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Five Things The U.S. Can Do To Prepare For Iran: Adm. Stavridis · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Joining
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  Speaker 1: us now is Admiral James Stavridis. He is the retired
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  Speaker 1: former military commander of NATO Diana, the Fletcher's School of
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  Speaker 1: Diplomacy at Tufts University. Also a Bloomberg opinion columnist, Admiral
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  Speaker 1: Stefridas a pleasure always to speak with you. What is
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  Speaker 1: your reaction to the war of words on Twitter between
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  Speaker 1: the United States and Iran? I think it's worrisome, pim um.
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  Speaker 1: But let's take it from Pres Trump's perspective. First, he
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  Speaker 1: sees um kind of an angry but actually fairly stereotypical
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  Speaker 1: set of rhetoric coming out from Tehran. We've we've seen
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  Speaker 1: that kind of language from them repeatedly. And then he
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  Speaker 1: launches this real screed, all in caps um. I can
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  Speaker 1: understand the emotion of the response, but I'll tell you,
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  Speaker 1: you know, to put it in a movie context, we
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  Speaker 1: probably need less fast and furious and a little more
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  Speaker 1: cool hand Luke, which is to say, slow down, analyze
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  Speaker 1: and understand. We want to avoid getting in a war,
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  Speaker 1: but we do want to change Iranian behavior. Um. Finding
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  Speaker 1: that balance, I think it's going to be the challenge
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  Speaker 1: going forward. Well, what do you recommend? What would be
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  Speaker 1: the next thing to do? Given that the president seems
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  Speaker 1: to well, I mean, if you want to, you don't
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  Speaker 1: carry the cool hand Luke. Analogy further, Um, it's a
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  Speaker 1: failure to communicate between the Iron and the United States.
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  Speaker 1: What a nice point. Um. So I'd do five things,
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  Speaker 1: I think, and I'll knock them off very quickly. One,
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  Speaker 1: I would focus the intelligence community more dramatically, particularly in
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  Speaker 1: the maritime zone. Secondly, I would increase our defensive posture
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  Speaker 1: in the Middle East, because if this thing is gonna
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  Speaker 1: go hot, we're gonna need to be ready. So that's
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  Speaker 1: for example, missile defenses. Thirdly, I'd go out to our allies,
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  Speaker 1: partners and friends in the region are Sunni partners and
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  Speaker 1: our Israeli partners. Fourth, I'd go to NATO. I'd go
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  Speaker 1: to the Europeans and try and work through our current
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  Speaker 1: set of tensions there to get them on board. And
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  Speaker 1: fifth and finally, PIM, i'd get the inter agency more connected.
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  Speaker 1: We need c I, a Department of Justice, Department of
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  Speaker 1: Treasury working more closely together. UM. We need That's a
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  Speaker 1: long way of saying we need a strategy g not
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  Speaker 1: an angry Twitter burst. Do we have any evidence that
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  Speaker 1: these strategies work? I think we do. UM. If we
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  Speaker 1: look around the world. UM, our strategy worked very successfully
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  Speaker 1: in Colombia in defeating an insurgency. It has worked very
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  Speaker 1: well in the Balkans, bringing peace to a very troubled
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  Speaker 1: region there. I think, uh. More contemporaneously, our strategy has
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  Speaker 1: worked fairly well in Asia, keeping our allies working together
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  Speaker 1: as we put pressure on North Korea. I commend the
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  Speaker 1: administration for what's happening in North Korea, and I think
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  Speaker 1: they took a strategic approach there. I hope they do
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  Speaker 1: the same in Iran. You mentioned the Sunni allies Saudi Arabia.
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  Speaker 1: What do you believe they want to have happened? They
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  Speaker 1: have a very belligerent stance towards Iran. Broadly speaking, what
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  Speaker 1: they want is Iran to withdraw from a variety of
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  Speaker 1: Arab countries where they are pushing hard at Sunni populations. Iran,
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  Speaker 1: of course leads the Shia bloc in the region, so
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  Speaker 1: that is they would like to see Iran back out
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  Speaker 1: of Syria, back out of Lebanon, back out of Yemen,
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  Speaker 1: back out of trying to interfere with the kingdom itself.
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  Speaker 1: The Kingdom of Saudi Arabia reduce its ties with Guitar.
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  Speaker 1: So they see Iran as an inspansionist imperial power. They
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  Speaker 1: want to contain it, and under Crown Prince Muhammad bin Salomon,
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  Speaker 1: they will be very strong in doing so. You mentioned
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  Speaker 1: the maritime zone, and I of course want to mention
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  Speaker 1: your latest book entitled Seapower, The History and Geopolitics of
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  Speaker 1: the World's Oceans. When you mentioned maritime power, don't you
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  Speaker 1: have to think of what China wants to do. You
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  Speaker 1: absolutely do. And let's reflect on the fact, Pim that
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  Speaker 1: this region is parked almost dead center in the One Belt,
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  Speaker 1: one Road UH strategy that is employing in the movement
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  Speaker 1: of raw materials from Africa and the Middle East to
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  Speaker 1: them and the return flow of finished goods. So this
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  Speaker 1: in my view would be an area in which attempting
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  Speaker 1: cooperation with China might prove fruitful. China does not have
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  Speaker 1: preconceived notions about its relationships with Iran, and it is
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  Speaker 1: in China's interests and in the United States interest to
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  Speaker 1: keep uh that maritime flow of goods going back and forth,
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  Speaker 1: especially out of the Arabian Gulf. Who or what entity
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  Speaker 1: inside of NATO do you believe will respond positively if
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  Speaker 1: we want to improve that relationship to help in these
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  Speaker 1: issues regarding the Middle East. You know, at the moment
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  Speaker 1: relations between the United States and the rest of our
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  Speaker 1: NATO allies are quite low. Let's be honest, we had
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  Speaker 1: a bad summit. Um, there was finger pointing both ways. UM.
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  Speaker 1: I think the President is right to press on the
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  Speaker 1: European allies to increase their defense spending. But I do
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  Speaker 1: think that they have a point that Um, if they
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  Speaker 1: are going to go forth and operate with the United
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  Speaker 1: States around the world, they want to do that in
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  Speaker 1: a spirit of cooperation, which didn't feel like it was
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  Speaker 1: forthcoming at the summit in Brussels. So I think there's
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  Speaker 1: some fence mending to do on both sides in terms
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  Speaker 1: of who we're closest to, who can help us the most,
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  Speaker 1: it would be the United Kingdom within the Alliance UM,
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  Speaker 1: and we have to hope that we improve our relations,
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  Speaker 1: particularly with Germany, which is a significant actor both within
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  Speaker 1: the EU and within NATO, and that relationship is in
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  Speaker 1: bad shape right now. Well in that vain. The summit
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  Speaker 1: in Brussels was followed by the summit in Helsinki. What
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  Speaker 1: is your reaction, what is your analysis? Um, the summit
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  Speaker 1: in Helsinki was a major misstep by the President of
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  Speaker 1: the United States, and I think that's pretty well validated
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  Speaker 1: across the political spectrum. The problem was UM less about
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  Speaker 1: the fundamental idea of talking to Russia. I believe we should.
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  Speaker 1: I think we should confront Russia where we must, but
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  Speaker 1: cooperate wherever we can. We don't want to stumble back
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  Speaker 1: into a Cold war. But the problem was the atmospherics,
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  Speaker 1: the sense that our president was taking the side of
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  Speaker 1: Vladimir Putin over the intelligence community, and I think above
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  Speaker 1: all a kind of refusal to fully admit Russia's intrusion
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  Speaker 1: into our election, which is a fundamental UM violation of
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  Speaker 1: international law by Russia. So atmospherically didn't work, particularly coming
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  Speaker 1: on the heels of the twelve indictments of Russian intelligence operatives.
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  Speaker 1: The overall idea of working with Russia does make sense.
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  Speaker 1: We've got to leave it there, Thank you very much.
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  Speaker 1: Admiral James Stavridis, Dina the Fletcher School of Law and
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  Speaker 1: Diplomacy and the author of Power, The History and Geopolitics
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  Speaker 1: of the World's Oceans. Currency manipulation, the dollar, China, the
• 8:21
  Speaker 1: Federal Reserve all come into focus of Vincent Signerella, are
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  Speaker 1: global macro strategist for Bloomberg News, joins us here in
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  Speaker 1: studio to figure this all out. All right, Vincent, what
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  Speaker 1: is going on with US officials talking down the dollar,
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  Speaker 1: talking up the dollar? Who are we to believe? I
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  Speaker 1: think you're gonna stick with Minuchin on this one. I
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  Speaker 1: think Trump's just firing a couple off the off the
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  Speaker 1: bow basically, just to get everyone a little nervous. He's
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  Speaker 1: very upset with Germany. So when he says the Europeans,
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  Speaker 1: he's really speaking about Germany. Uh, in terms of trade
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  Speaker 1: with Germany, we have a big deficit. So he when
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  Speaker 1: he's that all automobiles a big part of it as automobiles.
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  Speaker 1: But at the same time, I mean, it's uh, it's
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  Speaker 1: very specific machinery. Germany specializes in very high tech machinery,
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  Speaker 1: especially in the surgical space, so we we do have
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  Speaker 1: this broad deficit with Germany. He throws the Europeans all
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  Speaker 1: under the bus with it with the same stroke um,
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  Speaker 1: but at the same time, the Euros eighteen it's not
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  Speaker 1: doing anything. So I would look past any criticism of
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  Speaker 1: Europe and realize that this is specifically aimed at China.
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  Speaker 1: But is this is wait a second, but before we
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  Speaker 1: get to China, is this bus going to get more expensive?
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  Speaker 1: Which what do you mean the bus that if you
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  Speaker 1: want to import an automobile from Germany, is that going
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  Speaker 1: to get more expensive? My guess is at the end
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  Speaker 1: of the day, we'll reach an accord, especially on autos
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  Speaker 1: with the Europeans. It's a big business and he's getting
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  Speaker 1: a lot of pressure from the United States manufacturers as well,
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  Speaker 1: so I think they're gonna come together on that one.
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  Speaker 1: It's the same kind of squawking we hear about NAFTA.
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  Speaker 1: Eventually NAFTA will come back around. To believe that will happen.
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  Speaker 1: I believe it will happen. It's just going to take
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  Speaker 1: a little bit of time and a little bit and
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  Speaker 1: we're gonna see these gyrations in the market. Okay, because
• 10:13
  Speaker 1: we've got John Claude Junker. I believe he's tending the
• 10:17
  Speaker 1: White House. This is going to be really he's kind
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  Speaker 1: of lost some credibility on the street, to be honest,
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  Speaker 1: So it would be very interesting to see what he says.
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  Speaker 1: We'll explain that. Well, he's gone off over the years
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  Speaker 1: and in really odd, almost Trump like statements, so that
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  Speaker 1: the markets have like sort of pulled back and and
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  Speaker 1: and not reacted so much to what he's had to say.
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  Speaker 1: We're not you know, if you if you look at
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  Speaker 1: it in the sense it's like who is he really representing?
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  Speaker 1: He's going to the White House on Wednesday, all right.
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  Speaker 1: The move to China, China on what I would like
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  Speaker 1: to really really stress is this is not a currency war.
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  Speaker 1: This is not China trying to devalue the currency and
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  Speaker 1: take it back a few steps. When when Bernanke did
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  Speaker 1: q E and we were accused and he was accused
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  Speaker 1: of starting a currency war, what he was doing was
• 11:03
  Speaker 1: keeping interest rates low, flattening the curve because of worries
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  Speaker 1: about the economy. China has some substantial worries about the economy,
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  Speaker 1: They've seen increased corporate defalse. They had a massive liquidity
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  Speaker 1: issue that they've just again once again did a big
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  Speaker 1: medium term lending facility to add to this liquidity. Whenever
• 11:22
  Speaker 1: a central bank does a big add you see a
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  Speaker 1: currency weaken, so that the China's you and by default,
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  Speaker 1: is weakening. But it's not their aim to weaken the
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  Speaker 1: currency to be a pain to Trump, although he will
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  Speaker 1: point to that they're really pointing towards trying to to
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  Speaker 1: STI is a domestic issue for them, purely a domestic issue,
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  Speaker 1: purely liquidity issue, and it's a worry. I mean, if
• 11:45
  Speaker 1: if you're an emerging market investor, this is a big,
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  Speaker 1: big worry. China's growth has been slowing and for them
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  Speaker 1: to to put this much money into the system is
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  Speaker 1: a is a real wake up call for emerging markets.
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  Speaker 1: It should be UM. We've seen some appreciation and emerging
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  Speaker 1: market currencies, but to my look, we have a lot
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  Speaker 1: more to go if this becomes a major economic issue
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  Speaker 1: for China. What is the Vincent Signarella chart tell you
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  Speaker 1: about the future of EM currencies such as Brazil, Russia, India.
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  Speaker 1: I think EM is gonna stay under the gun. I
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  Speaker 1: think we're going to see Trump continue this pressure through
• 12:23
  Speaker 1: the midterm elections in November. This plays well to his
• 12:26
  Speaker 1: political base. Even if there's short term pain for US manufacturers,
• 12:30
  Speaker 1: which is in this rust belt, in the place he's
• 12:32
  Speaker 1: trying to aim at. From a political standpoint, there's a
• 12:35
  Speaker 1: there's a great deal of long term support and a
• 12:38
  Speaker 1: great deal of play that he gets out of that. Um,
• 12:41
  Speaker 1: it doesn't have a lot else to hang his hat on,
• 12:43
  Speaker 1: you know, other than I mean he's got tax cuts
• 12:45
  Speaker 1: as well, So we may see another round of tax
• 12:48
  Speaker 1: cuts hit the US before November. But in and in
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  Speaker 1: the end, that should keep the dollar a little bit alive.
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  Speaker 1: It should see pressure in the UM. Do you look
• 12:57
  Speaker 1: at the price of copper? I do. What does the
• 13:00
  Speaker 1: price of copper which has been yeah, falling, un volatile
• 13:05
  Speaker 1: and following yes, what does that tell you about let's
• 13:08
  Speaker 1: say the economy of a place like Australia. Well, I
• 13:11
  Speaker 1: think what it says again, um, what's going on with
• 13:14
  Speaker 1: the China situation and how that impacts Australia and then
• 13:17
  Speaker 1: eventually obviously copper. If these are the the the base
• 13:22
  Speaker 1: metals that feed into production, and when you have the
• 13:25
  Speaker 1: the main buyer of those products stumbling a bit, then
• 13:30
  Speaker 1: the input to that main product stumbles, and that's what
• 13:33
  Speaker 1: we've been seeing in copper, and we're also seeing any
• 13:34
  Speaker 1: Australian dollar. What's the biggest mistake that you see currency
• 13:38
  Speaker 1: traders make in an environment like this? Reacting to the
• 13:43
  Speaker 1: immediate news, we saw something hit the markets this morning
• 13:46
  Speaker 1: about how Mexico's economy minister says we're going to aim
• 13:51
  Speaker 1: to get an after done by the end of August.
• 13:55
  Speaker 1: Paso strengthened immediately off of that, a couple of big
• 13:58
  Speaker 1: figures told news he actually said that yesterday. Um. And
• 14:02
  Speaker 1: then the piece of immediately weakens when everybody wakes up,
• 14:04
  Speaker 1: or actually I squawked it and said, by the way,
• 14:06
  Speaker 1: this is yesterday's news. Uh, and then it immediately turned around.
• 14:10
  Speaker 1: The odds of getting NAFTA done by August are really
• 14:13
  Speaker 1: really tight. And then the bigger picture is, even if
• 14:16
  Speaker 1: we get an agreement of sorts, needs to be ratified
• 14:18
  Speaker 1: by Congress, which at this point unlikely to get done
• 14:21
  Speaker 1: in two thousand and eighteen. So even if we had
• 14:24
  Speaker 1: a agreement at arms length, we still need to go
• 14:27
  Speaker 1: through the congressional process. Not happening this year, So reacting
• 14:30
  Speaker 1: to news like that is always going to come back
• 14:33
  Speaker 1: to buy two ten seconds. Tell people how they can
• 14:37
  Speaker 1: follow you on Squawk. If you have a Bloomberg terminal
• 14:40
  Speaker 1: and you're just type esquq, you you'll see a launch
• 14:44
  Speaker 1: bad come up for a Squawk go and what we'll
• 14:46
  Speaker 1: do is we will speak live breaking news. Uh down
• 14:49
  Speaker 1: your terminal. Thanks very much, Thank you, Vincent Signarella, Global
• 14:53
  Speaker 1: macro strategist for Bloomberg News. Well, one of Colorado's largest
• 15:14
  Speaker 1: recreational pot companies is planning to bring Willie Nelson's marijuana
• 15:20
  Speaker 1: brand to Canada and then go public in Toronto. Here
• 15:24
  Speaker 1: to tell us about raising capital in the cannabis industry
• 15:27
  Speaker 1: is Kevin Murphy. He's the chief executive of Acredge Holdings.
• 15:32
  Speaker 1: Kevin Murphy, thanks very much for being with us. Tell
• 15:35
  Speaker 1: us about Acreage Holdings and your capital raise and what
• 15:39
  Speaker 1: that tells you about the appetite that investors have for
• 15:43
  Speaker 1: the industry. Bamn and Lisa, thanks so much for having
• 15:47
  Speaker 1: me on the show. And uh. Acreage Holdings today is
• 15:51
  Speaker 1: the largest US cannabis provider UM now with thirteen states
• 15:56
  Speaker 1: and to be fifteen states. UM I'll our footprint covers
• 16:01
  Speaker 1: a hundred and fifty million people in this country, and
• 16:05
  Speaker 1: our goal is to raise enough capital to be an
• 16:10
  Speaker 1: aggregator into space. And this would be the last round
• 16:13
  Speaker 1: of financing that we will do before accessing the public
• 16:17
  Speaker 1: markets here in the fall. All right, before we get
• 16:19
  Speaker 1: to the public markets, Acreage owns cultivation, processing, and dispensary operations. Correct,
• 16:28
  Speaker 1: that is correct. We are vertically integrated in every state,
• 16:31
  Speaker 1: um or striving to be vertically integrated in in every state.
• 16:36
  Speaker 1: But you are absolutely correct. We control the entire um
• 16:40
  Speaker 1: the life cycle of the plant from seed to dispensary.
• 16:43
  Speaker 1: And on your advisory board you have former Massachusetts Governor
• 16:47
  Speaker 1: William Weld as well as former House Speaker John Bayner.
• 16:52
  Speaker 1: That is correct. We couldn't be more proud to have
• 16:55
  Speaker 1: those two gentlemen standing shoulder to shoulder with us at Acreage.
• 16:59
  Speaker 1: Why if you could raise a quarter billion dollars, two
• 17:02
  Speaker 1: hundred and fifty million, why did you then just raise
• 17:06
  Speaker 1: a hundred nine million. Well, we had initially sit out
• 17:10
  Speaker 1: to raise fifty million dollars, but we had so much
• 17:14
  Speaker 1: enthusiasm for the raise that we ended up raising as
• 17:18
  Speaker 1: much as a hundred and nineteen million dollars, which is
• 17:21
  Speaker 1: the largest rays ever done in the United States for cannabis.
• 17:26
  Speaker 1: We also anticipate raising additional capital in the fall, and
• 17:31
  Speaker 1: so we wanted to leave a little bit room in
• 17:33
  Speaker 1: order to do another financing this year. Now you intend
• 17:39
  Speaker 1: to launch on the Canadian Securities Exchange. Why in Canada, Well,
• 17:45
  Speaker 1: that is correct, and we go where every we are welcome,
• 17:49
  Speaker 1: and today the Canadians are with open arms welcoming us
• 17:53
  Speaker 1: um to the Canadian Exchange. In Canada, it is federally legal. Unfortunately,
• 18:01
  Speaker 1: in the United States, cannabis is still a Schedule one drug,
• 18:05
  Speaker 1: which is defined by having no medicinal value. Now that
• 18:10
  Speaker 1: would preclude us from being on the New York Stock
• 18:13
  Speaker 1: Exchange or the NASDAC, but we do hope soon to
• 18:17
  Speaker 1: be able to list on one or the other here
• 18:20
  Speaker 1: in the US. What kind of financial gain are let's say,
• 18:27
  Speaker 1: taxpayers missing out on by having the federal government still
• 18:32
  Speaker 1: regard cannabis as a Schedule one drug. This business, in
• 18:40
  Speaker 1: this industry is estimated to be by two thousand and
• 18:43
  Speaker 1: twenty five one hundred billion dollars in size. Compared to
• 18:49
  Speaker 1: other consumables. It is a very very large marketplace. We
• 18:56
  Speaker 1: at acreage, advocate for a banking, we advocate to pay taxes,
• 19:02
  Speaker 1: and at the end of the day, I believe that
• 19:05
  Speaker 1: it could have a major impact on um this country's
• 19:11
  Speaker 1: opay crisis. We'd love to be taxed and have a
• 19:14
  Speaker 1: lot of those tax dollars go to reducing opiate use
• 19:17
  Speaker 1: in this country. That tax revenue is currently unavailable to
• 19:24
  Speaker 1: the federal government. What is holding this up the fact
• 19:30
  Speaker 1: that it's a Schedule one drug today again being defined
• 19:33
  Speaker 1: as having no additional value. And at the end, we
• 19:38
  Speaker 1: believe that this drug needs to be de scheduled. The
• 19:44
  Speaker 1: majority of this country believes that cannabis should be legal,
• 19:48
  Speaker 1: and we're hopeful that Congress will essentially vote with their
• 19:53
  Speaker 1: constituents to make that a reality, and we believe it's
• 19:56
  Speaker 1: going to happen sooner than later. Just give you a
• 19:59
  Speaker 1: thirty seconds. Does it strike you as ironic that cigarettes
• 20:04
  Speaker 1: and alcohol are legally sold in the United States and
• 20:08
  Speaker 1: tax but cannabis isn't. Every industry goes through a change,
• 20:14
  Speaker 1: and we believe that the change is now for cannabis.
• 20:18
  Speaker 1: We've seen prohibition in this country with alcohol, and from
• 20:22
  Speaker 1: our vantage point, we are on the cusp of sea change.
• 20:27
  Speaker 1: And with Speaker Banker being a naysayer historically and now
• 20:32
  Speaker 1: having the courage to change his mind, we believe others
• 20:35
  Speaker 1: will as well. And that's why we believe we're well
• 20:38
  Speaker 1: positioned to be a dominant force in the cannabis space
• 20:42
  Speaker 1: when it is federally illegal to us. It's not an if,
• 20:47
  Speaker 1: it's a matter of when. Kevin Murphy, Chief Executive Acreage Holdings.
• 20:52
  Speaker 1: They've raised nearly a hundred and twenty million dollars in
• 20:56
  Speaker 1: their latest financing round, with plans to go public at
• 20:59
  Speaker 1: the of the year in Canada. This is Bloomberg Markets.
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  Speaker 1: I'm pim Fox. My next guest knows all about the
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  Speaker 1: modern economy in a world where everything can be copied.
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  Speaker 1: In other words, control C control V. We all know
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  Speaker 1: about it, but how do you deal with it? He
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  Speaker 1: is Howard You. He is the legal Professor of Management
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  Speaker 1: and Innovation at the I M d School of Business
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  Speaker 1: in Switzerland, and his new book is called Leap How
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  Speaker 1: to Thrive in a World where Everything can be Copied?
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  Speaker 1: How are you? Thank you very much for being with us.
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  Speaker 1: Maybe you could just start off by telling us a
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  Speaker 1: little bit about why you decided to write this book.
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  Speaker 1: In many ways. The book concept really came from my
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  Speaker 1: conversation of executive and manager home I had run conferences
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  Speaker 1: and workshop and one of the key topic, or one
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  Speaker 1: of the biggest complaint they always have. They would say,
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  Speaker 1: my product is getting commoditized, meaning they find it very,
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  Speaker 1: very hard to differentiate in marketplace. They subject to all
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  Speaker 1: kinds of pricing pressure, and whenever they launch or introduce
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  Speaker 1: a new type of innovation, those product features get copy overnight,
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  Speaker 1: and so that becomes the crux or the thrust for
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  Speaker 1: me to dive into this inquiry. Now, as you decided
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  Speaker 1: that this was a focus of attention, did you notice
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  Speaker 1: that this is an issue that had been going on
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  Speaker 1: for a very long time. I mean, we may think
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  Speaker 1: that this is just something to do with technology, but
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  Speaker 1: you know, you go back even to let's say the
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  Speaker 1: founding of the United States and and the industrialization of
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  Speaker 1: the United States. UH, factories in the U S were
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  Speaker 1: copying European goods even then. Absolutely, I thought that's pretty
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  Speaker 1: much a contemper phenomena. But as I died dig into
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  Speaker 1: the historical past, it turns out things getting copy was
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  Speaker 1: a repeated complaint across era, across industry, across continent as well.
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  Speaker 1: In fact, once a point in time in Switzerland there
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  Speaker 1: is no pattern law for chemistry or chemical product. So
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  Speaker 1: in the land of counterfeat the Swiss were basically copying
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  Speaker 1: the German to produce drugs, and that had historically two
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  Speaker 1: years ago the biggest complained by the German drug manufacturer. Well,
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  Speaker 1: let's talk about leap and what did you discover? How
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  Speaker 1: can companies deal with copying in an age where it
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  Speaker 1: is as simple as a control C movement on the keyboard. Yeah,
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  Speaker 1: in many ways, executive always dream about building up a
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  Speaker 1: competitive possessioning that they could stay away from global competition.
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  Speaker 1: That turned out to be pretty much a mirage. In
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  Speaker 1: many ways, competition is almost like mountaineering. So the pioneering
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  Speaker 1: company would try to reach the mountain peak and the
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  Speaker 1: lake comer would also try to reach the same altitude. Now,
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  Speaker 1: when the knowledge underpinning the industry stays tgnate, the lake
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  Speaker 1: comers sooner or later would reach the same height. No
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  Speaker 1: value proposition can stay unique forever. No blue ocean can
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  Speaker 1: stay blue forever. Eventually blue ocean turn red. What I
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  Speaker 1: discover is pioneering company can play a different game. They
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  Speaker 1: can leap from one knowledge discipline to the next and
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  Speaker 1: then the next. And when the underlying knowledge of an
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  Speaker 1: industry continued continue to leap forward. Then climbing the mountain
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  Speaker 1: is as if there's constant mudslide pushing everyone down. In
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  Speaker 1: that scenario, it turns out it's the most experience, the
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  Speaker 1: most pioneering company stand a better chance to stay on
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  Speaker 1: top of competition. Can you give us some examples of
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  Speaker 1: companies that are able to do this? Sure? Um. One
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  Speaker 1: of the prime examples I use in the book is
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  Speaker 1: the pharmaceutical industry I briefly mentioned earlier. So it turns
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  Speaker 1: out in the beginning of the pharmaceutical industry two years ago,
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  Speaker 1: everyone come up with new drugs based on organic chemistry.
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  Speaker 1: The first blockbuster in the world is in fact called
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  Speaker 1: ant hip hiring is a fever reducing drugs, and it
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  Speaker 1: is this chemist making chemical die for the textile industry
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  Speaker 1: discovered this municipal medicinal benefit to to solve human issues.
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  Speaker 1: Now you might remember after people talk about Alexander Flaming
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  Speaker 1: who discover peninsillin the first an hipolytics roughly around the
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  Speaker 1: Second World War. So after the Second World War, all
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  Speaker 1: the pharmaceutical industry moved from the study of chemistry to microbiology.
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  Speaker 1: They want to find out the more potent fungus, to
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  Speaker 1: find out the next pay dirt, to find out the
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  Speaker 1: more potent ant hibiotics. So the knowledge discipline really moved
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  Speaker 1: from organic cam street to the study of microbiology. Today
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  Speaker 1: it's all about genomics and DNA and genetics. So looking
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  Speaker 1: back to the long history of pharmaceutical industry, the salient
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  Speaker 1: features of this particular sector is the leaping of knowledge
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  Speaker 1: from one to the next, from organic chemistry to microbiology
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  Speaker 1: to genomics. But that doesn't that beg the question that
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  Speaker 1: you need to have confidence in order to do that,
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  Speaker 1: because if you don't have the confidence, you're gonna try
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  Speaker 1: to build a bigger moat around your mountains so that
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  Speaker 1: no one even gets the climb on top of it.
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  Speaker 1: How do you help build that confidence? Yeah, this is
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  Speaker 1: a tricky question because on the verge of leaping from
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  Speaker 1: the old knowledge to the next, oftentimes those require investment.
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  Speaker 1: Is very very hard to pinpoint through the traditional financial
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  Speaker 1: and analysis. I give you a concrete example on the
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  Speaker 1: virtue of launching the targeted cancer drugs called Clevick by novartists.
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  Speaker 1: At the time, this CEO was facing a paradox in
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  Speaker 1: many ways. This new targeted drugs solving a rare form
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  Speaker 1: of leukemia cancer called CML. The target market is relatively small,
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  Speaker 1: so all the executives around him basically said we should
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  Speaker 1: allocate the corporate resources to more larger diseased class like
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  Speaker 1: prostic cancer, breast cancer and so on. But the CEO
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  Speaker 1: at the time, Daniel Vanzella, when he reviewed back the
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  Speaker 1: early clinical trial, he thought, it's not so much about
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  Speaker 1: increase of revenue, but it really pioneering of a new
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  Speaker 1: way for drug discovery using genomics. No how and he
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  Speaker 1: basically told the team money doesn't matter. We have to
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  Speaker 1: move ahead. So every time when I look back to
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  Speaker 1: historical analysis that companies successfully leap from one knowledge to
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  Speaker 1: the next, there is certain top down intervention has to happen,
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  Speaker 1: going beyond the traditional financial analysis that we all know
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  Speaker 1: very well. That was Howard you. He is Lego Professor
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  Speaker 1: of Management and Innovation at the I M d School
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  Speaker 1: of Business in Switzerland. His new book is entitled Leap
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  Speaker 1: How to Thrive in a world where everything can be copied.
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  Speaker 1: And to just give some more uh well pertinent information
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  Speaker 1: related to this, you know, the food and us Food
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  Speaker 1: and Drug Administration. Just last week it announced what it
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  Speaker 1: called something called the bio Similars Action Plan, and the
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  Speaker 1: idea is to improve the efficiency of the biosimilar and
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  Speaker 1: interchangeable product development and approval process, basically making it the
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  Speaker 1: easier and uh faster for companies to create biosimilar drugs.
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  Speaker 1: And already we know that about a dozen approvals for
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  Speaker 1: bio similars have made it through the f d A,
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  Speaker 1: and they have started this effort to accelerate the development
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  Speaker 1: and adoption of these particular drugs. Thanks for listening to
• 29:06
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 29:09
  Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast
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  Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at
• 29:16
  Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one
• 29:20
  Speaker 1: before the podcast. You can always catch us worldwide on
• 29:23
  Speaker 1: Bloomberg Radio.