Trust in Government Has Imploded, Edelman Says

with Tom Keane live from Davos. This morning, the Bloomberg Editor in Chief John michaels Waite sat down at the event for an interview with the new CEO of Uber, dar Across Rashahi. Let's take a listen to what he had to say in that conversation. Right now, you are close to six months into the job, and I wondered what you saw in terms of the year ahead of Uber as your biggest challenge. What's the thing that you think about most when it comes to two. We uh,

We definitely have our share of challenges at Uber. Uh and for me, where I want to get to Uber two of the year head is is a year of normalcy. You know, two thousand seventeen was I think we'll go down as one of the most difficult years for any company out there. And I have to and I have to give credit to the Uber team and the employees there. It is a group of true believers who believe in our mission, who believe in mobility as a service being

available to consumers everywhere UH at a reasonable cost. And what my job in two thousand eighteen is too is to get rid of the distractions and get the company back to business, get the company back to normalcy. There's a lot that we've done in the past six months as far as bringing the new investors, driving a new culture and norms where doing the right thing period comes first, bringing a new management team, etcetera. There's a lot that we've gotten done. But this is a company that knows

how to execute this is a service. Mobility as a services something that's universal that's needed in the world. And I want and I just want to get back to doing this. And you said true believe, true believers, not normally true believers are the last possible people where it's you're able to change a culture. Can you explain a

bit about that. Well, I think that they are. They understand that UM mobility is a service, bringing the cost of transportation down UH, making transportation services available to anyone and everyone on a local basis, and partnering with cities

to be a solution to traffic, to pollution, etcetera. That is a mission that they all believe in UH, and I think that they having seen what happened in two thousand seventeen to some extent, the crisis, enormous crisis that the company has gone through, is a benefit because everybody at the company knows now that we need to change, that we need to break with the past as far as the way the company was run. We need to go from growth in any cost to responsible growth and

and growth in partnership with other players out there. That's clear. But now I've got to kind of get the company down to the normalcy of execution of building great technology, and I think we're going to get there. It's still some tough sledding early on, but I absolutely think we're going to get there. When you talk about execution is profits one of the things you want to get. I think you lost four billion dollars last year by the

standards of profits will health. So at some point we absolutely have to become profitable, and that's part of the picture. You have a good do you have a kind of goal for that? Do you think you should be profitable by two by? Uh? This is the business itself. You want to come back a bit closer. Yeah, listen up of I don't want to name a specific year, but this is a business that UM, the core business, the

ride sharing business, can be profitable within three years. We will continue to make very bad investments in building out autonomy because we think that's a terrific opportunity, UH, for building out new technologies such as Uber elevate, where near term profitability is not a is not a goal, but long term growth is. So we will look to balance near term profitability. But as a company, we will always be a company that makes big boat beats and takes

big risks. To what extent there do you think that drive to become profitable fights against a little bit of this culture change if you want to make you talked about making money but not at all costs. Do those two things? Well? I don't think that profitability and culture are their issue. And it's UM the company in the past was willing to make tradeoffs as it related to how it did business. UH, and I think was was was guilty of hubris, was guilty of of thinking that

they knew better than others. And and I think that what we know now clearly is that breakneck growth can hide uh cultural issues. UH, that there are no excuses for not doing the right thing, and that you do have to make trade offs. And and as a management team, we're specifically talking about those tradeoffs that you have to make. We have to be a little more patient sometimes because working with government, regulators, etcetera sometimes takes longer. But in

the end you build a more lasting business. Uh. And so we maybe what we went through was necessary, but we're here. We can control our actions from this moment onwards. And and I think everyone at uber from this moment words wants to build a great company, not only in terms of growth, but in terms of the kind of

company anyone would want to work at. Can I ask you one thing which you have got to sort of hangover from last year, which is the all the all the regulatory problems and particularly all the all the cases against you. I think there are six criminal probes or whatever going on, But wisers are lining up outside to which which one, Which one do you sort of think?

Which one do you fear most I suppose different things. Listen, I think I think that all of them are serious issues, and and my responses that we're going to be transparent and we're gonna we're going to take responsibility for our actions in the past. Um. I do think that the uh, there are certain circumstances where uh there was smoke but no fire. Uh. And I think as a company, we have to defend ourselves and and and work with the kind of the appropriate frameworks. And my goal is just

to get beyond the stuff. Some of these things like pricing policies show they go right to the heart of what Hooper is or Am I wrong about that? Yeah? I think they do. But but I think that there's a way of of being smart but transparent at the same time. Uh. And that's where we've got to take the company. Take me through governments. When when you talk to governments privately, do they talk any differently than they

do publicly? Governments governments, Um, I think that they are honestly a bit relieved with how we are engaging with them because I think I think that the engagement is now real. I think they feel like, uh, we're out there,

We're we're genuine because we've learned our lessons of the past. Uh. And and I do think that we can take, for example, the data that we have in terms of traffic and in terms of movement of our drivers and riders, and we can use that data to partner up with cities, uh, in order to solve congestion issues, because congestion doesn't help anyone to waste enormous amounts of time for consumers, UH,

it hurts the environment. UH. And I think that we are aligned with cities, for example, to partner with them in a fundamental way to solve these problems. And I do think that when these are conversations that a number of regulators and cities have wanted to have with us for for many years, and I think we are really engaging with them at a depth UH that that I think is going to create a real win win going forward. Do you think you were too confrontational on this before? Yeah?

I do. That was the Uber CEO Dara cost Rochelle. He's sitting down with Bloomberg's editor in chief John Michael Thwaite at a conversation in the Bloomberg Year Ahead Forum at the World Economic Forum underway in Davos, Switzerland. Tom he used those words breakneck growth, and breakneck growth can hide cultural issues, it can also exacerbate them as well without significant discipline coming down from leadership. And what we found in Travis Kallinik is that leadership that's discipline and

was certainly absent. The question is whether down at Coast Roschale he can really turn around what is a massive tanker of a company. Well, it's a secondary tone here, but it is tangible that social media and frankly the modern Silicon Valley tech will be a changed tone, a

changed culture over the next two to five years. Ken Rogoff today was heated with David Rubinstein about the death of unicorn companies and particularly the extrapolation of their value based off small, tangible transactions in private markets and and none of them tell them have really come public in a significant way. Was still waiting for at BMBA, was

still waiting for ru but to make that move. David Rubinstein was really heated about not that they've you know, proverbally jumped the shark, but that there's just a change in tone that you witnessed there. With the interview with Mr Michael Swaite, to get to our guest. I want John Pharaoh to review sort of his take on Europe, Italy and politics. John Mr drag is a meeting tomorrow. Does he meant does he care about the March fourth elections in Italy? I think he does, but I think

he's less worried than he otherwise was. I think we came through the French election last year unscathed, and I think we came through that election unscathed because there was a realization that in many of these countries, leaving the monetary Union, even if you are anti Europe, leaving the monetary Union is something the electorate will not go for. And I hear less about that in Italy than maybe

we would have heard a couple of years ago. So I'd say President Draggy, less worried about the politics, may be much more worried, and it's a high class problem to have. I think, in his words, much more worried about this uptick and growth and maybe inflation around the corner, and how he's going to move monetary policy without shaking this market reviews Mr Drug this morning at my panel and now joining us Paul sheared Uh at SMP Global. They're Vice chairman and truly one of our claimed experts

on Japan. But to move away from Japan, Paul to Europe. The surprise of our panel are better than good Europe and even laggered Italy puts it out and does better. Yeah, Tom, it's great to be with you here in Davos. Um Europe, I think is is two distinct stories which obviously sort of intersect. But one is the more cyclical what's happening in terms of the economic expansion, and that's a pretty

good story. But um, the other story, of course is the whole set of issues, not just around Brexit, but around the whole architecture of the Eurozone and the architecture of the European Union. That's a conversation that's playing out in slow emotion, but I think that's really going to

be a big potential story for two thousand and eighteen. Again, I don't know how closely the audience is following this, but um, you know, the President of the European Commission has been coming up with reports and that there's a whole kind of political dialog which is going to take place, particularly after this third major election. The election in Italy is out of the way, in early March Pool. Anyone who's anyone on the international stage needs to be or

wants to be around President Emmanuel Macron. It seems to give them some kind of pr positive pr just being next to this guy. He wants more European integration, he wants a separate Eurozone finance budget. He wants a separate europe Zone finance minister. Does Chancellor Angela Merkel have the political capital at home to drive through the vision or at least help Emmanuel Macron drive through his vision for a more integrated Europe. Well, we'll have to see how

the coalition talks, you know, finally play out. But the encouraging thing there is that, you know, the coalition between Bengo Mercle's party at the CDU. But then on the other side of the table, of course, is Martin Schortz and the SDP. Martin Schortz having descended in from the European Parliament where he'd been speaker and a very strong advocate of more europe Um. I in that sense, the

Ducks are potentially lining up here. Um, it's not just Makron, it's as I mentioned, the Commission, the European Council UH and if the Germans come on board, and if we don't get some kind of uh something from left field politically in the in the attendant election. You know, if this, if it's not going to happen now it being moves towards greater integration, particularly as the Europeans, but it completing the economic and monetary union, had how to understand when

it would have actually happened? Well shared where this folks SMP Global uh this morning their vice chairman and of course and acclaimed economists with decades in Japan. I want to get to Japan in a bit, Paul. But right now something really really quite important, and that is the i m F study yesterday and Maurice Hobbs felt you claimed academic made clear they're looking at short term optimism.

Explain for audience the millier you live in, which is the short term, the medium term whatever that is, and the long term I m F was short term opposite optimism. There was a big butt, there wasn't there. Well. I suspect that the I m F for being good economists, which is not to get too absorbed by the short term cyclical movements which the markets tend to focus on more and you know, wherever you look, whether it's the US, whether it's Japan, whether it's Europe we just discussed, or

whether it's China with the challenges that they have. Um, you know, there are underlying structural issues in these economies. So the you know, the expansions that we've had since the financial crisis to a large extent that you have been you know, credit to the central banks in particular the policy authorities. But you know, a cyclical expansion driven my monetary policy doesn't cure the underlying structural challenges in

the economies. And I think the you mentioned Japan, it's been a long time there that one of the big lessons from Japan of the ninety nineties is that when you have deep structural problems, in that case it was in the banking system, um, you know, you do have to tackle them head on, don't rely on signical expansion to somehow bail you out. And as I would with Robert Phelbin and Morgan Stanley and John I want to dive into the Japan discussion here just because it's such

a treaty of Paul Sherd with us. The Emperor, I guess abdicates is the proper phrase that signals a generational change. Is that over played or is it really a generational change? Time has moved on in deflationary Japan, hasn't it. Well? You know, I used to is tom the the analogy of of a of a duck on a pond. We all talked about the lost decades in Japan, But you know that is misleading in the sense that there's been

tremendous change beneath the surface. The duck on the pond, before you know it has moved right across the pond. Because it's you know, paddling frenetically under the surface. You don't really see that. So it is a significant event. Um. You know, I think the fact that you know, he stepped down and handed over the reins, you know, is

a change to the normal practice in Japan. So it's it's it's a sign of Japanese breaking with some of the traditions, the cultural traditions, which are deeply held um and doing something a little bit different. Paul, you mentioned demographics front and center. The elephant in the room in Japan is demographics, and I wonder why we still have this structural issue in Japan, which is an older population you've heard the stats. More geriatric diapers sold in Japan

than baby diapers. That's how dire the situation is as as far as the demographic situation is concerned. Yet the Bank of Japan is sat there involved in trying to stimulate demand through lower interest rates and an expansion of its balance sheet. That doesn't make sense when the issues are structure. The issues are demographics. You can't print people.

So what is the bo J trying to address here? Well, I would make a distinction John, between the sort of the supply side of the economy of the structural side, which is really one of the important drivers is demographics. Obviously that leads into GDP growth from the question of macro economy or demand management, and that's really the job of the central bank. So I would sort of argue that the two issues are a little bit orthogonal. Sorry

to be um used some jargon there, but not in Switzerland. Yeah, he's given thumbs up, okay, And in the sense that what the Bank of Japan has focused on is saying that we want to get the rate of inflation to two percent. That's our job, keeping the un the economy at full employment. What real potential growth level, growth rate is associated with that being at full employment and having

low stable inflation. Is this is a sort of separate question. Now, what I just said is standard economic analysis, but it is been it has been contested, and in fact the prior governor, Governor Shirakawa um his view of the world was, as you intimated, perhaps the demographics drive deflation and there's nothing much monetary policy can do about it. Governor Groda obviously has taken a different view, right, Johnny, just to jargon,

I want you to get one more question. You're John with a doctor shared, but we do do a jargon alert here. Orthogonal, John is a perpendicular philosophy, sort of like looking at the New England patriots and comparing them to Milan that that would be certainly, Paul, My final question to you in the in the short period of time that we do have is whether what the Bank of Japan is doing is the right thing to do.

Whether we should have this obsession with inflation targets when GDP per capita in Japan is so strong, when by all metrics we're pretty much a full employment Why do this? Um? Big question? A short answer is that I do think they're doing the right thing. I do think there's too much obsession about decimal points in inflation targeting, and I do think that central banks uh a little bit too isolated.

I think we should be looking at demand management being the joint responsibility of the monetary and the fiscal authorities. But having said all of that, I'm a great supporter of what Governor Coroda has done. I have to be for consistency because I was a great critic of the previous regimes of the Bank. Jo Bullshit has been great to catch up with you, very insightful on on Europe and Japan. SMP Chief Global Economists and Executive Vice President.

Joining Tom Kenney, Davis Switz into myself Jonathan Faraoh here in New York, we now have an important conversation an individual who frequently advises banks, investment banks, accounting firms, hedge funds, and other major financial players on fiscal policy, the federal budget and developments of the likely deliberations in Washington, d C. He literally wrote the book on the budget. The Guide to the Federal Budget is Stan Collinder the corpus MSL Group join us now, Stan is great to have you

with us. My question as a bridge. A guest in your great country is why do we still do this in the United States of America? Still do budgets studio government shutdowns, still do debt ceiling debate. I mean, this isn't kinda way anytime soon as it stand. No. In fact that not only is it not going away, but I wrote an article in Forbes over the weekend that said that, uh, these are now the new normal, that

is shutdowns. You're likely to see them more because and more often simply because all the sides on on no one sees any downside to it. They see it the way is showing their respective constituencies base voters that it's good for them. Stan John McCain, when he was less sick, wrote an important essay begging for us to get back to the budget process of our You, the budget process that you helped invent. Why just a question I've had three times in Davos. Why can't we get back to

a normal process. Comm It's real simple. They don't want to. It's not that it's not doable. Um, it certainly is. But the most most members of Congress, Republicans and Democrats, but mostly Republicans, see the budget process is something to be used for their own device is rather than UH as a as a basic function of the government. So shutdowns, debt ceiling debacles, uh, you know, fiscal cliffs are things you've got to expect simply because they act as campaign rallies.

I think of how many members are going to go members of the Houses and are going to go home this weekend to their constituents and say, look what I was willing to do for you, And so these things act as reelection events rather than as good government. Well, and into a conversation I had with Jane Harman, the former at Liberal and Democrat congresswoman from California, but someone who's been a hawk on defense and very knowledgeable about how your capitol runs. What do the Democrats need to

do to respond? Do they go to the middle maybe where Mr Schumer is or do they need to stay out on the progressive left of our budget debate? Well, going to the middle doesn't seem like it's Look, let's think about the ultimate goal here for both sides, Republicans and Democrats. That's re election and perhaps increasing your numbers at the next election. Good legislating is not the plan and is not their goal under those circumstances going towards

the middle is not going to satisfy on the Democratic side. Certainly, the rapidness of the voters who are trying to get back at Trump. I mean, they're they're looking at this as a re election fight, part of a re election fight,

residents as something keeping the government the lights opens. So um, I think what the What the Democratic leadership would tell you, what groups like Indivisible and Resistance and things like that would tell you, is we're going to resist the Republicans at all times because it increases the motivation of our voters to get out and vote, and that's how we win in November two thousand eighteen. So stand this kind of feeds into shutdown politics. Death sailing politics is very,

very different. There are real consequences in that situation. How does this bleed out, if at all, to the death sailing debate that were sets confront really in the next couple of months, well not not only the next couple of months, but maybe the next couple of weeks. Jonathan, it looks like the debt ceiling is gonna well it's already expired, but it looks like it's going to start to get critical with the so called extreme measures that if the treasury can use running out about mid March,

so it's gonna have to be raised. The debt ceiling is gonna have to be raised by then. Um. I don't think there's any doubt that there will be some who threatened not to raise the debt ceiling. Um, if they don't get what they want. Remember the Freedom Caucus now Freedom Claucus. The ultra conservatives have done that, uh a number of times over the last couple of years, saying they they'll lie down on the tracks and let the train run over them before they'll raise the debt ceiling.

Now that's a tough position for them to take this year, given that they just voted to increased government debt by one and a half trillion dollars with the with with the tax bill. But um, I think that's that's I've

been saying this for weeks. That's what the markets really need to be worried about, which is if they're if Congress in the president are having trouble with nuts and bolts bills like appropriations and and the budget, and what happens when you get to the debt ceiling and there's just there's a dislike of the bill to begin with.

So um, I think we need to expect some sort of cliffhanger type situation with the death ceiling that will be even worse than it was with this, this first shutdown of what there could be many The economy is better, Our tax revenue is going up compared to what Tom is is you know is the logical question. Um, Look, we just voted to lower revenues. Economic growth is economic growth is not that much higher than we had anticipated before the tax cut. Um. So under those circumstances, where

are the higher revenues coming from? And in fact, the deal yesterday cut taxes further by another thirty one billion dollars for several muscle Um Yeah that yeah, so um, our revenues are not going up, and it's almost certainly going to increase the deficit, not the depth of the deficit, to over a trillion dollars a year starting now, starting um and through every year through the Trump administration. However

long unreal. I did not know that. That's why we love having you on a tidbit from the new slow thirty one billion large disappears in tax revenue. Si Holender, Thank you, so much. He is at the budget guy out on Twitter and of course the cour of his communication, I'm Tim Keenan Davos, and now you'll hear me say, folks, this is the most important interview of the day and investment management or foreign exchange, this is the most important

interview of the year for Tom Keene. The foundation of our analysis of you, our audience is founded and the Edelman Trust Barometer. It is an extraordinary document. I'll put it out on social thanks to Mike Allen of Axioso wrote it up big yesterday and joining us. The founder of this seminal document for Tom Keenan Bloomberg Surveillance is Richard Edelman, of course, the leader of Edelman and Edelman Digital. This year, your Edelman Trust Barometer is not a pretty picture.

It's in America in chaos. Well, Tom, we see that America has fallen to be the lowest of the twenty eight countries that we survey in trust. Uh, that trust and government has imploded thirty points drop and fourteen points in the general population. And what we observe is that

the rest of the institutions have followed government downward. And uh, it's it's actually a sort of lack of common facts and and the lack of rational discourse, and completely unusual in that it wasn't based on a big economic downturn or a calamity like Fukushima. The heart of the Edelman trust barometer is it ain't pretty. You people have had the courage to go in over the years and parce out society, and you do it as a general statement

of the informed public and the uninformed public. Richard, Is it just as simple as President Trump has a trust of the uninformed public and everybody else is informed. That's too simplistic an analysis, isn't it? Well, really, it's polarized, And um it's best evidence by um a look at trust in the media. The Clinton voter actually has rising trust and media to sixty one points and the Trump voter is at thirty points or so for for trust

in media. And so at the base of all of this is a different view of the world, different facts, different thought bubbles. And um, actually it's it's not sustainable, Tom, because we now see that there's a desire for facts, for knowledge, for for authoritative sources. Um, it's a drop in a person like yourself and a rise in academics technical perts and yes, even CEOs this year experts are doing better. Yes, because we want to have facts. We want to know that what we're hearing is correct and

unbiased and and has truth. Cause your job, I mean, your day job is to go around and tell CEO is what to do, particularly those in crisis. That's the acclaim of of the edlement of your father and the edlement of Richard Edelement. That's great. What do you advise the media people to get respect back? Or do you say, don't worry about it, this will go away. Look of the people we surveyed said that they have turned off altogether on mainstream media. Some part of it is um

they say media is too disturbing. Some part of it is I get everything I need from social in search. That group is differently informed from the other half who are very mainstream oriented. But the problem with it is tom we're not having common facts, and so I think it's really up to business in particular to speak to it.

Some ploice people trust their employer, and that's a real window into the employee group, who then can share the information And how do you synthesize and if you don't want to talk specifically about the property Jeff Bezos is success with the Washington Post. I'm assuming that's an evil media to Trump supporters. And I'm just making a generalization there. But what does the Edelman Trust parometers say about a media success like axehost or a media success like the

Washington Post. There's a twelve point rise and trust and journalists this year. People want credentialized folks writing their content for that half that is reading mainstream for the informed half not but you can't claim that it's the informed half. Actually it is some part of the general population as well.

Those people unfortunately are in thought bubbles. Uh. And there people say they can no longer tell the difference between fake news and real news, and more than half say therefore, I can't even judge a government of show, and I can't judge a CEO as to how well they're doing. So it has consequences. Just joining us Richard Edelman here an annual visit with his magnificent Edelman Trust parameter. I will put it out on social media and on Twitter. Uh. It's made quite a splash in Davas, as it does

every year, particularly with the Financial Times Breakfast. You didn't need to throw anybody throw a breakfast muffin at you at the ft breakfast? No, but there used to be not funny, and that CEOs are getting beaten up and media types are getting beaten up. The CEOs are doing

better within the trust parameter. Right. Well, I think CEOs have benefited this year from standing up on issues like LGBT or the Me Too movement and and uh you know, whether it's Mark Bannioff or Tim Cook or um Howard Scholtz, any of them, they are showing leadership. But the next phase has to be that they have to get their companies to speak into that information void and allow us to actually understand these issues better in the time that

we have left. Let's switch geared to an application. Do you represent Uber? And I am I am going to get into trouble and then our John mchlitwait today talk to the new leadership at Uber. Come on, they need to parachute in Edelman for you to do your pixie dust on Uber? What would you recommend to Uber to write what seems to be a set not not a big like Thailand all train wreck, but you know, a set of issues. How does Edelman handle that well? For Uber?

Which is a great brand, well known. Um. The uh, most important thing is to make their drivers feel as if they're part of the company. Give them equity in the company, give them some share in the future, as opposed to making freelancers and and otherwise distinct. I mean, but that's a brilliant idea. I mean not, you know, I just haven't heard that. To take the gig economy if you will, and give it equity. It means what it comes down to. But it's the same deal that

Oscar Immuniz has done at United Airlines. Pay people a good wage, give them a sense of the future, uh, and then they'll serve their customers better. I think this idea of better wages, better benefits, but expect better work is the next big idea. What does Edelman Digital and there two separate companies right essentially, what does Edelman Digital say about video? It's really front and center right now. Facebook is challenged by it. My observation is, as a generalization,

adults don't want to see video. They don't have time for it, they can't get through it. But what have you learned in your research on video? People want who are young, uh to see it, not read it and they want to witness it in a way, and they also want to produce it and they want to feel as if, um, they're part of the content creation crowd.

So in Edelman Digital, we're creating communities where it's respectful and shared content and shared experience within that is a phrase you said, who are young when they get older? Do they switch to act like you and me? Or do you think it's a game change? Where we mean the answers, we don't know. We don't know. But here's the thing. The big goal for me for media in the next year has to be to move from being

advocates to being people who inform. I think that the degree to which media has become opinionated actually is taking away the middle in the United States, and we have to get to a place where there is a common ground where people can actually debate. But the audience wants the angle. I mean, certainly within cable TV News, they've delivered a product with Mr Ale's Revolution, They've delivered a product that the audience wants, which is they want to

hear what their side says. But you see, I think that's just the people on the edges and and the ones who want to be loud um. There's this again of people who turned off on mainstream media partly because of the tone and the polarization doesn't suit anybody except for the I can't imagine your survey could be more

interesting next year. This is just extraordinary. This year, the divisible folks polarization witnessed in the edible and trust parameter of a number of countries and particularly the United States of America. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.