Bloomberg Businessweek Weekend - October 12th, 2019

in the magazine. It's such an interesting issue of the magazine, Carol, because I feel like there's an underlying theme, and it's all about the Silicon Valley notion of move fast and break stuff, the disruptors, and the implications of taking that as your business model. It shows up in Tesla, it shows up in Jewel and what we're seeing is doesn't always work so great, right some of the consequences as

a result of it. And I love the Tesla story in particular, it's the cover story, but it really gets into ethical questions that as we move into this self driving universe, how comfortable are we that we want this? But probably to get to it to full self driving, we're gonna lose some lives along the way. So what's the public's comfort hall with that? And speaking of Silicon value, we've got a deep dive into Oracle it's adventures, shall we say, in the cloud. And also economics taking the

and also economics taking center stage again. The risk of a global recession? What is it? And what are the risk of the recession closer to home? Well and right? And the US And and that's right, Jason, because the next US recession, it's probably not going to be homegrown. It's going to be the result of some geopolitical factors, some big macro story that's out there around the globe. So what will it be like and what can the

FED do to prevent it? First up, Carol. This week, Turkey launched air strikes, fired artillery, and began a ground offensive against Kurdish fighters in northern Syria. This came after President Trump pulled US troops out of the area, and that paid the way for an assault on forces that have long been allied with the United States. Republican Senator Lindsay Graham says the move will have dire consequences. The Kurds are the owned forces that destroyed the caliphate with

American air power. We've abandoned them. That breaks my heart. I hope the President will change his mind and readjust his policy before it's too late. Another busy news cycle this week, Jason, no doubt about it, and another geopolitical concern, and this one had to do with US policy in Syria. I feel like this took a lot of folks in Washington,

around the country, around the world by surprise. Well, and that global element is especially important because it affects other countries in the US relationship with other countries, none more so in many ways than Russia. Henry Meyer joins us from our Moscow bureau with some really good context his story. His reporting on the terminal this week has been key to understanding everything that's going on here. So there in your backyard, Henry, help us understand Russia's place in all

of this well. Russia has been looking to restore the influence at Hann in the Middle East, which was very strong during the Soviet era that changed dramatically after the collapse of the Soviet Union and really Putin. President Putin has had immense success in this field. The intervention that Russia did in Syria starting a few years ago, in which they succeeded in reversing the outcome of the Civil War. President Assett was on the verge of being overthrown and

he's now firmly empowered. This has been a great success. But what is happening now is that the US withdrawal from Syria is providing Russia and opportunity to really cement that situation in Syria. But it's not just about Syria. I think you're right that Russia has since filled the vacuum from Syria to Libya, even luring Turkey into buying um some military equipment. I mean, it's it's a much

broader impact here potentially, right for Russia. That's right. I mean, Syria, if you like, has been Russia's calling card in the Middle East. It's the reason why it's taken seriously now. But it's using that to expand its role in in many other countries. In Libya, there are increasing reports that Russia is backing the strongman in the East, General Halftar, and it is developing relationships with traditional US allies like Saudi Arabia. President Putin is due to visit Saudi Arabia shortly.

You mentioned Turkey. That's very important. The decision by Turkey to defy US pressure and to go ahead with buying the S four hundred missile defense system. It could be a turning point actually for that country's relationship with the West and with Russia. And so what is the most likely next move for Russia. You talked about President Putin visiting Saudi Arabia. Obviously that neighborhood as it were, has become very complicated. As you described, what might Russia and

Moscow do next? Well, their first priority is to try and use the current situation to its advantage in Syria, So it's trying to engineer a solution involving President Assad, the Koords and Turkey which would allow Assad to essentially reclaim control of most of the of the Kurdish area um. And then secondly, it's clearly going to be looking for corporation from Gulf country, Saudi Arabia and others in reconstruction

or Syria. It has very ambitious goals in terms of remaking its relationships with all the countries in the region. Russia has a very speci ific role in the sense that it keeps ties with all of the different countries,

mutual enemies. It's quite unique in that way. And that's Henry Meyer joining us from Moscow and Carol I thought that was so interesting in part because we've obviously been looking at this through a very US focus, Lens, but Russia is a major player in all of this well, especially when if we're creating vacuums in an area like the Middle East, which is so unsettled, it does provide an opportunity for Russia to fill that and you do wonder about the consequences UH in the future as a

result of that. This is an important story. The story of Jewel is not unlike that of so many esteem Silicon Valley tech startups that moved fast. It disrupted an established industry. We're talking about the cigarette business, that's right, and it has found itself in the middle of probably one of the biggest public health controversies we've seen in

quite some time. Lornetta joins us from l A. She is the co author of one of the really most spelling reads in the magazine this week, It's all about Jewel. I learned a ton from this story. Lauren, take us back to the beginning, because the origins of this company are fascinating. Yeah, absolutely so. Like many other Silicon Valley companies,

this one started at Stanford University. The two founders of the company were graduate students studying at the Business school, and they were smokers and they were sharing smokes out back and decided that, wow, this is a very outmoded product and maybe we can innovate on this. So that's what they set out to do. They did a lot of research, they launched their very first version of an east cigarette UM at a time when there wasn't too

much competition on the market. So they basically innovated in the cigarette space and launched what became the most popular east cigarette in the world. All right, but it wasn't so easy, right, because at first I think that the initial device maybe didn't work so well. It was hard

getting investor money to initially. Yeah. Yeah. You know. It's interesting because is at the time when they were seeking money, this is circa two thousand and five to two thousand and ten, when they were really starting to they have their prototype, they want to start launching it, and they kind of got the cold shoulder from Silicon Valley investors. Originally, this is considered the tobacco industry is kind of considered to be one of the sin industries, and Silicon Valley

really kind of shunned and shunned those sin industries. So they originally had a very tough time getting some funding. But that all changed, of course a little bit later down the road. And what changed it, I mean, obviously part of it was positioning, because they got people on board with this idea of no, no, no, no, this is actually an antidote in a way to what was

already considered then a public health crisis. Exactly. So two things, well, multiple things happened, but really cigarettes had just it was very clear that cigarettes were going to be a dying industry. Fewer people every year, we're smoking three percent declines year over year, and everybody was starting to turn away from cigarettes. But of course they're addicted. They are addicted to the nicotine. So that's sort of what the company founders really zeroed

in on. We can allow smokers to continue to have a nicotine fix, but it's not going to have the combustion that causes the tar and the lungs and is ultimately the cause of lung cancer. So they kind of positioned it almost as a more healthful product, as a healthful alternative to cigarettes, and that's really it started catching on. Um. But the second thing was really it's a very addictive product. Um.

They invented something called a nicotine salt vape liquid. And basically they had chemists early on in their laboratories and they devise this ultra powerful nicotine liquid and that for sure helped get a lot of people hooked onto their products. Well, and I think what is so troubling is how did so many teenagers, right those under age get hooked on a product like Jewel. Well, this is the thorniest issue

regarding Jewel. Um. But the fact of the matter is early on, Jewel laid out and marketing campaign that was pretty much designed to attract kids. It was super edgy, had colorful graphics, really bold, they hired models, um it just made it look like a very cool product. They marketed on Instagram and sure enough, too much to nobody's surprise, high school students eventually and meddical middle school students eventually

started trying the product. And the combination of the marketing and the highly addictive nature of the product really allowed this product or facilitated this uh facilitated the spread of this product across America and high schools and middle middle schools. Um.

So now you have millions of people addicted to it. Well, the other element of your story that's so interesting, as you say, like many other Silicon Valley starts, I think of something like Uber that just kind of came into the market may be ignored, you know, regulation in this

fast moving mindset. That was very much a part of the Jewel model, like just kind of get it out there, because from what I understand, and you're reporting along with Ellen Hewitt, is that there were folks within the company that were uncomfortable about kind of how fast they were ramping up into who they were ramping up. Yeah, exactly. They really adopted and embraced the model that is asked,

ask forgiveness, not permission. And that's we saw that with Uber when they flooded the streets with these on demand cab drivers, and then we saw it with birds scooters. That's why you trip over bird scooters everywhere on street corners. So they really they adopted that model like let's just get it out there as fast as possible. We need to really own this market as quickly as possible because it was rapidly becoming more competitive with a big cigarette

companies getting in it. So they really did. They scaled up super quickly. They were hiring lots of new people, they were producing the product at a really fast rate, and yeah, that did make people inside the company uncomfortable. All they felt like, wait a minute, let's let's slow down a little bit. Let's make sure our internal controls are adequate enough so we don't have any sort of

problem down the road. But there was constantly a mindset of growth first and then let's figure it all out later, which is a traditional silicon valley model. But when you have a product that has such a huge health implications, that's sort of that's where it got sticky Well and Lauren, it feels like also mindful of the fact that regulators

didn't really know what to make of this. Lawmakers didn't know what to make of it, so they had this moment that they could seize that while those were folks were figuring it all out, they were going to build a big business. Yeah. This is the most interesting aspect of all of this is when the cigarettes and jewels

started really unrolling unrolling their product. It was around two thousand and fifteen and the FDA had been regulating cigarettes and tobacco products now for several years, but when they wrote the regulation, they didn't include e cigarettes as a quote unquote tobacco product. So here come these companies that are starting to sell these highly addictive nicotine products and there's virtually no regulation from the FDA, So they had

a golden opportunity. Jewel and all these other cigarette companies, they had a golden opportunity to seize the market, to flood the market with as much as their product before regulators came in and kind of rain them in. So Jewel definitely exploited that, and all the other cigarette companies did too, and that facilitated definitely the rapid wildfire spread of the Jewel that we've seen over the past few years.

That's Lauren Eddar joining us from Los Angeles. This feature story, Jason, you and I talked about it a lot in the

news room. I think what's interesting about this one is I think we all just kind of take for granted Jewel in the marketplace, But this gets into the to Stanford, you know, graduates who worked on this, created this um, the troubles and kind of bringing it to market initially, but how they became really the major player in this market, and how they did it by flying really under the radar of regulators well and now very much front of

mine for regulators. And very much front of mine. I feel like in the broader public conversation, this happened very quickly. It's a fast moving story, and this is really important context and full transparency. Michael Bloomberg, the founder majority owner of Bloomberg LP, the parent company of Bloomberg Radio Bloomberg Television, has campaigned and given money in support of a ban

on flavored East cigarettes and tobacco. So, Jason, I think safe to say that increasingly we are seeing medical research tap into using the human body to figure out what ails it. Yeah, I was struck with this story. You know, we've talked a lot about immunotherapy when it comes to fighting cancer. That brings us to a story in the Tech section about really harnessing the body's garbage disposal. I love the imagery here. It's technical, but even I understood

it after reading it. Rebecca Penty joins us from London. She's got the details. So, Rebecca, what do we talk about here? So for a long time, scientists have known about the body's own garbage disposal. This is at a molecular level, when when the body realizes that there's proteins that are malfunctioning, that are bad proteins or just simply

proteins that it doesn't need anymore. It sends out these compounds that actually collect those proteins and break them down and either junk them or recycle them and create new ones.

And so for years, for decades, scientists have been trying to figure out could we actually use that that system and harness it in a way that would allow us to go after diseases, because keep in mind, most diseases are really just clusters of um of proteins that are clumped together and that are misbehaving in a way, and they need to be broken up, and most traditional medicines really make them, you know, kind of put them on pause,

pause their growth. In this new way of thinking, in this new technology, the drug companies are testing treatments that would go in and piggyback onto the body's own garbage disposal units and target those bad proteins and get rid of them. I feel like it makes so much sense, and I think they call them degraders. Right, So talk to us about what's going on in the medical world, who's working on it, who's who's doing the cutting edge research, Because it sounds like some big drug companies are also

getting involved. Yeah, that's right. It started out as an idea that came out of Yale University, and then it turned into sort of a fringe area of medical research. It was very difficult for scientists involved in the early stage to get funding. But earlier in this past decade, what scientists started discovering is that some of the most successful drugs, so Revlimid, for example, it's a it's a multiple my aloma cancer drug, functioned by blocking the body's

own garbage recycling unit so or process. Rather, so they discovered that these drugs work by blocking that process. Now scientists started to think, what if we could do the reverse and what if we could harness that process, and so in around two fourteen, two fifteen was when things really started to take off. And since then all the

big drug companies as well as some smaller biotechs. So if you think of the big guys like Beer and em Gine, Novartis, they're all involved in testing these new treatments targeting various cancers, Alzheimer's, you know, pick a disease, you name it, they're looking at it. Um this this could have broad, broad appeal. Is worth mentioning that this is still very early stage. Um. Only a few of these drugs have hit human trials and a few more

going to hit human trials in the coming year. So it'll be a few years yet before we find out whether this treatment, this type of treatment is really effective and safe. But there are high, high hopes. And so, Rebecca, what was the breakthrough moment in terms of moving it from the fringe to the mainstream. I mean, obviously the answer would seem to be there's some commercial appeal, that's

why these big drug companies are getting into it. But as you said, initially when it was coming out of Yale or when the research was happening, there weren't a lot of takers and a lot of skepticism about whether

this could even be a thing. It was. It wasn't one moment, but it was a series of discoveries with regards to drugs that were already on the market that they either found out they worked like REVLEMD the litamide, which is a predecessor drugs to revlement that they either worked by blocking the recycling process or they actually worked by using the recycling process. You know, sometimes drugs we don't actually know why they work or how they work.

But they work, and then scientists go when they reverse engineer that and try to figure out how does this work. So in around thousand and fourteen, thousand and fifteen, two thousands sixteen, they were discovering that a lot of the most popular drugs were working by tapping into this garbage disposal system, and so scientists started doing more targeted work, thinking, Okay, what's the protein we want to go after to cure,

you know, prostate cancer. If we've got a patient who is not responding well to traditional hormone treatments, could we start going after these proteins piggybacking onto the the garbage recycling process, and that's what they're doing. So various biotechs are doing different things. Some are doing more kind of experimental work, some are trying to just improve existing drugs, like the prostate cancer treatment. And that's Rebecca Penty joining

us from London. This was an interesting little story, I have to say, because we've talked a lot about immunotherapy, but this whole notion of the garbage disposal. It was a technical story in many ways and ultimately kind of simple, yeah, very simple. And what's interesting is we increasingly in the medical community about using the body to combat illness disease, and these protein degrade ers. They could be one of the most significant advances in drug making technology in decades.

Everybody's all and it may take some time for them to come out. They're still in the early stages. But I think fascinating about the possibilities. So getting to a world with self driving cars could be in a world where we save lives. Getting there, though, is probably going to require losing a few lives first. It's a predicament. This story really struck me because it is a very twenty nineteen story in the sense of technology and ethics and are very humanity all colliding in one story. Zach

Miter is here with us. It's all about Tesla and its efforts to create the ultimate self driving car. What's going on? So a lot of companies are trying to build driverless cars, and the promise is that set aside all the other good things that might come with driverless UH technology, it could has the potential to save a ton of lives. Something like thirty eight thousand people die every year. It just in the United States, more than a million globally, and most of those UH fatalities are

caused by human error of one kind or another. So if you can remove somehow keep the cars but remove the human error, there's just massive life saving potential. Well, and that's the predicament, right that in order to get to that point. Unfortunately, we're going to see some accidents as people continue to test auto pilots correct because they need the data to get better. Well. So Tesla is taking an approach that's totally different from everyone else in

the autonomous industry. Almost everyone else is basically saying, we have to be really careful about safety. We're going to try to build an autonomous car that works autonomously before we really like start producing it in large quantities and selling it to people, and we we have to sort of get it perfect or almost almost perfect before because otherwise the concern is the public is gonna react, They're going to freak out, they're gonna ban these things. It

could be a big problem. And then there's Tesla test is taking the total opposite approach, which is saying, listen, we don't have autonomous technology yet, but we have this stuff that's like pretty good. You have to oversee it. It might sometimes make mistakes, but we'll just tell we'll just sell it. We'll put it in the cars, and we'll tell the customers. You have to oversee this thing

at all times. You have to constantly supervise. It only works on highways basically, but it works pretty well on highways. You can um without touching a pedal or or the steering wheel. You can drive for miles. You got in a car, correct, that's right? And what was it like? Yeah, walk us through that. It's it's creepy, you know, it's

a it's a creepy feeling. It's very different from cruise control because it's doing all this stuff without you and you you get to see kind of what the car seas, right, so you can you have a little video screen that shows you, you know, if you drive along and there's a bicyclist in front of you, it shows an icon

of a bicyclist. It's recognizing somebody on a bike, or it's recognizing a truck, or it's recognizing a car, and it's making decisions about what these other objects are going to do where the road is, and it's it's driving. And so Tesla's approach, just so we totally understand it is this notion that they think you need a certain amount of data that can only really be captured in real life situations, Like, what is there? What's their approach here?

Help me understand that their approach is essentially they think that to get to a fully driverless car, rather than kind of keep it in the lab and perfect it and get it right, they're going to put something that needs human supervision into a car they can sell for money, right, and get hundreds of thousands of them on the road. So there's like more than half a million of these cars out there today that you can use autopilot on.

And the theory is it's a little bit like the Google search engine, right, which kind of gets smarter every time you search on it because it sees how well

it did in giving you the right search result. There's a Tesla claims that they're doing a similar thing with their cars, that they're they're actually collecting data from all these cars and they think that they claim that that will allow their their software to improve faster than the competition, because the competition, um the other the other companies using

developing autonomous vehicles are doing it mostly. You know, they've got a hundred test cars, six D test cars, there Tesla's got you know, hundreds of thousands on the road. I have to say one data points stood out for me zach test. The customers have logged more than one point five billion mi is an autopilot, right, and they're often pushing the limits, even though Tesla says, you know, you have to be aware, you have to be you know,

in control at all times. We know, we've seen the stories of people doing other things while driving their Tesla. But at the same time, Tesla takes that data right and they can continue to refine the software and then spit out upgrades right to these cars. I mean, this is kind of a constant loop that is going self learning. Yeah, that's the theory, right, But this is also a company

that up until very recently sounds skeptical. I think, you know, I think we have to be skeptical of all these companies and and try to kick the tires as it were, about you know what they're claiming, and it's it's uh, it may just be a coincidence. But Tesla until recently was telling everyone that it was going to become super profitable by selling the you know, by by building the first kind of mass market electric car. And selling those.

It's building the first mass market electric car them at three, but it's not profitable yet. And so now the focus is kind of in this new direction. We're going to get to autonomy. First, we need more time from investors more well, what about its safety record? What do we know about that? Because if this is this is what everybody's concerned about, and if Tesla saying, hey, listen, we know the way to do it by throwing a ton

of cars on the road, what is their safety record? Right, so you would think that, um, you you would think that, uh, it would be relatively easy to tell because there's so many miles that they've already got under their belt. And Tesla has of course such a good data about what all these cars are doing. It's constantly talking to all these cars. Um. But it's actually a mystery to outsiders exactly how dangerous this technology is. Regulators have basically up

until now not um taking any action. They open and they open a defect investigation that closed without you know, ordering a recall or forcing Tesla to make any change. Just um, but it's actually quite hard to figure out how safety these cars are. And you know, the kind of UM positive case is that Tesla says, Look, humans are always supervising these cars, so you have all the safety of a human driver. It's just that the car is doing things to help you write almost like almost

like analoc brakes or something. It's it's it's just the safe and added its additive safety feature. But um, the skeptical case says, when you take so much responsibility away from the driver, uh, they get lulled into a sense

of complacency and they get distracted. It's actually very difficult to pay attention to supervising system that's working, that appears to be working perfectly well on its own right and so and this is a problem that airlines have had for a long time, as autopilot on airplanes is so good that you know, they sometimes just get distracted the pilot zone out. Yeah, and you mentioned regulators. What's the issue with regulators? Have they just not caught up essentially

to to where the technology is? Can they not fully essentially comprehend where to go next? What what happens with them? This is a very different issue than the ones that um, federal uh car regulators are used to. A more kind of straightforward problem for them is, you know, company makes tires, the company that the tires fail, People get an accidents, something that you could kind of identify on a test track, right, breakston't work, the steering, steering doesn't work, something like that.

That's the kind of straightforward problem that regulators are very well equipped to handle. This is is it's a little bit more like an experimental pharmaceutical. There's potential life saving opportunity, but it also might have deadly side effect, and you have to kind of weigh those things, and it's very hard to know that on a test track. You really have to put it out in the real world to find out how it's going to react when another car

does something weird. I love that parallel that you make that you know, we do have a model for this industry, for the self driving vehicle industry, and that is the drug industry, right, because they do go through various phases of testing these ultimately on people to see if it works,

and sometimes it does and sometimes it doesn't. Right, And so there are people who are who are following the autonomous car industry who are saying we need to um to equip regulators to essentially act like the FDA does and have kind of a series of phase tests that are overseen by somebody outside the company. The Tesla Story the cover's story, one of the future stories in the magazine as well, written by Zach Mydor. This story he drove around in a Tesla Model three. He gave us

his firstand experience of what it's like. But as we talked with Joel Weber, the editor of the magazine, what's great about this story is it really does look at the ethical dilemma we've talked about, like autopilots having to make a choice between maybe somebody with a baby carriage versus somebody walking a dog. But this takes it even deeper. How willing are we as a society um going to

be comfortable with autopilot? We want it, but are we going to be comfortable with losing some lives along the way to get to that end? And there is, Carol, a really strong connection between this story and the Jewel story all around the regulatory framework, the ethos of Silicon Valley in a lot of ways, and some big questions that I think we're all wrestling with in terms of the role of big tech in our lives. This story

was among the most read on the Bloomberg terminal. When it came out, we talked about it so much on our daily radio program, and it was looking at what the next US recession might be like. And it will probably be like no other, right, we always talk about this time will be different. It's beginning to feel like it actually may be true when it comes to the US economy. Christina lind Lad, who oversees the economic coverage

in the magazine, here with us about this story. So give us the potential shape of a recession even when it ever comes. Well, they're usually from history. We know that they're triggered by a spike in inflation followed by a spike in interest rate as a FED intervened, and then that causes an unwinding of you know, either economic um you know, excesses or financial excesses. But this time, inflation is low, the FED is cutting, and we don't

really see any bubbles. You know, stock prices don't really seem to be you know, out of out of sync considering that that rates are still low. So what is going on? Why is there so much talk about recession? And basically, as we joked around this week, it's geopolitics stupid, you know, it's it's it's coming. It's sort of an external shock that we kind of self induced because we

started this trade war. But it's causing so much uncertainty that businesses are are not investing or not spending and creating new capacity because they're afraid that their supply chains going to start unwinding and lower interest rates by the Federal Reserve. I mean they're already low, you know as we as we sit right now, but even lowering them, that's not going to necessarily give businesses the confidence, right Christina to go out and spell. So it doesn't change

I mean, it doesn't change the outlook. I mean, it may weaken the dollar, which you know that would be helpful, but it doesn't materially change you know. It's basically you know what we call the fog of the trade warld right, well, And we talked so much about the strength of the consumer amid all of this, and there is this notion that at some point, if businesses do curtail spending by curtail hiring, people start to get a little bit more

worried about their jobs or promotions or bonuses or raises. Uh. But we don't see any signs of that yet, how is the consumer looking amid all this? The consumer is feeling pretty good because the consumer was you know, kind of late to harvest the fruits of this tenure um expansion, you know that we've been in companies and other investors

felt at first. So wage growth has been ticking up in in the you know, in the recent year, you know, and hiring, you know, even though there's been a little bit of wobbles, is still a pretty you know, on a high sustained pace. So we don't see yet that

the consumer has lost their nerve. But that really is going to be one of the things that people are going to be looking at the next year, and they're when we get hiring and how companies, because the feeling is that at some point the trade wark will may cause companies to start, you know, really um dialing back on hiring, right, right, if they start to look for ways to cut costs, right they either or let start to let people go, and then it just kind of

all snowballs from there. I mean, the odds of a recession. I mean, I feel like we keep seeing different polls of you know, maybe a little bit higher than they were a year ago, maybe a little bit lower. I mean kind of go back and forth. Actually, bloomber Economics said there were higher than the beginning of the year,

but actually lower than during the summer. So people are looking at a twelve month horizon and are seeing you know, Bloomberg Economics, for example, says less than chance of ever recession. I think the highest you see. The big one big wild card is whether Trump would go ahead and levy UM tariffs on the remainder of Chinese UM imports that have not been tariffed yet. Some people say that if

that happens, it's inevitable. Well, and we've certainly heard from FED chief J. Powell right who has talked about They seem to still be optimistic about the outlook and say that there's no reason why this expansion can't continue except for these kind of macro factors, and they often point to trade at this point right at the same time, though most people expect that they will cut again, you know, at the at the meeting at the end of October.

And that's Christina Lynn Blad. She oversees all of our economics coverage at Bloomberg Business Week. Carol always loved getting her perspective. It's global and also has a lot of context about what's happened before and what actually, I know, we say this all the time, may be different this time right, And this story really digs into what might cause the next US recession. It's been a long time in coming, we keep talking about it, and yet it

hasn't happened. The expansion continues. What's interesting about this story is that it might be different this time around in terms of what causes a recession here in the United States. It's been the talk of the global IPO circuit for years, the saudio around co I p O, and after several falls Stars Jason, it seems to be finally finally happening. Well, this one is such a collision of politics, economics, financial markets, investment banking, and of course the global energy market. Will

Kennedy joins us from London with the latest. So we'll remind us where we are now and a little bit about where we've been. So this was first suggested by the Crown Prince Society Arabia back in twenty sixteen, and he stunned the world actually when he announced it by saying that this company, Saudi Aramco, which had been part of the Saudi state for decades. He was going to do an I p O and a billions of dollars and bring it to global scrutiny and open up its finances.

Then it went away for a while. They have been talking about listing in London or New York, but investors bought really that the valuation the Crown princes had put on the company of two trillion dollars, which is, as you know, double what even the Microsoft or Apple. Currently the world's too large as companies are worth. All of a sudden has come back, but it's come back in a slightly different form. It's going to be listed in React only. They're going to sell one or two percent

of the company. And it seems that they've got the backing of some of Saudi of Ages, Saudi Arabia's richest people, richest families, and at the moment they think they can get that two trillion dollar valuation. Well that's what I think is also interesting. First of all, in terms of the listing, well, it's not like it's New York, it's not London, it's not Hong Kong. They're doing it on the Saudi Exchange. And I do feel like even though it's going public. The Saudi government will still have a

lot of oversight here. That's exactly right. I mean, the the rules on transparency are not quite the same as they would have been in New York. For example, I'll give you one example of that. In New York, sec regulations mean you have been very precise on your oil reserves as an oil company, how much is ready to drill now, how much might be ready to drill in the near future, and how much is still pretty speculative. They won't have to do that, for example, listing in

the read UM. They will be able to encourage Saudi banks to lend to potential investors, both large and small. And the Saudi government actually has a history of when there's an I p O in read it tends to encourage some intervention in the market to ensure that the price stays buoyant. So it's not quite like an IPO would have been in New York or London UM, but it's still a very vay by exercise, and they will be marketing the equity outside the AD to international investors

who want to come in through that mechanism. There will be a one four for a mechanism in New York for example, So it will be there for international investors, but it's not the same as the New York listing.

Hell well, and when you go back and think about where the world was in sen what the world thought of Saudi Arabia, Saudi Arabia's place in the global economy and the global political scene, Well that's changed pretty dramatically, not just for Saudi Arabia, but specifically for a Ramca was targeted by some Iranian made strikes missile strikes not too long ago. How has that changed the perception of

this deal. Yes, this is a world class oil company and operationally it's probably on a par with excellent Shell, but it operates Jason in a wholly different political situation. And we see that in several ways. This attack from drone strike, people aren't sure exactly what it was, a missile strike, showed the very vulnerability of the Saudi energy system and the fact that it's in the world's most dangerous neighborhood. And that's going to presume in the encourage

investors to perhaps apply some kind of discount. And then you've got the political risk associated with Saudi Arabia that was illustrated by the murder of Jamal Ka Shoggy, So investors are going to have to take those things into account when they assess the I p O for for sure.

I do also find it interesting in you I think mentioned this or references earlier, that some of those are some of the investors who were once under house arrest by MBS right, who are you know, kept up in that hotel a crackdown on corruption in they are now

being asked to be potentially anchor investors. It's just kind of interesting to see how it all works friend and foe, it feels like at the same time in terms of relationships in Saudi Arabia, I mean from from the Crown Prince's point of view, he probably thinks that's the legitimate way to go, that a lot of these families, a lot of these people had managed to construct fortunes on the back of perhaps favorable contracts with a savvy state, and that it's legitimate to ask them to take part

in his program of economic reform. But perhaps one way of looking at the deal as it's structured at the moment, as it will move a very large sum of money from the pockets of private Saudi investors, whether those are big millionaire and billionaire families or indeed smaller individuals who will be asked to subscribe in a big retail offer from private pockets and Saudi Arabia into the coffers of the Sovereign Wealth Fund. And it's a way of financing

the Prince's economics ambitions. This public investment fund he has to both drive economic change inside Saudi Arabia and invest in companies outside Saudi Arabia. Well and well, I'm so glad you mentioned that. I believe it's called the PITH, the Public Investment Fund, which obviously will stand to gain

huge amounts. And by virtue of that, you've got global investors in private equity and hedge funds and other types of funds just licking their chaps at the prospect of this huge new pool of money, not to mention the investment bankers who are signed up to work on this deal. So it has financial ramifications far beyond the Kingdom, it does. I mean, it's worth dwelling on the banks for a minute. I think, Jason, there were more than twenty five banks

around the world manddated on mandated on this deal. It includes all the giants of Wall Street Goldman Sacks, JP Morgan Morgan Stanley UM and they will make good money outside from this deal if and when it goes ahead. But also, as you say, it's sort of kicks off more transactions because that capital will then go through the p I F which will invest it in places outside side of the Arabia in private equity funds. So there's a lot of transactions here from people for people to

make money from. And don't forget this is just one side of the deal. There was a deal last year which isn't yet completed, where a RAMCA would buy from the p IF stake in the Saudi Arabia's chemical giant Sabbok, and that money is also going to p IF. So when you take both deals to David, you may be looking at something in the region of a hundred billion dollars. That's Will Kennedy. We caught up with him in London, Jason, and this aroundco I p O, it's been the talk

of the global IPO circuit for years. Finally seems to be happy, but lots of questions about the valuation UH coming to market when the price of oils and as high as it's been in the past and I do think it's also interesting in terms of the exchange. It's not rolling out in London and New York, it's rolling

out in Saudi Arabia well. And there are also all of these questions for investment bankers, for politicians, for investors on the other side of this who are waiting to get their hands on the proceeds of that I PO For years, Oracle has been making promises about its potential footprint in the cloud, and yet Jason, it has not quite happened yet well, and so much drama going on there in the C suite as well as just around this marketplace, a different sort of see the cloud, as

you say. Nicole Grant joins us from San Francisco with that story. So what are oracles ambitions and how are they playing out at this moment in the cloud? So first I want to unpack a little bit what the cloud is and what we mean by the cloud here. So there are three parts to cloud computing. One is where Amazon and Microsoft dominate, and this is renting computing and storage from a network of server farms around the world, and this is the market that Oracle has struggled the

most with. And then you have you know right above that sitting on top coding languages, databases, UM and other tools that organizations use. And then at the very top of of that cloud pyramid you have applications. Think of these like your smartphone apps. You know, tools that can help a business, for instance, manage its customers, or manage its human resources, manage its accounting. Oracle has for a long time touted its ability to play in all three

of these markets. The companies started out being very strong and databases, and then over time it developed and acquired many applications. But this bottom layer, where Amazon has been the pioneer and really shown what's possible, Oracle has struggled.

And right now what we see is the company deciding to de emphasize UM this part of the market basically using its cloud infrastructure, which is the name of the bottom layer, in order to be you know, the hosting site for the rest of the tools that they actually think UM they can sell to customers and make a

mark in the in the industry. So tell us what happened here, because they certainly put a lot of efforts a lot of money, they kind of put this whole cloud group separate from the rest of the company was kind of a kind of a hit place to be in terms of working. They got engineers from a lot of the other Silicon Valley companies. So what went wrong? Mm hmmm. So Oracle basically old, you know, a colony within itself, and it was based up in Seattle. It

still is up there. It's led by a man named Don Johnson, no relation to Melanie Griffith sex husband Um. And the idea was to find a lot of people from the cloud diaspora up in Seattle, people who had helped build the Amazon Web Services cloud, helped build Microsoft Azure UM and get them to really make Oracle competitive in this market. And so starting in it began a process of hiring lots of people and it ended up

being thousands of people UM. In terms of budget, you know, there was a lot of flexibility for them to pay staffers a lot of money. Mid level product managers were offered seven hundred fifty thousand UM. Engineers who were senior with vice president titles were sometimes paid more than five million dollars in total compensation. This is all from a company that, by Silicon Valley standards, is thought of as thrifty UM. Oracle generally doesn't give races to employees from

year to year. Uh. The company also never tops any any lists in terms of compensation in the valley, like you know Google and Facebook and other companies we can think of. And so they gave these engineers um lots of resources. They gave them these beautiful offices up in Seattle, UM with you know, lots of whimsy that you don't find at other Oracle offices. Uh. You know, massive chess sets for instance, and game rooms and pool tables and

doctor who telephone booths. And you know, the prompt was make us a cloud that is competitive, and also make us a cloud that you know works best for Oracle applications and Oracle databases. And you know what we saw

is that group grew to be thousands of people. UM. Larry Ellison, the co founder and chairman of Oracle, placed so much trust in Don Johnson that he actually decided to reorganize Oracle and take thousands of staff members away from Thomas Curian, who had been seen as his technological air. His last job at Oracle was being president of the Product Organization, the only president that the company had at

the time. And he, you know, gave those cloud engineers to Don Johnson and this group in order to expand it further. And that's Nico Grant joining us from San Francisco. I really love his reporting about Oracle. It's so in depth and this story really captures a lot of what was going on at the company in this ambitious effort to really make a dent, as it were, in the cloud business. I also love that Nico went into the

three layers of the cloud. If you really don't understand what's going on, he laid it out so clearly, so I gets an important read, a must read. So time for check on pursuites lots of stories to get us all ready for the colder weather and for skiing. It's ski season. That's very excited. We caught up with the CEO of Veil Resorts actually last week when we were out in Colorado. Here with this in New York City is Chris Rouser. And one of the things I guess

we may be doing is ice polo. You maybe watching some polo on the ice. We were closing this. Every year we do a snow special, so skiing, snowboarding, um, you know, winter camping, and as we were closing it, it was eighty degrees in New York City. We were like, this feels crazy, but it's snowing out west and it's

time for us to think about the winter. And one of the best, most crazy events during the winter around the world is the annual snow Polo in St. Maritz And it happens after Davos, and so a lot of people just hop in their private jets and go there. And it's sponsored by net Jets and Maserati and some other really luxury companies. And it's just a three day weekend. It's a polo tournament. They clear off the ice and they play polo all weekend and it's champagne and for

and parties and bling the whole thing. It sounds a decadent. It's it's nearly over the top. It's the first time and we cover luxury. And I had not heard of what they call a caviar bump, which is when they spoon caviar directly onto your fist for you for you to eat it that way, which you know, caviar on flash is a thing. But I had not party like you can go you can get beers and brought worst or you can have somebody you know, put some caviar

right right hand. Well, and that is something that jumped out at me is that this isn't even though you have to get the stand words to it, like they it's not just for the ultra decadent wealthy, like you can actually go as a like a regular. Yeah. So it's you know, it's one of the spots on sort of the global ultra high net worth calendar. But what they're trying to do is also make it accessible to anybody, so you can actually go and if you're there, you're

a local, you're living nearby, you can go for free. Actually, although tickets in the grandstands can cost up to almost seven hundred Swiss francs. But yeah, yeah, you can go, get a beer and just sort of watch this crazy sport of kings. It brings in a lot of money to the area too, right, Yeah, it brings in like twelve million francs and it um you know, they get a lot of money from sponsorships. Uh, and they you know, once they stopped doing it one year, they immediately start

planning for the next year. Well, and the other thing that struck me as just the mechanics and the logistics of how to put on a polo match on a frozen lake? Is it is what they're doing right? Yeah, so it's about three thousand tons of stuff, of tens of grandstands and stuff on the ice. The ice is about twenty six inches thick, so it's totally fine and a polo u the polo pitch is actually smaller than a normal pitch. You can get closer to the games.

They call them Chucka's and I was like, the horses must slip right like the man uh, And actually they don't. They give them special who's that have studs in them and braces to protect them from injury. But the you know, the only sort of injuries are stopped they actually have as usually from people getting hit by mallets, which is actually kind of something that can happen in any standard polo. Yeah, right, a standard hazard of polo. But it's a big business event.

Like I think about the sponsors that get involved. I think you guys talk about Maserati, right, They organized kind of some driving things around the Maserati will do like a snow driving test drives and they say they do about twelve They do about a dozen deals every time they do this, so they're selling cars, people are selling clothes, and you know it's for net jets. They do about twenty flights in just that weekend. That's like a flight

every cup private for every couple of hours. And it's and and in town there's a bunch of festivities to writes, some like black tie events. There's a club they're called Dracula's Ghost Riders Club where they has that want to go to something shaped like a head of garlic, which now I have to go. Yeah, they have parties all weekend long. All right, So if you're not doing that, you're probably thinking about skiing. And everybody's always looking for the next place. Zermat is so yeah, I guess, So

what's the new place? So there is this place that's been in development since about two thousand seven called Andermatt, which is it was actually quite an old resort um, but it kind of fell out of use by most people in the eighties and it used to have a military base and the military base clothes in the nineties and so it kind of became very sleepy. And then this Egyptian billionaire named Sammy Sars actually looked at this looked at the place and was like, you know what

I could develop this. This has all the bones of an amazing resort. So he developed a hotel, the Hotel Chetty, He built a golf course, and actually he got a special distimppensation to allow foreigners to buy second homes there, which you can actually really do in Switzerland. Um. And so basically over the past few years it's become more and more of an international destination. And of course it's a cute old Swiss town, so it's got all the charm that want of a kind of like Shamoni that

kind of thing, but it's actually kind of untouched. And now they're replacing all the old lists with gondolas and stuff, and it's really an amazing place. And it's big. Yeah, it's really big. And they're actually connecting more fountains with with gondolas and stuff, so you can actually connect to

other resorts too. Yeah, because it says the interconnected c Ski area ultimately a d eight kilometers hundred twelve miles of slopes and thirty three lifts and just by way of comparison, it's two more lips than Veil, yeah, exactly, and some pretty cool hotels and places to stay. Yeah, So there's the Chetty, which is which is actually a small chain and it's quite big and glamorous and new.

But then there's some old ones like the Hotel Zone, which are have been around for a while and there even though the Chetty is kind of the big new thing, all the hotels are pretty sight because a lot more people are coming now. Well, and we should point out not all the locals are thrilled. It sounds like, yeah, this was kind of one of those throwback places, well hidden sort of secret gem for the locals, and people

do it and now it's solid commercial. Yeah, that's the story of a lot of these ski resorts, right, like Whistler, and now everyone's worried it's gonna it's going corporate. You know, they're all charming, they're all independent, and then as they get bigger, it's it's good for a lot of the businesses, but then it does lose some of the character. All right.

So um, speaking of characters, the puffer coat kind of getting a bit of a makeover, right, I think a puffer coats and you just feel like the Michelin Michelin man right, bouncing off of each other during the winter time. You make it fancy, you guys have some nice versions. So the question when it gets the winter and style that we get asked the most is like, what is

a cute puffer coat? Which is like kind of an oxymoron, and also the newsroom goes silent, right, Well, one that doesn't look this like Canada goose, you know, they kind of all look the same. They're gray, they're blue, they're black, and they have that same look. So we went out and tried to find, uh, some other puffer coats that don't look the same and that are sort of trim and tailored. So we found a few and I brought some in case you guys want to and we're going

to try and describe them for radio. And for those folks on radio, please go to Bloomberg dot com or buy the magazin check it out so you can really see the pictures. So one of my favorites is by this brand called Perfect Moment, and it's four dollars and it's got this like harring Bone red and blue and white.

I'm trying to sign like digital Harry's cute. It's pretty short though it's in the picture because you get jeans, so you will if you're going to ski you were Skypands with the you know, the ones that go at the top. And then one of my favorite new brands is called Aztec Mountain. They actually have the designer from Mooglaire is also which is a very fancy fashion brand. They also have that's Adjason kind of Yeah, this is this is sex? Are these like? Is this one you're wearing?

The perfect moment? One is for women, and then Jason they have for men and women like this little yoga a little yoga hands, little elastics that cover your that cover your hands, and so Jason's is all blue and that's seven but it isn't. That's like a technical like a puffer, but like more hardcore. And yeah, and that's called the Nukes Suit. And that's Strands for you. And then I have one call from a brand called mam Mood, which is eight hundred dollars and it is the blingiest,

goldest thing. Are you gonna put it on? I'm gonna put it on. Oh my god, it's going over alright for a bidden radio. Chris is putting it over, so I'm not going to lose everyone. Yeah, but it definitely um looks good. Yeah, and it's so warm. The second you put it on, You're like, this is warm and kind of like a solar panel too. Yeah. That's Chris Rouser, the editor of Pursuits and so much in this magazine, and Jason. What I love about it is there are

some really great deep dives. You and I talked a lot about Jewel, finding out how the company was created, its process, hard to find investors initially on um but it was a great deep dive. It's what the magazine

is known for. And I feel like the story with Tesla too, it took us in another direction well, and there's a lot of connective tissue between those two stories, and we have talked a lot about that with the editor of Business Week, Joe Webber and others here in the newsroom, because we do seem to be at this moment where we're asking a lot of questions about what big tech has wrought, what our responsibility is just as people and as investors and as human beings, you know

where this all goes and what the trade offs are as we really embrace these different advances. And speaking of questions, I mean there's questions about are we headed for a US recession and if so, what will ultimately cause it, and what can maybe the US Central Bank do to help us along the way to maybe stay away from

it or get us through it. The other thing in terms of questions Syria, right, and the change in terms of US policy, the Turkey invasion, I think you know, just added to the list of macro concerns that are out there. We'll be keeping an eye on all of that. And that's going to wrap up the Bloomberg Business Week Weekend Podcast. Thank you so much for joining us. I'm Jason Kelly and I'm Carol mass Or. Be sure to tune into Bloomberg Business Week Radio Live Monday through Friday

starting at two pm Wall Street time. And if you can't catch us live, get our daily podcast for the ride home. Check that out at Bloomberg dot com or wherever you at your podcast, and of course you can get this week's edition of the magazine on newsstands. Now, you know you want to see pictures of those puffer coats, right, you can see them in the magazine, but you'll have to go to Twitter to check us out modeling those

puffer coats. I'm at Jason Kelly News and she's at Carol Master and we'll be back right here next week. At the same time, this is Bloomberg