Trump Says US May Strike Iran Again, Threatens New Blockade

21:18Carol Massar:Is that the case? Or is there some point where that lower end consumer that's struggling is really going to matter? I mean, it should matter on a social basis, but I'm just saying in terms of how you all look at it. Yeah. I mean, and I agree with you. It's a problem that this low end consumer has been left out of the recovery. Not in the market for the most part. Totally. It's a problem. That said, from a macro perspective, it doesn't really show up in the data in a big way. And you could have made this argue many times over the last couple of years. The low-end consumer, it's going to bleed into the middle-end consumer, and that's going to bring down the economy.

21:51It hasn't played out that way because this middle-to-upper-end consumer is really well off, and their balance sheets are pretty good. They might complain about the level of prices, but at the end of the day, they seem to be able to spend. They've had a lot of stimulus come at them with one big, beautiful bill, and the gasoline price increase hasn't been nearly enough to offset that.

22:12Carol Massar:All right, going to leave it there. Hey, great stuff. Thank you so much. Thank you for having me. Yeah, great to have you. Stephanie Roth, Chief Economist at Wolf Research, joining us here in studio.

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23:21Carol Massar:The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions and networking opportunities Thank you to our summit advisor, Bangkok Bank. Learn more at bloomberglive.com slash SBS dash Singapore. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app.

24:02You can also listen live on Amazon Alexa from our flagship New York station. Just say, Alexa, play Bloomberg 1130.

24:11Carol Massar:Our next guest has made a living off prediction markets for 25 years, not as a gambler, but as a scientist and entrepreneur tapping into their uncanny ability to consolidate the informed guesses of a crowd. He argues that the idea that prediction markets only work because traders have real money on the line is false. And here to explain his thinking, it is all spelled out in his Bloomberg Opinion column today, is Emil Servin Schreiber. He's the author of Super Collective Intelligence, who runs the Hypermind Prediction Markets, CEO of it. He also co-founded the Forecasting Machine. It's an AI-powered forecasting platform.

24:46Carol Massar:He teaches collective intelligence at IE University in Madrid, and he also teaches in Morocco. Emil, so great to have you here with Bailey and me. For two folks who've been following markets for a long time, and all of a sudden we're talking a lot about prediction markets, first of all, we've got to ask you, tell us about your world. You're joining us right now from Paris. But tell us about what it's like to be, you know, living off prediction markets for 25 years. Well, I mean, it's a fantastic idea, right? So I remember when I encountered the idea in 1999, I was actually a journalist like you guys.

25:24And I thought this would be the future of news, that, you know, the journalists would give the news of today and the prediction traders would give you the news of tomorrow. And so we created that original prediction market that was called News Futures, which eventually partnered with USA Today. And that was like back in 2001. And it just took off. It was fantastic. But of course, it was completely illegal at the time to use real money for prediction markets. So that kind of limited the business model opportunities for making a living of these amazing things. So we eventually drifted into the B2B prediction market business, which we essentially pretty much invented.

26:12And today still continues to exist. Well, I think that's one of the most interesting things as a reader of your column and just even thinking it through. We talk about Kalshi. Polymarket was top of mind in the most recent U.S. presidential election. But you were decades ahead of the curve. How do you think about the evolution of these markets and really what happens now? Well, I mean, the evolution is that it took an entire generation to actually make it, right? And that's generally the idea with great ideas is they come out. It takes a generation of pioneers to make them diffuse into the community and into the mindset of people and the mindshare.

26:58And then eventually somebody gets in there at the right time, having been informed by all the work of the pioneers and suddenly takes off because the minds of an entire generation has grown up on the idea. And we had to wait for the previous generation to sort of disappear because they were sort of blocking the idea. Right. So today I'm glad to see the prediction markets are really becoming a big thing.

27:26Carol Massar:Why is it important that we have them? What's the role, do you feel, in society, in something beyond sports? Where do you see it going? Yeah, especially beyond sports, because making predictions about sports is fun, but it's really not very useful for anyone. It even sometimes takes away from the pleasure of just watching the game. But it's important to price the future, to quantify the future, to measure the future, we would say, because every decision that we make requires that we anticipate the consequences of those decisions. And so it's important to know what is the probability field of the reality that we have to navigate into the future in order for us to make the right decisions as organizations, as individuals, as businesses, and as governments.

28:23So try to measure exactly as much as we can. The correct probabilities for what might happen is essential in order to make good decisions. Calci raised a billion dollars at a$22 billion valuation back in May. And when I talk to private investors, their view for the most part is these are markets that truly only work for the companies if they can get institutions to use it as ways to hedge on the S &P 500, to use it as ways to hedge if they're in the commodity space. Is that predicated on, is the future of this predicated on that being the case? well i mean the the future of prediction markets obviously as a business model would be to do sports because that's what the money is right there's a whole lot of money to be made in making sports betting and that's always been the case forever and there's a lot less money to be made on trying to hedge against you know whatever for your business so and that's why Calci is aggressively moving into the sports arena because the rest of the business isn't as lucrative as it should be.

29:37And that's why, you know, there's all these problems that you can see now between the states being angry for their gambling monopoly to be taken away or superseded by the prediction markets. But the point I'm trying to make in the column is that if you want to achieve the promise of prediction markets, which is to generate this, using the collective intelligence of people to generate useful probabilities for what might happen, pricing the different scenarios about the future because that can help people navigate the future. You do not need to do online gambling with a whole lot of money. You can do that in many other different ways that do not require wagers.

30:26And that's what I'm documenting in this column.

30:29Carol Massar:Well, this is, you actually did a study, right? And did a kind of comparison of having money involved versus not in terms of, I guess, you know, the accuracy. Is that the way to kind of say it in terms of prediction markets? Which kind of begs, I want to put that out there. But, you know, Bailey, you've been thinking about the insider trading component. Like if we take money out, do we get rid of some of the problems with prediction markets? Well, yes, I mean, you take away, you get rid of all the problems, especially the insider trading. People, you know, monetizing private information, and especially secret information, national security information, and that's a big problem, right?

31:09And it's also perverts, sometimes sports, right? When you can fix games, etc., because somebody is going to make a lot of money with it. So by creating these incentives to monetize any kind of private information, you're creating a lot of problems. And we have seen that over the last few months with both Calci and Polymarket. You do not have this problem when you're running these prediction markets or these prediction polls or competitions without money because there's no incentive to monetize the national security information. Well, because Brian Armstrong, CEO of Coinbase, had been saying insider trading is actually good.

31:52And when you think back to late 2025, he actually read off these buzzwords that just so happened to be wagered on some of these sites. It just feels like contrasting views if we're saying insider trading is good.

32:06Carol Massar:And Emil, we only unfortunately have about 30 seconds here. Yes, so insider trading, I was one of the first to say insider trading is great. promoting prediction markets 20 years ago. But in fact, when it's really happening, you can see all the abuses. And the abuses are grave because they do put national security in danger. And that's a big problem. It's a fascinating column as we continue to kind of work our way through this and understand what the impact might be, especially as you do see more of the establishment kind of tiptoeing in. Emil, I hope you will come back again, Emil Servin Schreiber, author of Super Collective Intelligence and runs the Hypermind Prediction Market.

32:50Carol Massar:He's the CEO of it. Stay with us. More from Bloomberg Business Week Daily coming up after this.

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34:02Carol Massar:Hi, I'm Carol Masser with a helpful tip to keep you plugged in throughout the market day. Subscribe to the Stock Movers Report from Bloomberg. These are short audio episodes, five minutes or less, delivered right to your podcast feed. Stock Movers fills you in on the day's winners and losers on Wall Street and tells you about the news and data that's driving those gains and losses. Why spend all day watching tickers scroll across your screen? Subscribe to Stock Movers today on Apple, Spotify, or anywhere else you listen. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m.

34:38Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube.

34:45Carol Massar:Not one, not two, not three. It takes three incredible reporters here at Bloomberg to put out this Bloomberg exclusive and most read on the Bloomberg terminal. B of A, Bank of America, handed a$520 million credit line, more than half a billion dollars to OpenAI in recent weeks after previously spurning the artificial intelligence giant's request, according to people with knowledge of the matter. It's a pretty big deal. Yeah, big deal, especially for a bank that seemingly has been sitting out this deal, especially as it potentially marches toward an IPO. All right, so interesting. So many questions.

35:17Carol Massar:As we said, it's a Bloomberg exclusive. So here with the tell, Srinath Arajan. He is Bloomberg News Chief Wall Street Correspondent. He's right here in our Bloomberg Interactive Broker Studio. We've got Kat Doherty. She's Bloomberg News Finance Reporter. She's here remotely in New Jersey, so not here, but remotely. And then Shireen Ghaffari, she is Bloomberg News AI reporter. She's out there in San Francisco. All right, folks, we're going to get to the different components. First, I've got to start with Shireen Kat. The deal, B of A, half a billion dollars, Shireen, according to folks in the know, sounds pretty big.

35:49Carol Massar:Why? Is it a change of tune for B of A? Oh, 100%. It now makes them one of the biggest lenders on that credit facility that OpenAI has, which now gives that company access to over$5 billion in credit line, which is undrawn. So that is important liquidity. But at the heart of the story is this internal struggle at the bank, which is famous for its conservative approach. And yet you will have senior bankers there worried about losing out to competitors. Brian Moynihan has been identified as synonymous with this responsible growth mantra, which has made this bank one of the more conservative ones, one of the more cautious ones on Wall Street.

36:29But the entire AI sector is defined by these high-risk cash-burning firms. So you have to make a serious call. Could you prefer to stick to that same idea that if a company continues to lose money, you stay away from them? Then what do you do when OpenAI or an anthropic goes public? Because they're not going to go public when they're massively profitable. Probably not. and if the current state of affairs is a sign of things, do you risk missing out? Can you, the CEO of Bank of America, be happy with the possibility that the firm that's known for its thundering herd, Merrill Lynch Wealth Advisors, misses out on one of the most significant US IPOs?

37:06That is not a good outcome. So clearly there is a strategic pivot here. You will see this bank embrace more of the companies in this sector, more of the companies adjacent to the AI boom, because if they didn't do that, they're going to miss out on a massive slice of where the capital markets is headed yeah basically you have to spend money to make money cat i just want to ask when we look back to october 2024 as shrie mentioned you've got jp morgan city goldman morgan stanley santander the list goes on but no b of a in-house at bank of america were they saying back in 2024 you know what we really need to be on the steel or was it more of a conversation of when we get closer to an ipo fee event, that's when we actually should turn to the risk on.

37:50So that was a period in the bank where the discussions were just starting about AI in general, open AI, any AI adjacent company, including data centers. There's so many companies and situations, including build outs that they, bank was starting to notice that where is where a lot of the financing and the demand was coming from. So the discussions became, do we get involved at what point? When do we get comfortable? you noticeably, as you're pointing out, did not see B of A show up at that time. But there were discussions going on behind the scenes in order to get the bank to where it is at today.

38:29Lending to OpenAI is the moment in which they are showing up. And it's not just with OpenAI, but on other deals, they have started really in earnest 2025 up until today, come forth and started to commit the bank's balance sheet and advise on various situations within the investment bank, whether it's financing, M &A, and leading up to what they're anticipating to be some of the biggest IPOs. So this is the change in tune that really started in the last year, two years. But it took a little bit of convincing to get to that point.

39:06Carol Massar:Feels a little bit like FOMO, but I'm not smart enough to figure that out. And I think time will tell. Shereen, come on in on this because you cover the AI world. I feel like the narrative changes from week to week, company to company, which model is going to be a winner. When it comes to OpenAI specifically, and I just want to go back to the story aligned, B of A slowly got comfortable financing AI and AI adjacent companies once it felt certain that the market would support their business models, even if they weren't profitable, according to a person in the know. Where is OpenAI in terms of its models?

39:41Carol Massar:What do we know, the transparency about this business? And are there still a lot of questions about, you know, who kind of wins in the long run? Absolutely. It's a constantly changing horse race. There's fierce competition between the cutting edge AI firms, OpenAI, Anthropic, and of course, some of the larger incumbent rivals like Google. And so, you know, it's still unclear if there will be one clear winner, who that winner will be, if there will be multiple winner, what this market really shapes out to be like. However, over time, the kind of value in AI, I think it continues to be perceived as growing in the financial markets to investors, to banks is what we're seeing as tools like coding agents are being rolled out more broadly.

40:29But of course, this is still a high risk, high reward industry.

40:34Carol Massar:Shereen, as you cover this in terms of the bank communities, and then I'll go back to Shereen and Kat. I mean, everybody willing to lend them money? It seems like they, whether it's debt markets, equity markets, banks, like they'd be able, they're able to access a lot of money. Certainly the most significant and known players. That's right. I mean, if we're thinking about the scale of OpenAI or Anthropics funding rounds, you know, 500 plus million is not a lot in comparison to that. But what this does provide them or show, it's a signal that this is the banks are ready to sort of open up their checkbooks, even as we've reported one of the more reluctant ones to give OpenAI that flexibility where if they need to tap into this revolving credit line, they can.

41:22Sri, you've covered finance for quite some time. Is there infighting? Is there infighting now?

41:28Carol Massar:Like a fine line. That's all it means. If I'm an ECM banker and I call up my colleague on the debt desk and say, what the heck, man? Like, I need to go. I'm going to be told that it's my fault for us missing out on this IPO. Is that going on behind the scenes at these banks? You hit the nail on the head, right? That is the internal frustration and that is the debate inside the bank. Now, can you look at this approach and wonder why CEO on down this bank would have taken a cautious approach? Let's just talk about the AI ecosystem in general. Is it a transformative technology? Yes. Could there be a bubble?

41:59Yes. Both could be true. This is what panned out in the dot-com period. Was the internet a farce or a real transformative thing? Yes, it was. Were there a lot of companies that missed out? Yes. And if you were a bank lending to those companies that failed during that period, you would have a scar on your results. But that doesn't mean the technology was wrong. And similarly, you can see the caution that Bank of America was espousing that is generally seen across their business lines. But at the same time, your bankers will be frustrated if the rivals are the ones coming in and taking over all that business and they don't want to lose.

42:33Carol Massar:You know what freaks me out? It reminds me of the great financial crisis. And was it Citi or somebody, CEO, who said, well, wait a minute, if I don't get involved, I'm going to be fired because I've got to do it because everybody else on the street is doing it. And sometimes that feels like what we're seeing now. You've got to dance until the music stops was that famous quote from the 2008 financial crisis. Exactly. Well, Kat, I want to ask just when we look at Bank of America with that in mind, $520 million, if they were to write that off, seemingly is a rounding error. And again, this is on top of the billions that the company has in a credit facility and on top of the billions that Shereen mentioned that they've already raised.

43:06So is there really risk? Are we all blowing this out of proportion? I do think if you see Bank of America show up, It's because they've done their due diligence, they've run the numbers, and they're now comfortable, as we've reported, getting involved. And it took them quite a long time to get there. When you talk about the 2024 events when this company was getting other banks involved that B of A was standing on the sidelines. So I think that there's the signal that also speaks to the bank's change in tune overall about whether or not to get involved and to support and to finance these companies that are AI or AI adjacent.

43:45To your point, Bailey, on the one hand, you can see the fact that is$520 million really a big number for a company that is the second largest U.S. lender? Yes, you're probably right. But I challenge you to put on where the hat of that banker who has to stand in front of Brian Moynihan and explain to him why you had to write a$520 million. That's not going to be an easy task. Well, no, but I still, again, it gets back to, well, if everyone else is doing it, if JP Morgan, Citi, Goldman Sachs, Morgan Stanley, Every one of your competitors jumped at the opportunity a year and a half, almost two full years ago.

44:19Correct. I mean, I understand the numbers are different, but it's still, I don't know.

44:23Carol Massar:You've got to be thinking about the IPO, too. Shireen, come on back in here. You've also got another story on the terminal about OpenAI getting ready to release its most advanced model widely. I think that's going to happen tomorrow. And you just talked about also the government has since lifted restrictions on its platform. that came from Axios, we know that we've seen its rival or arch rival Anthropic have troubles with the government. So does it look like open AI is kind of starting to come ahead or move ahead in terms of the AI race or the models? Well, what I would say is there's this sort of new increasing factor that's coming into play in terms of potential hindrances to the pace of model development, which is government involvement.

45:10And government is starting to step in and more closely monitor the releases of these advanced AI models as the AI companies are saying that their technologies have increasingly sophisticated hacking capabilities, right? That spooks government and government wants to be sure that these models are not going to wreak havoc on the U.S. economy or government. And so with OpenAI, there were no formal restrictions as we saw with Anthropik. Anthropik sort of got a timeout, had their models yanked. OpenAI worked with government and had some conversations. But as CEO Sam Altman said, they wanted to do a wider release right away.

45:47They didn't because they were working it out with U.S. Gov. Now they're in a position where they feel they have the green light they're going forward with their release more widely.

45:57Carol Massar:Just a lot of money, though. Anything with AI. It's pretty impressive. Thank you so much, team. Shereen Anandarajan right here in our Bloomberg Interactive Broker Studio. Bloomberg News Chief Wall Street Correspondent, Kat Doherty, Bloomberg News Finance Reporter out there in New Jersey. Shereen Ghafari out there on the West Coast. You guys rock. She's Bloomberg News AI Reporter. Highly recommend you check out this Bloomberg exclusive. It's also most read. It is on the Bloomberg Terminal. This is the Bloomberg Business Week Daily Podcast. available on Apple, Spotify, and anywhere else you get your podcasts.

46:31Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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