Latest / Bloomberg Intelligence / Apple Is Ready to Make Long-Awaited Push Into Smart-Home Market

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Apple Is Ready to Make Long-Awaited Push Into Smart-Home Market · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios.
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  Speaker 4: News.
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  Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 2: A lot of tech news out there. We want to
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  Speaker 2: get to that. Matthew Bloxham, Senior Media and Tech Analyst
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  Speaker 2: for Bloomberg Intelligence. Usually in London, he flies all the
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  Speaker 2: way over here to New York, the world's financial capital.
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  Speaker 2: And where is he today? He's at the Bloomberg offices
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  Speaker 2: in Princeton, New Jersey, because that's where Bloomberg Intelligence Week,
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  Speaker 2: that's where we got our start. Boy, how many years ago?
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  Speaker 2: 17 years ago, we started Bloomberg Anthology down there in Princeton. Matt,
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  Speaker 2: thanks so much for joining us here. I want to
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  Speaker 2: start with Apple. Looks like Mark Gurman was reporting here
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  Speaker 2: from Bloomberg News. Apple making plans to push into the
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  Speaker 2: smart home market with a smart home hub code named J490.
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  Speaker 2: That just rolls off the tongue. Talk to us about
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  Speaker 2: what Apple's doing here in the home market.
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  Speaker 6: Yes, I mean, obviously, they've been kind of pushing gradually
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  Speaker 6: into the home market for quite some time, but mainly
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  Speaker 6: through the kind of home speaker market with their kind
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  Speaker 6: of HomePod and the HomePod Mini, which I think, you know,
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  Speaker 6: hasn't been a runaway success the way you'd expect an
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  Speaker 6: Apple product to be, I think, and, you know, Some
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  Speaker 6: of that, I think, is the cost of the device.
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  Speaker 6: Some of it, you know, it kind of is playing
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  Speaker 6: to the Apple ecosystem. Some of it's about the fact
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  Speaker 6: that Siri hasn't been actually that great as an AI assistant.
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  Speaker 6: And it's been up against some pretty strong rivals in
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  Speaker 6: the likes of Amazon and Google. So I think, you know,
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  Speaker 6: this is a kind of revamp of that strategy in
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  Speaker 6: the addition of this kind of home hub technology. devices,
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  Speaker 6: kind of a concerted effort to kind of really push
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  Speaker 6: forward and make a bigger splash in that market, you know,
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  Speaker 6: and create these, you know, smart homes where you can
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  Speaker 6: control your heating and a whole bunch of other things,
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  Speaker 6: you know, through this kind of centralized hub. So let's see,
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  Speaker 6: you know, so far it's not been a great hunting
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  Speaker 6: ground for Apple, but maybe with this kind of revamp
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  Speaker 6: and in particular with Siri AI, they can have a
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  Speaker 6: better performing product and gain some more momentum.
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  Speaker 7: Turning our attention a little bit more toward AI, the
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  Speaker 7: news that the Federal Trade Commission is really looking at OpenAI, Anthropic,
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  Speaker 7: and other AI companies around the safety of their products
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  Speaker 7: amid recent cybersecurity incidents.
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  Speaker 2: What are your thoughts.
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  Speaker 7: With respect to how this may change those companies or
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  Speaker 7: what changes may be on the horizon for them as
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  Speaker 7: a result of this probe?
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  Speaker 6: Yeah, I mean, what I have to say is there's
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  Speaker 6: just like so much going on across the industry when
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  Speaker 6: it comes to safety. You know, collaboration, cooperation, agreement between
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  Speaker 6: companies and, you know, the extent to which some of
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  Speaker 6: this is anti-competitive or not. And, you know, whether it's
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  Speaker 6: kind of really necessary. So I think there's so many
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  Speaker 6: different things going on. Obviously, we have the kind of...
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  Speaker 6: The agreement signed by close to two dozen execs with
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  Speaker 6: Donald Trump and President Trump yesterday. So I think it's
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  Speaker 6: an evolving space. I think the fact that we saw
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  Speaker 6: that this agreement signed by so many executives does point
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  Speaker 6: to the fact there are real concerns out there that
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  Speaker 6: need to be addressed. Agreement within the industry is definitely
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  Speaker 6: the quickest way to kind of make progress on this.
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  Speaker 6: Possibly some kind of legislation is going to come at
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  Speaker 6: some point in the future. But as we all know,
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  Speaker 6: legislation takes time. There's a lot of differing views amongst
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  Speaker 6: politicians about what legislations would look like. So I wouldn't
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  Speaker 6: see anything coming any time soon on that front.
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  Speaker 2: Matthew, I guess we're also waiting on IPOs for some
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  Speaker 2: of these big AI names, Anthropic... OpenAI, it seems like
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  Speaker 2: maybe they're kind of pushing these things back a little
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  Speaker 2: bit for a variety of reasons. Where do you think
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  Speaker 2: the market reception would be for some of these big IPOs?
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  Speaker 2: Because the numbers they're talking about are pretty darn huge.
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  Speaker 6: Yeah, they are. And, you know, I think that the
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  Speaker 6: first number that people are looking to, particularly when you
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  Speaker 6: look at Anthropic and OpenAI, is their annualized recurring revenue
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  Speaker 6: or run rate revenue. And obviously that's been kind of
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  Speaker 6: growing materially over the last 12 months. So as their
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  Speaker 6: businesses scale. But that's kind of really the number that
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  Speaker 6: these IPOs are going to be anchored on and the
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  Speaker 6: revenue multiple you can get against that. So, I think
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  Speaker 6: ultimately that's kind of still the most important thing. And
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  Speaker 6: if perhaps they're delaying it, maybe it's a sign that
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  Speaker 6: the momentum in their revenue isn't coming through as quickly
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  Speaker 6: as they hoped. And playing into that, when investors look
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  Speaker 6: to the longer term, they're trying to assess what is
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  Speaker 6: the addressable market for these companies. And that's, I think,
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  Speaker 6: where these kind of AI safety concerns come in, is
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  Speaker 6: that if there are going to be more guardrails about
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  Speaker 6: the pace at which they develop their frontier models, to
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  Speaker 6: what extent does that slow the pace of adoption and
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  Speaker 6: the revenue opportunity on a kind of three to five-year view?
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  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 2: OpenAI CEO Sam Altman, he spoke with Bloomberg's Ed Ludlow
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  Speaker 2: from OpenAI's Dev Day in San Francisco. He spoke on
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  Speaker 2: concerns over AI safety, saying they will happily slow down
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  Speaker 2: releases when needed.
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  Speaker 8: When we need to make a decision about slowing down
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  Speaker 8: our training or our model release so that we can
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  Speaker 8: make more progress and put more of our attention into safety, alignment, monitoring, security,
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  Speaker 8: we will happily do that. Now, of course, we're going
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  Speaker 8: to continue to make progress, but the world should always
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  Speaker 8: have confidence in our safety cases, in our safety claims,
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  Speaker 8: and that we are going to be responsible with this technology.
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  Speaker 4: All right.
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  Speaker 2: That was OpenAI CEO Sam Altman speaking with Bloomberg's Ed
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  Speaker 2: Ludlow from OpenAI's Dev Day in San Francisco. We're now
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  Speaker 2: joined by Ed Ludlow, Bloomberg tech host. I believe he's
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  Speaker 2: down there in L.A. somewhere. You never know where this
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  Speaker 2: guy is. Ed, thanks so much for joining us here.
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  Speaker 2: I guess this whole safety guardrail thing, that narrative, it's
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  Speaker 2: just not going away, is it? How do you think
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  Speaker 2: this plays out?
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  Speaker 1: What does Mr.
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  Speaker 2: Altman think?
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  Speaker 9: Yeah, I think what's been interesting over the last 24
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  Speaker 9: hours is there is a combination now between the action
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  Speaker 9: that OpenAI will or won't take on either delaying the
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  Speaker 9: release of a model or pausing the training of a
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  Speaker 9: generation of model and whether or not and when it
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  Speaker 9: goes public. And so, you know, the way that Sam,
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  Speaker 9: he actually pushed back on me pretty hard because I
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  Speaker 9: asked him, is it that going public is incompatible with
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  Speaker 9: the idea that you need to slow down the cadence
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  Speaker 9: of release and pacing at the frontier?
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  Speaker 2: And he said, not quite.
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  Speaker 9: The whole point is that when you are a newly
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  Speaker 9: public company, that's when it's most difficult.
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  Speaker 2: You know this, Paul, right?
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  Speaker 9: You know what it takes to go public, all the
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  Speaker 9: internal audit, the requirements of you within 12 months of
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  Speaker 9: going public. I think his point is like, it's not
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  Speaker 9: just that you have your duty to shareholders. They want
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  Speaker 9: to see growth, profit, et cetera, and that that's incompatible
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  Speaker 9: with delaying or slowing down. It's that it's a body
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  Speaker 9: of work, two bodies of work that require a lot
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  Speaker 9: of the company. And so that was a fascinating discussion.
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  Speaker 7: In the news as well with respect to their IPO.
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  Speaker 7: What could open AI lose by waiting? Yeah.
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  Speaker 9: So, what was interesting, we broke this story yesterday with
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  Speaker 9: some curious timing, I have to admit, because it happened
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  Speaker 9: during the keynote at their Dev Day. But sources are
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  Speaker 9: telling us that they are in talks with their existing
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  Speaker 9: investors to do a private market round, which you can
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  Speaker 9: kind of see as a bridge to an IPO happening,
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  Speaker 9: whether it's next year or even 2028, right? Like what
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  Speaker 9: I hear a lot from sources is like, people are
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  Speaker 9: pretty supportive with OpenAI taking its time anyway. And to
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  Speaker 9: be fair, we talked to Sam Altman and OpenAI CFO
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  Speaker 9: about this idea and the way that the CFO Sarah
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  Speaker 9: Fryer put it is, you know, there is market demand
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  Speaker 9: for them to do a private market round. But they
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  Speaker 9: will go public eventually. They will go public when the
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  Speaker 9: timing is just better. The environment right now is not
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  Speaker 9: the right environment for them to do it. But I
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  Speaker 9: think answering your question, my understanding is that everyone's pretty
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  Speaker 9: calm about it, actually. The acceptance that Anthropic will likely
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  Speaker 9: go public first.
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  Speaker 2: So to the extent that there is another private round,
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  Speaker 2: I'm assuming it's going to be at some higher valuation,
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  Speaker 2: suggesting that at least the private market is still bullish
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  Speaker 2: on this AI story.
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  Speaker 6: Yes.
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  Speaker 9: So the valuation that we reported is about $ 1. 4 trillion,
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  Speaker 9: which would be up from $ 900 billion-ish, $ 850 billion to
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  Speaker 9: $ 900 billion in its last private market round. Again, what
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  Speaker 9: Sarah Fryer said on the record, because I said, here's
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  Speaker 9: what we reported. What can you say was that there
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  Speaker 9: is market demand for them to do this? You get
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  Speaker 9: the sense this is the investors pushing them to do
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  Speaker 9: it rather than them needing money. Because don't forget, when
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  Speaker 9: they raised one hundred and twenty two billion dollars earlier
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  Speaker 9: this year in a single round, that was a record
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  Speaker 9: and all that money sitting on their balance sheet. So
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  Speaker 9: right now there's like all this this debate about how
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  Speaker 9: much cash they burn through for the compute. But they
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  Speaker 9: do have a lot of cash, right? You know, sitting
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  Speaker 9: sitting there ready to use.
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  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
• 10:07
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  Speaker 5: you get your podcasts or watch us live on YouTube.
• 10:15
  Speaker 2: There's some bond deals out there in the marketplace right here.
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  Speaker 2: I'm talking size. Paramount Skydance out with something like $ 51
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  Speaker 2: or $ 52 billion. I don't know what's going on out there.
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  Speaker 2: That's a lot of debt for a media company. Stephen Flynn,
• 10:29
  Speaker 2: it's his job to figure it all out. Stephen Flynn,
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  Speaker 2: he's a credit analyst for Bloomberg Intelligence. Covers all the tech, media,
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  Speaker 2: telecom space here. Talk to us just about the structure
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  Speaker 2: of this deal. What's the company doing now in the marketplace?
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  Speaker 6: Sure, Paul.
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  Speaker 10: They're raising a lot of debt. They're bringing in a
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  Speaker 10: lot of money. They're hitting various markets. They have two
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  Speaker 10: components to the debt. There's the first lien debt that's
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  Speaker 10: investment-grade rated.
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  Speaker 4: They're doing loans, and they're doing U.S. dollar-denominated corporate bonds.
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  Speaker 10: On the high-yield side, they have second lien bonds that
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  Speaker 10: are high-yield rated, and they're hitting both the dollar market
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  Speaker 10: and the euro market in high yield.
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  Speaker 4: So there's multiple parts, they're hitting multiple markets.
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  Speaker 7: In your opinion, what would be sort of the first
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  Speaker 7: sign that that debt reduction plan is not working?
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  Speaker 4: Well, let's hope it does work because they are putting
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  Speaker 4: on a lot of debt. They're going to have a
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  Speaker 4: lot of leverage.
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  Speaker 10: What's expected is the company is going to be implementing
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  Speaker 10: a ton of cost synergies, right? So They're starting out
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  Speaker 10: with high leverage, but the goal is to de-lever, right?
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  Speaker 10: And there's two components there, right? You could increase your
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  Speaker 10: EBITDA to lower leverage, or you could reduce your debt
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  Speaker 10: or net debt balance. So they're going to do two things.
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  Speaker 10: Number one, they hope to grow the EBITDA, but a
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  Speaker 10: big part of that is the cost synergy. So if
• 11:39
  Speaker 10: you look at the two companies, combine them, you're talking
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  Speaker 10: about $ 12 billion of EBITDA.
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  Speaker 4: They're looking for $ 6.
• 11:44
  Speaker 10: Billion of annual cost savings within three years. That is
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  Speaker 10: a huge number. So that growing EBITDA will lower your
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  Speaker 10: leverage ratio. Also, Once you get past a year or two,
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  Speaker 10: they should start to generate a significant amount of free
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  Speaker 10: cash flow.
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  Speaker 4: And that free cash flow will be used to reduce
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  Speaker 4: the debt. And that will get you to de-lever over
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  Speaker 4: the next three years.
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  Speaker 2: Bloomberg News is out with a great story on this
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  Speaker 2: deal today. Just saying, hey, they wanted to get this
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  Speaker 2: deal done like six months ago, or if not more.
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  Speaker 2: But they had some delays, state's attorney generals kind of
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  Speaker 2: holding up the deal. So that delay... What's happened in
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  Speaker 2: those six months is interest rates have gone up dramatically.
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  Speaker 2: So now this is going to cost them a lot more.
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  Speaker 2: How much of a problem is that for them?
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  Speaker 4: Yeah, it is going to cost them a lot more, right?
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  Speaker 10: So if we think about it, they first announced plans to,
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  Speaker 10: I think they offered $ 30 a share back in December
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  Speaker 10: of 25. They agreed to $ 31 a share in late
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  Speaker 10: February of this year. And you think about where the
• 12:39
  Speaker 10: credit markets have gone over.
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  Speaker 4: That time, it's gone higher, right? So if we look
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  Speaker 4: at the generic U.S.
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  Speaker 10: 10-year Treasury bond, It's up about 100 basis points from
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  Speaker 10: about 4.2% to 5.2%. The IG market is up about
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  Speaker 10: 110 basis points up to about 6% in total. High
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  Speaker 10: yield markets up about 160 basis points. It's now on
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  Speaker 10: average 8.3%. So if you think about that significant rise
• 13:03
  Speaker 10: in the underlying markets, obviously in Paramount, they're issuing.
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  Speaker 4: A lot of debt. It's going to come wide, right?
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  Speaker 4: It's going to cost them a lot of money.
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  Speaker 10: But if you think about that change, In total, they're
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  Speaker 10: raising about $ 57.
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  Speaker 4: Billion of debt with all the different markets that we
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  Speaker 4: talked about.
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  Speaker 10: An extra 100 to 150 basis points, that's an extra
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  Speaker 10: $ 570 million to $ 850 million a year in interest expense.
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  Speaker 7: Oh my goodness.
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  Speaker 10: Now, the company is expected to generate significant free cash flow.
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  Speaker 10: This will clearly put somewhat of a dent in that
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  Speaker 10: free cash flow, but- hopefully the company will have the
• 13:37
  Speaker 10: capacity to deal with it.
• 13:38
  Speaker 2: You're a credit analyst. You don't rely on hopefully. I'm
• 13:42
  Speaker 2: an equity guy, so I say, ah, it's all going
• 13:43
  Speaker 2: to work out the way I buy the stock. You
• 13:45
  Speaker 2: guys really look at the numbers and can they actually
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  Speaker 2: do it?
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  Speaker 10: Yeah, well, like I said, we hope they can. But no,
• 13:50
  Speaker 10: the bonds are coming wide, right? So if you're a
• 13:53
  Speaker 10: bond investor, you're saying, hey, I have significant concerns, right?
• 13:57
  Speaker 10: Medium mergers don't have a great track record. There's a
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  Speaker 10: lot of synergies that they have to cut.
• 14:02
  Speaker 5: Right?
• 14:02
  Speaker 10: There's some uncertainties there, but it's going to be a
• 14:04
  Speaker 10: big name in the market and it's coming really wide, right?
• 14:07
  Speaker 10: So if I don't own it and it performs or
• 14:09
  Speaker 10: if it tightens, I'm.
• 14:10
  Speaker 4: Going to underperform. So that's going to force people to
• 14:13
  Speaker 4: be involved.
• 14:14
  Speaker 7: The new secure debt will basically place them above unsecured
• 14:17
  Speaker 7: debt holders currently for Paramount.
• 14:20
  Speaker 1: How much of a problem is that?
• 14:22
  Speaker 7: And what does that mean for those investors who are
• 14:24
  Speaker 7: already investing in Paramount debt?
• 14:26
  Speaker 2: Sure.
• 14:26
  Speaker 10: So it's going to be a complicated capital structure with
• 14:29
  Speaker 10: many layers, right? So like you said, the first lien
• 14:31
  Speaker 10: is the first priority.
• 14:32
  Speaker 4: That's investment grade rated.
• 14:33
  Speaker 10: The new bonds they're offering are second lien, which are
• 14:36
  Speaker 10: high yield rated. Now, there's some legacy debt on the
• 14:39
  Speaker 10: Warner Brothers side that's exchanging at the second liens, and
• 14:41
  Speaker 10: then there'll be some stub pieces. You referenced the legacy
• 14:44
  Speaker 10: Paramount unsecured debt. So that will be behind a few.
• 14:47
  Speaker 4: Layers of debt.
• 14:49
  Speaker 10: Now, those bonds are yielding much more. They're trading at
• 14:51
  Speaker 10: large discounts to par. So a lot of those risk
• 14:54
  Speaker 10: factors are already in where the Paramount bonds are trading.
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  Speaker 5: So it's interesting.
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  Speaker 10: Paramount bonds were a part of the investment grade index
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  Speaker 10: until I think it was March this year when they
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  Speaker 10: got their last downgrade to junk.
• 15:04
  Speaker 4: They fell out of the index and into high yield.
• 15:07
  Speaker 1: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 5: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 15:24
  Speaker 5: you get your podcasts or watch us live on YouTube.
• 15:29
  Speaker 2: Well, the New York Times investigation found that DraftKings built
• 15:33
  Speaker 2: a machine learning model that scored customers by how much
• 15:36
  Speaker 2: they would lose for each free bet or bonus they received.
• 15:41
  Speaker 2: That's raised some concerns here, and it's a subject in
• 15:43
  Speaker 2: part of our next guest's opinion column. That's Gautam Mukunda.
• 15:47
  Speaker 2: He's a lecturer at the Yale School of Management, and
• 15:49
  Speaker 2: he is a Bloomberg opinion contributor. We are in the
• 15:53
  Speaker 2: era of warped entrepreneurship. What do you mean by that, Gautam?
• 15:57
  Speaker 3: So this is a DraftKings story, but it's not just
• 15:59
  Speaker 3: a DraftKings story. And for DraftKings, I'd almost just want
• 16:03
  Speaker 3: to ask the people who are doing this, if you
• 16:06
  Speaker 3: told your mother that what you did was using the
• 16:09
  Speaker 3: data science skills that you acquired over years of painstaking
• 16:12
  Speaker 3: work to find people who are problem gamblers and extract
• 16:16
  Speaker 3: the last bits of money from them and make it
• 16:18
  Speaker 3: harder for them to sort of separate themselves from their
• 16:20
  Speaker 3: gambling habit, Would you feel proud of yourself? Like, is
• 16:24
  Speaker 3: that something that your mom would say, gee, I'm really
• 16:26
  Speaker 3: glad you did that, son?
• 16:29
  Speaker 2: I sort of hope not. But I don't think it's
• 16:31
  Speaker 2: not just a.
• 16:31
  Speaker 3: DraftKings story, although the issues of gambling, you know, sort
• 16:35
  Speaker 3: of online sports gambling, what it's done or something we
• 16:37
  Speaker 3: really should address. It's that we have created a version
• 16:41
  Speaker 3: of too much of American capitalism that's sort of oriented
• 16:44
  Speaker 3: around predation, around making life worse for your customers and
• 16:48
  Speaker 3: your counterparties, gathering money for your sort of returns for
• 16:52
  Speaker 3: yourself instead of creating wealth, which is what capitalism is
• 16:54
  Speaker 3: supposed to be about.
• 16:56
  Speaker 7: In my opinion, what the most striking part of your
• 16:58
  Speaker 7: piece was is basically the dichotomy between this aspirational capitalism
• 17:05
  Speaker 7: and this predatory capitalism. And you had mentioned in centuries past,
• 17:09
  Speaker 7: we really were better at reining that in. What are
• 17:13
  Speaker 7: ways in which you see that possibly happening again in
• 17:17
  Speaker 7: this age of globalization, in this age of having so
• 17:21
  Speaker 7: much information about others at your disposal very quickly?
• 17:25
  Speaker 3: Yeah, I think there are two thrusts that we could take.
• 17:28
  Speaker 3: One is sort of issue by issue, area by area, right?
• 17:31
  Speaker 3: We just say that, look, It's not, you know, I
• 17:34
  Speaker 3: would just say broadly, allowing online sports gambling nationwide, that
• 17:37
  Speaker 3: was a Supreme Court decision. It was a catastrophically bad one.
• 17:39
  Speaker 2: It should be reversed.
• 17:40
  Speaker 3: But there are other, like, you know, you see private
• 17:42
  Speaker 3: equity companies that are monopolized in construction of fire trucks
• 17:45
  Speaker 3: and then jacking up the prices. There's just no excuse
• 17:47
  Speaker 3: for that kind of thing. Antitrust was designed for that.
• 17:50
  Speaker 3: We need to do that much more aggressively.
• 17:52
  Speaker 2: But the broader one is the idea that.
• 17:54
  Speaker 3: We need to reorient the American economy around people who
• 17:57
  Speaker 3: make things instead of sort of people whose idea of
• 17:59
  Speaker 3: running a company is how do you squeeze it for numbers?
• 18:01
  Speaker 3: The classic problem here is Boeing. We all watched what
• 18:05
  Speaker 3: happened to Boeing and its slow recovery now. But, like,
• 18:08
  Speaker 3: if you were running an airplane company, you should think
• 18:11
  Speaker 3: that your product is airplanes and not a stock price.
• 18:15
  Speaker 3: And that involves sort of a pervasive attempt to de-financialize
• 18:18
  Speaker 3: the economy and really put it in charge of people
• 18:20
  Speaker 3: who like to make things, as opposed to just people
• 18:24
  Speaker 3: who are playing games with it.
• 18:26
  Speaker 2: But we've trained generations, and one could argue the backbone
• 18:30
  Speaker 2: of American capitalism is to maximize profitability for shareholders, full stop.
• 18:35
  Speaker 2: Are you suggesting something different? So I am, because.
• 18:39
  Speaker 3: It's sort of very important to say this. I do
• 18:41
  Speaker 3: this to my students every year. I'll ask them, do
• 18:44
  Speaker 3: you as a CEO in the United States have a
• 18:46
  Speaker 3: fiduciary responsibility to maximize shareholder returns? And most of them
• 18:49
  Speaker 3: will say yes, and they are wrong. That is a
• 18:52
  Speaker 3: matter of black letter law. It is not something that
• 18:54
  Speaker 3: is hotly debated in the law. You as a CEO
• 18:57
  Speaker 3: have a responsibility to exercise your best business judgment in
• 19:02
  Speaker 3: the interest of shareholders.
• 19:04
  Speaker 2: That's not the same thing.
• 19:06
  Speaker 3: And so, yeah, Paul, I would say very simply, The
• 19:10
  Speaker 3: model we have created that does this, it's not just
• 19:13
  Speaker 3: bad for workers and the environment and stakeholders and society.
• 19:16
  Speaker 2: It's bad for shareholders.
• 19:18
  Speaker 3: Before we had this model of short-term shareholder primacy, shareholder
• 19:22
  Speaker 3: returns were better than they are now.
• 19:25
  Speaker 7: I'm going to ask a deeply philosophical question right now.
• 19:28
  Speaker 7: So how do you untangle the idea of American individual
• 19:33
  Speaker 7: achievement that is obtained through that particular sort of edge
• 19:38
  Speaker 7: that somebody might have? So you had noted that that
• 19:40
  Speaker 7: kind of edge to take advantage of others is what
• 19:45
  Speaker 7: really is launching a lot of this really predatory capitalism.
• 19:48
  Speaker 7: What needs to happen to the American identity, especially as
• 19:51
  Speaker 7: it pertains to business, to not say, I'm going to
• 19:55
  Speaker 7: get my economic advantage at all costs, even if that
• 19:58
  Speaker 7: means harming another person?
• 20:01
  Speaker 3: Yeah, and I think that is an ideological shift and
• 20:04
  Speaker 3: it goes everywhere from schools, but the most important thing
• 20:06
  Speaker 3: is incentives, right? That we need to shift, if you
• 20:10
  Speaker 3: change incentives in such a way that this sort of
• 20:12
  Speaker 3: behavior is not rewarded, the norms will start to shift
• 20:15
  Speaker 3: with it too. And it's not just about incentives, but
• 20:18
  Speaker 3: sort of saying like, if we find out that you
• 20:22
  Speaker 3: as a company are treating gambling the way the opioid,
• 20:26
  Speaker 3: making gambling into the next version of the opioids epidemic
• 20:28
  Speaker 3: in the United States, we should probably intervene before it
• 20:32
  Speaker 3: gets that bad. And if we go after the people
• 20:34
  Speaker 3: who do it strongly enough, that will change incentives. But
• 20:37
  Speaker 3: the broader question, and I think it's like a really
• 20:39
  Speaker 3: powerful one, right, is in the 1950s, Peter Drucker wrote
• 20:43
  Speaker 3: about the fact, he said that if you were a
• 20:45
  Speaker 3: top graduate of a business school, he said you wanted
• 20:48
  Speaker 3: to go to General Motors or Ford, you wanted to
• 20:52
  Speaker 3: go to a place that made things. He said you
• 20:54
  Speaker 3: would be ashamed, ashamed of yourself if you went to
• 20:58
  Speaker 3: a place where you were just allocating capital. And that's
• 21:01
  Speaker 3: a very different model of the world. And it's one
• 21:05
  Speaker 3: that historically the United States has had that you can
• 21:07
  Speaker 3: sort of see ways in which you go back where
• 21:09
  Speaker 3: this idea that we really care about making great things,
• 21:12
  Speaker 3: not just short-term returns.
• 21:14
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