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Wealthy Endowments Should Subsidize Education: Ken Langone · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
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  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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• 0:33
  Speaker 1: next guest, Doug ditches and collected used cardboard when he
• 0:37
  Speaker 1: was a teenager. Today he's a billionaire and business icon.
• 0:41
  Speaker 1: I'm talking about Ken Langone, co founder of home Depot
• 0:44
  Speaker 1: and former director of the New York Stock Exchange UH
• 0:47
  Speaker 1: and founder and chairman of Infamed Associates. Keim. Thank you
• 0:51
  Speaker 1: so much for being with us. You have a new
• 0:54
  Speaker 1: book out. It has an unambiguous title, I Love Capitalism,
• 0:57
  Speaker 1: exclamation point and American Story. What made you write this book? Now?
• 1:04
  Speaker 1: It was very interesting. I've been approached by some people
• 1:07
  Speaker 1: in the publishing industry about three or four years ago.
• 1:11
  Speaker 1: I had a book to write, and I thanked him
• 1:14
  Speaker 1: and I said, really, not my thing. And then the
• 1:17
  Speaker 1: presidential election showed up in two thousand and sixteen, and
• 1:22
  Speaker 1: I happened to be watching Bernie Sanders, and I was
• 1:26
  Speaker 1: shocked at the number of young people that were passionately
• 1:30
  Speaker 1: and enthusiastically following his message. And it's scared the hell
• 1:35
  Speaker 1: out of me, because if people that young give up
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  Speaker 1: on what brought us to the party and what made
• 1:40
  Speaker 1: America great, we really have trouble. Uh. Capitalism to me
• 1:46
  Speaker 1: is as magnifficent, very unique engine that only America has
• 1:50
  Speaker 1: in where we have it and the results that are
• 1:53
  Speaker 1: all around us, you can look and see better lives.
• 1:57
  Speaker 1: A poor kid like me, a kid that mediocre student.
• 2:01
  Speaker 1: Uh mother and father didn't go past the eighth grade,
• 2:06
  Speaker 1: lived from paycheck to paycheck. Uh not easy, but I
• 2:12
  Speaker 1: never knew I didn't have anything because I always had
• 2:14
  Speaker 1: a warm house and uh plenty of good food. But
• 2:19
  Speaker 1: my parents had to work like hell. And here I
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  Speaker 1: am today, and by the way, whatever success I have,
• 2:25
  Speaker 1: and I'll leave it for others to judge that it
• 2:28
  Speaker 1: only happened because I had so many people, so many
• 2:31
  Speaker 1: many people helped me along the way. I'm not self made.
• 2:34
  Speaker 1: I'm anything but self made. But this is a magnificent country.
• 2:38
  Speaker 1: And I just thought it was up to me to
• 2:40
  Speaker 1: take a stand and say, hey, wait a minute. Let's
• 2:43
  Speaker 1: not kill the baby with the bath water. Let's that's
• 2:45
  Speaker 1: where the baby out with the bath water, I should say.
• 2:48
  Speaker 1: So that's what made me write the book. Ken lang Gone,
• 2:52
  Speaker 1: Just so people understand, you persuaded Ross Perro to hire
• 2:57
  Speaker 1: you to lead his initial public offering for electronic Data
• 3:00
  Speaker 1: Systems co founder of home Depot. I wonder if you
• 3:05
  Speaker 1: could just speak a little bit about that June day
• 3:09
  Speaker 1: in ninety seven when you graduated from Bucknell. And there's
• 3:14
  Speaker 1: a wonderful picture in the book of you and your parents,
• 3:17
  Speaker 1: John and Angie Langne, and how you got into Bucknell
• 3:23
  Speaker 1: and how you managed to graduate. Well, that's interesting. I
• 3:27
  Speaker 1: got into buck Now almost by accident. I had gone up.
• 3:32
  Speaker 1: I was a senior in high school. It was nineteen
• 3:34
  Speaker 1: fifty three. It was the spring of the year. The
• 3:36
  Speaker 1: Korean War was still on. I don't know how. Had
• 3:39
  Speaker 1: just been elected. I was going to join the Marine
• 3:40
  Speaker 1: Corps here for high school. My mother wouldn't saw it.
• 3:43
  Speaker 1: I wouldn't be eighteen until September, and my mother wouldn't
• 3:47
  Speaker 1: My brother was already in the military. I only had
• 3:49
  Speaker 1: one brother. He was in the military, and my mother
• 3:50
  Speaker 1: was adamant. She was not going to sign me and
• 3:53
  Speaker 1: if I wanted to wait to lateeen and I wanted
• 3:55
  Speaker 1: to go, she couldn't join me about it. But anyway,
• 3:57
  Speaker 1: I want to Bucknell for a weekend to visit some ends.
• 4:01
  Speaker 1: And it turns out it was we then called house
• 4:03
  Speaker 1: party weekend, and boy, I had a hell of a time.
• 4:05
  Speaker 1: And I thought, my god, if this is what they
• 4:07
  Speaker 1: do in college, and I might want to think about college,
• 4:09
  Speaker 1: and and on. And Eisenhower didn't cooperate because he ended
• 4:14
  Speaker 1: the Korean War, so there was no water go up
• 4:17
  Speaker 1: for and while the weekend I was up at buck
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  Speaker 1: Now the kids I was seeing the but I used
• 4:24
  Speaker 1: to have Saturday classes, and the kids I was here
• 4:27
  Speaker 1: to see told me to go see the gold and
• 4:28
  Speaker 1: the building up as a guy there registrar, he wasn't
• 4:32
  Speaker 1: called at Deana, it's called the Registrar's name was George Faint.
• 4:35
  Speaker 1: And I went over and I saw him. Any what
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  Speaker 1: are you doing you? And I was all My friends
• 4:38
  Speaker 1: said I should come and talk to you. What about
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  Speaker 1: I I don't know, Well, tell me about yourself. I
• 4:42
  Speaker 1: was long, I'm in high school and what are you
• 4:44
  Speaker 1: going to do? I don't know. I'm thinking about going
• 4:46
  Speaker 1: to the Marine Corps. Will I have you applied to college?
• 4:49
  Speaker 1: And I said no, Well you want to go to college?
• 4:52
  Speaker 1: I said, well, I'm not sure. I thought we had.
• 4:54
  Speaker 1: We ended up having a talk for about an hour.
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  Speaker 1: The following week, he sent me a letter and he said,
• 5:00
  Speaker 1: if you want to come to buck now, we'd love
• 5:01
  Speaker 1: to have you. But you're gonna have to work much
• 5:03
  Speaker 1: harder in college. And you did in high school. Well
• 5:06
  Speaker 1: that wasn't hard because I didn't do it. Damn practically
• 5:08
  Speaker 1: nothing in high school. But thank god I had a
• 5:11
  Speaker 1: good mind. I just didn't put it to much use.
• 5:14
  Speaker 1: And so I ended up going to buck Bell and
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  Speaker 1: I almost flunked out stories in the book, And but
• 5:21
  Speaker 1: for a professor who saw something to me, I didn't
• 5:23
  Speaker 1: see it myself. He he got all my other professors
• 5:27
  Speaker 1: together and they worked to pull me out of this
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  Speaker 1: nose dive, and I ended up graduating from Buckdell and
• 5:32
  Speaker 1: Free are years. I actually graduated in February fifty seven,
• 5:38
  Speaker 1: but the ceremony was in June, and I wanted my
• 5:40
  Speaker 1: parents to see the graduation. And that's when I went
• 5:43
  Speaker 1: back for the graduation, and that's where that picture came from.
• 5:47
  Speaker 1: So it was my parents. My parents just couldn't believe
• 5:51
  Speaker 1: they had a son who went to college, graduating college.
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  Speaker 1: It was, it was, it was, it was. It was
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  Speaker 1: just special. That's why I sorry. I'm sorry. I'm bringing
• 6:01
  Speaker 1: up ken Um. You have an amazing story and it's
• 6:06
  Speaker 1: a fabulous book. Everybody should read it. I'm wondering, you know,
• 6:10
  Speaker 1: I want to talk about what you were saying when
• 6:13
  Speaker 1: you said, you know, you saw Britie Sanders and people
• 6:15
  Speaker 1: who are kind of challenging the American capitalistic dream. And
• 6:19
  Speaker 1: I'm wondering whether you think anything has changed at a
• 6:22
  Speaker 1: time when there's one and a half trillion dollars of
• 6:24
  Speaker 1: student debt hanging out there and uh and sort of
• 6:28
  Speaker 1: the gap between wealthy and poor people has widened. Let
• 6:33
  Speaker 1: me show you how much I'm committed to the problem.
• 6:38
  Speaker 1: I'm shaman of the n Y you laying own health.
• 6:42
  Speaker 1: The Dean and CEO Bob Grossman, and I have one
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  Speaker 1: remaining major passion. We want to tell every kid that
• 6:50
  Speaker 1: comes to our medical school they will no longer pay tuition.
• 6:55
  Speaker 1: That will only happen if we can get wealthy people
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  Speaker 1: to con tribute to our endowment. That we can afford
• 7:02
  Speaker 1: to do that now about the trillion dollar, trillion and
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  Speaker 1: a half dollars of debt. Number one, my father insisted.
• 7:14
  Speaker 1: My father was a plumber. But while I was in
• 7:16
  Speaker 1: high school, my father insisted I helped him so that
• 7:20
  Speaker 1: when I got out of college high school. When I
• 7:21
  Speaker 1: got out of high school, I didn't go to college.
• 7:23
  Speaker 1: I'd have a trade a plumber. A lot of kids
• 7:27
  Speaker 1: that are going to college today and and burdening themselves
• 7:31
  Speaker 1: with debt would be better served learning a trade, learning
• 7:35
  Speaker 1: a skill. We have an incredible shortage in this city
• 7:38
  Speaker 1: of plumbers, carpenters, electricians, and they have great They are
• 7:42
  Speaker 1: hundred thousand, hundred thousand dollars a year jobs. These are
• 7:46
  Speaker 1: not low paying jobs. First of all, let's start with
• 7:50
  Speaker 1: the belief that college isn't for everybody, and you don't
• 7:55
  Speaker 1: have to go to college to be successful. Many of
• 7:59
  Speaker 1: the people I know I never saw the inside of
• 8:03
  Speaker 1: a college, and they were enormously successful. So I think
• 8:07
  Speaker 1: we need to take a step back and ask ourselves
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  Speaker 1: the question, is this the magic pill? No, I don't
• 8:12
  Speaker 1: think it is. But if it is, let's figure a
• 8:16
  Speaker 1: way out to make it affordable for kids. And I
• 8:19
  Speaker 1: don't know the answer to that, except I do know
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  Speaker 1: that the more money that you raised philanthropically, like Buck Noll,
• 8:26
  Speaker 1: like New York University, or I was in a finance
• 8:29
  Speaker 1: committee of the university last week. The more endowment we
• 8:32
  Speaker 1: can generate, the more income we have that we can
• 8:35
  Speaker 1: offer more student subsidization of their courts. There's no easy answer,
• 8:42
  Speaker 1: ken Lan gone, would you say that one of the
• 8:45
  Speaker 1: magic pills for your life has been your wife? Elaine?
• 8:49
  Speaker 1: Oh boy and half, big time, big time talk about
• 8:53
  Speaker 1: being us. How big this she is? I'm telling you
• 8:56
  Speaker 1: right now, big time. Every crazy idea I had, she
• 8:59
  Speaker 1: was always here, you know. And when they didn't work,
• 9:01
  Speaker 1: she was there. And when they did work, she was there.
• 9:04
  Speaker 1: You know. She's she's my anchor to Winwood. Absolutely. Hey. Look,
• 9:09
  Speaker 1: and by the way, every marriage has bumps on the road,
• 9:12
  Speaker 1: but that's part of living. Every life has bumps on
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  Speaker 1: the road. And and and where where? How we how
• 9:19
  Speaker 1: do we live? We'd blow to sit down on a
• 9:21
  Speaker 1: Sunday and rainy afternoon like it was this past weekend
• 9:24
  Speaker 1: and watch a movie. Simple stuff. Anybody can do it,
• 9:29
  Speaker 1: um can I just I want to? I want to
• 9:32
  Speaker 1: end on a slightly different note. I know that you
• 9:35
  Speaker 1: interest in Palenteer, a company that Peter Thiel founded, and
• 9:39
  Speaker 1: there's been some discussion that it could potentially be heard
• 9:42
  Speaker 1: by the sort of resumption of her Rand's sanctions. What's
• 9:46
  Speaker 1: your take on this and do you think it will
• 9:47
  Speaker 1: affect the valuations there? I don't, frankly understand. It's a
• 9:52
  Speaker 1: complicated situation where I ran, I know this much about
• 9:55
  Speaker 1: Palenteer and why I'm excited about it. I know that
• 9:58
  Speaker 1: American lives I've been saved by Palenteer. That's a dramatic statement.
• 10:04
  Speaker 1: I know that American lives have been saved by what
• 10:07
  Speaker 1: Palenteer does. I know that terrorist attacks in America have
• 10:13
  Speaker 1: been stopped before they happened because of Palenteer. And I'm
• 10:19
  Speaker 1: I'm a proud investor in Palenteer. If I didn't make
• 10:22
  Speaker 1: any money you a Palenteer, I'd be fine because what
• 10:25
  Speaker 1: they're doing to me is an enormous social good. I
• 10:29
  Speaker 1: am a devoted believer in what Palenteer does. I think
• 10:33
  Speaker 1: it's a social good. We gotta leave it there. Ken
• 10:36
  Speaker 1: lang Gone the co founder of the Home Depot, and
• 10:41
  Speaker 1: his new book is entitled I Love Capitalism, an American Story.
• 10:46
  Speaker 1: Thank you very much, Ken, langgoing. President Trump has said
• 11:04
  Speaker 1: the US is going to withdraw from the Iran Nuclear Agreement,
• 11:08
  Speaker 1: and after that announcement, we're getting worried today that sanctions
• 11:12
  Speaker 1: are being imposed on a governor of the Central Bank
• 11:15
  Speaker 1: of Iran for his role moving quote millions of dollars
• 11:17
  Speaker 1: to Hezbollah on behalf of Islamic Revolutionary God Corpse Force.
• 11:22
  Speaker 1: This according to the Treasury Department. Joining US now to
• 11:24
  Speaker 1: talk a little bit more about what else we can
• 11:26
  Speaker 1: expect in the wake of this decision by President Trump
• 11:30
  Speaker 1: is Daniel Weger, vice president in the Global Financial Crime
• 11:33
  Speaker 1: Compliance division at Lexus Nexus Risk Solutions, a part of
• 11:37
  Speaker 1: the ri l X Group based in New York. Daniel,
• 11:40
  Speaker 1: thank you so much for joining us UM. You have
• 11:43
  Speaker 1: extensive experience working with government agencies with these matters. How
• 11:49
  Speaker 1: much do you think that we're going to see these
• 11:51
  Speaker 1: types of headlines coming out? I mean, are there gonna
• 11:53
  Speaker 1: be quite a few additional sanctions revealed in the next
• 11:56
  Speaker 1: couple of weeks. Thank you for having me this morning.
• 11:59
  Speaker 1: I think it's going to be a constantly changing environment
• 12:02
  Speaker 1: over the next several months, not only as the Treasury
• 12:05
  Speaker 1: um imposes UM numerals and regulations, but also as they
• 12:09
  Speaker 1: reinstate old licenses UM sunsets and existing licenses UM for
• 12:13
  Speaker 1: companies that have engaged with Iran. So it will be
• 12:15
  Speaker 1: a constantly changing environment. Well, Daniel. Over the weekend, I
• 12:19
  Speaker 1: believe the chief executive A Seaman, said that his company
• 12:22
  Speaker 1: could not do any new business in Iran after the
• 12:26
  Speaker 1: United States decided to pull out of this deal. And
• 12:29
  Speaker 1: indeed there are about forty billion dollars worth of aircraft
• 12:33
  Speaker 1: deals for new planes from Boeing as well as air Bus. Uh.
• 12:40
  Speaker 1: Do you believe that that that will remain something in place?
• 12:45
  Speaker 1: So the Treasury is going to have to examine request
• 12:47
  Speaker 1: from companies on an individual basis for licenses and exceptions UM.
• 12:51
  Speaker 1: There's also a wind down period place that runs for
• 12:54
  Speaker 1: the next several months for companies to wind down existing
• 12:56
  Speaker 1: engagements and transactions. But it's certain that to many of
• 13:00
  Speaker 1: those deals and any deals that are inflighting enough finalized
• 13:03
  Speaker 1: could be in jeopardy. Daniel. I'm struck by what you
• 13:05
  Speaker 1: said that the environment is going to be constantly changing.
• 13:09
  Speaker 1: So how do companies make sure that they actually comply
• 13:12
  Speaker 1: with all of the new sanctions. It's an excellent question.
• 13:15
  Speaker 1: The companies like lectus Nectus resolutions focus on providing companies
• 13:19
  Speaker 1: with data from government lists as well as information on
• 13:23
  Speaker 1: companies and entities throughout the globe to help companies identify customers, counterparties,
• 13:30
  Speaker 1: supply chain entities that could bring them risk by way
• 13:34
  Speaker 1: of having transactions themselves with irany entities. Now, if you're
• 13:38
  Speaker 1: a non US company but the product that you sell
• 13:42
  Speaker 1: has ten percent or more of US originating parts, you'd
• 13:48
  Speaker 1: be covered by these new sanctions correct um. It's difficult
• 13:52
  Speaker 1: to make a single rule on that because there are
• 13:55
  Speaker 1: two aspects and two issues of play here. One is
• 13:57
  Speaker 1: the sanctions aspect, which prohibits broadly prohibits transactions services are
• 14:02
  Speaker 1: goods to be transferred to listed and named entities, But
• 14:05
  Speaker 1: there's also issues around the commodities involved so UM components
• 14:09
  Speaker 1: of the goods UM goods that are dual use UM
• 14:12
  Speaker 1: or armaments or could be used in such products are
• 14:15
  Speaker 1: subject to additional restrictions. So for companies UH. Fortunately, most
• 14:19
  Speaker 1: have complex structures in place to abide by these rules.
• 14:22
  Speaker 1: But it is a multi layered set of rules that
• 14:25
  Speaker 1: intertwined with each other and create a great deal of
• 14:27
  Speaker 1: confusion for companies that are operating that space. What are
• 14:31
  Speaker 1: you saying in terms of the oil industry and companies
• 14:35
  Speaker 1: that have longstanding agreements in the region to provide oil
• 14:40
  Speaker 1: field services, what is their situation going to be like? Well,
• 14:44
  Speaker 1: it would be good to delineate between US companies and
• 14:47
  Speaker 1: those that are global UM but which have a presence
• 14:50
  Speaker 1: UM either through trading on US exchanges or the sale
• 14:54
  Speaker 1: of US goods or as you mentioned before, the use
• 14:56
  Speaker 1: of component US goods, because the implications for both will
• 14:59
  Speaker 1: be somewhat differ for US companies UM. This period of
• 15:03
  Speaker 1: relaxed Iranian sanctions has not actually given much relief to
• 15:07
  Speaker 1: US persons or entities to engage in transactions with Iran,
• 15:10
  Speaker 1: so for them it will be somewhat less complicated. But
• 15:12
  Speaker 1: as you go down the supply chain, as you deal
• 15:14
  Speaker 1: with transactional counterparties for financial institutions, UM, global institutions and
• 15:19
  Speaker 1: global companies have been engaging in that space and can
• 15:22
  Speaker 1: bring risk UM either for themselves or for their US
• 15:25
  Speaker 1: company counterparties in such transactions. So, Daniel, I want to
• 15:29
  Speaker 1: shift gears a little bit to tap into your vast
• 15:32
  Speaker 1: knowledge after having worked at the U S Department of
• 15:35
  Speaker 1: Homeland Security, US Custom Service, that's just a part of
• 15:38
  Speaker 1: the Department of Treasury and the New York High Intensity
• 15:40
  Speaker 1: Financial Crime Area. I want to talk about something happening domestically,
• 15:44
  Speaker 1: namely Michael Cohen and the financial records that have been
• 15:48
  Speaker 1: widely reported about Essential Consultants, his shell company. And some
• 15:53
  Speaker 1: people are saying that the revelation of some of this
• 15:56
  Speaker 1: information is illegal because banks are not allowed to share
• 16:00
  Speaker 1: this information publicly. What's your take on this? So, the
• 16:04
  Speaker 1: Bank Secrecy Act and other related and implementing regulations provide
• 16:09
  Speaker 1: for requirements for US financial institutions and other regulated entities
• 16:13
  Speaker 1: such as payment processors and money services businesses, casino, etcetera,
• 16:17
  Speaker 1: to provide reports to the Treasury, specifically to FINCE in
• 16:21
  Speaker 1: the Financial Crimes Enforcement Network part of the Treasury um
• 16:24
  Speaker 1: highlighting what they believe to be suspicious or potentially suspicious
• 16:28
  Speaker 1: activity by customers. And that information has afforded a great
• 16:31
  Speaker 1: deal of secrecy, both to protect the privacy uh and
• 16:36
  Speaker 1: the rights of the person or the entity which is
• 16:38
  Speaker 1: being referred on the basis of mere suspicion, but also
• 16:41
  Speaker 1: to protect the banks and to encourage them to continue
• 16:44
  Speaker 1: to file such reports. And it's important to note that
• 16:47
  Speaker 1: such reports do not. They're not referenced in court filings,
• 16:50
  Speaker 1: they're not designed to being. In fact, they're they're restricted
• 16:53
  Speaker 1: from being a referenced It's incumbent upon investigators to review
• 16:56
  Speaker 1: them as lead material, to analyze financial records more holistically,
• 17:01
  Speaker 1: and then to present an analysis the activity in accordance
• 17:04
  Speaker 1: with judicial standards. Does the role of the US dollar
• 17:08
  Speaker 1: as the world's reserve currency, does it make it easier
• 17:11
  Speaker 1: for US regulators and investigators to actually track that kind
• 17:16
  Speaker 1: of misuse of funds. That's a great point. The the
• 17:20
  Speaker 1: US dollar, because of its pre eminence nets space, does
• 17:23
  Speaker 1: provide an avenue for enforcement and prosecution that has a
• 17:27
  Speaker 1: very global reach. And US enforcement and regulatory agencies have
• 17:30
  Speaker 1: shown a strong desire through their billions of dollars in
• 17:34
  Speaker 1: enforcement penalties and fines that have been levied against corporations
• 17:37
  Speaker 1: and banks. So, just to just to wrap up here,
• 17:41
  Speaker 1: as we hear all about some of these payments and such,
• 17:45
  Speaker 1: what's your big takeaway of some of the suspicious of
• 17:49
  Speaker 1: activity around the election? Well, um representing specifically focus on
• 17:54
  Speaker 1: the financials um the reference of shell companies. All of
• 17:58
  Speaker 1: these things by them selves are are simply suspicion or
• 18:02
  Speaker 1: potentially suspicious and things like shell companies are simply a
• 18:06
  Speaker 1: flag that require companies and financial institutions to dive deeper
• 18:11
  Speaker 1: to engage and enhance due diligence, to understand the people
• 18:14
  Speaker 1: behind those entities, the purpose of payment um and it's
• 18:18
  Speaker 1: really important that companies, both corporate who operate in the
• 18:21
  Speaker 1: global marketplace as well as banks understand their obligations and
• 18:24
  Speaker 1: their tremendous exposure UH to enforcement activities if they don't
• 18:29
  Speaker 1: exert the right amount of effort on such compliance programs.
• 18:32
  Speaker 1: I want to thank you very much for joining us.
• 18:34
  Speaker 1: Daniel Wager is a vice president Global financial Crime Compliance
• 18:38
  Speaker 1: for Lexus Nexus Risk Solutions, a part of the r
• 18:43
  Speaker 1: E l X Group. Talking about Iran and U S sanctions,
• 19:03
  Speaker 1: the approaching legalization of cannabis around the United States and
• 19:07
  Speaker 1: in Canada, of course, could it be igniting a variety
• 19:10
  Speaker 1: of deals. Well, in many cases it already has done so.
• 19:13
  Speaker 1: Ken Shay is our senior analyst for Global Food, Beverages
• 19:17
  Speaker 1: and Tobacco for Bloomberg Intelligence, and he joins US now. Ken,
• 19:22
  Speaker 1: thanks very much for being with us. Okay, so the
• 19:25
  Speaker 1: caveat is you're not an expert in the Canadian cannabis market.
• 19:29
  Speaker 1: But you know about what happens when a market is
• 19:33
  Speaker 1: open for business and you see the seeds pun intended
• 19:38
  Speaker 1: of consolidation. Tell us about your outlook and about the industry.
• 19:44
  Speaker 1: Oh yeah, sure thing him could be with you today, Yes,
• 19:47
  Speaker 1: you know, I look at this industry from a consumer
• 19:50
  Speaker 1: products lends an industry that I've been covering for a
• 19:53
  Speaker 1: while now, and the idea is that, like in the US, Canada,
• 19:58
  Speaker 1: I believe that the growth in the cannabis industry is
• 20:01
  Speaker 1: presenting a significant threat but also opportunity for a lot
• 20:04
  Speaker 1: of those companies. What we've seen all the last year
• 20:09
  Speaker 1: or so, particularly in Canada is the excitement of the
• 20:12
  Speaker 1: markets with regard to the pending legalization national legalization of
• 20:17
  Speaker 1: both medical and recreational usage, and that's really creating a
• 20:20
  Speaker 1: lot of change in the market over there right now.
• 20:23
  Speaker 1: You know, I was struck by the volume of pot
• 20:26
  Speaker 1: headlines yesterday. I mean really it was just like fast
• 20:29
  Speaker 1: and furious. We saw the consolidation of Canadian companies Aurora
• 20:32
  Speaker 1: Cannabis and med Relief. Also, though we saw one of
• 20:37
  Speaker 1: the errors of the jim Bean Whiskey bourbon empire um
• 20:42
  Speaker 1: coming out and saying he thinks that marijuana is the
• 20:47
  Speaker 1: looker industry in the nineteen twenties. What's your take on this?
• 20:50
  Speaker 1: I mean, do you feel like things are sort of
• 20:51
  Speaker 1: escalating at this point? I really do, and high Lisa, Yes,
• 20:55
  Speaker 1: I do, Um, And you know, I think what really
• 20:58
  Speaker 1: drives that home is really I asked you, I guess. Uh.
• 21:01
  Speaker 1: The beer spirits and wine Giant Consolation Brands went on
• 21:07
  Speaker 1: board a nine point nine perus an equity stake in
• 21:09
  Speaker 1: Cannapa Growth, one of the leading UH growers of cannabis
• 21:13
  Speaker 1: and Canada. And I believe, just like our friends over
• 21:16
  Speaker 1: a gym being, believe that there really is going to
• 21:19
  Speaker 1: be a substitute effect um between cannabis and alcoholic beverage.
• 21:23
  Speaker 1: I mean, if you think about it, it's a mood altar, right,
• 21:25
  Speaker 1: I mean, and I think a lot of the usage
• 21:28
  Speaker 1: recreationally will be looked that way. And that's just not
• 21:31
  Speaker 1: Pine in the sky. I mean, that's what Constellation has said,
• 21:35
  Speaker 1: and most in Chorus has suggested that's looking at cannabis
• 21:38
  Speaker 1: as a uh you know, as a potential opportunity. And
• 21:43
  Speaker 1: so I think, to um, the big answer here is
• 21:45
  Speaker 1: that I think the next big wave of mergers and acquisitions,
• 21:49
  Speaker 1: particularly in Canada. You know the growers now, but I
• 21:52
  Speaker 1: think the second wave will be the big consumer package
• 21:55
  Speaker 1: goods companies again has the bushes of the world the
• 21:57
  Speaker 1: most in cores, the Diaggio's that take a look at
• 22:00
  Speaker 1: what Consolation did and maybe pursue the same strategy. Can
• 22:04
  Speaker 1: do you believe that there will be a time when
• 22:06
  Speaker 1: a company such as Altair or Philip Morris will be
• 22:09
  Speaker 1: in this business? Yes, I do, pim Um. You know,
• 22:12
  Speaker 1: we learned back in the late seventies when upon discovery
• 22:16
  Speaker 1: of a lot of internal documents, we know that tobacco
• 22:19
  Speaker 1: companies were very interested in pursuing the marijuana markets. As
• 22:23
  Speaker 1: we know now, it didn't become legally at illegal at
• 22:26
  Speaker 1: the federal level back then, so it couldn't. But we believe,
• 22:30
  Speaker 1: uh that they are looking at very closely. As a
• 22:32
  Speaker 1: matter of fact, Um, but one of the largest tobacco
• 22:36
  Speaker 1: leaf suppliers to the big tobacco companies, Alliance One, already
• 22:40
  Speaker 1: owns a Canadian uh cannabis grower and so if you
• 22:46
  Speaker 1: think about it, what that means is that a significant
• 22:49
  Speaker 1: supplier of tobacco leaf to the big tobacco companies like
• 22:52
  Speaker 1: Philip Morris International and British American Tobacco is also capable
• 22:56
  Speaker 1: of supplying them marijuana leaf if it needs to. So yeah,
• 23:00
  Speaker 1: I think they are definitely looking at it. Ken, I'm
• 23:03
  Speaker 1: sure you're aware of the increase in the popularity of
• 23:06
  Speaker 1: vaping and the popularity of a company Jewel and its product.
• 23:11
  Speaker 1: Do you believe that they're going to be patent wars
• 23:14
  Speaker 1: over the exclusivity of the technology that allows for those
• 23:20
  Speaker 1: kinds of devices. Yes, I think there'll be some activity there,
• 23:25
  Speaker 1: But you know, one of those, a hugely successful product
• 23:28
  Speaker 1: like Jewel is threatening the status quo in this case
• 23:31
  Speaker 1: the big not only the big vapor products of the
• 23:34
  Speaker 1: big tobacco companies, both of the cigarette market in itself.
• 23:37
  Speaker 1: I think you will see some challenges. That said, I mean,
• 23:41
  Speaker 1: Altaria's Newmark subsidiary is coming out with a product that
• 23:46
  Speaker 1: is very much like Jewel, um, you know, a non
• 23:51
  Speaker 1: refillable vaporizer as they call it, and um, you know,
• 23:55
  Speaker 1: so I think they're gonna I think most of that
• 23:57
  Speaker 1: will be in the marketplace, but you know, as it
• 24:00
  Speaker 1: gets closer and closer to what Jewel is, perhaps there
• 24:03
  Speaker 1: could be some intellectual property. Um discussions. So, Ken, where
• 24:07
  Speaker 1: are we with respect to US legislation and legalization of marijuana. Well,
• 24:13
  Speaker 1: in the US, it's really hung up at the federal level.
• 24:16
  Speaker 1: As you may know, some twenty nine states have already
• 24:20
  Speaker 1: um legalized it for medical use and an additional eight
• 24:23
  Speaker 1: for recreational use, and that number just keeps on growing
• 24:27
  Speaker 1: um and but nevertheless, you know, without federal without a
• 24:32
  Speaker 1: federal mandate, it really is difficult for these operators to
• 24:36
  Speaker 1: grow UM. And what I mean is because for instance,
• 24:41
  Speaker 1: you can't um because it's a federal illegal product. You
• 24:44
  Speaker 1: can't bring cannabis products over state lines. When you, you you know,
• 24:50
  Speaker 1: generate income, you're not allowed on your taxes to deduct
• 24:54
  Speaker 1: normal operating expenses. So it's very difficult to make money
• 24:59
  Speaker 1: in the in the US in this business today. That said,
• 25:02
  Speaker 1: capital is still there for the companies that are in
• 25:04
  Speaker 1: the business, the thought being at some point enough public
• 25:09
  Speaker 1: support will force the hand at the federal level. So,
• 25:12
  Speaker 1: just given where we are today, do you know any
• 25:15
  Speaker 1: estimates for what the medical marijuana industry is worth, and
• 25:20
  Speaker 1: do you then have some kind of sense of what
• 25:23
  Speaker 1: it would be worth if you also have recreational use
• 25:26
  Speaker 1: thrown in? Well, both recreation and medical in the US
• 25:31
  Speaker 1: is an approxly five or six billion dollar business UM.
• 25:36
  Speaker 1: The majority of that is still medical UM. And in
• 25:39
  Speaker 1: terms of what it's worth, that's a good question because
• 25:42
  Speaker 1: there's a lot of capital institutional money on the sidelines
• 25:45
  Speaker 1: wants to invest in this business but just can't because
• 25:48
  Speaker 1: it's again it's illegal at the federal level, and there's
• 25:50
  Speaker 1: a lot of structural issues why they can't. But you know,
• 25:54
  Speaker 1: I think the industry was really wanted to push it along. Uh.
• 26:00
  Speaker 1: What I think what they ought to consider is because
• 26:02
  Speaker 1: the public support for the non th C cannabi oil
• 26:05
  Speaker 1: basically the extract from the cannabis plant can be applied
• 26:09
  Speaker 1: to so many positive uses, pain relief, glaucoma, etcetera, etcetera, UM,
• 26:16
  Speaker 1: that they ought to consider pushing that at the federal
• 26:19
  Speaker 1: acceptance level, illegalization level, and worry about the recreational side
• 26:24
  Speaker 1: down the road. I mean, you know, there's a lot
• 26:27
  Speaker 1: of there's a lot of opponents to recreational still, you know,
• 26:31
  Speaker 1: mothers again, drunk driving and so on, and someone there's
• 26:33
  Speaker 1: a lot of concerns that you know, um, more easier
• 26:37
  Speaker 1: access you know to this drug will could could lead
• 26:41
  Speaker 1: to some negative consequences. So what I'm saying is to
• 26:44
  Speaker 1: find out what this total market is worth. The easiest
• 26:46
  Speaker 1: way to do that is to kind of delineate between
• 26:50
  Speaker 1: the non t C S CBD oil opportunity, which I
• 26:53
  Speaker 1: think is huge, and the recreational side down the road.
• 26:58
  Speaker 1: Thank you so much for being with us. I'm sure
• 27:00
  Speaker 1: you're talking with you soon, based on the accelerating volume
• 27:03
  Speaker 1: of marijuana stories that we've been seeing these days. Ken Shay,
• 27:06
  Speaker 1: senior analyst covering the global food, beverages and tobacco industries
• 27:10
  Speaker 1: for Bloomberg Intelligence. Berkshire Hathaway Vice Chairman Charlie Mongers said
• 27:29
  Speaker 1: bitcoin is worthless artificial gold. He said, the fact that
• 27:33
  Speaker 1: it's clever computer science doesn't mean it should be widely used,
• 27:36
  Speaker 1: and that respectable people should encourage other people to speculate
• 27:40
  Speaker 1: on it. Well, that has not stopped more than people
• 27:44
  Speaker 1: from attending Coin Desks Consensus conference all about cryptocurrencies. They
• 27:50
  Speaker 1: paid at least two thousand dollars a ticket to attend
• 27:52
  Speaker 1: the three day conference and joining us now as one
• 27:55
  Speaker 1: of the speakers and attendees to Bermuda Premier David Burke
• 28:00
  Speaker 1: Premier birth Thank you very much, for being with us
• 28:03
  Speaker 1: and UM. I want to just offer you the opportunity
• 28:06
  Speaker 1: to talk about the criticism having to do with cryptocurrencies.
• 28:10
  Speaker 1: And as much as I believe Bermuda is leading the
• 28:15
  Speaker 1: charge in terms of legislation regarding cryptocurrencies with the Digital
• 28:19
  Speaker 1: Asset Business Act, what was your goal in putting that forward? Well,
• 28:26
  Speaker 1: thank you him. I would say that there are a
• 28:29
  Speaker 1: wide range of UH cryptocurrencies they're called UM and and
• 28:34
  Speaker 1: that deal with lots of different things in the digital
• 28:36
  Speaker 1: asset space. What we want to make sure that we
• 28:39
  Speaker 1: provide in Bermuda, and knowing that there's going to be
• 28:41
  Speaker 1: innovation in this space, and knowing that this space UM
• 28:44
  Speaker 1: is going to revolutionize the way that financial services UM
• 28:47
  Speaker 1: are delivered throughout the world, we just want to make
• 28:50
  Speaker 1: sure that companies that we build on our existing regulations
• 28:53
  Speaker 1: that we've been so successful with an insurance and to
• 28:55
  Speaker 1: make sure that we transfer those regulations to a digital
• 28:58
  Speaker 1: asset space so that players that are serious players that
• 29:01
  Speaker 1: want to be in a well regular jurisdiction and abide
• 29:04
  Speaker 1: within the law can be and can have a home
• 29:07
  Speaker 1: in Bermuda. And you were just saying that Bermuda was
• 29:10
  Speaker 1: the first to craft these crypto asset regulations in particular,
• 29:15
  Speaker 1: and the goal here is for companies to incorporate and
• 29:18
  Speaker 1: operate in Bermuda. How successful have you been so far
• 29:22
  Speaker 1: in attracting crypto asset companies? Um? Well, this conference has
• 29:26
  Speaker 1: proven incredibly successful. UM. We had the speaking engagement yesterday
• 29:30
  Speaker 1: and there were companies that were literally about to go
• 29:32
  Speaker 1: somewhere else that are are reconsidering their view and coming
• 29:35
  Speaker 1: to Bernuda. So one one pushback maybe people would say,
• 29:39
  Speaker 1: is you know, maybe you craft regulations that are regulations,
• 29:43
  Speaker 1: but perhaps aren't as strenuous as might be seen in
• 29:46
  Speaker 1: a place like the United States. UM. What do you
• 29:48
  Speaker 1: say to that? UM? What I would say is that
• 29:50
  Speaker 1: if you look at Bermuda's history, we've always been a
• 29:52
  Speaker 1: place with excellent regulation. There's only two places that have
• 29:56
  Speaker 1: regulatce worre equivalents with both EU UM and the United States,
• 30:01
  Speaker 1: and that's Bermuda in Switzerland. We play UM in a
• 30:03
  Speaker 1: different class in other countries when it comes to regulation,
• 30:06
  Speaker 1: and we're going to lead the way. So our regulation
• 30:08
  Speaker 1: is tough. How do you want to implement this new
• 30:14
  Speaker 1: Digital Business Act? What is the I know that you're
• 30:18
  Speaker 1: looking at. I think Finance is one of the exchanges
• 30:21
  Speaker 1: that has already said that they're interested in coming. They're
• 30:24
  Speaker 1: going to come to Bermuda. What kind of infrastructure, legal
• 30:27
  Speaker 1: infrastructure do you offer? UM, Well, Bermuda has been successful
• 30:31
  Speaker 1: for a long time and UH servicing international companies. UH.
• 30:34
  Speaker 1: The thing I said yesterday is that it takes longer
• 30:37
  Speaker 1: to probably get to j f K than it does
• 30:39
  Speaker 1: for the flight from JFK to Bermuda. But you can
• 30:42
  Speaker 1: land in Bermuda in the You can leave New York
• 30:44
  Speaker 1: in the morning. You can land in Bermuda by noon.
• 30:46
  Speaker 1: You can see. But what what what in the I
• 30:51
  Speaker 1: guess what I want to understand is what in these
• 30:53
  Speaker 1: draft regulations specifically would allow UH Internet coin offerings or
• 31:00
  Speaker 1: digital currencies to operate in Bermuda. UM. The regulations basically
• 31:05
  Speaker 1: govern the entire suite of digital asset providers. So if
• 31:08
  Speaker 1: you are someone who UM is an exchange, if you're
• 31:11
  Speaker 1: someone who's a wallet provider, if you're someone who's a
• 31:13
  Speaker 1: customer provider, or if you're someone in the business of
• 31:15
  Speaker 1: issuing digital assets for others. It is an entire suite
• 31:18
  Speaker 1: of regulations that is built on our money service business.
• 31:21
  Speaker 1: UM regulations and It flows from the way of which
• 31:24
  Speaker 1: we've always regulated companies, requiring mind management and control in Bermuda,
• 31:29
  Speaker 1: requiring a physical presence and making sure that the Bermuda
• 31:32
  Speaker 1: Monetary authority has access to the people. But what we're
• 31:35
  Speaker 1: also going to do is give the regulator a tie in,
• 31:37
  Speaker 1: so it's required at any point in time there's any
• 31:40
  Speaker 1: suspicious activity, the regulator can actually freeze assets which may
• 31:43
  Speaker 1: exist in the digital space. So I'm just wondering. I mean,
• 31:47
  Speaker 1: we hear a lot of pain which is talking about
• 31:50
  Speaker 1: Warren Buffets, colorful words about bitcoin. A lot of people
• 31:55
  Speaker 1: are convinced that this is just a bunch of quacks
• 31:57
  Speaker 1: who are trying to create something that will eve operating.
• 32:00
  Speaker 1: Is the next Tulip boom um. What do you say
• 32:03
  Speaker 1: to that? I mean, how much? What is the proportion
• 32:05
  Speaker 1: of you know, quackery or I c o s that
• 32:07
  Speaker 1: are essentially just fraud versus something real. I can't necessarily
• 32:12
  Speaker 1: speak to what is fraud. What I can speak to
• 32:14
  Speaker 1: is the fact that there is real money that is
• 32:16
  Speaker 1: going to this space. And you've seen real money coming
• 32:18
  Speaker 1: in from Wall Street firms and otherwise investing in digital
• 32:22
  Speaker 1: assets and investing in this But I just want to
• 32:25
  Speaker 1: clarify here because there's a difference between uh bitcoin and blockchain.
• 32:31
  Speaker 1: Where is the where is the opportunity here? Well, the
• 32:33
  Speaker 1: opportunity is for people who are going to use blockchain
• 32:36
  Speaker 1: technology to build a digital asset business. So that doesn't
• 32:39
  Speaker 1: mean that you have to rely on bitcoin or anything
• 32:41
  Speaker 1: else you are looking at saying, we recognize that digital
• 32:45
  Speaker 1: assets are going through the future. We're going to design
• 32:47
  Speaker 1: innovative financial products, whether it's distributed energy, whether it's a
• 32:51
  Speaker 1: distributed banking that is going to be more efficient in
• 32:54
  Speaker 1: delivering services, and we want those companies to use Bermuda
• 32:58
  Speaker 1: as the innovation hub where they can hast out those
• 33:00
  Speaker 1: products in our regulatory sandbox and scale them globally. Okay,
• 33:04
  Speaker 1: So let's say that you are an investor who is
• 33:07
  Speaker 1: intrigued with the notion of cryptocurrencies, and you go and
• 33:11
  Speaker 1: you establish your own digital wallet, and you somehow managed
• 33:14
  Speaker 1: to acquire a variety of digital currencies. Then one day
• 33:19
  Speaker 1: you go and you can't get access to your wallet,
• 33:22
  Speaker 1: or you find that the ledger that exists does not
• 33:26
  Speaker 1: match what you had the day before. Is there a
• 33:29
  Speaker 1: regulatory regime in Bermuda that you can go to that
• 33:32
  Speaker 1: will then investigate and if necessary, prosecute any problems related
• 33:37
  Speaker 1: to that kind of situation. Absolutely, those are things which
• 33:40
  Speaker 1: are spelled out inside of our Digital Asset Business Act,
• 33:43
  Speaker 1: and we're going to require providers inside of the space
• 33:47
  Speaker 1: to have the security measures in place which are necessary.
• 33:50
  Speaker 1: But there's also problems that need to be solved in
• 33:52
  Speaker 1: this space. And one of the key points Pim is
• 33:54
  Speaker 1: what you spoke about is custody. So the company that
• 33:57
  Speaker 1: on Friday at the Ethereal conference announced they're moving to Bermuda,
• 34:00
  Speaker 1: um Omega one is looking to solve that problem and
• 34:03
  Speaker 1: to find a secure place to keep the keys because
• 34:06
  Speaker 1: everything is race on who based on who holds the
• 34:09
  Speaker 1: private key, So we need to make sure that we
• 34:11
  Speaker 1: have a way to secure those private keys. And that's
• 34:14
  Speaker 1: why we're going to innovate in Bermuda because there are
• 34:16
  Speaker 1: problems that have to be solved in this space. Why
• 34:18
  Speaker 1: do you think other countries have been slow to adopt
• 34:21
  Speaker 1: a regulatory framework for crypto assets? Well, what I would
• 34:24
  Speaker 1: say is it's a question when you're talking about New York, sorry,
• 34:27
  Speaker 1: if you're talking about the United States, you know you
• 34:29
  Speaker 1: have the different states, you have the federal level, then
• 34:30
  Speaker 1: you have the SEC, the c SEC all the rest.
• 34:33
  Speaker 1: In Bermuda, we have one government, one regulator um and
• 34:36
  Speaker 1: so we can be a lot more swift. But the
• 34:38
  Speaker 1: fact is that we are just building on what we've
• 34:41
  Speaker 1: done already. So we've done this successfully already with insurance,
• 34:45
  Speaker 1: we've done this successfully in the fund space, and now
• 34:47
  Speaker 1: we're just moving the regulation of which we have that
• 34:50
  Speaker 1: very high level regulation into a new area of financial services,
• 34:54
  Speaker 1: which is digital assets. Thank you so much for being here.
• 34:56
  Speaker 1: Really fascinating to hear what you have to say. The R.
• 35:00
  Speaker 1: David Burt, he is the Premier of the Bermuda government,
• 35:04
  Speaker 1: joining us here in the eleven three oh studios. He
• 35:06
  Speaker 1: was here for the Consensus eighteen conference that has been
• 35:11
  Speaker 1: taking place starting Sunday in New York City. Yeah, the
• 35:15
  Speaker 1: New York Hilton attendees. And the bitcoin right now is
• 35:20
  Speaker 1: down three to be exact. Yeah, it's interesting. There's a
• 35:25
  Speaker 1: question right of how much sort of cryptocurrencies get conflated
• 35:29
  Speaker 1: with bitcoin providers that are being used by the likes
• 35:32
  Speaker 1: of HSBC to do trade finance. So definitely a fascinating conversation.
• 35:40
  Speaker 1: Thanks for listening to the Bloomberg p m L podcast.
• 35:43
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 35:47
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 35:51
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 35:54
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• 35:57
  Speaker 1: worldwide on Bloomberg Radio pek