key measures that allow me to understand whether
or not my teams are doing what we need them
to do.

Speaker 2 (22:56):
Has it helped you in terms of finding work? And
I'm very curious what you have to say about the
labor market. We're seeing signs of some softening. But I'm
just curious how being flexible helps you and then what
you are seeing overall in terms of labor market.

Speaker 7 (23:11):
It can help you, but you have to be really
deliberate with what you want that team environment to look like.
So as an example, there are some of our areas
from a technology perspective where we want the best of
the best, and we're happy with wherever they are in
the world, and we have the technology for them to
join us via video, and so we don't worry about
the fact that they may be remote from other members

(23:33):
of the team. But that's a deliberate choice. But I
think when you have a level of flexibility, it's just
going to allow you to cast a wider net on
who you bring into the company.

Speaker 3 (23:43):
How do you create those spontaneous moments that you know,
those water cooler moments here at Bloomberg, those pantry moments.
I mean, Joe Weber, editor at Bloomberg BusinessWeek, tells us
every week that some article, even a cover story, is
the result of just bumping into one of the reporters
of the pantry, rolling over to somebody's desk exactly.

Speaker 7 (24:01):
I think it takes work remotely. And this is the
rub I will tell you, like this was a long
time ago. I'm gonna say like fifteen or twenty years ago.
I remember I created something called the virtual Hallway conversation
because I had a team that was all over the
world and we would schedule this ten minute quick sync
and the only rule was we couldn't talk about work

(24:22):
for the first few minutes because sometimes we bumping should
in the hallway, we just talk about like how your kids.

Speaker 9 (24:27):
What are you doing?

Speaker 7 (24:28):
So I guess what I would say is we do
have to work hard to create that when you have
flex it doesn't mean that you don't come in. I
think you just have to be really thoughtful when people
come in.

Speaker 8 (24:38):
What is the best use of our time?

Speaker 2 (24:40):
Would you say there's a little softening of the labor market, you.

Speaker 7 (24:44):
Know, it's interesting I would say that despite the fact
that there is some softening, boy, the talent market is
still hot in many many areas, and I look at
an area like security as an example. Globally, the belief
is still that there are four million security roles that
are still open and that we can't find the talent

(25:06):
for those roles. The other thing that we understand is
about you.

Speaker 2 (25:08):
Those Would you say you have roles that are open
that you.

Speaker 7 (25:11):
I would say that we're always looking for amazing talent.
But I think around the world there's some struggle getting
to people that have some of the skills. On the
security side, About half of those roles are more entry level,
and so for us, what that means is there's such
an opportunity to train up talent and really help them
get the skills that get them started.

Speaker 3 (25:30):
How do you start? How do you train up that
talent earlier in their careers, earlier in their lives? I mean,
where does this start within our education system?

Speaker 7 (25:40):
You know, it's interesting because if you look at the
US President Biden, I think about nine months ago, convened
a group of leaders together against the backdrop of security.
And the approach that the team was taking was to
look at what are the security skills that everyone needs
to have? What are the security skills that own many

(26:01):
need to have? And then a few, right, And so
when you get to the few, you are talking about
your chief security officers, the top of the top. But
for all, what you're talking about is maybe we need
to start to teach our students in elementary school about
passwords and how to be secure, and so absolutely start
really early, to be honest. And then I think the

(26:22):
other thing that I would say is when I look
at Cisco and other tech companies, we used to spend
a lot of time at high schools and now we're
taking that down to elementary school as well. So I
do think we need to start earlier and earlier, and
especially for girls.

Speaker 2 (26:37):
That is fascinating. Hey, listen, we've got about a minute
and a half left here. You guys at Cisco, you've
had ESG initiatives and missions and goals for a long time.
Remind us a little bit about the impact that that
has had on the company financially and just overall in
terms of the cultural environment.

Speaker 7 (26:55):
The impact is significant. So it was about three years
ago that we created our new purpose to power Inclusive
Future for All, and that really started to guide everything
that we do across the company from a sustainability perspective.
We launched about a year ago our net zero goals
for Scope one and Scope two, which is twenty twenty five,

(27:15):
Scope three which is twenty forty. We now have an
SPTI approved plan, which basically means that we have a
scientific plan that has been reviewed and approved. I say
all of this because I think that inclusive future means
we need to have a livable planet. That inclusive future
means we need to have really good people practices within

(27:36):
the company and to influence communities more broadly, and that
we're doing everything we can from a digital divide perspective,
I do think, Carol, that how we focus on sustainability
will be an amazing business for Cisco.

Speaker 8 (27:50):
Two.

Speaker 7 (27:50):
So as an example, some of our technology now is
so much more energy efficient with higher bandwidth, like our
Silicon one products, and that's a great growth business for us.
But it's going to save our customers a ton of
energy on the other side, and that's the opportunity.

Speaker 6 (28:05):
Well.

Speaker 2 (28:06):
And I do think about when you've got the hottest
year on record, like how that kind of shapes and
whether that makes companies like yourself even rethink, you know,
is it sooner that you try to do this against
do you think about maybe trying to get there even sooner?

Speaker 7 (28:17):
We have to, and I think the technology and our
people will push us to do that, which is great.

Speaker 2 (28:22):
I know you're going to be involved in Global citizen
you guys always are. I'm so grateful for you finding
time for us. Thank you, Thank you. Frank Asudas. She's
executive EP, Chief People Policy Purpose Officer at Cisco Systems.

Speaker 1 (28:32):
Here in studio, you're listening to the Bloomberg Business Week podcast.
Catch us live weekday afternoons from three to six Easter
on Bloomberg Radio. The Bloomberg business app and YouTube. You
can also listen live on Amazon Alexa from our flagship
New York station. Just say Alexa, play Bloomberg eleven.

Speaker 2 (28:54):
Thirty Climate Week in New York against the backdrop of
the seventy eighth session of the General Assembly. You know
that we've been talking about it.

Speaker 5 (29:03):
They have.

Speaker 2 (29:04):
The UN has identified seventeen specific SDG sustainable Development goals,
including building out resilient technology infrastructure, and to get there
and reach some of those seventeen SDGs, the UN has
highlighted high impact initiatives, among them unlocking the Data Dividend,
which our next guests participated in an event that happened
here this week with us is Johannes Ulting, Executive head

(29:26):
of the Partnership in Statistics for Development in the twenty
first Century. The acronym is Paris twenty one, which is
hosted by the OSD in Paris. I have to say
that Johanna's former member of the UN Secretary General's Expert
Group on the Data Revolution. He's a development economist, expertise
and employment, social protection, healthcare, financing and gender. He's looked
at the world in a lot of different ways and

(29:47):
we were delighted to have him here in our Bloomberg
Interactive Broker's studio.

Speaker 5 (29:50):
Welcome, Welcome, Thank you very much for inviting me.

Speaker 2 (29:53):
Well, thank you. And I've learned about PARIS twenty one
because my daughter has done an internship with you all
this summer. So full transparency, but I've learned a lot.
Tell us though, in your words, your mission and your goals,
what you guys are all about.

Speaker 10 (30:04):
PARIS twenty one stands for Partnership in Statistics in Development
for the twenty first century. We basically do three things.
We help countries with technical capacity development National statistical offices,
so we help training of managers in statistical offices in
poor countries like Wanda and others, so we organize trainings.

(30:26):
We help with coordination in many parts of when you
produce data, there are many ministries involved, there are development
agencies involved, and we help them with to get coordinated.

Speaker 5 (30:38):
And last, but not least, we do advocacy.

Speaker 10 (30:40):
And you just mentioned the UNGA week, the SDG summit,
and we do advocacy for more and better funding for
data and statistics.

Speaker 2 (30:49):
Well, what's interesting in a world that's overrun with data,
we just assume it's good. Well, we don't stand it's good.
We talk about bias data and kind of dirty data,
not great data. But not all data is good, not
all data is productive or useful, right, And so you
guys are involved in that in helping countries develop infrastructure
so that they can actually accumulate their own data sets.

Speaker 5 (31:11):
Correct is absolutely correct.

Speaker 10 (31:13):
I think what is a bit difficult sometimes to understand
is on the one hand we have a data tsunami.
We have all these data digital data, which is very good,
which is feeding artificial intelligence and innovation. On the other hand,
we have and on the other hand we have data gaps,
terrible data gaps, and in some countries we don't even
know of how many people in a country are living.

(31:36):
We have difficulties to measure burst rates and to register
those people. We have a lot of data gaps in
the SDGs. We in particular on climate change or gender equality,
we are literally flying blind. So we are supporting as
paras twenty one with our partners to close those data gaps,
to be able to do better decisions, but also to

(31:59):
hold oh our government's accountable. I think that's also a
very important aspect of this. So that if you say
you want to reduce poverty in a given country by
six percent. You want to have the start point and
the endpoint, and you want to see if this is
on track.

Speaker 3 (32:13):
We've talked a lot this year about AI and the
impact that AI is having on companies whose stocks are
publicly traded. What about when it comes to your work
and how you can use AI to make sense of
this data and help these poorer countries actually make positive change?
Are you using it?

Speaker 5 (32:28):
An excellent question.

Speaker 10 (32:29):
I mean, what we see is that there are two
I mean we often talk about silos, right, I mean,
and this is a real sile of On the one hand,
we have people talking about the data that you were
just mentioning, feeding into the algorithms and that supporting these
AI driven innovation, and on the other hand, we have
data for development, which is an owned space by itself,
and there's not enough crossover. If you look at the

(32:51):
G twenty statement at the last one, there is a
working group on Data for development and there's a working
group on digital data.

Speaker 5 (32:58):
So there is yet not enough overlap. I think it's
it's about to close.

Speaker 10 (33:03):
And artificial intelligent for the public good is of course
very important, but also the quality of the data that
you feed into it is essential, garbage in, garbage out exactly.
So the quality of the data to help countries produce
verified quality statistics even is very essential and often unfortunately

(33:25):
not in the spotlight.

Speaker 2 (33:27):
Well, you can't have transformative I'm stealing words from you
guys by transformative policy without transformative data.

Speaker 5 (33:31):
Correct, absolutely correct. Yeah, Well, and I'm.

Speaker 2 (33:35):
Curious about you know, in a world where there's lots
of stress points, I'm thinking, you know, the hottest world,
You're right, hottest temperatures on record, So there's a lot
going you know, a lot of focus on climate, but
investment in infrastructure systems so that the data collection is better.

Speaker 5 (33:48):
How tough is that?

Speaker 2 (33:49):
To get the money going where it needs to go?

Speaker 10 (33:52):
That's, unfortunately, is a very very difficult exercise. So we
currently spend around six seven hundred million on data insteadistics
from Official Development aid ODA AID and this is less
than a percentage point since here. So we would need
to ramp up significantly the international support for data and statistics.
But we also need to convince countries to invest part

(34:15):
of their taxpayers' money, domestic resources into it and the payoff.
I mean, the thing is if I invest into a hospital,
if you're a minister, what would you do? Would you
invest in a hospital, or in vaccination or education, or
would you invest in a national statistical office? We're probably
the first, Yeah, because then you can show after two
three years is done. These benefits for investment in national
statistical systems will only take time. The benefit will take

(34:39):
time ten fifteen years later. They feed into everything else.

Speaker 11 (34:42):
Sell us on it.

Speaker 3 (34:43):
You know, if you're trying to sell a minister on
making this investment.

Speaker 4 (34:45):
How do you do it?

Speaker 2 (34:46):
What's the cost by not making those investments?

Speaker 10 (34:48):
What we say is if you want to have I mean,
for instance, economic growth, I mean it's very critical to
have very good understanding about key economic indicators right, and
if those are not sort of measured in your country,
you will not be able to, first off all, to
make very good decisions. You will not invest your public
resources very efficiently. You are not even able to tell

(35:09):
you if you do it or not. So in that sense,
we are not asking for a lot of money. It's
it's pe nuts. It's literally pe nuts, and there are
a lot of we have a lot of good tools
attend to help. So I think for a minister, and
many planning ministers actually know this and they are behind this.
It's sometimes just the politics behind which is a bit difficult.

Speaker 2 (35:29):
No politics, But what's interesting but the amount of investment
decisions that are made up of like all of the
US economic statistics or global statistics right in the developed world.
We've got about a minute and a half left, Johanna's
you know.

Speaker 3 (35:42):
A lot of times a little more.

Speaker 2 (35:44):
Sorry, Okay, you know, it's been that kind of crazy day.
So I think about, like our audience who's listening, a
smart financial investment audience, what is it that they need
to understand about again the importance of it and potentially
the payoff. What's being missed by not accurately having data
on a lot of different countries.

Speaker 10 (36:03):
I think we have to talk about the opportunities and
the investment opportunities we will have next year in Meddelin
or World Data Forum. So all your listeners, your community
is quarterly invited because we are working more and more
with the private sector, of course with the big companies
that have a lot of data that make those data. Also,
because we were asking about AI, I will later today

(36:24):
attend by Google and I for Public Good. There are
many other companies who are actively engaging I think they
could do a little bit more though, and also sees
it as a public good. So I think for the
many of our colleagues and partners from the private sector,
I interested. So are civil society organizations, by the way,
and to bring them together in multi partnership, that's the

(36:45):
partnership part is very important.

Speaker 3 (36:50):
How can we make the data collection easier from the
perspective of these countries, And I'm thinking about public private
partnership specifically. I mean, think about the data that a
mobile phone company has about what somebody does on their
phone transactions that they make. I mean, you can get
really granular information that can tell stories about an economy.
What's the role of a private company and in working

(37:12):
with the government to provide that data because there are
some privacy concerns too.

Speaker 10 (37:16):
It's on point exactly how you say. On the one hand,
I mean this we call this public private partnership, and
there are some really very nice public private partnership out
there where telephone companies share confidentially and secured the data.
But of course it's a business risk as well. I mean,
and you have to see what has happened to this
data and so on and so forth. But there are

(37:37):
some very good, promising examples of how what we call
big data, specifically on geospatial data is used, for instance,
on poverty mapping, day and night satellite imagery. So you
can look at a given country and you can compare
the light nights, and you can compare it with a day,

(37:57):
and then you can make a sort of calculation do
these people.

Speaker 5 (38:01):
Have light electricity or not?

Speaker 10 (38:02):
And from this with other data, you can estimate how
poor people are and you also know for your investors
where maybe you can put some infrastructure to solve this problem.

Speaker 2 (38:12):
And that's what I was thinking about. It was interesting.
I was over at the earth Shot Prize Bloomberg Philanthropy's event,
and we talked with some of the finalists of the
earth Shot Prize, and they've come up with different ways
to decarbonize the world. And one of the things, let's
talk about what you're doing, But then it's like, what's
the impact. Talk to us about some of either the
data sets that you have helped accumulate and what it

(38:33):
has led to if you give us some examples.

Speaker 10 (38:35):
Of course, I mean we have been we do a
lot of country work, and in specific the one area
which is very important it's on gender. So in some
parts of this world, I mean through our support in
the MALIDIVS in Colombia, in Africa, in many countries we
have no more sex disaggregated data, which is fantastic for

(38:56):
many different purposes.

Speaker 5 (38:57):
I mean this feels so basic, right, yeah, absolutely, I.

Speaker 10 (39:00):
Mean to sort of to know of how many men
and women there are children. So we have quite a
couple of countries where we can show success, where we
can show impact, and this impact is leading governments also
to invest more into data and statistics.

Speaker 5 (39:16):
So you can say the glass is maybe more half
full than half empty in our area.

Speaker 10 (39:22):
But through these events like what we have here at
the highest level that we had the DSG, I mean
A Mohamed was opening the High Impact Initiative. We had
another event just a breakfast on seven am in the morning,
full room.

Speaker 5 (39:34):
Very very important people. So there is more consideration for
the topic.

Speaker 10 (39:39):
And I'm rather optimistic than for the next eight years
that we can give it a big push and we
will be able to convince more people that this is
an important part of the development nexus.

Speaker 2 (39:50):
Johannas you talked about Google and Like or the media,
you're going that you've had or the conversations you've had,
and I do wonder about how much increasingly the private
sector complain all of this. It's interesting. We had a
guest yesterday and we talked about the Roaring twenties and
the crash and FDR, and we talked about who were

(40:10):
the power brokers back then, and it was you know,
the Carnegie and you know those kind of folks who
are industrialists. Today's power brokers are the data CEOs and
the data companies. What you are trying to do, does
it increasingly have to come from the private sector or
does that not necessarily give you the purest data that

(40:31):
you want.

Speaker 10 (40:32):
I try, it's a very very important question. They have
so much they have so much data, but of course
data is also linked to power, and it has lots
of questions about confidentiality. It's about the use to safe
use of the data. And of course these companies want
to make business. What we are talking here is about
a public good. So if you talk specifically about a

(40:53):
specific subcutory like official statistics, I would say this should
stay in the hand of governments. There are certain criteria,
we have principles for how to produce those things.

Speaker 5 (41:03):
Is a public good.

Speaker 10 (41:04):
We don't know what happens to those data, but I
think some of these data is just essential for the government,
for private sector, for civil society as well, to see
where a country stands, how is it about the education system.
So to leave this to the private sector, I don't
think it's a good idea to have the private sector

(41:24):
feed into those official statistics. That's a very different question.
We need to be on the same level playing field.
And we just talked about the numbers. If you look
at the budget of an official statistical office in a
poor country and you compare it with any other private
sector of funding, it's very.

Speaker 5 (41:41):
Clear where the power relate, how the power relationship is.

Speaker 2 (41:44):
We'll invest your money, not flow in if you don't
have those data sets well, to some make sense, that'ship.

Speaker 5 (41:50):
Absolutely, I mean it's flowing in.

Speaker 10 (41:52):
But then we make in some countries where we this
birth registration that I mentioned be registration.

Speaker 5 (42:00):
This is terrible.

Speaker 10 (42:01):
Mistakes are possible, and and also sort of investments that
are not sort of leading to the estimated results. I
mean the middle class for instance, you want to know
as a as an investor, the middle class in India
is it is it five hundred million.

Speaker 5 (42:15):
Now how big is it actually?

Speaker 3 (42:17):
Do you always trust the data?

Speaker 1 (42:19):
No?

Speaker 5 (42:19):
No, not at all. I mean there is, I mean
there were no, but there is.

Speaker 3 (42:25):
Calling out individual countries specifically or feel free.

Speaker 5 (42:27):
To Yeah, I mean that there are.

Speaker 2 (42:29):
Can they can talk about the past even the developed markets, right,
we questioned some of the There.

Speaker 10 (42:34):
Are two examples that very well known and it's Greece
and also Argentina at some point in the past, and
there was about the inflation CPI, which is very well documented.
So the the good thing is that there is a
trusted community that would call out those misbehavior.

Speaker 5 (42:53):
There's also a misunderstanding sometimes there is not one choose
in the data that is not It's not chous. It's
what's important is.

Speaker 10 (43:01):
You make it very clear that you buy to statistical
standards and that the data is sort of produced with
a certain quality standards, and you make it very open
and then you can start a debate about it, which
is really more fascinating than you sometimes tend to believe.

Speaker 2 (43:15):
I know, for my daughter christ you don't work with
you guys in gender? Why gender versus healthcare versus employment
versus financing or how do you choose where you want
to focus on how does that or is that determined
by the money that comes in in somebody's interest, or
how do you figure because there's so many probably different ways.

Speaker 12 (43:34):
You could go.

Speaker 10 (43:35):
Absolutely, I mean the demand is immense. I think many
of the questions around gender are underpinning every other sector.
If you look at development, we look often at sectors,
we look at agriculture, we look at health, we look
at education. If you try to improve all those sectors,
and the SDGs have seventeen different quote unquote sectors, gender
is underpinning everything. I mean in terms of if you

(43:57):
invest in good investment in gender statists, which could be
I mean sex disaggregated data, but also access to gender
based violence, which is important to document as well.

Speaker 5 (44:09):
So it's underpinning all other sectors.

Speaker 10 (44:11):
And what you ought to probably have talked about quite
a lot in the show is about the economic benefit
to use the potential of women's empowerment, in particular for instance,
to access to ownership rights of resources, land, credit, insurance.
So once you unlock this potential, once you have an
opportunity and you know how many women have access to

(44:33):
land and what kind of land and credit and education,
this will help you to make targeted investment and which
helps for all other sectors. So it's a huge multiplier effect.
Next to there's an intrinsic value that women and men
should be treated equally.

Speaker 3 (44:47):
Okay, what about when it comes to data collection and
how different countries are collecting data? Are you seeing you know,
in terms of developing countries where they don't necessarily have
the infrastructure built in. Are you seeing them in technologies
that are so called lead frogging technologies that allow them
to sort of bypass the big infrastructure investments that were
made in the past. And I'm thinking, like, you know,

(45:10):
ways to provide internet to folks without wireline broadband, you know,
without actually digging holes, using satellites, being able to use
data collection instead of launching satellites, use drones for example.

Speaker 10 (45:21):
This is happening and I'm personally I collected myself when
I did my master's thesis. I went to a couple
of countries and collected data from my own seasons. So
I was working with national statistical offices and we had
these paper forms. So you went with a paper form
with a questionnaire and you asked all these questions and.

Speaker 5 (45:38):
Then you went back and then you had to type
it in. I have seen statistical office packed with lots
of paper and it looks like in your office. Moreness anyway, So.

Speaker 10 (45:51):
This is changing now using mobile phones and copies and
and and different forms of basically collecting the data electronic.
And this is happening even in poor countries, so there
are technolog You said it very nicely.

Speaker 5 (46:05):
You said, this leap frogging is happening. I mean we
are not seeing.

Speaker 10 (46:08):
We also work at the OECD with of course rich
country statistical offices, and you can really see the difference
of how national Statistical office in particular in these middle
income categories like Philippines eventually Ghana, Columbia, how they jump
over this and how they change the infrastructure and through
very different forms of using modern technologies.

Speaker 5 (46:30):
And this is really how very very nice to see.

Speaker 2 (46:32):
Well, I know in our prop call I said, you're
kind of open able window is something that we are
not necessarily aware of and we just take for granted
that there's so much data everywhere. So this was really enlightening.

Speaker 5 (46:41):
Thank you so much, Thank you so much.

Speaker 2 (46:43):
Safe time to be here, so enjoyed it. Johannes Shutin,
his executive head of the partnership in Statistics for Development
in the twenty first century aka Paris twenty one. This
is start.

Speaker 1 (46:54):
live weekday afternoons from three six Eastern Listen on Bloomberg
dot com, the iHeartRadio app and the Bloomberg Business App,

Speaker 2 (47:08):
This next voice is going to sound familiar because we
caught up with him at the Milkin Institute Global Conference
earlier this year. So great to have back with us
in studio. Hans Kobler. He's found her managing partner of
Energy Impact Partners. They have about three billion in assets
under management. They invest in clean energy technologies and they
help deploy them through partnerships with companies trying to decarbonize.
He is in town for Climate Week, and as I said,

(47:30):
he's here in our Bloomberg Interactive Broker Student and I
have you here with him and myself.

Speaker 13 (47:33):
Great being here.

Speaker 2 (47:34):
Welcome back. Come on close to the mic because you
want to make sure we can hear you the energy transition.
Let's start basic. How's it going.

Speaker 13 (47:41):
It's going well, it's picking up momentum. We had the
first year in history that more money will spent on
the energy transition than on traditional energy one point one trillion.
So the momentum misbuilding.

Speaker 2 (47:52):
A tipping point.

Speaker 13 (47:53):
It's a tipping point, it's but it's the beginning. It's
the first inning of a long, long race. You know,
if you believe McKay and some forecast, we will need
eight nine trillion dollars a year one hundred and fifty trillion.
That's fifteen internets or one and a half times a
global economy. Spend there in the next few decades a lot.
That's a lot, and we may or we may not
get there, but we are taking it serious. So it's

(48:15):
picking up momentum.

Speaker 3 (48:16):
Well, one thing that I think about when it comes
to the energy transition is the role of nuclear power.
And here in the US it's a really checkered history.
It's a really checkered past. It's very expensive for US
to build nuclear power plants. They're always cost overruns, and
then you have the legacy of Fukushima, three Mile Island
in Chernobyl.

Speaker 13 (48:35):
What are your thoughts on nuclear I think so we
have a lot of corporate partners in our investor group.
The Southern Company was the last one here to try
to build a nuclear pend that finally got them all online.

Speaker 1 (48:47):
Which is great.

Speaker 13 (48:48):
We have edf as an investor that had fifty five
in the country running and half of them didn't work.
They when they shut down the Russian gas and Tepko
was an investor too, so nuclear. You know, the clean
energy transition is amazing and a lot will be winded solar,
but you need the baseload and nuclear is still the

(49:11):
best way to get to the baseload. So I think
it's critical to keep that in the arsenal. I'm from
Germany originally. I think you can tell tell the accent.
You know, the probably the greenest country that has most
ambitions to go clean. They spend a tonne and they
shut down there, which is.

Speaker 3 (49:26):
A stupid thing to do. It's I mean, is this reversible?

Speaker 5 (49:31):
Yeah, but it's hard.

Speaker 3 (49:32):
It's hard.

Speaker 13 (49:33):
Once you shut down an industry, you have to build
up the talent to build new to build new nuclear plants.

Speaker 3 (49:40):
You can, but I guess, can we transition to net
zero without nuclear?

Speaker 8 (49:44):
Right?

Speaker 5 (49:44):
How crucial?

Speaker 11 (49:45):
Is it hard?

Speaker 13 (49:46):
The transition to net zero is not only converting what
we have today, but to deal with the demand that
we are facing. We have had a flat demand curve
in this country for twenty years. We are now electrifying transportation.
We're building data centers running on AI where one Google search,

(50:08):
where one AI search is taking about fifty two hundred
times more power than a Google search. So you're talking
about doubling the infrastructure that we've built over one hundred years.
You know, Musk is out there saying no, no, no,
whatever you are calculated, it's going to be tripled.

Speaker 1 (50:23):
So you need a lot of.

Speaker 13 (50:24):
Electrons and so there is not one solution for that.
That means we have to use different tools in the
toolkit to get there and get there a lot faster
than we have been.

Speaker 2 (50:34):
But can we do it this energy transformation without nuclear?

Speaker 13 (50:41):
Yes, but I think it would be a lot cheaper
if we did it with nuclear. And at the end
of the day, you know, we have to address something
that we call in the industry trial emma. Everyone wants
to go clean, but but when you face not having
power at all, security reliability gets on the on the horizon.
And when the Germans pay twelve times more for natural

(51:03):
gas than the Americans and four times more for electricity,
then affordability comes in right. So that's an equation. This
trilemma is an equation very difficult.

Speaker 3 (51:11):
But also motivation perhaps to invest in renewable sources that
in the long run are less expensive.

Speaker 13 (51:15):
Absolutely, but in a way in our view, the only
way to solve that equation of this trilemma is to
really to apply innovation. That means you need new technologies,
great technologies, and you need to collaborate. You need to
involve the incumbents. The existing infrastructure sits on, sit on
trillions of dollars of investments that we have to help

(51:38):
them get there faster. That's, by the way, it's a
business model that we have where we team up with
corporates and bring them together in a room with the
innovators and the capital to forge those alliances to accelerate
that transition. It's look, everybody wants to see the rosy sky,
but you've got to be pragmatic about it. And that
means that means we got to work together and work

(51:59):
fast and harder than.

Speaker 1 (52:00):
We have in the past.

Speaker 2 (52:01):
So when you have those conversations and those collaborations, what
is it that you speak most about. Tim brought up
nuclear right, and we feel like it has become such
a no no is it nuclear, is it hydro, is
it solar?

Speaker 14 (52:13):
Is it?

Speaker 15 (52:13):
Like?

Speaker 2 (52:14):
What is it that you guys spend a lot of
time talking about with your partners?

Speaker 13 (52:17):
Yeah, yes, yeah, yeah, yes. So it is a complex undertaking.
We need to decarbonize supply, We need to create a
lot more supplies. So that's one Folcus there. The second
one is we need to create sustainable demand. That means
electrifying a lot of the industries, from transportation to home heating,
to the data centers, indoor agriculture. And then you have

(52:39):
to deal with the high intermittency you create. So I
was just telling you it's two to three times more
power that we need, but at its peak it could
be five times as much. You know, it's like building
a church for Easter Sunday, and we've got to somehow
we have to balance that, and that means you have
to invest in transmission distribution, which is very difficult.

Speaker 1 (52:58):
Right.

Speaker 13 (52:58):
It took fifteen years to get the clean electrons from
Canada through two of the greenest states to New York.
Because nobody wants to build anything in their backyard. You
build storage and great technologies are coming up. You an
investor in form you investor in power and so, but
that's a lot of space that is needed. Takes some time,
or you digitize the communication between the customer and the

(53:19):
supply and you tell them, look, don't charge your car
at six o'clock to it at midnight. It turned down.
It's nice.

Speaker 1 (53:27):
Years.

Speaker 13 (53:27):
Just don't cool right now because everybody's cooling.

Speaker 2 (53:30):
Can I ask you, is only about thirty seconds left here?
Would you invest in a fossil fuel energy company? No,
oil and gas company? No, you wouldn't anymore.

Speaker 5 (53:39):
No, even though there's going to be doing for some people.

Speaker 13 (53:42):
You know, look, we need certainly natural gas form.

Speaker 2 (53:45):
I know you're kind of talking your book because that's
the way we.

Speaker 13 (53:46):
Need natural gas for a long long time. But we
personally would not invest. We are fun focused on you know.
We are an Article nine fund. We invest in things
that decarbonize the globally.

Speaker 2 (53:57):
But if you weren't, would you, if.

Speaker 13 (53:58):
I was a financial investor, would Okay?

Speaker 2 (54:00):
All right, love having you come here, always provocative. I
always learned something.

Speaker 5 (54:05):
Come back soon, yeah, well do Hans.

Speaker 2 (54:06):
Kobler, he's founding Do you took a founder of managing
partner Energy Impact Partners? Here in our studio, you're.

Speaker 1 (54:16):
Listening to the Bloomberg Business Week Podcast. Catch us live
weekday afternoons from three to six Eastern on Bloomberg Radio,
the Bloomberg Business app, and you too. You can also
listen live on Amazon Alexa from our flagship New York station,
Just say Alexa play Bloomberg eleven thirty.

Speaker 2 (54:36):
Get all right, Well, there is definitely working in a
coal mine, and if you think about our history, right,
not good conditions.

Speaker 3 (54:49):
Yeah, and there's also working low wag low wage retail
jobs here in the United States in twenty twenty.

Speaker 2 (54:54):
Three, Carol mean, like at a dollar General.

Speaker 3 (54:56):
That's exactly what I'm talking about.

Speaker 2 (54:57):
Yeah, maybe not exactly like working in a coal mine.
But yeah, wait until we get into the story. Because
ck based on this week's Bloomberg Business Week cover story,
it also happens to be today's Bloomberg Big Take. You
will find things like rat infestations, blocked fire exits, expired
kids food, macheti wielding, and watermelon throwing shoppers. It sounds funny,
but it's really not a lot of nightmares at the

(55:18):
biggest dollar chained tim in the United States.

Speaker 3 (55:20):
With more on the story, which is reported out by Bloomberg,
Josh Eedelson, and Brendan Case. Let's bring in Brandon, Bloomberg
News US retail reporter joining us on zoom in our
Dallas bureau along with the editor of Bloomberg Business Week,
Joel Weber here in our Bloomberg Interactive Broker's studio. The story,
by the way, it is in the new issue of
Bloomberg Business a week. It's available on newstands tomorrow. You
can already read it though on the Bloomberg Terminal and

(55:41):
at Bloomberg dot com Slash BusinessWeek one of the most
read stories on the Bloomberg terminal today. Joel, this is
a deeply reported story with disturbing anecdote after disturbing anecdote.
How does something like this come together?

Speaker 11 (55:53):
Who knew that a story, a story like this that
has really changed a lot of American shop I think
I had this signed to it, and so one of
the things that struck me about it is that we've
talked I think for generation now about you know, how
big of a presence Walmart has had in America, and

(56:14):
it actually is like the story that Walmart sort of
I think, you know, propelled into America for like these
big box stores and changing small town America Dollar General
has actually taken a lot of that farther now. The
stores have a much, much, much smaller footprint, which we
described in the store in the story. The price points

(56:36):
are amazingly affordable and seemingly inflation proof. As we also
point out in the story. The cost of all of this, though,
is that it turns out to be a really troubling
place to work and the people who actually work in
the stores a retail job. Wow, the stuff that they've

(56:56):
gone through. So Brendan Josh Unilson, but was the lead
writer on this Brendan case also intimately familiar with it. Brendan,
what was the what was the reporting tidbit that made
you made you and Josh just really want to dig
into this.

Speaker 9 (57:11):
There were a couple of things, and one of them
was what we say at the very beginning of the story,
which was that if you look at a lot of
the fines that the Labor Department, through OSHA, has levied
against Dollar General, one of the things that keeps coming
up over and over again is blocked exits, which obviously
matters a lot to OSHA. It harks back to the

(57:34):
Triangle shirtwaist factory fire in New York the thing that.
One thing that surprised us was talking with an employee
in New Orleans who said that in his case, the
blocked exits were no accident. In fact, a manager had
told him to purposely block exits to try to cut
down on shoplifting make it harder to get out of
the store.

Speaker 1 (57:55):
That was one thing.

Speaker 9 (57:55):
Another thing that jumped out was just the lack of
you know, heating and air conditioning. And we talked with
people who had put ice packs down their pants when
it got hot, wore you know, multiple coats and layers
when it got cold, and one regional manager who you know,

(58:17):
was fairly high up in the company who told us
that she was just really shocked by how difficult it
was to get to get funding for basic maintenance, basic upkeep.

Speaker 11 (58:27):
On top of all that, there's this sense that Dollar
General has just been in this incredible growth strategy. So
talk about how it's kind of swept the country a
little bit.

Speaker 9 (58:37):
Brendan, Yeah, and it's really it's really amazing how fast
it's grown. To your point, it's a little bit sort
of a creature of the Walmart era. You know, Walmart
comes in and it wipes out a lot of retailers
across the country and leaves a landscape that if you're
not close to a Walmart or have a easy access
to a car, you might not have as many retailers
that you know as you had before. And so in

(58:59):
Swoop Dollar General and many of its rivals, and you know,
opens up stores to the tune of typically you know,
one thousand a year, and so you know, they've got
more than nineteen thousand locations around the country right now.
You compare that with a little more than five thousand
for Walmart, including the Sam's Club locations, and you start

(59:21):
to get a sense of how ubiqulus it is, especially
in smaller towns. About about eighty percent of its stores
are in towns of twenty thousand people or fewer. And
you know, if you if you drive through you know,
through the countryside in many states, particularly the Southeast, but
in many other parts of the country as well, you'll see,

(59:42):
you know, store after store.

Speaker 11 (59:44):
We talked about the block fire exits. Can we also
talk about the Bagwana because there's some of that in
the story, Brendan.

Speaker 5 (59:51):
Saying since he came in the state House.

Speaker 11 (59:53):
I was waiting to do that transition there. How crazy
are some of the reporting details that you found.

Speaker 9 (01:00:01):
Yeah, you know, the the issue of animals getting into
the stores and befouling the merchandise is something that also
came up over and over again. You know, there was
one there was one case in Oklahoma where birds got
in and you know, used sections of the store as

(01:00:25):
you know, as a as a bathroom. And the store
manager there told us that he was told to just
take the merchandise home, wash it in your washing machine
if you have to, and bring it back and put
it back on the shelves.

Speaker 1 (01:00:38):
You know.

Speaker 9 (01:00:39):
There was another another instance in which there was an
Iowa store there was a worry about asbestos, but after inspection,
you know, some state inspectors found out that it wasn't asbestos.
That was the good news. The bad news was that
it was stained from bad feces. I mean, this is

(01:01:00):
all over a wall.

Speaker 3 (01:01:01):
It's pages and pages of disturbing anecdotes, but disturbing experiences
that employees have had. I mean, one thing that really
stuck out to me was the employee who you know,
there's one employee in the store. The employee asking a
customer to watch the store, well, he or she went
to the bathroom I mean, the thing that I was
thinking through throughout this piece is is that this is

(01:01:25):
working for Dollar General. They're making a calculation that they
can allow their stores to reach this condition, pay their
employees this wage, have this few of employees in a
single store because it's worked, especially over the past five years.

Speaker 9 (01:01:44):
Yeah, it's really worked for a long time, and they've had,
you know, from a financial standpoint, a really strong record
of sales increases and profit increases. One thing they're good
at doing this is not true of all retailers, is
opening new stores and fairly immediately having them contribute to
the to the bottom line. This year has been a

(01:02:05):
different story for for for Dollar General, at least from
a stock market perspective, where the shares have come way down.
They've cut the profit forecast a couple of times. One
of the big problems, obviously, is just the financial precors
on on their customer base, which skews towards the lower
income UH end of the spectrum. They have said, however,
that they're going to spend more on labor UH and

(01:02:29):
and that's at least, you know, that's that's certainly an
acknowledgment that the store conditions are not where they want them, uh,
and that they're they're they're they're not to spend money
to try to improve things this year. Another thing that's
driving that I think is just a stepped up competitive threat.
For years, Dollar General was known as, you know, the
big successful dollar store chain. Dollar Tree, its closest rival,

(01:02:53):
was sort of an also ran. That company is in
the middle of a turnaround and so you know, seems
to be becoming a stronger competitor. And then you've got Walmart,
which lost some ground to the dollar stores in the
wake of the Great Recession. Really doesn't want that to
happen again if the economy slows down and is rolling

(01:03:13):
out a lot of initiatives, whether it's you know, pricing
or delivery services that are designed to sort of counter
competition on the lower end.

Speaker 2 (01:03:21):
Hey, Brendan, and the stock, as you said, down more
than fifty percent this year, you know, trading at a
fifty two week low. What does the company say about.

Speaker 1 (01:03:31):
All of this.

Speaker 9 (01:03:32):
They reported earnings a couple weeks ago and you know,
again cut their profit forecast. And interestingly, they had initially
said that we're going to spend an extra one hundred
million dollars on labor this year. They moved that number
up to one hundred and fifty million last month, so

(01:03:53):
clearly engaging with the idea that for their own customers,
their own workers. You know, there are some things that
are falling short right now. Whether that's enough remains a
big question mark.

Speaker 2 (01:04:05):
But what I mean, but what I mean about all
these specific things, I mean, this is pretty gross for
workers and unsafe for workers. And you know, we talked
about the New Orleans worker who were blocking you know,
the fire exits, and there was a fire. Unfortunately nobody
was there. But this stuff continues, and I'm curious that
the company addressed any of these specifics.

Speaker 9 (01:04:26):
The company told us in a pretty we we sent
them a very detailed inquiry. They got back to us
with with with a significant reply that that, you know,
repeated things they've said in the past which have to
do with them saying that they want to provide stores

(01:04:46):
that are safe to work in, they want to provide
opportunity for their workers. I think that a lot of
the details and the story show the ways in which
they've come up short in those those goals. The extra
investment they're making suggests that you know, they they they

(01:05:08):
you know, they're sort of acknowledging some of the shortcomings,
but again, you know, like whether that turns out to
be enough to really kind of turn things around. I
think the proof will be in the putting and this is.

Speaker 11 (01:05:21):
In the story, but it really does kind of culminate
with a shareholder meeting where employees really did get their attention.
So we'll see where that leads. I do think, you know, Brendan,
when you just look at the incredible performance that the
company has had on the stock market really until this year,
what's happened? Because you would think, like, with the economy

(01:05:43):
being where it is, inflation being where it is, this
looks like a pretty good value proposition to an American consumer.
And yet you know, you look at that share price
and it's like, you know, the ceiling of bat Iguano
fell apart and everything fell apart. What's happened?

Speaker 9 (01:05:59):
I pointed to say. And one of them is tougher competition.
I think Dollar Tree, you know, Dollar Tree brought in
a former CEO of Dollar General with backing from an
activist investor, Mental Ridge. They're comparable sales numbers suggest that
they're getting some traction there that people, you know, consumers
out there are noticing improvements and responding. That's one thing.

(01:06:23):
Another thing is the holy issue of trade down. You
you know, in the wake of the financial crisis, you
had a lot of trade down from middle income, higher
income people doing just what you say, saying, you know, look,
that's going to be a great bargain. I'm going to
buy more stuff at Dollar General or Dollar Tree or

(01:06:44):
other dollar stores. I think you're seeing a lot less
of that right now, and where you're seeing it is
in Walmart. And so I think that whether it's competition
from small box stores like other dollar stores, or competition
from the really big ones out there, I think Dollar
General is under a lot more pressure than it used

(01:07:04):
to be now. At the same time, you know, by
its own admission, it has this issue with store conditions.
You know, can it fix the store conditions. It's fixing
the store condition is going to be good enough to
get back some of that business and get back onto
a growth path in terms of comparable sales store by store.
I mean, that's an open question.

Speaker 2 (01:07:25):
I just think about too, that these stores do play
a role. That there are small communities around the country
right that don't.

Speaker 11 (01:07:31):
Have anything, don't and as the story also documents like
some of these communities have actually resisted having Dollar General
come in, have lost some of those battles, So there's
this tension there. I also just think the moment that
we seem to be at with labor in this country, with.

Speaker 3 (01:07:47):
UAW doing what it's doing, Hollywood doing what it's doing.

Speaker 11 (01:07:50):
Just to look at retail for a second and be like, oh, yeah,
there's this world that I don't think we talk about
enough Business Week, but this is, you know, a landscape
of what America really looks like, and the people who
are in the front lines actually dealing with some of
these issues that you know, you don't expect to have
to deal with a machete wielding customer, and yet at
Dollar General, that's part of your job description.

Speaker 3 (01:08:13):
Even if you don't get training for it.

Speaker 5 (01:08:15):
It's not in the training.

Speaker 8 (01:08:16):
No, it's not.

Speaker 2 (01:08:17):
It mean that point we laugh, but it's disturbing and
it's real for some folks. Incredible cover story Brendan Case,
Bloomberg News US retail repert. Of course, the editor of
Bloomberg Business Week magazine, Joel Weber, this is the cover story.

Speaker 1 (01:08:30):
Bloomberg dot com, the iHeartRadio app and the Bloomberg Business app,

Speaker 8 (01:08:53):
Ah.

Speaker 2 (01:08:53):
Yes, indeed we did write about real things. But he
also told some great tales.

Speaker 3 (01:08:58):
Yeah he sure he sure did. We'll talk about Yeah.

Speaker 2 (01:09:01):
A contrarian conversationalist and an iconic writer controversialist too. Yes,
focused on status it's dark side humiliation is. Nonfiction works
included tales of psychedelic dropping hippies, such as the electric
kool Aid acid test. You talked about that, reading it
in high.

Speaker 3 (01:09:19):
School, college college.

Speaker 1 (01:09:21):
Yeah.

Speaker 3 (01:09:21):
Class on the sixth dies pretty cool.

Speaker 2 (01:09:23):
Class, risk taking astronauts the right stuff, which was made
into an incredible movie. We're at the forefront of new journalism,
blending literary flair with immersive reporting.

Speaker 3 (01:09:33):
His portrait of the Downfall of Entitled bond Trader Sherman
McCoy and the Bonfire of the Vanities, his first novel,
came to define an entire era, so writes our next guest,
Joe Mysak, editor of Bloomberg Brief Municipal Market. Joe over
the last year spent many hours digging through the two
hundred and thirty six boxes stacked in the vaults of
the New York Public Library's main building, Carol in Manhattan,

(01:09:54):
the archives of Tom Wolfe.

Speaker 2 (01:09:56):
His story about what he found is featured in the
Remark section of the upcoming issue of Bloomberg Business Magazine.
Kind of reads like its own literary tale. You can
read it now at the Bloomberg Terminal, of course, in
at Bloomberg dot com slash BusinessWeek. Joe is here in
our Bloomberg Interactive Brokers studio, So talk to us. First
of all, I'm just curious, what was the pitch meeting

(01:10:17):
to Joel in doing this, or did Joel come to
you and say, Joe, you got to do this? Or
how did this come about?

Speaker 12 (01:10:24):
No, I discovered this, you know, this little episode of
literary history. I found a letter in the archives from
Tom Wolfe's. Tom wolf had been a trustee at Saint
Christopher's School in Richmond, had gone there, graduated nights at
forty seven, and there's a letter from the headmaster there saying,

(01:10:48):
you know, I wish you'd give this guy, Kirk Maturn
a call. He gave us a very nice bequest, and
as you know, we're starting up our ramping up our
endowment campaign. Okay, so you know, the archives are spread
out in a lot of different boxes, so that's not

(01:11:08):
perfectly chronological. So you're going through them and saying, ah,
here here, then this must be connected here and and
just like all of a sudden, you know, when I
saw this guy's response back to you know, Tom Wolf
writes him and says, thank you for this. This is wonderful.
As you know, we're starting up our endowment. Maturn gets

(01:11:30):
back to him and on his lazard fare stationery says, wow,
you know, thank you so much for your nice letter.
And you know, why don't we have lunch sometime And
you know, not just us, but I have some friends
on the street who'd like to meet you too, And
I'm not going to put you on a podium. Let's
just have an informal lunch. And he sets up this

(01:11:53):
lunch at the twenty one club now shuddered unfortunately, and
you know there's a separate for that. And you know,
then on one of the other letters, Tom writes or
you know, starts drafting a reply saying, you know, your
your friends were fascinating and they clued me into this

(01:12:17):
world that I knew nothing about. So I put all
this together and I said, wait a minute. This guy,
Kirk Mattern, is the guy who was responsible for Sherman McCoy,
the protagonist of Bonfire the Vanities, becoming a Wall Street trader.
He had been in the Rolling Stone series and it

(01:12:42):
went I think for about twenty seven.

Speaker 3 (01:12:45):
The serialized version of serialized version of Bonfire.

Speaker 12 (01:12:49):
Tom was writing it against deadline all the time he
had been a writer. And the title of his book,
and it was never quite defined what it was, was
called A Man in Slices, which, of course is funny
because Tom Wolf's third novel is called A Man in
full So.

Speaker 3 (01:13:07):
Joe, you call him Tom, Yeah, like you know him? Well,
you know, how did you find yourself at the New
York Public Library looking through Tom Wolf's mail Tom wolves
mail over the last year and tell us how you
came to know him over your career and over over his.

Speaker 12 (01:13:26):
Well, okay, I was I was in search of There's
a there's a couple of lines of Bonfire where Sherman
McCoy's daughter asks him, and this is in the published
version of the book. Book says, Daddy, what do you do?
What do you do, daddy, what do you do all day?

(01:13:46):
And Sherman McCoy starts to fumble around, and finally his wife,
Judy says, and I got this, and she says, what
daddy does is he slices the cake and he hands
out slices and Daddy gets to keep the crumbs. And
so Sharon recoiled. You know, I was completely humiliated by

(01:14:07):
this and like thinking, like, wow, the crumbs and at that,
you know they're out in Southampton right then? And uh
so I remember I asked Tom one night we're having
dinner at Ben Benson's, also now closed. I asked him,
I said, who came up with that?

Speaker 1 (01:14:26):
Did you come up with that?

Speaker 12 (01:14:27):
And he goes, no, Desmond Fitzgerald? And I remember the
name Desmond Fitzgerald. But you know, I, you know, last
summer I said, wow, remember that. I bet that'd be
a nice column. Let me go to his papers and
see if I could find that. Sure, how difficult could
it be? Well? Very difficult, because jos I said, two

(01:14:48):
hundred and thirty six boxes. And you know you don't
you're not just faced with him. You have to request
different boxes, and you know, so it's the whole process
so I'm I'm looking, I'm looking, and I didn't find that,
but I found Kirk Maturn. And so then Kirk Macturn's
son works on Wall Street. And I said, well, wait

(01:15:10):
a minute, this can't be that Kirk Maturn, this is
the Sun. So I emailed him cautiously and I said,
you know, I don't know if your father is still alive,
but I'm looking to find out this information and chat
with him bit. And he goes, oh, sure, let me
find out if you know, if you'd like to chat
he's retired for him, And he got back to me

(01:15:32):
and said, yeah, here's his email address. So then I
got to calm him up. And you know, I just like, basically,
you're the guy. You were the guy who changed the
course of literary history, really, because if you think about it,
on the one hand, if you have you know, here's
a novel about a writer of a man in slices,

(01:15:54):
or this entire chaotic scene of what did he put
men baying for money on, you know, the floor of
this Wall Street securities firm? And of course you know,
Bonfire was not a particularly good movie, but the Wall
Street scenes really captured people's imagination because all of a sudden,

(01:16:16):
it's like this whole world is shown to you, and
you know, one of the parts of this you know project.
As I was doing it, Kirk Maturn set up a
meeting at to go to Solomon Brothers during the Treasury
Bond auction so that Tom could just watch it and

(01:16:39):
witness it. And of course, you know, it was this
wild thing. And it happened that Michael Lewis, was working
at Solomon Brothers at that time, had not yet written
Liarus Poker obviously. Uh So that's you know, that was
why I was searching through the papers. And as I
was searching through the papers, I mean, I became sort

(01:16:59):
of a because you know.

Speaker 11 (01:17:01):
You go through every box.

Speaker 12 (01:17:04):
Yeah, in every box, there's there's a little surprise, like
a little presence ie, you know, like Okay, for example,
for example, Carol, it's Tom did this anthology called The
New Journalism. And there's an introduction basically made up of

(01:17:25):
a couple of pieces he wrote for New York Magazine
and for Esquire. But there's all you know, And and
what happened was I thought he just took those three
parts and cobbled them together. No, Instead, there's this manuscript

(01:17:47):
hundreds of pages, probably maybe even thousands of pages because
the Tom Wolf writing was rewriting. Uh, and it includes
this entire maybe two hundred pages of all about his
time at Yale in graduate school, which he has never

(01:18:08):
written about before. But there it is in the boxes
at the New York Public Library. Tom did not like
graduate school.

Speaker 2 (01:18:16):
Yea, I just said this picture of Joe just like
surrounded by all this stuff. I don't know, maybe some
coffee on the ground.

Speaker 12 (01:18:24):
Listen and public library.

Speaker 2 (01:18:27):
Very we're talking with Joe Maysak. Also of course in
our studios Joe Webber, editor of Bloomberg Business WEEKND you know, Joe,
We're just listening to Joe just unfold this tale of
what he found out, uh and uh how it led
to this most famous fictional bond trader, right that was
in Bonfire of the Vanities.

Speaker 5 (01:18:49):
Do you need me?

Speaker 11 (01:18:50):
Because he was he was great.

Speaker 2 (01:18:53):
We always thinking about like when this was inspiring and
just telling you the story and just I mean what
you like.

Speaker 3 (01:19:00):
We weren't there for Bloomberg BusinessWeek, Joe, right, like, this
is the piece that you wrote is a is a
product of you being there, the research that you did.
But Joel tell us how it came together.

Speaker 11 (01:19:10):
Joe wrote this story. I was like, why why do
we need to know about Tom Wolf now, like, didn't
he die? And then I'll wait a minute years documentary. Yeah,
And and the documentary was the reason that I was like,
you know, there's a reason that this matters now, right,
And it's because Michael Lewis went to the same archive

(01:19:32):
and wrote this story and he happened to write it
before Tom Wolf died, And at the premiere on Friday,
he actually said that he wanted to write it so
that he could like see Tom's reaction to the story.
We didn't get that that luxury, so we had to
deal with that afterward. But I think because Joe had

(01:19:53):
written the story and spent so much time in the
archive and and look, in this world, in the Bloomberg world,
Bonfire of the Vanities is a big deal, like that
is it still feels like a foundational thing. And so
the fact that Joe like found this little nugget that
like first draft wasn't even really about the bond market,

(01:20:14):
I was like, that is awesome, So that's that's what matters.
It just felt like there's a little bit of history
that we were able to to do to you know,
provide a significant insight on and that was one hundred
and fifty percent.

Speaker 3 (01:20:27):
Joe, what other archives are you questing to spend time?

Speaker 2 (01:20:31):
Well, you know about Jackie.

Speaker 12 (01:20:33):
I heard that Gay Talise has quite an archive in
the bottom of his house.

Speaker 1 (01:20:39):
Yeah, so that's.

Speaker 11 (01:20:40):
Going to the New York City Pilot Public viboraries, so
you can get to it right right.

Speaker 2 (01:20:44):
What else did you find out about tum Wulf Because
you did find out more about Oh, he became almost
one of the characters that he has written about.

Speaker 12 (01:20:53):
You know, there's so much in in the the archive
that you it's it's really it's it's an education in
certainly journalism history. You know, for example, I came across
this piece that he wrote first of that he pitched
he set like a twenty seven page pitch letter to
the Saturday Evening Post, which in nineteen sixty two was

(01:21:15):
quite a legitimate magazine, and he included this, you know,
a pitch for an article about a status life in Washington,
d c. Because at that point he was working for
the Washington Post. And you know, he sends this pitch
letter and then apparently later on sends the completed story,

(01:21:36):
and there's a thirty five forty page article about status
life in Washington and the Kennedy administration. And I was
never run the Saturday Evening Post. It's never run anywhere.
So you just keep coming across these little presence and
you know, this wasn't published, This wasn't published.

Speaker 15 (01:21:56):
Isn't this something unbelievable?

Speaker 3 (01:21:57):
I mean, is there going to be just opportunity for
a book of the unpublished works of Tom Wolfe?

Speaker 12 (01:22:02):
Oh? I think you know, not only the unpublished, the
un kind of unpublished work, but the uncollected work. So
many of his book reviews are really insightful where he
you know, he really tells you what he's thinking, including
this entire evisceration of Norn Mailer. Incredible.

Speaker 11 (01:22:25):
That was an interesting part of just how much tension
there was. And you know, if you're interested at all
in this, it's worth checking out this documentary, which in
New York is that i f C called.

Speaker 2 (01:22:35):
Radical wolf great stuff.

Speaker 11 (01:22:37):
You could go on and on.

Speaker 2 (01:22:38):
This story sounds like you need to write a book.
I'm just telling you you've got nothing to do. I mean,
if t has been in the archives, just go write
the book. Joe my sack, of course, and Joel Weber.
Check this out remark section of the upcoming new magazine.

Speaker 1 (01:22:53):
live weekday afternoons from three to six Easter Bloomberg Radio,
the Bloomberg Business app, and YouTube. You can also listen
live on Amazon Alexa from our flagship New York station,
Just Say Alexa, Play Bloomberg eleven thirty.

Speaker 3 (01:23:12):
Well, her next guest is an author of many books,
including the New York Times bestseller The Wizard of Lies,
Bernie Madoff, and the Death of Trust. That book made
into an HBO film. It starred Robert de Niro and
Michelle Pfeiffer. She also spent more than twenty years at
The New York Times, where she was a finalist for
the Pulitzer.

Speaker 5 (01:23:27):
Per Can I tell you?

Speaker 2 (01:23:28):
Robert de Niro for years leading up to with Tribeca,
kept asking him when are you going to do maidof
When are you going to do Meido?

Speaker 3 (01:23:34):
And then he did it, and then he did it.

Speaker 2 (01:23:35):
Anyway, go ahead.

Speaker 3 (01:23:36):
She got him to do Madoff.

Speaker 8 (01:23:37):
She did.

Speaker 3 (01:23:39):
Her most recent book is Taming the Street, The Old Guard,
The New Deal, and FDR's Fight to regulate capitalism. It
came out last week. It's an exploration of financial regulation
during the New Deal, a period of time that included
the creation of the SEC. The Financial Times called the
book quote riveting and timely, and I've got to agree.
We're very pleased to have with us. Diana B. Henriquez
here in our Bloomberg Interact broker's studio. Full disclosure, Diana

(01:24:02):
did give me my first job in business journalism when
I was a research assistant on The Wizard of Lies
back in graduate school. Diana, welcome, It's good.

Speaker 2 (01:24:10):
To see you in doors. You can I just say
thank you.

Speaker 8 (01:24:13):
You've turned out pretty well. I think my judgment was
pretty great.

Speaker 3 (01:24:17):
Well, thanks so much so. Carol and I were talking
about this just because in the last three hours, basically
like everything we see today reminds us of the Roaring
twenties and what was happening.

Speaker 8 (01:24:28):
Isn't it remarkable? It is remarkable deja boo all over again,
as the old joke does. But you know, these are
our roaring twenties and the press to deregulate, to reduce
the fetters on unfedtered capitalism. Some of the arguments that
I see in the press today were lifted from Calvin Coolidge,

(01:24:48):
almost word for word, Comma for comma. It's amazing how
the arguments, the defenses against regulation that emerged in the
twenties and thirties are have resurfaced today.

Speaker 3 (01:25:00):
But it's not just the arguments against regulation. It's also
the concentration of wealth that we're seeing.

Speaker 8 (01:25:06):
That's what I thought was concentration of wealth, the disparity
of wealth, the amount of income growth it is going
to the top one percent, the stagnation of average and
ordinary workers' incomes. All of that is straight out of
the nineteen twenties. We're seeing technologies disrupting major industry. Same

(01:25:27):
in the nineteen twenties. Major changes in manufacturing wiped out
three million jobs at the beginning of the twenties, and
a million of them never came back.

Speaker 2 (01:25:37):
So, Dana, does it make you because it's interesting because
we just talked a lot about AI today and the
disruption there again. I mean, it's kind of a constant narrative.
But does it make you say, listen, the world, the economy,
the market, business, it's cyclical, we go through these changes
or does it know?

Speaker 8 (01:25:51):
How do you think about I think the market is
always going to be a very sensitive barometer of a
disruptive change. And whether that disruptive change is radio as
it was in the nineteen twenties, which was changing the
way newspapers operated, changing the whole landscape of mass communication,
but whether it's AI arriving at a time when finance

(01:26:14):
is already highly automated. But the reliance of the market
on the status quo, considering that it makes its money
because things change, right, It is amazing to me that
everyone thinks it's going to stay the same. And indeed
they did in nineteen twenty eight twenty nine, right up

(01:26:35):
until October of nineteen twenty nine, they said, oh this
is this is a perfect world. And for the pudocrats,
it was a perfect world. And it's always going to
change in within the next decade. As I detail in
that that's the stretch of time I cover in Taming
the Street nineteen twenty nine to nineteen thirty nine, The
world turned upside down?

Speaker 2 (01:26:55):
Can I ask how you got there?

Speaker 9 (01:26:56):
Like, how did you say?

Speaker 2 (01:26:58):
You obviously could write about probably anything in every thing.
So what is it that said I got to do this?

Speaker 8 (01:27:02):
Oh? You know, I fell in love with the story
of Richard Whitney the Fall of the Great New York
Stock Exchange President when I first started covering Wall Street,
you know, back in the Pleistocene era, stopped and I said, gosh,
what a tale. And it had been included in a
kind of episodic anecdotal book called Once in Gaulconda by

(01:27:24):
John Brooks, which I loved, and I ducked it away,
tucked it away, and always thought that that period of
creation of market regulation would have been fascinating to live through.
But what really peaked my interest, Caroline, was the two
thousand and eight meltdown.

Speaker 14 (01:27:42):
You know.

Speaker 8 (01:27:43):
I was going to work at the New York Times
every day in the fall of two thousand and eight
after Lehman Brothers closed, wondering if that would be the
day the ATMs went dark. And I was aware, as
an amateur financial historian, that I was living through history.
I was living through events that would be his historic
in the financial history of the country. And I said,

(01:28:04):
you know, people going through nineteen twenty nine felt this way,
what an incredible experience they had. So but that kind
of began to crystallize what I wanted to do. Then,
of course, Bernie Madoff happened in two thousand and eight,
and my life went off in a different path. And
then the thirtieth anniversary of the nineteen eighty seven crash came, well,

(01:28:25):
that got me closer to twenty nine, because, of course,
the eighty seven crash was the worst day in Wall
Street history, eclipsing the worst days of nineteen twenty nine.
And finally, when that book was done, I said, I
think it's time. So I started work on this book
about five years ago, when no one ever mentioned the
New Deal, when it was as if Roosevelt had never existed.

(01:28:49):
But I'm digging, digging into the story and seeing more
and more parallels.

Speaker 2 (01:28:54):
And then as the last five years.

Speaker 8 (01:28:56):
Have unfolded, it is as if the puzzle pieces that
matched the nineteen twenties and thirties just dropped into place.

Speaker 2 (01:29:04):
It's pretty so it was amazing.

Speaker 3 (01:29:06):
Yeah, Well, let's talk about the political environment here in
which FDR came into office, because you note in the
book that it's quote alarming political discontent erupting from the
extreme left and the radical right. I thought to myself
when I read that sounds familiar. Are you talking about
twenty twenty one? Are you talking about twenty twenty.

Speaker 8 (01:29:25):
No, I'm talking about nineteen twenty eight, twenty nine, thirty
thirty one, thirty two. The right, the suffering in this country. First,
we can't even take it in today, but twenty five
percent of the workforce was out of work in those days.
That was thirteen million people. But imagine that one out
of every four people you know doesn't have a job.

(01:29:46):
Many of them haven't had a job in years. People
are living in caves in Central Park, there are scavenging landfields, fields,
The degree of suffering in the country is reaching such
a point that it's at powder keg waiting to explode.
From the left, you have increasingly militant communist interests that

(01:30:06):
are eager to harness this worker anger and outrage to
make gains in the political system. And that, of course
alarms the industrialists and captains of capitalism on the right,
who are fearful of labor uniting with communists. And they
start looking longingly at Italy and Germany, which have been

(01:30:26):
under fascist control in Italy's case for more than a decade,
and they say, hmm, they've got some pretty good ideas
over there. Look how they're getting their economy going. Look
how they're managing their labor unions, locking them up. But
so you've got these two tensions, and you've got a
man who steps in FDR and says, if democracy can't

(01:30:50):
fix this, people are going to give up on democracy.
And so this is one last chance for democracy to
relieve this suffering and give people hope. And that's what
carried him into office.

Speaker 2 (01:31:02):
The ties between capitalism democracy like it's tortured. It's important.

Speaker 8 (01:31:10):
It's actually so simple as FDR saw it. And I
didn't see it this way until I read speeches of his.
When he signed the bill creating the sec he said.

Speaker 2 (01:31:22):
Wait, said it again, the bill creating the SEC An
institution we take for granted. Yeah, well, and we.

Speaker 8 (01:31:27):
Take the FDIC for granted. That didn't exist before we
had lived our entire lives hell protection. Yes, right. So
he saw that a healthy democracy required well regulated markets
that seemed fair. He believed that if the average American

(01:31:50):
didn't feel he could get a fair shake in the economy,
he would not support the democracy. And so to him,
the two were completely wetted. And so if I say,
a lot of people are saying you with democracies on
the ballot in twenty twenty four. I'm saying, yeah, financial
regulation is on the ballot in twenty twenty four to

(01:32:12):
two because they are inextricably linked. The fairness of the economy,
in the eyes of the average American is what sustains
support for this democratic experiment, and Roosevelt saw that almost break.
There's an anecdote which I love. It's perhaps apocryphal, but

(01:32:34):
I love it anyway. A visitor of the White House
right after Roosevelt was sworn in at the depths of
the depression, said well, you know, if you can cure
this depression, mister president, you'll be our greatest president. But
if you fail, you'll be our worst president. And Roosevelt
corrected it and me said, no, if I fail, I'll
be our last president. To the perspective of the people

(01:32:55):
at the time, it was that desperate.

Speaker 3 (01:32:58):
That's journalist and author Diana Beinry. Her latest book is
out now. It's called Taming the Street, The Old Guard,
the New Deal, and FDR's fight to regulate American capitalism.

Speaker 2 (01:33:07):
You're listening to Bloomberg Business Week. We just talked regulation
on Wall Street, while coming up next we'll turn to
another hot button policy issue, controlling our Southern border.

Speaker 3 (01:33:16):
Chef John Fraser discusses what immigration flows mean for America's
hospitality labor force. This is Bloomberg.

Speaker 1 (01:33:23):
You're listening to the Bloomberg Business Week Podcast. Catch us
Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business App,

Speaker 3 (01:33:37):
Well, Jess, I'd love having restaurant tours on our program
because well, I love food, and sometimes if you're here
in person, they bring us foods. It's really fun. But
also I love speaking to them about the business, how
much food costs, how tough or how easy it is
to get employees, and of course customer demand. It can
tell us just a lot about how the economy is
doing in different parts of the country. Very please to

(01:33:58):
ab with us this afternoon, John Fraser. He's a restaurant
tour of Michelin starred chef. He's the founder of JF Restaurants.
They've got fifteen restaurants with more than four hundred employees
around New York City, Long Island, during California, in LA.
They've got places in Florida as well. He's also got
a YouTube series called Silent Chef, which we're going to
talk about as well. Chef John Fraser joins us on

(01:34:19):
a zoom from New York City. Chef, how are you great?

Speaker 15 (01:34:23):
Thank you, thanks for having me.

Speaker 3 (01:34:24):
Yeah, it's really good to have you with us. First,
just give us an update on the state of the business.
What are you seeing right now across your different restaurants
and concepts.

Speaker 14 (01:34:33):
Yeah, you know, it's really city by city. New York City,
as everyone knows, kind of is a really seasonal business.
Our New York City restaurants who were up from last
summer for sure. We'll know in a couple of days
kind of how much. But we do see a bit
of a little always in the second heading into the
third quarter, and then we ramp up into the fourth,
which is by far our best around Florida. Also, seasonal

(01:34:58):
dips happen in the summertime, and we're really really strong
demand across the hotel properties out in Long Island, as
you know, that's that's where it all happens in the summertime.
It's a seasonal business, and we've been rocking. We'll probably
go until around the end of October and then we'll
settle into the winter months.

Speaker 3 (01:35:15):
Well, what about getting employees. If we were to speak
to you two years ago, I know you would have
said it's tough to find employees to uh, to work
in the restaurants. Tell us about how tough it is
to get those employees, and then also tell us about
food costs and if they're going down.

Speaker 14 (01:35:32):
Yeah, Starting with food costs, I mean, we have seen
a drastic decrease in our food cost as supply chain
has gotten better. You know, thankfully we're able to pass
that along to our guests, and we're seeing that across
all of our restaurants in all of our markets. The
food hike, the food cost hikes were kind of universal.

(01:35:53):
It didn't matter market to market. Eggs we're still, you know,
wildly expensive. Gas was wildly expensive. That was all passed
on to us and there for our guests. So from
a food cost perspective, we're seeing things drastically reduced. There
still are some pockets, I would say, a lot of
proteins like beef I still very very high. I'm not
sure that's ever going to get better. To be honest
with you, it may just be a change in the

(01:36:15):
way that we construct our menus in the way that
our guests actually eat.

Speaker 15 (01:36:19):
From a labor perspective, we are starting to see some uptick.

Speaker 14 (01:36:22):
We've we've hired on let's call re hired a lot
of people that were pre pandemic hospitality employees. So in
other words, we're bringing folks in that who have had
experience in the past, whereas I would send in the
last couple of years we were training from zero, which
is fantastic for us, and I think that that guest
experience is drastically improved in that way.

Speaker 15 (01:36:43):
I still think that we.

Speaker 14 (01:36:45):
You know, hot topic, you know, when we figure out
a sensible kind of reaction to our borders, that will
be kind of the last domino for us to fall
in order to equalize and be able to pass as
savings on to our guests.

Speaker 2 (01:37:00):
So in your view, do you really think the economy
is slowing?

Speaker 14 (01:37:03):
In my view, well, compared to what right, compared to
a year ago, we're drastically up from last year compared
to two years ago. Obviously, what I would say is
what we're seeing is the sort of bifurcation of spending.
We'll have some folks that join us who, let's say,
are not big spenders. They're out for an experience, and
then we'll have some folks who are clearly out to

(01:37:26):
party and have a great time and who will have
a drastic spend. So what I would say is, I'm
starting to see a split of sort of people that
are willing to kind of separate with those those dollars
and people that are remaining sort of tight. But we
have not seen a drop in reservations, which for us
is kind of the tell.

Speaker 3 (01:37:42):
Hey, go back to chef what you were saying about
immigration and border policy here and connect that to what
you see at restaurant.

Speaker 14 (01:37:48):
At the restaurants, well, you know, I can only speak
from my experience, and it's anecdotal, right, I don't I'm
not coming from a place of data. But I can
tell you who our applicants are, and I can tell
you where they're from. What we used to have is
quite a bit of Latino applicants, especially in the back
of the house, and that has changed. We are now

(01:38:08):
not as not employing as many, and a lot of
those that we are employing our first time hospitality employees.
So I'm not sure if there was a move around
the United States and move back home to their home countries.
But I can tell you that the hospitality workforce is
severely understaffed and that would make a.

Speaker 15 (01:38:27):
Huge chunk for us.

Speaker 14 (01:38:29):
It has to be sensible, but it has to be soon,
and that would probably mark a drastic change in your
guest experience, its being better and the price that we
have to charge.

Speaker 3 (01:38:40):
That's so interesting to hear, and because I think that
part of the conversation often gets lost when we talk
about immigration policy, because it's so polarizing when you have
Democrats and Republicans fighting about it, and it actually sounds
very clear from you. I'm wondering if you do any
work in telling your local legislator about this, if you've

(01:39:01):
partnered with any other restaurants to talk about this, because
there are serious economic implications here.

Speaker 14 (01:39:07):
It is, it is polarizing, and I think that you know,
I'm a small business owner and I'm I'm I'm not
coming at it from a political point of view. It's
simply spaces that we need filled. We do some work
with our local folks in each one of our markets.
We do a lot of work also in some of
the training and onboarding of folks. You know, unfortunately, you know,

(01:39:28):
the hospitality industry is one it is the largest employer
in America. But our voice is not quite as unified
as I think it probably could be nationally. And that
could just be you know, a difference between states and
and and also the competition in between.

Speaker 15 (01:39:42):
You know, small businesses.

Speaker 2 (01:39:43):
Talk to us about your YouTube series thank you.

Speaker 14 (01:39:48):
So, you know, during COVID, for the first time I
had some some some some free time in probably twenty years,
and I was looking around the media landscape of on
the food scene, what's happening. And what I was finding
is a lot of what was out there didn't speak
to me. It was a lot of sort of how to,
a lot of you know, a lack of why, a

(01:40:10):
lack of why cook this way? Or why why this produce?
And and I felt like that storytelling it's inside of me.
It's how we weren't our restaurants. It's how we construct
our menus and our concepts. But I didn't see it
in the media. And so I wrote some short stories
and I was lucky enough to get linked up with
Jose Andres Media who who was a co producer and

(01:40:30):
produced these.

Speaker 15 (01:40:32):
These pieces. You know, it's.

Speaker 14 (01:40:34):
Storytelling in the very simplest way. There's no talking, there's
some music and ambient and it's sort of the chef's journey.
The chef's journeys is about community, and it's about bringing
people around a table. And I'm lucky enough to be
able to be connected with these incredible farmers and fishers
and wine makers and cheesemongers, and I really wanted to
tell their story but in a way that was perhaps

(01:40:56):
not loud and imbasticking in your face, but a little
bit more subdued. Is about connectivity and mindfulness.

Speaker 3 (01:41:01):
How do you do this in a way that without talking?

Speaker 15 (01:41:05):
I think the visual is is quite impactful.

Speaker 14 (01:41:09):
We really spent a lot of time thinking about the
best way to tell a story without words, and hopefully
what that does is it brings a viewer in and
they fill in the story. I mean, I would throw
the question back to you, have you ever made a
recipe off.

Speaker 15 (01:41:22):
Of something that you saw on television?

Speaker 3 (01:41:24):
I have, yeah, but it always requires me to go
back and like google it because it's just the way
my brain works, like inspired by it, you.

Speaker 6 (01:41:32):
Know, right?

Speaker 14 (01:41:34):
And I think that that's kind of what this series
is supposed to do. It's supposed to inspire you to
lean into where did those tomatoes come? From and how
are they being used. Not necessarily how to treat the
tomato and cut one inch and that sort of thing,
because I frankly quite boring. I want to know where
it come from and what was the life cycle of

(01:41:55):
the tomato, not necessarily one inch or two inches. I
find that actually most people would would say no to
that answer that they don't cook from what they see
on television. It's entertainment, and the style of entertainment that
we're hoping to bring here with our partnership with Calm
is one of mindfulness and connectivity.

Speaker 11 (01:42:15):
Yeah, once I get my cooking back calfs back on,
I will definitely be doing this.

Speaker 2 (01:42:20):
I'm curious how you pick a particular food for each segment.

Speaker 14 (01:42:25):
Right, So what this series does is it focuses on
a very small radius of locality. So within a couple
of miles in Long Island, there's a small town called Southold,
and inside of that there's a biodynamic farm called KK
there is an oyster fishery called Little Ram and there's
a cheesemonger called Coptapano.

Speaker 15 (01:42:44):
And what I really wanted to do is sort of
bring you into this place.

Speaker 14 (01:42:48):
It's very special and dear to me and show you
kind of what happens within a very small radius and
a very intense kind of time as well. Summer of
one year ago, basically summer of twenty twenty two.

Speaker 3 (01:43:00):
Hey, John, before we let you go, I am not
very good in the kitchen. I gotta be honest. However,
I loved the Bear, and I'm wondering if the popularity
around the FX series The Bear has led to an
increase in people just like wondering what happens in the kitchen,
you know.

Speaker 14 (01:43:17):
I think I think there's a lot of conversation around
also not only sort of the personality of a cook
or what happens during a service. Yeah, so it's beyond
the kind of recipes and sort of the action, but
also the kind of the people that are producing those
things and the kind of pressures that they're in. I'm

(01:43:38):
thankful for that story to be out there because I
think it's one that's it needed to be told.

Speaker 15 (01:43:43):
But also when you've got like a good looking dude
cooking and.

Speaker 14 (01:43:46):
Screaming and yelling, there's like great inspiration that hopefully will
come to more folks joining us.

Speaker 3 (01:43:51):
John Fraser, a restaurant ur and chef. He's the founder.
If you have restaurants, we love it when you join us.
Thanks so much.

Speaker 1 (01:43:58):
This is the Bloomberg Business Week podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from three to six Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
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Bloomberg Businessweek Weekend – September 22nd, 2023

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