Scott Galloway: Growth Is the New Profitability


A loser: profitability. The most disruptive company in the largest economy, Amazon, is setting the cue for a new relationship between investors and companies. Simply put, vision and growth have replaced profitability. Amazon wasn’t profitable until 2001, seven years after it was founded, and since then its profits have been negligible. What happens when Amazon reports a big profit? Jeff Bezos calls senior management into a room and says you fucked up and greenlights a bunch of very expensive initiatives that will deliver against long-term advantage. This gestalt around capital formation has moved all the way down the ecosystem. Small companies now pursue leadership versus profits. Why? The market doesn’t seem to demand profits from quote-unquote innovators. A continued loser: Ad-supported television. There’s almost triple the amount of sports content than there was ten years ago, but fewer people are watching it. On top of that, tech giants are buying the digital rights to sporting events. Amazon recently purchased NFL streaming rights for $50 million, quintupling the bid from last year from Twitter. Facebook also signed deals in March to stream Major League Soccer matches and is in talks to buy the digital rights for Major League Baseball games. Prediction? In the next 24 months, we’re going to have one of the Big Four – Apple, Amazon, Facebook or Google – buy the rights to the Olympics, March Madness or the Super Bowl. This is one of the last bricks to fall from the wall protecting the industrial ad complex. The winner: Viewers, who will have more options to view content on their own terms and hopefully, for at least now, fewer shitty ads shoved down their throats. The losers? Those of us that wouldn’t have known unless we watched ad-supported TV that there was a treatment for opioid-induced constipation. Hi, I’m Frank, I take Movantic for OIC – opioid-induced constipation. I tried prunes, laxatives, still constipated. Had to talk to my doctor. She said how long you been holding this in? What the fuck. A winner? Reviews, which have fundamentally changed the way we shop. Most adults under 50 read online reviews before buying new products and one in four shoppers check Amazon reviews even when they’re inside a store. A third of online shoppers claim they won’t buy products that don’t have positive reviews. The average consumer rating on Amazon is 4.4 stars. We’re living in Lake Wobegon. All the women are strong, all the men are good-looking and now all the products are above average. This is the part of the episode where I usually make some snarky comment about my prostate or porn. However, many of us were having a difficult time coming up with something humorous with all the images coming out of Syria. We wanted to spend this time talking about some of the things we can all do to try and help. You can donate or volunteer at the following charities. The International Rescue Committee has rescue workers in Syria providing medical services and emergency shelter, Save the Children is addressing the emotional scars of Syrian children and Oxfam is helping settle Syrian refugees in over 90 countries. I’m going to spend some time investigating Lifeline Syria where you can sponsor a Syrian family. I will let you know what I find out. We’ll see you next week.

General Mills Chief Brand Officer On What A Marketers Job Really Is


The role of marketer has changed so much as consumer behavior has changed and the way that consumers
consume media has changed, so how, what are the biggest
changes that you’ve seen? Wow yeah, there’s
so many great changes that are happening and so much disruption and I think some of the
bigger ones that we’ve seen, you know, General Mills
being in the food industry and being in the food industry
for a long time, 150 years. I think the amount of change that’s happened within
food trends the last decade have been pretty monumental. So natural organic has obviously
started as a niche trend and now that’s a mainstream thing, that’s a huge part of our business now and a decade ago it was a very small part. I think on the other end of the spectrum you have value brands that, you know, private label was kind of a nonentity in terms of what it stands for, now private-label brands
are becoming large. So those are two things
that are really, I think, changing the dynamic of how we think about
our brands and shoppers and then technology of
course is a huge shift. And so just how people
are getting their food. You know through things
like Amazon and Walmart and the push that people
are wanting their food like not a week ahead, but like right when I want it immediately and so we’re having to think about how to set up to take
advantage of that new behavior. And how, it seems so much more
integrated than it used to be, how did those initiatives come? Do they come from marketing? Do they come from
conversations with the consumer and then get prioritized in
other parts of the company, has that relationship changed? Yeah, you know,
so with our company and being in the CPG space for a long time it’s always really been marketing driven, and the consumer is at the heart of that, so we try to stay as far ahead as we can with consumers and understand those trends and bring them back in and then
really relying on marketing to figure out like where
are the markets going to be and how they’re going to exist. And so marketing kind of plays the hub and then the other functions
really cue off that to be able to support it. So what kind of products we
need to be making with R&D, how we need to set up our relationships with customers and sales, and then my group which leads
all like the brand experience, how do we set up soap, every interaction the consumer has with us is additive and solving a problem. So it really is kind of pushing us into, like where are gonna go next? Marketers have to lead that
because they’re really, in our company at least,
and I think many others, like seeing where the future is and also having to make it happen like in the current, present
day to drive results. And how do you look forward and what are you looking to do, you are the head of
marketing for a very established older company. How do you keep it
young and fresh for the next generation? Well, I think it’s things
like coming to Cannes and being able to get
inspired by other people and things that other companies are doing. You know it’s easy for us
to look in our own industry and say, okay, great other competitors are doing these things, or customers are doing those things, but I like to look at other industries so technology is really great. So we spend time in the
Bay Area quite a bit to understand what are new
start-ups in technology, what are new start-ups in food, why are they existing,
what’s happening there? Coming to places like this
which is all about creativity, or going to CES that’s about technology. And so I think getting
out to different places and bringing leadership
out to experience it is really important. And so you know on this trip we brought a couple pretty senior leaders so they can experience it too, because when they see the
changes that are happening, getting them back into building, it allows us to just
like use their momentum to create that kind of change. And then the other thing I would say, the last thing I would say, is we’re also trying to
really cross pollinate different levels of people
within our own company. So if you’ve been around
a company for 20 years you’re gonna have one perspective, but then having people that
are just out of college coming in and talking
about how they use media, how they’re connected with their networks, what things they’re passionate about, it just creates a lot of different ideas about where you should be doing marketing. And for somebody that’s interesting in marketing I presume that this skills
that you’re looking for in people that you’re hiring today, is different than the skills
that you were looking for when you first started? Totally. And so what is
the best advice you could give somebody who’s looking to get into marketing? So I had a marketing
mentor that told me this quote, and I think it’s always stuck with me it’s like marketing is
about creating markets. And so, I think that’s exactly true and a lot of times it can be seen as, oh, I’m just creating advertising, but marketing is much broader then that. So there’s so many places that you can show up as a marketer. I think that there’s two
things to really focus on. I think one side you wanna understand what drives a business and that’s kind of the fundamentals of – understand how P&L works, understand how forecasting works, those are basic things. But then, I also think you
need to think about creativity and imagining what things,
products and brands, can solve. And really think about the bigger picture kind of put together with the smaller kind of more every day
tactical executional ones I think makes the best marketers. We call them “and” people, at General Mills, that can do the big and the small, can think right brain and left brain, and those people I think are really adept at any
situation in presenting a clear picture of the future, but also making it really attainable for their current employees. And from a tangible perspective And from a tangible perspective what is the goal that you’re working on right now at General Mills? Yeah, it was funny, I was going to answer that differently, because you said tangible, and this feels a little broader. So I think one of the big
things that we’re working on now is a five-year facing plan
of how we’re gonna grow our North American business which is about 70% of our current, kind of mix, 70% of
current sales at General Mills. For me that is really
focus on the trajectory of where the food industry, where our businesses
and brands are gonna go, and really thinking about our brands and all the great things they do. You know we have Cheerios,
Yoplait, and Nature Valley, individually they’re awesome, but we haven’t necessarily thought about how to create portfolio
solutions at a level that can really make people lives better and solve bigger problems using the whole portfolio in new ways. And so I’m really focused on that because that’s gonna probably require different organization structures, different incentives, different culture, and our brands are always gonna be like the most important asset, but I think how we serve them up, based off technology and consumer changes, it’s gonna look different and so I’m really, really focused on that. That’s so interesting because I was just gonna ask,
does it matter if Cheerios, the branding for that is in line with the other brands messaging? And how do you do what you just said, how do you make it serve the consumer to be loyal to all of your brands? Yeah, and it’s hard because – Two totally different questions. No that’s really good, no it’s awesome. I think it’s actually
a really great question because we, as a company at General Mills, haven’t really, we don’t market
General Mills as a company it’s kind of more of a broad umbrella across many different food brands. And if you think about a couple brands, just for example, like in our portfolio you have like Pillsbury on one side, which has been around forever, is about kind of Americana,
about coming home and has these great products that are in the refrigerated dough section which is seen as kind of like
old fashioned a little bit and that’s a brand that’s really based on like traditional American values, it was really strong in
the Midwest and the South. And then we have other branks like Annie’s which is an amazing newer brand that’s born out of Berkeley, California, and has, you know, different
kind of views on the world. And so as a marketer
you might have to work on both those brands and they’re
in different life stages, they have different points of view, they’re purposes are way different and so it’s really important
I think, first and foremost, is to know that brand and
where’s it’s coming from and know the consumer. And we have to be adept
at doing different things. I mean working for one
brand, and one company, sometimes I’m like, oh, I wish I could just work for one brand, it’s so much easier. But then you just get a lot
more creativity and excitement by moving people around
at different challenges and so I like it a lot. It keeps I think a lot more agile in terms of being able to respond to different opportunities
as they present themselves. And you have to take risks in marketing it seems to
really make waves sometimes. Is there a risk that you’ve taken that totally paid off? Yeah, well this
one quote that I love that we say in our company, is like if you’ve got an idea that you think you might get fired for it’s probably like a really good one. And one that comes to
mind a couple years ago that was pretty against what I think we’d be comfortable doing
at General Mills is, and this is before where we are today, but Denver had just, Colorado had just legalized marijuana and we thought, you know what, our Totino’s Pizza Roll business is super compatible with
that particular product and so we didn’t obviously wanna like encourage people to take
part in marijuana, but it was such a
newsworthy thing in Denver that we did a really smart,
specific marketing plan, that was very strategically targeted towards people of the
appropriate age and disposition, and it was outdoor, and it
was social, and experiential, a very different kind
of plan that we’d made. And we had this idea that was
about, live free couch hard, which is what Totino’s is about, and the specific idea was called, better when baked. And it was about baking the pizza rolls so that they’re better in the oven than the microwave and we launched that. And that was a big risk for our leaders to take to do something like that at the time but they leaned into it because we kind of had done the work ahead of time and the market results were that we grew that market
in Denver about 20% on a shoestring marketing budget. And so it’s things like that when you know they’re
right for the consumer, and they’re right for the brand, that they’re worth the risk because they can kind of
payoff with business results and it’s propelled that brand to be kind of a cool lifestyle brand that it was not before. And is there a risk
you can think of And is there a risk
you can think of that didn’t pay off quite as much that you learned something from? Yeah, you know, I would say, similarly on that business, one of the brands that we
have is also Totino’s Pizza and it’s been around forever. It’s like literally a value
pizza for a dollar which is a huge great value. We changed the packaging of that to not actually come in a box, but actually come in more of a sleeve. And we did all of this consumer testing, we thought we got it totally right, and when we launched it the sales like fell pretty precipitously for the first couple months. And there was some very
obvious like things that we hadn’t done that as a human empathy type of thing we should’ve done because we were doing more
kind of standard research and it taught me the research
and the data is important, but also the consumer gut. We’re selling consumer food products like trust your gut. And so that for me was like a step back. Like that was not a great plan, but we quickly then
adjusted and figured out what did we miss and
relaunched it that way and the business has gotten
back actually to growth, but it was a good lesson
in humility and like, really like we’re here
for the consumer first if we’re going to change
something they value like we better have a good reason for it. There’s been a big
shift to privacy in the tech space and
I don’t know how much this affects your business,
but I am interested, how do you think that that will affect the advertising as we move forward? I think it’s huge. I mean we work with
all the major platforms and so we have a really high standard for our brands and our consumers and making sure that they’re always, our advertising shows
up in safe environments, that our consumers information
is treated really fairly and in the right kinds of ways. And so I think our kind of
expectation of those partners is they make sure that they’re doing what they need to solve problems to make sure that their consumer data is handled the right
way for their platforms. And so we’ve really expressed that. We meet with them a lot because we are a big spender with them and I think we’re gonna be, obviously, staying close to that to make sure that their expectations keep up with ours. And so I think it’s
important for us to know too. You know we rely on
working through customers to like learn about our consumers and so it’s not necessarily
as front and center for us, but because of our partners it’s an issue that we have to like stay on top of. And I’m asking everybody this. Is there a campaign that
somebody else created that when you saw it, it was so brilliant that you felt like, man, I wish
I had created that campaign? It doesn’t have to be this year. Wow, there’s lots of
stuff that I love. Wow, there’s lots of
stuff that I love. I mean this year’s one
that I’ll say first, and then I’ll give you a followup answer. Is I think every marketer here will probably say the
same thing around Nike, and I’m a huge fan of Nike. And so the way that they did the Kaepernick, kind of as a spokesperson
and really taking chances. Like just represented like I think a pretty
crucial moment in marketing for brands taking a stand. Because I think all brands
want to take a stand, but when push comes to shove it’s easy to kind of
fall back into the middle. And so, I admire the courage for that and I’m glad that the brand and the business results
have really paid off. I would say from a broader perspective a brand that I have
like a marketer crush on and have for a long time, is Red Bull. I love Red Bull’s marketing because it’s not about
campaigns specifically, but it’s about how they take a brand, and passion points, and create new things around it in a way that’s about like
giving you the courage to do whatever you want. And starting as like a energy drink and moving into basically being like a media creative
entertainment entity is like a total reframe of the market. And I think brands have the ability to play in a small box, or a big one, and they’ve said, we’re gonna play in the
biggest box possible. And so as a marketer
like that’s super cool to see how that they’ve blown that out to a total new level. Your portfolio of brands has been around for a long time, many of them have existed
for a very long time, how do you modernize some of those brands? What campaigns are you working on? You know it’s funny
because a lot of folks that now are in positions in companies and around different
industries Iike grew up with, like a lot of the brands
in their houses. So there is a strong affinity that we’re really tapping into people who are highly influential
in different industries. And so, you know, we’ve been
actually starting to work with the entertainment
industry a little bit and in the fall of last year
we came out to Hollywood with a couple of our brands and said, do you wanna work with
Franken Berry or Lucky Charms? And it was amazing to see
people come out of the woodwork and say like, I grew up with
those brands, I love them, like I would want to do a
movie with Count Chocula. And so we have the opportunity to work with partners in new ways and I think it’s probably
showed up the best way, over the last couple years, in the partnership that we’ve created with Ellen Degeneres and with Cheerios. And so Cheerios has been this brand And so Cheerios has been this brand that’s been around for a long
time, built on positivity, and it’s like, oats give you
great energy in the morning so they’re good for you,
they make you feel good, they make you do good things and they create this
virtual cycle of goodness. And so we really tapped into that and found partners like Ellen who also believe in
kindness and positivity and try to combine our ecosystems together to do bigger things. And when we came to her the
first thing she said is, I think we should do One Million
Acts of Good together, and we’re like, that’s
exactly what we want to do. And so we took our brand and polled it in all
these different places and so people would come on her show, or people would show
up with our customers, and we would have little micro campaigns that would do acts of good. One of the families
that she brought to us was a family that was
struggling financially. They had three boys, but they would always do
good things for other people, so we decided to give them a
million dollars from Cheerios. $500,000 went to them for themselves and $500,000 was for them
to give to other people. And to capture the
things, and the moments, and the experience that people have when they are able to give something back, is like the true
definition of, good goes around. And so it’s been really cool to see. And partnerships with the
right kinds of people, and the right kinds of other companies, I think are how brands
are modernizing themselves and so I only see us doing more of that and Cheerios has been
an amazing example because people see the
brand and they’re happy and we wanna translate
that into something bigger, especially with the
context of the current world and so it’s fun to work on
a brand that’s doing that. And Cheerios is one
of the brands that I associate with diversity and using diversity early with diversity and using diversity early and I don’t know if that’s true. Again, I’m not a marketing expert, but it certainly for
me is one of the brands that has been dealing with that early. Do you think other,
that any of the brands, or anyone who is doing enough in diversity and how we show people in media? I think some brands
are getting started on it and I think there’s a ton of opportunity. I think part of that is how brands show up in the market place with, with things like advertising and casting has been like
a good starting point over the years for brands
that showed different people, over the years for brands
that showed different people, over the years for brands
that showed different people, but it actually starts at the insight on different cultures
and what people believe. And if you do that the right way and then that carries
through to the end point, then that actually will make something that’s really
useful for people. What also happens is that we hire more diversity and inclusion
whether it’s gender, or sex, or gender, or affinity, or demographics of any
sort at General Mills. When people see themselves
represented in creative work it makes them feel more
proud about the company and we actually use their
insights to build our brands and build our business. And so I think it’s a flywheel that is actually really important, not because only it’s
the right thing to do, but also because it’s good for business and good for the employees. And so we’re doing a lot of that stuff. I know other people are
starting to do more of it, but there’s a lot of opportunity
to do even more in the future. If and how should brands get involved in political
and social conversations? Yeah, I think the brand, this goes back to the brand
really knowing what it’s for and what it’s about. And I think sometimes
brands can make the mistake of trying to take a stance on
a bunch of different things that, you know, at some point you’re like, well, do I really care what a toilet paper brand
thinks about, you know, this specific issue, maybe
I do, but maybe I don’t. But I think are certain things that brands have to fundamentally believe in and they have to take a stand on it if it’s important for them. You know we have a brand, Betty Crocker, that’s been around for
almost a hundred years and was built in a totally different time, but it’s a brand about creating — all being equal
and helpful for all families, and so a few years ago it took a stance on gay marriage, and for us that was a huge deal because that was like a big thing to say, but it was the right thing
for that brand at the moment and the right thing for our consumers and so we leaned in more on an issue than we might have in other places. And so brands can have a huge impact when they do it the right way. And that’s the Nike example again, I think that’s really great
to see a big brand do that, but I also think they have to decide where they wanna play
and where not to, and also be careful not to play in a place where they get caught up in a swirl where they’re not actually
running their business either.

How Customs At JFK Searches 1 Million Mail Packages A Day


About 1 million packages arrive at John F. Kennedy
International Airport every day. And just like travelers
have to go through customs, so do international packages. The US Customs and Border
Protection, or CBP, is tasked with screening all of them. They’re looking for anything that isn’t legally allowed in the US; certain foods, animals,
drugs, and counterfeit goods. JFK is one of nine international
mail facilities in the US. It’s essentially the
country’s biggest mail room, dealing with roughly 60% of all international packages
entering the country. First, the packages are taken off arriving passenger or cargo planes and transported to the US Postal Service’s mail room on site. They’re sorted and then taken
to the CBP mail facility next door for inspection. CBP uses a three-tiered strategy to efficiently search
each of these packages; intelligence gathering,
nonintrusive inspection, and hand inspection. We followed two units searching for drugs and counterfeit items. Before a package ever lands in the US, CBP gathers intelligence on the sender, the container, and the aircraft. They’ll check with
law-enforcement partners like Homeland Security,
the DEA, and the FBI to see if there’s anything of interest. This is how CBP narrows
down a million packages to ones that will get flagged
for further inspection. Once a suspicious package is pulled, it goes to the CBP inspection area. This is where human CBP
officers get a little help. Here, a four-legged officer, like Alex, will search hundreds of
packages in 20-minute runs. These dogs are trained to sniff
out seven different drugs. Michael Lake: The drugs
that they are trained for are hash, marijuana, cocaine, heroin, methamphetamine, ecstasy,
as well as fentanyl. Narrator: If Alex finds something, he’ll notify his handler
by sitting or lying down. If he’s right, he gets his chew toy. Lake: This is the game that they work for. All right, it’s good play. Here’s a good boy, good boy. Narrator: And if Alex or
one of his furry friends comes in contact with a drug, officers have the antidote Narcan on hand. Nearby, CBP officers are using another nonintrusive search tool: X-rays. Nathanial Needham: When
I first started this, I would literally open up everything ’cause I couldn’t tell what the image was. But eventually, after you
do thousands of parcels, opening them up and
comparing them to image, now you start getting
good. You can identify, oh, that’s this, oh, that’s this. We can let that go because of this. Narrator: If they see
something on an X-ray monitor that looks suspicious, officers
will isolate the package. Needham: Can we pull that one, actually? Narrator: Isolated packages go
through an intrusive search. Officers will cut them open to hand-search for drugs
or counterfeit goods. Needham: I always got taught, basically, expect a package to be something
that’s going to your mom, so that if it is good, it’s
coming back to your mom the same way that it’s supposed to be. This is common. It’s,
like, from back home. It’s pills, certain kind of vitamins, and they get them from
their little pharmacy. I’m pretty sure that this right
here is actually a steroid. Needham: No. The worst part is you don’t
know what’s in these capsules. Narrator: If the officer finds drugs, the package is sent to Murielle. Murielle Lodvil: That’s
4,000-plus pills here. Narrator: But if he
finds a counterfeit good, it’s sent to Steve. We’ll start with Murielle. Lodvil: The strangest areas
that we find drugs concealed are radio speakers or even car bumpers. For some reason, they love to
place cocaine in car bumpers. It’s crazy, where we even
find drugs in Play-Dohs. Also books, children books. In between the lining of the
pages, you’ll find drugs there. Narrator: Murielle tests the drugs with a spectrometer called a Gemini. Using lasers, the machine
can pierce through packaging and tell what drug is inside. Lodvil: Right now, I’m gonna
test this particular package. It’s telling me that it’s ketamine. It’s used for horse tranquilizer
and also painkillers. Narrator: Murielle will label the drugs based on where they fall among
the DEA’s drug schedules, Schedule V being a drug
with the lowest potential for abuse or dependence, like Robitussin, and Schedule I being a drug
with the highest potential for abuse, like ecstasy. Lodvil: We have the GBL
coming from the Netherlands, and someone in New York is receiving it. Steroid, a Schedule III,
coming from Hong Kong. Then we have the carisoprodol
coming from India. And then we have the tramadol
coming from Singapore. Narrator: Any scheduled
drugs will be seized. Lodvil: There is no day
that we come to work that we don’t find anything. Every day is a sense of
importance because of the fact that we taking out those
particular drugs from the street. Narrator: The narcotics
unit had over 7,600 seizures in 2018, including 246 pounds of cocaine and over 360 pounds of ecstasy. Now, back to Steve. He’s the one that gets
all the counterfeit goods. That’s anything that
infringes on a company’s intellectual property rights, or IPR. Think fake Air Jordans, Gucci
purses, or Rolex watches. Companies like Louis Vuitton and Gucci train Steve on the telltale signs for spotting a fake. While most of the tips are kept top secret to protect the brand, there are a few things that
Steve could share with us. Steve Nethersole: The
first, when it comes in, is the country of origin. These high-end manufacturers
here, Louis Vuitton, Gucci, they’re coming from France, Italy, Spain. The watch is coming from Switzerland. When it’s coming from China, bing, that’s your No. 1 red flag. Then you look at the dilapidated boxes, so that’s two red flags there. A third thing is commingling. The high-end manufacturers
never commingle their products, like, in other words, a Gucci inside a Fendi or a Louis Vuitton. These people will stuff watches,
a wallet, inside a handbag. And so, they’ll never
commingle their products. They are so precise. Some of the things I could say, like, some of the manufacturers, they don’t put any of this
in it, the filler, inside it. They would never do that. We’ll look at the smell. Sometimes it smells like petroleum. It’s not real leather. We look at the stitching. We look at the symmetry of the logos by the manufacturer, the zippers. This one here is a Coach bag
with a Michael Kors zipper. This coat has “Burbelly” on the
buttons instead of Burberry, so these are the comical
things that we find when you look at it up close, and you could pick it right out. Narrator: Counterfeit
goods make up an estimated trillion-dollar industry
that’s even been linked to terrorist groups around the world. In 2018, CBP had over 1,800 IPR seizures. And if all those counterfeit
goods had gone on to sell at their suggested retail price, they’d total an estimated $54 million. So, where do all these
seized goods end up anyway? Well, most of the narcotics and counterfeit goods will be sent to a top-secret incinerator
to be destroyed. Some of the drugs will
go under further testing, while some of the counterfeit
goods may be donated if the offended company allows it. But, in some cases, if
the illegal goods are part of a greater investigation,
CBP officers will actually put that package back in the mail. Then, they’ll track it all the way to the person it was sent to. This is known as a “controlled shipment.” Lodvil: I’m the one who
opened that package, and now I’m involved in
this controlled delivery. Now I get to finish the story. All right, now we go out. We knocked on your door, you open. Hello, we noticed that
you’ve ordered, you know, this particular package. It’s MDMA. What’s the story behind it? So then, we listen. Narrator: But whether they’re
up against fake Guccis or dangerous amounts of fentanyl, CBP stands guard at the
country’s busiest mail facility. Lake: This is where it comes. You don’t see it all the
time coming across the border in trucks and big bundles,
like the TV will have you see. This is where it’s all coming from, and it hits the street
and it destroys lives. So, in our way, if we can stop it here, it’s one less tragic story, probably, that we’re gonna have to hear about.

Repo: How Roughly $1 Trillion Moves Overnight | WSJ


(pleasant mallet percussion music) – [Narrator] Take a look at this chart. It tracks how much banks and
others pay for overnight loans using something called
repurchase agreements. This is also known as the repo rate. These bumps right here on
September 16th and 17th have caused a really big
stir in the financial world. That’s because the repo
market is a critical part of the financial system. It provides a lot of the grease that keeps the wheels spinning, meaning it provides the cash
that financial firms need to run their daily operations. When the repo market chokes
and cash stops flowing, trouble can reverberate
through the economy. That’s what happened in September, and in response, the Federal
Reserve had to step in to help, providing tens of billions
of dollars to borrowers to keep the system cranking. In the weeks since this happened, experts have called the incident
a technical malfunction, and banks, for their part, have said it could have been prevented. They’re blaming the rules
that were put in place after the financial crisis, rules intended to keep the banking system from falling apart. (dramatic mallet percussion music) (pleasant mallet percussion music) Imagine two people, Karen and Mark. Karen has $1000 and she’d like to earn some fast interest on her money. Mark has a stack of
treasury notes but no cash, so he strikes a deal with Karen. One note for $100, but there’s a catch. Mark has to agree to buy that
note back tomorrow for $101. The difference between
the price of the note on day one and day two,
that’s the repo rate. If everything works properly, Mark gets the cash he needs
right when he needs it and Karen makes some fast money. The repo market functions in the same way. You just have to replace the
Karens with money market funds and other asset managers who are looking to make a little money
without a lot of risk and replace the Marks with hedge funds, Wall Street traders, and
banks who have a lot of assets but need cash on hand to fund
their day-to-day trading. In the repo market, Karens and Marks all over the financial
system lend back and forth for short periods, often overnight, and they do this at an enormous scale. Usually, more than $1 trillion
runs through it every day. On September 16th and
17th when the rate spiked, the Karens were not willing
to trade cash for securities at the usual rate, so
the Marks who needed cash kept offering more and more and more until the Fed arrived with help. (pleasant mallet percussion music) When the Fed announced its
surprise repo operations, people wanted to know, why did the Karens suddenly stop lending? Experts point to two financial deadlines that sapped cash out of the
system on the same night, causing a crunch.
(gears snapping) September 16th was the cut-off for banks to submit their quarterly tax payments, so a lot of money that
they might usually lend in the repo market was being
sucked out of their accounts and deposited into the Treasury. September 16th was also the day that $78 billion of Treasury
debt was scheduled to settle, which just means that
another chunk of cash was being turned into
securities on that day, too. Now, some banks said the
crunch was compounded by another factor, a rule put in place after the financial crisis
to keep banks solvent. The rule, which is called
Liquidity Coverage Ratio, or LCR, requires banks to keep a
certain amount of reserves or cash on hold at the Fed at
all times, among other things. The idea was to improve the
banking sector’s ability to absorb shocks arising from
financial and economic stress. You can see it on this chart. Since the crisis, banks have stockpiled cash
in their reserve accounts. There argument is that
keeping these funds on hold makes it harder for them
to lend out cash on a dime when money gets tight. Now, for the Fed’s part,
Chairman Jerome Powell dismissed the possibility
of revisiting those rules. – If we concluded that we
needed to raise the level of required reserves for
banks to meet the LCR, we’d probably raise the level of reserves rather than lower the LCR. – [Narrator] What he’s
saying is that the Fed would rather provide
the extra funds itself than lower those liquidity
requirements for banks, and since that press conference, the Fed’s done just that. In October, it announced
it would start buying short-term treasury debt
at $60 billion a month and continue through
at least June of 2020, which means there’s
gonna be money to borrow even if the Karens stop lending again. Its aim is to boost reserves, allowing banks to stay liquid
without violating the rule, and in doing so, to keep the wheels of the financial system spinning.

How Negative Yields Work | WSJ


(gentle music) – [Narrator] This chart shows the yield on the German government’s 30-year bonds over the past few months. You’ll notice something unusual
happened in early August. The yield dropped below zero. A yield is the return
investors receive on a bond. A negative yield is the
opposite, meaning investors are receiving less money
than they originally paid. Negative yields are a
relatively new feature in the world’s bond markets,
but they’re appearing with increasing frequency. Globally, around $16
trillion worth of bonds currently carry a negative yield. Bonds are one of the safest
investments on the market. They’re staples of many
investment portfolios, from pension funds to retirement accounts. Investors like them because
of their reliable returns. So how did some bond yields go negative? And why would investors
keep putting their money in assets with negative returns? To understand negative yields, you need to understand how bonds work. Bonds are a form of debt that governments and companies issue for
various lengths of time. A bond’s lifespan can
range from a few weeks to a few decades. Bond issuers make
regular interest payments to bond holders over the asset’s lifespan. This is known as the coupon rate. But bonds are often bought and
sold on the secondary market. Their prices fluctuate, which affects what an investor can expect to earn. The yield is a calculation
of how much an investor can expect to make from
holding onto a bond bought at a particular price for a
particular length of time. The yield of a bond is
inversely related to its price. High demand in the bond
market drives up prices and drives down yields. This is largely why yields are negative. Right now, the bond market is experiencing unusually high demand. There are a few reasons for this. The first is that investors have grown increasingly concerned
about the lack of growth in the global economy. Amid low inflation, political uncertainty, and trade disputes, investors
are putting more money into safer assets, like bonds. The second is that several
central banks around the world have set their interest rates below zero. Central banks are banks
for commercial banks. So when they set negative
interest rates, commercial banks must pay them for the privilege
of holding their money. This incentivizes commercial banks to lower the interest
rates they charge to. So far, commercial banks
have been reluctant to pass that negative
rate to average consumers, but some have passed on
the cost to companies and large institutional investors. Negative rates give investors
an incentive to buy bonds rather than park their money at a bank. This drives up demand. These factors have
pushed bond prices higher and driven down yields, so
much so that they are now in negative territory and,
in some cases, even below the negative rates set by central banks. So why would investors
continue to buy bonds with negative yields? Well, if demand continues
to rise, buying now means potentially selling bonds
later at a higher price. This can help offset
losses in the short term, but the long-term implications
of negative yields could mean lower returns on pensions
and retirement accounts, meaning workers might have
to save more and work longer. Negative bond yields, and
negative interest rates in general, are viewed
as a short-term remedy to get economies moving. But with the footprint of
negative rates getting deeper and wider, investors worry
that they may be less of a temporary fix, and
more of a permanent fixture in the market. (gentle music)

Is economic growth fuelling climate change? | Crunched


So, Federica, what has
been bugging you this week. Well, I thought we
could stick our teeth into this debate about
whether economic growth is the enemy of the environment. All right. There was this video that caught
our attention, that went viral. We have to overthrow
this system which is eating the planet
with perpetual growth. I mean, since when was
GDP a sensible measure of human welfare. And yet everything that
governments want to do is to try to boost GDP. Now people like the OECD or
the World Bank are saying, oh, we’re not asking
for a lot of growth. Just 3 per cent a year. That means doubling in 24 years. Yeah, we’re bursting through
all the environmental boundaries and screwing the planet already. You want to double it? Double all that. Double it again. Keep doubling it? It’s madness. We’ve got to find a better
way of measuring human welfare than perpetual growth. You know, it’s a
very striking video. He makes a very
strong argument there. But I think there’s
a difficulty, there’s a risk here that
we say that economic growth and sustainability
and environment are mutually exclusive. That we’re sort of saying
you can’t reduce emissions while having economic growth. But there’s a really
interesting chart I saw the other day which is
showing how economic growth has changed but also how the
energy intensity of that growth has changed. So how much energy it takes to
produce a given amount of GDP. We’re starting from 1980
and going through to 2017. And if we normalise
all the numbers, so whatever the figure
was in the year 2000 becomes a value of 100. And GDP globally
has come through, and it is now double what
it was, global GDP, in 2000. However the carbon
intensity of that GDP has been gradually decreasing. So the amount of carbon dioxide
and the amount of energy that is used to
create economic growth has reduced, and that
sort of pulled down the total fossil fuel emissions. So fossil fuel usage
has risen by much less than economic growth because
the energy intensity of GDP has improved. If this energy intensity,
the efficiency at which we grow the economy
continue to improve, you could get to a point
where we have growth, but we are still
cutting emissions. So I just think we
shouldn’t throw out the baby with the bathwater
and say economic growth is now suddenly a bad thing. This chart purports to show
that fossil fuels and energy intensity, that
the pace of growth, of these elements
of economic growth has either slowed or
is actually declining. So everything is rosy. However, I think that it isn’t. If we look at oil
consumption, for example. OK. So this is global oil
consumption from 1994 to 2019. We’ve now hit 100m barrels
per day being consumed. So clearly, if we want
to save the environment we can’t carry on like this. Where I disagree with George
Mombiot is that I don’t think it’s necessary that we start
with overturning the system. I think we should go back to
how the system is measured. OK. And I’m not the only
one who thinks that. There is a massive
debate amongst economists in terms of how we
measure economic growth. And some have come up with
this idea of green GDP. So this is
environmentally-friendly economic growth,
and it all goes back to the idea that
gross domestic product and how we measure
it is very faulty. Let’s say, for example,
when often in our articles we’ll cover quarterly
growth and we’ll see the economy this quarter is
growing by 0.2 or 0.4 per cent. This decimal point
gives us the idea that it’s a very accurate
and precise number. But there’s a lot of uncertainty
behind this number, actually. Let’s say there’s
a natural disaster. Because of all the
reconstruction efforts that are needed to
rebuild a society after a natural disaster, that
also counts as economic growth. So even though
we’ve lost assets, there’s been destruction,
by definition, that’s still counting towards
economic growth to the economy. The output is still there, yeah. So statisticians have
come up with a new measure for economic growth that is
more environmentally-friendly, that discounts waste, social
disharmony, and so on and so forth. And that’s actually
been pioneered by some Chinese statisticians,
and they come up with a formula for green GDP. OK now, green GDP,
to me, I mean, it sounds conceptually great,
but how does that even work? How do you calculate it? Are they going around
counting trees being planted, and polar bears being saved? How do you calculate green GDP? And what kind of monetary value
can you assign to a river, for example. I mean, some people have tried
to do that, but let’s not get stuck into this. I’ll show you the
formula for green GDP. It’s actually kind of simple. Almost too simple, which
will make us a bit sceptical. So basically, it’s… we’ll just start from
GDP as we measure it now and we subtract from that CO2
emissions, waste, and the money that we could have
made had we converted that waste into electricity,
and we remove also the natural resources
that we depleted when creating this economic growth. Cool. And they’ve applied this
to a couple of countries to see what difference the
real GDP and the green GDP will make to economic growth. So I guess this will show us
which countries are getting the sort of dirtiest
economic growth, and which have got sort of the
cleanest growth, as you were. Like the difference
between those numbers. Yeah, I suppose so. And let’s try and make
a chart with something that I used to use
in elementary school. This is in Italy. Excellent. Number blocks. They just extracted GDP
growth figures from 2014 from a bunch of countries, and
they looked at those measures for economic growth. And then applied that
green GDP formula. Let’s have a look at
a couple of countries. Now we were going through
this, and we thought Mexico was quite interesting. So Mexico’s conventional
GDP growth rate in 2014 was 2.87, so about 3 per cent. About 3 per cent. But it’s green GDP growth
in that same period was actually a
contraction of 3 per cent. Yeah. So in fact, it’s negative. So the economy contracted if we
consider waste, CO2 emissions, environmental depletion. Mexico’s economy contracted. So we’re sort of
saying they were using a lot of the fossil fuels. They were creating
a lot of waste, and they were probably
depleting natural resources to produce that growth. Now let’s look at China. China grew by 9 per cent. Actual green GDP… Dropped to 6 per cent. Now let’s see. 1, 2, 3, 4, 5, 6. So it came in from 9 to 6 when
you factor in those resources. Let’s have a look at
the US and the UK. So the US was going to 4 per
cent and came in to 3 per cent. UK 10 per cent growth in 2014. Let’s do it. I don’t believe this. OK, but whatever. This is 10 and then green
GDP, it’s 9 per cent. So to be clear here,
we have the green GDP, it doesn’t actually mean that
our environmental resources have grown. This is just a more
eco-friendly way of measuring economic
growth in itself. Now separately, there are
efforts to actually calculate what is called our natural
capital, our trees, and our fish, and so
on, but it’s still at a very primordial stage. And so I guess to bring this
back to what George Mombiot was saying in the
video at the start, the problem we have today is
that economic growth, as it’s currently measured,
is in tension with environmental
conservation, and generally when economies grow
part of that growth is coming from
resource depletion, from damaging the planet. If economists, natural
accountants, as it were, all of these different bodies
can come together and create a new measure, a more
ecologically-friendly measure of green GDP, then we
could get to a stage where countries
could be targeting that green GDP in their growth. Could be growing, and
yet not at the same time damaging the planet. So effectively, the
ball now is in the court of the beancounters. It’s up to them. We need a robust measure
that all countries can agree is a precise and
useful measure, but one that includes, takes into account of
the value of natural resources and waste in fossil fuels. Let’s see what they can do.

How Horsepower Is Measured In Cars


This car is spinningup to a whopping 8,200
revolutions per minute.At 8,200 rpm, it screams.It’s a Ford Mustang GT350,and though its wheels are spinningat what should carry the car to 140 mph,it’s obviously not moving anywhere.But what you’re seeing
is an important testthat helps us understand
what the car is capable ofand, in this case, could
even help Ford decidehow much they could sell it for.It’s impossible to watch a car commercialwithout seeing torque
and horsepower numbers.Commercial: Bred to deliver 412 horsepowerand 390 foot-pounds of torque.Narrator: Car manufacturers
would have you believehigher horsepower and torquetranslate to “faster” and “stronger.”That’s not exactly true.What those two numbers do, more precisely,is give us an idea of
what a car is capable ofin different road situationswithout having to see the car in person.Before we examine how horsepower
and torque are measured,let’s break down what they are.Simply put, torque is
the capacity of a forceto twist something.Think of a torque wrench, where you fitthe mouth of the wrench to a boltand push down on the handle.The wrench’s ability to
turn the bolt is torque.The same exact twisting
action is happeninginside of a car engine, except, this time,instead of your hand and arm
pushing down on the handle,tiny explosions happen
inside each engine cylinder,pushing a piston down that
causes the crankshaft to rotate.No hands required!Torque!The harder this piston
pushes on the crankshaft,the harder the crankshaft spins,the more total energy a
car’s engine puts out.So, to recap, in the case of our car,torque is how much force
an engine produces.How does horsepower relate?Well, if torque is how much
force an engine produces,horsepower is how quickly
it can produce that force.So, we have a bunch of horsepower.What can we do with it?If we have, say, 5 horsepower,we’ll have enough to
move a 2,750-pound carone foot in one second,given weight and power
are the only two factors.If we had a heavier car, we would needmore horsepower to move it one foot.So, how exactly does one
measure torque and horsepower?Well, engineers use a
device called a dynamometer,of which there are a couple of types.This dynamometer, called
a chassis dynamometer,is a treadmill of sorts for cars.Here, the car’s wheels sit on a rollerthat lets the wheels spin without causingthe car to go anywhere.Various amounts of weight, or load,are applied to the car using straps.With the car chained
down, an engineer pusheson the gas pedal to see
how the car interactswith each load at a different rpm.The dynamometer outputs a
chart that looks like this.On it, two lines are plotted:a line for torque and
another for horsepower.Peak torque is where the
engine produced the most force.Peak horsepower is where
the engine producedthe most force the most quickly.The figures for torque and horsepowerthat are put on dealership stat sheetsand in commercials are, generally,the numbers at the peak
of each of these lines.While big torque and horsepower numberson a stat sheet surely are impressive,they only clue a new
car buyer into a coupleof many facets of a car’s personality.Those numbers, though, are
still the best ones we’ve gotof telling how capable a car really is.

Fastest Street-Legal Cars Of The Decade


Aj Caldwell: It’s a great
time to be a car enthusiast. Modern times have brought us the mind-boggling performance
of electric vehicles and some updates to some old favorites. Speed records have been
broken again and again as new technology fuels
automakers’ competition for the title of fastest car. So, as the 2010s near an end, here are the 10 fastest street-legal cars of the past decade. Coming in at the No.
10 spot is a car brand most people haven’t heard of. Noble is a boutique British automaker known to engineer some real track beast. The Noble M600 soars to
a top speed of 225 mph from a 650-horsepower Yamaha V8 engine. Pagani is a popular car brand
among high-end collectors. Its offerings are designed to be true pieces of art on wheels. But the Huayra doesn’t just look good; it’s seriously fast. Engineers tuned a
turbocharged Mercedes AMG V12 to push out 700 horses,
consequently giving the Huayra a staggering top speed of 230 mph. Zenvo didn’t hit the car scene until 2008 but gained a lot of attention by producing a 1,163-horsepower prototype
right out the gate. A few years later, that prototype became the Zenvo TS1. Its 5.8-liter V8 with twin superchargers propel it to 233 mph. At No. 7 on the list, we
have our first hybrid. Swedish automaker Koenigsegg has produced some of the most impressive supercars since it started in 1994, one of them being the Regera. The most eye-catching feature is Autoskin, but the Regera is still
all about performance. It combines three electric motors with the 5-liter twin-turbo V8
to make 1,500 horsepower, pushing the Regera to an
electronically limited top speed of 250 mph. Not to be confused with the
previously mentioned Regera is another entry from
Koenigsegg, the Agera R. It’s a limited-run supercar with multiple acceleration records, one of them being the
fastest 0-to-200 mph time, at 17.68 seconds. The 1,140-horsepower
engine runs on biofuel and pushes the car to 260 mph. Bugatti is one of the most
recognizable supercar brands, and for good reason. Its cars not only push
the limits of automobiles, but they’re also beautifully
handcrafted machines. Its famous W16 engine is a
quad-turbocharged monster, making 1,500 horsepower. Placed inside the Chiron, it launches the supercar to 261 mph. But there’s plenty more power after that, as it’s capped with an electronic limiter. Beating Bugatti is another Bugatti. The Veyron Super Sport
16.4 set the world record for fastest production car with a top speed of 267.857 mph, though the production version
was electronically limited to 258 mph. The world record shows just how powerful its 1,200-horsepower engine really is. Hennessey Performance Engineering
is a car-tuning company that specializes in modifying
sports cars and supercars. But the Venom GT is a car of its own. Though it’s based off
the Lotus Exige platform, the engineering is all Hennessey. The Venom GT broke Bugatti’s
world record in 2014 with a top speed of 270.49 mph. Building off the success of the Agera R, Koenigsegg introduced
the Agera RS in 2017. It went on to set the world record for fastest production car with a top speed of 277.87 mph. Though it has the same
5-liter twin-turbocharged V8, it makes 1,350 horsepower,
210 more than its predecessor. The owners of each of
the 25 Agera RS vehicles worked with Koenigsegg to
personalize every detail, including color, stitching, power output, and even nicknaming the
car, so no two are alike. Taking the No. 1 spot is
the Bugatti Chiron…again. This time, with a modified
version that’s longer, more aerodynamic, and clearly doesn’t have the electronic limiter. It’s still technically a
preproduction prototype, but it set the world
record for fastest supercar with a top speed of 304.77 mph in September of 2019. It’s the first car to
break the 300-mph barrier, a feat manufacturers have
been trying to achieve with production cars for years. So, there you have it. The fastest street-legal
cars of the decade. The 2010s brought us 300 mph; we can only imagine what
the next decade will bring. From a V8 twin-turbocharged
engine, a 1,200, I…what? [laughs] Cameraman: From a V8 twin turbocharged…