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Speaker 1: Bloomberg Audio Studios. Podcasts.
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Speaker 2: Radio.
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Speaker 3: News.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 5: Let's get to some of those tech earnings, Oracle and Adobe. We got an analyst who follows those companies, so that makes it very easy.
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Speaker 1: Anurag Rana.
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Speaker 5: He is a senior technology analyst for Bloomberg Intelligence. He's out there in Chicago. Anurag, let's start with Oracle here because, man, I saw their cloud business had a great number, and that's what I thought people were focusing on. The stock traded up 9% at the open, but it's kind of giving it back. What's going on there?
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Speaker 6: Yeah, to be honest, it's a bit confusing because we really like the numbers.
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Speaker 7: I mean, I think the.
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Speaker 6: Cloud business was improving even more than what– the street was expecting and that's what had happened. I think the guidance for next quarter is also conservative. They should be able to beat that cloud numbers as well. I think what's happening over here is there is a little bit of uncertainty about data center expansion. you know, it's probably that's more macro, not related just to Oracle. And I think that could be one factor. The one thing that I liked about the earnings was that they actually said they're not going to have to raise CapEx because that has been my biggest worry when it relates to Oracle is that do.
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Speaker 7: They have to keep on increasing CapEx?
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Speaker 6: One of the things they're doing is they are asking customers to think about it, bring your own chips or bring your own hardware.
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Speaker 7: This way, they don't have to foot the bill ahead of time.
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Speaker 6: So It's really doing these arrangements are helping them out, but I think it's more the macro related about data center expansion in general.
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Speaker 2: So our Bloomberg News story written by Brody Ford points out as well that gross margin shrank to 61%. And sequentially, that's a big drop because it was 66.3% in the previous quarter. Does that worry you, Anurag?
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Speaker 7: Well, we have been modeling that for a while.
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Speaker 6: I mean, it is normally a natural, whenever you have a brand new business starting in the infancy, it will have very low gross margins. But imagine this, they missed out massively on gross margins. I mean, compared to last year, I shouldn't say miss, but the gross margins dropped, but their operating margins improved. They have been cutting costs so well that they are actually showing, you know, very decent operating margin. So I personally would not worry about it because you're adding a lot of gross profit dollars to the company, which we would not get otherwise.
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Speaker 5: All right, Anurag, we got to get the story of the day here. Microsoft here, Bloomberg's got a green B, which means they got exclusive reporting. Brody Ford, Matthew Day, Microsoft plans to more than triple It's data center capacity going from 38 gigawatts.
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Speaker 1: I have no idea what a gigawatt is, but it sounds big.
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Speaker 5: Up to, you know, I mean, it's going to be up from like 12 gigawatts now.
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Speaker 1: What is going on there? Who's paying for that?
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Speaker 7: I mean, they are paying for that.
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Speaker 6: I mean, they're spending over close to $ 200 billion a year trying to do that. And in fact, you know, the gentleman they mentioned in the report, we had him on our podcast six months ago. And these guys really are changing the infrastructure of all of Microsoft data centers because the way you do GPU kind of computing or AI computing is very different than what you would do on a CPU-based or the older cloud-based. I mean, they have some really impressive data centers that are going on live.
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Speaker 7: There is one in Texas.
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Speaker 6: There is one in um wisconsin so they've done a very good job of managing it and right now whatever they actually can't do it in-house they are outsourcing it to neo clouds at this point so uh you know frankly speaking microsoft is in the middle of this is one of the biggest beneficiaries of ai um so you you know and and on top of that you know they will still be free cash flow positive.
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Speaker 7: This year Okay.
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Speaker 2: I mean, those are ambitious plans, but will they actually be able to do that given there's a lot of public opposition to data centers in local communities? I mean, it's one thing to say that this is what they want to do. Can it get done in the timeframe they want?
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Speaker 6: I think that is the single biggest, you could say, obstacle right now, or the overhang, and not just Microsoft, but you can extend that to everybody, whether it's AWS, Google, Oracle, or the Neoclouds, is do they get the permits to be able to do it? Will they have the power? And so far, we have not seen any major, I would say, there have been delays, but not any massive delays. But frankly speaking, the opposition we are seeing right now, I would say across the board, not just with the Democrats, but Republicans as well, I think this is going to be a bigger.
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Speaker 7: Issue that plays out over the next six to 12 months.
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Speaker 6: And that is one thing I could, I think that is one thing that could, you know, soften the growth rate of some of these AI labs, as well as, you know, I would say just the entire AI trade in general.
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Speaker 1: So is this in the numbers?
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Speaker 5: I'm looking at the, I see CapEx ramping up on the Bloomberg terminal for Microsoft, but is.
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Speaker 1: This kind of gigawatt expenditures? Is that in the numbers?
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Speaker 6: I mean, right now, I think you have because you're looking at this year and next year. Almost everybody is increasing CapEx next year. In our own BI's projected data center model, we have CapEx going over the next few years. We are not tapering it down at this point because you have more backlog revenue on the balance sheets than they have the capacity.
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Speaker 7: To fulfill it.
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Speaker 6: And the math is, you know, one gigawatt costs somewhere around, depending on what kind of data center you're building, $ 40 to $ 60 billion right now of an NVIDIA data center.
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Speaker 7: Are you kidding?
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Speaker 1: I don't know what these guys are doing. Big numbers either way.
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Speaker 7: Big numbers. By the way, half of that goes to NVIDIA. Just think about it this way.
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Speaker 6: Stay with us.
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Speaker 2: More from Bloomberg Intelligence coming up after this.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 5: I'll tell you, when I first worked down in lower Manhattan in the mid-' 80s, it was a ghost town. Man, at 5 o'clock, everybody just kind of bailed.
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Speaker 1: Maybe you had the South Street Seaport, but that was about it if you.
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Speaker 7: Wanted some action.
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Speaker 1: That was on the fringes of downtown, yeah.
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Speaker 3: Yes, exactly.
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Speaker 1: Now, that was good.
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Speaker 5: We did some good stuff down there at South Street Seaport after work.
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Speaker 1: But now it's just ripping down there.
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Speaker 5: They did a phenomenal job renovating and rejuvenating the entire town. southern tip of manhattan post 9-11 and we write about it on bloomberg news had a great great story amanda gordon joins us here she's a reporter for the wealth team at the bloomberg news joining us here in our studio amanda talk to us about what's going on in lower manhattan because boy post 9-11 it's not just that the world trade center site it's just kind of lower manhattan in general has kind of been rejuvenated what's going on down.
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Speaker 3: Exactly As this morning, as those names are being read, we think of a void that was created. And it really was one, to your point, that already existed. People already felt that the uses of this downtown area were not vital before 9-11. And so that void that was created that day sort of spurred so many New Yorkers to get on board to think about how to reinvent. And I just think it's so important reporting the story to note that those who played a part in conversions of those office buildings where you worked into residential, of opening restaurants when it was a leap of faith, of reopening businesses after 9-11, when people were scared to be down there, All of that, there's just a sense of pride now in what it has become, but also very much indicative of a New York spirit of resilience and reinvention. This was the land that George Washington and Alexander Hamilton also tread. And now the young people, the tech companies, Spotify, Uber, Amazon, that are down there and making things happen in the New York way is a sign that we always reinvent ourselves.
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Speaker 1: That was so elegantly put, Amanda.
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Speaker 2: And I heard you about Spotify and some of the other companies that have really sprouted up and opened offices there. That gets to the point that Paul said basically it was the home of Wall Street and it was the financial district, but it's so much more than that now.
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Speaker 1: I mean, finance is not even the.
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Speaker 2: It's still a big part of downtown Manhattan and lower Manhattan, but it's not dominant the way it once was.
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Speaker 7: That's exactly true.
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Speaker 3: About a quarter of the office tenants in lower Manhattan are finance-related. Tech, AI, design, a lot of creative industries have come in. And it's a place that is not just to go to the office. It's a place where people live and work. I talked to one 28-year-old who said that he chose the building that he did because the gym was open 24-7. And that was the critical thing. So what happened is that pre-9-11 and then afterward... when the responsibility was to make sure that we could remember and honor those lives that were lost, there was just a lot of energy and diversification that took place.
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Speaker 5: My 30-year-old daughter, she tells me, I'm going to go meet some friends in Phi Di.
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Speaker 1: I'm like, what? Phi Di? What is the financial district?
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Speaker 5: You mean Wall Street? Is that what you're trying to tell me? Apparently, it's a place young folks are going to kind of meet for drinks and dinner. And I'm like, Dude, you don't know what you're talking about, but all right.
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Speaker 7: That's the future.
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Speaker 1: That's what's going on down there.
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Speaker 3: Let's not forget the bones were there. Charm, gargoyles on the buildings, old buildings that were not all torn down, not a grid. So people who live down there, you know, cite these elements of character and authenticity that they feel that they don't see anymore in the rest of New York. And then the transit.
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Speaker 7: Being able to get to Brooklyn. I'll tell you, the Oculus.
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Speaker 3: Anywhere.
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Speaker 5: That thing, that Oculus Center down there. I mean, if you haven't been to that, that alone is a reason to go to Lower Manhattan. The Oculus, it is a transportation hub.
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Speaker 1: I mean, you can get anywhere. I think like anywhere in the world from there. I think that's a really good point.
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Speaker 2: The fact that you can get anywhere and the transportation options, the public transportation options there are just phenomenal.
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Speaker 1: And that was always the case, wasn't it?
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Speaker 3: It was, but the Oculus, as you mentioned, the remaking of the Fulton Street Station, everything was remade and made much easier to use, much brighter. And that's an amenity that cannot be beat for New Yorkers. Some get to walk to work and some zip up to Midtown to their office.
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Speaker 2: You spoke with Bill Rudin, who's co-executive chairman of a real estate.
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Speaker 7: Company, Rudin?
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Speaker 1: Yeah.
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Speaker 2: And he was one of the key players who helped diversify the area before 9-11.
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Speaker 1: What did he tell you?
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Speaker 3: Well, you know, the family has played such a role at these critical times in my lifetime. In the 70s, his father helped New York through fiscal crisis. And then in this moment, in 1990, it was a Valentine's Day massacre, he told me, when Drexel Burnham went bankrupt. And they occupied most of the building that he had built initially for Goldman Sachs. And he talked about mothballing it until the market turned around. And I think that shows you how bleak the outlook was. But what happened is that, as in the 70s, business leaders got together and really decided to put their brains to this idea of diversification. And in that building, 55 Broad Street, they wired it.
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Speaker 1: They put in broadband, fiber optics.
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Speaker 3: The New York New Media Association opened their first office there, and it became sort of the initial hub and promotion of New York as a Silicon Alley, sort of the downtown anchor of that new corridor, which we've seen flourish so much. And so... He laid down those roots, and I think it's very moving in the story that he said, you know, it's taken these 25 years to get recognized for that early work.
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Speaker 5: Very good stuff. 25 Broad Street was one of my first offices at Payne Webber. And that was just when computers were coming in. We didn't have enough outlets to plug in the computers because the building was built in like the 1800s.
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Speaker 1: They weren't really thinking about computers anymore.
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Speaker 3: I worked as a journalist a few blocks north. Our offices opened in 2002. And there were days when the phones didn't work because things were being rebuilt and it was chaos.
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Speaker 8: And you just had to go with it.
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Speaker 7: Stay with us.
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Speaker 4: More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 5: Jonathan Schanzer, he's an executive director at the Foundation for Defense of Democracies based down there in Washington, D.C.
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Speaker 7: D.C.
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Speaker 5: Jonathan, thanks so much for joining us here. As we remember, 9-11, 25 years on. What are some of the key lessons from just a geopolitical sense, an anti-terrorism sense? What are some of the lessons that you think this country has taken?
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Speaker 1: Maybe what we still need to do.
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Speaker 8: Yeah, first of all, thank you for having me. And it's obviously meaningful for me today to be on this program. This is an event that obviously shaped American history over the last 25 years and I think continues to. I think the first takeaway here is that we needed to take these threats seriously when they first began to materialize. We saw the 1993 World Trade Center bombing. We saw the 1998 Twin Embassy bombings, the 2000 attack on the USS Cullen. We did not put the pieces together that an enemy had waged or has declared war on us. And we just kept waiting for the attacks to get worse over time. I think that when you start to see an enemy declare war and to follow up on it, that you need to take action. And I would argue that there were two presidents in a row that didn't take the threat seriously enough. The first was Bill Clinton.
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Speaker 1: Then, of course, George W.
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Speaker 8: Bush didn't move quickly enough and then had to move more quickly than he ever thought he would need to. So taking those threats seriously as they emerge, I'd argue we didn't even learn that when ISIS emerged. We were still thinking that it was a minor threat This is a consistent theme in American history. But I think the other thing that we still struggle with to this day is just getting our heads wrapped around the ideology of jihadism or militant Islam. It's a minority interpretation of the faith. There's no question. But it is still, after all these years, something that we are having a hard time getting our heads wrapped around. It is playing a role right now in the Middle East conflicts that we're grappling with, all the different Iranian proxy groups, not to mention Iran itself. I'm looking at the Houthis right now as they look to expand their war in the Middle East. We still don't seem to understand how to defeat these groups. Admittedly, they don't want to surrender, but that's part of the problem. This is a martyrdom complex, a sense that they need to continue to fight to the finish. And we have not adjusted our way of war to figuring out how to defeat this problem long term. And my sense is we're going to have to continue to grapple with this, even as we pivot into great power competition with China and Russia. I don't think that these smaller conflicts are going to go away. They're going to become potentially even more of an irritant.
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Speaker 2: Jonathan, you previously worked as a terrorism finance analyst at the Department of Treasury, where you followed and froze the funding of Hamas and al-Qaeda. We now have different forms of funding that is less traceable. Crypto, for instance. You have a gray market, a black market. How does that complicate our efforts to follow the money, so to speak?
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Speaker 8: Oh, it is absolutely more complicated than it was when I was doing this, you know, some 20 years ago. Back then, it was much more simple, right? I mean, you know, people were still dealing in cash, which is, I think, still the preferred way of terrorists to move money. But yes, now we have various means of crypto trading. And it's a lot easier in many ways to create cutouts and front companies than it was even back then, even though we've got greater tools to be able to track some of this stuff. But yes, I would argue that terrorists are getting more creative here. It's also important to understand that, you know, there are state sponsors that continue to front these terror organizations and move money on their behalf. You know, I look at China. That's one example. Russia is another. North Korea has been a perennial problem. Iran, obviously, although I think that Operation Economic Outcast is certainly constraining their ability to move money in this way. But yes, crypto is a growing problem. Crowdfunding platforms are a big problem. One of the things that I look at right now is, have we done a good enough job of purging the bad apples from just the American nonprofit sector, the 501c3s that have a license to operate here? My sense is that we've not done enough to purge. We were so good looking abroad, but I think we've kind of taken our eye off the ball on the terror finance problem here at home. That is going to be one of the things we have to address in the months and years to come.
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Speaker 1: Jonathan, do economic sanctions work.
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Speaker 8: They do, but they only work as much as you're willing to ensure that they are adhered to by all. One of the things that I've been marveling at is the success, at least so far, of this new sanctions regime that we've put in place against the Islamic Republic of Iran. It's actually not new at all. There's nothing new or innovative about what we're doing. We're just simply making sure that these sanctions are adhered to in jurisdictions that were ignoring our sanctions guidance. So I think right now about the UAE, a friend of the United States that continued to allow for Iranian assets to move through their banks and through their businesses, the Turks, NATO allies, that had banks that were openly operating on behalf of the Islamic Republic. In fact, one bank moved $ 20 billion in cash and gold during the height of our effort to sanction the nuclear program of Iran back in 2012 to 2015. Iraq is another jurisdiction that we need to be aware of. Malaysia, Indonesia. These are all areas and countries where we have alliances. And we have an understanding with these governments, but they have not been enforcing our sanctions. So now we're really starting to button all of this down. And we've made it serious that nobody gets a free pass. That's great. But why did it take so long? Why can't we make these sanctions work the first time, bankrupt our enemies, force them to come to the table and get the capitulation that we were looking for?
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Speaker 4: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 1: Bloomberg Audio Studios. Podcasts.
00:00:05
Speaker 2: Radio.
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Speaker 3: News.
00:00:09
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 5: Let's get to some of those tech earnings, Oracle and Adobe. We got an analyst who follows those companies, so that makes it very easy.
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Speaker 1: Anurag Rana.
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Speaker 5: He is a senior technology analyst for Bloomberg Intelligence. He's out there in Chicago. Anurag, let's start with Oracle here because, man, I saw their cloud business had a great number, and that's what I thought people were focusing on. The stock traded up 9% at the open, but it's kind of giving it back. What's going on there?
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Speaker 6: Yeah, to be honest, it's a bit confusing because we really like the numbers.
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Speaker 7: I mean, I think the.
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Speaker 6: Cloud business was improving even more than what– the street was expecting and that's what had happened. I think the guidance for next quarter is also conservative. They should be able to beat that cloud numbers as well. I think what's happening over here is there is a little bit of uncertainty about data center expansion. you know, it's probably that's more macro, not related just to Oracle. And I think that could be one factor. The one thing that I liked about the earnings was that they actually said they're not going to have to raise CapEx because that has been my biggest worry when it relates to Oracle is that do.
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Speaker 7: They have to keep on increasing CapEx?
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Speaker 6: One of the things they're doing is they are asking customers to think about it, bring your own chips or bring your own hardware.
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Speaker 7: This way, they don't have to foot the bill ahead of time.
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Speaker 6: So It's really doing these arrangements are helping them out, but I think it's more the macro related about data center expansion in general.
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Speaker 2: So our Bloomberg News story written by Brody Ford points out as well that gross margin shrank to 61%. And sequentially, that's a big drop because it was 66.3% in the previous quarter. Does that worry you, Anurag?
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Speaker 7: Well, we have been modeling that for a while.
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Speaker 6: I mean, it is normally a natural, whenever you have a brand new business starting in the infancy, it will have very low gross margins. But imagine this, they missed out massively on gross margins. I mean, compared to last year, I shouldn't say miss, but the gross margins dropped, but their operating margins improved. They have been cutting costs so well that they are actually showing, you know, very decent operating margin. So I personally would not worry about it because you're adding a lot of gross profit dollars to the company, which we would not get otherwise.
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Speaker 5: All right, Anurag, we got to get the story of the day here. Microsoft here, Bloomberg's got a green B, which means they got exclusive reporting. Brody Ford, Matthew Day, Microsoft plans to more than triple It's data center capacity going from 38 gigawatts.
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Speaker 1: I have no idea what a gigawatt is, but it sounds big.
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Speaker 5: Up to, you know, I mean, it's going to be up from like 12 gigawatts now.
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Speaker 1: What is going on there? Who's paying for that?
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Speaker 7: I mean, they are paying for that.
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Speaker 6: I mean, they're spending over close to $ 200 billion a year trying to do that. And in fact, you know, the gentleman they mentioned in the report, we had him on our podcast six months ago. And these guys really are changing the infrastructure of all of Microsoft data centers because the way you do GPU kind of computing or AI computing is very different than what you would do on a CPU-based or the older cloud-based. I mean, they have some really impressive data centers that are going on live.
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Speaker 7: There is one in Texas.
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Speaker 6: There is one in um wisconsin so they've done a very good job of managing it and right now whatever they actually can't do it in-house they are outsourcing it to neo clouds at this point so uh you know frankly speaking microsoft is in the middle of this is one of the biggest beneficiaries of ai um so you you know and and on top of that you know they will still be free cash flow positive.
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Speaker 7: This year Okay.
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Speaker 2: I mean, those are ambitious plans, but will they actually be able to do that given there's a lot of public opposition to data centers in local communities? I mean, it's one thing to say that this is what they want to do. Can it get done in the timeframe they want?
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Speaker 6: I think that is the single biggest, you could say, obstacle right now, or the overhang, and not just Microsoft, but you can extend that to everybody, whether it's AWS, Google, Oracle, or the Neoclouds, is do they get the permits to be able to do it? Will they have the power? And so far, we have not seen any major, I would say, there have been delays, but not any massive delays. But frankly speaking, the opposition we are seeing right now, I would say across the board, not just with the Democrats, but Republicans as well, I think this is going to be a bigger.
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Speaker 7: Issue that plays out over the next six to 12 months.
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Speaker 6: And that is one thing I could, I think that is one thing that could, you know, soften the growth rate of some of these AI labs, as well as, you know, I would say just the entire AI trade in general.
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Speaker 1: So is this in the numbers?
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Speaker 5: I'm looking at the, I see CapEx ramping up on the Bloomberg terminal for Microsoft, but is.
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Speaker 1: This kind of gigawatt expenditures? Is that in the numbers?
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Speaker 6: I mean, right now, I think you have because you're looking at this year and next year. Almost everybody is increasing CapEx next year. In our own BI's projected data center model, we have CapEx going over the next few years. We are not tapering it down at this point because you have more backlog revenue on the balance sheets than they have the capacity.
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Speaker 7: To fulfill it.
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Speaker 6: And the math is, you know, one gigawatt costs somewhere around, depending on what kind of data center you're building, $ 40 to $ 60 billion right now of an NVIDIA data center.
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Speaker 7: Are you kidding?
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Speaker 1: I don't know what these guys are doing. Big numbers either way.
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Speaker 7: Big numbers. By the way, half of that goes to NVIDIA. Just think about it this way.
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Speaker 6: Stay with us.
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Speaker 2: More from Bloomberg Intelligence coming up after this.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:06:06
Speaker 5: I'll tell you, when I first worked down in lower Manhattan in the mid-' 80s, it was a ghost town. Man, at 5 o'clock, everybody just kind of bailed.
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Speaker 1: Maybe you had the South Street Seaport, but that was about it if you.
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Speaker 7: Wanted some action.
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Speaker 1: That was on the fringes of downtown, yeah.
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Speaker 3: Yes, exactly.
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Speaker 1: Now, that was good.
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Speaker 5: We did some good stuff down there at South Street Seaport after work.
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Speaker 1: But now it's just ripping down there.
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Speaker 5: They did a phenomenal job renovating and rejuvenating the entire town. southern tip of manhattan post 9-11 and we write about it on bloomberg news had a great great story amanda gordon joins us here she's a reporter for the wealth team at the bloomberg news joining us here in our studio amanda talk to us about what's going on in lower manhattan because boy post 9-11 it's not just that the world trade center site it's just kind of lower manhattan in general has kind of been rejuvenated what's going on down.
00:06:50
Speaker 3: Exactly As this morning, as those names are being read, we think of a void that was created. And it really was one, to your point, that already existed. People already felt that the uses of this downtown area were not vital before 9-11. And so that void that was created that day sort of spurred so many New Yorkers to get on board to think about how to reinvent. And I just think it's so important reporting the story to note that those who played a part in conversions of those office buildings where you worked into residential, of opening restaurants when it was a leap of faith, of reopening businesses after 9-11, when people were scared to be down there, All of that, there's just a sense of pride now in what it has become, but also very much indicative of a New York spirit of resilience and reinvention. This was the land that George Washington and Alexander Hamilton also tread. And now the young people, the tech companies, Spotify, Uber, Amazon, that are down there and making things happen in the New York way is a sign that we always reinvent ourselves.
00:08:11
Speaker 1: That was so elegantly put, Amanda.
00:08:14
Speaker 2: And I heard you about Spotify and some of the other companies that have really sprouted up and opened offices there. That gets to the point that Paul said basically it was the home of Wall Street and it was the financial district, but it's so much more than that now.
00:08:26
Speaker 1: I mean, finance is not even the.
00:08:28
Speaker 2: It's still a big part of downtown Manhattan and lower Manhattan, but it's not dominant the way it once was.
00:08:34
Speaker 7: That's exactly true.
00:08:35
Speaker 3: About a quarter of the office tenants in lower Manhattan are finance-related. Tech, AI, design, a lot of creative industries have come in. And it's a place that is not just to go to the office. It's a place where people live and work. I talked to one 28-year-old who said that he chose the building that he did because the gym was open 24-7. And that was the critical thing. So what happened is that pre-9-11 and then afterward... when the responsibility was to make sure that we could remember and honor those lives that were lost, there was just a lot of energy and diversification that took place.
00:09:21
Speaker 5: My 30-year-old daughter, she tells me, I'm going to go meet some friends in Phi Di.
00:09:25
Speaker 1: I'm like, what? Phi Di? What is the financial district?
00:09:29
Speaker 5: You mean Wall Street? Is that what you're trying to tell me? Apparently, it's a place young folks are going to kind of meet for drinks and dinner. And I'm like, Dude, you don't know what you're talking about, but all right.
00:09:37
Speaker 7: That's the future.
00:09:39
Speaker 1: That's what's going on down there.
00:09:40
Speaker 3: Let's not forget the bones were there. Charm, gargoyles on the buildings, old buildings that were not all torn down, not a grid. So people who live down there, you know, cite these elements of character and authenticity that they feel that they don't see anymore in the rest of New York. And then the transit.
00:10:00
Speaker 7: Being able to get to Brooklyn. I'll tell you, the Oculus.
00:10:02
Speaker 3: Anywhere.
00:10:02
Speaker 5: That thing, that Oculus Center down there. I mean, if you haven't been to that, that alone is a reason to go to Lower Manhattan. The Oculus, it is a transportation hub.
00:10:11
Speaker 1: I mean, you can get anywhere. I think like anywhere in the world from there. I think that's a really good point.
00:10:14
Speaker 2: The fact that you can get anywhere and the transportation options, the public transportation options there are just phenomenal.
00:10:20
Speaker 1: And that was always the case, wasn't it?
00:10:23
Speaker 3: It was, but the Oculus, as you mentioned, the remaking of the Fulton Street Station, everything was remade and made much easier to use, much brighter. And that's an amenity that cannot be beat for New Yorkers. Some get to walk to work and some zip up to Midtown to their office.
00:10:45
Speaker 2: You spoke with Bill Rudin, who's co-executive chairman of a real estate.
00:10:49
Speaker 7: Company, Rudin?
00:10:50
Speaker 1: Yeah.
00:10:52
Speaker 2: And he was one of the key players who helped diversify the area before 9-11.
00:10:57
Speaker 1: What did he tell you?
00:10:58
Speaker 3: Well, you know, the family has played such a role at these critical times in my lifetime. In the 70s, his father helped New York through fiscal crisis. And then in this moment, in 1990, it was a Valentine's Day massacre, he told me, when Drexel Burnham went bankrupt. And they occupied most of the building that he had built initially for Goldman Sachs. And he talked about mothballing it until the market turned around. And I think that shows you how bleak the outlook was. But what happened is that, as in the 70s, business leaders got together and really decided to put their brains to this idea of diversification. And in that building, 55 Broad Street, they wired it.
00:11:45
Speaker 1: They put in broadband, fiber optics.
00:11:47
Speaker 3: The New York New Media Association opened their first office there, and it became sort of the initial hub and promotion of New York as a Silicon Alley, sort of the downtown anchor of that new corridor, which we've seen flourish so much. And so... He laid down those roots, and I think it's very moving in the story that he said, you know, it's taken these 25 years to get recognized for that early work.
00:12:16
Speaker 5: Very good stuff. 25 Broad Street was one of my first offices at Payne Webber. And that was just when computers were coming in. We didn't have enough outlets to plug in the computers because the building was built in like the 1800s.
00:12:26
Speaker 1: They weren't really thinking about computers anymore.
00:12:29
Speaker 3: I worked as a journalist a few blocks north. Our offices opened in 2002. And there were days when the phones didn't work because things were being rebuilt and it was chaos.
00:12:39
Speaker 8: And you just had to go with it.
00:12:40
Speaker 7: Stay with us.
00:12:41
Speaker 4: More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:13:02
Speaker 5: Jonathan Schanzer, he's an executive director at the Foundation for Defense of Democracies based down there in Washington, D.C.
00:13:09
Speaker 7: D.C.
00:13:09
Speaker 5: Jonathan, thanks so much for joining us here. As we remember, 9-11, 25 years on. What are some of the key lessons from just a geopolitical sense, an anti-terrorism sense? What are some of the lessons that you think this country has taken?
00:13:26
Speaker 1: Maybe what we still need to do.
00:13:28
Speaker 8: Yeah, first of all, thank you for having me. And it's obviously meaningful for me today to be on this program. This is an event that obviously shaped American history over the last 25 years and I think continues to. I think the first takeaway here is that we needed to take these threats seriously when they first began to materialize. We saw the 1993 World Trade Center bombing. We saw the 1998 Twin Embassy bombings, the 2000 attack on the USS Cullen. We did not put the pieces together that an enemy had waged or has declared war on us. And we just kept waiting for the attacks to get worse over time. I think that when you start to see an enemy declare war and to follow up on it, that you need to take action. And I would argue that there were two presidents in a row that didn't take the threat seriously enough. The first was Bill Clinton.
00:14:23
Speaker 1: Then, of course, George W.
00:14:25
Speaker 8: Bush didn't move quickly enough and then had to move more quickly than he ever thought he would need to. So taking those threats seriously as they emerge, I'd argue we didn't even learn that when ISIS emerged. We were still thinking that it was a minor threat This is a consistent theme in American history. But I think the other thing that we still struggle with to this day is just getting our heads wrapped around the ideology of jihadism or militant Islam. It's a minority interpretation of the faith. There's no question. But it is still, after all these years, something that we are having a hard time getting our heads wrapped around. It is playing a role right now in the Middle East conflicts that we're grappling with, all the different Iranian proxy groups, not to mention Iran itself. I'm looking at the Houthis right now as they look to expand their war in the Middle East. We still don't seem to understand how to defeat these groups. Admittedly, they don't want to surrender, but that's part of the problem. This is a martyrdom complex, a sense that they need to continue to fight to the finish. And we have not adjusted our way of war to figuring out how to defeat this problem long term. And my sense is we're going to have to continue to grapple with this, even as we pivot into great power competition with China and Russia. I don't think that these smaller conflicts are going to go away. They're going to become potentially even more of an irritant.
00:15:48
Speaker 2: Jonathan, you previously worked as a terrorism finance analyst at the Department of Treasury, where you followed and froze the funding of Hamas and al-Qaeda. We now have different forms of funding that is less traceable. Crypto, for instance. You have a gray market, a black market. How does that complicate our efforts to follow the money, so to speak?
00:16:09
Speaker 8: Oh, it is absolutely more complicated than it was when I was doing this, you know, some 20 years ago. Back then, it was much more simple, right? I mean, you know, people were still dealing in cash, which is, I think, still the preferred way of terrorists to move money. But yes, now we have various means of crypto trading. And it's a lot easier in many ways to create cutouts and front companies than it was even back then, even though we've got greater tools to be able to track some of this stuff. But yes, I would argue that terrorists are getting more creative here. It's also important to understand that, you know, there are state sponsors that continue to front these terror organizations and move money on their behalf. You know, I look at China. That's one example. Russia is another. North Korea has been a perennial problem. Iran, obviously, although I think that Operation Economic Outcast is certainly constraining their ability to move money in this way. But yes, crypto is a growing problem. Crowdfunding platforms are a big problem. One of the things that I look at right now is, have we done a good enough job of purging the bad apples from just the American nonprofit sector, the 501c3s that have a license to operate here? My sense is that we've not done enough to purge. We were so good looking abroad, but I think we've kind of taken our eye off the ball on the terror finance problem here at home. That is going to be one of the things we have to address in the months and years to come.
00:17:45
Speaker 1: Jonathan, do economic sanctions work.
00:17:49
Speaker 8: They do, but they only work as much as you're willing to ensure that they are adhered to by all. One of the things that I've been marveling at is the success, at least so far, of this new sanctions regime that we've put in place against the Islamic Republic of Iran. It's actually not new at all. There's nothing new or innovative about what we're doing. We're just simply making sure that these sanctions are adhered to in jurisdictions that were ignoring our sanctions guidance. So I think right now about the UAE, a friend of the United States that continued to allow for Iranian assets to move through their banks and through their businesses, the Turks, NATO allies, that had banks that were openly operating on behalf of the Islamic Republic. In fact, one bank moved $ 20 billion in cash and gold during the height of our effort to sanction the nuclear program of Iran back in 2012 to 2015. Iraq is another jurisdiction that we need to be aware of. Malaysia, Indonesia. These are all areas and countries where we have alliances. And we have an understanding with these governments, but they have not been enforcing our sanctions. So now we're really starting to button all of this down. And we've made it serious that nobody gets a free pass. That's great. But why did it take so long? Why can't we make these sanctions work the first time, bankrupt our enemies, force them to come to the table and get the capitulation that we were looking for?
00:19:27
Speaker 4: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
