Everybody's Business: The Business of KPop Demon Hunters

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1:42This is Everybody's Business from Bloomberg Businessweek. I'm Max Chafkin. I'm Stacey Banik-Smith. And Max, I think the theme for this week is situationships. I don't know where this is going, but okay. Situationships as in a relationship that's kind of messy, not entirely defined, source of a lot of drama situationships. All right, Stacey, I'm going to work with you here because I think you're right a little bit. Like it does kind of describe our situation with tariffs right now. Yes. Maybe they're awesome. Maybe they're not. Maybe they're legal. Maybe they're not. We've got Joe Wiesenthal of Bloomberg's Odd Lots podcast, a friend of the pod here talking markets and tariffs.

2:22Also, the movie of the summer is, well, it's not in theaters, Max. It is on Netflix. I'm sorry. The movie of the summer is on Netflix. I'm so excited about this. I just want to say the title. I know. The great Sam Sanders is here to talk. Go ahead. K-pop Demon Hunters. K-pop Demon Hunters. Max is very into this movie. And we'll talk with Sam about it. And finally, I'm told it's pumpkin spice latte season now. Oh, I'm told. You know it is. Americans love the flavor. It's everywhere. Nothing is complicated about that one, right, Stacey? Except most of the ingredients are imported. So tariffs are complicating our relationship with pumpkin spice lattes.

3:03It's pumpkin spice tariff season.

3:11Now, I think right now in our economy, the ultimate situationship is between companies, workers and AI. And we talked about this two weeks ago on the episode with Zitron, which people should check out if they haven't listened to. There's all this promise with AI. We're all a lot of businesses are super excited about it. They're investing billions in some cases, tens of billions. Happily laying off workers that will be replaced by this technology in some cases. Right. And there's also the promise that it could create more jobs. It's just it just feels like so much there is up in the air. We really don't know anything yet except we're all spending tons of money on it.

3:46Yes. Well, and I think things are changing really fast and everyone's like, is this going to take my job? Is this going to help me do my job? But I thought I would go to students because they tend to be more comfortable with new technology on the cutting edge. So to Columbia, to NYU, to kind of track down some students and ask them how they are using AI. And here's what they said. Do you guys use AI? Yes. All the time. All the time. We're actually AI students. Yes. Grad students. Really? Yes. What do you use it for? Editing. So like if you write a paper, it could be like as simple as just like a text just to polish my language or just like some simple research.

4:24I don't trust an AI on like super deep academic stuff yet. And what about like with schoolwork? Is it like a big helper? I would say take AI with a grain of salt because they make mistakes just like humans do as well. Always double check. Honestly, it's basically the greatest cheat code for college. Like I'm not even kidding. I do know a few people who have used AI or ChatGPT as kind of like a friend, like getting advice from. I agree, but I definitely think that other people might find more comfort in AI as a friend than what we might like to think. I study actually in the field of public health.

5:02I studied cancer and epidemiology. We're actually working with AI, like studying and working with it. With the rise of AI, like pretty much anything is possible. Yeah, I agree. Yeah. Oh, my God. Oh, God. I'm so worried for our future. Really? The AI students? Are they AIs or are they actual people? What do you mean? Well, I just got worried for a second that you had interviewed like a couple of chatbots. There was, in fact, a chatbot in the mix. There was one of the answers was a computer. It was the one who said that AI was the best cheat code. I asked ChatGPT to come up with, like, its, like, defense of AI.

5:44I was like, if you were an AI enthusiast, what would you say? And you were a student. So he said, like, AI is the greatest cheat code. I'm not even kidding. And then I used Descript, the software program, has AI voices that you can interject. And so I mixed that in. But everybody else was real. Everybody else was a real student. Okay, a couple of things. One is I'm glad at least one person said, yeah, you can't trust it for everything because, yes. Yeah, she was one of the AI grad students. Yeah, well, that makes sense because she's actually an expert. And the funniest thing about being an AI hater is that the biggest AI haters are AI experts in many cases because they're the ones who actually understand the limitations of these technologies.

6:23Whereas like people who are just like, you know, dipping in and out. I don't know. In some cases they're using it in dangerous ways, like trying to trick their co-host into misidentifying. I think I was doing that for illustrative purposes, not for gaslighting. Not malintent. No, there was no malintent. I was just kind of showing you that if that voice had been like 10 percent better, I don't think you would have picked it up. No. Yeah, I don't know. It's super interesting. I do think that in terms of these questions of new technology, there are probably two categories that are worth looking at.

6:58One is pornography because that's where all new technologies seem to start. And the other are the youngs who are using AI. Well, I chose to go with the youngs for this episode because we are a family podcast, Max. You do what you need to do for research.

7:23Max, without a doubt, the situationship I believe is dominating our economy right now, at least this week, is tariff. I hate the word, but you're right. That is what this is. And I felt like it was really worth exploring this because I looked into this and since Liberation Day, the tariffs have been like postponed, paused, modified, you know, enacted, redacted more than 100 times. It has been so much back and forth. A lot of defining the relationship going on. A lot of like DTR talks that just seem to be going nowhere. And in the latest twist, there's a big question about their legality. So Trump used something called IEPA to pass the tariffs.

8:01That's the International Emergency Economic Powers Act. It was put in place in 1977. And it essentially because normally Congress has to OK the tariffs. This gives the president like an emergency power to override Congress and just make it happen. Yeah. And OG listeners of Everybody's Business will remember that we talked about this when a lower court initially invalidated this. Yeah. Basically said, no, Trump is sort of abusing this law. He doesn't have all the power that he says he has to do these Liberation Day tariffs. Right. He's claiming the trade deficit is the emergency. And so our trade deficit with all these countries is an emergency.

8:38The Supreme Court is now going to be hearing this case and Trump has asked to fast track it. But if it doesn't happen, it would mean all the tariffs were invalidated and the U.S. would have to refund the money it's collected so far. It would be a mess. It was very complicated. We decided we would bring in someone to help us kind of navigate like why the markets are reacting to this as they are. Yeah, we walked all the way over to the other side of the floor where our deaths are and found Joe Weisensall. Leaping over desks. Odd Lots podcast, which is awesome if you don't listen to it. Joe is like one of the smartest, one of the most entertaining people on markets.

9:18Agreed. We could find. And here he is in the studio with us, Joe Weisenthal, co-host of Odd Lots. Welcome, Joe. Hi. Thank you for having me. Well, we're very excited to have you here, especially since we are confused. Max and I are confused right now, and we're hoping you can clear this up. So when tariffs were first put in place, I think it's fair to say that some people liked them, some people hated them. The markets did not like them. Sure, correct. Now that their legality is being questioned, it seems like the markets do not like the idea of the tariffs going away. Yeah, and amid this ruling, Trump got up at a podium, the market was going down, and he said this.

9:59Let's just listen. and now it's going to the Supreme Court and we're going to ask for expedited an expedited ruling because you know when you look at the stock markets down today the stock market's down because of that because the stock market needs the tariffs they want the tariffs I listened to that and I was like okay Trump's probably just saying that because he likes the tariffs but like it made me wonder is there any truth to that does the stock market we can talk about the bond market do the markets like the tariffs and something is there any aspect of this that he's right about? I will try to maybe make the strongest defense of that claim, which is there probably is some truth to the idea that policy uncertainty is not great for the market.

10:44And this would clearly re-inject, I guess, I suppose policy uncertainty. The volatility of the tariff policy is probably narrower than it was back in early April, although there still seems to be changes every day. So I guess the idea that the tariffs could be pulled out the rug from the whole thing. I would not entirely, I suppose, discount the possibility that investors aren't crazy about that. I don't really believe it directly. I mean, the thing is, this market is driven by a handful of gigantic tech companies, and it's mostly an AI story at this point. And that is an industry in space that largely is unaffected by the tariffs.

11:22So the market is up a lot since early April, in part because there's been some walkback from the Liberation Day levels, and also because nothing has derailed the AI story. Now, there's one other element that could be interesting, which is that there is quite a bit of revenue coming into the federal government, thanks to the tariffs. Yes. One of the anxieties in markets is what's been happening at the long end of developed market yield curves and sort of bond yields blowing out. If there is some perception that, okay, deficits are already very wide, and one of the few sources of growing revenue is going to suddenly disappear.

11:57Maybe there could be something where people get more concerned about the fiscal equilibrium and that having an effect. That was kind of the story on Tuesday. Like how far I would take that, I'm not sure. But I suppose I wouldn't completely say this is not a factor. I mean, beyond just the uncertainty, which markets notoriously do not like, It also seems like if for some reason the tariffs are declared illegal, this is just going to be a mess because everybody would have to get their money back. I can imagine businesses could sue the government for like lost business or increased costs. I mean, it seems like as much as you might dislike the tariffs, as much as someone might dislike the tariffs, doing away with the tariffs is a mess.

12:43Yeah, it would be a mess. I mean, there's sort of two things going on at once here that are both very interesting. I think longer term economists would say, look, even if it's messy in the short term, tariffs are bad. Tariffs create inefficiencies. They create all kinds of problems. They create divisions between trading partners and allies to make it hard to plan. There are all kinds of issues that tariffs raise. And they would probably say, look, yeah, maybe it'll be a mess in the short term to dial them back. But it does not compare to the mess that tariffs introduce. So better to like wade through the mess.

13:14Yeah. I mean, I think most economists would say, please, please get rid of them. Now, the one complication I would say here is that I would say that there is a perception in the United States right now that we have this dysfunctional public sector and decisions essentially can't get made. Things can't get built. Legislation can't get passed, etc. This is because of the sort of very diffuse nature of democracy where there are a lot of veto points, etc. And a lot of people aren't crazy about how many veto points there are in American democracy, whether at the court level or the local level, etc., how hard it is to build things, etc.

13:50There is this frustration of stagnancy in the built environment and in the policy environment. And perhaps someone would say, well, if the Supreme Court undermines the Trump tariffs, this just confirms the fact that nothing can get done in America. We can't set a new chart, a new policy course. Now, again, like the ability to tariff is something that is theoretically in the Congress's purview and theoretically should only be used by the White House in emergency situations. And Trump, in fact, invoked those emergency situations, but like for all the countries in the world. And Congress has not stood up for itself.

14:25So if Trump is sort of usurping this power that belongs to Congress, it's not like Congress has really complained or certainly the Republican leaders of Congress. Nonetheless, I suppose if the Supreme Court were to rule the tariffs invalid, the money was no longer be connected. It may feed into this idea that the American sort of presidential three system of power. It's difficult. Well, there's also the risk. Three branches of government. When you were talking about uncertainty, I was trying to think, OK, well, what is the uncertainty? Because if they invalidated the tariffs and like, I don't know, it seems pretty certain.

14:56We don't have those tariffs. But it seems like part of the risk is that Trump would somehow ignore the Supreme Court or do some other additional thing that would further create a sense of uncertainty. And well, we're in a very weird situation right now with the TikTok ban where there does not seem to be any legal basis whatsoever for TikTok to exist on the app stores in the United States. states that law has not been repealed at all but the white house unilaterally said i'm just gonna not ignore it we're just not gonna pay attention to the law we're not gonna enforce it but that's a very weird situation like right why does i keep forgetting that take i know it's like supposed to be illegal it is it is illegal by the law and yet no one is enforcing the ban for better worse but that is what if the supreme court said no tariffs can no longer be collected and the white House instructed the ports to keep collecting the tariffs.

15:54I mean, this is potentially some very weird situations here. I mean, also, if you're running a business and you're trying to figure out what to do and you're like, OK, should we if the tariffs are locked in, it would be better for us to build a factory and start making things here or invest in an iron mine or whatever it is. But it's just hard to know if it's going to get overturned or if it's going to go away with the next president. It's like, where do you invest your money? You can't really grow and expand the way you could if you had like a clear course. Totally. So this is a really important dimension, which is that the longer these tariffs exist in any form, the more likely it is that they will exist forever.

16:27Because once you start getting any company that is making domestic investments predicated on the existence of tariffs, that company is a perpetual lobbyist for the existence of tariffs. Not only a lobbyist, but like a lobbyist with a pretty good case to make. We should talk about the bond market a little bit, because like what Joe said about the stock market is true. Like, the stock market has done really well during the Trump presidency, but it could just be a comment on, like, NVIDIA. That's right. Maybe, in fact, if there weren't tariffs that would be even high. There was certainly a comment on NVIDIA.

16:57But we know that a huge amount of it is attributable to these air companies. Anyway, keep going. Yeah, yeah. So, anyway, I was just, that's a segue for Stacey. Yes. So, since the tariff conundrum happens, it seems like the legalities come into question in a serious way. The bond market has reacted in this way where like yields have gone up. In other words, kind of interest rates have gone up. The U.S. is perceived to be a riskier place to put your money. Yes, yes. So what is going on? I guess one way to think about this question, and it gets back to, I think you really have to talk politics and you really have to talk about this idea of whether you feel that over the next several years, we will still even have a nominally or truly independent central bank that can set rates at will or set rates sort of independent of the political cycle, regardless of who is in the White House.

17:45And so if you're going to put your money in the U.S. for a long time, if you're going to lock up your money for a long time, you probably would like that the central bank to feel you would like that confidence that the central bank will do its job to preserve the value of your currency, avoid high inflation. If you are worried about the political status of the central bank, if you're worried that an entity will no longer exist that is committed to doing getting to two percent inflation sort of whatever the cost because of something upstream in the political cycle etc i don't know maybe you want a little bit more compensation in your long-term holdings to compensate you for this risk well wait that doesn't really have anything to do with liberation day though or like the tariffs i mean or it doesn't really you're right no no it's totally true so it only has anything to do with it insofar as all of this is a commentary on U.S.

18:40political stability. Well, totally. Like if you're lending money to the U.S. government, you're like, okay, I like most of those people like the global financial system as it exists today. Like the U.S. is like integrated this like incredibly successful experiment in politics and capitalism that played out starting after World War II. And if Trump is blowing that up, that makes you nervous. I think that's what it is. Yeah, I think that's right. And all of these things are just sort of novelties within the American political system, right? Say the Supreme Court were to say tariffs are illegal. I mean, broad-based, first of all, the broad-based tariffs on these emergency claims, that's a novelty.

19:20The idea of the Supreme Court then reversing tariffs, that's a novelty. A potential dispute between the White House and the judicial branch, that's a novelty, all of these things, right, that we sort of took for granted, certain institutional arrangements. And this is where it gets back to the Fed itself. The way I think about the Fed is it's been encased in glass, right? And it sort of let operate to do its own thing. And the independence is like a little glass. But it could get shattered and maybe it will get shattered at some point, or maybe it already has been shattered or at least cracked based on the fact that it's already coming under a lot of criticism.

19:53So a lot of institutional arrangements, which had been perceived to be stable, are perceived to be less stable. And once again, the Fed is part of that and could have a factor in the degree of the payment that you want in order to keep your money in dollars long term. And just to bring it back to this initial question, like Treasury yields went up yesterday, which, again, kind of feeds Trump's idea that like, yeah, we need those tariffs. And what you're saying is this is another the story is kind of the same. It's an uncertainty. It's a certainty versus I think part of this, too, you know, where it's really bad is in the UK right now, that's getting a lot of attention is how much their bond yields are blowing out at the long end.

20:33But it's really, it's Japan too. And they're, you know, for them, long-term rates are like 1.8%, which is very low, but it's Japan. So for them, that's very high by their grand standard of things. But there is this concern, I would say two concerns at least, in maybe three concerns, within rich developed countries, which is that they have unfavorable demographics, that they have aging populations that are going to require a lot of resources that will soak up and burden a lot of the productive labor, to some combination of this burden of the aging population and then other sort of the hollowing out of industrial activity, specifically because of competition with China, is this fear that the productive base of rich Western or, you know, sort of rich liberal countries is going to get hollowed out, et cetera.

21:28And then finally, add on to these things, this sort of evident political dysfunction, which kind of exists everywhere. I mean, we see it, I think people perceive political volatility in the U.S. They certainly, you look at the U.K., it also doesn't look like they can get anything done. They're always having these very picayune scandals that seem to be at the cover of the paper. But everywhere you look, there's similar things going on. There's these sort of stresses that are being put on the sort of political arrangements. So you combine all these three things together and there's sort of this global story going on that is beyond just the question of tariff revenue.

22:03So, Joe, little known fact, well, maybe not that little known, but you are in a band. That's right. Called Live Sweet Crew. That's right. And I had a musical questions for you because this is so weird. Max is going to die. But it's it's the first thing that came into my head when I read about the illegal, possibly legal tariffs, which was that song by The Clash, like, Do I Stay or Do I Go? Oh, yeah. Great song. Because it seems like with the tariffs, this is the case. Yeah. Kind of like if they stay in place, there's going to be trouble. If they go away. It'll be double. It'll be double. I love the setup.

22:35That was really well done. Thank you. It's a really long setup. No, but it paid off. I appreciate you rolling with it. I think there are a lot of things like that these days where we sort of arrive at these forks in the road and we sort of want them to never be resolved because neither of the resolutions seem great? I mean, I think about this with AI. Do we want the AI bubble to burst or do we want AI to take all our jobs? I'm not sure at this point. I think with tariffs, I look, I have no, I'm a journalist. I have no opinion on tariffs. I just, I just report the news. And usually I just ask the questions.

23:05Rarely am I answered them. Yes. All of these things are very strange. And I don't, you know, from a sort of, when you balance out economics with sort of institutional stability, et cetera. I think there's this feeling that we're hurtling towards genuinely uncharted territory. I feel like that clash song is how investors feel about everything, like not just tariffs. Yeah. I mean, I feel like it also works with the AI bubble too. I mean, do we want things to keep going and get super overheated? No. Do we want the bubble to burst? No. Yeah. I got to retire. Not soon, but. Yeah. Joe Weisenthal, thanks for being here.

23:42Thanks for having me. That was a lot of fun. Should I stay or should I go? If you say that you are mine, I'll be here till the end of time. Your best restaurant location gets five-star reviews. How do you make every location like your best location? Your best paper mill has been operating at peak productivity. How do you make every mill like your best mill? Your best data center has optimized every drop of water. How do you make every data center like your best data center? The answer is Ecolab. Better performance, better outcomes, better impact. Ecolab. Now every location is your best location.

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