Latest / Bloomberg Intelligence / Archegos Blowup Likely To Draw SEC Scrutiny On Leverage

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Archegos Blowup Likely To Draw SEC Scrutiny On Leverage · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
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  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Well, the story of
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  Speaker 1: the morning certainly has been this Archegos Capital Management, the
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  Speaker 1: unwinding of this fund and the volatility that it's caused
• 0:30
  Speaker 1: a handful of names, including some of those big media
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  Speaker 1: names like Viacom, CBS and Discovery, as well some tech names,
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  Speaker 1: and the in in fact it's had on some of the
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  Speaker 1: relationship banks. Let's get the latest with Shawnalie Bassek, Bloomberg
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  Speaker 1: Wall Street reporter fanale Thanks so much for joining us here.
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  Speaker 1: It's really been the story over the last several days
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  Speaker 1: here about what happened. What do we what's the latest
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  Speaker 1: on Archaegas Capital Management. Yeah, well, first of all, it's
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  Speaker 1: the fallout we're seeing of the banks, but also what
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  Speaker 1: an ugly day for Viacom. I mean the share is
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  Speaker 1: still dropping. You know, I've spoke to a bunch of
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  Speaker 1: investors today that playing these media stocks and obviously not
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  Speaker 1: so thrilled with the moves you're seeing in the market
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  Speaker 1: and really just the violent fundamentals, um, you know, the
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  Speaker 1: violent swings you're seeing underneath the surface. Y, especially among
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  Speaker 1: the investors that bought a secondary offering that Viacom issue.
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  Speaker 1: Just uh, I guess on March five dollars to share
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  Speaker 1: they bought stock and now the stocks stating at forty four.
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  Speaker 1: So a lot of unhappy investors out there, I'm sure, yeah, absolutely,
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  Speaker 1: And I mean if we need to take a big
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  Speaker 1: step back, I mean a lot of this was bought
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  Speaker 1: on by this family office run by you know, of
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  Speaker 1: Bill Wong, who was embroiled in an insider trading a
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  Speaker 1: scandal and then was able to really get all of
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  Speaker 1: this exposure on leverage from multiple banks. UM. Really a
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  Speaker 1: huge family office, despite not many people having heard much
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  Speaker 1: about him before, not since two thousand twelve. I mean,
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  Speaker 1: he's a family office, be because he um settled wire
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  Speaker 1: fraud charges, right, and it's interesting that he's even trading
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  Speaker 1: with Goldman Sachs and others because we know that um,
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  Speaker 1: the compliance uh people at Goldman Sachs on numerous occasions
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  Speaker 1: had told the their bankers, no, you can't work with
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  Speaker 1: this guy anymore. Yeah, And ultimately that kind of moratorium
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  Speaker 1: ran out, and it was Goldman Sacks, it was Morgan Stanley,
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  Speaker 1: it was no Mura, it was Credit Sweets, even Deutsche
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  Speaker 1: Bank at one point. So you really had a range
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  Speaker 1: of banks show up and really enable the this um
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  Speaker 1: person really amassing humongous family office that has now a
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  Speaker 1: mass these major positions on leverage by means of the
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  Speaker 1: banking system that has supported him and Shinali, what do
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  Speaker 1: we know about the use of swaps in this transaction?
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  Speaker 1: I guess one of the big issue for a lot
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  Speaker 1: of people's, you know, particularly investors of some of these
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  Speaker 1: names like Viacom, CBS and the Discovery, like why are
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  Speaker 1: these stocks going up so dramatically when the fundamentals do
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  Speaker 1: not support it? You even it prompted the company the
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  Speaker 1: issue stock, it prompted analysts that downrade the stock, and
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  Speaker 1: it was all because we didn't really know who the
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  Speaker 1: buyer was, and it was because of these swaps. What
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  Speaker 1: do we know? Yeah, it's a great question. These swaps
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  Speaker 1: um you know, the arcane type of financial product called
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  Speaker 1: contracts for difference. And you know, big hat tip to
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  Speaker 1: Tracy Allaway on our team for really running through the
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  Speaker 1: issues here. It's very unclear as to you know, what
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  Speaker 1: the rules are around these swaps across borders. Right, We're
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  Speaker 1: not even just talking about a US story here, and
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  Speaker 1: the SEC did say they are in contact with the banks,
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  Speaker 1: they are looking at the issue here as a major
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  Speaker 1: financial regulation nerd. I've got to say that Gary Gensler
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  Speaker 1: led SEC moving forward, I'd be pretty upset about what
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  Speaker 1: happened here, and I'd also be looking moving forward around
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  Speaker 1: why the leverage outside of the banking system has just
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  Speaker 1: gone so far and away such that we're seeing one
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  Speaker 1: of the biggest blow ups since LTCM. What does this
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  Speaker 1: mean for Wong? What does this mean for our gos?
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  Speaker 1: Is is this the end for that family office? I mean,
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  Speaker 1: I want to see who banks with him again, Matt,
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  Speaker 1: And I mean after something like this, you know how,
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  Speaker 1: I think there will be much more to come in
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  Speaker 1: the coming days on exactly how this happened. That that
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  Speaker 1: that reminds me is there more to come in terms
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  Speaker 1: of unwinding? Do you think I do think that we
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  Speaker 1: have to be watching this closely I do think there's
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  Speaker 1: more to come. One sign of faith that was given
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  Speaker 1: by a hedge fund manager just this morning was, you
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  Speaker 1: know the vix is still pretty low. Right, you're not
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  Speaker 1: seeing these uh this these massive swings go into the
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  Speaker 1: broader market and it's entirely But will you see a
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  Speaker 1: few more hedge funds lose a lot of money? Probably? Yeah.
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  Speaker 1: I mean first it was meme stocks and we could say, Okay,
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  Speaker 1: that's just a bunch of retailers playing around because the board, Uh,
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  Speaker 1: now we've got this issue. Um, have we heard anything
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  Speaker 1: from the regulators in general? It just feels like you
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  Speaker 1: were mentioning shy. It just feels like if I were
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  Speaker 1: Gary Gensler coming in here, Um, I got some work
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  Speaker 1: to do here. There's a lot of things for me
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  Speaker 1: to look at, right, and let's let our memories be
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  Speaker 1: longer too, Because at the end of early before even
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  Speaker 1: the markets one hey, riot wire, we were seeing hedge
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  Speaker 1: funds trade at you know, like a hundred to one
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  Speaker 1: sometimes leverage when they were trading in treasury markets, to
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  Speaker 1: the point that it caused pressure on some of the
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  Speaker 1: safest funding markets in the world. So you know, it's
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  Speaker 1: not even just game stop or you know this this
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  Speaker 1: issue that we've seen with archegos. How is it that
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  Speaker 1: you see so many issues in the hedge fund industry
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  Speaker 1: in regard to borrow money in in just a year
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  Speaker 1: and a half. Yeah, so leverage is definitely give me
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  Speaker 1: a point. Um the gnsler is going to focus on
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  Speaker 1: in terms of regulation, is there anything else? Is there
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  Speaker 1: anything else? Well yeah, well yeah, yeah, Well there's Jenny Yellen,
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  Speaker 1: there's f stock, right, I mean, are they going to
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  Speaker 1: be clamping down on the non bank financial system in
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  Speaker 1: a big world? And also disclosure? Right, Remember Gary Gansler
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  Speaker 1: was former CFTC that was the main overseer swaps market.
• 6:14
  Speaker 1: That's exactly what I'm thinking in shale. When you see
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  Speaker 1: the words secret um in regards to assets then in
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  Speaker 1: a headline, then you know that there's gonna be at
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  Speaker 1: least one or two Congressmen thinking this is a problem. Yeah, exactly.
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  Speaker 1: It's the most read story on Bloomberg today, so it's
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  Speaker 1: got to be in the back of everybody on Sunday
• 6:31
  Speaker 1: and Saturday and Friday. It's been the eight of the
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  Speaker 1: top ten most dread stories over the weekend. So definitely, UM,
• 6:38
  Speaker 1: a fascinating scoop there, and uh, who we all props
• 6:42
  Speaker 1: to is this Eric Shatsker with Eric Schrie, Sophia Horte
• 6:47
  Speaker 1: coast to Tracy Alloway Bay who we have a whole
• 6:50
  Speaker 1: team on this one, all right, and remember, you know
• 6:54
  Speaker 1: it's interesting. We're gonna have you know, a return, a
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  Speaker 1: story and a show on four thirty Wall Street time
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  Speaker 1: on Bloomberg Radio and television, really diving into this issue,
• 7:03
  Speaker 1: so make sure to tune in for that. There was
• 7:07
  Speaker 1: recently a really cool deal done by a Canadian electric
• 7:11
  Speaker 1: vehicle manufacturer. Electro Mechanica had UM from the beginning, done
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  Speaker 1: all of its production in China, but now the company
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  Speaker 1: is opening a location in Arizona. And we've got the
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  Speaker 1: guy who did that deal for b d O on
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  Speaker 1: the air, Tom Stringer, Corporate real Estate Advisory Managing Director
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  Speaker 1: UM running site selection and incentives there. And Tom, let's
• 7:35
  Speaker 1: talk about before we did the back to work, UM,
• 7:38
  Speaker 1: you know, back to school uh discussion, let's talk about
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  Speaker 1: Electro Mechanica, UM, how you got them into the US,
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  Speaker 1: into Arizona and why they're building there instead of another
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  Speaker 1: plant in China. Well, good morning, guys, thanks for having
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  Speaker 1: me back. Really appreciate it. Very interesting story. Um, certainly
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  Speaker 1: it's a it's one that's part of a frothy ev
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  Speaker 1: market it right now. But you know, we started looking
• 8:02
  Speaker 1: at the project a couple of years ago. UM, the
• 8:04
  Speaker 1: market for evs was still really just emerging. Obviously Tesla
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  Speaker 1: had had established itself, but other players were really just
• 8:11
  Speaker 1: sort of coming up to bat at that point in time.
• 8:13
  Speaker 1: And we were in the midst of the tarif from
• 8:15
  Speaker 1: the trade discussions, UM, which caused right a lot of
• 8:18
  Speaker 1: ripples and people were having to make adjustments for that.
• 8:21
  Speaker 1: So access to the North American market, solidifying the supply
• 8:24
  Speaker 1: chain were really kind of strategic decisions that the company
• 8:27
  Speaker 1: was making early on. And by the time we got
• 8:31
  Speaker 1: through the project and COVID had read its ugly head
• 8:34
  Speaker 1: and then market demand and awareness really poor EVS in
• 8:37
  Speaker 1: the US really just surged dramatically. It was looked like
• 8:41
  Speaker 1: a very strategic decision that was made two years ago.
• 8:43
  Speaker 1: Now these these a lot of these sites are going
• 8:47
  Speaker 1: up in Texas, California, Arizona. Does the sun have something
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  Speaker 1: to do with that? Well, I don't think anybody dislikes
• 8:55
  Speaker 1: warm weather. Certainly into the winner that we've had here,
• 8:58
  Speaker 1: in the northeast. So that's checked on for those locations.
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  Speaker 1: But I think if you look at the states that
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  Speaker 1: are really emerging as EV powerhouses and you hit the
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  Speaker 1: nail on the head, I would say, you know, you Texas,
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  Speaker 1: Arizona in particular, which had really no automotive manufacturing industry
• 9:12
  Speaker 1: prior to too Lucid, to Nicola now electro Mechanic and
• 9:15
  Speaker 1: some others. Um, you're looking at southern states that are
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  Speaker 1: aggressive in economic development in terms of corporate recruitment, job training, UM,
• 9:24
  Speaker 1: aggressive tax and incentive policy, terrific utility rates, and frankly,
• 9:29
  Speaker 1: with warm weather and good tax rates from a first
• 9:32
  Speaker 1: lincome standpoint, places people in talent really want to go.
• 9:36
  Speaker 1: So those have been very attractive kind of benchmark points
• 9:39
  Speaker 1: for those locations. Hey, Tom, you mentioned earlier, you know,
• 9:43
  Speaker 1: the push for some companies to bring their supply chains
• 9:46
  Speaker 1: um maybe on shore in the US UH, and that
• 9:50
  Speaker 1: was certainly a big discussion point during the Trump administration.
• 9:54
  Speaker 1: Where are we now that we have a new administration.
• 9:56
  Speaker 1: Are companies still moving that way or they reassessing? No,
• 10:01
  Speaker 1: I think it's a it's a good bit of continuity
• 10:04
  Speaker 1: between the administrations. You know, anytime you can get Republicans
• 10:06
  Speaker 1: and Democrats degree on anything, watch out, it will probably happen.
• 10:10
  Speaker 1: But this one seems to be um really taking hold
• 10:14
  Speaker 1: because the markets and commercial industry and and frankly consumers
• 10:18
  Speaker 1: were driving it more so than any policy decisions. So
• 10:21
  Speaker 1: here we have the policy decision makers chasing the markets,
• 10:24
  Speaker 1: which usually makes for very good policy. Um. So there's
• 10:27
  Speaker 1: a lot of continuity. I think you saw great investment
• 10:30
  Speaker 1: also again in Arizona with Intel just last week with
• 10:33
  Speaker 1: the twenty billion dollar chip fab facility, and that was
• 10:36
  Speaker 1: facilitated by both administrations, both the Trump administration starting it
• 10:40
  Speaker 1: and the Biden administration coming on and taking hold to
• 10:43
  Speaker 1: help the state of Arizona drive that home. So, UM,
• 10:46
  Speaker 1: some good continuity in in the kind of will will say,
• 10:49
  Speaker 1: um resetting of supply chains. Uh, that's that's really going on.
• 10:53
  Speaker 1: So we're an implementation now, it's not just policy anymore
• 10:56
  Speaker 1: thought process. I just want to jump in and I'll
• 10:58
  Speaker 1: tweet out a picture of the Electro Mechanica solo car.
• 11:03
  Speaker 1: It's so cool. It's a little three wheeler with an
• 11:06
  Speaker 1: awesome trunk. I recommend googling it, but again I'll send
• 11:09
  Speaker 1: it out on Twitter. Tom let's get to the bank news,
• 11:12
  Speaker 1: which is, you know a lot of our listeners obviously
• 11:14
  Speaker 1: working in banks, tired of being at home with their
• 11:18
  Speaker 1: kids or in the case of the younger workers, with
• 11:20
  Speaker 1: mom and dad. They want to get back to the
• 11:23
  Speaker 1: excitement of the office, or maybe they don't. What are
• 11:26
  Speaker 1: you hearing, Hey, great question, I think all of us now.
• 11:30
  Speaker 1: A year in UM, it was super positive. At first,
• 11:33
  Speaker 1: it was unbelievable how quickly corporate America, financial institutions, government
• 11:37
  Speaker 1: really shifted gears and and kept productivity up and shifted
• 11:41
  Speaker 1: to it to working at home. UM. I think we've
• 11:43
  Speaker 1: certainly realized there's some advantages to it, but there's certainly
• 11:46
  Speaker 1: some limitations, and those limitations are starting to kind of
• 11:49
  Speaker 1: pray the edges of it. I think people are excited
• 11:52
  Speaker 1: to get back. I think it's gonna look a little different.
• 11:54
  Speaker 1: That's one thing that's been consistent. You hear that term
• 11:57
  Speaker 1: hybrid thrown out there are probably a thousand times today
• 12:00
  Speaker 1: every leader that gets asked this question. That's because it's right.
• 12:03
  Speaker 1: We've proven our cost effect that it is to allow
• 12:07
  Speaker 1: people to work from flow from home and have flexibility,
• 12:10
  Speaker 1: and that access to talent really means you can recruit
• 12:12
  Speaker 1: somebody to work in New York, but they could be
• 12:14
  Speaker 1: in Iowa or across the other side of the world.
• 12:17
  Speaker 1: And that's a huge advantage for companies and a challenge
• 12:19
  Speaker 1: for jurisdiction. So I think as we start to come back,
• 12:23
  Speaker 1: flexibility is going to be extremely important. Probably less square
• 12:27
  Speaker 1: footage in the central business district is something that's definitely emerging,
• 12:31
  Speaker 1: and that's the challenge that's going to have to be addressed.
• 12:33
  Speaker 1: In those higher cost jurisdictions, They're gonna have to get
• 12:36
  Speaker 1: into economic development a lot more aggressively because all those
• 12:40
  Speaker 1: jobs won't come back. Um, there was a great static
• 12:42
  Speaker 1: in that from the Journal the other day that office
• 12:45
  Speaker 1: occupancy physical occupancy in New York City, for example, is
• 12:48
  Speaker 1: down eight four from last year, and I mean that
• 12:52
  Speaker 1: is just a devastating when you think of the number
• 12:54
  Speaker 1: of turkey sandwiches and bagels that are not consoled and
• 12:58
  Speaker 1: how that affects right the rest of the region. Yeah,
• 13:01
  Speaker 1: we'll have to see how people come back, certainly in
• 13:04
  Speaker 1: some of these urban markets. Tom Stringer, thank you so
• 13:06
  Speaker 1: much for joining us. Tom Stringer's corporate real Estate Advisory
• 13:09
  Speaker 1: Managing director for Site Selection and Incentives at the firm
• 13:13
  Speaker 1: b DO based in your giving us some thoughts about
• 13:16
  Speaker 1: how the supply chain coming closer to home for a
• 13:18
  Speaker 1: lot of US companies and what that means for infrastructure
• 13:23
  Speaker 1: time for Bloomberg Opinion. We rejoined today by Chris Anderson,
• 13:26
  Speaker 1: CEO and co founder of three D Robotics based in
• 13:30
  Speaker 1: San Diego, and the topic really is some of these
• 13:33
  Speaker 1: big tech companies, are they media companies that are responsible
• 13:36
  Speaker 1: for the content or are they simply technology platforms uh
• 13:40
  Speaker 1: and sourcing and hosting user generated content therefore uh not
• 13:45
  Speaker 1: liable for that content. Chris, thanks so much for joining
• 13:48
  Speaker 1: us here. We we just had some of those big
• 13:49
  Speaker 1: tech CEOs Facebook, Google and others in front of Congress.
• 13:53
  Speaker 1: Yet again, I don't think anything of substance was achieved.
• 13:58
  Speaker 1: What's your view on how maybe some of these you know,
• 14:02
  Speaker 1: big tech copies should be thinking about the content that's
• 14:06
  Speaker 1: on their platforms. Yeah, you're you're right. There was nothing
• 14:10
  Speaker 1: of substance achieved in there, and there never is and
• 14:12
  Speaker 1: these sort of things they're largely theater um. The problem
• 14:15
  Speaker 1: is that there's a, you know, a fundamental disconnect between
• 14:18
  Speaker 1: the role of the platform, which is really what they
• 14:20
  Speaker 1: call common carrier. They you know, there's the user created
• 14:24
  Speaker 1: content is impossible to uh to to edit the way um,
• 14:29
  Speaker 1: you know, professionally created content is um. And then then
• 14:32
  Speaker 1: then the their power which is now you know, greater
• 14:36
  Speaker 1: than than the newspapers um. And so the you know,
• 14:39
  Speaker 1: the question is is it's is it going to be
• 14:41
  Speaker 1: some sort of oversight board like Facebook you're creative? Well,
• 14:44
  Speaker 1: that doesn't scale. Is it going to be you know,
• 14:46
  Speaker 1: actually imposing requirements on them that they responsible for all
• 14:51
  Speaker 1: the content? Well, that doesn't scale. Is it breaking them
• 14:53
  Speaker 1: up like an antitrust? Well, that doesn't really solve the problem.
• 14:56
  Speaker 1: And we recommend that actually a um, you know, a
• 14:59
  Speaker 1: concept from the new paper ages is the best one.
• 15:03
  Speaker 1: So what's the what's the concept? Well, back back when
• 15:07
  Speaker 1: in when newspapers were the dominant cultural force for politics
• 15:11
  Speaker 1: and and and and and news in America, newspapers took
• 15:14
  Speaker 1: their responsibilities pretty seriously, and they were considered the fourth
• 15:17
  Speaker 1: the state, you know, after the after the three states
• 15:20
  Speaker 1: of government, the fourth the state was like the gate
• 15:22
  Speaker 1: keeper that rather the the the you know, the the overseer,
• 15:25
  Speaker 1: the you know, the people of the institution that kept
• 15:27
  Speaker 1: them honest and so newspapers have created the role of
• 15:30
  Speaker 1: om Boozman and on Woodsman is an independent UM and
• 15:34
  Speaker 1: you know, person and employee often whose job it is
• 15:37
  Speaker 1: to not only respond to complaints from the public, but
• 15:40
  Speaker 1: also to examine the institution from the inside, UM a
• 15:43
  Speaker 1: little bit like for example, an inspector general might be
• 15:46
  Speaker 1: UM within government. And most newspapers had on Boodsman, and
• 15:50
  Speaker 1: you know, and they just they just kept an eye
• 15:51
  Speaker 1: on you know, they watched the Watchman if you will, UM.
• 15:54
  Speaker 1: And now, over time, as newspaper industry has declined, the
• 15:57
  Speaker 1: role the om Boodsman has gone away. The New are Times,
• 16:00
  Speaker 1: for example, which called there's a public editor. They got
• 16:03
  Speaker 1: rid of their last one in two thousand and seventeen.
• 16:06
  Speaker 1: And yet and so, and that's appropriate as as newspapers
• 16:09
  Speaker 1: became less of a central figure in our you know,
• 16:12
  Speaker 1: our public discourse. But Chris, it's also in a newspaper,
• 16:15
  Speaker 1: you can't Paul and I can't write in and say
• 16:18
  Speaker 1: whatever we want in the New York Times the addition
• 16:21
  Speaker 1: coming out tomorrow, right. They they really are in charge
• 16:24
  Speaker 1: of their own content. Whereas Facebook is more like Speaker's
• 16:28
  Speaker 1: Corner in Hyde Park. Anybody can go there with a
• 16:32
  Speaker 1: soapbox and spew whatever kind of lies misinformation he or
• 16:38
  Speaker 1: she wants, and they often do. That's the problem, right
• 16:42
  Speaker 1: exactly what the analogy is that that a newspaper, you
• 16:46
  Speaker 1: you know, the writers the words are our subject, your control,
• 16:49
  Speaker 1: their employees. For social media, what you have instead is
• 16:52
  Speaker 1: policies and algorithms. The you know, they can't control the words,
• 16:56
  Speaker 1: they can control their algorithms and how they promote the
• 16:58
  Speaker 1: words to other people. And they control policies about what
• 17:01
  Speaker 1: moderation rules will be applied to take words down if
• 17:03
  Speaker 1: they're considered hate, speecher or whatever. And so the ambutsman
• 17:06
  Speaker 1: role here is more technical and and sort of policy oriented.
• 17:10
  Speaker 1: So in this case, for example, let's say that there's
• 17:12
  Speaker 1: a intrinsic bias in in Facebook's algorithms, Well, you know,
• 17:16
  Speaker 1: an ambutsman could spot that from from both inside and outside.
• 17:20
  Speaker 1: They not only can see the damage on the outside,
• 17:22
  Speaker 1: but they can see what's causing it, the root cause
• 17:24
  Speaker 1: on the inside and recommended change. Non botsman would then
• 17:27
  Speaker 1: have the ability to make public recommendations. The company would
• 17:30
  Speaker 1: be obligated to respond to those um those recommendations with
• 17:34
  Speaker 1: a certain time period etcetera. So that's something that that
• 17:38
  Speaker 1: an outside institution which doesn't have access to the algorithms,
• 17:41
  Speaker 1: can't do, and an inside, a purely inside institution might
• 17:44
  Speaker 1: have a conflict of interest from doing themselves, such as
• 17:46
  Speaker 1: an internal ethics group. Non Buosman states straddle the two
• 17:50
  Speaker 1: worlds and has perspective on both. It's interesting, this is
• 17:54
  Speaker 1: the seriousness of this issue here is getting ever more
• 17:59
  Speaker 1: apparent here. Uh, it impacted presently the election. In fact,
• 18:03
  Speaker 1: we're having a guest coming up later in the show
• 18:05
  Speaker 1: this morning, Jack Divine, former chief of ci CIA's worldwide operations.
• 18:09
  Speaker 1: He's actually written a book about what a threat Russia
• 18:13
  Speaker 1: poses in the cyber world. Uh, and again calling to
• 18:16
  Speaker 1: mind the election. So, Chris, the question is, can we
• 18:21
  Speaker 1: really depend upon these platforms to self police given how
• 18:25
  Speaker 1: serious this issue is? What the answer is by themselves?
• 18:30
  Speaker 1: You know? No? And And the reason is is not
• 18:33
  Speaker 1: just that they're you know, might have conflicts of interests
• 18:35
  Speaker 1: or financial you know, reasons to do this. The answer
• 18:38
  Speaker 1: is that this is really their DNA. They're they're all
• 18:41
  Speaker 1: about growth, you know, They an engagement and the problem
• 18:44
  Speaker 1: is that growth and engagement sometimes leads to toxic behavior.
• 18:47
  Speaker 1: As a matter of fact. You know, as we know,
• 18:48
  Speaker 1: we're sort of driven to negative, negative news, and so
• 18:51
  Speaker 1: you know, newspapers have the same problem. They sort of
• 18:53
  Speaker 1: you know, push negative news because it was more if
• 18:55
  Speaker 1: it leads, it leads, If it bleeds, it leads, exactly.
• 18:59
  Speaker 1: So we can't count on them to do it themselves.
• 19:00
  Speaker 1: We do need some sort of independent oversight at a
• 19:04
  Speaker 1: certain scale. Obviously every little startup doesn't doesn't need this,
• 19:07
  Speaker 1: but a certain scale you're considered in the big leagues.
• 19:10
  Speaker 1: Call it million, you know, active users or a hundred millions.
• 19:13
  Speaker 1: You know, we know it when we see it at
• 19:15
  Speaker 1: that scale. There's a public responsibility, but there's not a competence.
• 19:20
  Speaker 1: We can't assume they have a competence to themselves. We
• 19:23
  Speaker 1: you know, we're looking for different methods. Congress doing it
• 19:25
  Speaker 1: for them isn't gonna work. Antitrust isn't gonna work. You know,
• 19:29
  Speaker 1: Facebook's oversight board is completely overwhelmed. They had two d
• 19:32
  Speaker 1: and twenty thousand complaints over the last three years and
• 19:35
  Speaker 1: they've resolved and they've looked at seven of them. But Chris,
• 19:38
  Speaker 1: your idea is a good one. I mean, is there
• 19:40
  Speaker 1: any possibility that it gets traction and ombudsman that straddles
• 19:44
  Speaker 1: both worlds and controls the algorithms and you know, uh
• 19:50
  Speaker 1: watches the watchers. Well, it's clear that Congress wants to
• 19:54
  Speaker 1: do something. They want to pass the law. Um, you know,
• 19:56
  Speaker 1: getting rid of the two thirty protections is like an
• 20:00
  Speaker 1: an H bomb. It's it's not gonna work. So you know,
• 20:02
  Speaker 1: they can need to bring up you know, Mark Zuckerberg
• 20:04
  Speaker 1: gonna tie every every three months, and they know, have
• 20:07
  Speaker 1: that little that little circus, or they can pass a
• 20:10
  Speaker 1: while requiring them to have this independent board member called
• 20:14
  Speaker 1: non budsman called you know, a public editor. Whatever they want,
• 20:17
  Speaker 1: and that seems structural, It seems easy to do. And
• 20:20
  Speaker 1: then you know what the experiment play out. Is there
• 20:23
  Speaker 1: appetite in Washington for that? Is there appetite for for action? Yes?
• 20:30
  Speaker 1: Is it an non budsman per se. Let's hope far
• 20:33
  Speaker 1: our o edit hasment influenced there. And I wonder if
• 20:36
  Speaker 1: there's appetite and Silicon Valley, because on the one hand,
• 20:39
  Speaker 1: they want to get rid of this problem, then they
• 20:41
  Speaker 1: don't have to deal with the idea that they would
• 20:43
  Speaker 1: have to break up our to thirty. On the other hand,
• 20:46
  Speaker 1: they want growth and engagement exactly. I think it's an
• 20:50
  Speaker 1: appetite to get to I mean, they want to do
• 20:52
  Speaker 1: the right thing. They're just not really set up to
• 20:54
  Speaker 1: do the right thing, and all the incentives are wrong.
• 20:56
  Speaker 1: So if they could have a a a surgical you know,
• 21:01
  Speaker 1: um effective solution, which is to say, one of the
• 21:03
  Speaker 1: board members have to be independent, has to be responsible
• 21:06
  Speaker 1: for this, has to be accountable to the public, but
• 21:08
  Speaker 1: a visible internally, I think they'd love it. It reminds
• 21:11
  Speaker 1: me of when Google decided they needed an adult in
• 21:14
  Speaker 1: the room and they brought in actual Eric Schmitt. Chris,
• 21:17
  Speaker 1: thanks so much for joining us, real pleasure're talking to you.
• 21:19
  Speaker 1: Fascinating stuff. Chris Anderson, CEO and co founder of three
• 21:22
  Speaker 1: D Robotics, also writing one of our pieces on Bloomberg Opinion.
• 21:28
  Speaker 1: If you want to see the work of our opinion people,
• 21:30
  Speaker 1: just type in O, P, I N GO on your
• 21:34
  Speaker 1: Bloomberg terminal. Let's talk about weed a little bit, because
• 21:40
  Speaker 1: New York lawmakers are agreeing to legalize recreational marijuana and
• 21:46
  Speaker 1: we could see dispensaries opening up as early as next year.
• 21:50
  Speaker 1: Let's bring in Keisha Cluki. She's a government reporter out
• 21:53
  Speaker 1: of Albany. Keisha, Um, so this is really going to happen. Yeah. Yeah,
• 21:59
  Speaker 1: it's a long time coming. Lawmakers have been pushed in
• 22:01
  Speaker 1: it the last few years, but they managed to push
• 22:04
  Speaker 1: it through and we're expecting a vote on the bill
• 22:07
  Speaker 1: any day now and Governor Cuomo has already staid he's
• 22:09
  Speaker 1: ready to sign it. Alright, So what does this mean
• 22:13
  Speaker 1: from I mean, how did that? Did think? Why? Now?
• 22:16
  Speaker 1: I guess how did this get done? Now? Keisha? Yeah? Well,
• 22:20
  Speaker 1: I think Um, Like I said, lawmakers have been pushing
• 22:22
  Speaker 1: it for the last few years, and they've really just
• 22:25
  Speaker 1: been stuck on a certain number of issues within the
• 22:28
  Speaker 1: bill and they weren't able to pass it through and
• 22:30
  Speaker 1: the last few years and sessions, UM. Last year they
• 22:34
  Speaker 1: said we've got it figured out, we're going to go
• 22:36
  Speaker 1: through and do it, and then the coronavirus pandemic hit,
• 22:39
  Speaker 1: so it was really delayed an additional year. Um. And
• 22:42
  Speaker 1: I think there's really this additional push because there's we're
• 22:46
  Speaker 1: surrounded New York day is surrounded by states passing UM
• 22:49
  Speaker 1: and legalizing recreational adult youth marijuana. New Jerseys on on
• 22:54
  Speaker 1: track to do it in a in two years. I
• 22:56
  Speaker 1: believe in New York is used to being first, and
• 22:59
  Speaker 1: I think here, uh, they've really been waiting and looking
• 23:03
  Speaker 1: at what's been going on nationally and they want to
• 23:05
  Speaker 1: get out there and get get their hands on some
• 23:07
  Speaker 1: of that tax revenue. So funny to think of adult
• 23:10
  Speaker 1: use marijuana because I feel like people quit smoking pot
• 23:13
  Speaker 1: when they're twenty one or older. It's like a it's
• 23:16
  Speaker 1: a high school thing. But this is do a lot
• 23:19
  Speaker 1: of people in New York smoke pot? Well, it's it's
• 23:23
  Speaker 1: actually expected to be. We we have a large marijuana
• 23:27
  Speaker 1: medical marijuana market right now, but this is gonna be
• 23:30
  Speaker 1: anywhere from a four point to to six billion dollar
• 23:35
  Speaker 1: industry depending on on what your what business outlooks you're
• 23:40
  Speaker 1: looking at now. So it's gonna be one of the
• 23:42
  Speaker 1: largest markets in the US, maybe I think even second
• 23:46
  Speaker 1: to second in the nation to California. Alright, how about
• 23:50
  Speaker 1: for the folks that may have been convicted of a
• 23:54
  Speaker 1: marijuana related crime, what happens to them and their records
• 23:57
  Speaker 1: and so on. Yeah. So one of the main things
• 24:00
  Speaker 1: that lawmakers have been pushing to do in this legislation
• 24:04
  Speaker 1: is to help people who help both people and the
• 24:07
  Speaker 1: communities who were hindered by previous drug laws and UH,
• 24:12
  Speaker 1: the bill which came out this the details came out
• 24:14
  Speaker 1: this weekend, is going to have an automatic expungement of
• 24:17
  Speaker 1: records for people with previous convictions who UM for activities
• 24:22
  Speaker 1: that would no longer be criminalized. So as soon as UM,
• 24:24
  Speaker 1: marijuana would be legal for people ages twenty one and older, UM,
• 24:29
  Speaker 1: and they're going to reduce the amount of UM. The
• 24:33
  Speaker 1: there's still a certain amount of marijuana that you can
• 24:37
  Speaker 1: have on your person. It's not you know, a free
• 24:39
  Speaker 1: for all. UM. There's still rules. They want to make
• 24:41
  Speaker 1: sure that they're keeping the market legal, people aren't selling
• 24:44
  Speaker 1: it on the black market, and really trying to keep
• 24:46
  Speaker 1: it safe. But they're also trying to make sure that
• 24:49
  Speaker 1: individuals aren't targeted for this. Has it been unsafe before?
• 24:54
  Speaker 1: We've seen danger problems with pot. Yeah, I mean when
• 25:00
  Speaker 1: when people are buying it on the black market. And
• 25:01
  Speaker 1: this is just talking to lawmakers. UM, it can really
• 25:05
  Speaker 1: contain anything. There's no guarantee of what's in it. So
• 25:09
  Speaker 1: just like alcohol. Way back in the day when alcohol
• 25:12
  Speaker 1: was UM, they they started a labeling system. Actually with
• 25:16
  Speaker 1: Bourbon was the first labeling system. Thats wired you to
• 25:20
  Speaker 1: put exactly what was in it, because people were putting
• 25:23
  Speaker 1: anything in it, and it'll be the same with marijuana,
• 25:25
  Speaker 1: so theoretically it'll be safer controlled. You know, the dosage
• 25:29
  Speaker 1: that you're getting, um, you know exactly what's been it.
• 25:33
  Speaker 1: A Keisha, thank you so much for joining us. We
• 25:35
  Speaker 1: appreciate a. Keisha Kluki, government reporter for Bloomberg Government Weed legalized,
• 25:40
  Speaker 1: weed coming to New York State. Here in New Jersey,
• 25:42
  Speaker 1: it has been legalized, although I don't think it's actually
• 25:44
  Speaker 1: been implemented yet. They're kind of working some things out,
• 25:47
  Speaker 1: but it's coming and it's interesting. You know, it doesn't
• 25:50
  Speaker 1: appear math that there's going to be a federal law
• 25:53
  Speaker 1: anytime soon, but the boy, the states are moving very aggressively,
• 25:57
  Speaker 1: and so when you get a big state like New York,
• 26:00
  Speaker 1: that really makes a statement. Of course, California, Colorado, some
• 26:04
  Speaker 1: of the other western states have had it, but it's
• 26:06
  Speaker 1: been really it's a big statement here when uh, you know,
• 26:09
  Speaker 1: state as large as New York does it. Of course
• 26:11
  Speaker 1: with New York City, so it's a big move forward
• 26:14
  Speaker 1: for the cannabis business. Thanks for listening to the Bloomberg
• 26:17
  Speaker 1: Markets podcast. You can subscribe and listen to interviews of
• 26:20
  Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller.
• 26:25
  Speaker 1: I'm on Twitter at Matt Miller three. On Fall Sweeney,
• 26:30
  Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You
• 26:32
  Speaker 1: can always catch us worldwide at Bloomberg Radio