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Welcome to Bloomberg Opinion. I'm Amie Morris. This week we look at some of the bigger problems facing the US economy, things that reach beyond inflation and interest rates. Plus a robust job market has more young Americans skipping college and going straight to work, and how politicians can take advantage and the power of sleep. Scientists say we can be smarter, stronger, more creative if we just get enough zs. We begin with the latest shakeup at Ali Baba. It is highlighting
a problem for investors. Profit or growth. CEO Daniel Zang was supposed to be in charge of the holding company while also running the struggling cloud division. The board, though, decided to bring in a couple of company veterans and says chair and CEO. This with the backdrop of talks between the US and China. Secretary of State Anthony Blincoln says talks have been good, but there's still more work to be done.
I came to Vision to strengthen high level challenge of communication, to make clear our positions and intentions in areas of disagreement, and to explore areas where we might work together when our interests aligne on share transnational challenges.
And we did all of that.
Secretary Blincoln says, the trip has achieved its goal because the two sides were stored some senior level communications. Let's talk about it with Bloomberg opinion columnist Tim Culpen. He covers technology in Asia, and we want to start with the Ali Baba shakeup. Why is this significant? Bring us up to speed.
Well, basically, what has happened is Ali Baba has had a tough few years. They have six divisions. Five of them don't make any money. One of them makes all the money. But that big division, which is it's called Tawbo, it's the e commerce division. It's flowing down. And so what they're doing is they're splitting the company into six.
Essentially five of those will be able to IPO and up until you know, this past week, the same gentleman who was running the whole company, the kind of the mothership, Daniel Jung, was also running one of the smaller divisions, the cloud division, which is it's quite large, but it's unprofitable, and it's certainly smaller than the e commerce division. But in its wisdom, the board decided that's not a good idea.
They let him go and focus on the cloud division, which may turn profitable in the next year or two, and brought back a gentleman called Joe.
Say.
Now, if anyone follows Ali Barber will know that Joe is kind of an old hand. He's an old confidante of Jack mar who founded the company, and so he's coming back into the role of chairman of the group company so that the mothership, and I think you'll be a steady hand for the company. The mothership after the split will not do as much as it did a few years ago. It's more of a kind of, as I say, a holding company within with cash but not
really much direct operations. So I think his role there will be to be that kind of oldest statesman of the company, I guess, in many ways, and allow various division chiefs to do what they need to do to make each of their divisions grow and be profitable, which is not an easy thing right now in China's economy.
How are things going to be shaking out over the next twelve months. It feels like every few months we have a new twist to how they're going to try to remap this.
Yeah, that's very good observation. Amy. There has been a lot of changes happening in the last few months. In fact, it was only three months ago that they announced the big breakup, and that was not something that we really saw coming. Some media had reported it, but generally speaking it was not a rumor that was going around too much. And it's really part of this idea that Ali Baba has kind of grown too big it's hard to manage.
There is six major divisions, one of them brings in sixty seven percent of its brew and all of its profit more than one hundred percent of its profit. And the other five divisions, which are the startups of the company, things like cloud and logistics. They're growing, but maybe not
growing enough and certainly not becoming profitable quickly enough. So it's all part of this idea of making every individual unit responsible for its own p and L and forcing the management of those teams to find ways to either find growth, cut costs, whatever it takes to get to profit, because over the next eighteen months, many of them are going to list, probably in Hong Kong, and they will definitely want to show investors a very nice P and L before they hit the prospectives.
In your column on the Bloomberg terminal, you say that this could become a problem for investors, the choice of profit or growth. What is the response so far or have we had a chance to hear that response.
Well, the response really was generally quite positive to the breakup. The idea of the breakup was announced back in March and since then things I would say that people, you know, analysts and investors think, oh, it's not a bad idea, it's a good thing. But in terms of the way the stock goes up and down, there's bigger macro economic
issues at play in China right now. But really what they have if you're going to invest in any of the Aled Barber Group companies, and let's say by the end of next year they'll all be listed, then you're really going to have to choose between a profitable company or a fast growing company, because right now there is no company that is growing and is profitable, and that's really what it comes down to. And if you're an investor, you might say, well, okay, of course I want profit,
but if there's no growth, what's the point. And the reverse side is you might like to go for the high growth company, betting that will turn profitable in the future.
We do want to shift gears now. Tim to the Secretary Blincoln's trip to China, it seemed to start off kind of clunky, then it ended with some momentum, and then it seemed a little clunky again. Bring us up to speed on the response to that trip.
Well, I think the thing that you need to remember is that Anthony Blincoln went to Beijing setting a very very low bar, really low expectations. And you know how you know when you're an investor and the investor relations teams tells analyst earnings are not going to be that good. Maybe your estimate's a bit too high, and the analyst knocks it down a little bit, and guess what the earnings come out and it's a lot better than they said. Well,
that's kind of what they had here. Like I think I think Lincoln's kind of sandbag expectations here because a he really wasn't sure what he was going to get out of the trip. And b he wanted to be able to walk away saying, oh, it was really good, much better than expectations. As one point to note, when he landed in Beijing on Sunday, a meeting with Chinese leader Shi Jimping wasn't even on the agenda. Now, everyone
kind of speculated will he, won't he? And he got that meeting at an hour's notice, right, So they called that meeting at but one hour's notice, and of course he met Shi Jimping, which is you know, I guess comes off as looking like a coup, right, And that's the kind of way that this whole thing was managed. The key point that I guess came out is that
they have agreed to further talks. There is one area that they didn't get a breakthrough on, and that is this kind of emergency hotline, military to military emergency hotline, which the US has wanted to kick start again. That was kind of cut off after Nancy Pelosi visited Taiwan of the summer of last year, and the Chinese were
very incensed by that and kind of ceased all communications. Unfortunately, out of the blink and visit, that communication hasn't been switched on again, and the US would very much like to make sure that's switched on because there's been some pretty provocative actions by the Chinese military in the Taiwan Strait over the last few months.
I want to get into that with the Taiwan, the concerns about Taiwan, in addition to the relations between the US and China, just a big picture, if you could. The tensions have gotten worse over the past year, especially because of that surveillance balloon shot down over the East Coast. We all remember that back in February. But can you compare now how relations are today to what they were earlier this year, or even to what they were during
the Trump administration. Are we seeing a trend towards better or is it just a stalemate? Where are we right now?
My opinion is that it's a stalemate now. In the Trump years, it was very much focused around there's obviously some national security issues the CFO Huawei was being detained in Canada, not in the US, but that was definitely causing tensions with the US. Trump came in down pretty hard on various trade areas, including technology trade and so forth. But we've seen it move into a much more military
dimension that we didn't see during the Trump years. Now the trip by then, how speaker Nancy Pelosi the first time in a quarter century, was an excuse for China to kind of rattle at Seber. China has had designs on Taiwan for well for fifty years, but it's been ratcheting up those designs since Shi Jimping got into power,
and it's just not willing to relent on that. So you'll hear pretty much anytime there's a conversation between Beijing and Washington at any level, that'll be told that the Americans will be told to, you know, lay off Taiwan. That is a red line, don't you dare? And that's what we're seeing more and more. So we may see trade tensions ease over the coming years. I think it could only get easier. I don't think it could get
much worse. I don't think that US will ease up too much on some of its technology curves and so forth. But on the military side, the best thing we can have is dialogue, because it's very very hard for me sitting in Taiwan to see that the military dimension is going to get any friendlier over the next few years.
We are anticipating another visit from Chinese officials to the US in the next few months. Is there anything particular you'll be you watching for.
I mean, the number one thing that I and I think everybody is watching for is an opening of the military communication the hotline, so to speak. I mean, that would be the key breakthrough the US. Really, really, what's that? Chinese don't seem as eger and I think it's kind of a punishment from the Chinese. But it'll be interesting to see what comes out of a Janet Yellen trip. And we shouldn't forget climate. You know, the climate change and climate issues are very important to the US and
the Biden administration. But China, they don't dismiss it. But China, like many developing countries, is in this position of saying, well, hey, you know, you had your chance to pollute the world. Don't tell us what to do. And so I think any breakthrough that John Carey could have in Beijing, I think would be welcome. It wouldn't be so much a political or trade thing. But you know, we can't dismiss that the climate issue is very very important to the US administration.
Thank you, Tim. Tim Culpn is a Bloomberg opiion columnist covering technology in Asia. Coming up, we'll look at what other problems may be facing the US economy. It's not all about inflation. You're listening to Bloomberg Opinion.
You're listening to the Bloomberg Opinion podcast Contest Saturdays at one and seven pm Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
You're listening to Bloomberg Opinion. I maybe Morris. When you think of the US economy, you probably think of the battle with inflation. Treasury Secretary Janet Yellen appeared before the Senate Finance Committee and discussed President Biden's budget proposal. Part of that, she talked about wage growth and pay gaps.
Well, the highest journers of seen their income grow, Families at the bottom end of the distribution have seen their pay stagnate. Gender and racial pay gaps also.
Persistation might not be the most pressing problem facing our economy. Let's get some insight now. Bloomberg Opinion columnist Catherine Edwards, a labor economist and independent policy consultant, joins US now If it isn't inflation that is the biggest problem facing our economy, then what is it?
Inequality? Inequality is the term that economists use to describe the different pace of growth and progress of different parts of the income distribution. So the rich get richer, the poor get poor. That's not just, you know, a market outcome that's not fixable. It's one that tends to be reinforced by American policy choices. My hope in pointing out this article wasn't just to paint a portrait of the future we're heading towards, but to help people understand the
era that we're living in. The richer getting richer and the poor getting poor. That's right now. If it continues this, you know it'll be worse. And of course income is nothing compared to the inequality and wealth.
We are talking with Blomberg opinion columnists Catherine Edwards about the big problem facing the US economy, and that is inequality. Catherine, where do you see this going? How bad could this get?
The concentration of income and wealth right now is not precedented in US history, so we can't say, oh, but this happened before and then and then it corrected this way or this policy was helpful to justin it. We've never seen the type of income and wealth inequality that we're seeing today, you know, so it's harder to say
and this this is what we'll fix it. We do know that the prior apex of inequality was the period right for the Great Depression, and what fixed it was not something that I would recommend, is that you just need to wipe out a lot of wealth and put the economy through you know, it's worse economic period, and that in the in the rubble that's left we built We rebuilt the economy more equally, you know, out of the Great Depression in World War Two and kind of
the apex of unionization in the United States. But I mean that that's not something that I would recommend. If you know, let's just burn it all down and start again. You know, we could have much better policy options than the ones we have.
Now, Okay, what are some of those policy options. Let's just go right into it.
Well, let me make sure that I'm speaking to the naysayers out there, because inequality has two ways of being measured. You can measure it before taxes and transfers are the federal government, or after so not one's not wrong or right. One of them is telling you how much inequality does the market generate, and the other one is telling you how much inequality does the government mitigate through its own
taxes and transfers. The inequality that I focus on is the market generated inequality and the policies that we're not pursuing. There are things that would increase remuneration for people at the bottom. We have not raised the minimum wage in fourteen years. We do not have wage in hour enforcement at the Department of Labor to make sure that people's wages and over time are not being stolen. Right. We are not trying to make the labor market bend to
be more remunerative for people at the bottom. In fact, we've kind of stepped away from regulating the labor market in so many ways. But that's a change the market's kind of output style policy. The back end, you know, on the government side, would be to have transfers that would say, Okay, look, the market's super unequal, like we can't change that. We're just going to tax and transfer
in a way that evens it out. The transfer side, the government has been doing like a kind of a let's just maintain the minimum that we have now, but it's been systematically cutting taxes on the highest income earners and the wealthiest, so that our ability to tax and transfer this problem is being clipped by the fact that we don't seem willing to tax. So the example that I given the piece is that the estate tax exclusion amount is thirteen million dollars right now. It used to
be six hundred thousand. If we continue this pace, by the time we're entering this period of terrible inequality and it's been compounding, we won't tax wealth you know, of estates less than twenty six million, which means that like the only wealth tax we have, we are decreasing the revenue from it.
How did we get here?
I think slowly and marginally, you know, with lots of small policy changes. You Know, something I try to reiterate is that we choose inequality on the margin. We have lowered the marginal tax rate on the highest incomes earners. We have lowered the taxes that we collect from the highest wealth households in the United States, and then we do things like put work requirements on a food subsidy. We do things like take a welfare program that provides money to people in times of need, and we've just
ended it. And we don't do these things all at once, and let me design a perfectly unequal system. But we kind of on the margin, we make the inequality choice as opposed to the redistributive choice most of the time. I mean, we're probably we're ten years away from the probably likely outcome of cutting social security as opposed to reinforcing it. Right, there's lots of choices that we make that are small, and they compound to more wealth and
income going to the top. That's been a truly breathtaking transfer of income and wealth to the top.
I'm going to ask you something a little more esoteric here. When you are talking about changing the system, or at least tweaking the system, or somehow gently steering the ship a different direction, right to do that? When you're in a system of halves and have nots, which is what you are effectively describing, then it would be the halves who would have to do it, what would be their motivation to do it.
Our economy's economic growth overall is clipped by inequality. We are making a worse version of economic strength when we don't include more people in it. And you can do that and from a kind of a colehearted calculation of you know, seventy percent of the US economy is the consumption of households. We're clipping the consumption of more or
households and redistribute to the top. You can think of it that way, or that when income you know, when growth is shared, you're like your ability to what's this phrase. It's not about splitting up the pie. It's about making a bigger pie, right, not.
A zero sum game with what we have, but making it bigger and more equitable for all.
And that's not something of like, well, let's just cry in your sleeve about all the poor mothers out there that need help. Right. It's a stronger economic growth when it's shared by all because it increases the consumer base, which increases our economic potential. The IMF and the World Bank have done systematic studies of this type of growth.
I mean they typically apply it to developing economies to try to get them in line with their lending standards, to say, look, you need to have you need to have more growth at the bottom and not just the top. But you apply it to the US and if it's a similar conclusion if our economy would be stronger if we weren't so hell bent on the market leaving so
many people behind. And I would I would, you know, say to your listener that you might think that no one earns seven to twenty five an hour and that the minimum wage doesn't really apply, which is either an admission that people who earn less don't matter in the economy, or that it's a policy we've completely abandoned. And I don't think it's something to be proud of that, you know, a wage increasing measure for people who are at the very bottom of our labor market we've walked away from.
Are there any moves anywhere on Capitol Hill, the White House, in private industry? Are there any moves anywhere that look like they might be leaning toward maybe trying to fix this?
You know, economic research has told us, through kind of historical retrospectives that one of the most effective means of fighting income inequality is in fact, unionization. So having a national Labor Relations Board that is starting to actually tell companies you can't do illegal things in order to prevent unionization is a step in the right direction. But I wouldn't say I'm politically connected enough to understand what the notion is. I do think that more corporate and higher
income tax cuts, it's just not going. It's not going to do it. It's going, and it's going in the wrong direction.
Bloomberg Opinion columnist Catherine Edwards and coming up, the robust job market luring more young Americans to just skip college and go straight into the workforce. We'll take a look at what that could mean down the road. Don't forget We're available as a podcast on Apple, Spotify or your favorite podcast platform. This is Bloomberg Opinion.
You're listening to the Bloomberg Opinion podcast counts Saturdays at one in seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
This is Bloomberg Opinion. I'm Amy Moore. As it's that time of year. Kids grew graduating or they've just graduated high school, enjoying a little summer relaxation before the big move to college. But wait, maybe your kid isn't interested in college or college can come later. While your son or daughter enters the workforce and makes little money there are expanding alternatives now to higher education. We're going to learn all about them now. Bloomberg Opinion editor Romeshratnazar joins us.
He covers national security, education and immigration. Rome is always a pleasure. Thank you so much for taking the time with us today. Just full disclosure, I'm a gen xer and had I not gone to college, my parents would have burst into flame. Now. Is that just an old school, old school, no pun intended way of thinking. Is there some new trend that we need to monitor here?
I don't think it's entirely outdated. I do think that most Americans still see college as the clearest path to a successful career, to a good paying job, to financial stay ability. At the same time, I think there is something going on where Americans are reevaluating the return on
investment that you get from a traditional college education. And certainly in the last few years since the pandemic, you've seen increasing numbers of Americans choosing not to go to college and entering the workforce instead, And those numbers are
actually now higher than we've seen in twenty years. So part of that is sort of a hangover from the pandemic, but there's increasing evidence that there's something real going on, and more and more young workers are looking for an alternative to a traditional college four year education.
You brought up a lot of different things there the expense of the pandemic. Let's dig into each of those if we could. Starting with higher education. We know it's expensive. It's a whole thing with the Biden administration. When something reaches that level of attention, you know it is seriously expensive. Is that a big part of this?
I think it's definitely a big factor. I think again, this has been happening for some time where you know, the cost of tuition has outstripped inflation for and continues to outstrip inflation and has been going on that This is been going on now for for years, and I think it has reached a point for a lot of people where there just isn't a clear sense that that investment is going to pay off and that the degree that you get from, uh, you know, a traditional institution
is going to lead to you know, a job in a in a field that is going to pay you enough to pay off your loans and reach some level of stability. And more and more Americans you read these stories all the time, are saying I've been in the workforce for twenty years. I can't afford to down payment on a house. I'm still paying off my student loans. You know, this degree that I thought was going to be my ticket to success really hasn't gotten me as
far as I would have liked. And so, you know, there's also a it's a strong job market, and I think people see, hey, there are opportunities out there. I could work and for a little while and maybe put off college, maybe do something in between. But I think there's a definitely reevaluation. I think the cost of college and the amount of debt people are going into to finance that education is a factor here.
Can schools help play a role in this, not just with the financing, but preparing students for things like internships in vocational training.
There's definitely a role for the education system, and by that, I guess we mean the K through twelve education system to prepare more kids for you know, careers or you know, technical trades that don't require going to college and a traditional college pathway that that's going to take time. You know, we have not invested in vocational training in career technical education nearly enough, certainly not nearly on the scale that
a lot of European countries have done. And so you know, you're starting to see smaller experiments happening across the country, but there hasn't yet been the kind of really sustained investment at the K twelve level in those kinds of programs.
We are talking with Bloomberg Opinion editor Romas Retinissur about a path to success? Does it necessarily include college? Ormich? How far can this go? If you look way down the road, could we see a time when there's a workforce that's made up of more people perhaps who aren't college educated, more of a balance.
Well, yes, I mean I think that a lot of the jobs that are in demand going forward will not
require a traditional four year degree. They do require a post secondary education of some kind or training of some kind, And so I think, you know, ideally what our system should look like is something probably closer to what you have in parts of Europe, where you continue well to have people who are going down in a traditional pathway, but you have more options and a more developed ecosystem of programs that offer people technical training and apprenticeships, work
based learning that allow them to start their careers earlier in fields that don't necessarily require them to obtain a four year degree, and up until this point, really that four year degree has been kind of the main ticket that employers have used to identify people that they think
can do the jobs. And I think what we need to move toward is a skills based system where you can get the training, you can get the skills, you can show that and demonstrate that you have the necessary tools to do the job, and employers can use that rather than the degree to determine whether you're somebody that they want to hire.
What's the downside to this? Is there a downside?
Well, you know, one of the downsides has often been that you run the risk of tracking people and limiting opportunities for certain students who at an early stage are sort of funneled into what we considered a vocational track as opposed to being the current system, which pretty much allows people to pursue if they want to pursue a traditional college degree, they can, if they want to pursue vocational training, they can look for ways to do that.
And so there is the risk that certain segments of the population, if they are you know, don't demonstrate potential at an early enough age will be sort of funneled into a vocational track and not given those opportunities potentially to go on to a for year university type experience.
If I actually think that's less of a risk than a system which doesn't provide people with a better sense and an easier way to pursue these kind of training, work based opportunities that in some cases for a lot of students might be better suited and might actually provide an easier and faster pathway to a successful career.
We talked a bit about what schools can do and how education can play a role in this. How can politicians play off of this. It seems like an opportunity for Washington to somehow get on board. What's the role there?
I think there needs to be an adjustment of priorities. If you look at how much money we currently spend in some form or another in supporting traditional colleges through grants and other kinds of financial aids, so financial support that allows people to pursue of a traditional college degree, it's something on the order of four hundred billion dollars a year. The amount of money of the government spends on apprenticeships, which basically allow people to develop and learn
a skill and get paid while they're getting trained. Is point zero point one percent of that amount we spend on traditional higher ED. So we need to just rebalance that equation and take some of those resources that are currently spent to support higher ED and move them more
into work based learning. I think if you do that, if you have a little bit more balance, if the government finds more ways to provide people with money to allow them to pursue these kinds of training programs and skills based learning, I think that would go a long way toward building the kind of system we need.
Romesh Red Nazzari is a Bloomberg Opinion editor who covers national security, education and immigration. We live and work in a competitive society, and somewhere along the way, lack of sleep became a badge of honor. How did we get here and what are we missing when we don't let our brains and our bodies recharge. Let's learn more from Faith Lam, host of Follow the Science podcast and a Bloomberg Opinion columnist. Fay always a pleasure, Thank you for
taking the time. Scientists have found a way to direct dreams and get creativity out of them, tell us what you've discovered.
I had always thought that sleep was useful for resting, but then I read this amazing article about the way that scientists were helping sort of give people suggestions so that they would dream about particular things, and then afterwards tested them on storytelling and creativity and found that the dreams actually were useful to them by stimulating creativity.
So is this mostly for musicians or artists or writers? Can this apply to scientists or economists or politicians? Who is this for? How does this work?
Most people have dreams, we often don't remember them. But they actually tried to manipulate the dreams people tend to have when they first start dozing off, and this is a stage of sleep they called N one, And then they used a device that kind of that monitored some signals that you give off in your hand, your skin conductivity and pulse, and they can actually tell when people
enter this stage of sleep. And then the device would give them a suggestion dream about trees or think about trees, and then after a minute or so, that would wake them up and prompt them to say what they were dreaming about. And people had all kinds of wild dreams and so it was, and it was after a forty five minute session of this that they were asked to write a story about trees and talk about creative uses
for a tree. And the people who would have the tree dreams were really creative, more creative than people that weren't given that suggestion or controls, that weren't given the chance to take this little nap.
So let me back up a bit. I'm old enough to remember back in the late seventies and early eighties, there was this whole campaign did you hear about this where we're all wasting our time, We're sleeping away more than a third of our lives. We're not using that time wisely because we're asleep. Sort of made sleep sound like we were being lazy. But according to your column and the researchers that you talked to, your brain is not idle while you rest.
Yeah.
Well, one of the researchers on this project has been doing dream research for decades, and I remember a study he did that came out right around two thousand where he was interested in people sort of reinforcing memories and learning during dreams. And he had been out rock climbing and then he was dreaming about sort of getting handholds on these rocks, And then he did some experiments where he had people in the lab play this video game it was popular at the time, Tetris, and that made
them dream about playing Tetris. So he hypothesized that dreams might have something to do with learning and consolidate memories and developing skills. So there was actually something useful going on while people were asleep, and he's continued to study that to this day. And then was also part of this study.
How far can this go?
Fey?
How far can researchers take this? What's the end game here?
I think we just want to learn more about what happens during sleep, what's useful about it. Dreams have not really been explored, so I think that we could learn there's a lot more to be learned about dreams, about what they are and why they need to sleep for so many hours evolved in people, and it also may result in some way people can, as they say in MIT Media Lab, hack their dreams and get more creative.
Power from them. Bay Flamm is a Bloomberg opinion columnist and host of Follow the Science podcast That Does It. For this week's Bloomberg opinion. We are produced by Eric mollow and you can find all of these columns on the Bloomberg terminal and we're available as a podcast on Apple, Spotify, or your favorite podcast platform.
Stay with us.
Today's top stories and global business headlines are coming up. I'm Amy Morris, and this is Bloomberg