Bloomberg Businessweek Weekend - March 17th, 2023

thrifts failed. He's now chairman of the consulting firm Secura Isaac and a member of the boards of directors of Immigrant Bank and New York Private Bank and Trust. Who joins us via zoom from Sarasota, Florida. Built so nice to have you here with us. How do you see what is going on? Silicon Valley Bank, three regional banks in the past week here in the US collapsing? You got credit suites? Is this great financial crisis banking breakdown

two point zero or something different? Before? You all know what it is right now, and you knows it's not a surprise that these things are happening. Why Why Well, because the federal government has been out of control for a long time. It just reminds me very much of the of the nineteen eighties when I was chairman of the ft I C of late seventies and through the eighties.

We had guns and butter approach in the nineteen sixties with the Vietnam War that was not paid for by taxes and the big deficits, and we had the Great Society programs that wind in Johnson and they were not paid for, So we had very very high budget deficits, and we had a very accommodated, will say, loose fed policies monetary policies, and that led to a decade or

more of very high inflation. And finally Paul Boker was appointed chairman in nineteen seventy I was a fund in the FDIC in nineteen seventy eight and when he worked together, but Paul Hooker was determined and the fenders determined to bring down inflation, and they did. They raised rates very high, and that led to all sorts of problems. And we're repeating that period right now. I don't I don't know

how long it's going to last. I don't know how many firms it's going to happen, but I do think we're trying to figure bill if things are different just right, what specifically is different this time around? Is the issue because of specifically depositors. What's different about about the depositors in your mind, well, the issue surrounding depositors with those FDIC limits also usually when you'd think back, that was more geared toward individuals, but now you're dealing with companies.

Is that the hurdle this time around versus in past crises that you've seen. I don't. I don't think that's materially different. We had a lot more depositors back then. In terms of numbersity and numbers of banks. We had thirteen thousand banks when I was chairman of the FDIs and now we have about forty five hundred banks. And but we I mean, I'm not saying that things aren't different there. It's a lot of different things today, but

some of the things are not different. Let's take let's sake s B, the Silicone Valley Bank, that's not new at all. That's that I mean, they were doing new types of financing, but it was the same problem we had a crisis we had in nineteen seventy nine with First Pennsylvania Bank, the largest bank in Pennsylvania, the oldest national chartered bank in the country, and they decided they had a great idea letten invest in government bombs, which

they did. They loaded up on government bonds at fixed rates, and then Paul Boker became chairman of the FED and decided he was going to raise the rates very high and kill inflation. So history has shown us that we've been here before, is basically what you're saying. We've been here before. And why these guys did this again, I don't know. It was not very smart. Well, so then do you fault regulators here? You were a former regulator?

I mean, is it regulators in the United States elsewhere, FED, FDIC, Treasury and more that have to some extent once again

failed us. Yeah, I'm not trying to pick on anybody, but but this is primarily the problem of a bank, a bank that had a board of directors that was not doing its job properly, and a bank that had managements that was not doing its job properly, and they and they did a bunch of things that they should not have done, and they weren't they and it failed, and now we're trying to clean it up, and the FDIC and the FED and so horor will clean it up.

This is not something we haven't done before, even in bigger ways than this, So we will clean it up. And should we fault the regulators, of course we should. The regulators did not do their jobs. This bank grew in two years from sixty billion in size to over two hundred billion dollars in size. That's insane. So it is that a red flag? So help help us out here because oversight obviously lacking. So what stones should we

as analysts, as investors, as regulators be overturning? What balance sheets? What sectors are the financial system? Would you be focusing right now and asking lots of questions about since we've already missed some big things the red flags were out here. You tripled the size of the more than tripled the size of the bank in two years. That is a huge red flag that every regulator, every analysts, every board member, everybody ought to be on top of. Why is this

thing growing tripling in two years? That's that's that's a huge red flag. And and I don't know how, I don't know how they got away with it, frankly, without being without being brought down faster and sooner. I mean, I really don't understand. Yeah, how this took so long to find? Bill really have about twenty seconds left? Could you tell us should the FDIC limit of two hundred and fifty thousand dollars? Should that be changed? I'm sorry to do what should the FDIC limit be changed off?

Two hundred and fifty thousand dollars? So as they kind of look forward and think about maybe what we should be doing differently. I think there's been a lot of conversation about that two hundred and fifty thousand deposit levels? Should that be changed? In your view? Well, it shouldn't. I don't believe it should be increased. It was, it was I think it was forty when I arrived at the FCIC, and then it went to one hundred, and that went to two fifty, and I don't see why

it keeps on growing. But there's one thing that we really could do, and that is we need to pay attention to non interest bearing business accounts. Those those, in my opinion, should have much more coverage, much more protection. We need to do that because that money is not hot money. It's it's money that's been supporting payrolls and business and you know, and we really should not have that money running and so I believe we really need

to pay attention to that. I recommended that when I was at the FDIC before I left, that we needed to increase coverage on nine interest bearing business accounts that would be very, very helpful to the economy when times gets tough. Well, so appreciate your perspective. I know it's a busy day for everybody, including yourself. So Bill, thank you so much. Be While Bill Isaac, he's former chairman of the FDI see chairman of Secura Isaac It is a consulting firm and as we mentioned on the board

of directors of a few banks. You're listening to the Bloomberg Business Week podcast. Catch us live weekdays from two to five pm Eastern on Bloomberg Radio, The Bloomberg Business a band you two. You can also listen live to our flagship New York station, Just Say Alexa, play Bloomberg, Eleve and Verdi. So we did talk a lot about

credit suees today. The stock spiraling as it was unable to line up a top shareholder to up at stake in the bank, as you know, did cause shivers through global banking on top of an already heightened nervousness following the laps of three regional banks in the past week,

most notably Silicon Valley Bank. So let's get into how Silicon Valley banks collapse threatens an already fragile economy that's storing the upcoming new issue of Bloomberg Business Week on newsstands starting tomorrow, already online at Bloomberg dot com, slash business Week and on the Bloomberg Let's get to it with Bloomberg News Fed and US Economy reporter Chris Condon on the phone in Washington, d C. And also with us the editor of Bloomberg BusinessWeek, Joel Webber here in

our Bloomberg Interactive Broker's studio. Joel, you know, we talk about black swans or unknowns when we talk about the economic outlook. Who would have thought a couple of weeks ago that we would be talking about you know, it feels like some continued problems in the banking sector, and it all started off. It feels like with SVB or

maybe Jpal or maybe j Yeah. Right, there's that guy who you know, been raising interest rates and at some point we're maybe going to see some cracks in a facade, as as Chris has in his story, and I think we were all kind of maybe waiting for something somewhere to track, and now we've seen what that looks like. And you know, this is also interesting, Chris, because we're

gonna have maybe some more movement next week. Right, So what's on the docket from the FED mating of course to I think Jay Powell is going to be testifying again, and then if we're not too long, the FMC is going to meet and they're going to have to decide how to handle their interest rate policy. People had been expecting at least a twenty five basis point increase if not fifty. Powell signaled the door was opened to fifty in his last appearance before Congress. Now the calculations are

going to have to change. Obviously, the Fed is not only focused single mindedly on inflation, but they have to worry about financial stability, so that will certainly kind of change the entire Next, they have to steal unemployment, because that's the other part of that dualmanded. But okay, let's say let's stay with it, because there's this lag that has been talked about a lot. How much. Does JPOW

care about that lag? Very much so, because we'll look at how much they've already raised, Joel, you know that they went from just above zero to where they are here, almost at five percent. The full effect of those increases has not really been transmitted into the economy. So even if they stopped now, you can't expect the economy will continue to slow because of that, make financial conditions tighter, make it more difficult for firms and households to borrow money,

purchase things, and invest. So they have to think about, you know, how those previous increases will be transmitted to the economy and when, and then how much they want to add on top of that makes their calculus always a pretty complex one, and it's not always clear and looking at the economy how much of the past increases has been fully realized yet. Well, the good news no, there is none. There is some historical precedent for what interest rate increases you know, can do and the implications

that they can have for the economy. Walk us through some of what you wrote about in the story. Well, the history of rate hiking cycles is not a very pretty one. It's not only of course, everybody says it's very difficult to pull off the so called soft landing. But even more than that, when you don't get the soft landing and you get a recession, you almost never

glide gently into that recession. Generally, the economy is slowing down, things start to become fragile, weak points begin to get exposed, and then something breaks, something like an SVB or in previous cases of the dot com bubble burst or another bank failure happened, and then it serves as a trigger point, and it shakes the confidence of investors, shakes the confidence

of consumers and lenders, and you get this retrenchment. And so suddenly the economy previously just kind of gently slowing down kind of just tips over and turns into a recession, and then unemployment can very sharply ramp up after that. And so the big question, of course now is is this SVB incident going to be that kind of trigger point. It's really not certain yet. The credit suee situation is

greatly complicating it. Of course, it's not really very similar to sv being it's but it's suffering from now this leaking away of confidence in financial markets, and so I don't think it's clear yet that these really will be the break point. But we're at a very perilous moment, that's for sure. Okay, So maybe I'm trying to find

the silver lining. If we do see this collapse or this triggering of a recession, does that mean inflation Actually, Chris gets back down to two percent and the Feds like, whoa, I can start cutting rates. Well, yeah, there are a couple of things, Carol. In fact, number one, yes, if we go into recession, the inflation problem will very likely disintegrate. The other thing that is a bit of a silver lining. Economists will will point out that, you know, outside certain sectors,

the economy is in pretty good shape. Balance sheets pretty good. The banking sector, particularly the largest banks, are very well capitalized. They were forced to be so by the twenty and ten Dodd Frank changes. Household balance sheets are also pretty darn good shape, and so most economists say that they're expecting a recession, but a shallow one. So if that's

the silver lining, perhaps that's what you're looking for. So, Chris, with this week's data, when you're looking at CPI, the core coming a little bit hotter than expected, but you're seeing these sort of maybe silver linings with producer prices easing up again, and then also some softwas in the retail sales. Where exactly does this leave the FED as we're heading into next week with this big, great decision. You know, I do think they're not going to be

so worried about the latest inflation data points. First of all, you know, they are never They're not expecting this to be a straight line inflation. The inflation figures month to will always be bumpy. They're gonna want to look at

friendline first of all. And then in the context of these bank issues and the financial stability questions, they're just going to want to kind of thread the needle here and first and foremost, do no more additional harm, do not spook the markets with something the markets are not expecting on the hawkish side. And at the same time, they're going to want to say, look, even if we pause, we are we're going to get right you know, once things are settled down, we're going to get right back

to fighting inflation. That job is not done. They're going to want to signal that one way or another. Okay, Well, just to put a bow on all this, I'm gonna give you the quote that Chris has in the story from David Wilcox, who's the director of US Economic Research at Bloomberg Economics, also a former division director at the FED, who said, it's hard to be totally certain of anything once a crack has appeared in facade. So yeah, I

have a glass of wine. Yeah, maybe make a bourbon good idea That facade crack is what I think we're all watching, That is for sure. All right, Chris Connin, thank you so much, FED and US economy reporter at Bloomberg News on the phone in Washington, dcar. Thanks to the editor of Bloomberg Business Week, Till Webber. Here in our interactive broker Student, you're listening to the Bloomberg Business

Week podcast. Catch us live weekdays from two to five pm Eastern on Bloomberg Radio, the Bloomberg Business a band you two. You can also listen live to our flagship New York station, Just say Alexa, play Bloomberg e Love and Dirty. All right, So, yeah, we're trying to figure out if the walls are coming tumbling down here. Um, you know, we've heard a lot of conversations that this isn't another banking crisis, but let's get to the cover

story of Bloomberg BusinessWeek magazine. It's a new double issue. It's available on newstands, Bloomberg dot com, slash business Week. He's on the Bloomberg terminal. It's a finance section takeover. It could not be more timely. It is about the sudden unmaking of Silicon Valley Bank, which for for forty years really enmeshed itself in the venture capital community. So let's get to it. Lots of facets to this story. So with us is Bloomberg Markets Finance editor of BusinessWeek magazine,

Pat Ragnier. He's in our studio along with the editor at large, Eric Shatzker, and the editor of the magazine, Joel Weber. And we're gonna start with you, Jael. This is a story we continue to track some headlines on the Bloomberg about the banking community overall. How did you and your editors and your team kind of figure out how to actually cover it and put it to bed

for this week? This was such a significant story and it broke it really a crazy time for us because of course also Silicon Value Bank not alone in this, you know, three banks and three US banks and one week was significant obviously of those three, Silicon Value was the biggest. And that's why we wanted to really kind of like make sure that we looked at that because there's a greater meaning to this bank. It relates to obviously Silicon Valley venture capital, private equity, and interest rates.

And so you know, we've I think we spent ten years talking about the financial crisis, if not longer. This at the moment doesn't look like it's going to become

quite like that. But you know, on that's balance sheet, Silicon Valley had us, As Eric writes, um, you know, really kind of strategy that you can call into question now, and that has raised a lot of eyebrows, and it's meant to me that you know, we might not be we might not through all of this yet, and so I wanted to make sure that in the magazine we

we we flagged that in a big way. And Pat was the architect that kind of I mean, frankly, he hit this structure where it was like, we want to talk about Silicon Valley Bank, we want to talk about what happened in DC, which we also had as part of that package. And then Eric put a bow on it just to say, like, you know, there's a great meaning here that is about the financialization of everything. And so we'll talk about probably all those threams, those three

themes here. What was the thing that really stood out to you in this package of coverage in the magazine. One of the things that I really wanted to convey was how crazy the weekend felt. M You know, I was sitting in a diner in Brooklyn and looking at my Twitter feed and watching not just the aftermath of a bank failure, but a very loud bank failure. This was probably one of the loudest failures of a regional bank that that we've ever had. You could see, you

could see the VC community sort of raising alarms. I think in some ways on purpose, um and uh, it created a scary weekend, even though I think probably you know it, there was there was reason to to think all along that this was not going to be allowed to get too far. Are people seem to understand it, but that but that anxiety, uh, that we came in on a Monday morning really said that, you know, we really just had to talk about something important has changed

here that we could have a moment like this. Well, and I think what's fascinating about this story. It's not like this was a household name in the banking community SVB. Now it is, but Pat, I feel like that was a big part of telling this story of like who

is this Pang and why are we also stressed out right? Well, obviously, um, it wasn't an unfamiliar name if you were in the valley, and so like one of the one of the stories we wanted to tell was we have Ellen hewitttum In, who's our reporter in the valley, talking about just like how essential this was to to to sort of the way day to day life work for people in the

startup community. And she said was like waking up to a hell fire in your living in your very own living room, Like what you know, what, what's suddenly on fire here? Um? And uh, that dynamic was really powerful because it was all the same kinds of clients at all the same bank, all talking to each other and

with a lot of cash. We've talked a lot about the fact that like there was something happening on the asset side of their balance sheet, but but but the other thing that was happening was what was going on on the liability side of their balance sheet, which was they they had people who had who suddenly woke up to realize that they had reason to be nervous, which is not usually the case with most with most bank most banks, half of your half of the people who

have half the half of your money, like you know you, it wouldn't matter which you did in your on your assets side. They don't need to run to the bank. They're ensure that money's ensured. This was a very different situation. Yeah, Eric, I want to bring you in a little bit here because I love the headline on your comment on this issue arrogance, incompetence or both what spb's failure really means.

And I think, you know, it's interesting. Whatever we have a failure like this, the question often is, well, was this incompetence or was their actual sort of criminal behavior here? It doesn't seem like that with SVB, But I mean, can incompetence be so great that it sort of crosses the threshold into criminality? Incompetence is probably the best explanation for one half of what happened to SVB, and arrogance is probably the best explanation for the other half of

what happened to SVB. Incompetence applies to the asset side of the balance sheet. The fact that they mismanaged duration risk is unconscionable for any banker, certainly a bank of SVB size. It was the sixteenth largest bank in the country. The arrogance, though, applies to the liability side of the balance sheet, and what we mean by that is the fact that they clearly not just SVB, that they is bigger than SVB in its management. It also applies to

the bank regulators the collective. They failed to recognize or appreciate that there was a different kind of concentration risk at the bank, and it had to do with the nature of the bank's deposits. Over the course of some twenty years, SVP SVB, excuse me, changed from being a bank that really did focus on the innovation economy, the startups in the valley in tech and life sciences, medical devices, biotechnology, and became a bank that principally served the VC and

private equity communities. And those ended up being massive depositors at SVB. And we know now that founder collective, Katu Management, Founder's fund, Peter Teel's fund, all in a heartbeat withdrew those deposits and ordered their portfolio companies to do the same.

That wouldn't happen. For example, at a fifth third Bank Corps that's the next largest bank after Silicon Valley Bank, it has six point one seven million visual accounts that fall under the two hundred and fifty thousand dollars cap for Federal deposit insurance corporation insurance. That means all of those six point one seven million accounts effectively were protected. And at Silicon Valley Bank that number was it was only equivalent to six percent of their deposits. Pet likes

to talk about hot deposits. You will not find hotter deposits than the deposits that were and no longer are at Silicon Valley Bank. Jill, come on back in. Okay, So, Erica, you I think we're just a guiding presence and in a lot of just what we were thinking about in this package actually, and I do want to, you know, make sure that we spend this forward a little bit and think about what this could mean going forward. I mean, obviously this interest rate thing that SVB got really wrong.

Is it a question at this point of like, you know, SPB did it wrong, but like who else didn't. And you know this lag that we've talked about a little bit before with interest rates. How else are you kind of just thinking about where else this could show up in the financial ecoso Well, I was already thinking about First Republic, And just to revisit a few of the headlines of the past hour, it just got thirty billion dollars of deposits from a number of big banks, including

Bank of America and JP Morgan. So yes, that was a problem, and there may be other regional banks that similarly mismanage their interest rate risk. We don't know all of the details. It's very important to say that because some of these banks actually are smart and do hedge, some of that interest rate exposure didn't happen at Silicon Valley Bank. Quite probable that it didn't happen elsewhere as well.

But beyond the quality of the asset side of the balance sheet, there are other things to think about that we've been talking about and which undoubtedly we will end up covering here at Bloomberg. In many different ways, the second, third, fourth, and fifth order effects like corporate treasurers asking themselves, do I really want to have money in deposit accounts? Any longer. Why shouldn't I take the excess cash that I've got

and sweep it into a money market fund. It'll earn a higher yield to begin with, and it will be protected because if it's a money market fund that's invested in treasuries and agencies, it has the backing of the US government. This is not I mean, these things are going to play out over the next weeks, months, quarters, possibly years, and it might not be a serious issue in the short run, because there are so many federal

facilities now in place to backstock the banking system. But these changes will happen, they will take place, they will transform the American banking landscape. I wouldn't be surprised if, maybe even as little as eighteen months from now, things look vastly different. Pat. I want to bring you back in here because I do think about this perfect storm of think about in a year, what has happened with the interest rate environment. That's one thing to think about.

Also the role of social media and creating a velocity, certainly with SVB. And then you've got what Eric writes about this financialization of our world and increasingly the role of private markets that don't necessarily have the transparency. You put that together and you're like, well, of course we're gonna have some problems. Yeah, you know, after we closed

this issue, I called my dad. My dad worked in the savings and loan industry during the savings and loan crisis and he ended up working for the Resolution Trust Corporation, which was the government agency that did the bailout. So he called me in. He said, you know, I thought we had another five years before another one of these. Why do they keep happening so fast? And why don't

people learn? And I think, you know, that's going to be the big question we're gonna be asking ourselves is why do we not understand how fundamentally risky a bank is. You know, we think of banks as safe. It's actually an important part of how banking works is that it they project safety. You know, they always used to build banks to look like Roman Temple so that they would

look like they were very safe. But the reason we do that and we feel safe is because they're actually considerably riskier than putting your money in a money market fund. It's backed by t builds. They're actually doing something risky and they have to be watched and watched quite carefully, but they're doing something essential. Let's not forget about that. Without fractional reserve banking, I'm not going to get into details about what that means. Please look at up on Google.

And without credit creation, which something we do understand, the transformation of liabilities i e. Deposits into assets ie loans, we would not have the economy that we have. You couldn't take a dollar for dollar. You need one dollar of liabilities effectively transformed into ten dollars of assets, correct velocity of money. In addition to economic growth and opportunity, if you couldn't borrow to invest in your company, you

know your hands would be severely tied. You wouldn't all of these things that individuals and even and small businesses need. So many of those things would be effectively unavail. Can I quote Eric here which second graph of the story. That's why when a bank fails, it's so essential to figure out what happened and ensure the same mistakes won't

be made again. That's why we did this, and that's why we put it on the cover, and that's why we'll be talking about it, I think for you know, hopefully a little while longer, and to that end, I do think that the repercussions of this are still playing out, and that's why I also we haven't talked about the

second piece of this package, which is worth mentioning. But it's also why Jamie Diamond was in DC yesterday talking with Treasury Secretary Janet Yellen to make sure that you know, this thirty billion that ended up in First Republic could could happen, right, and that that actually, you know, it shows how much attention there is on this stuff. And you know, of course you'd call in the guy from

the financial crisis to make sure that everything goes smoothly. Yeah, Eric, I also wonder if he has sort of zoom out and look at it from a macro level. Was there a bubble in venture capital after a decade of low interest rates that just popped? Is the golden age of the quote unquote founder over after this and just got a bat Well, that's an excellent question. I think you can only call a bubble after it's actually happened and the dust settles. And I don't think we're quite there yet.

We're not there where we can look back and see it was a bubble. There's no question there was way too much liquidity there probably still is. We said it the other day, Carol Jee Powell secretly might be not glad, but boy, a bank collapsure does help to tighten financial conditions and make it easier to get a rein on inflation.

Now it's a really good point, right, because you've got to look at this all the big picture here, right, not as preferred filing you guys, all right, we gotta run Fat Regney or Mark Markets and Finance editor A Bloomberg Business Week Editor at Large, Eric Shats Garb Bloomberg News and Joe Weber, Editor Bloomberg Business Week. Folks, it's a finance takeover. It's the cover. It's a must read for the weekend. This is Bloomberg Radio. You're listening to

the Bloomberg Business Week Podcast. Catch us live week days from two to five pm Eastern Bloomberg Radio, the Bloomberg Business vand you two. You can also listen live to our flagship New York station. Just say Alexa, play Bloomberg You Love and Dirty. Remember the movie Damian. I don't know if you remember this. The day after it was nineteen eighty three, ABCTV streaming wasn't even on our narrative

day after a nuclear war, god forbid. Okay, today, very different scale, but it does kind of feel like the day after. We've had twenty four more hours to kind of think about what happened over the weekend, and it does feel like some calmness has come in because comin has come back to the market. Yeah, but I think, you know, the whole episode is definitely revealing popples in the US economy right now. We're seeing some things deep down, you know. I'm really excited to get Johnson of JP

Morgan in later in the show. He's going to tell us what's going on in US housing. I mean, for me, that is the key element here. If you talk about SVB, you talk about, you know, what went wrong there. It wasn't necessarily that they were lending to venture. It was that they had stuff on their balance sheet they shouldn't have. Well, speaking of venture, we've got a great knowing perspective with

us from the venture capital world. Longtime venture capitalist Alan patrick Off, chairperson co founder at Primetime Partners, author of No Red Lights, Reflections on life, fifty years in venture capital and Never Driving Alone. Great book. He joins us via Zoom from New York City. I can say great because Alan joined us to talk about it before. Alan, good to have you here with Damian myself. It is twenty four hours you got. You were gracious enough to

join some of our colleagues on TV yesterday. As you're thinking about Silicon Valley and the impact the venture world and capital raising fundraising world four startups changed at all, Well, clearly it's got to change someway after what happened yesterday. And you know, as you just said a second ago, that the full wasn't really in with the venture capitalis

it was the full with the bank itself. And as far as I can tell from emails I'm beginning, the bank is back in business again and based on their own words or lending money. And I've gotten an email for another bank besides SBB, and they are lending money.

And the big question over the weekend, which you know unnerved everybody, including me, even though I frankly had very little exposure, thank god, so I had a little bit less less violent weekend and some but it was the concern over the deposits and and I you know, said this broadly over the weekend. There was no way the banking system. The stock market could open on Monday without

solving the problem. And I think the government did a great job in solving the deposit problem and taking over a couple of banks, and so no worri about contagion. Do you think we're done? U? Well, no, yes, I

think contagion a sense you're thinking of. I think the contagion is how it's going to affect loans and druid ends from banks and what kind of lending they're going to do, and how that will affect the industry going forward, because venture lending has been a you know, on the edge of the traditional banking system, and now you know all of these loans and people's nervousness about being able to draw down loans in an appropriate fashion timely, and

whether they really existed The bigger the first question was deposits. The second moment was if you had a line, are you can be able to draw down on? And obviously they are drawing down on all their deposits, assume and all their lines and have made a point of setting we're open for business. So I would say that we're back. We can't be back to normal. People have to have

some second thoughts. Now is so how they go forward and basically in terms of lending lines and how much they can depend on it, how much they wanted to. I mean, Alan, look, you've had an unbelievable career, right, I mean in your autobiography entitled No Red Lights, which released last year, you discussed not only the successes of your career but also the failures, and one that stood out for me was your that you didn't make an

investment in Starbucks. I want you to take that forward to Chair Powell when he writes his autobiography and he has to discuss his failures. Is he going to have to state that he was late to the game on inflation and that the FED is behind the curve or do you think that you know they can manage through this and we can achieve that soft landing. Well, you really are stretching the point of of my making mistake of not investing in a coffee like that, one with

the strengths that affect the world. Yeah. Probably. Uh. You know, the acceleration of rate increasing rates didn't help the situation, but you have to understand that did not have an impact of the venture business per se or on lines that were outstanding. I think that that didn't topple anything. I would personally say that this would not be the best time increased rates again next week. I've let the market settle down a little bit here and get used

to what's happened. But I think the whole the real challenge the industry is thinking about venture banking, the venture at the sdpiece of the world, which there's more at least a dozen or two dozen like that. How what what role are they going to play going forward? How much are you going to depend on those kind of lines.

The government has clearly done a great job and that the fact, not just the role the deposits is say, but the fact that they're telling everybody go forward and keep lending on the same basis is really a very strong sign that the government is standing behind these banks and does not want to see well, you know, Alan not just the government coasal Ventures is going to be

backstopping pay for some of its impacted companies. Is that going to be a role that you know, VC funds are going to have to take on in the future, you know, being that sort of backstop is something should go wrong with the bank and should they be Yeah, no, you know, it's misleading to say banks their backstop. They're

not doing that. If they're an investor in a company as we are, and you you depended on a line and all of a sudden the lines not there, you got to figure out how we got to replace it. And the easiest way, of course, is to get the existing investors to put up additional capital, whether it's in an interim or a more long term basis. But they're not doing to, you know, act as a backstop for lending.

Their ACT is a backstop to you know, the alternative to these loans was going out and raising more equity capital. So I think if anything but this is going to do is to put some pressure on companies to build up their equity positions, and they in the process, it would not surprise me if there were some write downs and some reef or financings to build up these balance

sheets at lower prices than we saw. I mean, the market was very very strong in twenty one and twenty two for a lot of venture financing, whether it's startup or even later stage, and I think that to the extent that companies want to improve their overall balance sheet position, even if they have these lines, they would probably want to build their equity and that may be at a lower price in the last round possibly. So Alan, what in terms of longer lasting impact, you know, how does it?

I think you know the doomsday is like, oh, it's going to affect innovation, and you know the startup community is that overblown. There's money to be made. Investors will find a way. No it startups to wind a way. I will not use the vernacular, but I don't believe that it is going to have very very little impact.

Will tell you a specific I am involved with one company that had a large deposit of one of these banks not named, and had a line not used that they had not drawn down upon and they were encouraged on Monday to draw down that line and they did and the money transferred into the bank account of the company. So clearly the banks are back providing capital again. But if you don't have a line this time, I don't know what the attitude is going to be to put

on new lines at the moment. And I would think it will be proven for a company to build up its equity base that may come at a discount from the last round, because a lot of these last rounds were very very high prices in retrospect, and it may cause some you know, some type of markdowns, but other than that, the business is so healthy and innovation not

going to be stopped. Well, Alan, I mean you you're now with Primetime Partners, right, You founded that along with Addy Levy, who was the former SVP of Soul Cycle. Your goal, your mandate as a word, is to invest in early stage startups that bring products and services to individuals above the age of sixty, which of course is

twenty five percent of the world's population. My question for you is those early stage startups that you're investing in, would you tell them to bank at some you know, made and small sized regional banks going forward, or you encourage them to be banking at you know, the big ones, the JP Morgan's, the city groups of the world. And

Alan just got about thirty thirty five seconds. Unfortunately, I don't want to answer that question directly, but I would say that for the moment, I think they continue bank you as usual. But remember, for these early early stage deals, they're not doing too much banking. They're really relying almost entirely on equity stage. All right, Going to leave it on that note, Alan always good to get some time

with you and so appreciated. Alan Patrikoff is your person and co found at Primetime Partners, showing us via new Zoom excuse me in New York City. And his book is No Red Lights Reflections on life fifty years in venture capital and never driving alone. Did you know he really likes music, Carol? Did you know Alan ran at eight eight years old in New York City Marathon last year and he finished, and he finished. He's pretty remarkable,

unbelievable and so delighted to have him here. And just you know, I feel like calm right, like it's not like the it's not good. It's got feel better now if you're talking to Alan, yeah, yeah, it's good. You're listening to the Bloomberg Business Week podcast. Catch us live weekdays from two to five pm Easter on Bloomberg Radio, The Bloomberg Business a band you two. You can also listen live to our flagship New York station Just say

Alexa play Bloomberg. He love him Verdi all right. We did also want to get a check on the auto sector. All of these conversations, all of these earnings reports help us to give us more clarity about the economic outlook. Right now, we have with us and back with us the CEO of the online seller of the aftermarket auto part company. We're talking about carparks dot Com. David Mignon joining us via zoom from Torrens, California. David, nice to have you here with Mike Reagan and myself. Welcome back.

Your stock rallied yesterday following earnings Tuesday night fourth quarter revenue beat. Tell us about the quarter, tell us about the outlook. Tell us about the environment, the business environment. Are you thinking recession or not? Thanks for having me. Yeah, I'll tell you even more than the quarter. I'll tell you about the year. We know we've been in business for twenty five years and twenty twenty two was a record year for us, both the top line and the

bottom line. Our sales were up fourteen percent to six hundred and sixty one million. Our adjusted IBADAO was up more than fifty percent. And today as we sit, we're free cash flow positive, we're growing, and we're virtually debt free. Now. As far as the second part of the question, in terms of the economy, what we're seeing is that inflation

is everywhere and the customer is still spending. However, what I'm feeling is that they're a lot more discipline as to where they spend, how much they spend, and when they spend. Yeah, so what does that signal to David? You know, I'm trying to wrap my head around where a company like yours fits into the economic climate. You know, on one hand, you would think, like any business, sales

would slow down. But on the other hand, is it actually a little bit resilient to an economic slowdown because people maybe will repair their car rather than buying a new one. Yeah, good point. And historically we see that our business and our company is you know, it's inflation, if inflation and recession resilient, you know, we sell a need and not a want. Now, the last three years have been an economic boom in terms of spending because

of all the artificial dollars flowing into the system. But what we're seeing today, and at least for us at Carparts dot Com, is an opportunity to double down on the customer. Like I said, because the customer is still very discipline as to where they spend. We have to focus on the value that we deliver to the customer. So for me, the last three years have been about availability and trying to figure out a way to connect

the dot between the supply and the demand. But today it's more about what value can we deliver to the customer and how can we be there for them in times of needs? You know, Carol, it's funny as we talk to David, I'm reminded I have a busted taillight on my Toyota Highlander. I think we'll have to talk after you can't get it. I know a place quality director consumer factory at the warehouse warehouse? Do you Carparts dot Com? And I'll give you the VIP pricing? Oh no, no,

I can't. I can't accept that. But I do want to ask about those those warehouses. You know a lot of suppliers have struggled to match inventory with the band over uh you know, the last three years with the pandemic, the supply chain disruptions. How is the inventory situation with cap Carparts dot Com? Are you back to sort of a normal supplying demand relationship? Are you ever supplied undersupplied? You know? Is it a depend on what parts you're

talking about? What's the sort of big picture there as far as inventories with car parts, so you're absolutely right. The last couple of years have been around you know, longer lead times and the need to carry additional inventory to fulfill the demand. And so if you look at our inventory position last year, we significantly flexed up in a lot of parts. Now today, to your point, we're

in a much more normalized kind of inventory position. And you know, as at the end of last year, we sat at you know, about one hundred and thirty eight million dollars worth of inventory, and that's the right level for the current environment for us. So ultimately, what we do is we try to focus on carrying the right parts close to the customers so that we could deliver that value as quickly as possible. So you guys are

ahead of pre pandemic levels at this point. We are ahead of pre pandemic levels because our business has grown so pre pandemic. Actually, pre twenty nineteen, our business was sitting at around less than three hundred million dollars in sales, and like I said, twenty twenty two was six hundred and sixty millions. So we're a different company. We've opened a lot of buildings. You know, the last year was very exciting for us. We delivered record results. So we're

in a good spot today. So not pulling back in any way in terms of spending, expansion, none of it. So what we're doing is trying to be a little more intentional as to where we spend the money. And so there's a couple of areas where we're kind of taking away some of the spend in terms of that discretionary spend and reinvesting those dollars into customer centric initiatives. So it's intentional the same as being cautious a little bit.

It's cautious, it's aggressive mindset, but it's a defense playbook. David, what keeps you up at night? You know? I think what keeps me up at night today is how do we become the number one destination for our customer? You know, the way I think about our industry is there's three hundred billion dollars of parts being sold in the United States and only four percent of that or five percent of that are online. How do we make it ten percent?

How do we make it fifteen percent? Like apparel, like electronics, We want to be the number one. What keeps me up at NiFe is trying to become number one? All right? I canna leave it there, David, thanks so much, appreciate the time. David Meagnon, CEOT Car Parts dot Com. You're listening to the Bloomberg Business Week Podcast. Catch us live weekdays from two to five pm Easter on Bloomberg Radio,

The Bloomberg Business a band you two. You can also listen live to our flagship New York station Just Say Alexa Play Bloomberg e Love and Dirty. Well. Her next guest had, as we said earlier, from OC to five decades of technological and social change. It's about eight years a CEO of one of the iconic tech firms of the past century. We're talking about IBM, and yet, as she says in her new book, she's not writing about technology or IBM, but rather about how we can all

drive meaningful change in positive ways for all. She calls this good power. We are so delighted to have with us. The former chairman and CEO of IBM, Jinny Rometti, her new book is good Power, leading positive change in her lives, work and world. She's here in our Bloomberg Interactive Broker studio, Pens and Needle is so delighted to have you here. Congratulations, Thank you very much as big milestone two years in the making, right, it's always Oh, yes, I never expected

how hard it would be. That's what everybody says, I have to say, And I think Mike and I would both agree that when we started reading this, it started. It didn't start like I expected it too. And I'm sure everybody who talks to you starts there. But it is a very personal story, a very real and revealing story.

Talk to us about your family and your dad leaving. Yes, it's one of the many moments I speak of, but because I think we're all shaped like how we lead today has a lot to do with what we experienced in the past. And I was sixteen when my father decided one day that he abandoned my mom and our whole family. He didn't realize I walked into the garage and heard him, and I heard him say to her, I don't care about you. I don't care about any of you. You can go work on the street for

all I care. And how do you process that as a sixteen year old, Well, and you had younger siblings. I had younger siblings. Yes, I stood there, and I think I reacted because I watched my mom and she didn't cry, she turned around, she walked out. Effect I never saw a cry. And here she was the as I think now, thirty four years old, four kids, never worked a day in her life, hadn't gone to college, just barely through high school. But she was so determined. So what I the reason I start there and the

only reason I wrote a book. Do you know you were going to start there? No? I absolutely did not know that. In fact, my collaborator helped me to start there because it's a very vulnerable moment to start. But the reason is to celebrate what she did and how she reacted, because it's like I saw my grandmother and great grandmother both had big tragedies in their life, and I saw that she had power to change something when

she had nothing else. And that's kind of the premise of the book, that we all have more than we think. And she was like, I'm not going to be a divorce, I'm not going to be someone on food stamps. I'm not going to let it end this way. And she had a little bit of education, a little bit of education, a better job, a little bit better and she never did get a degree. But it's the other thing, well, two things I learned. She taught us, never let anyone define who you are, only you are. He was never

going to define her as those things. And it's so easy to go in the other direction. It is very easy to be defined as a victim and feel a victim. And the second thing was that you know, someone's access to education in their aptitude are not equal, meaning my mom really wasn't dumb. She's never had access to anything. And that would be a silver thread through my whole life that I would find to be true about you know,

how people can get skills. And to me, why I work today on this when I think is so unfair in this country and it's very solvable. How many jobs have been over credential to require a college degree when they don't need one, and so many people in this country don't have one, especially when you think in a

tight labor market, maybe things could be different. I'm hoping the absolutely well, Jenny, one of them we're touching things in the book to me was and you mentioned, you know, your mom was embarrassed that on occasions she would have to use food stamps and would actually drive to the next town over so no one saw her. Really kind of heartwrenching moment in the book. But I wonder, you know, having seen the economy from both sides, now, what do you think about the social safety net in the US

right now? Could it be done better? Is there a different way? I am a believer in it right that it's needed, and it's needed for what I saw with my mom. It's to transition people. It's not a permanent thing. And that's to me. What can be done better is the transition part, to transition you to a better place. That's what it did for us. It transitioned us to

a better place. She had to do it till she didn't have to do it, and I really feel accompanying it has to be all these things about getting people the skill so they can get a decent job. And that was really, you know, what my mom fell into. But it's such a I think, a very practical I find it. I've had a decade of working on this topic that with some skill doesn't have to be a degree. We can give people lots of new jobs right now. So safety net until you get there, all right, So

talk to us about getting to IBM. In nineteen eighty one, my dad was an engineer too, you were an engineer. An engineer open arms easy for a woman. Yeah, you know, Okay, so this is I'm sorry to have to say that's critical. I just meant, yes, I'm going to answer that two ways because tech is not known for obviously for its diversity, so I would often be the only woman. But my first three managers at IBM were women, and so I have to just credit it is a company of meritocracy

and inclusion that goes way back before me. So I was really lucky to grow up in a place like that that for the most part, although for the times, right, I mean, it's all relative. But the only thing I remember when I went, I mean, i'd never want a suit before I came home from my interview, as I wrote it, took my jacket off and my husband's like, what's on your arm? I'm like, well, it's my first suit,

and that is the price to egg Stan. Still, I'm like, how gracious they never mentioned it, you know, yeah, absolutely, well go ahead, Mike. Oh no, I was gonna say, you know, so much has changed in the tech world in the last few years, with the trade war and everything, and I'm thinking back to a boy, it must be twenty years ago when Lenovo bought the PC business for IBM, I can't help but think that that deal would ever

go down today. It was in this climate. So how do you see all of that going, This whole tension over tech between the US and China. Yeah, and if I've been to China once, I've been there fifty times and over my life, and to me, this spoiled down. I've always said in the past, when people talk about it is coopetition and competition. I mean, I've really believed

that the safest world is an interdependent world. That is the safest world, and that right now, I've also felt the only reason I was ever in China was if I could do something better than than the Chinese could do it. So, in other words, your only route is to out innovate. And so when we think about what to do now, I am really happy to see the US finally really take under a serious you know, you

would call it a technology agenda for the country. Right, It's been a long time since we've really had one, And I go back in time, you said, Yeah, Unfortunately, I've been around it five decades when some of our greatest technology innovations all started in the government and then we're commercialized by private sector. That was the way it was done. So now we finally have a national technology

agenda and yep, okay, fine, let them go off. Now we got to of course protect our intellectual property and do it better. And I mean that is to me what the focus has to be. And of course some of the most sophisticated of course, you know, those not aligned. You don't want to have fall into the wrong hands. And so that's how it'll be. But I'd love to

see it more around both competition and cooperation. But do you see, Jenny, that there's a clear division between the US and it's technology prowess in China doing it like it's not the globalization that we've been living for so long it is. What do I see a difference between the two types? Well, I just meaning that there's going to be not the cooperation, yea, not as much cooperation. But there are things we can cooperate on the environment, okay,

and technologies around the environment. I think about that. And then on the other side, no, we've got to have our own race and really be the best in the world. So much of the US prosperity has been driven by America being the leader in technology right by far across any other country. And that's what we have to continue and so, like I said, that's why I'm glad to see it, and then so we will continue our out innovating part of that. Immigration needs to be part of that. Yes,

I agree with that. I've always said that, you know, skills have no passport, and this idea that ideas flow without a passport too. And I really believe in a central part of America actually is that ability to bring in skills and be a destination for people who want to innovate in a country that has rule of law protects ip. I mean, that is what brought people here. There are other countries in the world that you see when they have focused on that they've blossomed. When they close,

they don't. So that is a that is a concern. Carol Master, Mike Regan and our Bloomberg Interactor Brokers Studio still with us as Jenny Rometti, of course, former chairman and CEO of IBM. Her new book out, Good Power Leading positive change in our lives, work and world. Excuse me, good power versus bad power? Yeah, great question. What's the difference to me. The difference is good power does three different things, versus about how to do hard things in a good way. In a good way right now, that

would mean go toward attention, don't polarize yourself. So in other words, I really believe, like, embrace tension, that's a good thing, do it respectfully, and then just celebrate progress not perfection. And so much of what it's like my way or your way. Okay, I'm like, okay, we're never gonna get anywhere if that's the two views we're going to take. And so if you do those three things,

really practice them in like especially tension. I learned to love conflict intension because I always knew something better was going to come out the other end if I would really go into it and listen, and it was. But you know what a tension is today? I know, but you know what I mean, Like the divides and I

a conflicting view, it's gotten so ugly, so polari. So I feel like it's its moment that that no, with all this division, there is another way to go about this that that brings people together and it doesn't divide them. And so that's kind of what the book is meant to be all these little tips about that I learned from watching lots of great people over the years on how they did that and that. You know, you ask young people today, hey, do you want to be powerful?

They're like, no, no, no, I want to solve important problems. And I'm like, irony is You're going to need power to do that, and so it's how you exercise it. So actually end the book with a hand written note that it says your greatest legacy maybe how you do your work, not what you did. You know, Jinny, when I think back on your tenure at IBM, what an amazing transition that company made during your time, you know, really moving from a hardware primarily business to services, cloud,

everything else. And you retired in twenty twenty. But I look at the stock price of IBM, and after an awful stock market last year, IBM pretty much reached a record high towards at the end of twenty twenty. So I feel like there's got to be some things you'd want to brag about from that from that era, you know, because it wasn't easy that. I'm sure you had some

fights there to make these changes. What do you think the most important changes are what's the sort of top line on your resume from from your tenure there that allowed IBM to become the company it is. Yeah, I mean what I did was give it a foundation for growth. I believe in me. The lots of ibmers worked hard, and I think this striking point is it's not just what I did. We had to change how we worked and so, yes, we had to move into all these

new areas. That's what everyone talks about hybrid cloud. We had to move you know, faster into AI, etc. But changing how so that you could work faster, that you could consumerize stuff, because it's so unfair to say to a workforce, you know, hey, run a marathon, but do it in hiking boots. I mean, and so I think the biggest thing would be around changing how work was done and all of our work around diversity and inclusion. We had records on all of those. You said the

magic word there, jinny AI. That's all I was waiting for you to talk about right now, So how do you see this all playing out? Chat GPT, Yeah, Google's efforts, IBM, where's it all going? Well, Look, I am a big believer in AI, but I have always believed it would make men better man humanity. Yeah, and that you got to think of it that way. I've been at this for way decades now, and I think finally it's reached for us and everyone's conscious. Right, that's what chat GPT did.

It made it like come to the forefront. Because AI has come in and out of interest over many yes, winter they call it AI winters, many of them, So now it's in front of everyone. To me, it is finally teed up the most important issue with technology, which is that if we don't build trust into this technology, it is going to have a very bad ending. And it's a show do we do that. We acquire regulators like how do we be I have a very strong view trust comes when you manage the up and the

downsides of something at the same time. So that means, all right, I introduced chat all right, do people understand it? Is it explainable? We got to get that done quickly? Do they know how it's trained? Garbage in, garbage out? All right? And it makes sense? And then depending on the kind of problem I really tell people to use it for, they have a very different tolerance level I learned on technology. If it's searching, you get a wrong movie back. You don't care. If it's about your health.

You care you got a bad answer, even though your human doctor could be wrong some percentage of depending up the doctor of time. So this idea of trust means take responsibility for it. So so the onus is on companies. It's going to be on companies. The users and the builders have even greater responsibility. Out always felt that, and so that you are telling people a how to use it, be what it's trained with or see let's say I train it and it's my proprietary data. I don't want

that train thing going to the next guy. So we had to work on all this at once. Do you need regulation? Here's my big point on regulation, precision regulation. Do you like that you can open your phone with your face? That makes it pretty fast, gloves on you don't want to do, okay, But you don't like facial recognition for things like racial profiling. So we should regulate the uses of it, not the technology itself. Because we

try doing that. People who make laws don't really understand the details of it, that this is going to go nowhere, but they do understand the uses, and so that would be how I would do the regulation because you want it to flourish. I have tried to hold technology trends back in the past. You can't stop them. Do you think this is like kind of the biggest thing that's going to be Just think it's a really big turning point.

And I actually think it's got the propensity to make you and me do our jobs better, and so I think it's going to bring and can uplift a lot of people into better jobs. At the same time, we got to mitigate the downsides. And that's like active just like social media. Right, yes, great, great, great, until then

there were some bad things. You'd like to have pulled back the clock and said, let's work on the bad at the same time, making it a little nervous though that social media has had its problems and it's just still working. From all of this we learned, yet we're not well. I think that now when you talk about all the companies involved, and you know, you talk about banks using a telcos, these are mature companies. They recognize that the one attribute they have the world cares about

his trust. And so I think when you think that way, you're going to think twice about how you introduce it to the world. So I'm hopeful about that. Well, there's that risk of backlash too, you know, I'm thinking back too. Yeah. If people don't understand something, fear and revolt. Right. Well, remember when IBM's Big Blues started beating the chess maskers. This is I learned very much trying to introduce technology, like introduce AI to doctors. I learned the biggest thing

was this was not a technology issue. The doctors had to make the time to change how they worked. They're very busy day in and day out. They didn't necessarily trust what data trained it. I mean, there was a you we're seeing this play out one more time. Um, I keep looking at my list because I have a million more questions and we've run out of time. Thirty forty seconds, you do? I have to ask you because you're you see so much. You're on corporate awards JP Morgan,

Cargill and others, Northwestern. I'm failing you, No, thirty seconds, how would you describe kind of this environment right now? You know, in many ways it's a perma crisis. I've heard used as a word. Right, there's so many at one time, and so it's I think we'll be living with that uncertainty for a very long time. And on an up note, I think these are the moments when

you can back to how I started this. Companies and people can define who they are in people's minds, and so I think right now I put a premium on trust if I was a company, on everything I did for my customers, my partners, etc. Because this is going to be with us for a long time. And when's the last time you ate tripe? That's what I want to know. You know, in spaghetti sauce. It tastes pretty good, very tender. I have to say a couple of decades ago. You have to read her book to find out why.

Jenny Rometti, Thank you so much. Goodpower is the book. Check it out, everybody. This is Bloomberg Radio. You're listening to the Bloomberg Business Week podcast. Got us live weekdays from two to five pm Eastern on Bloomberg Radio, the Bloomberg Business app band you two. You can also listen live to our flagship New York station. Just say Alexa

play Bloomberg E Love and Verdi. I have to say, Damian, we were thinking about this one of the conversations we've all been having following the collapse of Silicon Valley Bank, was the uptick in social conversations ahead of the bank's takeover, and how that might have contributed to the bank run on SVB. It's just kind of part of the narrative.

We're living in this increasingly digital world with NonStop data collection everything we do, everything, we buy, everything we say, everything we think right, and we willingly contribute to contribute to it, or don't even realize is the data dump that we keep doing. Um I came across one measure the world generating some two and a half quintillion bites per day. I don't even know what It's just gigantic. So with that in mind, let's bring in our guest,

n Parah Honey. She is the author of the Battle for Your Brain, Defending the right to think freely at the age of Neurotechnology. She's Professor of Law and Philosophy at Duke University, founding director of the Duke Initiative for Science and Society. Delighted to have with her here via zoom Endorament, North Carolina, Nita Welcome, Welcome at Blomberg BusinessWeek Carol Master with Damian Sassauer. So tell us about what is the Battle for our brains it's been waging for

a while. First of all, it's so nice to be with you here today. But The Battle for a Brain is a book that talks about the next step in data commodification, which is commodification of her brains. So that's already happening in many ways, as all of the different platforms that we on that we're on crets genetic profiles of us. But there's more coming, which is the coming age of consumer brain wearables. People are used to wearing already fitbits or Apple watches that have sensors that are

embedded in them. What they don't have yet, although some people use them already, are sensors that track their brain activity into code what's happening in their brains. And that's what's launching now is multifunctional devices like earbuds and headphones and watches that have neural interface pickup into code brain activity. Yeah, some of the items you address in the book, I mean, for me, wait wait, wait, wait wait, you're telling me

so wait. So if I put on earbuds, bows, earbuds or something, you're telling me they're picking up brain activity. Not today, but they will. So the you know kind of next Basically like every major tech company from Meta that is coming out in early twenty twenty five with a watch that the primary way that you'll interact with their AAR glasses is neural interface. It'll pick up brain activity as it goes for your brain down to your

rest or. You know, companies like Neurable have headphones where they've partnered with a major headphone manufact actor like your Bo's headphones that's in the cups that go around the ears. They have censors that pick up brain activity. And you know, the kind of goal for most of these companies is to make neural interface the kind of primary way that

you interact with the rest of your technology. Like eventually you might not need a keyboarder or a mouse, but until that day, right until that day, you'll be able to track your brain activity for focus and attention and mind wandering and help symmetrics. Things that you couldn't do before suddenly will become possible and will also become possible for companies and governments. And so the battle for your brain is the kind of rush to this field to

see who can really hack and track the human brain. Sanita, you mentioned brain biometrics and deciphering, you know, all that all that's going on up there, you know, But some of the items in the book that you mentioned, I mean, it's great out of minority purport. You know. I feel like Tom Cruising talking about arresting individuals for even contemplating murder, not even committing it. I mean, if that were the case,

I mean, I've been arrested a long time ago. But I mean, how far away are we from having technology that can effectively read people's minds? Well, what I say to people as a defense of what you think your mind is right. So if you think of your mind is literally the inner dialogue that you're having, I think it's a long ways before these types of technologies will

decode that complex thought. But already with the technology today, your basic emotional levels, your reaction to everything from pictures of political candidates, that might be able to suss out what your political biases are. Too. If your mind is wandering when you're at work and your employer asked you to wear one of these neural devices that track your fatigue levels, or your attention or your engagement or your gordum, that's already possible today, and the technology even enables probing

the mind for information that's there. And so you mentioned the Minority Report, which I talk about it in the book and I always talk with my students about but it's already being used by law enforcements around the world to interrogate criminal suspects for recognition of a crime scene

detail or a murder weapon or something like that. So it's really one of the things I hope to do with the book is to just document kind of example after example of what's already here and how much of the brain can already be decoded, and how much of it is already in use already. So within a technology, there's a good to bad and the ugly. What's the upside to this? It can't all be bad? Or is it all that? No, No, it's really not all that.

I mean right, First of all, I think in the hands of individuals who have control over their own brain data, suddenly the one area of our bodies that's the most important aspect of our well being, our brains, becomes accessible

to us. So you know, your ability to actually start to track brain metrics and metrics of well being in health and to know what's happening in your own brain, including by the way, how well you pay attention or focus if you're working from home or working in the workplace, or what your optimal hours are, or how you meditate

effectively to bring your stress levels down. There's a lot that these technologies can do to empower individuals, but it all depends on who has access to what's happening in your brain, how is it used or how is it misused, And that's the kind of balance that we really have to be striking. Now. That's what this book is about, is a call to action to say we're standing at

a fork in the road. There is this major inflection point at the deployment of this technology as all of the major tech companies come out with these products and devices, and we have choices to make that could set the terms of service in favor of individuals, to make it something that's empowering, not the dystopian or reelian possibilities. On the other side, NITA, are people using brain biometrics to handle real world problems and diseases I'm thinking dementia, Alzheimer's.

Are there new technologies and treatments that are coming to market that can impact that. Yeah, there's some really promising ones. There was in the research for the book, I came across a company in Israel who are in clinical trials for the possibility of detecting epileptic seizures an hour before they occur. That could be incredible for people to suffer from epilepsy or you know, the ability to be able

to use it for depression. There's already some companies that are using it to provide low levels of electrical stimulation that can be transformative or neurofeedback for people who have ADHD. They can use the devices to be able to train their brains to have better concentration and focus, and in some head to head studies against using drugs, the neurofeedback is very favorable. Well. So there's a lot of potential health applications and ways in which this can be transformational

for humanity and good ways. There's just also the dystopium psabilities that we have to safeguard against, and those aren't minor. Because you know what you think, what you feel, it's so fundmental to who we are. Having that inner space of mental privacy and freedom of thought is so critical that we just can't get it wrong this time. We can't know what trade over you wore. I feel like, right, well, but but you've always thought you had that at least right.

You thought you at least had your thoughts right well right in a related topic. So then how do you because you obviously study you know this, I feel like falls under your purview. When you think about the work that Elon Musk is doing with neurrolink, and he wants to build this brain chip interface it can be implanted that might help disabled patients ultimately move or communicate again, or restraint vision. How does this and we've got about a minute left, how does that? How do you think

about that? So you know, I have a chapter dedicated to these implanted technologies. And while I think it'll be a long time before a healthy person will choose to have implanted neurotechnology, it's just not safe enough for somebody who doesn't need it. The possibilities already are transformational for people who have everything from neurodegenerative disorders like als to be able to communicate again, to being able to move

and have independence to interact with other technology. I'm very bullish on what those companies are doing and developing and how thoughtfully they're trying to develop the technology. There's real risks, but there's huge upside in that space and it could be incredible for so many people. I have to just see. My brain hurts a little bit because I'm trying to understand there's a lot going on in our world, and I'm thinking that the government's listening to me through my earbuds. No,

it's fascinating. Nita. Hopefully you'll come back soon and we can continue this conversation. Nita Fara Honey. She is Professor of Law and Philosophy at Duke Law School. Her book at is The Battle for Your Brain, Defending the right to think freely in the age of neurotechnology. I do feel like when it comes to the brain the human body, were you still learning so much? Oh? Absolutely? And Carol hopefully, if they're not listening to my brain and wondering how

I'm going to cheat on my taxes, I'm sorry. If you're still listening, I would never do that. You're listening to the Bloomberg Business Week Podcast. Catch us live weekdays from two to five pm Eastern on Bloomberg Radio, the Bloomberg Business app band you two. You can also listen live to our flagship new York Station. Just say Alexa. Play Bloomberg eleven thirty time now for a weekly dive into the Pursuit section of the magazine, and our undercover

reporting expert has outdone himself once again. This time. Bloomberg Pursuits contributing writer Brandon Presser has previously embedded himself within some of the world's most prestigious brands and destinations everywhere from New York's Plaza Hotel to the Las Vegas Strip and even Walt Disney World, all to decipher what goes

on behind the scenes. Well, this time, Brandon has ventured out to the Pacific to visit Hawaii's Turtle Bay Resort, and no surprise, he has brought back some delicious details. Think of the HBO series White Lotus, but in real life. Brandon joins us along with Bloomberg Pursuits editor Chris Rouser. So Chris set the stage here for us. We always look forward when we see Brandon, kind of in the

brief of the upcoming issue. Why Turtle Bay specifically, we're always talking about fun places for Brandon to go and work as a staff member and see, you know, all the hard work that the staff do to deal with these patrons and these luxury communities, and you know, the White Lotus has been so popular. We were like, we've got to do a big, fancy resort. And Brandon started doing his research and Turtle Bays probably the most iconic one in Hawaii, and it's big, tons of people come through,

it's it's luxurious. We were like, this is the perfect opportunity, all right, So Brandon, come on in and as you started to unfold some of the secrets, the wild secrets tell us about your experience there. So Turtle Bay was really appealing to me because it's set on one thousand, three hundred acres and so to give you a comparison, the entire host Hotel Strip of Whiti can fit twice

into Turtle Based property. So what I really liked is that you have all of this space, but in a lay you're sort of a cap of audience, but you're never really going to leave property to go out for dinner. So it was really an opportunity to explore every single element that the resort had to offer, everything from golf to the you know, the all you can eat buffet. There's horseback riding and there's a surf school, as well.

So it was really fun to pick at all of the little sort of distinctly Hawaiian elements, and we even found a few ghosts lurking on properties. Can I say I had no idea how iconic this property was. I mean, it's been around for a long time, but I mean a lot of movies right have been filmed there. I

mean it's a really well known property. Basically, every single movie or TV show that you can think of that has that jungle, you know that you know, Lost or Pirates of the Caribbean, they've all all been shot on property in Turtle Bay. I met with the wedding and events team and they said that over thirty percent of people wanting to have the wedding on property said straight up it was because they loved for getting Star Marshall. Unbelievable. I have to say that when I first started a

reader's story, I'm of that generation. I kept thinking about the Brady Bunch, which we'll get into later on. Get into that, all right, So tell us what you actually got to do and see. Yeah, So I spent a full week on property, and every day sort of I was kind of like an intern, doing a variety of different jobs. One day I worked exclusively in housekeeping and really understood the process of cleaning rooms. One day I sat at the concierge desk and fielded a lot of

bizarre requests. And then another day I worked with the Bellman team, moving luggage to guests rooms and getting people settled. And then finally I worked at the first school. All right, So, Chris, as you were getting feedback from Brandon, I mean, and you were starting to read through, you know, his writing, what is it that really jumped out for you that

you thought was just like, oh my god. Well, you know, I remember when I went on my honeymoon, and I was like, we should tell everyone we're on our honeymoon because they're going to be so happy for us, and

they're going to give us upgrades and stuff. And what you don't realize is that the hotel people might be very nice, but up to thirty percent of the people checking in or telling them that they're on their honeymoon, maybe more or anniversary, So they don't all get upgraded to the Pineapple Suite, but they do get you know, little like charcuterie boards in their rooms and things like that. But what I would surprised me about people who are on their honeymoon is that they can complain about a

lot of things, including the weather. And Brandon said that people would even ask for their money back from the hotel if the weather was bad. The strangest thing about about the weather was that some people would complain that it was too sunny. Also, you would get every version of the complaint about other And I think there's there's really intense feeling about Hawaii. You know, it's paradise for all of us who live on the mainland, and so people really put all of their hopes and dreams and

there's one aspirational holiday, all right. So I do want to go to the Brady Bonch reference because I'm like, I wonder if it's going to be in there. I always remember Bobby, right, he gets the tiki that's cursed, the idol and like everything starts to come on done. But there is a real superstitious aspect to this resort. I guess, yeah, there really is. I think that u Polituan culture is really in touch with a lot of

super natural elements. So the idea that there could be spirits or ghosts some property is very normal to them and there's certain places where some staff members won't go. You know, the resort's huge. I'm not talking about you know, like specific areas within the hotel, but there's you know, sites on property that used to be crowned land, so

there are little burials that are carefully protected. But almost every single staff umber I talked to said that they had seen a spirit roaming in some capacity and sometimes during their tenure. But you have to say that there are people who take stuff home, but there are people who actually return it right they get home. They've taken something from the resort and they returned it back to the hotel because they're like, shoot, you know, I've had

bad luck. And that was told to me in passing and then someone I was like, wait a minute, you got to tell me more about this, and they took me to the provisioning department where all the purchasing and orders are made, and I swear there was a stack a mound of boxes full of shells and lava rocks, a huge mound that people have to go out and take back to shore or return to the sea. So one are the craziest things that the staff told you they've seen from guests there was a gender revealed party.

There were the beautiful pink and blue cookies and all of them were taking them home to share with their kids because they were, you know, they were beautifully wrapped still and hadn't been touched. And a few of them started beating them during their shift. And then all of a sudden they were reporting to their senior you know, manager, I'm having weird vision. I've seen things. I don't know

what's going on. And one of them went to the hospital and the talks report came back that they had marijuana and their blood stream and they were like, I've never used marijuana my entire life. From a gender revealed party. Hey, I really confusing. I have to say a couple of the things too. And I've always wondered about the throw pillows in a hotel or the comforters. I'm like, yeah, that thing hasn't been washed in a while. That's the

reality of it, right, Yeah, I know. That was That was the most important question that I needed to ask while I was looking at all of the rooms, because honestly, I would watch some of the housekeepers pick up grains of sand with paint brushes, and so the attention is till is huge. But then with the comforters, yeah, you always wonder, um, and if there's no sign of visible wear and tear, the cycle is a minimum of forty

five days before it's queen. And those little pillows that are on the bed too, actually throw them on the floor. Put them on the floor. Yeah, I always put them on the floor. You know what's interesting too is and I just um, before we wrap up, when you were at the concierge, I mean some of the requests I too was like, oh my god, you said there was a couple who requested a baby monitor so they could go off property without hiring a babysitter for they're six

months old. And then someone who insisted not being picked up for dinner on horseback. I mean that actually seems reasonable to make like they have stables, they have stables on property of And I think it was it was the tone with which the couple asked to be picked

up my horseback. It was completely dead path. You know, there's this port to share and all the cars driving, so this beautiful opening at the hotel and they were like, oh, you know for Jenner tonight, you know it'd be nice and sort of our car to have us, you know, pick us up. Let's just have some horses. That sounds reasonable. Works for me. It works for me, And I'm just going to tell you. You You know, folks out there, you know you've done this. Those satin hangers and those towels.

People still five hundred pool towels a month from that hotel. You're not alone in doing that. The hotel takes that into consideration. Brandon. We have to run. Always fun when we get to see your next ventures and where you've gone behind the scenes. So really appreciate it. Bloomberg contributor Brandon press Or check out his latest work. It is the opener in this week's Pursuits section of Bloomberg Business Week.

Fund it online on newsstands on the terminal some really fun artwork as well to accompany this piece, Brandon, Thank you. Chris Rousers. Going to stick around with us as we go through the rest of the Pursuit section. Wrap up our program On the other side, This is Bloomberg. You're listening to the Bloomberg Business Week podcast. Catch us live weekdays from two to five pm Easter on Bloomberg Radio, the Bloomberg Business Band. You too. You can also listen

live to our flagship New York station. Just say Alexa, play Bloomberg, E Loove and Verdi, or it's still with us as Bloomberg Pursuits editor Chris Rouser, And let's take a run through the rest of the section. So, Chris, Noma. This restaurant is iconic. Yes, it is said by many to be the greatest restaurant in the world, and many times right, many times over. It's won that award five times. And it's closing. So the Copenhagen restaurant, the original restaurant,

is closing. And they've been doing pop ups in Mexico and in other places, and they're doing another pop up in Japan in Kyoto. The first one was in Tokyo in twenty fifteen, and I remember it so vividly because our then food critic did an entire review in emojis. Oh my God. We sent her to Japan because this is such a big deal. It was our first pop up and it was so great. And so when the Noma team wanted to return to Kyoto to Japan, I

thought we got to get a preview of this. So we had Oscar Boyd, a Bloomberg writer, go talk to a neighbor, does that be the chef and other chefs and really learn what they're doing this time? What is it that's so neat about these pop ups that Noma does. Is it just really tapping into the area Sometimes yeah, yah, so the sometimes when Noma does a pop up, it's kind of like Noma but somewhere else. Yeah, And in this case in Japan, it's really looking at Japanese food

ways using Japanese ingredients. And you know the first time they went there, they were too nervous to do rice. They were like, it's such a staple, it's such a vaunted ingredient. If you like, if you screw, if you don't do something spectacular with it, then like people are gonna be like, what this is what we eat every day? So they're doing rice this time, but they're doing raw shrimp. There's a lot of mountain vegetables that they're foraging, a lot of seafood from across Japan. If you look at

the story online, you'll see the pictures. It's really beautiful, forgeous, like want to frame each to these pictures. It's stunning. And you know, I have not eaten at Noma, but several of our team members have and every one of them says it has been worth it. Don't people always say that? Come on, no, I feel sometimes you go to a rushtaurant, You're like, that is not oh okay, Well I have to say it looks fascinating, all right, from food to running. I can't make a good transition.

I didn't know about these running shoes that are actually it's a subscription. Yeah, so it's very it's relatively new. So On is a sportswear company. They make sneakers, and they wanted to start a recycled sneaker program, and so they have what it's basically a running running shoe subscription And for thirty dollars a month, you get a pair of shoes, you wear them until they wear out, you send them back. This end you another one. So you kind of just always have and you can do it

as as often as you want. So every two months, if you want a new pair of shoes, you can do it. Yeah. And Noreene Malik, who is a Bloomberg reporter who's a big runner. She loves to try out everything. She tries a lot of the fitness gadgets and she tested them out and So these are called the on

Cloud NEOs, and it costs thirty dollars a month. As I said, so about for every if you were switching them every six months, it's about one hundred and eighty dollars, which is a little pricey for a running shoe, but not crazy. Yeah, but you have to give them back and you have to give them back. Yeah, and they have those kind of curved soles that make you really bounce when you walk, so it takes a minute to

get used to it. But when Marine started running long races again after the pandemic, she said they were very forgiving and she really liked them. The issue is on hasn't figured out yet what to do with the recycled material, so you send it back, and this happens a lot in companies like this. UM they're like a business plan waiting for a solution. So they'll shred the shoes. It's it's usable material, but they haven't found like the final

use case for them yet. I love it. I love the idea and where they're going because this whole idea of like we've talked about right fashion, like how waste so that they're trying to figure in out running shoes are this is I mean, it is a huge It ends up being a huge amount of waste. Um, Chris, good stuff is always Thank you so much, The editor of Bloomberg Pursuits, Chris Rousers. The Bloomberg Business Week podcast available on Apple, Spotify, and anywhere else you get your podcasts.

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