Welcome to Marry Talks Money the after show. This is where we unpacked all the commentary here in our regular podcast.
I learned some set web this week.
John Stepack, senior reporter at Bloomberg and author of the daily Money to Shelve newsletter, joined me as usual to discuss my conversation with Cock. Here's Society General's global head of Economics, cross at IT and quant Research and UK head of Research.
Right, John, have you listened to this one?
I've read the transcript again, so read it rather than listen to it?
Do you do you?
Yes?
I hope everyone else listens to it. But what did you think of this conversation? Where would you like to say you absolutely do not agree.
I mean, I'm going on my issue here and I think is actually a lot to do with the job descriptions that if you'd given me a list of the questions you were going to ask CORKU before I read this transcript, I could have told you what all of the answers were going to be pretty much.
Wow, I don't have a list of questions in advance. It doesn't work like that. But oh yeah, if you try to send you the list to questions, you can tell me the answers, and we went bothered with all this boring podcasting business.
If you give me the improv before you before you did the improv, I mean it's let's say it's not it's not really a Christmas so much as like it's okay. So the received wisdom is, surely there's going to be a recession, but does the recession thing even matter that much? And you know, interest rates have gone up an extraordinary rate, but somehow everything's going to basically be okay because we've
got enough time role off that. And if you know there is a disaster, then it means, you know, the central plants can cut interest rates anyway to stop it from being a disaster. So it's basically everything is going to be okay, and therefore you should a diversified portfolio.
That's not an acceptable answer.
Oh yeah no. And they meant to be fairy through some ideas there. And you know, there's there's a lot to be said for warning passive investments and all the
rest of it, and transition metals alone. Again, i'd sort of make the point that transmit transition metals are fine, but probably have to be a wee bit picky because I mean, like the lithium price is kind of like shot up and then collapsed when everyone realized that actually there's plenty of lithium in the world, and as soon as the price is high enough, assuming we even stick with elitium batteries, it's yeah, it's not going to be
the new oil. It's you know, a pretty common substance, and as long as you know it's there's enough of it out there, it's just to be never had to use it before, So I don't I don't know, it's it's I know, sorry, it sounds like I'm being like terribly kind of I mean, but I think it's just at a high level, if you're not going to say something out of the ordinary about micro then the rest of it's just sort of like, oh, can the decimal points.
Basically it's like, oh, is the decision going to be in this quarter or is it going to be in that quarter? And at the end of the day, that sort of thing doesn't matter that much. Forests, and then beyond that it's kind of they can have At the more detailed level, you kind of need to be a little bit peckier than just you know, okay, well buy by these transition metals or whatever.
Yeah, I suppose the thing that I would I would have picked him up on. I probably did pick him up on.
Is this idea that everything will be fine because interest rates of everything will be fine because interest rates have gone up so fast that they can come down again.
Whereas I tend to feel more that interest.
Rates went out very fast because they had to, because the central banks made some enormous mistakes and latinflation get out of control. So we now have rates at what you might consider to be historically historical normal levels. So the idea that as soon as something goes wrong, we can drag them back down again to beats historically extremely abnormal levels of you know, real terms negative or one percent, zero point five percent, et cetera.
So the idea that that ammunation exists.
So I'm not sure that it does, because the central banks may just may because they didn't alway learn their lessons, but they may have learned a lesson about how very very very low interest rates allow for the misallocation of capital and also open the.
Door to inflation.
So even if something does go very wrong in the global conin which I expect it will, at some point in the not two distal future. I'm not sure that that leeway exists, that put still exists.
Oh yeah, because they went up for a reason. So it's kind of like with you know, if they go back down, then you can't sot. They can't just see that inflation is going to vite niche because it's convenient at that point for central banks to be cut in rates. The one thing that I did find kind of interesting or that I think is something that we could do with talking more about in a more specific way is
the thing about productivity. There's a lot of time people talk about productivity and talk about his artificial intelligence going to help me out? It is tech going to help but it and I think it'd be interesting they just maybe break down, well, actually, how are these things going to help the productivity? And is there not an issue
with the way really that we measure productivity? And like, one of the reasons productivity is falling so badly in the UK, for example, but in lots of other places is because productivity measures are basically based on manufacturing industries being much more significant parts of the economy than they are. And if we all acknowledge that, we'll actually, how does a hairdress have become more productive? What is the nature
of an increase in hairdress is productivity? And what's kind of like, well, you know you can't it's going to measure that, and you're never going to get to a point where one hairdresser can do three haircuts in an hour rather than two haircuts in an hour.
No, no, no, no, no, that's simply not true.
Hair cutting takes too long.
This is one of the conversations I have every time I go to the headdresser, say how long is this going to take? And they take an hour? I'm like, how can this take an hour? How can this possibly in any rational world take an hour?
Man?
This is why you always look five minutes to cut a woman's hair.
Anyone's hair tops absolute tops this.
I mean accept that it's very skilled work and that it's difficult, but an hour.
No, no, no, there is a huge room for productivity gains in hedressing. You've chosen the wrong example.
I don't be You could just get a set of clippers and then that would kind of, you know, boost productivity technically speaking, but but would it actually boost productivity if you've got a whole lot of unhappy people we know here.
I can't answer that's that's that's too much for me today anyway, But I get your point. It's very hard to rise productivity in the service industries.
But yeah, but I think this is I think this is the things that we talk about this again at the kind of very high level, but it's I think a lot of time it's if we talk about the abstract number of productivity, but they're actually talking about, well, what would the more productive economy actually look like? And also I think the product I mean, I find productivity are very abstract, difficult concept or at my head rounte.
So I do not know what most of for example, or kind of non finance listeners think of whenever they think about productivity, because this is, like I say, it's this kind of like a concept that is infuriatingly abstract to me. I'd like to think that we break it down in more concrete levels, as in, what would this mean for you? Well, I think this means for these industries.
One of the things in the UK is that it's public sector productivity that has been such a disaster, and really private sector productivity isn't great either. But when you look at our productivity numbers. It's the public sector that is genuinely letting us down. And the place where I think most people can see that productivity could be massively
improved is in particular in the NHS. And that's where we have where when you talk about digitalization and you talk about AI et cetera, something an organization such as the NHS could be massively improved by a higher level of efficiency and productivity and middle management in particular. Yeah, definitely, that's somewhere where we really could see dramatic change have a huge benefit not just for us in our health, but for our government finances.
And see on the private sector, say they can allaw lawyer area and the process of buying houses and selling houses and all the paperwork that kind of has to be chucked in between parties. I can see that's another area where that could improve it. I mean one thing one point I would make with that though, is that we sort of point to AI as being a solution for all this, but you know, the enertis is still using fax machines in some areas.
This is the point.
It's kind of like, well, it's not the fact that we've invented AI is not going to change this with What we need to do is break down some of
the guilds that are protecting these professions. And I mean that's the big hurdle is things like the and all the you know, the kind of British Medical Association kind of you know, doctors, but also but on the laws side, you know a lot of paperwork could presumably have already been replaced, and it's all about professions protecting their you know, the leveled up status if you like, and rather than the technology lagging, because there's lots of technology that could
already improve all of these areas that wouldn't require artificial intelligence. I mean, simple algorithms and spreadsheets would work very wellful things like tree eyes, if you know, we were more capable of getting them nty all these different parts of the bureaucracy. We kind of moved off the interview.
We had totally and I was about to start talking at something else will together and then remembering that we're supposed to be talking about this interview. So one of the things that he did talk about when we came to productivities, he was talking about the Roaring twenties a.
Little good point. I mean, there was a lot of comparison between the Roaring twenties and the Roaring twenty twenties. After the reopening of the economy, these sort of revenge spending et cetera. When you look at total factor productivity, it has actually sort of been flat to two, falling independent on countries. Obviously, the US clearly has a lot more investment in innovation and productivity, so for that you
need investment in technology, robots, et cetera. Even artificial intelligent intelligence is expected to increase the productivity in the service industry, not just replace jobs, but make us a lot more efficient at what we do. So I think there is a there is a probability for productivity to increase because we won't have much alternative As businesses will are facing, as you said, real wage growth, they'll have to find ways to protect our margin by investing in more productive assets.
Otherwise they'll just have to they'll struggle and under perform.
So I think it is yeah, And I remember you and I are talking about there's a lot in twenty twenty. Twenty twenty one fully expected there'd be a Roaring twenties coming, and I wonder if that might still happen. I've started seeing mentions again after a break, Mentions of the Roaring
twenties popping up all over the place. Eddie Ardini at Yardini Research is always talking about his Roaring Twenties outlook and how it centers on the technological innovations, etc. That we were talking about in this podcast, and that he thinks that this productivity boom is coming back, and that is reflected in the moves in the stock market this year. And so this is not just a pop and a bear market, but the beginning of a new bull markets that reflects this massive productivity search.
This idea of the Roaring twenties is still out there.
I don't know if you remember a few years ago, maybe it was last year Billy Gifford had a conference and it was called the Roaring Twenties and we all got notebooks with the Roaring Twenties written on the front. I still have that notebook and I must open it and see what it says inside, to remind myself of what we thought was going to happen for what actually happened.
But it may come back.
Maybe maybe next year, John, you and I'll be talking about Mooring twenties again.
What do you think I'll be always I feel pretty optimistic. I can see these round twenties being a actually actually coming back and actually happening, because there is so much pessimism, you know, a high level. And I'm not saying I don't necessarily think interest rates will break anything or explode anything.
I just think I sort of feel that either something either quite drastic will happen or actually we'll see a boom on the other side of this, because people actually realize, well, wait, I'm actually nothing particularly bad it's going to happen, and what we actually need to do is just get our heads down and get invest in and maybe high interest rates will get rid of some of the extraneous rubbish and the misallocated capital, and we'll start focusing on what
matters I do. It's a weirdly uncertain setting outcomes, even compared tea, you know, the usual future uncertainty.
I think it is, but I keep looking at it and thinking, as you just said, high interest rates will solve some of our capital misallocation problem, and the labor shortage may solve other problems, and that it is when there is a labor shortage that companies have to get a grip and use technology to solve their their general economic problems. And I know, I promise I wasn't going to talk about my holidays, but back to my holidays.
So one of the things that I did at three Nank was I visited quite a few tea plantations because you know, I love a plantation and I love the factory, right, So I've also visited a couple of them tea factories, which was absolutely fascinating. And one of the things that constant complaint out there was the shortage of labor. That it's really hard to get people to pick tea or pluck teath, which seems which makes sense to me, because
it's extremely hard work and it's horribly underpage. You get one one hundred and fifty rupieces a day as a base base pay for plucking tea, which is, you know, about three pounds I think, so really not very much, and the tea pluck is in in the hells around. Candy are demanding a doubling of their base break, which seems entirely reasonable. And there's also a incentive program on top of that where you get another fifty rupees for each kilo of tea that you pluck etc. So it's
still extremely low wages. Even if it was double, that's still extremely low. However, a doubling of wage from whatever from a level plus a labor shortage means that the plantations are having to look at alternative ways. How can we make this more productive? How can each person have more tea picked at the end of the day. And so they've started looking at mechanical pickers, which is amazing because one of these machines and go look them up online, if anyone can be bothered, is quite everything.
To look at.
You can double or triple their productivity of each tea picker, ie the amount of tea that they pick every day, using a variety of machines that are two in particular, one one that is used by tvlee, one that is used by one person. And this is extremely innovative and it's a classic example of employers going, Okay, we can't get enough labor and we can't afford to pay labor what labor needs, or maybe you can't afford it and want to However, you look at it right, and so
we need to come up with an innovative solution. And suddenly everyone is inventing ways to help a picker double the amount of tea they get during a day by using mechanical pickers. And I found that very interesting, just because there's actually a classic of the shortage of labor causes technological change genre. And that's all I'm going to say about the holidays for now. Anyway, we can talk about the beaches later.
Yeah, and we'll look forward to motivate. It's also it's really interesting here there's a labor shortage like kin Sholanka as well, laker.
Shortages, labor shotges coming everywhere, which is one of the reasons why I mean, we won't talk about immigration at the moment, but one of the one of the things about the idea that we can use migrants forever to cover our own lower paying jobs as absurd because there are labor shortages across the world, and across the world there are people who are saying, I see, do you know what, I'm not going to do that really hard work for their money.
I'm going to need a bit more, which is entirely reasonable. Right.
So this is a global dynamic, not just a UK dynamic. So it makes no sense for us to say we're going to solve our labor problem by importing labor from other countries, but there's also a labor shortage. It might work a short time, but its perfinitely not going to work long time. Excellent, right, John, I think we'd better leave it there and remember everybody that had diversified portfolio. Is a good thing, but it's not the most interesting thing.
Thanks for listening to this week's Maren Talks Money the After Show. This episode was hosted by me Maren Sunset Web alongside John Stepic. It was produced by Some Society and additional editing by Blake Naples.
Now we gould you like to hear more about my holiday? We've done here