Latest / Bloomberg Intelligence / Slow-Walking Regulation On Vaping Is Being Challenged

Transcript

Slow-Walking Regulation On Vaping Is Being Challenged · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul Swinge You.
0:05
Speaker 1: Along with my co host Lisa Brahma Wicks. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money, whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Time to check in with Bloomberg Opinion.
0:21
Speaker 1: We're joined by opinion columnist Max Neeson. Max covers biotech, pharma,
0:25
Speaker 1: and healthcare for Bloomberg Opinion. He joins us here in
0:28
Speaker 1: a Bloomberg eleventh three oh Studios. So, Max, yesterday the
0:31
Speaker 1: President came out swinging pretty hard against the manufacturers of
0:34
Speaker 1: vaping products. What's the story. Yeah, absolutely so. So this
0:38
Speaker 1: is kind of coming into the news and become more
0:40
Speaker 1: controversial lately because there have been a spade of illnesses
0:44
Speaker 1: and deaths related to to vaping, and then more broadly,
0:48
Speaker 1: over the past couple of years, we've seen the really
0:51
Speaker 1: rapid uptake of these products by by teenagers, many of
0:55
Speaker 1: them underaged, and a lot of them gravitating towards flavored products.
0:59
Speaker 1: So the residents announcement yesterday focused on those uh they're
1:03
Speaker 1: gonna move towards trying to clear the market of these
1:05
Speaker 1: flavored products that have been so popular and and also
1:09
Speaker 1: on top of that keep kind of press for for more,
1:12
Speaker 1: more more to be done on the safety issue, which
1:14
Speaker 1: is related but separate, I guess to the flavored and
1:17
Speaker 1: and the the use by teens. Max. How much is
1:21
Speaker 1: this relegated to illegal vaping products that have been tied
1:25
Speaker 1: to certain uses of oil that when uh evaporated into
1:30
Speaker 1: the lungs can cause all sorts of problems. How much
1:32
Speaker 1: is tied to the vaping products sold by the vehemoth
1:35
Speaker 1: tobacco companies, So that that's still very much up in
1:39
Speaker 1: the air, it looks like from the data we have,
1:42
Speaker 1: and this is very limited because you know, the investigation
1:45
Speaker 1: is still go ongoing. They're looking at samples in different products.
1:48
Speaker 1: But but there is some evidence to suggest that a
1:51
Speaker 1: lot of the kind of acute issues are tied to
1:54
Speaker 1: people using these sort of bootleg and black market products,
1:57
Speaker 1: specifically H T hc UM. So people vaping marijuana have
2:02
Speaker 1: been kind of overrepresented among those who've been sick. But
2:06
Speaker 1: at this point, you know, we we know so little
2:08
Speaker 1: about the safety of these products the long term impact
2:11
Speaker 1: that we can't really rule anything out. And then there's
2:14
Speaker 1: sort of the broader issue of you know, if if
2:16
Speaker 1: we have these potentially emergent safety issues, how how much
2:21
Speaker 1: should we be you know, letting these products get a
2:23
Speaker 1: relatively unrelated foothold on the market, which sort of in
2:27
Speaker 1: the case in the past couple of years. Um, you know,
2:29
Speaker 1: the the FDA has been sort of slow to to
2:32
Speaker 1: put a regulatory regime in place and then make companies
2:35
Speaker 1: apply for approval and and do some some kind of
2:37
Speaker 1: more rigorous testing. So I think even if the product
2:42
Speaker 1: the problem, you know, the most acute health problem is
2:44
Speaker 1: tied to these illegal products, uh, it's still probably behooves
2:48
Speaker 1: the US government to take a more active role. And
2:51
Speaker 1: then specifically comes to the flavor products, Um, there's you know,
2:55
Speaker 1: crystal clear evidence that that these are the ones that
2:57
Speaker 1: teams gravity towards so a band makes sense. They're so
3:00
Speaker 1: max That's kind of goes to you know, one of
3:02
Speaker 1: the areas I thought was very interesting, it's just how
3:04
Speaker 1: did some of these how did these products get to
3:06
Speaker 1: the market with It seems to me just fund the
3:10
Speaker 1: outside is little to know f D a analysis approval
3:15
Speaker 1: with so little known about the health risks. I'm just
3:18
Speaker 1: surprised that we've It's almost like shutting the door after
3:21
Speaker 1: the horses kind of fled. That's exactly what we're seeing here.
3:24
Speaker 1: So the FDA only gained sort of regulatory oversight over
3:29
Speaker 1: this market back in it had been sort of even
3:33
Speaker 1: more than it is now a no man's land, and
3:35
Speaker 1: so that that sort of began to the initial process
3:38
Speaker 1: of building a regulatory apparatus trying to figure out how
3:40
Speaker 1: to regulate these. Initially, companies were supposed to have to
3:44
Speaker 1: apply for approval by by two eighteen, but then when
3:48
Speaker 1: the Trump administration came to power, they bumped that deadline
3:51
Speaker 1: back and and that's the period when we saw Jewel
3:55
Speaker 1: kind of you know, hit the market and then create
3:57
Speaker 1: this whole sort of a big trans Asian And I
4:01
Speaker 1: think the motivation behind that wasn't necessarily a bad thing.
4:04
Speaker 1: It's this hope that this could be as valuable cessation
4:07
Speaker 1: device away for adult smokers to switch from combustible cigarettes.
4:13
Speaker 1: But we're now finding out with the embrace of this
4:16
Speaker 1: by by from you know, non smokers, uh, and the
4:19
Speaker 1: potential safety issues. I think that argument is sort of
4:23
Speaker 1: going out the window, which makes that that decision to
4:26
Speaker 1: slow walk the regulatory regime a little bit less defensible.
4:31
Speaker 1: So this is actually the implications of this are pretty vast,
4:33
Speaker 1: because you've seen the big tobacco companies come out and
4:36
Speaker 1: try to present vaping products as a safer alternative. I mean,
4:39
Speaker 1: that really has been the future of some of these
4:42
Speaker 1: tobacco companies. And I'm wondering, do you think that regulators
4:46
Speaker 1: are prepared to force tobacco companies to stop using that,
4:50
Speaker 1: to stop saying this is safer when there's not necessarily
4:53
Speaker 1: the evidence to back it. So I think that's beginning
4:57
Speaker 1: to a certain extent. I recently. I think earlier this
5:00
Speaker 1: week we saw the f D send a letter to
5:02
Speaker 1: Jewel about about some of its marketing practices, and then
5:06
Speaker 1: when they actually start having to apply for marketing approval,
5:10
Speaker 1: you know, that's not just about safety, but it's about
5:12
Speaker 1: what kind of claims you can make on the market.
5:14
Speaker 1: I think that's an area where where there's definitely room
5:16
Speaker 1: for the for a regulatory crackdown, And you know, it
5:19
Speaker 1: may very well be that over time that this does
5:22
Speaker 1: prove to be a safer alternative in some cases. I
5:25
Speaker 1: think the issue is that, you know, unlike Europe, where
5:27
Speaker 1: these are pretty well regulated and you can make a
5:30
Speaker 1: better a better case, potentially, we just have a lot
5:33
Speaker 1: of people that are using this for for something other
5:35
Speaker 1: than switching or cessation, and uh, until we have a
5:39
Speaker 1: much stronger marketing and regulatory regime where we're you know,
5:43
Speaker 1: it's it's not a market that that can really make
5:45
Speaker 1: that claim broadly. Thank you so much, Maxneis and Bloomberg
5:49
Speaker 1: Opinion healthcare columnist joining us, and of course you can
5:51
Speaker 1: read all of his columns as well as all the others.
5:54
Speaker 1: They're really fantastic. Read them on the Bloomberg terminal O
5:57
Speaker 1: P I n go, or you can read them at
5:59
Speaker 1: Bloomberg dot com slash Opinion. It's quantitative easing forever. That
6:18
Speaker 1: is the message from the European Central Bank, which cut
6:20
Speaker 1: illustrates further below zero today and revived bond purchase until
6:24
Speaker 1: whatever today in an announcement. Interestingly, the bond market reaction
6:28
Speaker 1: has been a full circle. Yields sharply higher on the
6:32
Speaker 1: front end in Germany. You've got the euro strengthening versus
6:35
Speaker 1: the dollar after initially weakening to try to help us
6:38
Speaker 1: make sense of all of these market moves and going
6:40
Speaker 1: forward what some of the e CPS actions will mean
6:42
Speaker 1: for the currency. Jukes joins US now Global Fixing come
6:45
Speaker 1: strategist for so see it's a general So kid, why
6:49
Speaker 1: is the market responding? Perhaps not the way that Mario
6:53
Speaker 1: Draggy would have wanted. Um, Well, the turnaround came pretty
6:58
Speaker 1: much after all. The news came in so um that
7:01
Speaker 1: he announced the quantity of easing details in the first
7:05
Speaker 1: ten minutes of his of his talking what they were
7:08
Speaker 1: going to do, the new lower revised forecasts on growth,
7:12
Speaker 1: concerns about inflation or all of that's in the front
7:15
Speaker 1: and we were going down at that point. And then
7:18
Speaker 1: after that, really there's no new negative news for the currency.
7:22
Speaker 1: That came through, just a Q and A session, a
7:25
Speaker 1: joke about how the one thing everyone agreed about was
7:27
Speaker 1: that the DISCO policy ought to do more of the
7:29
Speaker 1: work from now on in UM and the market just
7:32
Speaker 1: mounted back the other way. Hindsight trading would be a
7:35
Speaker 1: wonderful thing to be allowed to do, but the market
7:38
Speaker 1: was barrish to the euro has been for a long time.
7:40
Speaker 1: We were expecting something, We got a package, and we
7:44
Speaker 1: just needed a constant diet of of of euro negative
7:48
Speaker 1: news and and maybe this sort of summarizes up where
7:52
Speaker 1: Mario Mario dragging has got to as he as he
7:55
Speaker 1: closes out his time at ECB effectively, UM, it's really
8:00
Speaker 1: hard work to push the euro down any further. The
8:02
Speaker 1: minute you stopped talking, it just doesn't want to go
8:05
Speaker 1: on going down because we're really historical week levels. So kids,
8:11
Speaker 1: from your perspective, how effective do you think the moves
8:15
Speaker 1: we saw today from the ECB could really be on
8:18
Speaker 1: the European wide economy? UM? Pessimistic, but by instinct, I mean,
8:25
Speaker 1: you know, sort of the the caveat to that is
8:28
Speaker 1: what would happen if you didn't do them, in sense of,
8:31
Speaker 1: you know, what would happen in terms of the currency.
8:32
Speaker 1: If he'd come around and done nothing today, we might
8:34
Speaker 1: have shot that up, we might have shot Bundy olds that,
8:36
Speaker 1: we might have done things that would have been damaging
8:39
Speaker 1: to everybody except President Trump's happiness at breakfast. And so
8:43
Speaker 1: so you have to you have to start off them that.
8:45
Speaker 1: But I don't get a sense really that UM continuing
8:51
Speaker 1: to supply more and more bond buying, keeping bond shields
8:56
Speaker 1: really low, having further negative interest rates really has much
9:01
Speaker 1: of an impact. And I don't know underlying credit growth,
9:03
Speaker 1: which isn't really the problem that you know, Europe suffering
9:07
Speaker 1: from a world trade slowdown and suffering from a global
9:09
Speaker 1: disinflation problem. It's suffering Germany in particular, suffering from what's
9:13
Speaker 1: happening in China. Um, to my mind, if you want
9:18
Speaker 1: to offset weakness in China, why not offset it since
9:22
Speaker 1: it affects Germany most with easier fiscal policy in Germany
9:25
Speaker 1: to upgrade some of their roads and some of their infrastructure,
9:28
Speaker 1: that would be a fine thing to do from that country.
9:31
Speaker 1: But but but but putting the financial sectors of the
9:36
Speaker 1: point that's closer to the one where they're going to
9:38
Speaker 1: charge people. Um, they're going to charge people fees on
9:41
Speaker 1: their checking accounts if we push much further and so on.
9:44
Speaker 1: I don't know that that's I don't know that that
9:47
Speaker 1: really boosts economic activity much. Let's talk about QI forever.
9:51
Speaker 1: What's the easy to be going to buy? I mean,
9:53
Speaker 1: they own so much of the of the regions dead
9:56
Speaker 1: at this point, are they just basically going to own
9:59
Speaker 1: all of it at some point and then start buying
10:01
Speaker 1: up buildings and stocks and I think that's sort of
10:05
Speaker 1: the piece. I mean, this isn't QUEI forever until you
10:08
Speaker 1: change the capital key, until you turn around and you
10:11
Speaker 1: increase the pool of what it is they are allowed
10:13
Speaker 1: to buy. So this is this is qui with um,
10:17
Speaker 1: you know, slightly slower pace of bond buying than some
10:20
Speaker 1: people have expected. But for as long as for as
10:22
Speaker 1: long as they want to keep on going, or for
10:24
Speaker 1: as long as there's anything for them to buy, or
10:26
Speaker 1: for as long as there's anything to buy, until they
10:28
Speaker 1: change what they're allowed to buy. But they'll have to
10:30
Speaker 1: they'll have to cross that bridge. And in a sense,
10:33
Speaker 1: it was that piece. Is part of what happened today
10:36
Speaker 1: is saying, well, what does Quei forever mean? I'm only
10:38
Speaker 1: going to buy you know I can. I'm only going
10:41
Speaker 1: to buy these particular biscuits. I'll buy them forever. No,
10:44
Speaker 1: you'll buy the muntil they run out. And that's how
10:46
Speaker 1: it works. Um so so I think we we well,
10:49
Speaker 1: we'll cross that bridge another day. But I thought you
10:53
Speaker 1: could interpret this if you really wanted to, as a
10:55
Speaker 1: plea from Mario dractures were either going to really you know,
10:59
Speaker 1: challenge our man date by expanding what we buy or
11:02
Speaker 1: you guys in charge of fiscal policy, you've got to
11:05
Speaker 1: come and help. That's exactly where I want to go,
11:07
Speaker 1: kit were Marry Drawing made several references to the need
11:12
Speaker 1: for fiscal stimulus from some of the leading European economies.
11:15
Speaker 1: In reality, how much influence does the ECB have over
11:19
Speaker 1: individual countries in their fiscal policy. Um, she may be
11:25
Speaker 1: more with Christine Lagarde at the ECBs and with Mario
11:30
Speaker 1: Dragging in a sense that you know, um, she's a
11:33
Speaker 1: She's seven heavyweight. At every big I m F G
11:36
Speaker 1: seven meeting you've you've you've had She's She's been there,
11:38
Speaker 1: she you know, has been involved. Mayo drag has has been,
11:42
Speaker 1: you know, the savior of the Eurozone really sorting it out.
11:45
Speaker 1: Without him, I don't know where we would have been
11:47
Speaker 1: for the last um eight years since he since he
11:50
Speaker 1: turned up. Um So I think they have an influence.
11:53
Speaker 1: But counter to that, there's a lot of dogma in Europe.
11:57
Speaker 1: You know, politicians don't like aggressive fiscally, particularly in Germany.
12:01
Speaker 1: And if you remember back to the G seven meeting
12:05
Speaker 1: UM in southwestern France and Burrits, there was nothing in
12:09
Speaker 1: the communicuet about major threats to global growth. You know,
12:13
Speaker 1: there was plenty of things that were discussed, but I
12:17
Speaker 1: didn't I didn't hear President mac Hall talking about, you know,
12:21
Speaker 1: the dangers of another European recession anywhere in there and
12:24
Speaker 1: what they needed to get together to do for a
12:26
Speaker 1: big growth push. So I don't think the politicians are
12:29
Speaker 1: quite on the same page as the markets and central
12:33
Speaker 1: banks yet. I mean, Europe at least on growth, to
12:36
Speaker 1: be honest. But yeah, that's not to say that that's
12:38
Speaker 1: not to say they'll ignore Christine Lagarde. I think that
12:40
Speaker 1: would be wrong. The thing they do that. I do
12:42
Speaker 1: want to just bring you some breaking news. CNBC is
12:46
Speaker 1: coming out and reporting the White House is not considering
12:49
Speaker 1: an interim China deal, and you're seeing the rally and
12:52
Speaker 1: status pair back a bit with a NAZDAC up now
12:55
Speaker 1: just for tents of a percent in the SMP up
12:57
Speaker 1: two tenths of a percent. And I wonder when we
12:59
Speaker 1: talk of about headwinds to growth, whether we're really just
13:02
Speaker 1: talking about trade disputes. I mean, how much of what
13:05
Speaker 1: central banks do at this point kit will be dictated
13:08
Speaker 1: almost entirely upon whether there is some sort of easing
13:11
Speaker 1: and global trade tensions um. Yeah. The trouble with the
13:15
Speaker 1: global trade ens is they come and go and come
13:17
Speaker 1: and go and come and go, and time passes, if
13:20
Speaker 1: you like, in the sense that uh, you know that
13:23
Speaker 1: that that the impact on corporate profitability for example, just
13:26
Speaker 1: continues to um feeds through and that's not something it's
13:32
Speaker 1: going to go away. Beast planted on my desk a
13:34
Speaker 1: couple of hours ago from my colleague Albert Edwards, who
13:36
Speaker 1: is known as one of the big bears of most
13:38
Speaker 1: things in the markets, warning about you know what the
13:44
Speaker 1: profit cycle and what it means for recession risks and
13:47
Speaker 1: and my senses and I'm really sort of feels sitting
13:50
Speaker 1: in the UK every day that uncertainty about trade with
13:53
Speaker 1: deals on off, tariffs up, not uf postponed, but not
13:56
Speaker 1: postponed forever. What's going to happen? Time goes on in
14:00
Speaker 1: that process and on the procession risk grows globally. Kid
14:03
Speaker 1: Duke's chief Global ex Strategists for Society General, joining us
14:08
Speaker 1: from London, Thank you so much for your thoughts on
14:11
Speaker 1: the E C. B UH news we had this morning.
14:30
Speaker 1: This week, Lisa and I were in Boston for the
14:32
Speaker 1: Boston Fintech Week, where we met a lot of cool
14:35
Speaker 1: entrepreneurs bringing their technology to the financial services industry. One
14:39
Speaker 1: of the participants at the Boston Fintech Week is Mike Massaro,
14:42
Speaker 1: CEO of fly Wire. UM. Mike joins us here from Boston. Mike,
14:47
Speaker 1: thanks so much for joining us. So we think about finance,
14:51
Speaker 1: fintech and just bringing more technology to financial services. Give
14:54
Speaker 1: us a little sense of what your company, fly Wire
14:56
Speaker 1: is all about. Sure, thanks Paul, thanks for having me. Uh.
15:00
Speaker 1: Flywire really helps with global cross border payment challenges. So
15:05
Speaker 1: we look at vertical markets such as education, healthcare, travel, uh,
15:09
Speaker 1: and they're really complicated when comes to how money moves
15:11
Speaker 1: around the world and uh, and what we're doing is
15:14
Speaker 1: we're making that much much simpler. We're making it easy
15:16
Speaker 1: for people to pay, for instance, from China to attend
15:18
Speaker 1: a place like Harvard UM and and those transactions have
15:22
Speaker 1: typically gone over the banking rails historically. And what fly
15:25
Speaker 1: Wire has done is we've made it a lot easier
15:27
Speaker 1: for those institutions, uh, you know, educational, medical, or travel
15:31
Speaker 1: companies to to collect money all over the world. So
15:34
Speaker 1: what are some of the obstacles that make this much
15:37
Speaker 1: more difficult than people might imagine, Which is send over
15:40
Speaker 1: your money and be done with that. You know, one
15:43
Speaker 1: thing is the transaction size. Right, A lot of consumers
15:46
Speaker 1: we think about buying you know, five or ten or
15:47
Speaker 1: even things on e commerce when the transaction size goes
15:52
Speaker 1: north of thousands of dollars, sometimes tens of thousands of
15:54
Speaker 1: dollars um only so many consumers can even put a
15:57
Speaker 1: transaction of that size on a credit card, so they
16:00
Speaker 1: need other ways to pay, traditionally through their bank accounts
16:02
Speaker 1: or alternatives, um. And so it's really difficult for the
16:05
Speaker 1: billers or the receivers of money as well to manage
16:08
Speaker 1: all the changing dynamics and payments. Right, as much as
16:11
Speaker 1: everybody's trying to make payments easier, they're probably the most
16:14
Speaker 1: complicated they've ever been. Right, More global commerce, more regulation,
16:19
Speaker 1: more security vulnerabilities, all of those things make it more challenging. So, uh,
16:24
Speaker 1: you know, both the receivers have had a hard time
16:27
Speaker 1: with it, but it also the payers haven't had a
16:29
Speaker 1: great experience because there aren't great ways to pay outside
16:32
Speaker 1: the traditional international bank wire. So, Mike, one of the
16:35
Speaker 1: big issues I know for all of us, all consumers,
16:38
Speaker 1: as we transact more and more online, is security. Give
16:41
Speaker 1: us a sense of kind of how you guys approach
16:43
Speaker 1: security because you're talking about, as you mentioned, kind of
16:45
Speaker 1: some some bigger sums of money. Yeah, you know, it's
16:48
Speaker 1: critical to be part of that trusted environment, right. So
16:52
Speaker 1: you know, flyware doesn't help you send money anywhere. Right,
16:55
Speaker 1: it's very purpose built, so we work with the receivers.
16:58
Speaker 1: So it's a it's a trusted receiver on one side.
17:01
Speaker 1: In many ways, it's almost like a closed loop, right,
17:04
Speaker 1: because the money ultimately is going to Yale or Mass
17:07
Speaker 1: General Hospital, u c L A Medical Center um OR
17:10
Speaker 1: or you know somebody like um USC from an educational perspective,
17:15
Speaker 1: so you know that one side of the transaction, you
17:17
Speaker 1: know it's where it's going to go, and you know
17:19
Speaker 1: the purpose of those funds. So that in it in
17:21
Speaker 1: itself is a big game changer when it comes to
17:23
Speaker 1: cross border payments. And then the challenge that we had
17:26
Speaker 1: to do is we had to build a platform that
17:28
Speaker 1: could understand all the regulatory and security requirements within the
17:31
Speaker 1: various countries. Uh. So you know, for instance, in places
17:34
Speaker 1: like China, India, Korea, you have various kind of checks
17:37
Speaker 1: that have to occur either with the financial system or documentation.
17:41
Speaker 1: You have to collect to make sure the funds can
17:43
Speaker 1: securely move and so that's part of what we've done,
17:45
Speaker 1: is as as building Flower and the technology platform we've
17:49
Speaker 1: built in to really check that we're both satisfying the
17:52
Speaker 1: security and compliance requirements within the country, but also taking
17:56
Speaker 1: that effort in that those issues away from our clients,
17:58
Speaker 1: which are the ones receiving them. Any Mike, a lot
18:01
Speaker 1: of people going to blockchain and actually that these cross
18:04
Speaker 1: border payments are a key place for blockchain products crypto
18:08
Speaker 1: assets to play an important role to basically transfer something
18:12
Speaker 1: in a very easy, seamless way. Is that something that
18:16
Speaker 1: is on your horizon at all that your company is
18:18
Speaker 1: looking into? Yeah, you know, I think we're always I'm
18:22
Speaker 1: a big believer in the underlying blockchain technology associated to
18:25
Speaker 1: validating transactions or having a shared kind of global ledger.
18:29
Speaker 1: I think crypto has turned a little more into speculation lately. UM,
18:32
Speaker 1: And I think ultimately if you look years and years out,
18:35
Speaker 1: UM there is likely to be a digital cryptocurrency based
18:38
Speaker 1: off some kind of fiat currency. UM. I think how
18:41
Speaker 1: long that takes to develop? I think people have been
18:43
Speaker 1: wrong so far. UM. I think it's going to take time,
18:45
Speaker 1: But I think it will get there. Uh. And the
18:47
Speaker 1: way we look at the world is if people want
18:49
Speaker 1: to pay in a certain method, UM, we want to
18:52
Speaker 1: make sure Flywire has that method available, whether they're using PayPal,
18:55
Speaker 1: American Express, Visa, or their bank or something like Allie
18:59
Speaker 1: pay wee chat in China. We want to have all
19:01
Speaker 1: those methods there. So, you know, if crypto really takes
19:04
Speaker 1: off from a consumer perspective, UM, and the and they're
19:07
Speaker 1: looking for a certain cryptocurrency, UM, that's something that Flywire
19:10
Speaker 1: would definitely consider. So, Mike, what are some of the
19:12
Speaker 1: areas of growth for your company right now? Is more
19:15
Speaker 1: and more people transact online. You know, there's there's really
19:19
Speaker 1: uh it really falls into three different buckets. Geographic expansion
19:23
Speaker 1: for US UH. You know, if you look at the
19:25
Speaker 1: verticals were in education, healthcare, and travel, they are truly
19:28
Speaker 1: global industries. Uh. And so there are students crossing borders
19:32
Speaker 1: to study from places like UM China to Australia or
19:37
Speaker 1: New Zealand. Right there's obviously one point one million students
19:40
Speaker 1: coming to the United States every year. UM. International patients
19:43
Speaker 1: are the same way, They're crossing borders all the time
19:46
Speaker 1: for medical care. UH. And and anybody that lives in
19:48
Speaker 1: a majorly developed city. Um. You know, all the all
19:51
Speaker 1: the top hospitals in the United States have international patient programs.
19:55
Speaker 1: So geographic expansion really getting out there and making sure
19:57
Speaker 1: more people know about the fly Wire solution. And then
20:00
Speaker 1: I would say the second um is around more capabilities.
20:03
Speaker 1: Right where our clients asked us to help with cross
20:06
Speaker 1: border they're actually now looking because payments get more complicated,
20:09
Speaker 1: they're actually looking for us to just offload all their payments, right,
20:12
Speaker 1: and so we're starting to expand and do that as well. UM,
20:15
Speaker 1: So you've got kind of geographic expansion, you have providing
20:19
Speaker 1: more products and services related to payments for existing clients.
20:23
Speaker 1: And then it's the vertical expansion. Right. We just launched
20:26
Speaker 1: this travel sector a year ago. It's growing over year
20:29
Speaker 1: on year for us, and we're helping people as they
20:31
Speaker 1: travel around the world just make it easier to pay for,
20:34
Speaker 1: you know, an adventure trip or a luxury trip. Mike Massaro,
20:37
Speaker 1: thank you so much for being with us. Mike Massaro
20:40
Speaker 1: is chief executive officer of fly Wire, based in Boston.
20:43
Speaker 1: He is in Boston today for the Fintech Week conference
20:47
Speaker 1: and he's participating in it on a panel called a
20:50
Speaker 1: personalization of payments and a purpose driven market. There's more
21:10
Speaker 1: than a thirty trillion dollars of assets undermanaged that are
21:13
Speaker 1: subject to non traditional criteria such as environmental, social governance
21:18
Speaker 1: and impact analysis in order to determine where they are
21:22
Speaker 1: going to go. Where those dollars are going to go,
21:24
Speaker 1: the question is how much does this money actually change
21:29
Speaker 1: company behavior or create social value? Here to answer that,
21:32
Speaker 1: Vicram Gandhi, Professor at Harvard Business School. He also has
21:35
Speaker 1: been an investment banker for twenty three years at Morgan
21:39
Speaker 1: Stanley and Credit Swiss. You're also he's also on the
21:42
Speaker 1: board a senior advisor to the Canada Pension Plan Investment Board.
21:47
Speaker 1: Professor Gandhi, thank you so much for being with us.
21:49
Speaker 1: So let's start there. How much social value are these
21:52
Speaker 1: E s G funds actually creating? At least? I think
21:56
Speaker 1: if you look at the whole spectrum, as you mentioned
21:58
Speaker 1: the thirty trillion dollars, still a majority of that is
22:01
Speaker 1: what one would call negative screens, and that is excluding
22:05
Speaker 1: stocks that you don't want to own your portfolio. A
22:07
Speaker 1: big trend and that is really around fossil fuels, etcetera. Recently,
22:10
Speaker 1: but there's been a tobacco, alcohol, religious beliefs in the past,
22:14
Speaker 1: and the question remains as to whether those negative screens
22:17
Speaker 1: actually create value. I think they in terms of changing behavior.
22:21
Speaker 1: I think there's a reflection of values, but not necessarily
22:24
Speaker 1: changing behavior because for every seller there's a bar and
22:28
Speaker 1: unless there's an overwhelming um uh majority on the cell side,
22:32
Speaker 1: you're not going to increase the cost of capital essentially
22:34
Speaker 1: necessarily of the companies. But what we are seeing is
22:37
Speaker 1: a is a pretty conscious trend towards moving from that
22:40
Speaker 1: aspect to what one would call e s G integration
22:44
Speaker 1: as well as engagement. And the debate about divestiturevis engagement continues,
22:49
Speaker 1: but there's more and more large institutional investors beyond just
22:53
Speaker 1: making public announcements about it, actually focusing on the engagement
22:57
Speaker 1: side to push companies to change behavior with with a
23:01
Speaker 1: with an eas G, with with an e s G
23:03
Speaker 1: framework in mind. So yeah, so victims. So in my
23:06
Speaker 1: experiences we're talking and just before we went on airs,
23:09
Speaker 1: just this seems to in my experience come primarily from
23:14
Speaker 1: Europe first, i e. The focus on e s G,
23:17
Speaker 1: environmental sustainability, governance, impact investing, um is it. Where where
23:22
Speaker 1: are we in terms of the United States and some
23:23
Speaker 1: of the big mutual funds and then the big companies
23:25
Speaker 1: and how are they adapting if at all. Well, it's clearly,
23:29
Speaker 1: as you said Europe, nearly half the assets in Europe,
23:32
Speaker 1: you know, off the trill trillion that you said, half
23:35
Speaker 1: the half the assets in Europe have some sort of
23:36
Speaker 1: E s G overlay. That number is closely in the US,
23:40
Speaker 1: but the growth has been pretty strong. And I think
23:43
Speaker 1: if you look if you talk to the large pension plans,
23:45
Speaker 1: even some of the passive investors UM, they clearly are
23:50
Speaker 1: are focused on the fact that if you are a
23:53
Speaker 1: long term holder of stocks UM and the passive in
23:56
Speaker 1: the index investors by definition are they own the market.
24:00
Speaker 1: Is that if you don't factor an E s G
24:02
Speaker 1: into your analysis, you probably are not making good investment decisions.
24:06
Speaker 1: So that the discussions gone from let's tick the box, Okay,
24:09
Speaker 1: we've looked at s G, We've gone on our Bloomberg
24:11
Speaker 1: terminal and found our E s G metrics and done
24:13
Speaker 1: it to moving on to risk management, saying this is
24:16
Speaker 1: a core part of risk management. And then I think
24:19
Speaker 1: we're also starting to see trends in some of the
24:21
Speaker 1: pension plans of incorporating E s G to generate alpha
24:24
Speaker 1: is that how do we bring in s G factors?
24:27
Speaker 1: But companies that are actually doing it well because they
24:29
Speaker 1: are potentially alpha generators. So I think that trend is
24:33
Speaker 1: there and in fact is accelerating. Professor Gandhi, how much
24:36
Speaker 1: alpha are we talking about? Can you give us an example? Well,
24:40
Speaker 1: for example, one of the leaders and you have a
24:43
Speaker 1: case on this in our course. And you know, we've
24:45
Speaker 1: written about twenty two new cases here for our course,
24:47
Speaker 1: me and our colleague of mine, which we teach in
24:50
Speaker 1: the NBA class at Harvard UH. One one of the
24:54
Speaker 1: cases there is a company called Generation Investment Management which
24:57
Speaker 1: was set up by David Blood and vice president Gore
25:00
Speaker 1: and who and they incorporate E s G into the
25:03
Speaker 1: investment process right from the start. And they have fifteen
25:06
Speaker 1: years now they've been in existence and gone from a
25:08
Speaker 1: few hundred millions to now they've managed about twenty five billion.
25:12
Speaker 1: They have generated consistently generated alpha on on on their portfolio.
25:17
Speaker 1: And we're starting to see um various other plans. As
25:21
Speaker 1: I said, allocate some percentage of their assets to this
25:25
Speaker 1: to this UH asset. The investing style if you Will
25:30
Speaker 1: has a head fund industry writ large. How have they
25:33
Speaker 1: in terms of adopting this, I mean they're looking for
25:36
Speaker 1: any edge they can degenerate alpha And if I guess
25:38
Speaker 1: he made the incredible pitch to them that this isn't
25:41
Speaker 1: their best interests, I would think that way they would
25:43
Speaker 1: make a part of their investment process. Yeah. So I
25:45
Speaker 1: think they're there too. Um if you if you view
25:48
Speaker 1: them as long term investors, they are bringing in as
25:50
Speaker 1: risk management. But another interesting case we did was on
25:54
Speaker 1: John A Partners. As you know, they're a pretty active
25:57
Speaker 1: investor and an activist investor in fact, and they announced
26:00
Speaker 1: last year that they were going to set up a
26:02
Speaker 1: billion dollar fund to bring in their activist mindset by
26:07
Speaker 1: by identifying companies that are underperforming necessarily on the E
26:10
Speaker 1: s G front and pushing that and that using their
26:13
Speaker 1: activist methodology with the E s G framework. So I
26:17
Speaker 1: think you're clearly seeing more of that. Um, you're probably
26:20
Speaker 1: seeing less of it in hedge funds though compared to
26:22
Speaker 1: I say long only managers that have a longer term perspective,
26:25
Speaker 1: because risk management for them becomes a key issue. I
26:29
Speaker 1: do also think that to make change happen, this mindset
26:33
Speaker 1: of quarterly earnings versus long term investing has to change.
26:37
Speaker 1: I'm wondering, giving your role as a senior advisor to
26:40
Speaker 1: the Canada Pension Plan Investment Board, how are you advising
26:43
Speaker 1: they take into account some of these E s G criteria.
26:47
Speaker 1: So as if you talk to the Canada's c p
26:49
Speaker 1: p i B, you know when they talk about a quarter,
26:52
Speaker 1: they're talking about not ninety days, They're talking about twenty
26:54
Speaker 1: five years. That's quarter for them, So you know they
26:59
Speaker 1: have they they'll be having more inflows uh than outflows
27:03
Speaker 1: for the foreseeable future. And they're going to go from
27:05
Speaker 1: four hundred billion Canadian roughly now to seven eight hundred
27:08
Speaker 1: billions in just five or seven years. So they have
27:10
Speaker 1: a very long term horizon. And from a risk management perspective,
27:14
Speaker 1: they are proactively incorporating e s G when they make
27:17
Speaker 1: any investment decision. I mean, I've advised them on making
27:20
Speaker 1: investments in India and Asia, etcetera. And I could see
27:24
Speaker 1: that that that this this mechanism of dick the box
27:27
Speaker 1: due diligence to risk management, and now they're also experimenting
27:31
Speaker 1: on incorporaing e s G from an alpha generation perspective.
27:34
Speaker 1: Just I guess broadly speaking, you've been you know, looking
27:37
Speaker 1: at this for a while. Are there certain industries that,
27:40
Speaker 1: for lack of a better word, screen well from an
27:43
Speaker 1: e S dre impact and maybe some industries that don't.
27:47
Speaker 1: So an interesting case which we have written was on
27:51
Speaker 1: State Streets. So State Street Or a couple of years
27:53
Speaker 1: ago on Women's Day launched an e t F called
27:56
Speaker 1: SHE and it was seeded by large pension plan basically
28:02
Speaker 1: to identify investments where the leadership both on the board
28:07
Speaker 1: as well as leadership there was a significant of agenda
28:09
Speaker 1: or diversity, not because there was a social aspect to it,
28:13
Speaker 1: but it was also that you know, there's been enough
28:15
Speaker 1: studies which show that doversity leads to business better business
28:17
Speaker 1: decisions which will lead to hopefully financial performance and stock prices.
28:22
Speaker 1: And when they did but they couldn't veer away from
28:24
Speaker 1: the index too much. And so when they did that analysis,
28:28
Speaker 1: they found that they would be heavily overweight on consumer durables,
28:32
Speaker 1: consumer staples, some of the consumer oriented companies, and highly
28:36
Speaker 1: underweight on technology, energy and financial services. So that kind
28:41
Speaker 1: of would be uh interesting dynamic as to it shows
28:44
Speaker 1: that on those e S g Metrics that they looked
28:46
Speaker 1: at the diversity between the industries. Very interesting. Vicar and Gandhi,
28:50
Speaker 1: thank you so much for joinings professor at Harvard Business School.
28:52
Speaker 1: We appreciate your thoughts on impact investing an E. S. G.
28:56
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
28:59
Speaker 1: You can subscribe in listen to interviews at Apple Podcasts
29:01
Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
29:05
Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Woyits I'm on
29:07
Speaker 1: Twitter at Lisa abram Woits one. Before the podcast, you
29:10
Speaker 1: can always catch us worldwide on Bloomberg Radio