The transcript from this week’s MIB: Jeremy Grantham, GMO, is below.
You can stream/download the full conversation, including the podcast extras on iTunes, Bloomberg, Overcast, and Stitcher. Our earlier podcasts can all be found at iTunes, Stitcher, Overcast, and Bloomberg.
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This is Masters in Business with the Barry Ritholtz on Bloomberg Radio.
BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, what can I say? Jeremy Grantham, he is a legend, the founder of GMO, he is literally the G in GMO.
He is the chairman of the firm as well as sitting on the asset allocation committee. He has had a fascinating career, I could have spoken to him for, but we only had him for a finite amount of time for his next, actually, dinner, we were recording this late on a Thursday night. It’s dark out, the Bloomberg Studios are empty, it’s kind of interesting evening recording.
But what can I tell you? His track record is astonishing, he’s created a ton of wealth over the years, his philosophy of investing is pretty straightforward, be a value investor, be aware of the data, understand when things are getting out of hands, you may not get the timing perfect, but when things become excessively pricey when the animal spirits run amok, when all the bubbles begin to form, you know how that ends and it’s never well.
The history he’s put together of warning and positioning himself correctly before the 19 late ’80s Japanese bubble popped, the dotcom bubble in the late ’90s, the great financial crisis, his timing has been pretty extraordinary. He’s been pretty bearish on US stocks over the past few years and has become much more enthusiastic for emerging market value stocks.
He has warned if you jump into E.M., you are going to feel foolish and uncomfortable for a period of time and not sure first buying opportunity then it becomes even more painful that your second buying opportunity, but if you have a 10 or a 20 year window, that’s where you want to be.
We discussed philanthropy, he has basically donated all of his money to his charitable foundation and of course since it was Jeremy Grantham, we talked a lot about climate change, it’s his favorite philanthropic issue and he’s basically warns that if we don’t do something and soon, there ain’t going to be a whole lot of people around in 50 years, that we’re standing on the precipice of a catastrophic set of changes.
And he says he approaches climate change the same way GMO has approach in investing, he looks at the data, he looks at the overall trend and makes what he believes are intelligent, reasonable decisions based on that data and those decisions have led him to be extremely cautious about what’s coming our way courtesy of rising carbon in the atmosphere caused primarily by burning, wood, coal, and oil and gasoline and we need to figure out if we want to be here a century from now or not.
He talked about the propaganda industry that’s been pushing back against this, how the oil industry and the Koch brothers have funded a disinformation campaign as he said, brilliantly, quite successfully and lots of people no longer believe in science, because it’s profitable for these companies to have the public not believe in science.
I can talk about our conversation for hours and hours but rather than listen to me continue to babble, with no further ado, my conversation with Jeremy Grantham.
I have an extra special guest this week, his name is Jeremy Grantham and he is one of the cofounders of GMO where he is also chief investment strategist, a member of the asset allocation team and a member of GMO’s Board of Directors. Previously he was cofounder of Batterymarch Financial Management, he began his career as an economist with Royal Dutch Shell, he did his undergraduate work at the University of Sheffield, got his MBA from Harvard Business School, Jeremy Grantham, welcome to Bloomberg.
JEREMY GRANTHAM, FOUNDER, GMO: Hello. A pleasure to be here.
RITHOLTZ: So let’s start with Batterymarch Financial Management, that was 1969, GMO was 1977, I’m curious the ’70s were not especially fun period to be an equity investor, how much of your investing philosophy was shaped by your experience in the 1970s?
GRANTHAM: The ’70s were hugely kind to us, contrary to what you’re suggesting. We had a battle plan to invest all our money in small-cap value before institutionally they had invented small or value, everybody invested with Morgan Guarantee Trust and they bought the nifty 50, the great Avons and IBM’s and we bought Great Lakes Dock and Dredge, which no one had heard off and then they went down with the rest of the market but no more badly than the Avons, they all — everybody went down 50 percent in the great ’73 — ’74 decline.
RITHOLTZ: Sure.
GRANTHAM: And then where they rallied for a year, we just rallied and rallied and the small-cap inherited the Earth and between ’74 and ’82, our small cap outperformed by well over 100 percentage points.
RITHOLTZ: So did that experience affect your philosophy, did that make you more of a small cap and value factor investor?
GRANTHAM: It made me much more a devotee of trying to find which group might do better. And ’82, we basically abandoned small-cap and went into large-cap because they done so well, so we gave up our 10 years of background together, Dick Mayo and me …
RITHOLTZ: Being the M in GMO.
GRANTHAM: Being the M in GMO, and changed because when something has a run and beats the market by 100 points, you better be ready to abandon ship and so we did.
RITHOLTZ: So before we get up to the 1980s, I want to stay in the 1970s when you were at Batterymarch, you worked with Dean LeBaron and the two you kind of put together an idea that you first floated at a Harvard business school seminar and the concept was maybe people should just buy a broad index of stocks instead of trying to pick individual names? Tell us how that played out.
GRANTHAM: Dean had a friend, Lee Bodenhamer and this was a summer course of pension fund offices at HBS and they written a special case where these pension fund guys were going to choose between the establishment, Morgan Guarantee Trust, they J.P. Morgan basically and the other banks in New York owned the pension fund business back, and the second player was T. Rowe Price when he was relatively new and represented growth which was also relatively new. And the third one was a little unheard-of new company they actually invented a new name for us and do they had to decide between these three.
And at the end of the class when they had gone through the proceedings, as is typically the case, they, the boss asked the visitors sitting on the backbench have they got any comments? They are not allowed to talk during class but you usually get asked. And I can’t remember what Dean said but what I said was when I looked at the case and I look at the data for the three players and the S&P, I was surprised that no one in the room had suggested giving their money to the gentleman from Standard & Poor’s. That was it.
It went over like a lead balloon, no one twitched and on the car back in the drive, I said to Dean, why don’t we take this seriously, honestly think about it GM is said to have 100 different managers, what chance do they have of actually beating the S&P? They are drowning in turnover and management fees. So if you look at it you know one thing with absolute certainty, the players are going to pay 1 percent or 2 percent a year to play the game and the observers sitting at the bar, if you will, watching the poker game are going to have a market return.
Therefore by definition the guys at the bar going to beat the average of the poker players.
RITHOLTZ: Because that will be a zero-sum minus …
GRANTHAM: The poker players, some of them may do brilliantly well by inflicting their transaction costs and their management fees on one of the less good poker players and the — but at the end of the game all the players will sum to -1 1/2, and all the observers will sum to zero. And you would win. And why don’t we suggest of the big players instead of instead of having 30 investment managers or 100, that they put a big chunk of the money into the market?
So the entire logic was zero-sum game, which was a sufficient reason to do it then and is a sufficient reason to do it today and no one was interested, we offered it, Dean was a brilliant propagandist.
RITHOLTZ: No one was interested.
GRANTHAM: No one was interested and he got written up the story in the New York Times Magazine supplement and so on so forth and it got a lot of exposure and at the end of the year, Pension and Investment, the trade rag jokingly gave us an award for the most talked about product with no business.
RITHOLTZ: How did you first get interested in the challenges of climate change?
GRANTHAM: When I’m doing my stump speech to financial people, I always hope that someone will ask me this question and what I say as you’ve seen the data that I’ve just gone through and you are asking me this damn stupid question, why would I be excited? If you’ve seen the data the real question is what the hell are you doing not being excited? How is it possible that the great majority of you sitting in the audience of done nothing and know very little about this threat which is the most severe one you will have to deal with for the rest of your life.
RITHOLTZ: There was a book out not too long ago called “Windfall” and one of the conclusions of the book was the dry areas are going to get drier, the wet areas are going to get wetter, where it’s hot, it’s going to get hotter, where it’s cold, it’s going to get colder, and the way this falls out across the planet is disproportionately on the poorest people in the world. Does that still ring true? Is that what we are looking at going forward?
GRANTHAM: Yes, I think in general, the consequences of climate damage are felt in the most sensitive areas, which are occupied mainly by the poor, they live in the least desirable parts of the world, the semidesert zones of Africa or in the Far East being classic examples. However the cold areas are not getting colder, actually the further north and south you go towards the poles, the faster it is warming up in the closer you get to the equator, the more slowly it is warming up which interestingly has had some profound effects because the wind draws its power from the temperature differential between the pole and the equator and if you narrow that by having the poles get warmer faster, you slow down the winds.
So now hurricanes are moving 10 percent slower, so you’re more likely to have a hurricane amble its way across your territory and rain a whole lot more rain which is what happened in spades in Houston when it rained 30 inches in three days.
RITHOLTZ: You have raised the question as to whether or not energy will give us a serious and sustained set of problems over the next 50 years. What’s your thinking about energy? It looks like parts of the world are transitioning to renewable, somewhat slowly, but it it’s moving forward. Tell us about energy.
GRANTHAM: Well the technology in energy has been unexpectedly great, it’s moving at great speed and has thousands of new enterprises trying to push it along, and in general, it’s been a very pleasant surprise.
RITHOLTZ: Meaning the cost have come down, the efficiencies …
GRANTHAM: The cost of wind have come down more than anyone dreamt possible 30 to 40 years ago and the cost of solar have come down the same.
RITHOLTZ: Solar is now equal or cheaper than coal, is that a fair statement?
GRANTHAM: A modern utility plant to solar or wind in any one of half a dozen beta stage is cheaper to construct and run done it is merely to run an existing coal plant.
RITHOLTZ: Wow.
GRANTHAM: It’s actually fully cost cheaper than the marginal cost of the best nuclear and the best coal plants.
RITHOLTZ: Do you see much of a future from nuclear?
GRANTHAM: My motto is never underestimate science and also unfortunately never underestimate Homo sapiens’ ability to screw it up.
RITHOLTZ: Right.
GRANTHAM: But in terms of nuclear, there are endless attempts to come out with what you might call third-generation fusion of trying to bypass some of the problems that have slowed them down for 20-30 years based on the new technologies. They have so much invested in in the old approach to fusion that that kind of now they are 30 billion in the hole, they feel they have to keep going, and some of these new people working on a shoestring may get lucky, may come out with a form of fusion.
RITHOLTZ: There was there was a buzz a couple years ago about thorium reactors, that kind of came and went.
GRANTHAM: And even on fission, thorium or new engineering tricks small scale, you can’t rule them out, if you come back in 30, 40 years, I think this may be a 50-50 shot that one or the other will have come through it was something that is helpful. And of course by then, energy storage which is the key to wind and solar may have become so cheap that it’s not really necessary even if it’s technically feasible, solar and wind which are continuing to decline by the way out into the distant future as far as one can see.
I will just give you one example of that and that is that to the winds over the ocean are 70 percent faster than the winds on land and the bigger the wind tower, much more efficient it becomes, it’s the swept area so that a 20-foot blade doesn’t give you twice the energy of a 10 foot blade, it gives you four times. And as you go up, the wind speed increases in the power of a windmill is a cube of the wind speed, that’s why hurricanes of 140 miles an hour are so much more deadly than 120, it sounds like it should be 17 percent but it’s 50 or 60 percent.
And so if you can build a truly giant windmill and the ones you drive past on a cycling trip in Holland, the 2 Megawatts, and the one you can order from GE if it still around the delivery in 2022 is 12 MW and that is almost as high as the Eiffel Tower believe it or not…
RITHOLTZ: Wow.
GRANTHAM: And they are massively efficient and you can only build them in the end in the oceans where the wind is more constant and if you could find the technology to build it in the North Atlantic and have cables that could carry it back to civilization, the wind is blowing 80+ percent of the time in the winter when you really needed in the northern hemisphere. So there is a lot of potential up our sleeve for the next few decades.
In the end, I think we will have a plentiful supply of green energy, we will not as a civilization be brought to our knees for lack of green energy. The problem will be how long has it taken us to get there?
So we will get plenty of energy in 50 years, we will be fully decarbonized I should think in 100 years maybe sooner, but the damage that would have been done by that is a carbon dioxide count rises, we have seen and been amazed including the scientists by the way at the rate at which the damage and fires and floods and the hurricanes and the speed they build up that power at droughts and floods for agriculture, we’ve all been horrified by how quickly that has escalated. And if you extrapolate what is going on today, we have no hope of controlling this for one and a half degrees, that is merely an intellectual exercise, we have no real hope at 2 degrees.
We are going to have to fight and scratch and do much better than we are doing today to keep it below 3 degrees, and at 3 degrees, all manner of bad things are already happening and some of them may actually get out of control, become self-reinforcing vicious cycles. There is no guarantee that that will not happen at any time in the next few decades.
RITHOLTZ: So let’s talk for a moment about agnotology or culturally constructed ignorance, you have a line that I’m intrigued by, you wrote the misinformation machine is brilliant, please explain. The Koch Brothers and the Exxons of the world have been basically funding a disinformation for 30 years, maybe longer, and the they have helped set up institutes, right-wing institutes who were basically defend the idea that climate change is a hoax are in that sense anti-science and they’ve done it well, they been persistent they’ve funded it, if you will, generously, and they have achieved remarkable results.
In comparison sciences been diffident and cautious, careful not to overstate anything and in that care they have guaranteed they understate everything and as I like to tease them, it may be dangerous to overstate most things in science but one thing is absolutely certain and that it is dangerous to understate climate change. If by understating it by being too cautious, too careful, you influence a politician to under react, you influence the general public to under react, you may be making a huge painful dangerous mistake.
RITHOLTZ: So the tobacco industry managed to keep people confused about the impact of tobacco for decades and decades before they ultimately had to make a multibillion-dollar multi-decade settlement, how long will it take before the carbon industry similarly stops pulling the wool over so many people’s eyes?
GRANTHAM: I think we are changing very rapidly, this last couple of weeks, there’s been a confluence of reports and coupled with the terrible of forest fires burning all the time in California regrettably of those natural horrors seem to be necessary to move public opinion, but that the confluence of that tragedy with all these major reports one from NASA, a government agency and a major one from the UN IPCC talking about the chances and costs of holding it at 1-1/2 degrees centigrade, and also three or four other articles in peer-reviewed seriously important journals, what I would call the top three science journals, that confluence has created an enormous amount of attention in the press which is so rare.
And it is played and it is played in my opinion. And I think Trump has agitated the science world into standing up and actually stating now for the first time in terms that represent their honest belief. So I think the worms have turned fairly big time, I used to tease them I had an actually a commentary in “Nature” perhaps the number one journal and it was called “Be brave, be persuasive, be arrested if necessary” and I was haranguing these guys for not stepping up.
Well now, Trump has done what many people couldn’t and he stepped up, they have stepped up I should say.
RITHOLTZ: Let’s talk a little bit about philanthropy, I read a fascinating statistic only 2 percent to 4 percent of all charitable donations made each year go towards environmental causes. Is that possibly right?
GRANTHAM: Sadly, it is absolutely right, I mean it’s tragic, it reflects I think the motivation for a lot of for charitable giving which to be uncharitable is to move in the right circles and be recognized for what you do and you move with illuminati and you go to dances and balls and photographed and put in in “The Tattler” and so it goes on.
And in comparison, lowly defense of the environment is not very good from promoting your life in smart circles, it’s the kind of country cousin and it gets 2 percent even though without solving the climate problem, your colleges, your museums, everything that in the end is not going to be worth much if we can’t maintain a fairly stable global civilization which is seriously at risk and almost any serious scientist would confirm that.
RITHOLTZ: So let’s talk a little bit about the Grantham Foundation for the Protection of the Environment, what sort of activities does that fund?
GRANTHAM: First of all, let me say, it has 98 percent of my accumulated ill-gotten gains from the financial world, and that is a pretty effective statement of how serious I think it is. I don’t even see it really as philanthropy, I see it as defensive investment trying to look after my children, grandchildren, and their progeny indefinitely. And I’m always amazed that more people don’t see it that way. I’m not a scientist and you don’t — but you don’t have to be a scientist to understand that the science that is coming down the road so fast.
RITHOLTZ: So let’s talk a little bit about your long-term goals, how do you specifically identify different recipients that you fund? You fund a lot of existing groups as well as some of your own new projects?
GRANTHAM: To start with the exciting stuff, 20 percent of our corpus is invested in green investing by us directly in venture capital, so and I have three very industrious shop helpers, and we spend — I spend as much time as I can and they spend all their time really chasing down great opportunities in this field. And one of the rules we have is they have to be capable of really making a difference, changing the probabilities of surviving all of these stressful points.
And we spent a lot of time face-to-face with scientists and entrepreneurs, scientists/ entrepreneurs and it it’s a amazing what they’re up to. They have done incredible things. I will just give you a few examples. RNA is the kind of engineering part that sends messages to the DNA what to do and the problem with it was it is so expensive to isolate that a lot of work just couldn’t be undertaken, it was $1,000 a gram and we bumped into a group that with a completely different approach, can now make it at $0.35 a gram with a target of $0.10 next year.
RITHOLTZ: Wow.
GRANTHAM: That is the kind of order of magnitude you need to be disruptive and having obtained the material, they can now the design endless things, but one of them, they started with a very obvious one was to send the instructions to a very expensive beetle, the Colorado potato beetle that can devastate whole fields in kind of one sitting as it were, and the RNA says are you a Colorado beetle? Yes, I am. Please proceed to this part of your DNA, now we will turn off this particular switch and what that does is unique to that beetle, it will make it impossible to digest cellulosic fiber. So the beetle munches away on the potato and dies of starvation and drops harmlessly to the ground where is not even poisonous and can be eaten up by other local insects.
And all of the literally poisonous insecticides that previously were used can be dispensed with, I mean that is the kind of thing that could really change the world.
And another one is we fund a lightweight vehicle, the trouble with the Tesla, I just received my Model 3, and I’m thrilled by the way, but it weighs 3000 pounds — 3500 pounds, and it’s moving 150 pounds of me down the road.
RITHOLTZ: Right.
GRANTHAM: And the vehicle where funding by MIT work is under 800 pounds.
RITHOLTZ: Is that like a composite material that’s been…
GRANTHAM: Yes, it’s carbon fiber protection around a three wheeler and you could say it’s a glorified comfortable motorbike with one or two passengers and room for some groceries and keeps the rain off but it’s also the most streamlined vehicle on the road, moves like a rocketship, entirely electric of course, and has a range far beyond any reasonable needs.
RITHOLTZ: The material, the composite, stronger than steel but a fraction of the weight, is that the goal?
GRANTHAM: It’s 10 times more capable of absorbing injury and still bouncing back than steel and of course very much lighter, whether it’s a 10th as light, I should think probably something like that.
RITHOLTZ: Ad you mentioned the potato beetle, I have to ask about agriculture in general this I know this is a topic that’s been very worrisome for you and I think most people are aware of the great die off of bees, maybe it’s the pesticide, we’re not exactly sure what it is. How dangerous, how threatened is the food supply of Homo sapiens given all the changes that’s going on?
GRANTHAM: I actually think that the intersection of food problems with the rapidly growing population particularly in Africa is the most direct threat of climate change because climate change makes the growing of food that much harder. A report from the proceedings of the National Academy said that they expect if nothing is changed in the current agricultural processes, that to the grain productivity will drop by 35 percent or 40 percent by the middle of the century, 2050 around the corner, and the UN will tell you we need a 50 percent increment to keep feeding the cattle that the Chinese want to eat, et cetera.
And the second biggest problem that may be burning faster even than climate change is toxicity, and the they have kind of flashed on to we are not looking for trouble, we want to keep life simple and we can’t because these problems are all interrelated but let’s start with the insects.
Two years ago, a wonderful group of amateur insect lovers in Germany looked at to 63 forest preserves in Germany so they are not around refineries, they are in a forest — protected forest and they measured that from 1989 until now, 75 percent of all flying insects have gone missing, I mean this is absolutely catastrophic. People felt there must be something wrong but it was done so meticulously with Germanic thoroughness one has to say…
RITHOLTZ: Right.
GRANTHAM: And there is no possibility of a major error. They put out the same net, the exact same net in the same part of the forest on the same day of the year and they go back and back and had thousands of measurement periods of over that time period. And then to make matters worse in the last six weeks, a similar study in the proceedings, National Academy of Science once again which is generally considered the second most important science journal, came out with a insect study in a protected the semitropical forest in Puerto Rico which was protected by the King of Spain long ago.
And again to everyone’s horror, 75 percent approximately of the flying insects were missing the birds that fed on insects were down by 90 percent, the birds that fed on seeds weren’t down at all, the frogs and lizards that ate the insects were down by 50 percent, and the impact on the soil, it is very hard to find out but unless we’re careful, a lot of the year compost and leaves and dung is going to be left there unprocessed and pretty soon soil will not be able to do what it does and also of course the effect on pollinators, you lose the pollinators, you lose 40 percent of the value of all your agriculture and a lot of the — for all the fruits need pollination, all flowers need pollination, and no one yet we been able to find can tell is the cascade effect of going from where we are minus 75 percent to 100.
So how come no one knew this and it turns out no one has been studying insects. So why not? And it turns out because you can’t get grants, because it’s a boring damn topic in the past and no one was funding the research. The only research that we knew were on monarch butterflies because the kind of trophy insects…
RITHOLTZ: Right.
GRANTHAM: And bees because they are commercially important. And we knew that they were under terrible duress and we assume that was unique to monarchs and bees and it is, it’s common to all flying insects.
RITHOLTZ: So the bee die off that’s been in the news for the past five or so years is not so much a bee die off as it is a winged insect die off.
GRANTHAM: A winged — a flying insect die off, yes/
We know that chemicals that are commonly used can have terrible effects on fertility rates, now we know by a study that’s only two weeks old where some guys in East Anglia responding to the Puerto Rico study grabbed the beetle and quickly because they reproduce so quickly ran it through various cycles and found out what happened when you raise the temperature. And because everyone supposed that in the Puerto Rico study it was the rising temperature of the forest that was doing the damage, insects in a tropical forest are used to no change in temperature and suddenly you have bumped it up almost overnight in a way, two degrees centigrade, and the distribution means that out there in the tail, those rare nights when it’s four degrees, have gone from one a year to 15. So they put these beetles in the lab and they gave them a heat wave of 4° extra for five days, a typical heat wave that we’ve all suffered through, and it lowered their fertility by 50 percent.
RITHOLTZ: Wow.
GRANTHAM: And the two weeks later, they gave them a second t heat wave and they were sterile.
RITHOLTZ: Really, that is quite fascinating.
GRANTHAM: And a lot of people wrote in who were studying humans and other mammals and saying yes of course sperm count is terribly sensitive to heat, and this ring — this rings very true, but in Germany where they have tolerance, where the temperature does change we know it’s more insecticides, so these multiple reasons exotic insecticides, fumes from coal burning, mercury et cetera wafting through the air and temperature changes, it’s just turning out to be a brutal war for insects and without them, EO Wilson the famous insect end guy, would say we can do without humans but we absolutely can’t do without insects.
RITHOLTZ: Last question on philanthropy, you created a prize for excellence in reporting on the environment, what — why is such a prize necessary?
GRANTHAM: we created it because the wasn’t enough going on and we abandoned it after a few years of because in the great fall off on print that the first guys to go were the bottom of the totem pole, and the bottom of the totem pole, sadly to say, were the environmental journalists.
RITHOLTZ: Sure.
GRANTHAM: So pretty soon we found we were trying to award a prize to a nonexistent group of journalists and we thought we can use that money, it wasn’t tiny, we can use it to get direct investigative journalism done and research — direct research done and it was much, I think much more effective to do that.
RITHOLTZ: Quite fascinating.
So let’s talk a little bit about the current state of investing, I read something you would written some time ago that I found somewhat shocking but I guess I shouldn’t. From 1998 to 2000, you wrote that GM all lost half of its book of business, you guys had turned cautious while the market was screaming higher, warning of the dotcom bubble in fact I should preface my remarks by saying you presciently warned of the Japanese bubble in the late ’80s, the dotcom bubble in the late ’90s, the financial crisis and housing collapse in the mid-2000s, what was that experience like in ’99 and 2000 and did you sort of have a repeat of it in ’07, ’08?
GRANTHAM: ’07, ’08 was the only thing we nailed, we got it pretty well the timing down right and lost very little business going into it.
’98, ’99 was entirely different, we had a good record running through ’97 and you normally think you have three years in the institutional business and we lost half our business in less than 2 and a quarter years.
RITHOLTZ: Right.
GRANTHAM: And why was that, it’s because it’s completely untrue that you lose business in down markets, in down markets the clients become catatonic in a serious decline and they wait to see what is happening when the smoke is cleared and then nervous returned.
But in a bull market, they are absolutely dripping with adrenaline and they are exchanging ideas on the golf course and they can’t wait to make more money than their neighbor, and you underperform in a bull market and your life is reduced in length, the patience drops like a stone.
RITHOLTZ: Barton Biggs had a famous quote, “Bullish and wrong and they’re angry at you, bearish and wrong and they fire you” is that a fair statement?
GRANTHAM: Yes, I think that’s a very fair statement. There is nothing you can do more dangerous to your career than underperform in one of the great enthusiastic bubbles and anyone who was around in ’98 ’99 is lucky they experienced a bubble bigger and better than 1929 a full of sound and fury and dot-coms and the real test that I love is that you went to the Greasy Spoon that in Boston and instead of watching the Celtic replays, you were suddenly watching talking heads on MSNBC and other channels recommending the latest dotcom, pets dotcom or whatever.
RITHOLTZ: And that was right before an 80 percent or so collapse.
GRANTHAM: We actually predicted and were quoted in the “Economist” of saying the S&P we expected to drop by 50 percent and the NASDAQ by 75 percent and the S&P dropped by 50.0 and the NASDAQ by 82, and so they are…
RITHOLTZ: Not too bad.
GRANTHAM: They were catastrophic declines for almost everybody.
RITHOLTZ: So after you were proven right about the dot-commissions, did the clients come, the half the book that left, did they come back?
GRANTHAM: I’m afraid to say not a single client that I’m aware of came back on the grounds that yes we had been right and would’ve saved a lot of money and they made a mistake, many other clients came back who felt that they would’ve stood their ground and we were their kind of guys and so the business flooded in and we made up all our losses with a lot of interest indeed. That was a lovely time to live through for us.
RITHOLTZ: So let’s talk about the current circumstances, I would describe you as bullish on emerging market value, but bearish on US large cap stocks, using your forward seven year forecast as a basis, let me put a little — some numbers on that. Seven year forecast, US large-cap stocks minus 3.9 percent, is that per annum or is that total?
GRANTHAM: Per annum for seven years to get it down to fair value.
RITHOLTZ: And then EM value, you’re talking about 7.7 percent on the positive side.
GRANTHAM: Which is in fact a little cheaper than it needs to be in the long run, so that means you could sit back with that and hope to get a decent return in perpetuity.
RITHOLTZ: So one would think you should be lightening up on US stocks here and buying EM value? Is that a —
GRANTHAM: Well, that would be a very conservative statement. I think at what you should do here is sell all of your US, there has never been a bigger gap between the US and emerging than there is now.
And those opportunities don’t come very often and they have a very old-fashioned feel to them and I described it basically as you buy when they are very cheap, they become extraordinarily cheap, you suffer, you double down, maybe suffer a bit more, and then you win. And if you can take the pain, you always win on those kind of bets. There is very little chance that you’ll come back in 10 or 20 years and emerging will not have beaten the pants off the US.
RITHOLTZ: Do you look at specific countries or regions or is it just by all of E.M.?
GRANTHAM: You do the best you can to optimize the return and I don’t want to get into my colleague’s territory but yes you would wait that that the better -looking countries in terms of true value growth compared to cost and pick the best stocks and the best industries to the best of your ability.
RITHOLTZ: Earlier this year you talked about a potential US equities melt up before the next down cycle, are we still looking for a melt up?
GRANTHAM: I think the odds have dropped way down because we are living in a rather ancient economy and a rather ancient stock market, both of them are two of the longest that that’s ever been and that we were doing splendidly through January, January as you remember, was a wonderful speculative month and the market was up 8 percent for the month and then we got into this strange era where the administration rattled the currency markets which whiplashed through as it usually does, to the riskier and the emerging market and the dollar is in a crisis to blue-chip, so the dollar was strong helping local stock prices.
And then we had trouble with the agreements and allies and NATO and …
RITHOLTZ: Go down the list.
GRANTHAM: Do down the list and it created a not an undercurrent but an overcurrent, if you will, of nervousness on many fronts and that is not the juice with which a great bubble proceeds. That didn’t exist in ’98, ’99, we had Greenspan saying the dotcom and Internet would drive away the dark clouds of ignorance and introduce a permanent new era of higher this and higher that and better this. It was almost poetic. And this time we had to everyone going from one little nervous twitch to another. So I think it was nipped in the bud.
Now having said that, the market has a history of being resilient, I think it’s quite likely since we’re in the sweet spot of the presidential cycle, this is a time when presidents look to the Federal Reserve to stimulate the economy because it needs at least a year running start to produce the best labor for election.
RITHOLTZ: Sure.
GRANTHAM: And what moves the dial on Election Day, we studied at some considerable length and it’s the shift in employment six months up to the election. A year before, it doesn’t matter, it is all forgotten, six months before the election, you’ve got to have as a strong looking labor movement, labor results.
And to do that, you got to stimulate the economy a year or 18 months ahead of that to get the lag effect and that’s what they do, and they’ve done it since 1932. The returns in the seven-month window from October of this year through April of next year in every presidential cycle which is the theoretically perfect time to do economic stimulus, since 1932, that has beaten the remaining 41 months like the 48-month presidential cycle.
Just think about that, the seven months has beaten the 41 month…
RITHOLTZ: So that’s your …
(Crosstalk)
GRANTHAM: Since 1932, so this is the last gasp opportunity for melt up. I don’t think it’s 50 percent any longer but I think it’s maybe 25 percent chance that we will have a handsome rally between now and the end of April.
RITHOLTZ: You mentioned all of the international intrigues and various policies and pacts and what have you. I would be not doing my job if I didn’t ask you about the tariffs and trade wars. What is the impact of this president who has said it’s easy to win a trade war, what is the impact of these tariffs? Is this potentially inflationary? Is this potentially something that could knock the economy off its footing?
GRANTHAM: So net, net, it’s deflationary.
RITHOLTZ: Deflationary.
GRANTHAM: Because it discourages global growth.
RITHOLTZ: Okay.
GRANTHAM: And so you have weaker growth, slightly higher unemployment and …
(Crosstalk)
RITHOLTZ: As we have seen with General Motors …
(Crosstalk)
GRANTHAM: And that puts pressure on wages and it’s very hard to have inflation when you have downward pressure on wages.
RITHOLTZ: So how are you going to have a stimulative presidential cycle 18 months in advance if there’s a tariff trade war going on? That doesn’t sound like it’s productive for the party that has the White House.
GRANTHAM: No, it’s not productive. So two things would have to happen for my 25 percent chance to come right, you’d have to have the fed these up a bit…
RITHOLTZ: Slow the rate hikes or…
GRANTHAM: Slow the rate hikes, no, they can have one or two but not four or five.
RITHOLTZ: Okay.
GRANTHAM: And to have the administration cool it on trade wars and make a “surprise announcement” of an agreement with China and …
RITHOLTZ: And there’s your meltdown.
GRANTHAM: And then you get some resilience.
RITHOLTZ: That sounds pretty good. Can you stick around a little bit? I have some questions for you.
GRANTHAM: Yes.
RITHOLTZ: We have been speaking with GMO’s Jeremy Grantham. If you enjoyed this conversation, check out our podcast extras where we keep the tape rolling and continue discussing all things investment related. You can find that at iTunes, Overcast, Stitcher, Bloomberg.com, wherever your finer podcasts are sold.
We love your comments, feedback and suggestions, write to us at MIBPodcast@Bloomberg.net, you can check out my daily column at Bloomberg.com/opinion, follow me on Twitter @Ritholtz, I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.
Welcome to the podcast. Jeremy, thank you so much for doing this. I’ve been looking forward to having this conversation with you for so long. I don’t know if you remember we you and I had a lunch sometime last year and I should have recorded that, that was endlessly fascinating and all it did was remind me of all the questions I had for you.
Before I get to my favorite questions, there’s one or two things I missed that I want to get to, God, I could keep you here for another hour but I know you have places to be. So, first, you describe yourself as GMO’s chief of propaganda, explain that title.
GRANTHAM: To be honest, I have not been making important investment decisions for quite a few years, I think my last input was exiting emerging markets in July of ’08…
RITHOLTZ: That worked out be pretty good…
(Crosstalk)
GRANTHAM: That worked out splendidly. It was the 12th hour but what the hell, saved an amazing amount of money. But other than that, we have terrific teams, I’m 80 years old, they should be making their own mistakes, and making their own hits. So what did that leave me, I asked myself? And loosely-speaking communications, or as I like to call it, propaganda.
RITHOLTZ: Right.
GRANTHAM: And since I’ve always been drawn to big picture items that that’s a natural cannon fodder for propaganda, I have overwhelmingly more interest in the big issues of climate change, do we have enough resources to get the job done, what is the role of growth in the long-term economy when you can’t have compound growth in a finite planet? How are we going to deal with that? What is the role of capitalism now that it’s so profit centered for the short term and has little interest in the long term, what are the consequences, what are the consequences of the US corporate system having so much power that it practically controls the government and the profit margins have gone up 30 percent to 40 percent and squeeze labor down by three or four points.
The consequences of these kind of issues are absolutely fascinating and frankly, been there done that, in terms of stock picking and industry picking and …
RITHOLTZ: Sure.
(Crosstalk)
GRANTHAM: …picking, and I’m happy to leave that to my colleagues.
RITHOLTZ: And so you mentioned big picture, let’s talk a little but about the world of bubbles. You were right there on the Japanese bubble, perhaps a little early on the dotcom bubble, on the great financial crisis the timing was as good as it gets, so the first question I have to ask related to bubbles is are there any visible these days where and when — what do you see as…
GRANTHAM: To take a little bit of credit from a generally tough environment back when I suggested a melt up, I did point out in a little box in that paper that I thought Bitcoin was a classic bubble, the essence of bubble, and it was 15,000 the day I wrote it.
RITHOLTZ: Right, well from the highs, we’re down what, about 75 percent to 80 percent?
GRANTHAM: For something that volatile, this is by no means impressive, a 50 percent decline would be an intra-week setback …
RITHOLTZ: Right, we are down to about 4000 from …
GRANTHAM: About 4000 from 15,000 but when you’ve gone up 15 times in no time flat, you might reason reasonably think of a bubble breaking as a 90 percent decline.
RITHOLTZ: Right. Where else are you looking at bubbles? Anything else standing out?
GRANTHAM: For me a bubble requires overt euphoria and other demonstrations and they to me have been up a little lacking …
RITHOLTZ: Right.
GRANTHAM: Perhaps they were beginning to take place in the FANGS, and the FANGS have now receded in what feels more like reorienting the market moving from one group to another than the beginning of the end of a major collapse.
RITHOLTZ: A rotation not a bubble …
GRANTHAM: A rotation, thank you.
RITHOLTZ: Not a bubble pop.
GRANTHAM: To me it feels that way. And at the moment, once again, as we’ve had dominating this ten-year, nine-year bull market, we have been climbing the wall of worry, there’s always plenty to worry about and you read it freely, it’s not dripping with optimism. When was it? I’ll tell you when it was for a brief period back in January/
RITHOLTZ: Right.
GRANTHAM: Other than that, this has been a quite a pessimistic major bull market has it not?
RITHOLTZ: The most hated bull market in history. In fact there’s an argument to be made that since the dotcom — I’m sorry, since the great financial collapse, investors seem to be suffering from a form of posttraumatic stress and they’ve been very reluctant to embrace the bull with both hands.
GRANTHAM: Yes.
RITHOLTZ: Is that what’s needed in order for that …
GRANTHAM: To get a classic bubble breaking, that’s what’s needed, and what provided the juice in ’08 was the housing market, because we defined in the old days a bubble as a two sigma once in a 40 year break out, and the US housing bubble did a three sigma, that is a once in several hundred years.
RITHOLTZ: Right.
GRANTHAM: Never in history had the entire US real estate market gone up a lot at the same time, it would bubble in Chicago, crash in Florida, but this one…
RITHOLTZ: Previously.
GRANTHAM: Previously.
And this one, everything went up together and it took years of moral hazard and the fed talking it up and the Fed saying things about the housing market that the US housing market unquote merely reflects a strong US economy.
RITHOLTZ: Sure.
GRANTHAM: Et cetera, et cetera, and then the one I really love, the US housing market has never declined, meaning it never would.
RITHOLTZ: Which by the way is completely false if you go through history there are many examples of the housing market declining.
GRANTHAM: Declining but only a little bit and what he should’ve said is the US housing market has never had a major bust because it has never had a collective major bubble, and now it has had a major bubble, the question that they should’ve been asking is has ever been a major bubble in anything that didn’t bust? And the answer to that is in general terms, no, but there is a special case in real estate.
If you live in a real estate market where the zoning is tightly controlled…
RITHOLTZ: Right.
GRANTHAM: Sydney, London…
RITHOLTZ: San Francisco.
GRANTHAM: San Francisco, you can have aberrant looking bubbles, if you live in a real capitalist market like the US, Spain, Ireland where house prices went up and you covered the whole of Ireland in new houses and the south of Spain began to sink under the water from the weight of new apartment buildings…
RITHOLTZ: Right.
GRANTHAM: And the US built an extra million and a half houses over trend in response, then you will have a classic well-behaved bubble which we had in the US housing market, without that, the world would have been quite different, it was driven then the power and the juice was provided by the housing market and all the amazing subprime stuff that went with it.
RITHOLTZ: So you mentioned moral hazard. I don’t find a lot of people who share my belief on this but I have to bring up yours, you have suggested that we should of let more than just Lehman Brothers visit that lovely building downtown with the columns and the bankruptcy judges inside. Tell us about that.
GRANTHAM: Yes, I think one of the problems we have today with the steadily increasing levels of debt on each cycle wave is that the moral hazard has never been truly broken. In the end, the bet has been if things are going well, you’re on your own to make money, and if things go badly, we will come and help you. And as long as that is there, there will be more risk taken each cycle as more or less there has been.
RITHOLTZ: So you end up with privatized profits but socialized losses.
GRANTHAM: Socialized losses, they bailed out the rich bankers and made the home owners suffer, and I thought that was a bad choice, they should’ve done more to help the homeowners and less to help the bankers. And I think obviously you can’t let AIG, Citi and the others all go under together but you could and should probably have let one of them go at the difference between Citi and Lehman and AIG is that the Goldman Sachs had an enormous amount of its future wealth and income hinging on AIG insurance products that were …
(Crosstalk)
RITHOLTZ: Shareholder derivatives …
(Crosstalk)
GRANTHAM: Yes, the derivatives which no sane person would ever have insured was offered insurance by some dopey department of AIG in such enormous quantity that had they defaulted, the future of Goldman Sachs is an extreme doubt, I think they would have failed.
RITHOLTZ: Really, it’s that much…
(Crosstalk)
GRANTHAM: If you say what is really different between Lehman and AIG, they said they couldn’t bail out Lehman Brothers could bail out AIG and one of the huge differences is that enormous amount of junk 70 percent of which was a covering Goldman Sachs and 30 percent everyone else added together, but my choice nevertheless would’ve been Citi.
RITHOLTZ: Well, what is this? The third or fourth bailout they have gone through.
GRANTHAM: They were technically bankrupt if you mark them to market, they were way under on and Bagehot and banking authorities say you know if you have a run on the bank, you better protect them, this wasn’t a run on the bank, this was technical bankruptcy.
RITHOLTZ: Right.
GRANTHAM: They had made a lot of bets that’s the didn’t work, they were bankrupt.
RITHOLTZ: There is a big difference between liquidity and insolvency.
GRANTHAM: And insolvency, this was way on the wrong side of insolvency. And you should have picked one of AIG or city and let it go, and you would have had a deeper — you would have had a deeper pullback…
(Crosstalk)
RITHOLTZ: Dow 5,000, something like that.
GRANTHAM: Yes, Dow 5,000 or 5,500…
RITHOLTZ: But it would have been healthier in the…
(Crosstalk)
GRANTHAM: But it would’ve recovered just the same and today the undertone would be slightly different and most of the data would be the same, in my opinion.
RITHOLTZ: Quite fascinating. I only have you for a few more minutes.
GRANTHAM: Can I? There are two — a couple of issues …
RITHOLTZ: Sure/
GRANTHAM: I really think that I have missed.
RITHOLTZ: Sure.
GRANTHAM: You asked me what we do with the Grantham Foundation.
RITHOLTZ: Yes.
GRANTHAM: And I should say a very important 25 percent of all our grantmaking is done to communications, 15 little groups who do investigative journalism who try and change the hearts and minds of politicians and the general public to counterbalance the forces of obfuscation that we have discussed.
RITHOLTZ: Is that effective? Are you seeing progress in that space?
GRANTHAM: Well it’s a bit of an unequal struggle, we put some money into the carbon tax in Washington state and last, we were outspent 12 to 1, but you have to do — pick your spots and do the best you can, and that’s what we try and do.
And I think in terms of investigative journalism and other efforts, it’s first rate, otherwise we look for the point of maximum leverage where a big organization like WWF or the Nature Conservancy …
RITHOLTZ: Right.
GRANTHAM: Is doing something that we think really impacts the problems of agriculture or climate change, water, fishing, things that will really matter to the well-being of the world as we go forward.
RITHOLTZ: Let me ask you about, go on, I’m sorry.
GRANTHAM: The other thing is I wanted to elaborate on the population problem in Africa where all of the 3 billion that’s forecast for incremental population between now and 2100 is basically in Africa.
RITHOLTZ: Wow.
GRANTHAM: And the let me just give you some terrible numbers, when I was born, there were 28 million Nigerians, there are 190 today and the midrange forecast for 2100 from the UN is 780 million.
RITHOLTZ: And can that country support…
GRANTHAM: Of course not.
So between now and then, what misery and collapse and basically robber barons and regional bandit chiefs are going to go on.
RITHOLTZ: That’ll be a nightmare over there.
GRANTHAM: A nightmare. And if you asked them today, 50 percent would like to emigrate and what that will be in 10, 20 years, Lord alone knows, and you see the damage that hundreds of thousands of immigrants have done to the liberal traditions of Europe.
RITHOLTZ: Sure.
GRANTHAM: And the stability of politics and you replace that with an attempt to have hundreds of millions, you simply can’t get that from here.
RITHOLTZ: Right, right.
GRANTHAM: And how much does that the destabilizing of European politics affect the behavior of the Russia’s and China’s and the US’s of the world, the mega powers and where does that leave us? I think that is a thing we should really focus our attention.
RITHOLTZ: Quite — quite frightening.
You mentioned the Nature Conservancy, I was curious as to because I noticed in this part of the country, I frequently see spaces purchased or donated to the Nature Conservancy, there’s the little sign with the green leaf, how effective as an environmental strategy is the idea of taking a parcel of land and removing it from farming, from development, from housing, what does that do for us?
GRANTHAM: You need some genuinely wild pockets and corridors between them to maintain a hope of having a successful wildlife.
RITHOLTZ: Any sort of biodiversity.
GRANTHAM: Yes, WWF recently said that we had lost 60 percent of the mass of all the wildlife added together above the level of insects so we’re not exactly winning the struggle, so you need that, but you also need to limit climate change. If you have all these lovely corridors and the climate goes up by 4 1/2 degrees centigrade…
RITHOLTZ: It doesn’t matter.
GRANTHAM: Most of what you’ve done right is wasted.
RITHOLTZ: Right, it doesn’t make any difference.
All right, so I only have you for another five minutes, let’s get to our speed round with our favorite questions, god I could keep you here for hours and hours more, but your wife will kill me so I want to do that…
GRANTHAM: She would kill me first.
(LAUGHTER)
RITHOLTZ: All right, so tell us the most important thing we don’t know about you.
GRANTHAM: No. I’m an open book.
RITHOLTZ: Open book.
GRANTHAM: What you see is what you get.
RITHOLTZ: Early mentors, who were the people who helped shape your career?
GRANTHAM: I think my grandfather, he was brought up Quaker, he gave up Quakery but he stayed with the spirit of being a Quaker. He was a good person he didn’t believe in flamboyant spending, he became quite wealthy and used his money very wisely and discreetly, I think that’s…
RITHOLTZ: Set an excellent example.
GRANTHAM: Yes, and by the way Yorkshire values are very much value-oriented from an investor’s point of view so that when you read Ben Graham, you tend to go, you know cheaper is better than more expensive, I get that, and I don’t see quite as much magic in the value here is perhaps because of that background.
RITHOLTZ: So let’s talk a little about the investors had influenced your approach to investing, what thinkers have shaped the way you look at markets? Ben Graham obviously.
GRANTHAM: No, I don’t think Ben Graham did much, I will give it to Dean LeBaron who I had a hard time with in general, he was a brilliant propagandist, he could sweet talk the year pension fund offices out of the trees, and take them off to Russia on trips and things like this.
And what he showed me was that we’re pretty boring industry and a little bit of pizzazz can go a long way and how important it is to project your ideas, having great ideas and not projecting them doesn’t get you that far. So I owe him that, so let me get that on paper, at least I’ve said one good thing about Dean LeBaron and that’s a pretty good thing.
(LAUGHTER)
GRANTHAM: And I learned an enormous amount from personal experience speculating in what was a very interesting speculative surge in 1968, ’69 in tertiary quaternary stocks, tiny little stocks that would tentuple and then collapse.
RITHOLTZ: Wow.
GRANTHAM: And we had an interesting group of people exchanging ideas and we made and lost fortunes and I made enough to buy a house in Newton without a without a mortgage and a BMW but I didn’t do it, I could’ve done, instead I maintained my speculative position in stocks that disintegrated, and from then on, rather like Keynes getting it out of the system with commodities and Ben Graham going into the great crash leveraged long, from then on, you get to be much more conservative.
RITHOLTZ: Let’s since you mentioned Keynes, let’s talk about some of your favorite books, what fiction, nonfiction, investing or not, what are some of your favorite …
GRANTHAM: Well I made a little list quickly, the ones I like to recommend is one is “Dirt, the Erosion of Civilizations.”
RITHOLTZ: “Dirt”.
GRANTHAM: By David Montgomery, “Dirt” and it looks at what happened to bad farming practices and what it did to the ancient Greeks, the Assyrians, the Babylonians, and the Romans, and the Mayans, and the Khmer, they overworked their local territory and when the weather turned against them …
RITHOLTZ: That was it, it wasn’t productive anymore.
GRANTHAM: That was it, they didn’t have any resilience.
RITHOLTZ: Wow.
GRANTHAM: Another one somewhat the same theme was called “Immoderate Greatness” which I recommended…
(Crosstalk)
RITHOLTZ: “Immoderate Greatness”
GRANTHAM: Yes, which is a quote from the decline and fall of the Roman Empire and the subtitle is “Why Civilizations Fail.” by William Ophul and that’s a very short book that covers all the reasons, hubris, complexity, overworking your local resources and at so on that bring civilizations down which is really quite terrifying because almost everything they list applies to today’s modern world to some considerable degree.
And the one that I like the most really is hubris because every civilization tends to think that they going to survive because they are so goddamn brilliant.
(LAUGHTER)
And the infinite capacity of the human brain, which is illiterate historically because the brains were the same for the Assyrians and the Babylonians as we have today and the Mayans, but every civilization thinks it is special and after 400 years and your brilliant viaducts, the Romans get pretty confident and finally the weight of bad luck and bad fortune brings them down, and that’s what we have — we’re a 200 or 300 year old organization, sorry civilization modern society and we are the first global one, but we’re not old, we’re not seasoned, and we’re nothing. The Mayan civilizations to call its 1200 years of civilization before it was brought down.
RITHOLTZ: Any other books before we get to our final question?
GRANTHAM: Yes and there is a very good book by Charles Mann called “The Wizard and the Prophet” and he looks at really discontinuous struggle between the optimists and the Malthusians, Cornucopians I call them, and the Malthusians, Borlaug who engineered the green revolution that saved millions from starvation and a guy called Vogt who represented Malthusian said be careful and try and sustain your long-term ability.
RITHOLTZ: “The Wizard and the Prophet.”
GRANTHAM: “The Wizard and the Prophet.”
RITHOLTZ: And that sounds fascinating.
And our final question, what you know about the world of investing today you wish you knew 40 years or so ago when you were getting started?
GRANTHAM: The world was so straightforward 40 years ago and there was so such a limit on the talent in the business that if you showed up and used your brains you were likely to do pretty well and that you didn’t need any help, and now when I have learnt all my lessons, the market is so difficult and so full of talent you need lots of help so the question doesn’t really compute for me.
RITHOLTZ: Well thank you so much, Jeremy, for doing this, this was absolutely fascinating. We have been speaking to Jeremy Grantham he is the chairman and cofounder of GMO, managing over $71 billion.
If you enjoyed this conversation, well, be sure to look up an inch or down an inch on Apple iTunes, Overcast, Stitcher, Bloomberg.com, wherever your finer podcasts are sold and you can see the other gee, we are coming up on 250, I want to say 220, 230 prior conversations we’ve had, they are available for download for free.
We love your comments, feedback and suggestions, you can write to us at MIBPodcast@Bloomberg. net, check out my daily column, you can find that at Bloomberg.com/opinion, follow me on Twitter @Ritholtz.
I would be remiss if I did not thank the crack team that helps put these conversations together each week. Michael Batnick is my head of research, Atika Valbrun is our project manager, Taylor Riggs is our booker/producer, Karoline O’Brien is our audio engineer this year. I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.
