AI in Higher Education and the Supply Chain, Trump’s Tariffs Hit Lesotho

24:43It has to be linked to autonomy. What is AI without autonomous vehicles? What are autonomous vehicles without AI? I fundamentally see the next decade really about building the autonomous infrastructure of an industry. And I view self-driving as the most profound help in driving efficiency and safety into supply chain. The whole digital infrastructure in the end of the day can drive 10, 15 % optimization of the network. When you start actually moving assets in a self-driving way, when you can move an asset from six hours a day of being utilized with a human driver to 20 hours, 24 hours, When you can drive safety into our roads with thousands of unnecessary deaths and half a million related incidents in the U.S.

25:33every year on trucks, you can make a profound change and a profound help to the industry. This is the time. I think it's a confluence of many things really coming together to make the next year, not even five years, the next year transformative from self-revenue in the industry. Like, this is game time. This is real now. It's happening.

26:00Up next, Lesotho may not come to everyone's mind as a textile exporter. But it was on President Trump's list of tariff recipients for not playing fair. We go to the country in Southern Africa to see what a small kingdom can do to stand up to the world's largest economy.

26:39Bloomberg Surveillance also brings you the analysis behind the headlines. We do that through conversations with the smartest names in economics, finance, investment, and international relations. We do all this live each and every weekday that bring you the best analysis in our daily podcast. Search for Bloomberg Surveillance on Apple, Spotify, YouTube, or anywhere else you listen. On the East Coast, listen at lunch. And on the West Coast, listen as soon as you wake up. That's the Bloomberg Surveillance Podcast with Tom Keene, Paul Sweeney, and me, Alexis Christophorus. Subscribe today wherever you get your podcasts.

27:15Bloomberg Surveillance, essential listening each and every business day.

27:28This is a story of David and Goliath. President Trump's biggest tariff moves have been against countries of similar stature to the United States, places like China and Europe. But he's also hit some of the smallest economies in the world. Our colleague David Gura has the story of Lesotho, a country out of sight for some, but one that's been hit particularly hard. The African nation of Lesotho, which nobody has ever heard of.

28:00The sun is rising over the Tetsani district of Maseru, the capital of Lesotho. The smoke rising from the textile factories signals the workday has begun, but only for the lucky few. Cutting fabric, sewing seams, making clothes for the Western world. Many of these workers make as little as$1 ,800 a year. Outside the factory, a crowd is building of locals hoping to find work. Any kind of job in the factory, they will have the ticket. President Trump should show mercy to Lesotho because the demand for jobs is high in the country. It's been like this since June, when Lesotho's largest industry began to feel the effects of President Trump's tariffs.

28:45First, 50 percent among the highest rates in the world at the time. It came as a shock to us. Luckily, later on it was revised to 15%. Sam Atakane is the prime minister of Lesotho. He declared a two-year state of disaster for his country's economy after the tariffs were put in place. We're still in negotiations with the U.S. government on a federal reduction maybe to 10 % or to zero, where we were before. We would appreciate the reduction as well as the renewal of AGOA, because AGOA has just come to an end now. The African Growth and Opportunity Act. AGOA, the African Growth and Opportunity Act, signed in 2000, gave some nations in Africa duty-free access to the U.S.

29:36market. That deal expired last month. And while the Trump administration has said it would support a one-year extension, that hasn't happened. The prime minister says Agoa's expiration and the higher tariffs have had a crushing effect on Lesotho. Well, we are hoping for the best. Negotiations are still ongoing, but we are hoping for the best of the best. Dubbed the denim capital of the world, there are two industries that drive Lesotho's economy, a landlocked country of just over 2 million people surrounded by South Africa. Those industries are diamonds and textiles. 2022, and that's led to layoffs in Lesotho's mines.

30:18Now, it's textiles that have been hit hard. As recently as January, Lesotho's central bank expected the sector to grow in 2025. But by June, it had downgraded its forecast by more than 10 percentage points, saying textile and clothing manufacturing would, quote, shrink significantly due to the negative impact of newly imposed tariffs. AFRA Expo Textiles is feeling that pressure. Taboho Kabeli is the company's founder. But at the end of the day, one must specialize on something. It was a big shock. If you know what happened with COVID, it was something similar to that. Because it meant shutting down.

30:58And when you shut, you mean 30, 40 ,000 jobs.

31:05The U.S. imported more than$235 million worth of goods from Lesotho last year, about 11 % of Lesotho's total GDP. That represents just a tiny fraction of America's. 47 % of Lesotho's exports are clothing that will end up being sold by retailers such as Walmart and Levi's. Some of President Trump's branded golf shirts are made in Lesotho. But the trade relationship has been unbalanced. Last year, Lesotho imported less than$3 million in goods from the U.S. And although Trump might have been unfamiliar with the country a few months ago, that imbalance was enough to make Lesotho a target for tariffs.

31:45Such horrendous imbalances have devastated our industrial base and put our national security at risk. They've ripped us off left and right. But now it's our turn to do the ripping. Cabelli didn't imagine the American president was talking about him. His factory is one of only a few that's locally owned in Masero. The biggest punch was on the foreign direct investors, who are the biggest. And where are they ahead of us? They are not in Lesotho. It's just there are workers here who are producing employment for our people. and therefore our people are out of work and now we suffer, you see. But if we could have taken it up to our hands, then we'd be now knowledgeable of how do we talk to other markets easily.

32:42But we never take that opportunity. The government failed to produce their own. The unemployment rate in Lesotho in 2024 was 30%. That's the most recent official data collected before the tariff-induced layoffs began. Tsipang Makakole is the General Secretary of the Economic Freedom Trade Union.

33:23So if the factories are not engaging a lot of workers, then it means we have a big problem as a country. What, if anything, is the government doing to improve the economy here? Not doing anything. We don't see anything yet. But the government, says Lesotho, is not competing on a level playing field. The introduction of the terrorists have put us in the disadvantaged positions. because now the tariffs are not equal. In many countries, you'll find that they've got lower tariffs. Others have got higher tariffs. So the ones that have got the lower tariff have got advantages over the ones that have got higher tariffs because the business can be able to move from other countries to other countries because of that.

34:20Kenya's tariff rate, for example, is lower than Lesotho's, at just 10%, which makes it more attractive to foreign investors looking for a manufacturing hub. Given that, what can a country like Lesotho do? Trudy Micaiah is a Johannesburg-based consultant who works on trade and geopolitics at the Boston Consulting Group. It is devastating in the short term, and to pivot is not always easy. So the idea that, you know, workers can be retrained, do new things is difficult. So to that extent, you know, the preferences and the access to the market, just the pure access to the market is important. I think where a different argument can be made is that if you look globally at the level of U.S.

35:07trade, we still see from WTO figures that 80 % of trade is still happening outside of the U.S. contribution, still happening on kind of regular trade rules on most favored nation principles. So there is a sense that there is a world out there that continues, but it would be folly to underestimate the second order and the third order effects that come from this. because once we're seeing all of these production shutdowns, we see investments being pulled out. So I think it becomes very difficult for a small landlocked economy with significant development challenges to find other ways to grow itself out of this situation.

35:54And I think that's why trade policy like Agora and also just general market access has been an important part of the economic growth story of the past 30 years. And now countries no longer have that option. I mean, even if you look at Asia, for instance, and you look at the development story in Asia, a lot of it was driven by trade and the ability to not only sell product, but trade also brings expertise. You know, having to meet those standards, having to be export ready does something to the productivity of an economy that needs to develop, that now is, you know, the rug is being pulled up from under their feet.

36:35Makaya says that while the trade story has devastated Lesotho's economy, the ramifications of President Trump's trade policy go beyond exports and imports. These are small economies, yet to think about the gains that they've been able to make in terms of taking people out of poverty, it rewires the global economy in a different way. It resets their relationships. It also has meant value chains that support American industry. So in many instances, you'd have investors that come from the United States, not always. You would have capabilities that are delivered by American institutions. So to the extent that you create a market, creating a market also means that the people that you want to sell things to should also be able to sell things to you and develop their purchasing power.

37:31So to the extent that you open up your markets, you're developing that purchasing power in other parts of the world. It also means strengthening relations between countries. We do see generally that there's greater trade within the South, and that is going to happen. But it doesn't mean that therefore the West should step back, because by losing economic relationships, it also weakens the geopolitical ties that have been so important for global stability. So even from that perspective, if you want to look at it from a security lens, there are benefits to ensuring that countries are able to attain some level of economic self-sufficiency and are not beholden to other influences which might also take them in ways that are hostile to interests.

38:23in countries like America. Since taking office, President Trump has rewired the global economy. For now, countries like Lesotho appear to be losing out. But Taboho Kabeli says it's also given his country an opportunity. I asked him what he'd say to Trump, the American president who claimed he'd never heard of Lesotho, if the two ever met. I would say thank you, President Trump. Thank you. For making Lesotho known. for a president of a powerful country like US to mention Lesotho in his Congress. You know, it's a powerful marketing tool. Because nobody knows where Lesotho is. And everybody else now started traveling to Lesotho.

39:09Thank you, President Trump. And also, the world will now tend to ask, what is Lesotho good in? It's good in producing high-quality governments to the U.S. market. That is why I said, thank you, President Trump. If it was possible for me, I would shake your hand and say, thank you for making us wake up. Because that was a wake-up call. In the biblical story, David beat Goliath. But Taboho Kabeli says it's not about winning and losing, but about finding common ground. President Trump is a businessman. And my prime minister is a businessman. What they have to do is just to talk business. President Trump, I've got this and that and that.

39:54I can supply you good, high quality goods. What do you want from me? Let's change the way we were doing things. Because the giant has dictated that.

40:06Coming up, why some of our biggest and most innovative companies won't let us own a piece of them, and whether we should be concerned.

40:22This is Scarlett Fu. And I'm Paul Sweeney, inviting you to join us for the Bloomberg Intelligence Podcast. Every day, we harness the power of Bloomberg Intelligence to bring you deep dives into the companies that are moving markets from publicly traded companies like Apple to those that are privately owned but known by everyone on earth, like OpenAI. Now, I helped to build Bloomberg Intelligence to what it is today, Scarlett. And now, our analysts are the best in the world, covering more than 2 ,000 global companies. That is your legacy, Paul. And we speak to those in-house experts every day. They are Bloomberg's go-to authorities on sectors, companies, and legal processes.

40:55And we do it all live each weekday, then bring you the best conversations in our daily podcast. So be sure to search for Bloomberg Intelligence on YouTube, Apple, Spotify, or anywhere else you listen. Listen in the afternoons on your way home from work to catch up on the market news you missed during the business day. That is the Bloomberg Intelligence Podcast. I'm Scarlett Fu. And I'm Paul Sweeney. Subscribe today, wherever you get your podcasts.

41:22This is a story about privacy, specifically the privacy of keeping a company's ownership and operations out of the public domain. It seems like every day we hear about another so-called unicorn, a private company valued at over a billion dollars. It's not just the number, it's the size and how long they've maintained their privacy. I'm in a rush to go public. The public is, I guess, a way to potentially make more money, but at the expense of a lot of public company overhead and inevitably a whole bunch of lawsuits, which are very annoying. There seems to be broad agreement that more early stage companies are in no great hurry to go public.

42:08It used to take seven years and now it takes 11. So that's a big change. And that doesn't count, obviously, the companies that failed and didn't get to go public. There's no doubt that many companies now are staying private more than 10 years even, which used to be the typical maximum time they would stay private. This reluctance to rush into the public markets has meant we've seen an explosion in the number of so-called unicorns, private companies reaching valuations of$1 billion or more. According to PitchBook, we've gone from virtually no unicorns in 2010 to over 1 ,400 today, worth over$5 trillion combined.

42:48The reasons are straightforward. First of all, being a public company can be expensive and just a pain in the neck. I have several friends who are CEOs of public companies. The worst part of their life is the week before earnings day or the week after earnings day. You know, it's incredibly painful, expensive to have a public company. Jonathan Foster is president and CEO of Angelus Wealth Management, advising high net worth individuals on their investments. There's not a public company alive that doesn't pay at least$5 million and up for being public, and that would be for micro cap. So you imagine what the large companies are paying and the scrutiny that you have from the public market.

43:34It's not just the cost and hassle that can discourage growth companies from going public. Gordon Phillips is a professor at Dartmouth's Tuck School of Business who has studied the reasons behind the decision to stay private. When you go public, you release a lot of information. So there's sometimes proprietary information that you don't want to convey. Does that drive the impetus to stay private longer, in part because you can't necessarily patent the relationship between what you know and what the capital provides? Right. I think it does. I think then you're waiting, you're waiting, David, to go public until you've established a brand name that's well-recognized.

44:10You can think of Uber and Lyft. They wanted to wait to go public until there was enough consumers signed up. And then there's perhaps the biggest reason that large, successful tech companies stay private for longer, simply because they can. One of the reasons is because of the availability of private capital and the venture capital money and growth equity money that's available. So there's tons of money, so you can get a lot of money from private capital. You don't need to go to the public market as quickly. But not all private companies are created equal. And most of them are certainly not unicorns.

44:43They're not your typical private company. I think when most people, and regulators and others historically, have thought of private companies, they've historically thought of a family company or a small business or something along those lines. The companies that you're talking about are nothing like that. Those are real companies that are operating on a global scale. Sarah Cohan Williamson is the CEO of FCLT Global and author of the new book, The CEO's Guide to the Investment Galaxy. What's interesting about private markets is that the ultimate owner sets the price. So if you think about in private markets, who actually, if a company goes private, for example, whoever pays for that sort of sets the price and then that's what the price is.

45:26In public markets, the marginal trader sets the price. So the price changes every day, every minute, perhaps. And so I think that one of the really important differences is how good are the valuations on different sides. And so you mentioned some of the companies that are valued very highly, and those may be very accurate valuations. But a lot of times, the difference is between a mark and an actual trade. Being a public company has its share of costs and disadvantages. But staying private has its own drawbacks. Professor Phillips has compared some similarly situated companies that have gone public with those that have not.

46:03In a research paper, we looked at companies which went public, and then we looked at companies which pulled their IPO. They filed to go public, and then they decided, hey, the price isn't good enough. I'm going to walk back. So we look at those who filed. They both had the incidents. And we filed those that went. They still got substantial benefits. The benefits are the liquidity we talked about, but really the second benefit also is acquisition currency. When you're public, you can actually buy other companies with stock, and you don't need necessarily cash to make that purchase or debt. One example is Apple has done lots of acquisitions, including Beats by Dr.

46:40Dre. They bought that back a while back, and they paid$2 billion, but it was, again, they had enough cash and shares that they could easily make that purchase, even though it was$2 billion. Having publicly traded stock also allows management to give incentives to employees through stock options and similar compensation arrangements. A lot of times is the employees want to be able to sell. Now there are some private internal markets that are developed to allow employees to cash out before they go public. However those markets are not as liquid, maybe the prices aren't as good. There are also some benefits in going public that can't be measured.

47:17There is credibility to being a public company whether that is to suppliers or other business partners or employees or others. And then I think it really opens up all of these opportunities, like issuing more stock to purchase companies. It just opens up a whole new world. So there are very good reasons for companies to go public, and that's why many do still. But what does it all mean for the rest of us, for those of us not lucky enough to get in on the ground floor? First of all, it means that there are just fewer public companies for us to invest in. 25 years ago, there were north of 7 ,000 public companies, maybe 8 ,000 public companies.

47:58Now there are only 4 ,000 public companies. So there's been a real shrinkage of opportunities to invest in equities in public markets. And then there's the prospect that by the time those big growth companies go public, they've already realized their explosive growth. When Apple went public, it only had like one round of venture capital. People went and bought Apple stock. You got to participate in all the upside as the stock was rising in the public markets. If you're going public and it's already worth$100 billion at the time of the IPO or$20 billion, whatever the number is, still a big number already, then you've already baked in a lot of the gains.

48:35And so the gains don't get distributed as much broadly to the population. Retail investors are not getting that period of heady growth at the beginning. Now we're seeing, you know, OpenAI staying private and they're going to be pretty big. And then, you know, other companies like SpaceX, you know, again, staying private. You can't yet participate until they go public as a retail investor. The pendulum has definitely swung toward companies maintaining their privacy for longer or even indefinitely. But as so often happens in the markets, what looks like a long-term trend may turn out to be more of a cycle.

49:10in no small part because coming into the sunlight over time has given investors some pretty favorable returns. I asked chat to you, PT, a great question a few weeks ago. What is the relative return between putting a million dollars into residential real estate on an unleveraged basis in zip code 90049? So that's, you know, in Los Angeles, which is where I happen to have a home, and that's been one of the great residential markets in America. said doing that versus$1 million in the stock market from 1960 to today. And it took it like a minute to figure it out. And it said, if you put$1 million in the residential real estate unlevered in that zip code in 1960, it's worth$7.7 million today.

49:53And in the S &P 500 with dividends reinvested, it's worth$1.1 billion. The public markets are great over a long-term basis. So I think people should not feel they're being left out. The biggest consideration of all might be the value of public companies to the depth of the capital markets. Well, if you look at economic history, you will see that the most vibrant economies over time have had a vibrant public market. So I think there is public value in vibrant public markets. And of course, that's where we come back to this level playing field argument, which is it used to be 10 or 20 years ago that a regular retail individual, just a regular citizen, would be very unlikely to have much exposure to the private markets.

50:39But today, because there's such a large portion of pension plans, defined benefit plans in particular, and other investment vehicles, individuals do have a lot of exposure to private markets if they are a participant in a pension plan. With all the pluses and minuses of going public or staying private, in the end, it comes down to more than just capital structure and protecting your trade secrets and incentive compensation. So I think as a business leader, the question is really what kind of company do you want to be as much as what kind of capital do you want to get? The best company leaders think about their investor strategy just like they think about a customer strategy.

51:23So if you ask a CEO what their customer strategy is, you can almost always get a very clear answer about what kind of customer they're targeting, in what location, why. If you ask a lot of leaders what is their investor strategy, you don't get nearly as clear an answer. And it's really important to have that kind of clarity because those investors will end up dictating or at least nudging the company in certain directions, whether it be shorter to term or longer term. So have an investor strategy that's just as robust as a customer strategy. That does it for us here at Wall Street Week. I'm David Weston.

52:03See you next week for more stories of capitalism.

52:19This is Special Agent Regal, Special Agent Bradley Hall. The time is approximately 11.15 a.m. I'm about to start a consensual telephone call with Dr. Daiwa Zhang.

52:37China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world. But in 2017, the FBI got inside.

53:00I've never seen that much evidence in my entire career, and I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question, of his life. And that's a unicorn. This is a story of the inner workings of the MSS and how one man's ambition and mistakes opened its vault of secrets. Listen to The Sixth Bureau from Bloomberg Podcasts starting on February 13th on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.