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Live From Fringe: What Adam Smith Can Teach Us About Debt and Power · Merryn Talks Money

0:02
Speaker 1: Bloomberg Audio Studios Podcasts Radio News You're listening to the
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Speaker 1: third and final panel conversation I had at this year's
0:22
Speaker 1: Edinburgh Fringe Festival. I spoke with Nick Hopton, British diplomat
0:25
Speaker 1: and former ambassador to Yemen, Qatar, Libya and Iran, Alec Cutler,
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Speaker 1: director of Orbis Investment Management, and Adrian Wildridge, Bloomberg opinion
0:33
Speaker 1: columnist and author. As well as their favorite Adam Smith quotes,
0:37
Speaker 1: we talk about the rise and influence of megacorporations on democracy.
0:41
Speaker 1: We talk about how governments just can't curb public spending.
0:44
Speaker 1: We talk about how to invest in North Sea oil
0:46
Speaker 1: and about how prepared the UK is or is not
0:49
Speaker 1: for war.
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Speaker 2: Hope you enjoy.
0:51
Speaker 1: This is the year when we're beginning to see the
1:01
Speaker 1: effects of AI enter society. not just our economy, but
1:04
Speaker 1: also our communities. We're at the point where we are
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Speaker 1: beginning to say, well, what is humanity? How does this work?
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Speaker 1: What happens when we have an AI that can imitate us,
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Speaker 1: but hasn't been through the pain and the joy that
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Speaker 1: makes us? And that brings us right back to a
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Speaker 1: lot of things in moral sentiments. And of course, this
1:23
Speaker 1: development leads us to think great length about wealth of
1:26
Speaker 1: nations about the division of labor about the division of
1:29
Speaker 1: wealth about taxation about the role of government all these
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Speaker 1: things are much more at the fore this year than
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Speaker 1: perhaps they've been for the last decade so it's a
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Speaker 1: very important time luckily i have incredibly impressive important and
1:42
Speaker 1: intelligent guests to discuss with me and by the end
1:45
Speaker 1: of today we will all know exactly what's going to
1:47
Speaker 1: happen over the next few years and your worries will
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Speaker 1: be assuaged right So on my left, I have my
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Speaker 1: colleague Adrian Wildridge from Bloomberg. He's an opinion columnist and
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Speaker 1: an author. Most recent book, Centrists of the World Unite,
2:02
Speaker 1: which if you don't have, you should get because it
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Speaker 1: really is excellent.
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Speaker 2: I've actually read it, Adrian.
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Speaker 3: Thank you.
2:07
Speaker 4: Thank you.
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Speaker 1: Next to him, I have Nick Hopton, who is a
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Speaker 1: former ambassador and Middle East expert. He's been an ambassador
2:14
Speaker 1: to Yemen, Qatar, Iran and Libya. So that's something we
2:18
Speaker 1: might want to talk about a bit. And then we
2:20
Speaker 1: have Alec Cutler, who, if you listen to the podcast,
2:23
Speaker 1: you will know who's heard my podcast with Alec.
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Speaker 2: Oh, come on.
2:28
Speaker 1: They're absolutely brilliant. They are some of the best ones
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Speaker 1: that we have done. And Alec has flown all the
2:34
Speaker 1: way from Bermuda to humor you today. He is the
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Speaker 1: chairman of Orbis Investment Management. And I suspect that if
2:41
Speaker 1: you were here last year, you will already be holding
2:43
Speaker 1: his fund. But if not, listen closely to what he says.
2:46
Speaker 1: You're the stock tip guy, aren't you?
2:48
Speaker 3: Oh, yeah. Oh, yeah.
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Speaker 2: Definitely stock tips. You came for stock tips, right?
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Speaker 3: At least one person.
2:51
Speaker 2: They'll be stock tips.
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Speaker 3: Right.
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Speaker 2: Alec, as you've been it before, let's have your quote first.
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Speaker 3: Sure. the debasement of coinage is always favorable to the
3:01
Speaker 3: debtor and ruinous to the creditor. And Adam Smith lived
3:05
Speaker 3: in a time of coinage, so that's why you have debasement,
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Speaker 3: the modern-day equivalent would be devaluation.
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Speaker 1: Sorry, I was just helping Adrian struggle with his phone here.
3:17
Speaker 1: Explain about debasement and devaluation again. I don't think everyone
3:19
Speaker 1: immediately understood the difference between them.
3:22
Speaker 3: Money printing is bad. It's bad for the creditor. It's
3:25
Speaker 3: great for the debtor. So someone like Donald Trump who
3:29
Speaker 3: made a living running up huge debt, it's great. So
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Speaker 3: maybe that tells you something about today. I think from
3:37
Speaker 3: a current event standpoint, why I think it's noteworthy is
3:42
Speaker 3: that the U.S. government has figured out that the creditors
3:44
Speaker 3: of the world don't want to give them credit anymore.
3:48
Speaker 3: So it's become part of all these trade negotiations or
3:51
Speaker 3: military negotiations that We're going to take our troops if
3:54
Speaker 3: you stop buying our bonds. In fact, we're going to
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Speaker 3: take our troops away from your country, Japan, South Korea, Europe,
4:02
Speaker 3: if you don't buy more U.S. bonds. So yeah, holding
4:05
Speaker 3: our debt is going to be ruinous to you as
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Speaker 3: a creditor, but we need you to do it.
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Speaker 2: Okay, and that's going to work?
4:15
Speaker 3: I don't know. It may work for a little while,
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Speaker 3: but it's not sustainable.
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Speaker 1: And right now the bond market is kind of hinting
4:23
Speaker 1: that they don't think any of these things are going
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Speaker 1: to work. Yields go up and up and up, and
4:27
Speaker 1: we all get a little nervous, but we try not
4:29
Speaker 1: to think about it too much. There comes a point,
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Speaker 1: maybe 6%, 7%, 8%, where this level of debt is
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Speaker 1: not sustainable, even for the U.S.
4:38
Speaker 3: So you need to pull out all the stops to
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Speaker 3: keep that level of debt down, or the level of
4:43
Speaker 3: interest payments down. Interest payments are now more than the
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Speaker 3: defense spending. which has historically been a really, really bad
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Speaker 3: sign for any nation. And the debasement or the, you know,
4:56
Speaker 3: it'll go from forcing Japan and Korea to buy U.S.
5:00
Speaker 3: bonds to U.S. banks and then the citizenry somehow.
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Speaker 1: So we move to a point of financial repression, we
5:07
Speaker 1: call it, when we effectively force a population to... to
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Speaker 1: buy their local government bonds in order to keep yields down.
5:14
Speaker 1: Whether you want them or not, you have to have them.
5:15
Speaker 1: And we talk about that a lot in the UK
5:17
Speaker 1: at the moment. Are we going to get to a
5:18
Speaker 1: point where DC pension funds, who has a DB pension fund,
5:22
Speaker 1: one of those defined benefit ones, where the money comes
5:24
Speaker 1: in every single month, inflation linked, And.
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Speaker 2: I can see you're of an age audience. I know
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Speaker 2: you have them.
5:30
Speaker 5: Put your hands up.
5:31
Speaker 2: You're definitely a DB audience. So a lot of you
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Speaker 2: have them.
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Speaker 1: Okay, so one of the problems in the UK at
5:36
Speaker 1: the moment has been, and this is not a problem
5:38
Speaker 1: in the US because it hasn't been quite the same,
5:40
Speaker 1: that over the last many, many decades, a lot of
5:43
Speaker 1: our bonds have been bought by defined benefit pension managers.
5:48
Speaker 1: And now that defined benefit pensions are not really a thing,
5:51
Speaker 1: who has a DC pension? Miseries, right?
5:54
Speaker 2: Miseries.
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Speaker 1: We don't buy bonds in the same way, not obliged
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Speaker 1: to buy bonds in the same way. So the demand
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Speaker 1: falls even as the supply rises in the UK.
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Speaker 2: And in the US?
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Speaker 3: The US will force that eventually. They need creditors. If
6:13
Speaker 3: you're going to keep having to issue $ 3 trillion in
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Speaker 3: new debt every year, somebody's got to buy the $ 3
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Speaker 3: trillion in debt.
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Speaker 1: And there is an excellent Smith quote on this, on
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Speaker 1: public debt, a personal favorite. Public debt has gradually enfeebled
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Speaker 1: every state that has adopted it. When national debts once accumulated,
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Speaker 1: to a certain degree there is scarce, I believe, a
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Speaker 1: single instance of there having been fairly and completely paid.
6:37
Speaker 1: And one of the things he talks about, and I
6:39
Speaker 1: think is exactly what you're saying here, is that the
6:41
Speaker 1: higher your public debt goes... the more fragile your sovereignty
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Speaker 1: becomes because you have this obligation and you have to
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Speaker 1: keep doing things you wouldn't necessarily.
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Speaker 2: Want to do.
6:52
Speaker 3: And financial repression is the sign of that fragility.
6:55
Speaker 5: Yeah.
6:56
Speaker 3: 15 years ago, you would have said, you would have
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Speaker 3: been able to claim that American debt is the most
7:00
Speaker 3: popular debt in the world. Now it's not so popular.
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Speaker 3: Norway's debt is more popular than the U.S., maybe even Brazil's,
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Speaker 3: but the U.S. can force you to buy it.
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Speaker 1: From a financial point of view, an investing point of view,
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Speaker 1: if you suspect that intense financial repression is on the way,
7:18
Speaker 1: does that make U.S.
7:19
Speaker 2: Treasuries a buy?
7:22
Speaker 3: That's a really tricky one. Are you a trader or
7:24
Speaker 3: are you an investor? As a trader, you can try
7:27
Speaker 3: that one on. As an investor, where you have to
7:31
Speaker 3: look clients in the eye and you have a fiduciary duty,
7:34
Speaker 3: I can't do it. Yeah. Traders?
7:37
Speaker 2: I don't want to admit to being a trader in
7:40
Speaker 2: this room.
7:41
Speaker 4: Yeah.
7:42
Speaker 3: But you can hold gold instead. You can hold gold
7:45
Speaker 3: or you can hold Norwegian bonds that yield the same.
7:49
Speaker 3: A country that has a surplus every year and $ 2
7:51
Speaker 3: trillion in net cash on the balance sheet. Hopefully everyone
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Speaker 3: runs out and tries to buy Norwegian bonds so that
7:59
Speaker 3: my bonds increase in value.
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Speaker 1: I don't know if this room is going to move
8:03
Speaker 1: the market.
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Speaker 2: I mean, give it a go, but I'm not sure.
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Speaker 3: Iceland.
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Speaker 2: Iceland.
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Speaker 3: Iceland runs a very appropriate financial system. Mm-hmm. The governance
8:13
Speaker 3: is quite high. Those bonds yield quite nicely and they
8:17
Speaker 3: have unlimited electricity and all of it's green. We love
8:20
Speaker 3: green things.
8:22
Speaker 1: Let me ask you about gold because I know that
8:23
Speaker 1: at some point when we get to Q & A,
8:24
Speaker 1: we will try and do 20 minutes of Q & A.
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Speaker 1: When we get to that bit, the first question is
8:29
Speaker 1: going to be how much gold should I have in
8:31
Speaker 1: my portfolio? I know this.
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Speaker 2: I know you. First question. What's the answer?
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Speaker 3: We're not going to wait until then.
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Speaker 5: No.
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Speaker 2: All right.
8:40
Speaker 3: I think it depends.
8:41
Speaker 2: And front-running our own questions.
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Speaker 3: Right now, for my clients, it's around 8.5%. It's been
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Speaker 3: as high as 13 and as low as 6 over
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Speaker 3: the last 10 years. And before that, it was zero.
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Speaker 3: So before that, we weren't worried about prolific government spending
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Speaker 3: and zero interest in fiscal discipline. And then we have
9:04
Speaker 3: been increasingly since then.
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Speaker 2: Okay, but what brings it from 13 down to 8?
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Speaker 3: Just feel. It's an art form, really. And other things.
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Speaker 3: I mean, tips are somewhat interesting. So treasury inflation protected securities.
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Speaker 3: Brazilian bonds are interesting. So if I think about where
9:23
Speaker 3: the money went, if you took it from 13% or 14%
9:27
Speaker 3: down to 6%, it went into energy stocks in January.
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Speaker 3: It was pretty good timing. Brazilian bonds, Australian bonds, and
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Speaker 3: Icelandic bonds.
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Speaker 1: You know, I read a column a few weeks ago
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Speaker 1: about how the best fund managers describe what they do
9:43
Speaker 1: as a feel. I didn't even read that. I know.
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Speaker 3: Thank you very much.
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Speaker 2: Same for the best fishermen. Same for the best sailors.
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Speaker 2: It's all about that little extra feel.
9:55
Speaker 3: Yeah. we have to get something for getting old.
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Speaker 2: Adrian I have this feeling that you had something you
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Speaker 2: wanted to say about this.
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Speaker 4: Subject no no it's above my level a long way
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Speaker 4: above my level really.
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Speaker 1: Yes disappointing to be honest do you want to should
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Speaker 1: we move on to your quote because I.
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Speaker 4: Think it's a bit connected isn't it sure My quote
10:15
Speaker 4: is that the government, an exclusive company of merchants, is
10:18
Speaker 4: perhaps the worst of all governments for any country whatever.
10:23
Speaker 4: And the question is, why is a man who is
10:26
Speaker 4: associated with the free market, with capitalism and all of
10:28
Speaker 4: these sorts of things, why is he so hostile to companies?
10:33
Speaker 4: And if you look at the wealth of nations, one
10:35
Speaker 4: of the great targets of the wealth of nations is
10:38
Speaker 4: the East India Company. He's furious about the East India Company.
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Speaker 4: He doesn't really like companies. He likes small groups of traders.
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Speaker 4: Companies are big, bad, awful things. Why does he think that?
10:50
Speaker 4: And it's because up until during Smith's lifetime, before Smith's lifetime,
10:54
Speaker 4: in order to become a company, a limited liability company,
10:59
Speaker 4: you had to get an exclusive license from the government.
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Speaker 4: It wasn't something that was formed by the market. It
11:06
Speaker 4: was something that was given to you, a right that
11:08
Speaker 4: was given to you by the government in return for
11:11
Speaker 4: limited liability. And that is the case right up until
11:15
Speaker 4: the middle of the 19th century. And what happens in
11:17
Speaker 4: the middle of the 19th century is that you're allowed
11:19
Speaker 4: to form a company for whatever reason. You can get
11:25
Speaker 4: limited liability on a wholesale basis, not because you get
11:29
Speaker 4: a particular contract with the government. And this is one
11:34
Speaker 4: of the great revolutions in history because it means that
11:38
Speaker 4: companies don't have to do something for the government. They
11:40
Speaker 4: can do something for themselves. They don't have to swear
11:43
Speaker 4: that they will do a specific thing like running a
11:46
Speaker 4: university or building a bridge or running a jail or
11:50
Speaker 4: anything like that. They can just operate according to the
11:55
Speaker 4: laws of business. And so the markets and companies begin
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Speaker 4: to move in sync. And one of my great worries
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Speaker 4: about the contemporary situation is that we're going back to
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Speaker 4: the world of Adam Smith. We're going back to the
12:10
Speaker 4: world in which companies... getting licenses to do a particular thing,
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Speaker 4: a world in which companies are no longer the agents
12:18
Speaker 4: of the markets in which they've been since the middle
12:21
Speaker 4: of the 19th century, and that if Adam Switzer were
12:24
Speaker 4: to be reborn today, he'd be looking at many companies
12:28
Speaker 4: and seeing that many, many of them are a bit
12:30
Speaker 4: too much like the East India Company. We have an
12:35
Speaker 4: enormous number of companies that are state-owned, state-run companies. I
12:40
Speaker 4: would say it's a big chunk of the global companies,
12:43
Speaker 4: not just in China, not just in the emerging world,
12:46
Speaker 4: but also increasingly even in the rich world. So this
12:49
Speaker 4: is something that, well, the Norwegians are big on state companies,
12:51
Speaker 4: but something even that Trump is going in for, taking
12:54
Speaker 4: shares in companies, allowing companies to operate if they're pursuing
12:59
Speaker 4: Trumpian or public purposes. And we're getting something even more
13:03
Speaker 4: strange than that at the moment, in terms of the
13:06
Speaker 4: collapse of the limited liability company, the sort of the
13:09
Speaker 4: ideal sort of notion of a company, according to Adam
13:11
Speaker 4: Smith's principles, If you look at the tech companies, a
13:15
Speaker 4: lot of these companies operate because they have very, very
13:19
Speaker 4: good relations with governments. And they have single owners who
13:24
Speaker 4: leverage 10%, 13% of share ownership to total control of companies.
13:30
Speaker 4: So the investor is completely excluded from the process of
13:35
Speaker 4: decision making. And a lot of these companies are doing
13:39
Speaker 4: things both in the world of military exploration, but also,
13:45
Speaker 4: more importantly, in the world of space exploration, that begin
13:48
Speaker 4: to look a bit more like the East India Company
13:50
Speaker 4: than anything else. So I predict a future in which
13:53
Speaker 4: we will have things, the equivalent of the East India Company, owning, controlling,
13:59
Speaker 4: and trading in outer space, Musk-style companies, because they have
14:03
Speaker 4: particular licenses and particular relationships with government. So the golden
14:08
Speaker 4: age of the free market company, which starts in the
14:11
Speaker 4: 1850s and goes through, you know, perhaps to the early
14:15
Speaker 4: 20th century, 21st century, is beginning to fade. And the
14:18
Speaker 4: great problem, the monster company that Smith is talking about
14:22
Speaker 4: is coming back.
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Speaker 1: And I think we all intuitively understand why that is
14:27
Speaker 1: a problem.
14:28
Speaker 2: But let's look at it a bit more.
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Speaker 1: Is that a problem because reduced competition is bad for innovation?
14:33
Speaker 1: Is that a problem because it leads us further down
14:35
Speaker 1: the path of wealth inequality? Is it a problem because
14:38
Speaker 1: it compromises democracy? What's the main problem here?
14:44
Speaker 4: All of those above. The company, the mid-19th century company,
14:48
Speaker 4: is an exercise in liberal constitutional restraint. It puts a
14:52
Speaker 4: restraint on the power of the state. And Robert Lowe,
14:55
Speaker 4: one of the great chancellors of the Czech Republic under
14:57
Speaker 4: Gladstone in the mid-19th century, says a company is a
14:59
Speaker 4: little republic. It controls the power of the state, but
15:03
Speaker 4: it also controls power internally within companies. That means that
15:07
Speaker 4: the CEO is not a dictator. He is constrained by
15:10
Speaker 4: the board. He is constrained by the shareholders and constrained
15:16
Speaker 4: by a constitution, essentially. And what we're doing now is,
15:19
Speaker 4: is destroying that constitutional balance. There is no control constitutionally
15:23
Speaker 4: on the power of Zuckerberg in Meta. He is a
15:25
Speaker 4: dictator of that company. So if you get a world
15:28
Speaker 4: in which you basically have a tight relationship between a
15:31
Speaker 4: president or Xi Jinping or whoever, and a company that
15:37
Speaker 4: is run as a dictatorship by a single controller, all
15:42
Speaker 4: the problems that you mentioned, problems of inequality, problems of
15:46
Speaker 4: constitutional restraint, problems of power, distribution are magnified.
15:52
Speaker 1: And it's been coming a long time, this sort of
15:54
Speaker 1: growing relationship between government and big business. And I know
15:58
Speaker 1: we're not allowed to talk about this, but if we
15:59
Speaker 1: look back to the Brexit referendum, one of the conversations
16:04
Speaker 1: that came up over and over and over again was
16:06
Speaker 1: the way that the EU regulatory environment encouraged oligopoly, or
16:11
Speaker 1: still encourages oligopoly, by wrapping a huge wave of regulation
16:16
Speaker 1: in around companies that effectively protects them from smaller company
16:20
Speaker 1: competition because it's too hard to get going if you're
16:22
Speaker 1: a smaller company. And that's been a problem in the UK.
16:24
Speaker 1: It's been a growing problem in the US. The government effectively,
16:29
Speaker 1: by introducing raft after raft of regulation, guarantees oligopoly across
16:34
Speaker 1: pretty much every sector.
16:35
Speaker 4: Well, that's an unintentional product of the EU, but now
16:41
Speaker 4: you're getting an intentional product. If you look at the
16:43
Speaker 4: Draghi report, the Draghi report, explicitly says that we need
16:46
Speaker 4: to encourage economies of scale and in certain big sort
16:50
Speaker 4: of areas of technology such as such as uh it
16:54
Speaker 4: and such as military suppliers we in europe should be
16:57
Speaker 4: creating conditions in which we have a an oligopoly a
17:01
Speaker 4: small group of companies that achieve scale in order.
17:04
Speaker 1: We can work with and control yeah yeah so nick
17:07
Speaker 1: isn't this just a consequence of our changing environment, a
17:10
Speaker 1: consequence of a more dangerous world, a consequence of building
17:13
Speaker 1: layers of wars globally, that big economic grouping such as
17:18
Speaker 1: the EU and the US will say to themselves, well,
17:20
Speaker 1: we need to control the companies that we will require
17:23
Speaker 1: over the next couple of decades to protect us.
17:25
Speaker 2: We need this. It has to be done like this.
17:27
Speaker 2: There is another way.
17:28
Speaker 6: I'm not sure it's a direct consequence. I think it's
17:31
Speaker 6: a consequence of the speeding up of history and the
17:35
Speaker 6: impending end of the post-Second World War settlement. between international organizations,
17:41
Speaker 6: through the Bretton Woods organizations, which are unraveling before our eyes.
17:45
Speaker 6: It's a consequence of all of that and the weakening
17:47
Speaker 6: of central right-thinking leadership, which I'm afraid has also diminished
17:54
Speaker 6: in recent decades. And the reasons for that are manifold.
17:59
Speaker 6: But I think the growth of these East India-type companies,
18:04
Speaker 6: and I totally agree with Adrian on this point, that
18:06
Speaker 6: that's the direction of travel, is to be something we
18:09
Speaker 6: should be worried about because it comes at the expense of,
18:13
Speaker 6: for want of a better term, democratic government. It comes
18:16
Speaker 6: at the expense of the prosperity of the majority, of
18:22
Speaker 6: hardworking citizens, and obviously it also leads to an erosion
18:26
Speaker 6: of individual rights.
18:43
Speaker 3: Yeah.
18:43
Speaker 1: I mean, you've written, Adrian, about quite a lot before
18:45
Speaker 1: about them, and I've written as well relentlessly about shareholder
18:47
Speaker 1: democracy and the way in which the development of the
18:51
Speaker 1: listed corporation over time has become slightly anti-democratic because of
18:55
Speaker 1: the way the fund management industry interacts with.
18:58
Speaker 2: Top markets, etc., etc.
18:59
Speaker 1: So we've had for quite a long time a problem
19:02
Speaker 1: of the distancing of the corporation. from the man in
19:04
Speaker 1: the street. And one of the things I've written about,
19:06
Speaker 1: and I think you've written about as well, is that
19:08
Speaker 1: wouldn't it be wonderful if we could recreate the connection
19:12
Speaker 1: between the corporation and the individual shareholder, which the technology
19:16
Speaker 1: now exists to make possible. We don't need the middleman anymore.
19:20
Speaker 1: But this seems to suggest what you're talking about suggests
19:23
Speaker 1: that we're moving further and further away from the end
19:26
Speaker 1: goal of a positive type of shareholder democracy.
19:28
Speaker 4: Well, the latest wave of corporate creation since about 2000
19:32
Speaker 4: with the IT companies is precisely designed to reduce the
19:36
Speaker 4: say of shareholders over the way the companies operate. So
19:40
Speaker 4: you have two classes of shares, voting classes, one man,
19:46
Speaker 4: one vote, and one man, 10 votes, which is the
19:48
Speaker 4: case with Meta and Google. Or you have three classes
19:51
Speaker 4: of shares. In quite a lot of companies now, you
19:53
Speaker 4: have no voting shares. And so you are reducing the
19:59
Speaker 4: role of investors and you're reducing the independence of boards.
20:04
Speaker 4: So if you look at Meta, Zuckerberg has 13% of shares, 52%
20:10
Speaker 4: of voting shares, complete control over the board, just appoints
20:15
Speaker 4: the sort of people he wants. So democratic control or
20:18
Speaker 4: citizen control or investor control is zero in that company.
20:23
Speaker 4: And so what companies are, they used to be sort
20:26
Speaker 4: of publicly funded I mean, publicly in the sense of
20:30
Speaker 4: the general public buying shares. Now they are basically bets on,
20:35
Speaker 4: you're buying a bet on Zuckerberg, you're buying a bet
20:38
Speaker 4: on Musk, you've got no right to control them. They
20:40
Speaker 4: will say that the reason for that is that without
20:43
Speaker 4: this constant pressure from shareholders, they can shape the future,
20:47
Speaker 4: they can make long-term investments. There's some truth in that.
20:49
Speaker 4: But if it goes wrong, you've got very little recourse,
20:53
Speaker 4: very little exit from the process. And, you know, NVIDIA
20:58
Speaker 4: is widely held, widely dispersed, making a good bet on
21:00
Speaker 4: the future. So there's no absolute necessity to have that
21:04
Speaker 4: sort of shareholder structure.
21:05
Speaker 3: But if they make bad bets, they go out of
21:07
Speaker 3: business and new companies pop up.
21:12
Speaker 4: Well, I would say one problem with that, again, think
21:15
Speaker 4: of historical analogies. I think what's happening with AI now
21:18
Speaker 4: is very similar to what happened with the railroad boom
21:21
Speaker 4: in the 19th century. when companies are saying, well, you're
21:24
Speaker 4: betting on us, you're making a bet on the future,
21:27
Speaker 4: if we go out of business, that's terrible. But in fact,
21:29
Speaker 4: because they're building infrastructure, and because they are so intertwined with,
21:34
Speaker 4: because they're costing so much money, and there's so much
21:37
Speaker 4: bank money going into them, that if they go out
21:39
Speaker 4: of business, the whole community suffers. And you get, you know,
21:44
Speaker 4: you get a series, 1873, 1893, you get a series
21:48
Speaker 4: of bank runs, which almost bring the economy down. I
21:51
Speaker 4: think we're going to get the same thing with AI,
21:54
Speaker 4: but the decisions, the bets will be made by unaccountable individuals.
22:00
Speaker 2: But their infrastructure will still remain.
22:02
Speaker 1: I mean, that was the upside of the railway bubble.
22:04
Speaker 2: You've got the railways.
22:05
Speaker 1: This time, of course, the concern is, and Alec, I'd
22:07
Speaker 1: be interested in your opinion on this, this time the
22:09
Speaker 1: concern is that all the money is going into building
22:11
Speaker 1: vast data centers, which we may or may not need.
22:16
Speaker 2: And that's the difference. The railways, that was great. We
22:18
Speaker 2: needed the railways. Do we need these data centers?
22:20
Speaker 3: Well, I mean, fiber optics was the same as the rails, right?
22:24
Speaker 3: All those companies went out of business. Remember Global Crossing
22:26
Speaker 3: and MCI? But those were used and useful over... The
22:32
Speaker 3: original fiber optic cable is still being used. It's incredible
22:37
Speaker 3: what that infrastructure has done. The difference I would say
22:40
Speaker 3: this time is the infrastructure that's being created is all consumable.
22:44
Speaker 3: These chipsets, these NVIDIA chipsets only last five years. Again,
22:48
Speaker 3: a rail line has lasted 200 years.
22:50
Speaker 2: I think we're still using the same one from Edinburgh
22:52
Speaker 2: to London, aren't we?
22:55
Speaker 3: The original fiber optic line is probably 70 years old
22:57
Speaker 3: and still in use. These chipsets are going to be
23:01
Speaker 3: in the dustbin in five years, which is wonderful if
23:04
Speaker 3: you own semiconductors, but it is not great if you
23:08
Speaker 3: try to call it infrastructure. The only thing that's infrastructure
23:11
Speaker 3: are the electric generation, the pipelines that go into it,
23:15
Speaker 3: the electric lines that go into it, the skin and
23:18
Speaker 3: the shell.
23:18
Speaker 2: The warehouse itself, the shell of the warehouse.
23:20
Speaker 3: The lines, the roads into it, that's all permanent, but
23:23
Speaker 3: the 85% of all AI spending are chipsets that are consumable.
23:28
Speaker 5: Yeah.
23:29
Speaker 1: So when this all collapses, what we're going to have
23:31
Speaker 1: is a network of giant trampoline centers around the country.
23:36
Speaker 3: Pickleball. Yeah, pickleball.
23:39
Speaker 5: Pickleball.
23:41
Speaker 2: No, there's been an overbuild of pickleball courts.
23:44
Speaker 1: Oh, no.
23:44
Speaker 7: Yeah, there is.
23:46
Speaker 2: This has been a bubble.
23:47
Speaker 1: Across Europe, there are now far too many pickleball courts,
23:49
Speaker 1: and pickleball investors are going faster. Keep me in a
23:51
Speaker 1: great column about it, the great pickleball bubble.
23:54
Speaker 2: I haven't got around to it yet.
23:57
Speaker 4: Not in Clapham Junction. I mean, the queues are long,
23:59
Speaker 4: but still.
24:01
Speaker 1: Well, Clapham Junction is its own little economy. We can
24:03
Speaker 1: do a special column on that. Does this all make
24:06
Speaker 1: investing easier or harder? The existence of these giant companies
24:10
Speaker 1: that are government-sponsored, you can look at those and go, well, actually,
24:12
Speaker 1: there's much less risk in that. I'll buy that, particularly
24:14
Speaker 1: the defense ones, for example.
24:16
Speaker 3: I mean, as a contrarian, we don't do that because
24:19
Speaker 3: they tend to be expensive. But we have 4,790 other
24:24
Speaker 3: companies that we can look at. So it makes it
24:27
Speaker 3: interesting from a relative performance standpoint. They will get super
24:31
Speaker 3: cheap one day. I think we you know, we'll be
24:33
Speaker 3: buying these companies at some point as contrarians when they
24:36
Speaker 3: fall off the bridge and we as trolls can run
24:40
Speaker 3: around and scoop them up. And we have in the past,
24:44
Speaker 3: after the fall of the internet, the internet bubble, we
24:46
Speaker 3: were buying these names. It's no different. It's always been
24:52
Speaker 3: the same. There's always some vogue, something that's exciting and
24:56
Speaker 3: the market is fascinated by. If we were here five
25:00
Speaker 3: years ago, we would have been talking about ESG and No,
25:03
Speaker 3: we wouldn't have been. The war on carbon and.
25:05
Speaker 2: We weren't. Who was here five years ago? Were we
25:08
Speaker 2: talking about ESG?
25:09
Speaker 3: Were we? In disparaging terms, maybe. Maybe disparaging, yeah, I
25:15
Speaker 3: don't know.
25:15
Speaker 2: But in passing, perhaps.
25:16
Speaker 3: But there's always something.
25:17
Speaker 2: There's always something. Let's go with our third quote. Yes.
25:22
Speaker 6: So the quote I chose was, great nations are never
25:26
Speaker 6: impoverished by private, but sometimes by public prodigality. and misconduct.
25:34
Speaker 6: And the reason I chose that, apart from the wonderful
25:37
Speaker 6: word prodigality, which I hadn't come across before, and I
25:40
Speaker 6: don't actually know what it means, but I think I've
25:41
Speaker 6: got a sense. I've got a sense, as I'm sure
25:44
Speaker 6: we all have. And the reason I chose that quote
25:48
Speaker 6: was because it just seemed to me very pertinent to
25:52
Speaker 6: be thinking in those terms, given the geopolitics of today,
25:56
Speaker 6: which also very much reads across to what we've been
25:59
Speaker 6: talking about, the growth of these half a dozen or
26:02
Speaker 6: so mega modern East India type companies who risk taking
26:09
Speaker 6: over from governments around the world as being the key
26:13
Speaker 6: decision makers. And where you place them as private or public,
26:18
Speaker 6: I think is a gray area. Leave that to one
26:20
Speaker 6: side and we can come back to it. But the
26:22
Speaker 6: other obvious reason I like this quote was because it
26:27
Speaker 6: made me think about the role of the second Trump
26:31
Speaker 6: presidency which is essentially, of course, a public administrative government leadership,
26:40
Speaker 6: global leadership, the last superpower. But also, it is very
26:45
Speaker 6: much driven by the private interests of one particular man.
26:50
Speaker 6: And just to tie that round, in government, in my experience,
26:55
Speaker 6: there is always a tension between the national interest and
26:59
Speaker 6: the self-interest of the politicians in power. And what I
27:04
Speaker 6: think we are seeing at the moment, which comes back
27:07
Speaker 6: to your question to me about the reason for this
27:10
Speaker 6: growth of these half a dozen powerful companies, is that
27:14
Speaker 6: we are seeing a shift so that the most important
27:18
Speaker 6: politicians in the world are no longer prioritizing at the
27:22
Speaker 6: end of the day the national interest over their personal interest, self-interest.
27:26
Speaker 6: And as Adam Smith describes many occasions about actually at
27:30
Speaker 6: the end of the day, people do tasks and do
27:32
Speaker 6: work for self-interest. But you've got to harness that for
27:36
Speaker 6: the public good. Now, what we're seeing is the disregard
27:41
Speaker 6: of national interest by the most powerful political leader in
27:45
Speaker 6: the Western democratic world. And that is to the detriment
27:50
Speaker 6: of us all. So that's what this quote got me
27:52
Speaker 6: thinking about.
27:53
Speaker 2: Yeah, it's interesting.
27:54
Speaker 1: We've been talking this week quite a lot about politicians
27:57
Speaker 1: and about the extent to which the modern politician seems
28:01
Speaker 1: incapable of seeing the second order effect of their actions.
28:05
Speaker 1: So they tend to, and I don't know when and
28:07
Speaker 1: how this changed, they tend to act entirely for immediate
28:10
Speaker 1: electoral gain with no thought whatsoever.
28:13
Speaker 2: Of what will happen next.
28:14
Speaker 1: So we were talking the other day about rent controls,
28:15
Speaker 1: for example, rent controls being one of the few policies,
28:19
Speaker 1: actually there are quite a lot of policies like this,
28:20
Speaker 1: but this is the one that there is so much evidence.
28:24
Speaker 1: It's been tried so many times in so many places
28:27
Speaker 1: in so many different ways. There's no way you can
28:30
Speaker 1: say we've never tried real rent control because someone has
28:33
Speaker 1: tried it in every possible way.
28:35
Speaker 2: It doesn't work. It never works.
28:37
Speaker 1: The second order effects are always a reduction in housing supply.
28:40
Speaker 2: And a rise in the price of housing. It just is.
28:44
Speaker 2: But they do it anyway. They do it anyway.
28:46
Speaker 1: Even though they know this, they cannot possibly be a
28:49
Speaker 1: politician so stupid that they don't know that.
28:52
Speaker 2: This is the case. I mean, am I wrong? Could
28:54
Speaker 2: there be a politician so stupid they don't know this
28:56
Speaker 2: is the case? Maybe there is one. But they do
28:58
Speaker 2: it anyway.
28:59
Speaker 1: And they do it for immediate self-interest to stay in office.
29:02
Speaker 1: And it becomes increasingly bemusing.
29:05
Speaker 6: So for rent control, I mean, a part of the
29:07
Speaker 6: world I look at quite a lot, given my experience.
29:10
Speaker 3: Is the Middle East.
29:11
Speaker 6: So swap rent control for policies of persecution of minority
29:19
Speaker 6: in your country for the sake of staying in power.
29:24
Speaker 6: And I'm talking, obviously, about what's been going on in
29:26
Speaker 6: Israel and Gaza for the last couple of years, where
29:29
Speaker 6: for one man's self-interest in staying out of the courts
29:33
Speaker 6: and in remaining in power, millions of civilians have paid
29:39
Speaker 6: the price for a group of terrorists who acted in
29:43
Speaker 6: their name and committed terrible atrocities. So I think Prime
29:47
Speaker 6: Minister Netanyahu is as guilty of what you're describing, Merrin,
29:51
Speaker 6: as the local councillor or housing minister, perhaps Angela Rayner, whoever,
29:57
Speaker 6: introducing policies of rent control. but obviously with much more
30:00
Speaker 6: dramatic consequences.
30:01
Speaker 2: Was politics better in the past?
30:04
Speaker 1: And we tend to think, don't we, this is a
30:05
Speaker 1: new and uniquely unpleasant thing that politicians are incapable of
30:09
Speaker 1: moving to second order or third order or fourth order
30:13
Speaker 1: thinking ever.
30:14
Speaker 6: I think politics at the moment are particularly nakedly brutal.
30:19
Speaker 6: The prodigality, if you like, is extreme.
30:22
Speaker 1: You do know what it means.
30:26
Speaker 3: I'll look it up in a dictionary later.
30:28
Speaker 6: But the misconduct, in simple terms, is evident and nobody's
30:33
Speaker 6: trying to hide it. And that, for me, signals flashing
30:38
Speaker 6: lights because on the global scale, when it's been conducted
30:42
Speaker 6: in that way, misconducted in that way, by the country
30:47
Speaker 6: which should be a beacon of good conduct for the
30:50
Speaker 6: rest of the world, this undermines the whole system upon
30:55
Speaker 6: which the world has stood for the last 80 years
30:58
Speaker 6: and losing that which I think is at high we're
31:02
Speaker 6: at high risk of losing that system for a much
31:05
Speaker 6: worse impoverished system will be to all our loss.
31:10
Speaker 1: Well that brings us back slightly to our first conversation
31:13
Speaker 1: about public debt and not being able to reduce spending
31:16
Speaker 1: um A, politicians in situ at any particular given time,
31:20
Speaker 1: given in the US they're four years and another four
31:22
Speaker 1: years and here five years, here five years. They don't
31:24
Speaker 1: really have any long-term incentive to reduce government debt if
31:28
Speaker 1: all they're looking for is the next election cycle. And
31:31
Speaker 1: at the same time, given this new, very erratic, volatile
31:36
Speaker 1: environment globally, everyone really does have to push up defense spending.
31:40
Speaker 2: Has to happen, right?
31:42
Speaker 6: I think you're talking about John Healy's apparent U-turn this morning.
31:46
Speaker 4: Yes, I am.
31:46
Speaker 3: Announced.
31:50
Speaker 6: I don't, I'm not surprised to read that the new
31:53
Speaker 6: Chancellor of the Exchequer has realised that what he resigned
31:56
Speaker 6: over as Defence Secretary is a big challenge for him
32:00
Speaker 6: as Chancellor, and therefore he'd like to postpone the decision.
32:03
Speaker 6: And he has actually postponed it. I think my understanding
32:09
Speaker 6: is he's postponed it till the Public Spending Review, which
32:11
Speaker 6: will be next year, as opposed to dealing with this
32:14
Speaker 6: and committing to the defence spending we do need urgently.
32:18
Speaker 6: We needed it five years ago, but the defence spending
32:21
Speaker 6: we need now was going to be in the budget.
32:24
Speaker 6: And I assume that was the basis for him taking
32:27
Speaker 6: the job as Chancellor because he'd made a point of
32:29
Speaker 6: principle and everyone applauded it by resigning over Keir Starmer's
32:34
Speaker 6: Defence Secretary. So I think the world is extremely dangerous
32:39
Speaker 6: at the moment. Countries like Britain in particular, we are vulnerable.
32:45
Speaker 6: I'm not saying anything that others who are much more
32:47
Speaker 6: expert and read in on this have not already said,
32:51
Speaker 6: but it's real. I, like many of you, will be
32:54
Speaker 6: conscious we are under daily cyber attack as the UK.
32:58
Speaker 6: That's been going on for quite a long time, but
33:00
Speaker 6: it's now very evident. And we can't even control the
33:04
Speaker 6: English Channel. We've got Russian frigates and submarines apparently acting
33:10
Speaker 6: as they wish in the English Channel and certainly around
33:13
Speaker 6: the the north coast of Scotland, we are struggling to
33:16
Speaker 6: control our airspace. Now, this isn't something we can't deal with,
33:20
Speaker 6: but we do need the investment and we need it urgently.
33:23
Speaker 6: And it's a great pity, therefore, that this decision has
33:25
Speaker 6: been postponed.
33:27
Speaker 1: And it falls into exactly this, this absolute failure of
33:31
Speaker 1: politicians to consider the second order effect of not spending
33:34
Speaker 1: enough money to protect our borders. Exactly.
33:37
Speaker 6: The global leaders, of which we're talking about a handful,
33:41
Speaker 6: have the power to really disrupt the whole global system
33:46
Speaker 6: and economy. And we've seen the consequence of those two
33:49
Speaker 6: decisions in Ukraine, which hasn't disrupted the global economy. There
33:54
Speaker 6: was blips at the beginning with supplies and grain and
33:56
Speaker 6: so forth. The world dealt with that. But the consequences,
34:00
Speaker 6: the unintended consequences of the 28th of February attack on
34:04
Speaker 6: Iran by another powerful, big, powerful leader who was doing
34:11
Speaker 6: something out of self-interest rather than national interest ultimately we're
34:15
Speaker 6: going to be living with.
34:16
Speaker 3: That for a few years to come.
34:17
Speaker 6: This is all symptomatic of a new order emerging. I've
34:24
Speaker 6: talked about the erosion of the Bretton Woods order, the
34:27
Speaker 6: post-Second World War settlement, but the new order is going
34:30
Speaker 6: to be something much more similar, probably, to not just
34:34
Speaker 6: the East India Company on the commercial side, but on
34:37
Speaker 6: the nation side, it will look much more like 19th
34:40
Speaker 6: century great power politics. And there'll be different great powers
34:43
Speaker 6: from the previous ones. Some overlap, some different. But I
34:47
Speaker 6: think that's where we're heading. And that's the reason for
34:50
Speaker 6: what Alex just said.
34:52
Speaker 1: I will tell you, and Adrian, this will please you,
34:54
Speaker 1: that I do have in my house food for three days,
34:59
Speaker 1: water purification tablets. cash in case of a major cyber attack,
35:03
Speaker 1: all that kind of thing to keep me and my
35:05
Speaker 1: family going for a few days. I'm not going to
35:07
Speaker 1: tell any of you my address, but I do recommend
35:11
Speaker 1: that you do the same. Because if there, you know,
35:14
Speaker 1: as Nick says, we are under cyber attack every single day.
35:17
Speaker 2: Why do you think that some of them aren't going
35:19
Speaker 2: to work?
35:20
Speaker 1: Why do you think it is impossible that your banking
35:21
Speaker 1: network won't go down, that the Sainsbury's supply network won't
35:25
Speaker 1: go down for a couple of weeks, that all these
35:26
Speaker 1: things might or might not happen, might not be ready?
35:29
Speaker 2: And whenever I tell people that I have these grab
35:31
Speaker 2: bags at.
35:31
Speaker 1: Home, even my husband, sorry, darling, I know you're here
35:33
Speaker 1: and I shouldn't tell people what you think, but he
35:35
Speaker 1: doesn't approve of my grab bags.
35:36
Speaker 2: It's ridiculous.
35:38
Speaker 1: But why would you not just have that little bit
35:42
Speaker 1: of insurance against the things that we know are quite
35:46
Speaker 1: likely to happen? Anyway, I was going to move on
35:47
Speaker 1: from miseries. That didn't work. First question, please make it
35:50
Speaker 1: a jolly one.
35:51
Speaker 7: My question is, given, I'd like to imagine how Adam
35:56
Speaker 7: Smith would view today. And if he were being recruited
36:00
Speaker 7: by Mr. Burnham as to what to do next with
36:03
Speaker 7: the UK economy, what policies would he suggest? And given
36:08
Speaker 7: his observations of human nature, how would he sell them
36:12
Speaker 7: to the UK government?
36:14
Speaker 1: That's the most interesting bit. We all know, I think,
36:16
Speaker 1: what he should do. But how would you sell it, Adrian?
36:19
Speaker 3: I mean, you've given us a good.
36:22
Speaker 1: Start on the defence bit, by the way.
36:24
Speaker 4: Too difficult a question. But I do think that Burnham
36:29
Speaker 4: has a sort of quality which Starmer clearly didn't have
36:34
Speaker 4: as a sort of storyteller, as a narrative person, as
36:37
Speaker 4: somebody who is capable of persuasive speech. And I think
36:41
Speaker 4: he really ought to start off by talking about the
36:44
Speaker 4: number of people in this country, particularly young people, who
36:47
Speaker 4: are just dependent on the state, who are not creating
36:49
Speaker 4: any wealth, and say that this is bad for the country,
36:53
Speaker 4: bad for these people. And that, you know, we ought
36:56
Speaker 4: to be talking a little bit more about labor, everybody
36:59
Speaker 4: contributing to the economy and getting rid of this dependency culture.
37:05
Speaker 4: And he should be using his.
37:06
Speaker 2: Are you going to sell that to the young people?
37:08
Speaker 4: I think that, you know, it's a bit like Nixon
37:11
Speaker 4: and China. That as a labor party leader, he has
37:14
Speaker 4: the capacity to... I mean, as a reasonably articulate person,
37:18
Speaker 4: he has the capacity to say that. And it's in
37:20
Speaker 4: a position to say, and unless we do that, I
37:24
Speaker 4: don't see any other policy working. We're just wasting a
37:29
Speaker 4: huge amount of money and a huge amount of human potential.
37:33
Speaker 4: And the Labour Party is sitting there thinking only in
37:35
Speaker 4: terms of, you know, what the NGOs are saying. And,
37:40
Speaker 4: you know, as the last chance, as Tahili actually said,
37:44
Speaker 4: you know, nobody comes up to him without asking, you know,
37:47
Speaker 4: for something. for some money to be taken from one
37:50
Speaker 4: group of people to be given to another group of people.
37:53
Speaker 2: At some point it has to end. Any other good
37:55
Speaker 2: policies for Burnham?
37:57
Speaker 6: Well, as you say, Maren, I think I'm not an economist,
38:01
Speaker 6: I should say straight away.
38:03
Speaker 2: None of us are.
38:05
Speaker 6: Some do a better pretense than others. I would say
38:09
Speaker 6: that the key thing, as you said, we all know
38:12
Speaker 6: what needs to happen. I think the fundamental thing lacking
38:14
Speaker 6: at the moment from my layman's point of view is growth.
38:17
Speaker 6: If we had economic growth, then so many other things
38:20
Speaker 6: become possible. The kind of Christmas present giving that Andy
38:25
Speaker 6: Burnham's done since he became prime minister then wouldn't matter
38:29
Speaker 6: at the moment. It seems quite significant that he's going
38:31
Speaker 6: around giving a lot away without explaining where the money's
38:33
Speaker 6: coming from. But I think growth is the key. I
38:37
Speaker 6: would suggest that there are ideas out there. Some of
38:40
Speaker 6: them may be worth exploring.
38:43
Speaker 3: I'm intrigued.
38:44
Speaker 6: I don't know whether it's a good idea or not.
38:45
Speaker 6: I mean, the real economists in the room will be
38:47
Speaker 6: able to tell me. But I'm intrigued by this idea
38:50
Speaker 6: that actually, if one were to ask a bit more
38:54
Speaker 6: in taxation from the billionaires, one, they wouldn't notice it.
38:59
Speaker 6: And I think Adam Smith maybe says something to this
39:01
Speaker 6: effect that you ask the people who have the most
39:05
Speaker 6: to give more, not the people.
39:07
Speaker 3: So it should be proportionate, I think he says.
39:10
Speaker 6: So you asked the billionaires to give a much greater sum,
39:13
Speaker 6: which in proportion is the same as those under.
39:15
Speaker 2: We haven't got very many billionaires, you know.
39:17
Speaker 3: Fewer by the day. Fewer by the day. Fewer by
39:19
Speaker 3: the day because.
39:20
Speaker 2: They're mostly leaving.
39:21
Speaker 6: But some of them are volunteering to do this, of course.
39:23
Speaker 3: You've seen Gary Lineker.
39:23
Speaker 1: And they are more than welcome to just do it
39:26
Speaker 1: any day. You know, there's a special website for that.
39:27
Speaker 1: You can log on to it and give as much
39:29
Speaker 1: money as you like. to the UK government without any
39:31
Speaker 1: fuss at all.
39:32
Speaker 2: It's a low-admin thing.
39:33
Speaker 3: Do you get a Trump gold card?
39:34
Speaker 2: Anyone in the audience like to pay more tax?
39:37
Speaker 6: Well, I don't know how many billionaires we've got in
39:38
Speaker 6: the room.
39:40
Speaker 2: Well, do you know what the thing is?
39:42
Speaker 1: What a lot of people don't know is that their
39:44
Speaker 1: DB pensions capitalized probably make them near to billionaires.
39:47
Speaker 2: I mean, yours probably does. A wonderful DB pension from
39:50
Speaker 2: the foreigners.
39:51
Speaker 3: I haven't noticed.
39:55
Speaker 6: Actually, on that, I don't know if there are any
39:59
Speaker 6: civil servants in the room, former civil servants. Those of
40:02
Speaker 6: you who are, only one hand I saw. But two
40:05
Speaker 6: of you is expensive enough for us. I know where
40:08
Speaker 6: you're going with this, Maren. The civil service pension scheme
40:11
Speaker 6: is in meltdown at the moment, and you should all
40:14
Speaker 6: be worried about that, because ultimately... Yes, you do bankroll
40:17
Speaker 6: civil service pensions and the civil service as private sector taxpayers.
40:22
Speaker 6: But if the civil service pension scheme goes into even
40:25
Speaker 6: greater meltdown and chaos than it has been in the
40:27
Speaker 6: last year, something should be written about this, Maren. Maybe
40:30
Speaker 6: that's a column for you there.
40:31
Speaker 2: Oh, Adrian can do that.
40:33
Speaker 3: So I have two things.
40:34
Speaker 5: Yeah.
40:35
Speaker 3: One is if we keep going the way we're going,
40:36
Speaker 3: we'll all be billionaires.
40:38
Speaker 5: I know.
40:39
Speaker 1: Great.
40:39
Speaker 3: And we'll all fall under that billionaire tax bracket. It
40:41
Speaker 3: would be fantastic. Fantastic. But my suggestion would be, and
40:45
Speaker 3: this isn't going to surprise Maren, to re-embrace the North
40:47
Speaker 3: Sea energy. I am speaking from my book, but why
40:56
Speaker 3: the UK has taken the policies it is to try
40:58
Speaker 3: and put that out of business when the neighbours to
41:00
Speaker 3: the north have created the most bulletproof government balance sheet
41:05
Speaker 3: on the planet in the same oil field. Insanity. Insanity.
41:09
Speaker 3: this notion that the UK oil has run out oil
41:13
Speaker 3: and gas has run out and there's nothing there the
41:15
Speaker 3: Norwegians are just laughing at the Brits and it is
41:20
Speaker 3: talk about bringing money in and.
41:23
Speaker 1: Security what should we invest in in the expectation that
41:25
Speaker 1: that will happen because it will happen this idiocy can't
41:28
Speaker 1: go on much longer when the North Sea is opened
41:32
Speaker 1: again to exploration and production where will the money be
41:34
Speaker 1: made which listed equity.
41:36
Speaker 3: Should we be holding the pure plays are Ithaca Serica,
41:40
Speaker 3: and then less of a pure place, Harbor Energy. But
41:44
Speaker 3: there's also hunting. Hunting does a lot of the couplings
41:49
Speaker 3: and deep sea bits and bobs. The Scottish economy. I
41:54
Speaker 3: don't know how you can bet on the Scottish economy.
41:56
Speaker 2: Buy houses in Aberdeen.
41:58
Speaker 3: Yeah. Good idea. Not for immigrants.
42:04
Speaker 2: We better take another question.
42:06
Speaker 5: Yes. How much is of the current problems relate to
42:11
Speaker 5: the inability of the West to understand different nations. Putin
42:16
Speaker 5: was actually very good for Russia, given the history. For
42:20
Speaker 5: the 15 years, up until about 2014, they grew and
42:24
Speaker 5: they were getting better. We now have a major problem
42:26
Speaker 5: in the Middle East where I don't think people understand
42:30
Speaker 5: the issue, but how much is it that our understanding
42:36
Speaker 5: of what we think is right fails because we don't
42:39
Speaker 5: understand the interactions.
42:43
Speaker 2: That's one for you, Nick, I think.
42:44
Speaker 6: Yes, I think that's a very acute observation.
42:46
Speaker 2: Now, you could answer that in an hour.
42:48
Speaker 3: Yeah, no, I'll keep it very short.
42:51
Speaker 6: I think you're spot on. We know a lot about
42:56
Speaker 6: other nations, and we have a lot of expertise in
42:58
Speaker 6: our countries. There are thousands of Iran experts in the
43:03
Speaker 6: US administration. But the key thing is whether the decision
43:08
Speaker 6: makers listened to them. And nobody should be surprised that
43:11
Speaker 6: Putin invaded Ukraine when he did. He'd shown all the
43:13
Speaker 6: signs over a period going back to the invasion of
43:17
Speaker 6: Georgia and before that, 2008. And so nobody should be
43:21
Speaker 6: surprised about that. Nobody should be surprised that Russia exploited
43:25
Speaker 6: the vacuum created when Obama and the UK, Cameron Sarkozy,
43:31
Speaker 6: left a vacuum after the use of chemical weapons in
43:33
Speaker 6: Syria and showed that we weren't prepared to reinforce our
43:35
Speaker 6: red lines. Putin said, thank you, bring it on. And
43:39
Speaker 6: nobody should be surprised at the complete disaster of the
43:44
Speaker 6: US-Israeli unwarranted attack in Iran on the 28th of February,
43:51
Speaker 6: not because anyone wants to defend an appalling regime in Tehran,
43:55
Speaker 6: but because the consequence of it were very clear to
43:58
Speaker 6: read from day one.
44:00
Speaker 3: And lots of.
44:01
Speaker 6: People within the US administration knew this, All the US's
44:05
Speaker 6: close allies in the Gulf and in Europe were trying
44:08
Speaker 6: to advise the White House what would happen. Many journalists
44:12
Speaker 6: were saying the right things. If the decision maker ultimately
44:16
Speaker 6: comes back to national interest, self-interest, chooses for self-interest to
44:19
Speaker 6: do something over the national interest, doesn't listen to the advice,
44:23
Speaker 6: then you end up in the kind of mess we
44:25
Speaker 6: are in now.
44:27
Speaker 3: Thank you.
44:28
Speaker 2: Okay, another. I've got one here at the front, please.
44:31
Speaker 2: Thank you.
44:32
Speaker 4: What would Adam Smith make of climate change and what
44:35
Speaker 4: would be his approach to the problem?
44:39
Speaker 2: Anyone want to say that?
44:42
Speaker 5: Thank you for that.
44:43
Speaker 4: A very, very difficult question, but it's a classic example
44:47
Speaker 4: of the way in which people's preoccupation with the short
44:52
Speaker 4: term overrides everything else and they don't do things for
44:55
Speaker 4: the long term. And what he would have done is
44:57
Speaker 4: utilize the price mechanism. essentially that the only way that
45:00
Speaker 4: you can you can adjust people's behavior to um the
45:06
Speaker 4: problem of climate change in the long term is to
45:08
Speaker 4: make them play pay for for for pollution i can't
45:11
Speaker 4: think of anything else that that he would have done
45:14
Speaker 4: it's the right it's the right way forward.
45:16
Speaker 1: I wonder if you would also that man of system
45:19
Speaker 1: quote we've had a few times um about you know
45:22
Speaker 1: the man of system being the man in government etc
45:24
Speaker 1: who thinks that you can you can control a system,
45:27
Speaker 1: you can say something, and it is done. And I
45:29
Speaker 1: wonder if we might have looked at a lot of
45:30
Speaker 1: our climate change policies and gone, well, that's pretty man-of-system stuff.
45:36
Speaker 2: Maybe we're better off working on mitigation.
45:39
Speaker 3: Or adaptation.
45:40
Speaker 2: Or adaptation, yeah.
45:43
Speaker 4: The trouble with the adaptation policy is if climate change
45:46
Speaker 4: really is spiringly out of control because of the amount
45:48
Speaker 4: of pollution going in, you can't adapt fast enough.
45:51
Speaker 3: Yeah, yeah.
45:53
Speaker 2: Oh, man of system, and that bit isn't working, is it?
45:56
Speaker 1: So he didn't actually write very much about existential threats,
46:03
Speaker 1: you know? Well, we can ask the people who've most
46:06
Speaker 1: recently read both of them. Adam's read them, haven't you?
46:09
Speaker 1: Is there anything in Wealth of Nations about existential threats
46:12
Speaker 1: and how you might bring a world together to deal
46:14
Speaker 1: with one?
46:15
Speaker 4: Well, I think, is it Adam Smith or David Hume
46:18
Speaker 4: who says that what should I care about more, my
46:22
Speaker 4: own hand being a little bit singed and burnt, or
46:26
Speaker 4: a million people being killed in China by the eruption
46:29
Speaker 4: of a volcano. And he says, well, I'm obviously going
46:32
Speaker 4: to care more about my hand being burnt.
46:35
Speaker 1: Yes, and Smith did write something very similar about how
46:38
Speaker 1: it is the nature of being human to care more
46:41
Speaker 1: about your neighbour than a distant civilisation or group.
46:45
Speaker 2: So possibly he might have done nothing.
46:48
Speaker 3: But it would have been interesting, what would he say
46:50
Speaker 3: about the UK and a couple of other countries really
46:54
Speaker 3: going for it.
46:55
Speaker 2: And nobody else following.
46:56
Speaker 3: And nobody else following.
46:58
Speaker 2: He'd say that was absurd.
46:58
Speaker 7: Yeah. Yeah.
47:00
Speaker 1: Which brings us back to North Sea Oil, but we'll... Right.
47:03
Speaker 1: Thank you to my wonderful guest, and thank you for
47:05
Speaker 1: being really the best.
47:06
Speaker 2: Audience of the week.
47:08
Speaker 3: Thank you.
47:18
Speaker 2: Thanks for listening to this week's Merrin Talks Money.
47:21
Speaker 1: If you like our show, rate, review and subscribe wherever
47:23
Speaker 1: you listen to your podcasts. And keep sending questions or
47:25
Speaker 1: comments to Merrin Money at Bloomberg.net. You can also follow
47:28
Speaker 1: me and John on Twitter or X. I'm at MerrinSW
47:31
Speaker 1: and John is John underscore Stepak.
47:33
Speaker 2: This episode was hosted by me, Merrin Somerset Webb.
47:36
Speaker 1: It was produced by Sam Asadi and Moses Andam. Special
47:38
Speaker 1: thanks to Nick Hopton, Alec Cutler, Adrian Wooldridge, Blair Barrows
47:41
Speaker 1: and Alan Lloyds and everyone at Pamir House.