Wall Street Week 04/26/2024

Wall Street Week 04/26/2024

Tesla moves forward after all.
Goldman finally gets out of retail
and everyone’s trying to figure out
where inflation is headed.
This is Bloomberg Wall Street Week.
I’m David Westin.
This week,
Wes Edens’ Brightline breaks ground
on the nation’s
first truly high speed train line.
This is now the beginning of the high
speed rail industry in the U.S..
Sir Clive Gillinson of Carnegie Hall on
what it takes to make one of the world’s
great concert halls not only survive,
but thrive.
You always go for the vision,
go for something that is irresistible.
And Tony James of Jefferson River Capital
on making sure New York’s
Metropolitan Museum of Art doesn’t
turn into your grandmother’s attic.
We’re trying to be current.
We don’t want this
to be your grandmother’s attic.
We start with
the ever present question of inflation
and where it’s headed with Peter Borish,
chairman and CEO of Computer Trading.
So, Peter, welcome back.
Good to have you.
Every week we get new data on inflation
points one way or the other.
But in a larger sense, you often
look at what you call the Seven Cs
and commodities.
One of those telling you right
now, first of all, thanks for having me.
The Seven Cs are relatively consistent
that inflation is going to be persistent
for longer.
You’re starting to see
some of the seasonal commodities
potentially break out.
Cattle one, see
corn, the other
see that have been relatively weak.
The stronger Cs,
coffee, cocoa and crude.
They’ve been relatively stable
after having fairly large moves.
And what’s driving that right now?
I mean, what are the forces?
Why do you look at the seven Cs?
I look at them as the C,
which is the consumer.
And in terms of is the consumer going
to have to substitute their spending
for more on staples
where demand is inelastic
and that then is going to lead to less
discretionary spending across the board.
And so then I look at bigger picture
stocks
like Visa, MasterCard, Costco,
Target to see
if the consumer strength is still there.
Those stocks have demonstrated
a little bit of weakness.
So that is the conundrum.
The ninth C, of the pressure
on commodities and potential weakness
of these consumer stocks,
which definitely puts the Fed in a box.
So if there’s a breakout
in some of the Cs and the commodities,
that puts pressure on Visa and MasterCard
because people don’t have as much money
to spend at Target, for example,
they have to spend it on food.
Yes. Yes.
And so those stocks in particular
are a good measure of consumer strength.
And you see that in weekly data
that you can get from JP
or Bank of America
compared to week over week or year
over year
as the strength of consumer spending.
Now, some stocks have really felt
a lot of pressure just recently
have been the big tech.
What is going on with them, do you think?
Well,
first
of all, there’s the trading aspect to it.
So, you know, there’s the old saying
what goes up must come down.
So you basically had a really big move.
You’ve corrected technically,
a number of the stocks
have broken key levels.
And if they don’t reject those levels
and start their uptrend again,
that could mean that
the leading aspect of the technology
relative to other stocks is ending,
which can hurt the large cap indices
because they’re such big weights.
What does this all say to the Fed?
I mean, I could speculate that actually
a little bit of tightening
financial conditions
would not be a bad thing
for the Fed right now
because they’ve been going the other way.
I think the Fed is sprinting in place
very, very challenging
because you have this tug of war.
But it’s hard to say
that you should be easing
when you’ve just had record
highs in Bitcoin,
record highs in equities,
and you’ve seen gasoline prices
go up and potentially
now these other commodities breaking out.
So they’re stuck in my
mind of not doing anything.
Probably the rest of the year.
Gold doesn’t begin with the C,
last time I recall.
But, you know, at record highs,
we’ve had some record highs in gold.
Is that a useful indicator,
in your experience over time of where
inflation might be headed?
Because often you think that’s
where you go through the year inflation.
So I am not one that particularly favors
gold as an indicator
of what’s going on with inflation.
By the way, the correlation between gold
and the S&P has been fairly high.
So you would think, oh, that’s across
current
people tend to look backwards.
So in the 70s
when gold was really strong
and inflation was high, there weren’t
really a lot of other instruments
to use to hedge against inflation.
But today there are many more instruments.
You can short bonds in the futures market.
You can participate in individual
commodity markets or you can actually
participate through options
or futures in the equity markets.
So I don’t think gold
is as much of an inflation
indicator
as perhaps a supply and demand question
for uncertainty
in the global geopolitical.
And then non-U.S.
central banks
may have added to gold demand recently.
Of course, that too, in the last week
or so has had
a pretty significant correction.
Let me go back to your ninth C,
I think it is conundrum
that you said.
Yes. Okay.
As an investor,
how do you invest into a conundrum?
What do you do?
So it depends on your timeframe, right?
If you’re younger and you have a long
timeframe, then do you sit back?
And that’s the nature of markets
on average, right?
There’s a double digit
decline in the S&P every year.
Of course,
I’m always mindful of the six foot tall
man that drowns in water
an average of five feet.
So you have to be careful of averages
because there are bear markets.
But in that case, you stay the course.
If you’re more like me and you’re a trader
and you’ve had a good run,
I think the hardest thing
in portfolio management and discipline
is selling a winner
or taking it down and rebalancing
your portfolio is this a time to rebalance
your portfolio where you have this
conundrum combined with Fed uncertainty?
I think that makes a lot of sense.
Peter is so helpful.
We’re always good to have you on Wall
Street Week. That’s Peter Borish
of Computer Trading.
Coming up, government subsidies:
China’s long embraced them.
The United States is getting into
the game is Europe.
Next, we ask Bloomberg’s senior executive
editor for economics and government,
Stephanie Flanders.
That’s next on Wall
Street Week on Bloomberg.
This is Wall Street Week.
I’m David Westin. Treasury
Secretary Yellen traveled to China to
criticize the government
for subsidizing parts of its industry.
But this week, the IMF leveled
a similar criticism at the United States
and urged Europe not to follow suit.
To take us through where Europe stands
in the apparent race to subsidize.
We welcome now Stephanie
Flanders, Bloomberg senior executive
editor for economics and government.
So, Stephanie,
welcome back. Great to have you with us.
So tell us about this wonderful world
of industrial policy.
I mean, sometimes we criticize it
and it looks like right now
the United States is embracing it.
Where are we
globally on industrial policy?
You know, this is one of those things
where it’s a fast moving
bit of a bit of economics,
certainly of economic policymaking.
You know, for decades,
certainly when I was first learning about
industrial policy and economic policy,
it was is kind of a dirty word.
Certainly capital I.
Capital P industrial policy,
because it was the idea
made it more popular in the 50s
and 60s that governments could spot
strategic industries and invest in them.
And the line I was always given
that they were good at picking losers,
they weren’t good at picking winners
and that you could waste a lot of money
doing that as a government
and if you were going to do it
successfully, well,
the only places that had done
that were maybe places like Korea
or Singapore, where you had
highly effective states and you had,
you know, these were emerging market
economies that had a path to follow.
They could see
what other countries had done.
So they had less chance
of getting it wrong.
And what’s changed?
I think, you know,
like so many things, has been upended
by the different geopolitical outlook.
You know, that
what you think of as even, you know,
what a winner would be in a context
where you could have in ten
or 20 years time
a decoupled global economy really changes.
You know, it could be
you may have wasted a lot of money
and an economist might have said
that is a big you’ve
inefficiently used those resources.
You’re not making profits.
You’ve produced excess capacity
of a good in the global market
from doing this industrial policy.
But if in 20 years time
you find that you’re the only place
with, say, a solar panel
industry on one side of a big economic
divide in the global economy, well,
maybe all that quote unquote wasted money
will turn out to have been well spent.
So I think everyone’s having to kind of
rethink what success
and failure looks like
in an industrial policy context.
But we certainly could be in for wasting
a lot of money with these subsidies,
whether it’s a good thing or a bad thing.
How much of this do
you think is triggered by China?
Because China is now the second
largest economy, some to maybe on its way
to first.
It certainly embraced subsidizing industry
quite a bit.
The Biden administration
criticizes China a great deal for that.
But it’s an enormous amount of money.
How much of that is the rest of us
being afraid that they will overwhelm us?
Well, and I think it’s also it’s
not just the fear, right.
It’s actually the reality
in some key sectors.
I mean,
the green technology is a classic example.
We’re now looking at how much Chinese EVs,
electric vehicles are just
sort of swamping the global market.
A lot of subsidies have certainly gone
into that.
The European Union
announced an investigation into EVs
and they’ve already been burned
when it comes to solar panels
because the European Union had invested
a lot in developing, wanted to have
a big domestic solar panel industry was
just wiped out of the water by by China.
There’s the sheer scale of Chinese
production.
Now, 90% of solar panels in Europe
are made in China, and actually
a very high proportion in the US as well.
So, you know, China is driving this,
but of course if you’re Europe, it’s
also the Biden administration’s
response to China.
Things like the Inflation Reduction Act,
you know, the the Europeans have felt like
they had to have their own thing.
They announced the Net Zero Industry
Act last year was very explicitly
about building the European domestic
green energy
systems and products so that they weren’t
going to end up reliant on China.
And how much pressure is there on Europe.
That’s what the IMF warned about,
that they thought that Europe would go
that direction, warned that
that was not a good idea.
They’re better off breaking down
some of the trade
barriers
that they already have internally.
At the same time,
there’s a general perception
that European economy is not as efficient,
is not as competitive as the US economy,
and maybe some others.
Right now.
Do they need to do of some sort of large
fiscal infusion to really get competitive?
I mean, I suspect certainly the
the International Monetary Fund would say
it is as much about
developing the single market and working
as a cohesive bloc
as it is about spending lots of money.
Yes, there’s going to need to be
a lot of investment funds
for green technologies,
for decarbonizing the economy,
potentially for taking advantage
of digital technologies that Europe
hasn’t hasn’t
been able to do as well as as the US.
So a basic principle of ethics
that I learned back when I was in college
was art implies can which just say to say
you ought to do something first.
You have to be able to do it.
When you say you have to kind of
competitively Europe to the United States,
can it do it?
Is it possible
or are there structural factors
that really mean
that it’s never going to catch up?
Well, I think even the philosopher
Immanuel Kant was wasn’t
quite sure whether or not implied Kant.
And certainly when you’re a policymaker,
you often find that does not imply
Kant at all.
If you’re a voter, you often find that.
So I mean, clearly Europe,
as I’ve mentioned, has been trying
to do this stuff for a while.
I think it is interesting
that they’re focusing, particularly
when they’re talking about
investing in green technologies.
Now, their minds have been focused
by what has happened with China
and the fact that they’ve basically lost
the battle on solar panels.
So they’re thinking about
how can they invest in a smart way,
not completely matching China on scale,
but maybe matching or
exceeding it on quality innovation, also
thinking about how they work together.
So individual countries now,
if they’re all warring against each other,
you know, having battling subsidies
against each other,
that’s obviously going to be a disaster.
Is there the political will in Europe
to really become more competitive
economically?
Is this a political issue
that is on voters minds?
I think it’s always one of those things
that is talked
about a lot in Brussels
by the European Commission.
Always sounds a bit boring.
Even the phrase European competitiveness.
I mean, voters have had the have heard
politicians talk about it a long time
and even worse,
while these capital markets union,
which they’ve been talking about for
for you literally years decades.
But, you know, if you have
the kind of pool of investment capital
that you have in the US,
you’re not just relying on bank finance,
which obviously is the dominant source
of funding for companies for investment.
And in Europe, you know,
that does open up a lot of opportunities.
So I think voters understand
that the green transition is a big deal.
Decarbonization,
They’re worried about the costs of that.
They understand
that may be a more kind of European energy
market, might be a good way of doing that.
They certainly notice
the number of Chinese EVs on the streets
of Germany, of France,
of all these countries, whether they’re
really ready to make sacrifices for that,
that is less clear.
Stephanie,
it’s always so good to talk to you.
Thank you so much.
That is Bloomberg’s is Stephanie Flanders.
Coming up, is
America finally going to get one of those
high speed trains
we’ve envied in France and Japan?
We talk with
Wes Edens about his bold new Brightline
venture that broke ground this week.
Do we think that the adoption rate for
it is going to be rapid?
That’s next.
On Wall Street Week on Bloomberg.
This is Wall Street week.
I’m David Westin.
And the United States took a big step
toward high speed trains this week
when Brightline West broke
ground on a $12 billion project
to build a rail link
between Las Vegas and Los Angeles.
And we welcome now the founder
and chairman of Brightline, Wes Edens
Wes, great to have you with us.
Thank you for joining us
to tell us about this project.
Brightline West.
It’s the second Brightline
project after Florida.
Give us a sense of how big a business
this is in success.
Well, first of all, thanks for having
me on, David. You know, it’s
it’s a great time for us.
It’s a great time for the rail business.
And so we said we broke ground
earlier today
on on Brightline West,
which is the second train project for us.
But it’s a
most notably is the first high speed
train, true high speed rail
that’ll be built in America.
And that’s a big deal
and a monumental occasion.
And I think actually even a bigger deal
is I really do think that this is now
the beginning of the high speed rail
industry in the US, which I think has got,
you know, massive, you know, opportunities
and growth in front of it.
So it’s a really exciting time.
Given your investment
tracker, you’ve checked how much demand
there is out there potentially
and you’ve concluded
it’s big enough to support this
and make it a good business.
How much demand is there?
Are you?
There’s about 50 million trips that happen
between Los Angeles and Las Vegas
every year.
About 85% of those happen by car.
And I don’t know if you’ve ever done
the drive from Las
Vegas to L.A.,
but it’s is a notably difficult drive.
It’s probably 4 hours in the best case.
It’s very, very unreliable
in terms of what the time actually is.
And so there’s a tremendous amount
of demand between these two cities.
There’s only one way to get those,
which is on I-15.
And so our train is going to go right down
the middle of I-15
and we think it’s going to have
a massive amount of demand
from people that make that road.
This is not your first foray.
You have brightline up and running.
I’ve been Florida
right between Miami and Orlando.
What have you learned from that
that will change what you do?
A Brightline West?
Well, I’d say most notably
we learned that people like trains, right?
So we have millions of people
that ride our train down there.
The adoption of it in South Florida
and out to Orlando has been terrific.
We opened the route from Miami
all the way to Orlando recently.
It was actually last September.
The numbers have been fantastic
and we’re very optimistic
about the future of that train.
The biggest lesson, I’d say, is that
when we built that train, we basically
use the existing rail corridor
for a portion of it.
So basically from Miami up to Cocoa Beach,
it’s kind of a straight shot from south
to north.
At that point, you turn left and then go
across Route 528 to the Orlando airport.
That’s how the route is made.
What we did, you know that because we had
access to the train, it was version 1.0.
As I said, it makes a lot of sense,
but there’s a lot of things about it
that we think can be improved
on in particular.
There’s a lot of rail crossing service
that runs up really U.S.
Highway one.
So this train from Vegas to L.A.
will site it in the middle of I-15.
It’s a big 200 foot wide corridor,
but we’re right in the middle of it.
And because of that,
you can put a fence around it.
You can electrified no rail crossings.
You can go through high speeds.
So north of 200 miles
an hour is going to be the objective.
And that version 2.0 is what we think
makes sense for this quarter.
And I think it’s a good blueprint for what
we should find success with
in other parts of the country as well.
What’s the time horizon
you’re looking at for these investments?
I believe your cash positive
in a bright line out in Florida, now
that you haven’t recoups the investment,
you put your cash positive.
How long until you actually recoup
investment
in bright line
or for that matter, Brightline West?
You know, I think from this point forward
and Brightline East, it’s all systems
go, you know, we’re adding more capacity
this summer and June with more train cars
the same in the end of the year
in December and the same again next year.
And so with that, you’ll then get to
higher ridership levels, higher revenues.
And we think that that’s a time
in which we’ll start to look at,
you know, different alternatives
in terms of financing, bringing in equity,
you know, etc., etc..
Brightline West
is a bit of a different situation
in that it’s
a unitary train line that goes from L.A.
to Vegas.
So as I said, there’s 50 million trips
that happens on that route already,
most of them by car.
So we think that the adoption rate for
it is going to be rapid once
it’s up and running.
And I think that the capitalization for it
will also give us
a lot of alternatives as a result.
But I think that, you know, not
only the train being incredibly popular
and satisfy demand and be green and safer
and all those things,
I think it’ll also be highly profitable
and a terrific investment.
Do you have a sense of
when you would bring in other investors,
either equity or debt?
Yeah, we have brought in,
you know, modest investors.
I mean, I’m a large investor in it
personally, so I’m a big believer and I
eat my own cooking, so to speak, with it
and have for a long time.
I think that is an investable,
you know, project now.
And so the the
groundbreaking today, I think signifies
kind of the next layer of it.
And I think that there will be
some investment
opportunities
both on the debt and equity side
in the upcoming kind of, you know, months
between now and the end of the year.
And then I think
as you get under construction,
I think that there’s lots
and lots of different opportunities
to to grow the business because this is
something clearly can be replicated there.
City peers around the country.
Tell us about the government role.
We had Secretary Buttigieg come out
for the groundbreaking
for Brightline West.
How critical is government?
Can this happen without the government
really supporting them?
I think in the long term,
the answer is absolutely yes.
But I think that there’s lots of examples
of government playing
pivotal role
to getting new industries off the ground.
So if you look at the history of,
you know, Elon Musk with his SpaceX
or the electric vehicles or,
you know, subsidies
for the solar business,
there’s lots of examples of things
that started out being subsidized
and then turned into be,
you know, big, robust businesses.
And I think the train is
is going to follow those same footsteps.
So, you know, when you say government, it
would it really
there’s many governments involved.
So it’s it’s really a coalition
of local governments and state
governments and federal governments,
all of them playing a big role.
Obviously, the federal government
in the form of transportation,
you know, providing a $3 billion
grant was a huge part of this.
But frankly, so we’re, you know, the
the delegations from Nevada
and from California, frankly,
the governor in
in Nevada, you know, I got to Lombardo,
who’s been an incredible supporter.
The DOD,
the Department of Transportation,
is our partner in Nevada for this project.
So, you know,
I like
to think that it takes everyone to say yes
and only one person to say no to derail
these kinds of projects.
And fortunately,
we have such a compelling project
that we’ve actually had nothing but yes.
So it’s a it’s a really good position
to be in assuming continued success.
Where next and particularly
for those of us in the Northeast,
is there any prospect of this
ever happening in the Northeast?
You need a new kind of a
a unitary corridor
that you don’t share with anybody else.
So the
the Northeast, obviously the a sell out
route from New York to Washington
to New York to Boston is incredibly
popular and is actually quite profitable.
So that’s a that’s a great thing
to go at the highest speeds.
You need to have, you know,
a little bit more of a confined corridor,
if that makes sense.
So when we think of the things, places
that are likely to be next on the list,
it’s city pairs that have got
the same characteristics as we see here,
which are two big population centers
separated by two or 300 miles.
Lots of travel between them
and lots of traffic between them.
So, you know, Atlanta, Charlotte, Dallas,
Houston,
Houston, San Antonio, San Antonio,
Dallas,
that whole triangle in Texas is one.
Portland, Seattle, Chicago to Saint Louis.
There’s there’s
lots of different expressions of it.
And I think that the successful
launch of this will be the beginning,
not again only of the next rail system,
but of the rail industry.
Because I think in this country
we have a big automotive industry,
we have a big airplane,
you know, aeronautical industry.
I think it’s time to have a big passenger
rail industry and it could be,
you know, hundreds of thousands,
if not millions of jobs,
lots of the technology we deploy in
other ways in this country deployed here.
And I think that that if there’s
that my view is the lasting legacy
of this event today and of the
the rail is not only the rail system,
but more importantly, the rail industry
that’s likely to follow.
Okay Wes,
thank you so very much. That’s Wes Edens.
He’s chairman of Brightline
and Brightline West.
Coming up,
the answer at the center of who we are.
But many venues across the country have
come under increasing financial pressure.
We travel to Carnegie Hall to hear
from its leader, Sir Clive Gillinson,
about what it takes to make a great arts
institution thrive,
not just artistically, but financially.
That’s next on Wall Street
Week on Bloomberg.
This is Wall Street Week.
I’m David Westin.
The arts, including music,
museums, photography and more,
contributed over $1
trillion to the US economy
in 2022, according to the Bureau
of Economic Analysis.
And New York in particular
is known for its performances and museums.
But the very nature of the arts
is going through fundamental changes
in what is presented
and in how it is paid for.
Changes triggered in part by a pandemic
that forced most of us to stay at home.
Sir Clive Gillinson has been the executive
and artistic director of Carnegie Hall
for nearly two decades,
and he remembers well the dramatic moment
when his legendary concert
hall was once again open for business.
One of the most moving things
is when we open again after COVID.
The emotion in the hall was astounding
because Robert Smith, our chairman,
and I thought we should speak
to the audience on the opening night.
And I literally said the first two words,
which were, Welcome back.
The place exploded.
Welcome back to Carnegie Hall.
And that emotion has carried through.
So firstly, I think the whole thing
of live music and the impact of live music
that is in the greatest possible shape
and, you know, and people love it,
care about it.
And I think they even today
that emotion is still there
about how they now value it in a way
where you only value something
when it’s taken away from you or you.
Carnegie Hall,
fully back from the pandemic.
Yes. The first year
we had to reduce the number of concerts
last season, and this season it’s
the full number of concerts.
We’re back to the normal number
of presentations and audiences
are averaging 93%.
So, I mean, you know, fantastic response
to what we’re doing.
And there’s a real feeling of engagement
with the music in a very powerful way.
It wasn’t just
performing arts centers like Carnegie Hall
that were hit hard by the pandemic.
Tony James of Jefferson River
Capital serves as co-chair
of the Metropolitan Museum of Art,
a position he came to
when the pandemic hit and hit the Met
particularly hard.
The Met, for example, lost $100
million of revenues over the two years.
So that’s hard to recover from.
A lot of the art scenes in New York
depend on tourism.
Our our attendance from locals
are all the way back.
Our attendance
from tourists early in the seventies,
and particularly Asian tourists,
that’s where we’re really short.
And so it’s it’s a bit of a struggle.
We’ve had to find new revenue sources.
We’ve had to be careful about costs.
But I think, you know, as we’ve
discussed in the past, David, I think arts
are what make New York the gateway city,
the wonderful city that it is.
The success of a great art center
like Carnegie Hall or the
Metropolitan Museum requires a balance,
a balance between a high culture
that appeals to changing audiences
and running a very large business
with all the challenges of managing costs
and attracting revenues
that any CEO of a big complex
company would understand.
One of the things that strikes me
is your title,
your executive and artistic director.
It reminds me a little bit
about the division
between a publisher and editor
and newspaper.
You have both.
You’re responsible for the business,
as it were, of Carnegie Hall,
as well as the arts artistry.
Give us a sense of the balance.
How do you get the right balance between
the business side and the art side?
I mean, it’s it’s
a really interesting question
because most organizations
separate the two.
And the reason I would never, ever
do a job,
which was half of what I do, is
because I feel
if you’re involved in the artistic,
you want to be as expansive
and imaginative and take risks
and, you know, and really travel
extraordinary journeys with the music.
Now, if you’re the person responsible
for the money,
you’re probably going to be cautious and
keep saying, I’m not sure we can do this.
I’m not sure we can do that.
The good thing about doing
the two together is if I want to dream,
I think going to be part of making sure
that can happen as a business.
So in a way,
I think it enables you to take far
greater risks
because you’re responsible for both.
You’ve been known throughout your career
for taking some risks.
I mean, you were,
of course, a professional cello player
back in the London Symphony Orchestra.
Well,
that was somebody else’s risk having me.
But then you stepped up,
not necessarily volunteering,
but you stepped up to really take over
a struggling organization.
And you took risks
from the very beginning.
You’ve taken risks at Carnegie Hall.
How do you get the right balance
between take a risk and know
that we’re not falling off the high wire?
Well, I mean, of course, the key thing
about all risk is how you manage risk.
I mean, you can’t live without risk
and so,
you know, there’s a famous saying,
which is, you know,
if you’re not living near
the edge, you’re taking up too much space.
Money follows vision.
You always go for the vision.
Go for something that is irresistible,
that has to happen.
And then there’s a chance
you can sell it to somebody else.
If it’s good
and the world can live without it.
I mean, it’s very nice for it to happen.
If it’s only that
it’s very hard to sell to somebody
else, it’s got to be irresistible.
Over at the Metropolitan Museum,
Tony James says
that the mission is to show the world
great art.
But to do that, it needs to generate
a great deal of revenue each year
to support the facilities, including the 2
million pieces of art the Met owns,
only 15% of which are on display
at any given time, and to mount more
than twice as many exhibitions each year
as any other museum in the world.
About 30% of our revenues
come from people paying to go in,
buying food, buying stuff in stores.
So let’s just call that revenue members
as well that pay dues.
So that’s about 30%.
About 30% of our revenues
comes from spin off from the endowment.
We spend about four and a half percent
of the endowment each year,
but that’s very restricted
because people give,
you know, I’m giving this money,
but the interest on it can only be used
to buy Renaissance art or something
or fun, fun digs in Egypt.
There’s all kinds of strange things.
And then about about 40%,
the remaining 40% comes from contributions
of different sorts and benefits.
And but but charitable giving.
The problem that has is a problem
or one of the great things about the Met,
depending on how you want to look at it,
we sit on city land.
It was given 150 years ago,
but we sit on city land
and the deal was that city residents
that can pay what you wish as you come in.
So the average city resident pays
less than $10
to come in for one of the biggest museums
in the world.
They can spend days there or weeks
there. And.
Whereas, a tourist pays $28.
And so when you lose your tourism,
you lose a lot of the people, honestly.
And so that’s that’s been a challenge.
What about the donation side, the
philanthropic or charitable donation side?
By the way, how much of that is from
corporations as opposed to individuals?
Very little from corporations.
I gather Clive Goldstein’s done
a better job than that,
perhaps than we have.
But ours is almost all
giving up individual giving,
but a little bit from the city as well.
And that key role of the donor
in supporting
the revenues of Carnegie Hall
or the Metropolitan Museum, is one way
that art centers are very different
from any for profit corporation.
They need to pay attention
to their appeal, not just to customers,
but also to those making charitable
contributions each year.
And the reasons for those donations
can vary every bit as much
as the particular interests of each person
writing a check.
How people give money and who gives
money is never decided by us.
It’s always decided by the donor.
And and so, you know, the whole thing
about raising money
is you’ve got to share vision
and share the things you believe in.
Now, if somebody doesn’t believe
in those same things,
they’re not going to give you money.
So I think
the donors have changed enormously
because what we do has changed enormously.
You know, the wonderful thing
about the board, about the donors
is they’re passionate about what we do
because they don’t need to give money.
They only give it if they care
and if they’re excited about what we do.
Talk to me about costs.
How have costs changed over time?
To what extent are you falling
prey to inflation in the way
the rest of the country
and much of the world is?
We I mean, it’s a business
like any other business.
And I mean, I remember a businessman once
who was on my board
in London, in fact, saying
people think that the arts is a luxury.
I mean, he said the way you have to run
your business is much tougher
than I have to run my business
because you have no margin for error.
Big businesses, you know,
which are purely commercial businesses,
have much more margin for error.
And if they make a bit of a loss here or,
you know, a huge amount there,
they can balance it all out.
I mean, essentially in the arts,
you have no room to move.
You’ve got to always be on top of it
financially.
So it’s hugely demanding
in terms of the business.
And it has to be
because if you can’t make it work
as a business,
then you’re going to fail artistically.
So, you know, it’s one of those things
where I think people
assume the arts are not about a business.
I mean, in point of fact,
they have to be incredibly rigorous
businesses to be great arts institutions.
Coming up, we’ll take a closer
look at how centers of art and culture
are changing what they present
to adjust to changing audiences
and what lies ahead in
an increasingly digital world.
That’s next on Wall
Street Week on Bloomberg.
This is Wall Street Week.
I’m David Westin.
There’s more to sustaining
the cultural center of New York
than presenting great art institutions
like Carnegie Hall
and the Metropolitan Museum
must respond to the changing city
and culture around them,
reaching out to new communities
and adapting
to the new forms of expression
that the digital world makes possible.
And perhaps most of all, using the art
to tell compelling stories for all of us.
We have transformed the whole.
So, I mean, firstly,
we do much more Storyteller.
We started big festivals when I began.
And one of the earliest
things was Jessye Norman,
an extraordinary singer to create
and curate a series
about African-American culture.
And we’ve looked
at a number of big stories.
I mean, we’ve looked at migrations and how
migrations created American culture.
And we’ve looked at Afrofuturism.
We’ve looked at the role of women
in music.
But, you know, more generally
across the whole of culture.
Now, currently we’re looking at the fall
of the Weimar Republic and using
that as a lens to look at the fragility
of democracy all around the world.
Big, big issue of our day next season
we’ll be looking at Latin music, so
a huge amount of storytelling
and that’s only one dimension.
I suppose if you’re a tourist
that you’ve never seen
Haystack Van Gogh’s Haystacks,
you want to go see them in person.
But because so much of our
audience is local
and we want them not to go once a year
or once every three years,
we want them to go every month.
We want to come back.
So we
have to have things that they want to go
see that’s current.
I just got back from Berlin last night,
as you know, and we’ve got a wonderful
contemporary art museum there,
and it’s got beautiful
paintings, one Picasso and one Magritte,
and that’s that.
It’s lovely collection of random,
if you will,
but very high quality contemporary art.
But there’s no theme to it.
There’s no story.
We’re trying to create things
that have a story
so that people want to come,
Oh, this is, you know,
the rivalry between they got money
and how they fed off each other.
And they were both friends
and at one point enemies.
And and how money cut
they got out of one of the paintings
and you get them interested
in the narratives.
And the Harlem Renaissance show
has been a huge success of celebrating
that whole wave of culture
that centered in New York
about the strength of Africa and the
wonderfulness of African-American culture
that’s been spectacularly successful
and was not very well known.
That’s what gets people’s interest.
It’s not just seeing an object
as important as it is to preserve
the best of what is time
honored in the arts.
It’s just that important to recognize
great art
that is being created to the present day
and in places that go
well beyond the traditions
we’ve lived with for so long.
Especially as the profile of audiences
continues to evolve.
What is your sense of how the profile
and I’ll say demographic
profile of your audiences has shifted over
that nearly 20 years?
It’s hard to say.
We have so many audiences
because we do so many different things.
We’re the best of every sort of music
we aspire to be.
And so, I mean, the sum audiences,
which are very young,
I mean, for instance, our Afrofuturism
audience was very different,
and some of
up to 70% had never been in Carnegie
Hall before.
So with each project,
we develop new audiences
and then we try and keep them
as part of our audience going forward.
So, I mean, I think the audience has grown
in terms of diversity,
but diversity meaning, you know,
not only race but age
men, women, I mean, you know,
nationalities, everything.
And we want to be and represent
the best of every sort of music,
which means
that we’re going to be relevant.
I mean, there’s something
like 180 nationalities in New York.
I mean, insane.
And it’s
the most diverse city in the world.
But we want to be relevant
and meaningful to everybody.
If you think about what’s called the
Western canon of arts of the traditional.
They’re all white male artists.
A lot of them are from Europe all the way
back to the Middle Ages, Renaissance
to Impressionism, old masters,
not often,
not a lot of diversity in that group.
And then we had sections of the museum
dedicated
to the arts of the Pacific
and Asia, for example,
but they were very discrete
parts of the museum.
I think the greatness of the Met
is that we can integrate all these things.
If we went back 20 years ago
and looked at the nature of the performers
appearing on the stages here
at Carnegie Hall and compared today,
how would it be different?
How are you getting new young talent
and where is it coming from?
Well, we all the time
part of our job is obviously to bring,
you know, the most extraordinary
established performers here.
But at the same time,
we’re always looking out
for the most brilliant young players.
So a few days ago,
we had somebody called Young Chan Lim,
who won the Van Cliburn competition.
He was 19. He’s just turned 20.
So now he’s an old man, of course,
But he came in.
It was sold out weeks in advance.
He’s a dazzling player.
I mean, he is going to be part of our life
for the next 50, 60, 70 years.
Probably what we think of
as the traditional patrons of the arts
remain key to success of a place
like the Metropolitan Museum, but
they’re now being joined by a new, younger
and more diverse group of supporters.
We’re building
a new modern contemporary wing.
It’s going to be a really exciting project
for the city.
$600 million.
You can spend 200 million on one
Giacometti sculpture if you had to buy it,
and we got to fill an entire wing
one hour.
So we depend on collectors.
Usually at the end of their lives
giving us their collections
or parts of their collections.
So that that set of givers is not
that hasn’t changed very much.
That’s still not very diverse.
It’s old, it’s predominantly white, it’s
very wealthy almost definitionally.
But the people that come in and give cash
or go to benefits, that’s you young,
and we make every effort to make
that younger and more exciting and hipper.
We’re trying to be current.
We don’t want this to be
your grandmother’s attic.
Four True centers of Art.
It’s not enough to be great programmers
to present works in compelling ways
to tell stories beyond featuring what
people have already come to appreciate.
They also play a key role in
educating us all and what we haven’t seen,
what we have yet to appreciate,
what is new, what is different,
and what is coming around the corner.
For me, education is not about audience
development.
Education is about giving every child
the opportunity to have access to music.
So we’ve got programs that are all around
the country and serve kids everywhere.
I mean, we now reach 800,000 people
a year with our education programs.
Probably the bulk of those outside
New York City.
But if those people
never come to New York,
I think we’ve succeeded as long as music
can be part of their life.
And, you know,
whereas if you were looking at
as an audience development,
we would have failed miserably.
So you’ll forgive me. This is Bloomberg.
So we like to think of the business
model too.
When you talk about educating
800,000 kids, how do you support that?
Where’s the revenue for that?
Well, I mean, there’s two things.
Firstly, you to create it,
you have to have partnerships.
So we have partnerships
all around the country with people
who share our values.
And you can’t have partnerships
without shared values.
So we do all of that and then we have to
raise a huge amount of money.
I don’t know the exact amount
we spend on education every year,
but out of a budget of about 120 million
a year, I would have thought we spend
probably at least 15 million on education,
which is not much less than we spend
on presenting concepts
like every business
and institution, art centers are embracing
what digital technology makes possible,
expanding their reach and exposure to
people in New York and around the world,
such as, for example, Carnegie Hall’s new
streaming service called Carnegie Hall,
plus providing us the opportunity to enjoy
great music in the comfort of our homes.
It’s on Apple TV, it’s on Amazon, Comcast.
It’s on ten different major platforms.
It’s available to every home in America
just about now.
We’re also getting more
and more international.
And my view always is here we are.
I mean, even though it’s, you know,
such an extraordinary city, New York,
I don’t know. I mean, what is it?
Probably 95% of the world’s
population will never come to New York.
So what we do needs to be available
everywhere to everybody.
I never think
that digital is a competitor.
We live and the live experience
is the greatest possible experience.
It’s it’s of the moment
it’s being created for you
at that moment,
you’re sharing it with other people.
There’s something magical and special
about a great live performance,
which is inspirational, but if you can’t
have access to that, then to have access
digitally is a fantastic opportunity,
which we should give people as well.
But it is not a replacement.
So I never worry about digital
being something that’s going to
undermine
people’s wish to go to live performance.
The Metropolitan Museum
is also using digital technology
to gain more ready access
to audiences around the world,
but it’s also designing a new wing
of the physical museum
with the future evolution of technology
very much in mind.
We’re trying to digitize every one of
our significant pieces of work in high def
and make that free to the world.
And our mission is to show the world
great art.
And it’s not everyone’s going be able
to afford to travel to New York,
so we have to make that available to them
digitally.
The big question is when you build
a new wing is like, what’s technology?
This wing has to last 100 years,
so what what are we building for?
But perhaps above all is the central role
that the arts play in the vibrancy
and health of the city of New York,
something that makes it the great capital,
not just of finance and commerce,
but of culture that it is today?
New York,
I mean, like all the great cities
of the world,
has extraordinary cultural institutions.
They are part of why
a city is a great city,
because people want to come
and work in New York
because of the great cultural
organizations.
All these things work together.
So I think it’s a fundamental part of why
New York is a great city,
why it’s a magnet for the greatest talent
from all around the world in every way.
And that is a fundamental part
of what you need a great city to be.
The vibrancy of this city
all depend on us getting young people
that are knowledge workers.
I mean, yes, we have to have service
workers, too, but the economic engine
will be especially young tech people,
programmers, coders, so and so forth,
people that want to go into finance,
people want to go to creative arts media.
Those are all high intellectual content,
low physical footprint jobs.
That’s what we need in the city.
We obviously can’t be building
auto plants, so we need those people.
Those people, they’re highly educated,
they’re sophisticated.
They want culture in their lives.
What distinguishes
New York City from Dallas
or Cleveland,
Fine cities or Frankfurt or Shanghai?
A lot of it is the culture
that’s our foundation.
Coming up, a husband’s gift to his wife
becomes an icon for the music world.
That’s next on Wall Street Week
on Bloomberg.
Finally, one more thought from Sir
Clive Gillinson,
executive and creative director
of Carnegie Hall, about the hall itself,
how it came to be and what makes it
an icon for performers of all sorts
the world over.
A Genuinely
think it’s the greatest concert
hall in the world, which is completely
baffling in terms of acoustics.
Yes, it’s what I’ve always heard.
And I mean, what is astonishing
is because of its size, it’s 2800 seats.
Most concert halls are 2000. Yeah.
And yet it feels completely intimate
wherever you sit and people who sit.
Right.
You know, because students will sit right
where you’ll see it from the platform
right at the back.
And you can hear it
as if it’s in your living room. Yes.
If you look
up there,
they can hear as well as anybody else
in that entire hall.
You can have a massive orchestra
making a huge noise
and it works perfectly.
It can carry any sound,
any amount of sound.
And yet you could just have somebody
playing a flute here
and you could still hear every sound.
So what goes into making a concert hall?
One of the greatest in the world?
It turns out pretty much everything.
The reality is
you cannot replicate a great concert hall
because, I mean, every single thing
counts.
The density of the plaster on the wall
batters
the carpet with the padding in the cities.
We send these seats back to candidates,
the manufacturer who made them in 1891,
because nobody dares touch
anything that could affect the sound.
So they go back to the same place
that they were made
130, whatever it is, years ago and so on.
You know,
even when you have to put wires
on the walls,
the fact that you’ll be changing
the plaster.
You’ve got to be careful that you try
and get the right density of plaster.
But the unique combination of qualities
that have made Carnegie Hall
a legend around the world came together
almost by accident.
Created by someone unknown as an architect
who’d never done this before.
To please the wife of one of the world’s
richest men.
And this guy had never built
a concert hall in his life.
One of things I read you can tell me
if it’s right or wrong or not.
The fellow who was
the architect was actually a cellist.
He was.
You played cello, which, of course, is
the reason why he was such a great icon.
He was the treasurer of New these
kind of guys
choral society because she sang Louis
Carnegie sang in the Oratorio Society.
There was no decent concert hall.
So she said to her husband,
As you do, would you build a school?
That does it for this episode of Wall
Street Week?
I’m David Weston. This is Bloomberg.
See you next week.

On this edition of Wall Street Week, Peter Borish, Computer Trading Chairman & CEO looks at inflation through the “7Cs” of commodities. Stephanie Flanders, Bloomberg News Head of Economics and Government looks at how Europe fares in a global subsidy race. Wes Edens, Fortress Investment Group Co-Founder and Brightline Founder says that Brightline West could signal the start of the high-speed rail industry. Clive Gillinson, Carnegie Hall Executive & Artistic Director and Tony James, Metropolitan Museum of Art Board of Trustees Co-Chair talk about the evolution in the business of fine arts institutions in New York.
——–
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