Latest / Bloomberg Intelligence / Simon Nynens on How to Fail Less

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Simon Nynens on How to Fail Less · 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 A. Bramowitz. Each day
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Speaker 1: we bring you the most important, noteworthy, and useful interviews
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Speaker 1: for you and your money, whether you're at the grocery
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0:32
Speaker 1: We are broadcasting from with Ham's fifth Annual Global Summit
0:35
Speaker 1: in New York City and the Keno It speaker how
0:39
Speaker 1: to Focus That really hit home with me how to
0:41
Speaker 1: fail less? He joins us, Now tell me how I
0:43
Speaker 1: can fail less? Simon at nineans is chief executive officer
0:47
Speaker 1: and chairman of Wayside Technology Group in Eatontown, New Jersey.
0:51
Speaker 1: He joins us here at the Renaissance Hotel Street in
0:54
Speaker 1: New York City. Simon, how can I fail us? Pleasure
0:58
Speaker 1: to be here? How we feel less? Preferably by failing
1:01
Speaker 1: a lot early on in life? And you fail a lot,
1:03
Speaker 1: but when it doesn't matter, when it doesn't matter, so
1:06
Speaker 1: you should practice a lot, fail a lot and get
1:08
Speaker 1: better every single time. Usually when you have a first activity,
1:11
Speaker 1: you're not that good at it. So tell me the
1:13
Speaker 1: time that you failed early, that you think is a
1:16
Speaker 1: sort of a lynch pin for your success. Well, we
1:19
Speaker 1: looked at it. I came to this acquisition. I worked
1:21
Speaker 1: for an auditing firm and they hired me Ernstain. I
1:25
Speaker 1: used to work for Instain Young and they bought this
1:27
Speaker 1: company and said, you don't have a treasury company, you
1:29
Speaker 1: don't have a holding company. UM, so why would you
1:33
Speaker 1: you know you need that? And they said, well, if
1:34
Speaker 1: you know everything, why did you come do it? For?
1:36
Speaker 1: As I was from Amsterdam, the Americans came in and
1:38
Speaker 1: I said, sure, I'll come join you, and they sent
1:40
Speaker 1: me to Paris and the numbers looked really good. But
1:43
Speaker 1: when I joined them in Paris that it was apparent
1:46
Speaker 1: that it was a big mess. So there you go. Failed.
1:49
Speaker 1: Didn't do my homework before I joined UM, but we did,
1:53
Speaker 1: and I went with a lot of youthful enthusiasm and
1:56
Speaker 1: tried to fix it and did that. And then they
1:58
Speaker 1: got me to the US here and it became apparent
2:01
Speaker 1: when I came here that we really have to sell
2:03
Speaker 1: the European operations. So I went back to try to
2:05
Speaker 1: sell the European operations. UM failed a lot there too.
2:09
Speaker 1: You gets a lot of frogs and then finally you
2:11
Speaker 1: get to do that success. There's a difference between failing
2:14
Speaker 1: and taking risk. Though it sounds like he took risks
2:16
Speaker 1: and perhaps you know, went into it without doing as
2:20
Speaker 1: much homework, but can you. I mean, it seems like
2:24
Speaker 1: it is part of the issue that to be a
2:26
Speaker 1: good leader, especially early on, you have to take risks
2:29
Speaker 1: and you have to try to do the impossible. Is
2:32
Speaker 1: that what you're really going after here? Yeah, it's all
2:34
Speaker 1: calculated risks, right, But there are three ways to lead.
2:37
Speaker 1: One is with a fist. Right when we were living
2:39
Speaker 1: in the cave and you didn't do what I said,
2:41
Speaker 1: I smack you. You gotta do it like it's parenting, right,
2:43
Speaker 1: you you and my child do what I say. And
2:45
Speaker 1: then there's the third. The second one is um money,
2:49
Speaker 1: I pay you money. You're management tensill over think people
2:53
Speaker 1: are corn operated machines. And then the third one is
2:56
Speaker 1: really motivation. What really makes you take Why are you
2:59
Speaker 1: choosing a professional? Really drives you in your life? And
3:02
Speaker 1: I've noticed that as soon as you focus on the
3:04
Speaker 1: third one, yes, you can fail their calculate risks, but
3:07
Speaker 1: you love what you do and you do for the
3:09
Speaker 1: right reason. So, um, that's basically what I want to
3:12
Speaker 1: talk about. How do you implement that in your business
3:14
Speaker 1: and wayside? So in our company, I grew up under fear.
3:19
Speaker 1: And well, it's funny when I do these talks and
3:21
Speaker 1: I asked people, do you have a bad leader, The
3:23
Speaker 1: first thing that comes to mind is always that one
3:25
Speaker 1: bad leader who stood out, and usually it's the violence person.
3:27
Speaker 1: And it's not just physical violence, it's also psychological warfare.
3:31
Speaker 1: Right when you walk into that office, you've got to
3:33
Speaker 1: come all guarded. You're like, oh my god, I'm gonna
3:36
Speaker 1: go in, I'm gonna get yelled at. I hated it.
3:39
Speaker 1: I hated it, this public humiliation when you did something
3:42
Speaker 1: wrong and that leader came in and it's your fault
3:44
Speaker 1: and look showing off. I call it PEAKR behavior, like
3:48
Speaker 1: you know, you're my victim and I show the rest
3:50
Speaker 1: of how strong I am. Um. So I hated that,
3:52
Speaker 1: and I said, there's only there's only two ways, um,
3:56
Speaker 1: you can lead. It is by motivation or by fear.
3:58
Speaker 1: So I chose motivation. And so in our office, I
4:01
Speaker 1: asked people what really drives you? And they said, it
4:03
Speaker 1: would be great if we can work from home normally
4:05
Speaker 1: people work only from home. We've done senior positions. I
4:08
Speaker 1: turned that around and I said, everybody can work from home.
4:10
Speaker 1: We started with one day, we're now up to three days.
4:13
Speaker 1: You can come in if you want to for the
4:15
Speaker 1: camaraderie and and and talk. And our office are beautiful.
4:18
Speaker 1: Um people like in silence, people like to be loud.
4:21
Speaker 1: We had them next to each other. Didn't work out well.
4:24
Speaker 1: So now we have half her office. Nobody has a
4:26
Speaker 1: desk anymore. I don't have a desk. Half two people
4:28
Speaker 1: can work in outside. Half two people work in what
4:30
Speaker 1: we call the cockpit. It's a quiet zone and you
4:33
Speaker 1: don't talk. People like to work at cubicles. People like
4:36
Speaker 1: to work in private offices. People like to work in
4:38
Speaker 1: a collaboration room. So build all of it. Don't force
4:41
Speaker 1: people in cubicles, but also don't force him in this
4:44
Speaker 1: open room or in private offices. Do what they want.
4:48
Speaker 1: And some people like to work in the Starbucks cafe setting,
4:51
Speaker 1: so we build a We build a cafe Starbucks kind
4:54
Speaker 1: of like we have a outdoor deck. You can work.
4:56
Speaker 1: But the point of the matter is what really matters
4:59
Speaker 1: interviews is that we sell software. It doesn't matter that
5:05
Speaker 1: you know, I had a manager coming in. She came
5:07
Speaker 1: in late today and it was horrible. So I made
5:09
Speaker 1: her state in our extra so what do we in kindergarten? Is?
5:12
Speaker 1: This is this high school? What are you doing? Well?
5:15
Speaker 1: She came in late, so I said, why don't we
5:16
Speaker 1: have a conversation with her? You know, underpinning all of
5:19
Speaker 1: this is this feeling that it isn't that easy to
5:23
Speaker 1: recruit and retain quality workers right now? Have you found
5:27
Speaker 1: have you found that has it been difficult for you?
5:29
Speaker 1: Not with the retention necessarily because it sounds like people
5:31
Speaker 1: are very happy with this, but as far as when
5:33
Speaker 1: you go out and look to replace somebody, is it
5:35
Speaker 1: difficult for you? Yeah? I mean we're in Eaton Town,
5:38
Speaker 1: New Jersey, right, We're not in New York. Uh, So
5:40
Speaker 1: what do we do out there? You know, you really
5:42
Speaker 1: create a family atmosphere. People want to work with us.
5:44
Speaker 1: Our average tenure is much longer than our competition, and
5:48
Speaker 1: I believe in that. I believe paying a fair wage
5:51
Speaker 1: and really involving people. But more than that, we have
5:53
Speaker 1: a banner above the door that says did today really matter?
5:57
Speaker 1: And I actively when in the beginning, when I took
5:59
Speaker 1: over and worked my way up and two thousand and
6:01
Speaker 1: six I started as European controller, then became worldwide controller
6:04
Speaker 1: and a CFO and executive vice president. And when I
6:08
Speaker 1: became CEO, the first thing I told people is like,
6:11
Speaker 1: if you're unhappy, you got to come to me. And
6:12
Speaker 1: they said, yeah, here's the European guy that that's going
6:16
Speaker 1: to be helping me finding a new job. If I'm
6:18
Speaker 1: happy in my job, I said absolutely well, and but
6:20
Speaker 1: don't tell your manager. If you feel uncomfortable about it,
6:22
Speaker 1: come to me. Now, why would I do that? I
6:25
Speaker 1: did that because unhappy people effect on average like eight
6:29
Speaker 1: people around him. And we all know that you all
6:31
Speaker 1: have that unhappy person at work, and it's like, oh,
6:33
Speaker 1: we had a great speech, and then after us, oh,
6:35
Speaker 1: it's all bus with that is bad. I don't believe them.
6:39
Speaker 1: We're gonna go. It's terrible. Um. So I helped a
6:44
Speaker 1: couple of people find that other job. And you know
6:46
Speaker 1: what they did. They went to that other company. They
6:48
Speaker 1: were happy and they said this guy was crazy, but
6:51
Speaker 1: buy your software there. That's a win win. Simon Ninans,
6:54
Speaker 1: thank you so much for joining us. Simon Ninans is
6:56
Speaker 1: chief executive officer and chairman of the Wayside Technology Group
7:00
Speaker 1: based in Eaton Town, New Jersey, with treadmills for the desks.
7:04
Speaker 1: This is Bloomberg. Right now, we are going to take
7:18
Speaker 1: a look at the October jobs report. Ward McCarthy joins
7:22
Speaker 1: US now. Ward McCarthy is the chief financial economist for Jeffreyes.
7:27
Speaker 1: The numbers came out, they were slightly disappointing, and US
7:31
Speaker 1: added two hundred and sixty one jobs, lesson people expected.
7:34
Speaker 1: But really it's the wages that they didn't grow at all,
7:37
Speaker 1: and they had been expected to grow. Word, what was
7:41
Speaker 1: your first take of this report? Well, the the labor
7:45
Speaker 1: blanket data continues to reflect some of the consequences of
7:49
Speaker 1: the hurricane. Last months, the payerial numbers were really weak
7:54
Speaker 1: because of the hurricane, while the household survey was strong
7:57
Speaker 1: and this month that clip plopped. And as you pointed out,
8:01
Speaker 1: the weakest aspect really of all of this data was
8:05
Speaker 1: the fact that average hourly earnings were unchanged and they've
8:09
Speaker 1: been just very volatile in recent months. And to the
8:12
Speaker 1: prior three months, average hourly earnings had risen five tenths
8:16
Speaker 1: of one per cent. And I think that in September
8:19
Speaker 1: and October some compositional issues played a big factor. For example,
8:24
Speaker 1: the low paying food service and drinking establishment pay rolls
8:28
Speaker 1: fell ninety eight thousand in September and they also popped
8:31
Speaker 1: eighty nine thousand in October. So uh, the decline in
8:35
Speaker 1: September boosted wage measures, while their rise this month UH
8:39
Speaker 1: suppressed wage measures. So I think we really have to
8:42
Speaker 1: see the November data and maybe even wait to see
8:45
Speaker 1: the Deceamberge data before we can really get our hands around,
8:49
Speaker 1: uh whether or not the labor market has changed. So uh,
8:54
Speaker 1: you know, I know we have a sense of what
8:56
Speaker 1: the Janet yell and Photo Reserve would look would look
8:59
Speaker 1: at in these jobs supports. What's Jerome Powell going to
9:02
Speaker 1: be looking at next year, because we granted the data
9:05
Speaker 1: right now is pretty muddy, is still kind of being
9:07
Speaker 1: influenced by the hurricanes. But next year, what's he going
9:11
Speaker 1: to be looking for in order to determine whether the
9:14
Speaker 1: high rates three times two times or not at all? Oh,
9:17
Speaker 1: I think he'll be looking at the same thing that
9:19
Speaker 1: Jenny Ellen has been looking at and that other members
9:21
Speaker 1: of the f O m C have been focused on,
9:24
Speaker 1: and that is, you know, what is really happening with
9:27
Speaker 1: the underlying inflation measures in the US. Uh, inflation has been,
9:33
Speaker 1: you know, a gone through a series of stops and
9:35
Speaker 1: starts over the course of this cycle. And this year,
9:38
Speaker 1: of course, inflation measures have been somewhat on the soft side.
9:42
Speaker 1: So I don't think that's going to change with with
9:46
Speaker 1: Powell being at the HELM. I think that uh, you know,
9:50
Speaker 1: they're the Fed is pretty happy with what's been happening
9:53
Speaker 1: in the labor market. Uh, They're still pretty confused and
9:56
Speaker 1: not completely comfortable with what's happening on the inflation side.
10:01
Speaker 1: I'm struck by the tax reform bill that we got yesterday.
10:04
Speaker 1: A lot of people were waiting for this to sort
10:06
Speaker 1: of ignite growth, some sort of fiscal stimulus. We haven't
10:09
Speaker 1: hearned anything about infrastructure spending. But yesterday the GOP released
10:14
Speaker 1: their tax bill and yields fell upon prices rose, Expectations
10:20
Speaker 1: for growth seemed to diminish if you look at the
10:22
Speaker 1: narrowing yield curve. Why is that? Well? I think this
10:27
Speaker 1: was another one of those by the rumors sell the
10:29
Speaker 1: news types of stories. Uh, And quite frankly, with a
10:33
Speaker 1: lot of the information that came out on tax reform
10:37
Speaker 1: yesterday was a little bit um, I think conflicted and
10:42
Speaker 1: and confusing. On the corporate side, I think they pretty
10:46
Speaker 1: much nailed it, uh. And the corporate tax reform is
10:49
Speaker 1: much needed and will help make the US economy UH
10:53
Speaker 1: much more competitive in the globalized world. So that was
10:57
Speaker 1: for the most proud, I think pretty good news on
10:59
Speaker 1: the end of visual tax size and the changes UM
11:04
Speaker 1: make it really difficult to assess, UM because the consequences
11:09
Speaker 1: are very different UH for different types of people. UH.
11:13
Speaker 1: If indeed, and this appears to be the case, that
11:17
Speaker 1: there is going to be a meaningful tax cut for
11:20
Speaker 1: uh most middle class individuals, then that should help growth
11:24
Speaker 1: because it gives UH the people who are most likely
11:27
Speaker 1: to spend it more income to spend. But it also
11:31
Speaker 1: causes some problems in areas where already have problems, specifically
11:36
Speaker 1: with the handling of mortgage deductions and also state local taxes.
11:41
Speaker 1: Because of demographics, some of the higher UM priced existing
11:47
Speaker 1: homes having a difficult time selling and um uh these
11:53
Speaker 1: and and that's especially true in some of the high
11:56
Speaker 1: tax states, and yesterday's tax reform is really only going
12:00
Speaker 1: to exacerbate that problem. It also will increase the federal
12:04
Speaker 1: deficit by one and a half trillion dollars. At least
12:06
Speaker 1: that's the estimate, not including any extra income from faster growth.
12:11
Speaker 1: I do wonder though, what that means for the U. S.
12:14
Speaker 1: Treasury Department. Does that mean that they're going to have
12:16
Speaker 1: to start issuing longer dated bonds in order to finance themselves. Well,
12:21
Speaker 1: I think the answer to that question is yes, um,
12:25
Speaker 1: both because, uh, you know, if this tax reform goes through,
12:29
Speaker 1: the size of the deficits it's going to increase, as
12:32
Speaker 1: you pointed out, by as much as one and a
12:34
Speaker 1: half trillion. But in addition, the Fed has started to
12:37
Speaker 1: shrink its balance sheet and the Treasury securities that it
12:41
Speaker 1: rolls off its balance sheet um does have to be
12:45
Speaker 1: financed by the Treasury. So, uh, it may it's not
12:48
Speaker 1: going to be a seventeen event, but yes, in eighteen
12:52
Speaker 1: and beyond, we are going to see the Treasury issue
12:55
Speaker 1: more longer term debt simply because the government seems intent
12:59
Speaker 1: to and digging itself into a deeper fiscal hole. Well,
13:03
Speaker 1: what's your sense about what that will do to yields?
13:05
Speaker 1: I mean, I would guess that as the deficit deepens
13:07
Speaker 1: and the US sells moren't debt, that would mean that
13:10
Speaker 1: borrowing costs go up. I mean, that's the logic, especially
13:13
Speaker 1: if the Federal Service also unwinding its balance sheet. How
13:16
Speaker 1: how could that not play out that way? Well, I
13:21
Speaker 1: tend to agree with you, and I think that is
13:23
Speaker 1: how we'll play out. But it's it's a very slow
13:26
Speaker 1: moving process. With the FED beginning to shrink its balance sheet.
13:30
Speaker 1: It's the beginning of the end of the control that
13:34
Speaker 1: central bank balance sheets have over the bond market. And
13:38
Speaker 1: that's the normalization process. And as the normalization process persists, uh,
13:43
Speaker 1: that should cause rates to you know, um, move somewhat
13:48
Speaker 1: higher over a period of time. Uh. And that's both
13:52
Speaker 1: from the balance sheet and the FED and all the
13:55
Speaker 1: central banks raising short term rates as well. And all
13:58
Speaker 1: of this is a natural process of the US economy
14:02
Speaker 1: showing strength and resilience, um, you know, many years now
14:07
Speaker 1: since our after the financial crisis. So I'm just curious
14:12
Speaker 1: because as I listened to it all makes sense, and
14:14
Speaker 1: I'm not in an agreement. I'm thinking, all right, throw
14:16
Speaker 1: on wanting their balance sheets. The US is going deeper
14:18
Speaker 1: into deficit, it should lead to higher yields. And yet
14:21
Speaker 1: the logic that seemed to guide markets in the past
14:24
Speaker 1: seems to be missing these days. The FETE is actually
14:27
Speaker 1: raising rates. Um, do you think this time is different? Well,
14:32
Speaker 1: it's I'm not sure what you mean by this time different. Well,
14:36
Speaker 1: the yields will actually rise. Well yeah, I think that. Well,
14:42
Speaker 1: this time, I wouldn't say is different. I think that
14:44
Speaker 1: what's happening is we're returning to a normal cycle. Has
14:48
Speaker 1: been the last nine years that have been different, and
14:51
Speaker 1: they've been different because of the youth of central bank
14:55
Speaker 1: balance sheets to influence the financial markets. And as this
15:00
Speaker 1: a central bank balancing influence over the financial markets, uh
15:05
Speaker 1: is a gradually eroded, then the financial markets will return
15:10
Speaker 1: towards normal and that will give us more normal cyclical
15:14
Speaker 1: behavior both our interest rates in the stock market. How
15:17
Speaker 1: high can tenure yields go before they send the US
15:22
Speaker 1: economy and to another recession? Well, I think that, Uh,
15:28
Speaker 1: you need to see interest rates substantially higher from where
15:31
Speaker 1: they are now to cause the US economy to go
15:34
Speaker 1: into recession. And I think short term rates would have
15:38
Speaker 1: to be as much as three hundred basis points higher
15:41
Speaker 1: than this. The tenure yield probably somewhere around two hundred
15:46
Speaker 1: basis points higher. So, in other words, of tenure yields
15:48
Speaker 1: were about a little over four percent. That would be
15:51
Speaker 1: enough to send the US into a session. Well, not necessarily,
15:55
Speaker 1: but I would that's the yield levels of of that magnitude, UM,
16:00
Speaker 1: I think would be uh, you know, cause yellow flags. Anyway,
16:17
Speaker 1: here to talk more about the tax plan and some
16:19
Speaker 1: of what Gary Khne was talking about as Dave Springsteen,
16:22
Speaker 1: partner and head of the tax department at with Them,
16:25
Speaker 1: were also joined by Tony Anita, the tax partner for
16:28
Speaker 1: with Them in Colorado. Dave, I want to start with you.
16:31
Speaker 1: One thing that Gary Cohen said was that people do
16:35
Speaker 1: not buy a house based on the deduction that they
16:38
Speaker 1: get from their taxes with respect to their interest payments.
16:42
Speaker 1: Is that true? I think it's a motivating factor that
16:44
Speaker 1: people buy homes invest a little higher than their means
16:47
Speaker 1: because they get an interest tax deduction, they get a
16:51
Speaker 1: real estate tax deduction. So, you know, I take a
16:53
Speaker 1: different view. Maybe there's a level of taxpayers that don't
16:58
Speaker 1: need the interest deduction, but more stuffus do. So Tony,
17:01
Speaker 1: just have you been I'm sure, spending pretty much every
17:04
Speaker 1: waking hour since yesterday morning trying to pass through this
17:07
Speaker 1: report the plan? Um, do you think that it will
17:11
Speaker 1: materially change the outlook for smaller businesses for the positive. Well,
17:17
Speaker 1: I think the answer to that really hinges on how
17:20
Speaker 1: you to find small business You know, it's funny when
17:23
Speaker 1: this proposal first came out, you know, I I get
17:27
Speaker 1: inundated with emails from lobbying groups just because I write
17:29
Speaker 1: about tax law for Forbes. And the first two emails
17:33
Speaker 1: that came into my box, the first one said, uh,
17:36
Speaker 1: Trump tax proposal doesn't House tax proposal does nothing for
17:39
Speaker 1: small businesses, and the second one says, House tax proposal
17:43
Speaker 1: great for small businesses. Depends on how you find small
17:45
Speaker 1: businesses because the idea of a rate for flow throughs
17:49
Speaker 1: is all well and good, but the reality is people
17:53
Speaker 1: under current law up to two fifty dollars of income
17:56
Speaker 1: are already paying tax at rate. So who's really benefit
18:00
Speaker 1: tends to be on the higher end of the income scale.
18:02
Speaker 1: So it tends to be the people that are paying
18:04
Speaker 1: thirty nine point six under current law that suddenly get
18:06
Speaker 1: a drop in the rate. And that's where the real
18:09
Speaker 1: windfall is. And so small businesses, that depends how you know,
18:14
Speaker 1: if you're making three a year from your business, is
18:17
Speaker 1: really necessarily a small business for some it maybe for
18:19
Speaker 1: others it may not. Well, David, who is getting the windfall?
18:22
Speaker 1: Because I've also been reading reports that the big conglomerates,
18:26
Speaker 1: the international companies like Ge and Apple, will as we've
18:29
Speaker 1: been hearing, basically been be taxed more on the cash
18:32
Speaker 1: that they hold and will be facing other levees that
18:35
Speaker 1: they currently aren't that they could actually end up with
18:37
Speaker 1: a higher tax rate after this is implemented than they
18:40
Speaker 1: face now. Yeah, I guess the scorecard on winners and
18:43
Speaker 1: losers just yet to come. The guys down scoring the
18:46
Speaker 1: tax lell change. They only have limited amount of information
18:49
Speaker 1: to deal with this. But at the end of the day,
18:52
Speaker 1: corporate rates are going down, but we don't know how
18:56
Speaker 1: much corporate taxes. Well, but I'll let me push back
18:58
Speaker 1: on that a little bit because now people we talk
19:01
Speaker 1: about a very high tax rate, No big company pays
19:04
Speaker 1: that rate exactly that That was my point absolutely, so
19:08
Speaker 1: we had had a discussion about that before that. Even
19:10
Speaker 1: though there's a thirty corporate rate, how many companies are
19:13
Speaker 1: actually paying at that rate with all the incentives and
19:15
Speaker 1: the off shoring. So we'll see, Tony. One thing that
19:19
Speaker 1: has loomed large certainly in the credit world is that
19:24
Speaker 1: for highly indebted companies, they will not be able to
19:28
Speaker 1: deduct all of their interest. This could potentially, frankly, I
19:32
Speaker 1: mean life or death for some of the smaller, more
19:35
Speaker 1: levered companies. I mean you think about the Toys r
19:36
Speaker 1: US for example, they would have probably gone into bankruptcy
19:39
Speaker 1: earlier if they couldn't deduct as much of their interest
19:41
Speaker 1: as they could. What are you hearing about that? Well,
19:44
Speaker 1: the proposal we saw yesterday builds in a safeguard, so
19:47
Speaker 1: any company with average re seats in less than twenty
19:50
Speaker 1: five million is not going to be subject to the
19:52
Speaker 1: interest limitation. But yeah, any anybody beyond that. What they're
19:55
Speaker 1: trying to do, um, it's really kind of threefold. I mean,
19:58
Speaker 1: number one, that need a way to pay for these
20:01
Speaker 1: corporate tax cuts, right, so you raise some additional revenue
20:04
Speaker 1: by the denying deduction for interest expense. Uh. Number Two,
20:08
Speaker 1: you're trying to shift the dependency on debt away and
20:12
Speaker 1: have more infusion of capital rather than loans into corporations.
20:17
Speaker 1: And then three you're simplifying the tax law a bit
20:20
Speaker 1: because you no longer have incentive to set up a
20:23
Speaker 1: foreign affiliate loan money to the US and then strip
20:27
Speaker 1: earnings out by paying interest to a tax in different countries.
20:29
Speaker 1: And so they're going to move forward with this, at
20:32
Speaker 1: least that's what they're saying at this point. It was
20:33
Speaker 1: certainly in the proposal yesterday, and again it's it's a
20:36
Speaker 1: key part of paying for these huge corporate tax rate reductions,
20:40
Speaker 1: because the rate reduction a loan from thirty is at
20:45
Speaker 1: one point eight trillion dollar tax cut over ten years,
20:47
Speaker 1: and the maximum size of all of these cuts, business, individual,
20:51
Speaker 1: foreign what have you can only top out at one
20:54
Speaker 1: point five trillions. So you've got to come up with
20:56
Speaker 1: pay for us. Dave, our company is going to be
20:58
Speaker 1: filing their tax on postcards. I doubt it's what about individuals?
21:04
Speaker 1: There may be a few that will go the postcard route,
21:07
Speaker 1: but right now we have a lot of those anyway.
21:09
Speaker 1: Really okay, Well, I'm just wondering from your perspective, this
21:13
Speaker 1: bill gets dropped. It's November. They're looking to pass this
21:16
Speaker 1: by the end of the year. They want to implement
21:18
Speaker 1: it as quickly as possible because I need delay. Uh,
21:20
Speaker 1: sort of pushes back any potential growth that could come
21:23
Speaker 1: from this. How do you guys deal with that? Day
21:26
Speaker 1: We're gonna be spending a lot of hours dissecting the rules,
21:28
Speaker 1: watching the changes. At the end of the day, we
21:31
Speaker 1: also need to be aware of the regulations that will
21:33
Speaker 1: follow these rules, because it may be beneficial on paper
21:37
Speaker 1: in the basic code, but once the legs are done,
21:40
Speaker 1: it could look completely different. So being aware and that
21:43
Speaker 1: makes those business decisions with our clients is gonna be
21:45
Speaker 1: very important, Tony. And just from your experience, how much
21:49
Speaker 1: can we read into what we're seeing now? I mean,
21:52
Speaker 1: whenever I speak to somebody that they're saying, you know,
21:53
Speaker 1: this is an opening salvo. What in this bill sort
21:57
Speaker 1: of gets your attention as being a non negotia, a
22:00
Speaker 1: bull point that will not change. Well, you know, if
22:04
Speaker 1: you believe President Trump, you know that corporate rate is
22:06
Speaker 1: not going to budge, you know, one percent higher than UM.
22:11
Speaker 1: I think that's a part of his kind of the
22:14
Speaker 1: pillar of his presidency, which is just convinced corporations to
22:18
Speaker 1: invest in Michigan instead of Mexico. And so I don't
22:20
Speaker 1: think you're going to see that change. I think what's
22:22
Speaker 1: really gonna be at the center of any negotiations are
22:25
Speaker 1: the pay force. You know, I think the rates are
22:28
Speaker 1: pretty much set where they're going to be. It's just
22:30
Speaker 1: now everyone's going to hash out as you said, you know,
22:33
Speaker 1: um special interest groups coming up and say no, we
22:35
Speaker 1: need our mortgage interest deduction, we need our full real
22:38
Speaker 1: estate tax deduction, we need deductions for state and local
22:40
Speaker 1: income taxes, and then the banks are gonna not be
22:43
Speaker 1: pleased at business is losing interests, expense deductions, and that's
22:46
Speaker 1: where the battle is going to be waged. And the
22:48
Speaker 1: pay force when you do tax reform, cutting rates is
22:50
Speaker 1: the easy part, right, it's paying for those rate cuts
22:53
Speaker 1: that proved problematic. And I don't think this scenario is
22:55
Speaker 1: going to be any different. Use assiliation of votes forces,
22:59
Speaker 1: tax cuts just coming. Have you guys just been getting
23:01
Speaker 1: a flood of calls, look coming in, look coming in frantic.
23:05
Speaker 1: Oh my god, this changes my entire business. Thank you
23:08
Speaker 1: so much for joining us, as well as for hosting
23:11
Speaker 1: as David Springsteen partner ahead of the Tax Department at
23:13
Speaker 1: with him, as well as Tony and Nitty tax partner
23:16
Speaker 1: for with them in Colorado. And they both are here
23:19
Speaker 1: at wham's fifth Annual Global Summit in New York City.
23:23
Speaker 1: They probably had planned to talk about other things, but
23:25
Speaker 1: today it is all tax plan, all the time. Thanks
23:31
Speaker 1: for listening to the Bloomberg P and L podcast. You
23:34
Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
23:38
Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
23:42
Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
23:45
Speaker 1: Abramo wits one. Before the podcast, you can always catch
23:48
Speaker 1: us worldwide on Bloomberg Radio