This is Bloomberg Wall Street Week. The global push into infrastructure, breaking the IPO logjam in text. The financial stories that sheepe are work cutting inflation without losing jobs. Do we need rate cuts? And if so? How many? Investing in a time of geopolitical turmoil.
Through the eyes of the most influential voices.
Ten Rogueff economists at Harvard former FDIC had Shila Bert ge CEO, Larry Kulp, San Francisco FED President Mary Daily Bloomberg.
Wall Street Week with David Weston from Bloomberg Radio.
The White House drama continues, bank earnings get started, and Chair Powell walks a line. This is Bloomberg Wall Street Week. I'm David Weston. This week Professor Kate Judge on the Bank Reserve regulations. Jay Powell says, are on the way.
It certainly looks like what we're going to end up with? Is it a very different suite of reform?
And Mark Soter of EGI the man picking up the baton from legendary investor Sam Zell.
And Miss Malatty was my mentor and a great human being. We've all been in the roles for years.
We begin with the US economy after a week when Chair Powell said he was gaining confidence but not yet enough to claim success and controlling inflation. And then on Thursday, us CPI numbers seem to underscore the progress he is seeing from an investor's perspective on the economy. We welcome back now Scott Besson. He is founder and CEO of Key Square Capitalist. So Scott, great to have you back
with us. David always good to be with you. So we heard from j Powell this week and he said, look at we're looking at something in the two zero point five range, and inflation going in the right direction, and labor market's still pretty strong. Growth is pretty strong. It looks like a pretty good economy, is he right?
I think if we look at the aggregate numbers, aggregates are good. But you know Chinese have a central plan and you know they tell us they have a five point five percent the GDP target. So GDP looks good, but underneath the hood, you know, there's some alarming things. The last job's number, fifty percent of the jobs were created by the government. If we have government adjacent which is healthcare and education, it was up to about eighty percent.
Inflation is slowly coming down. The shelter number came down this month, and you know, I don't think the FED needs to be in a hurry. They had been with this so called dot pod, which I think they should get rid of because it's becoming an embarrassment forum. They'd been at three cuts for twenty twenty four. Just at the June meeting they adjusted to one cut and now the market is pricing in two or three for the year.
So it's all over the place. So having been very wrong, why not take your time, make sure and see what happens.
So let's talk about what you think second term with Donald Trump might mean for some of those very factors you're talking about, particularly that bottom fifty percent, the people who really feel that they're hurting right now. What would he do given this economy, given that's pretty good for most measurements, what would you do to really make it that much better?
Well, look, I think we're going to have to reprivatize the economy because this is running on government spending where at it's seven percent peacetime non recessionary budget deficit. This is unheard of. I have a peace out today is saying for the first time, interest costs are exceeding or defense spending. So the spending is now becoming also a national security issue. So I think we are going to go back to under Donald Trump, the private sector push
the economy. We didn't get inflation because the private sector impetus was met with deregulation. Under the Biden economy, they had big government spend, but it was met by increased regulation. That's the formula for inflation.
There's a lot of talk, as you know, about getting the deficit under control, but President Trump in his first term did not get the deficit under control. I mean, if you look at this is the Committee for Responsible Federal Budget, they say under his administration, we added eight point four trillion dollars, and four point three trillion of that was not COVID related. We added a lot under Biden as well, but actually substantially less than under President Trump.
Yeah, well, they're using CBO projections, not the actual numbers.
We'll talk about taxes. That's also a concern. In that piece you refer to the Bob Rugen and Ken channel, they actually said there's a problem with the tax extending the tax cuts that we had back in twenty seventeen. If you extended that that would really substantially increase the deficit because only and I think this is a CBO number. You correct me if it's wrong, but only twenty percent of those tax cuts actually paid for themselves.
Well, I think this summer around, and I think with Trump one point zero, we got to stop the clock at the end of twenty nineteen because COVID was a game changer. And I think that there is big appetite for pay fors this time. So I think we would get this Orwellian named Inflation Reduction Act under control. I think you can say a trillion on that. If you empower states on Medicaid, that's another trillion. I think that
there will be some tariff income. So I think that there is a big appetite to reinstate the tax cuts.
But with pay fors, well, well, terrorists, it would be income to the federal government, but the money would come out of consumers pockets. We did not, I mean, China doesn't pay that money consumers paid, and it might stow inflation.
Well, look, I think that if you are if we have forty or fifty dollars oil and we have deregulation, we have higher growth, we control immigration at the border because this unfedered immigration. Now, the economics profession had for years said that somehow the one thing that didn't they respond to supply and demand was immigrant labor. Now they're saying,
oh no, it does suppress inflation, increases economic growth. So I think if we secure the border, the bottom twenty five percent of Americans will see wage increases.
President Trump is talking about more than securing the border. He certainly has been talking about that for a long time. He's also talking about deporting a lot of people who are not documented here. Now, wouldn't that reduce the workforce and therefore increase wage costs and inflation?
It could for the bottom twenty five percent. Those people are not working in Microsoft and not even in middle income jobs. And I don't know about you, I've got no problem at the bottom twenty five percent gets a much deserved waveg increase. You know, under Trump, one point zero working class Americans did better than the top ten or twenty percent the Joe Biden economy. It's been great in the Biden economy. You either own assets or you don't. The stock market set a record high housing prices or
a record high. Bottom fifty percent of Americans have debt. Most households couldn't meet a five hundred dollars medical emergency, and I think it'd be great if that group got a wage increase.
Fascinating. We're always great to talk with you, Scott, Thank you so much. That is Scott Bessant of Key Squared Group. In his testimony before Congress this week, Fedchair Jpole spent a fair amount of time on those proposed Basil three regulations and specifically when we can see a new version, given the agency's decision that more than just some tweaks were needed to what the agencies first proposed to take us through. Where we are, we welcome back now, Catherine Judge.
She's professor at the Columbia Law School, So professor, thanks so much for being back with us. We don't know what they're going to come out with. It looks like later on this year, won't go into effect till sometimes next year. But do we think basically they are cut back on some of these reserve requirements.
That is certainly what it looks like right now. Powell has said on multiple.
Occasions that we should expect broad and material changes.
Again, this is not just the FAED.
The FED has to work closely with the FDIC and the OCC But it certainly looks like what we're going to end up with is a very different suite of reforms than those that were proposed about a year ago.
So there are specifics with regulation like this. It's come downe on Pike and we'll find out where it ends up. But we also had a pretty momentous I think term in the Supreme Court when it comes to regulation, not necessarily involving bank regulation, but about regulation overall. But particularly the thing if you were focused on, is Chevron. The overturning the Chevron doctrine, in which the courts would defer
to the agency's determpretation of the statute. Could that affect banking regulation as well?
It certainly could and will.
I mean, if you look back historically, Chevron was actually one of the key vehicles that facilitated deregulation during the
nineteen eighties and nineties. So, as you just said, the core idea of the Chevron doctrine is when a statute is ambiguous, that's going to be treated as a delegation to the relevant agency to figure out the best interpretation under the circumstances that they're facing using their expertise, and so in the nineteen nineties that was a mechanism through which they said, look, look banks can have to engage in a far broader array of activities than we previously thought.
In the short run, I think banks are celebrating this as a win. Business is celebrating this is a win. Longer term, it's really hard to know. It really creates a lot more legal uncertainty. It does reduce the relative certainty regulators are going to have regarding the whether or not their rules are going to be respected, and it puts courts in the.
Driving seat in a way that I think could really shake things up.
So I'm going to ask you something to do something you're not going to want to do. Is just speculate, but we don't know. But you teach regulation and legislation with respective particularly financial institutions. As we look at various regulations that are pending, including the Basil three, but not limited to that. Right now, do we think that that may affect the way they go about making their rules,
because now they're very a conscious effect. They're going to have a court of some sort looking over their shoulder, right quick.
Yeah, So two things.
One, I think it's certainly going to effect the way that they undertake rulemaking Basle three and otherwise.
That's partly because again lower Bright just overall Chevron, but there are also a number.
Of other significant Supreme Court decisions that really allow courts to scrutinize far more closely the decisions that regulators are making and the processes through which they're making those decisions. So there is a risk it's going to make regulators a little more gun shy and a little more worried about making sure they've crossed every single ty and have dotted all of.
Their eyes before they problet get a regulation.
That being said, bank regulators are also bank supervisors, and they have an ongoing duty to really promote the safety and soundness of the institutions that they oversee. So you could end up in a world where regulation is not able to keep up with potential changes in market dynamics, or risk that supervisors are.
Seeing a lot more work.
It's done through that supervisory process, which is far less transparent and far less uniform.
Well, so this is a fascinating point I had not already thought about. It may shift away from the regulatory approach where they have a notice in comment every comments and we know what's going on. As opposed to i'll call it prosecutorial discretion of a sort through the supervisory function. That's a very different kettle of fish.
It is a very different kettle of fish. It's one banks have had to deal with for a long time. But the question is relative important. One of the ways of understanding Chevron, particularly as it's been narrowed in recent years, is it created a real carrot that really encourage regulators to undertake noticing comment rulemaking, which is very time consuming, very resource intensive process, because at the end they knew they were going to get this carrot called Chevron difference.
Now that you've taken that carrot away, it puts a lot more onus on the regulators to think, well, what is the right tool of the very tools I have available for trying to achieve a particular end. It still might be regulation in some set of circumstances, but it could also be supervision for banks, to be things like the living will process that we've seen being a mechanism
through which you get kind of change over time. It could also, for something like the CFPB, be policy making through enforcement rather than clarify with certain terms mean use enforcement policy be a mechanism to which you make policy.
So again, I think it certainly changes.
The world around regulation by rulemaking, but that doesn't mean long term it's really a win for business.
Professor has always a great treat to have you with us. That is Professor Catherine Judge of Columbia. Coming up, Sir Kiir Starmer has won his large majority in the British Parliament. Now what's he going to do with it? We ask former UK Ambassador to the United States, Sir Peter Westwickotte. That's next on Wall Street Week on Bloomberg.
This is Bloomberg Will Street Week with David Weston from Bloomberg Radio.
This is Walterree Week. I'm David Weston. Last week saw a labor government sweep into power after spending many years in the wilderness, but the size of the majority did not necessarily indicate how much the new Prime Minister, Sir Kiir Starmer can do with it. We turned to someone who spent his career in the British Foreign Service as ambassador to the United States, France and Turkey for his views on the nature of the win and what we can expect next.
The interesting thing is that although they've got a huge majority and the working majority will be of one hundred and seventy or so, they've only in fact received slightly less than two percent more votes from the British public than they did last time. So what's happened is not so much that there is an overwhelming vote of confidence
in the Labor Party. It is a sense that throw the bombers out if you like, that the Conservatives had had run out of road and run out of trust and run out of support, and people have to some extent voted for the Labor Party. Certainly ten percent more voted for Labor than for Conservatives, but there's also been fourteen percent for the right wing anti European Party of Nigel Farage, and the Scottish Nationalists lost big time to Labor in Scotland, and the Liberal Democrats have won more seats.
They're going to have seventy one seats in the new parliament, which is a historic high. They've never done that well since the party came into being, So everybody has done well except for the Conservatives.
Which leads to at least an interesting question, which is normally you think about a mandate when you have this larger majority, if it was a vote against the Conservatives more than it was for Labor. When it comes to policies, what did the British people vote for? In terms of policies.
The slogan which the leader of the Labor Party came up with after road testing a number of different options, was one word change, and their focus groups and political scientists told them that that was what the British electorate really wanted to hear. These guys, the Conservatives have been in power for the last fourteen years. We've had COVID,
We've had Brexit which hasn't gone well. We've got no very little economic growth, We've got no productivity, you know, investment and exports have been patchy, if not done in a whole lot of different issues, and stagnant middle class incomes over the last probably twenty years, which has upset a lot of people. So they voted for change. They voted to get rid of the guys who've been in charge for the last fourteen years. But the Labor Party was very cautious about not being very specific in terms
of what that change would bring. You know, they didn't want to talk about Brexit, which almost the three quarters of the British people now recognized was doesn't mean to say three quarters of the British people want to go back into the European Union, but most people recoon that
was a mistake. They didn't really get discussed. The Toriest didn't want to talk about it because it was their handiwork, and the Labor Party didn't want to talk about it because they were frightened of losing votes which had become a first time conservative voters and who were traditionally their supporters.
A change, but not a change in taxes as I understand it, We're not going to increase taxes, and yet we want to increase growth, productivity and investment. How do you do those two things fiscally? Where do you come up with the money for that?
Well, they're going to have a little bit of a cushion fiscally because they revised the numbers for growth and we're now looking at zero point seven percent for the first quarter of this year, whereas people thought it was pretty much stagnant. So there's a little bit more growth coming in. There is quite a lot less inflation. We were up at eleven percent last year at the highest point, and we're down at two percent now. There isn't any
evidence at the moment of productivity increase. Exports have surprised people by doing a bit, but particularly of course to non European markets, so there's a little bit of extra cushion, extra wiggle room coming in there. The other thing David to be clear about is that they've said we will not be raising income tax and we will not be raising corporation tax, but they have not said they were and they will not be raising VAT, which is a
sales tax. But they have not said anything about capital gains tax, and they've not said anything about some of the other business specific taxes. They've not said anything about windfoll taxes for energy companies, which have made a lot of money out of the rise of global prices as a result of the Ukraine conflict, and so the big headline tax issues they've said no, no, no, we won't mess
with that, but they haven't excluded some other things. And they are going to put tax on private education fees, which they nobody's ever done before in the United Kingdom, which will raise a bit of money. And they have done something which the Tories had already done, which was to change the non dom as we call it, the non domicile tax regime for very wealthy people who have an expatriot status and who live in the UK but don't get taxed on any of the wealth that they
have outside Britain. They're changing all that which the Conservatives already promised to do it. The labor parties say they'll go further. I'm not sure how fuch further they'll go. I worry that we might just drive away a lot of the wealth that we need for our economy at a time when it's still pretty fragile. So there are some areas of tax where they've got the option to raise more money, but they are scared of being deemed
to be business unfriendly. And you may have noticed that even in the first day or two after the election, stock markets rallied Sterling did a bit better. The business community at the moment anyway, doesn't seem to be too scared, and they probably quite like the idea that with a whating great majority there is going to be some political stability and maybe some policy stability for the next four or five years.
So Petero's talk about the relationshiptween the United Kingdom and Europe. You mentioned the name that must not be named in the campaign of Brexit that nobody wanted to talk about. What do you anticipate this Labor government might do with respect of Brexit. I understand maybe not pull back entirely, but maybe modified around the edges.
Yestarmer has said and so have his other ministers, that there will be no return to the Single Market or to the Customers Union under a labor government. So that's pretty definitive in terms of not turning the clock back to pre Brexit days. Was that necessary to ensure that they got a substantial majority. Perhaps it may also be realistic in that the price of going back on the deal, which is very europe favorable. Frankly, the price of going back on the deal negotiating by Boris Johnson would be
quite considerable. There would have to be restoration or free movement of labor, which is free movement of people, which is a political hot potato, especially for the Conservatives, but it's also going to be tricky for the Labor Party.
So Peter, thank you so much for be with us here on Wall Street Week. Really appreciate it. That is Peter west mccott. He is former British Ambassador to the United States. Equity Group Investments was the investment firm Sam Zel ran so successfully for so many years. Mark Soder for many years served under Sam as president of the group. And we welcome h now to Wall Street Week. So welcome Mark. Great to have you here, David, thanks for having me. Sam Zel was such a friend of this program.
We so benefited whenever he came on, and so we're really fortunate to have you here. First of all, talk about that transition, because those are really big shoes to fill. You were president before Sam passed away, but talk to just about that transition where you are in it.
Yeah, So thank you first of all for having me. It was a long transition and continues to be a long transition. Sam put me in that role nine years ago, and when he did, it surprised me. I'm an operator at Rank Companies and I never expected to run this business. And he said, look, it's a business. If I could come back and look at the place thirty years from now, I want Equity Group to be there and healthy and running.
And so I want somebody who can run a business that was again nine years ago, and he said, I don't actually don't need you today, but I need you to start planning for when I'm not here, And so dial it that far back. We've been working myself, the family, Sam's son in laws involved in the family office. We've been working at this for a decade. And so you know, it's a big loss to have him leave us, and I miss Melott. He was my mentor and a great
human being. But we've all been in the roles for years, right, so this isn't a wow. Sam's gone. Now what do we do? He was really good at not just letting us practice but actually run the business, and he slowly kept stepping back year after year. And I would say the last two three years we didn't really talk about deals. We talked about people. We talked about developing people. We talked about do we have the right people? So the
development kind of moved into that phase. And you know, so far, I don't want to say it's been easy, but it's been reasonably smooth for that big a change.
So a long evolution, certainly with Sam no longer with us, but also I wonder in the nature of the business. I mean, I think if Sam as a real estate investor, going back to ann arbor and student housing right where he started out. I don't think Sam's out so much as a private equity guy.
Yeah, So that I think is something that a lot of people don't realize. Sam, I think, more than anything, was a person that just evolved over time. So that real estate, yep, back in the sixties and seventies, that's what he did. Then he built the reads and went public with all this, and that was in the seventies
and the eighties early nineties. Real estate started to get crowded at one point, and so he actually moved into distressed investing, so he was doing good company, bad balance sheet type stuff back before the phrase existed, back in the late eighties early nineties. That started to get crowded. And then he went overseas and he went to Argentina and China and India and invested overseas. And again people don't know that as much. And now we're in a
different stage. We're if you kind of come current, we're doing a lot of business with lower middle market more in the US, a lot of family run businesses, So especially coming out of COVID, there's a lot of owner operators who've kind of realized that their company is growing, they need more capital. But the flip side is ninety eight percent of the net worth is tucked in that one company. They don't want to sell out, right, they don't.
They're not ready to retire and they're looking for a partner, and so they've a lot of them have heard about private equity and there's good bad about it, but they don't want to sell the company to someone and then have it foot three years later, years later, And so you know, that's who we are. We tend to own companies for a very long period of time, and you know, Sam with his background and frankly how we've built the organization,
we show a little bit more patience. I think with some of these companies where there's been a founder, their names on the door and they've been doing it for twenty years. So that is really really different when you think about it. First of all, I don't have to if I own a company for fifteen years and you own them for five, I have to find one third
as many companies. So that's a benefit. We're very big on compounding, right, So Sam was real advocate of if I find something, stay with it at the end of the day, and we reinvest in our winners. Okay, so you take a typical private equity firm. Let's say they invest one hundred million dollars in a company and they double it, right, or maybe they triple it, then they
definitely want to sell it. When we make three times our money, we look at it and we're like, look, we have the right management team, We're in the right industry, with the right company, we'd probably get the right processes in and in our minds, that's the best risk return we can find.
That's a great story. Really fast saying we're fortunate to have you here to tellus thank you so much for being here. I'm with Sam, but we're glad to have you.
I appreciate it.
Thank you, Chris, Thanks so much to Mark Sodter of Equity Group Investments. Coming up, it's time for the annual gathering of the Aspen Economic Strategy Group, focused this year on dynamism in the US economy. We'll hear what to expect from the director of the group, Melissa Karney of the University of Maryland. That's next on Wall Street Week on Bloomberg.
This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
This is Wall Street Week. I'm David Weston. At the end of the month, prominent economists, business leaders, and policymakers will gather again in Colorado for the Aspen Economic Strategy Group meetings. Wall Street Week was there last year when the subject was building a more resilient US economy. If you look at the economy day, it's a pretty resilient economy. You know, we've been through a lot of challenges and we look pretty strong today in a relative sense.
A lot of people think, oh, this is a technically hard issue, but what we've seen at this conference is a bunch of people saying, well, gee, if you do this, and you do that, and you do that, if you can make real progress.
It really is a question on the political will.
And we're trying to keep the fires burning. We are not focused on the short term, okay, We're focused on the longer term. And when we get Democrats and Republicans together, there's really not that much difference between us, right, and that gives me hope.
This year, the subject will be strengthening America's economic dynamism, and to set the stage, we welcome back now University of Maryland economics professor Melissa Karney, who is director of the Aspen Economic Strategy Group, So Molist, who we're really looking forward to this at the end of the month, give us a sense of that. I think it's sort of a pivot. We've gone from resiliency not to dine what is the state of dynamism? What are the questions you're asking?
That's right, Well, thanks for having me back, David, and we're looking forward to having Bloomberg return to ask them at the end of the month to be with us for this meeting. So the reason why we're shifting the focus now from resilience to dynamism is because our economy has proven to be quite resilient. It's in a pretty strong position. We came out of the pandemic and the economy.
Really was resilient.
But now the nation is moving very deliberately away from some of the market principles that have guided economic policy making in this country for decades that have led to great improvements and innovation and living standards, and that poses I think a lot of important questions for a group like ours about how to how to frame a new
economic policy regime. Taking the nation's move towards more protectionist nationalist policies in mind, and do this in a way that still preserves and strengthens economic dynamism as opposed to impeding economic growth. And so that's what we're going to
be focused on. We're going to take this apart in a lot of directions, talk about industrial policy, trade policy, but really with this goal of maintaining economic growth, innovation in the face of this national reconsideration and reconfiguration that's coming from both parties.
Exactly, it is for both parties, although the Bida mistation particularly has embraced some of the industrial policy you're talking about in the acts we've had. Let's pick up on that. You mentioned industrial policy. When does it work? When does it not work? What are the questions again you're going to be addressing at this form.
Yeah, this is really critical. I mean the conversation that needs to be had is not a simple one of is industrial policy good or bad, but rather when is industrial policy appropriate? When is state driven industrial policy likely to succeed versus be captured by political and business interests. There's also very important questions about how to actually design
industrial policy. So if you think about what the proponents of industrial policy are saying, they draw on and they claim lots of policy goals national security, a transition to a green economy, supply chain resilience, job creation, the revitalization of economic communities. Which of those policy considerations or goals are appropriate to justify state driven innovation and funding of particular manufacturing. When is industrial policy more appropriately thought of
as sort of a political favors to swing states. When do national security issues really arise?
What products should.
Be thought about as part of the need to invest in US capacity for production under the guise of national security versus looking to friendly allies or diversified supply supply chains, and so all of that really needs to be considered. There is also the very practical question about state capacity so ales.
It used to be said that industrial policy is picking winners versus losers. There are some people now who are starting to question whether in fact we're only picking winners that basically the government intervenes to help people across the spectrum. Does that interfere with dynamism? Do we have to and I hate to say this, have a little bit more creative destruction or to guarantee that dynamism that's driven the United States economy in the past.
I mean, this is why to mainstream economists, and I would consider myself one get nervous when when the federal government is really taking an active approach to deciding which
sectors or which firms to invest in. That's not to say there aren't real reasons and opportunities for government subsidies to advance, you know, innovation investments in basic science, for example, we know have really larger terms, but there is a worry that that government funding can sort of just prop up firms that really, you know, wouldn't be successful on their own. And this is why the details of how these kinds of federal programs are designed are critically important.
One of the things that I think has really sustained the US economy in recent years has been the fiscal intervention. A lot of money has been pumped into the economy, and that leads to debt and deficits. Well, how does that interact with the dynamism that we need in the economy.
Oh, the US debt is a challenge that whoever wins the election, this needs to be a real issue that's dealt with the fact that by the end of this year, our deficit will be seven percent of GDP, unprecedented outside of wars or recessions, really impedes and impedes the federal government's ability to make the investments that would be consistent with bolstering economic dynamism. This is a real drain on our fiscal capacity.
It also makes us much.
Less resilient in the face of future shocks that are sure to come. It also heightens the risk that eventually we're going to have another financial crisis, and so dressing the data absolutely needs to be part of any economic policy making going forward in an effort to improve the US's ability to make the investments that will bothster our economic dynamism.
Melissa here at Blueberg, it seems as if we cannot have a conversation with anyone without talking about generative AI. Is that a potential driving force behind dynamism? How much can we counter? Is it hyper? Is it real?
Yeah, David, I have no idea what's hype or real, but it does certainly add a lot of uncertainty in the background of all of this. What AI is going to do to the labor market, in my view, is entirely unclear, but I think we could be pretty confident that it's.
Going to shake things up.
I mean, there are definitely going to be new jobs created, but there are also going to be jobs lost. This has you know, experts say this has the capacity to sort of change the labor market in society in the same way that electricity or steam power did. So it's going to be transformed. But if the challenge is it's going to be transformative in ways that I don't think
anybody really has a good handle on. And so thinking about how our country, our workforce, our students are in a good position to leverage the power of AI so that it's a force for good, both in an economic sense and I mean personally, I'm really concerned about the impact it could have on democracy in the functioning of our institutions. We need to be getting ahead of this.
Melissa, thank you so very much, and we look forward to being with you and asmen again. As Professor Melissa Karney of the University of Maryland mutually assured, destruction it's a term some of us are old enough to remember from the Cold War, a theory that the best way to keep the United States and the Soviet Union from destroying each other was for each side to know that the other would wipe it out if it moved first
in a nuclear war. Things have certainly changed a good deal since the nineteen sixties, when I was a boy reading Seven Days in May Failsafe, afraid that the Russians would hit my hometown of Flint, Michigan because of our auto plants. We've had arms reduction agreements and non proliferation agreements, none of which stopped several other nations getting their own nuclear weapons without any clear and certain way of deterring
them from using them. And now there's a new potential threat to be guarded against, one that's much harder to deal with because it can, and we hope will be used to do a lot of good that nuclear bombs never could. It's artificial intelligence, which many see as affecting every part of the economy.
I think it actually does run right across the entire economy. Maybe not to the same depth in every sector, but nevertheless, it's very broad based.
And AI may be every bit as deep as it is wide.
Yes it is profound, Yes it is transformative.
But as with any powerful tool, there are also some big potential risks, Risks that chat GPT creator sam O but admits we have to be careful to guard against.
I mean, I think there's many ways it could go wrong, But we work with powerful technology that can be used in dangerous ways very frequently in the world, and I think we've developed over the decades good safety system practices in many categories.
It's not perfect, and this won't be perfect either.
Things will go wrong, but I think we'll be able to mitigate some of the worst scenarios you can imagine, you know, bioterrors like a common example, cybersecurities.
Another Mustafa Suliman, co creator of open Mind and now CEO of AI at Microsoft, has even proposed that the United States and China avoid an AI arms race by starting talks right away on a bilateral agreement to contain what's coming, sort of an arms limitation agreement like those negotiated between the United States and the USSR back in the nineteen eighties.
We will ultimately need global cooperation, but at this moment we have to be optimistic encouraging of the Nation States. There's no way to put the genie back in the boggle. This really is happening. So there art is going to be around shaping it in the public interest and making sure that our democratic governments remain in control.
So only one's concern is about AI escalation between countries. But another AI battle is being waged even as we speak, this one between employers and employees. IBM says that the substantial portion of the AI large corporations are using already is for talent acquisition.
And how do we actually bring to life for us what we call ask HR, which is really enabling us to have all two hundred and fifty thousand IBM rs kind.
Of become really productive and actually.
Elevating our HR teams to truly hire value perhaps skills, talent recruiting, and allowing us each day to sales service. And I think we love the most about it, Boody, is it's like available to you twenty four by seven and it allows you to get really fast responses.
Not unexpectedly, the other side is striking back. Recent studies from resume Builder and Canvas say that nearly half of job seekers are now relying on AI in their applications for help in putting together their resumes, to help write the cover letter, or for both. But wait, there's one other place where maybe we could use AI to choose our next employee like maybe the person we employ as
president of the United States. Americans are about to go to the polls in November, with about a quarter of voters saying they don't like either of the two candidates. So why not turn it over to the chatbots to choose our next president? And according to novelist Tim Dorsey, we wouldn't have to worry about that mutually assured destruction business. He says that as things are now, our political process appears to be a toxic dance of mutually assured destruction
that takes all the citizens down with you. But then again, we'd have to make sure that we weren't creating some sort of doomsday machine. The doomsday machine, and what is that which will destroy all life on earth?
Doctor Strangelove, How is it possible for them to have built such a thing.
It is not only possible, it is essential.
I wish we had one of those day machine.
Streets that does it. For this episode of Wall Street Week, I'm David Weston. This is Bloomberg. See you next week.