Monopolies In The U.S. Have Threatened Our Democracy: Tim Wu

Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. A big question, especially as the big tech giants sell off today and exert an incredible amount of control over markets, is how much control should they have over the tech space?

How big should they be allowed to get? And weighing in on that as Tim Woo, Professor Law of Law at Columbia Law School, also a contributing opinion writer at The New York Times, author of a new book, The Curse of bigness Antitrust in the New Gilded Age, And just if people don't know who you are, your background is tremendous. You've worked in the White House, You've worked at the Federal Trade Commission, You've been a law clerk for Judge Postner and Justice Brier. So can we just

start with why did you write this book? Now? I think the time has come to start really engaging with these questions again, age old questions about how the US economy is structured and how much monopoly and oligopoly we allow. We face these questions before hundred years ago. I think it's time to face them once again. Is there a difference between a consumer and a citizen? Uh? Well, they're

you know, technically the same people. But I think that we have more interests than just our identities as as as consumers. In other words, I think some of the reasons you might want anti trust enforcement our citizen interests. That the political stakes of too much private control over political outcomes. Well, yeah, that was one thing. You sort of drew a parallel between monopolies and fascism and that basically democracy depends on a certain sort of equality of businesses.

Can you explain. Yeah, sure, Now, I mean this is a historic and they every monopolies a fascist enterprise. But there there is this there's this dark history I think where countries allow too much domination of the economy by monopolies, too much power centralized in private companies, have shown themselves

vulnerable to to to to dictatorship. Um. You know, the most strong examples were Italy in Germany in the nineteen thirties, and I think when people could really angry, if if, if their needs aren't meant, they feel that the economic system is completely unaccountable, they start turning to stronger, uh and more radical leaders. And I'm very worried about the politics of our time going in the same direction that

we saw in the twenty century. Do you see a time when there will be government action to break up companies such as Google and Facebook? I think we're do um. There hasn't been a major case in more than twenty years. And it was once an American tradition that when you have a dominant monopolist of company that dominates an industry like Microsoft, off A T and T al Cola standard oil, you go back that the adjustice Department would take a run at them. Uh. They didn't always win, but they

broke up a lot. So I would imagine we are do So I just want to push back a little bit because you talked about how big corporations can kind of exert their power over the political scenario in a

disproportionate way. Someone could argue that actually they could also exert their power, uh, you know, in ways that go against the political establishment and have a lot of power, whether it's uh, you know, reducing greenhouse emissions, which is what we're seeing, or whether it's increasing diversity among staff. So I mean there's a flip side of that too. No, yeah, no,

I hear you. It just depends on what kind of government you believe in, you know, whether you think that the decisions should mainly be made by private industry, which even if they make good decisions, you still have to wonder why is that their decision? Or if you essentially believe in democracy, which is more to do with with obviously with representatives making those decisions. So how do we get here? And how do of a regulator or a judge determine when a business has gotten too big? Yeah?

So I think we're in a There's been a forty year campaign to weaken and feeble that the antitrust laws. Um it has more success with the Republican Party, but has sort of spread to some degree to both parties. And you know, it was on the road the back. It's associated with Robert Borke, the famous almost justice of

the Supreme Court. Yes, it was borked, but his actually his effect was stronger than many actual justices because so he said he kind of rode the coattails of a movement that said the judiciary is out of control, and you know, VI Opposition Roe v. Wade, a lot of other things, and said, we need to uh. And I think what we've done is destroy something that was once very important to the U. S. Economy, which is a supervision of excessively sized companies and and and breakups were necessary.

As part of the theme of your book, The Curse of bigness Antitrust in the New Gilded Age. You right in a way about Louis Lewis Brandeis, former Justice on the Supreme Court. I'm wondering if you could just tell people who he was briefly and why you brought him into this discussion. Yes, so, Lewis Brandeis is probably most famous as Justice Supreme Court. He was also a key advisor to Woodrow Wilson the nineteen twelve campaign. And I think he is important for his vision of what the

economy could or should be. Uh. He saw the economy in in deeper terms. He thought the point of a democracy was flourishing of its citizens and human flourishing more generally. And so he said, you know, we really have to realize the economy is the biggest factor in most people's lives, and they need the economic liberties economic securities before this will be a place that people really want to live.

And sometimes I think we've lost sight of that. We're sort of upset with numbers and you know, did the Dow go up today or down? And you know what about what the economy does for what it means to be a citizen of this country. So which mega mergers do you see as being the most dangerous currently? That's a great question. I think there's a lot of mergers we shouldn't have let happen. I take the airline industry as a good example. I don't think other than shareholders

of airlines that that that's particularly good for passengers. Just have three major airlines. A huge number of hospital and pharmaceutical mergers I think have led to higher prices, worst care UM. In the tech sector, I don't think we should have let Facebook buy all its competitors. I think we've seen the fallout from that politically, security wise, from having one company with so much domination over social networking. UM.

You know, every day there's a new scandal. So I think we see the curse of business across the economy. And you know, I'm not saying something radical. I want to return to sort of the American tradition of of competition being our guiding light and decentralized power being how we run the country. Just to stick to a couple of luminaries, perhaps just so that we get a little bit of detail about how you kind of frame the book. Um, John Perry Barlow, Yes, people may not remember him, but

I've got the gray hair to prove it. Um. He really described a lot of these situations back in the nineteen nineties. Well, John Perry Barlow was a figure embellic of you know, sort of symbolized the nine nineties where everyone assumed that since tech was so different that we didn't need the old rules. You could never really have a tech monopoly. Everything was kind of in cyberspace, and you know, we need to throw everything out the window.

And I think that approach led us to ignore some of the more obvious anti competitive harms that we're starting to appear allow allowed. We basically let the tech companies have something of an immunity to the antitrust laws for uh for a decade. And I think now we're reaching a time of reckoning. So I have to wonder, you know, at what point is bigness? Okay, right, so how do you determine whether something is uh not too big or too I mean, it's sort of it is it is.

It's an important point, especially in a global world, albeit perhaps less so uh now than it was a year ago. Uh. And and they're big companies globally that are going to potentially knock others out of the out of the water if they're not big enough and have economies of scale. Yeah. No, I think that is definitely one of the hardest question. And I don't think it's right to just say, well, this company got big, so we better break them up because they're they're big, even though I called the even

though I called the book the Curse of Bigness. On the other hand, I think with the benefit of retrospect, of retrospect, if you can see how important it is to challenge companies that are no longer able even though they're big, to compete on the merits, but have resorted

to increasing numbers of abusive anti competitive measures. Um. You know, take IBM in the seventies, A T and T in the eighties, there were huge companies, and thank goodness, I think we challenged them and broke up a T and T because they had become almost like a parasite on the you know, they had started to block and control so many lines of conduct that no entrepreneur could get started.

So when you have a part of the economy you know that just has started to stagnate because of you suspect a company that is immune to competition and has began to suppress all its competitors. That's when it's time for antitrust take action. How close do you think we are to a dangerous tipping point with respect to how big the biggest companies have gotten. I think we're there. I think that we are in an unprecedented level of

concentration in the U. S. Economy. I think we've had a decline in entrepreneurship and innovation, and I think we're gonna begin to suffer seriously um from all kinds of sectors becoming places that new companies just can't get started, not to mention the effects on employees and suppressed wages. So I think we're there. That's why I think there. I think some of the populist political movements are actually reflecting the concentration of the economy, reflecting a sense of

powerlessness among the middle classes, and um. The historic trends all suggest that the moment has come to question whether we've let the private sector become too concentrated and too unaccountable. Thank you very much for being with us. Tim Wu was professor of Law, Columbia Law School. He is also the author of the new book entitled The Curse of bigness Antitrust in the New guilded Age, And whatever your perspective, it is worth reading because it enjoins the debate that

affects everybody's life and business. Tim will thank you very much for being here Long Island City as one of two new headquarters. And the big question has been how much will this impact the commercial real estate market in New York? Joining us now Leslie Wallman Himmel Co, Managing partner of Himmel and marrying off properties focused on New York realists eight. Thank you so much for being with us.

So let's just start there. I mean, do you think that this is going to have a material positive impact on commercial real estate prices both in Long Island City as well as elsewhere in this in New York. First, well, thank you for having me here. UM him all americoth properties that we buy office buildings in Manhattan and the boroughs, and we've had a partnership for thirty four years. We purchased a full square block in and with the theory

being buying in emerging neighborhoods. People in this last week have been saying, you were so smart. That's a long time ago. Thirty Yes, it's it's a building at thirty four two Queens Boulevard. And UM, I can't tell you how many phone calls we've gotten saying you're just such a you know how to buy an emerging neighborhood. Well, Amazon, the Amazon effect is going to be a multiplier effect. It's fantastic that they're gonna add jobs. And they picked

Long Island City. We've been thinking for the last three decades as we've watched the area emerge but very slowly compared to Jersey City, Hoboken, Brooklyn, that it should be developed. Is so close to Manhattan. You go right across the fifty Night Street Bridge, you go right through the tunnel. Um. The big story here as you watch tech stocks are going down, but the tech companies are expanding in New York. New York is the greatest city in the world to

help build careers. Amazon, Google, Facebook, they're all growing in New York. And it's definitely going to increase values in Long Island City. But that's it should have happened a long time ago. Now you have been part of I don't know how it maybe fifty a hundred transactions at least in New York, and I mean value over two billion dollars. What are the rents gonna do in Long Island City? Because I was looking at a report having to do with rents in Seattle right to kind of

measure another city that is obviously went through the Amazon transformation. Uh, last year, rents in downtown Sea, Seattle, we're about forty two dollars per square foot. Now, if you go back to two thousand and nine, I understand there's regular inflation and so on, they were thirty one. So we've got about,

you know, a ten dollar increase per square foot. Do you see that same magnitude of change coming to Long Island City and indeed even to Crystal City in Washington across the Potomac from Washington, where they're gonna put their Northern Virginia headquarters. The simple answer is yes. This is

a simple supply and demand UH equation. When you have an expansion of twenty five thousand workers and many residents that are gonna be living there, you have the multiplier effect that you're gonna have more people living there, more people working there. UM we needed that. If you look at the buildings I d C and Y Factory Felci UH related has to properties Paragon Blanchard. It's been a little quiet in the office market in the last eighteen months.

People bought an anticipation of being able to attract the tammy tenants UM paying mid to high forties. That hasn't really happened. Amazon coming to Long Island City is going to help attract many other offices. UM. We bought a property just to be granular a year ago in Long Island City on the right over the bridge, thinking we were going to make it into again a tammy you know, tech advertising, media and internet building, and we decided it was better to keep it as a hybrid between industrial

and office. UM. Reality is that's another emerging area that last mild distribution. Many companies that no longer are retailing or actually selling online, So that's going to be expansion in the boroughs are going to be for sure fraught with expansion in that narrow market as well. So when I take the seven train out to Queens and I go past this area, one thing that I see is just cranes everywhere and lots of buildings going up. And you know a lot of people have said that there

has been an overbuilding. Uh to a certain degree. Does this even it out? Oh? For sure? Um, I think you know, not only on the residential You saw the building is going up like mushrooms that we're just expanding, and I think a lot of people got awful, awfully lucky. Um. Although I do think that T. F. Cornerstone, who's going to be developing a lot of the Amazon, they were pioneers in buying all along the waterfront like fifteen years

ago and worked with the city to um develop it. Okay, one other thing, infrastructure, right, I mean, how important is it to improve the infrastructure, whether it's the subways, whether their parks. I mean there really aren't that many parks in Long Island City. There's the waterfront that's it. I mean, how important are sort of these aspects that perhaps the city won't have that much more money to pay for because Amazon isn't paying them that because they're gonna a

tax break. Well, there's always the ferries. That would be a great right across the right, but it hasn't necessarily evolved yet to the point where it's as easy as a subway. So what so how? I mean, how much do they have to develop that and who's gonna pay? For sure? The infrastructure needs to be improved. Um, I think though with all the residential buildings that are there, you may have a lot of people who prefer to walk to work. Um, those who are going to come

from Manhattan. You do have great subway access, and um, you know, there's always uber. You bring up an interesting point because there are going to be so many other businesses that profit from having such a huge anchor in the neighborhood. Right. We used to think of anchors as being big department stores in malls, But now you're gonna have all the ancillary services and products and companies that are going to be supplying not only Amazon but the

people that work at Amazon. Does that mean that this is going to be a much longer kind of increase in real estate value? Well, clearly, if you walk around Long Island City, there's very little retail, very little street retail. Um. I've spent a lot of time actually on weekends walking neighborhoods. Surprisingly few restaurants, surprisingly few venues there. They're starting to be that um more retails stores and you're gonna have

for sure restaurants, coffee shops, etcetera, all growing. It's like you have in Brooklyn. So how much will the trickle out effect be away from Long Island City to other parts of the boroughs in Manhattan really wants to know what's next, what's the next area that no one's discussed. That's great, what's next, but also, you know, does this

sort of boost the whole market? I think the Bronx is next sat An Island for last mile industrial, a lot of companies that need online if you will, distribution centers. That's going to be a huge expansion. And I think I said the last time you guys interviewed me that I think Midtown East is next. It's so out it's got to come back in happen disclosure, So we're out. It's just about the perspective. Anything you want to offer

us in terms of Amazon anything. We should that real estate investors should not get ahead of themselves when they hear Amazon's going there. I think it's all good news for New York. Um. And you know, we we all have to be mindful though, not to get to euphoric on news like this, because reality of numbers are numbers. Um. You know New York City's interest rates are going up and vacancy is around tem per cent here, So let's

not get ahead of ourselves. Um. The interest rates, I know you did a story and that before, have a huge impact on pricing. And uh, we're lucky. We we financed all of our properties in the last few yearsentary and a half percent rates and now we're looking at five percent rates. So well wait until the check clearance. I guess is a good A good motto. Leslie Wollman Himmel, thank you very much, co managing partner Himmel and Marong Golf Properties. Talking about Amazon dot Com they're coming to

New York. Well, we want to learn more about the decline in value of cryptocurrencies, and here to help us do so is Leonel Laurent. He is our Bloomberg opinion columnist, and he could knows everything about the world of bitcoin and cryptocurrencies. Are joining us from our London bureau, and of course you can follow Leonel on Twitter at Leonel R. A. Laurent Alright, why is bitcoin below five thousand dollars right now? It's down about three And this decline in cryptocurrency started

last week and it's continuing. It's like a thirteen month low. Why, well, hello, and thank you for the intro. We said I knew everything about bitcoin. I actually don't know it's it's it's value, it's price. No one does. And you say the set off began last week, maybe the most recent one did, But the bigger picture is it began this whole set off at the end of last year. This whole year has just been one long, massive decline. And to an understand why, we have to understand why it blew up

in the first place. And it blew up because essentially it was sold as a new, great utopian, disruptive investment that would take over the world of payments. It would become the new gold. It would essentially you know, make everybody rich, uh, and it would be you know, there for the taking for a retail crowd. While all the sort of fiddy duddy bankers would sit back and not get it. And like most dreams, you know, myths, you know, sales pitches, it hasn't come true, and it stopped coming true.

And that's what we're seeing right now. I'm happy to go into all the various things that have happened recently, all the news, the hard fork, the regulation, but for me, the bigger picture is it was it was a loser, a losing strategy to begin with. Well, let's dig in a little bit to the regulatory or i should say, the Justice Department probe into bitcoin in a number of

the cryptocurrencies. There was a story today talking about how prosecutors are homing in on a clutch of crypto currencies that potentially they may be alleging work together to manipulate prices. Last year a bit the incredible rally. How much is that contributing to what we're seeing today. Well, honestly, I'm not sure it should be, because this was again obvious

to us a year ago. It was obvious to us earlier this year when cryptocurrencies like Ripple would be you know, suddenly up you know, an incredible amount one day and then quickly sold off the next when we saw there were chat rooms where people would pump and dump small and new tokens um. You know, the news is that the regulators are actually waking up to this and getting involved, right, So the news is they're actually going to spend resources

trying to work out what's happened. I think, you know the fact that I'm looking at Tether, this kind of um, you know, coin that was supposedly redeemable for one real dollar um and was therefore used as a dollar proxy on markets to buy bitcoin. I mean, Tether still exist today, right, so perhaps what comes out of this has yet more impact on today's market. But you know, as as a picture, I mean again, you know, don't don't want to keep

on playing the same music. But you know, we we who sort of were skeptical year ago that these were real markets with real price discovery and with you know how kind of put itself regulation being proven right, Well, you can play the same music, just use a different instrumentally. And all the question I have is that whenever I asked someone to describe to me in detail, okay, what is bitcoin and show me how it works somehow or other.

And within the first let's say thirty seconds of an answer, the conversation pivots to blockchain, as if somehow, because they're in favor of blockchain, they can kind of downplay the connection to bitcoin. Have you found that as well, So again we have to think about this in terms of marketing. Um, you know, when when bitcoin was going through, because bitcoin has been around for a while, we we forget it's

been around for basically ten years. Um, you know, bitcoin has had these booms and bus before, and when corporations realized that it was not going to be possible to you know, get banks and regulated entities to deal with it, they began to sell the idea of blockchain without bitcoin, this idea that underneath it all there is a totally useful use case which is um, you know, I'm not going to boy with the details, but essentially lots of

interconnected databases that would you know, work in concerts and be Tampa proof, which again sounds like a great idea in theory until companies sat down and tried to actually implement it. And if it sounds messy enough to have you know, a dozen databases trying to work in concert at a company that is just trying to you know, sell a car from from A to B. Then you know, yeah, the reality was it was super complicated. So, you know, Bitcoin is the original blockchain, and it is one vision

of a blockchain. But you know, we have seen many, many reasons why this particular blockchain is not at all what it pitched itself to be, which was a kind of perfect decentralized, you know, Tampa proof kind of utopian mechanism for essentially handling payments. Well, it definitely doesn't seem utopian today as it continues it's plunge Leonell Laurent Bloomberg opinion calumnists, thank you so much for being with us.

Definitely been quite a swoon. It'll be interesting to see with some of those bitcoin hedge fund returns, will be considering that maybe what if they were leveraged. One concern that has been weighing down on these big tech shares has been the trade tensions with China, right, I mean, that's been one of the big issues, and that sort of brings us to the next topic, which is mergers and acquisitions. Cross boarder US companies looking to acquire Chinese

companies or uh or vice versa. David Willard joins is now founder and chief executive and managing partner of fifty two Capital Partners based in San Francisco and New York. David, you have a lot of experience both the mergeras and acquisitions and com Sacks and Cravat Swaine, but also uh with advising with China relations. And what do you see right now? How many calls are you getting from clients concerned that they will never be able to do another

cross border transaction? Again, those calls happen with greater frequency in this market at LISTA. It is a tense environment right now, the tariffs, the economic sanctions between the United States and China, It's unprecedented. We are in a new normal. I tell our clients the appetite for our services is interestingly increasing in this tense environment. Clients have a great

amount of uncertainty about the market in China. The domestic regulations in China are more onerous for US multinationals and private investment firms that are looking to deploy capital into China, and with that there's greater uncertainty. But that being said, we're seeing a lot of clients, a lot of US

businesses building a ground game right now. There is optimism that there will be a good probability of a rebound in M and A in t SO, M and A clients now are building a ground game in anticipation that the regulatory environment will improve. That's a really interesting development we're seeing. What does that mean when you say they're building a ground game, Does that mean they're hiring lots

of lawyers among that? Uh pam. It's a great point among that a lot of American businesses now in building a ground game or conducting massive amounts of what I call front end due diligence. Front End due diligence consists of conducting major reviews of the regulatory situation. In China, deals that haven't been you know, fully commenced are basically necessitating a lot of front end review and diligence by lawyers,

M and A advisors and corporates. That's a major change in the market from three or four years ago, when regulations in China were far less ownerous um. As a result, it goes without saying M and A deals now are more expensive. There's a longer lead time to putting deals in place, and with that, the costs of doing business

in China and doing M and A have gone up. Okay, So can you just give us a state of play as far as how much M and A you're expecting cross border between with the US companies buying Chinese companies and how that compares to the past many are we seeing a material slowdown and do you expect that to continue. It's a great point, and the data is really interesting, Lisa, and I want to mention one point, which is this there is a massive reduction across border M and A

which with China this year. The data bears that out interesting however, today there's been about eighty billion US in M and A with China. That is a massive reduction from twenty sixteen. But interestingly, the amount of M and A eighteen surpasses the M and A levels and volumes of fifteen in preceding years. So while there's been a massive reduction prior to the two preceding years, on a long term historical basis, eighteen has actually been quite robust.

And so notwithstanding the tariffs, the economic sanctions, the rhetoric, there's still is good appetite to find good deals and to get them across the finish line. And that's a really interesting point. I want to mention if someone came to you and said, I'm looking to do a technology deal, particularly in either artificial intelligence or some kind of cyber security industry in China, would you say take a number, come back in six months and then we'll talk, or

we'll just start doing something now. I would start doing something now. It's a great point. We we deal with this situation all the time in my firm, and it goes to the point about building a ground game. We don't know when the regulatory environment and China will change. There is a decent probability will see in t a

software environment, but that's a question mark. It's important for businesses in America who are sizing up the m and A landscape in China to conduct due diligence now to understand what the risk is that mofcom or major regulatory agencies in China will step into block major deals. That's a really important component for dealmaking today in China, and it's important to start that ground game now. So where which industries are you seeing the most interest in terms

of u as companies looking to acquire Chinese ones. It's a great point. Software technology still remain robust. Verticals notwithstanding the concerns around intellectual property, theft, data privacy, force, technology transfers. We see the headlines, that is still a concern UM, so that remains a robust part of M and A. In addition to that, we're seeing a lot of activity in non technology verticals, industrials, sustainability related verticals. Those are

getting a lot of attention in China. UM. Those have less of a sort of regulatory burden in China for the most part, and as a result, US businesses see those non technology verticals, particularly in industrials, is really attractive from evaluation standpoint to those industrials. Businesses in China are comparatively more attractive in this environment. And with that, private equity firms in the U s are dialed into identifying opportunities in those areas. Just quickly, give you twenty seconds.

Do you still have to know someone in the Chinese government in order to get a deal done? It's a great question. The short answer is no. UM. I believe it's important to have sound advisors in both the US and China in identifying ways to get great deals across the finish line in China. UM. Clearly, the regulatory situation in China is fascinating, but uh, not necessary from my standpoint. But great question, Pim, Well done, Thanks very much for

being with us and sharing this information. David Willard is the founder and the chief executive and the managing partner of fifty two Capital Partners. They're based in Silicon Valley and they also have operations in New York. Thanks for being here and thanks for listening. I'm Pim Fox along with Lisa Abramowitz. This is Bloomberg. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, sound Out, or whatever

podcast platform you prefer. I'm Pim Fox. I'm on Twitter at Pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio.