General Electric CEO Jeffrey Immelt weighs in on the state of the global economy in this interview with Charlie Rose. He says we are in a "tough situation." and that while there is recovery in emerging economies (China, Brazil), "headwinds" are going to keep slowing down the US economy. And, he tells Rose, "this is more than just a cycle....This company and this country is going to come out the other side, I think, looking differently."
We humans seem to have a problem understanding value. Last week, Mark Thoma alerted us to a fascinating Scientific American article on how we may want to blame our ventromedial prefrontal cortex (VMPFC) for our inability to battle the "money illusion" that makes us think something is worth more than it really is. And today, economists Hugo Benítez-Silva, Selcuk Eren, Frank Heiland , and Sergi Jiménez-Martín write at Vox that we consistently overestimate the value of our houses by 5 to 10%. And, they write, "Overly optimistic expectations about the evolution of house prices may have planted the seed of the current mortgage crisis in the US."
Homeowners, it seems, routinely overestimate the capital gains they expect from sale of their homes, so they report a skewed estimated value. But, the authors found, the problem is much greater if the homeowners purchased their homes during strong economic periods. There appears to be a strong inverse relationship between interest rates and the value estimation:
Given the characteristics of our data on house purchases and house sales, we observe properties purchased as early as 1955 until 2000. This information enables us to explore whether the timing of the purchase and the market conditions at that time could have lasting effects on the accuracy of the individual in reporting the value of their homes. We document a strong correlation between the evolution of our accuracy estimates over time and the business cycle. In periods of high interest rates and declining incomes, the buyers are likely to have lower appreciation expectations due to the declining housing prices (see Figures 1 and 2 below), and end up assessing, on average, more accurately the value of their homes, and even in some cases underestimating it.
Figure 1. Interest rates and home sales in the US, 1960-2007
Figure 2. Home sales and home prices in the US, 1968-2007
Read How well do individuals predict the selling price of their homes? here.
The repo--or repurchase--market is about to undergo some significant changes. As the Financial Times reported last week, there is concern that the structure of the repo market sped up the collapse of markets after Lehman Brothers failed last year, and that the Fed needs to "cut the risk of relying on this type of short-term funding, which can evaporate quickly in a crisis and potentially roil a clearing bank." Marketplace's Paddy Hirsch explains why the government is interested in shoring up the repo market in this Whiteboard video:
The Banker has released its list of the Top 1000 Banks around the world. The top banks are all familiar names: JP Morgan, Bank of America, Citigroup, Royal Bank of Scotland, and HSBC make up the top five. Of course, any cursory reading of the front page these last 10 months would help one realize these banks have had a tough stretch. And indeed the The Banker's report reinforces that notion--this is the first time in four decades that the top 25 banks on the list have registered a loss. While the Top 1000 as a group brought in $780 billion in profits for last year's report, they made a combined $115 billion in this year's report. That's a drop of over 85%.
The losses were built up by banks in the West, while banks in Asia primarily propped up the Top 1000's profits. The Banker's Geraldine Lamp writes:
US banks made an aggregate loss of $91bn, the EU 27 an aggregate loss of $16.1bn, and the UK’s banks lost, on aggregate, $51.2bn. In terms of return on capital (ROC), the disparate fortunes of the world’s banks is equally as startling. On aggregate, China’s banks in the Top 1000 chalked up an ROC of 24.38%. This compares with an aggregate ROC of -15.32% for UK banks and -10.32% for US banks. Japan’s banks in the Top 1000 achieved an ROC of 4.43% and Brazil’s 15.98%.
The inexorable rise of Asia, excluding Japan, is also played out in the composition of the Top 1000. The number of banks in the rankings from Asia has risen from 174 two years ago to 193 this year, as the number of banks from the US has dropped from 185 to 159, and from the EU 27 from 279 to 258.
But Lampe adds that this does not mean that the top banks--Western banks--are ready to hand over the reins to banks from emerging economies yet:
With next year’s profits largely determined by the ability of Western economies to emerge from recession and generate growth, it may seem axiomatic that China’s banks – and those from other emerging economies that are weathering the downturn a little more smoothly – will climb even higher up the Top 1000. This cannot be taken for granted. For one thing, the very creativity that got the West’s banks into this mess will be the thing that gets them out of it. Over and over again, Western banks have displayed a remarkable ability to reinvent themselves to keep pace with global change.
You can read the report here. And watch Lampe discuss the Top 1000 with Brian Caplen, editor of The Banker, below:
David Wessel, economics editor of the Wall Street Journal, says you can forget recovery until the housing market stabilizes:
The foreclosure rate is a driving factor for the weak housing market. And while this was once a problem for subprime borrowers, more and more "prime borrowers" are losing their homes. Marketplace's Mitchell Hartman reports:
Nicholas Barberis teaches at Yale's School of Management and studies the psychology behind pricing--or why we place the value we do on financial assets. So when he looks at the root causes of the global financial crisis, he is drawn to the behavior of consumers, investors, and bankers, and the cognitive psychology behind that behavior. Barberis does not fall into the camp of economists who believe that these are always "rational agents." In this talk before Yale alumni, he explains behavioral finance, and how irrational decision-making factored in to the economic meltdown (skip to 4 minutes in for the start of the talk):
The Organisation for Economic Cooperation and Development's latest Economic Outlook features something the organization's projections haven't shown in two years: projected growth revised upward. The US is among those OECD nations to have better news in the June Outlook. In March, the OECD report projected a 4% decline for the US economy this year. The June Outlook now projects a 2.8% decline. Large emerging economies all get strong projections:
A recovery already appears to be taking hold in China, helped by major stimulus measures. Chinese GDP growth is forecast to be 7.7% in 2009 and 9.3% in 2010, an upward revision from the OECD’s March forecasts of 6.3% this year and 8.5% next year. In Brazil, economic activity is forecast to fall by 0.8% in 2009 and rebound to 4.0% growth in 2010 (March forecast -0.3% and +3.8%); in Russia, economic activity is forecast to drop by 6.8% in 2009 and climb by 3.7% in 2010 (March forecast -5.6% and +0.7%); and in India, growth is predicted to slow to 5.9% in 2009 before accelerating to 7.2% in 2010 (March forecast 4.3% and 5.8%).
This interactive map shows the OECD Economic Outlook's GDP growth projections for 2009 and 2010:
And here's Jorgen Elmeskov, acting chief economist of the OECD, explaining the report:
More information on the Economic Outlook is available here.
Most companies have had to make some tough decisions during the global economic crisis, and few are tougher than those involving personnel. Michael Beer, chairman of the consulting firm TruePoint, says successful companies take a dual-approach to these decisions by thinking about both the needs of workers and the needs of the company--and that these needs are not mutually exclusive. He calls companies that take this approach "high commitment, high performance organizations." These companies are, for example, more likely to make across the board pay cuts and preserve jobs rather than "slicing and dicing." In this video, Beers describes a policy he calls "equality of sacrifice," and says it is good business in tough times:
Slate's Daniel Gross reports on a talk by deputy governor
of the Bank of Japan Kiyohiko Nishimura titled "The Past Does Not Repeat
Itself, but It Rhymes." As Gross writes, a Japanes central banker...
...is well-situated to comment on the current global crisis, given
Japan's own sad history of dealing with the overhang of a credit/real estate
bubble—or, more accurately, of not dealing with it. The government and
private-sector's uncertain policies condemned Japan to a traumatic lost decade
of slow growth.
In his talk, Nishimura points to a remarkable similarity between
Japan's economic fall and recovery during the 1990s and the current crisis in
the US. But while the patterns look the same, the pace is completely
different. For the last year, the rate in the US has been about 7 times
faster than it was in Japan. Gross:
According to Nishimura's schema, in less than two and a half
years, the United States has experienced as much trauma and recovery as Japan
did in about 12 years. All of which means that if the dog-years analogy
continues, things could start looking up by early next year. But we shouldn't
get too far ahead ourselves. There are other lessons to be learned from Japan's
experience of starts and stops. "We should be careful not to be very optimistic,"
Nishimura concluded. "That's my advice to myself."
Read the A
Recession in Dog Years here.
Add Vivek Wadhwa to the list of successful entrepreneurs who think there are benefits to starting a company during a recession. Writing in BusinessWeek, Wadhwa, who founded two technology companies, pushes the "less is more" theme hard. Companies that have to make due with smaller budgets are much more likely to build strong sustainable business models, Wadhwa says. Equity money, on the other hand, breeds bad habits and comes with a lot of baggage:
First, a CEO will usually feel pressure to bring in a "grown-up"
management team. But seasoned managers want big salaries and large
chunks of equity. VCs usually expect a portfolio company to use a
preferred headhunter to find the rock star VP of sales. Naturally, the
headhunter also wants an equity stake, on top of a finder's fee in the
neighborhood of six figures. When the rock star manager arrives, he or
she expects rock star perks—an assistant, first-class travel, etc. Now
imagine these distractions aren't limited to one new hire but half a
dozen or more. In my own experience, bringing in a new team meant
remaining members of the original team stopped worrying about keeping
costs down and didn't care as much if a sales cycle stretched out
longer. And the new hires were eager to embrace this unhealthy
attitude. It's an attitude that can quickly cripple and kill any new
Second, bringing in outside money usually creates expectations of
very rapid growth. VCs want a home run, not a single or a double. And
they want the home run within five years or less. But founders, not
outside investors, should determine the proper pace of growth for a
company. And a founder who is about to lose his or her life savings is
far more likely to drive a company towards profitability. A founder in
this position turns every person in the company into a salesperson—and
that's the best model for a scrappy startup. In the end, creating a
culture that emphasizes long-term profitability over rapid growth is
critical for success.
Furthermore, in an economic downturn like the current one,
increasing sales quickly is far harder since consumers and businesses
are spending less. So a focused, eager team is essential.
Read Why Less is More for Startups here.
Anita Campbell of Small Business Trends has a book tip for budding entrepreneurs who need a kick out the door cubicle. Pamela Slim's Escape from Cubicle Nation is based on Slim's experience as a corporate trainer, and gives workers the tools for making the leap and starting their own business. Campbell says it provides the "mental and emotional fortitude and clarity needed to make the jump to entrepreneurship."
One of the wonderful things about this book is its target market: it
is crystal clear. It’s for those who have spent their careers in the
employ of some other business, but who have secretly harbored a wish to
go out on their own. If you are currently employed in a corporation
somewhere, silently wishing as you sat in endless meetings that
you could be your own boss but are not sure how or where to get
started, then get this book. You will devour every page of it — and
come back begging for more.
I would even go so far as to say that if you’ve recently left the
corporate world to start a business (say within the last couple of
years) this book will be helpful because it will reinforce your
commitment and re-energize you.
It may also prove a valuable teaching aid, in that it hits key steps in potential entrepreneurs' decisions to start their own businesses. Read the full review here.
The top US advertisers cut their ad spending last year for only the fourth time since 1956. Ad Age's Data Center Analysis shows that the top 100 advertisers, as a group, spent 2.7% less on ads than the previous year. This year, not surprisingly, looks worse:
The overall picture for this year is shaping up to be more grim:
Measured media spending for the top 100 advertisers tumbled 8.1% in the
first quarter, according to TNS.
Moreover, Publicis Groupe's ZenithOptimedia forecasts an 8.7%
decline in U.S. media spending in 2009 and 1.7% drop next year, with a
tepid recovery -- 1.1% growth -- in 2011. It predicts U.S. spending
declines of 5.1% in 2009 and 1.4% in 2010 and then growth of 2.4% in
2011 when it combines media spending and unmeasured disciplines.
Last year's ad-spending drop may seem relatively mild. But
full-year figures smooth out the stunning declines that came after
financial markets imploded last fall.
Brad Johnson, Ad Age's director of data analytics explains the report here:
You can read the full Ad Age report here.
The non-profit Cure Alzheimer's Fund is applying some financially aggressive tactics to putting funds toward research. For one, it is shunning building an endowment during the recession in favor of more quickly applying finances toward the work of researchers. The organization also applies some strategic thinking borrowed from the venture capital field in its search for a cure. And the man behind this approach is Chairman of Greylock Partners Henry McCance, one of the co-founders of Cure Alzheimer's Fund,
Anthony Tjan, founder and CEO of the VC firm Cue Ball, interviewed McCance for Harvard Business Review, and asked him to explain how VC principles manifest themselves in the organization's approach:
The most important way it did was in our mission: we are daring to be great. VCs don't seek 5% improvements; they try to invest in things that will be transformational, like Google, Cisco, Red Hat, and others. We wanted to apply the same upside-seeking strategy to Alzheimer's research. We looked at the way research was traditionally done and said we needed a much more entrepreneurial and VC mindset towards funding projects that could move us more rapidly to a cure. When we hosted a dinner for some leading neuroscientists, we learned that they spend a disproportionate amount of time, 30 to 35%, filling out bureaucratic forms to receive research grants from the NIH or other well-meaning organizations. The worst part is that the grant making peer review process is so risk adverse resulting in incremental progress. That kind of funding is the equivalent of a one-yard plunge by a full back from the New England Patriots, a far cry from the breakthroughs we wanted to fund. The scientists told me that they don't have any funding available for the twenty and thirty-yard pass kind of research. This was like the early days of VC when some very talented entrepreneurs did not have good funding sources for big ideas. After that, I was convinced that there was a role for Cure Alzheimer's Fund.
Read the full interview, and watch a video of McCance and Tjan's discussion here.
After his op-ed on inflation concerns (see post here)--or lack thereof--Alan Blinder spoke about inflation and deflation to Bloomberg. Take a look:
Business professors Jeff Cornwall of Belmont University, and George Solomon, of George Washington University, have created a new interactive quiz to, as Cornwall puts it, "help entrepreneurs assess their susceptibility to the recession." The Small Business Threat Index is up at Entrepreneur.com. Click here to take the quiz.
Nouriel Roubini is more concerned about looming inflation than Alan Blinder (see previous post). The NYU economics professor and chair of RGE Monitor sees a looming "W-shaped"--or "double-dip"--recession for both Europe and the United States. And today, speaking to CNBC from the Paris Conference on Long-Term Vlue and Economic Stability, Roubini warned of the effect of rising oil prices.
There's quite a bit of inlfation chatter going around these last few days. Some are concerned that the behavior of central banks around the world in applying varying degrees of quantitative easing policies will bring about inflation. Domestically, the question of inflation seems to center on whether or not the Federal Reserve has the capacity to fight inflationary threats that might come down the road. Columbia University economist , and former Fed governor, Frederic Mishkin, writes in today's Wall Street Journal that "the Fed is boxed in."
Alan Blinder says there are plenty of choices for things to worry about, but inflation shouldn't be at the top of the list. Blinder, professor of economics and public affairs at Princeton, former Vice Chairman of the Fed, and author, put forward three reasons he is not concerned with the Fed's capacity in the New York Times:
The possibilities for error are
two-sided. Yes, the Fed might err
by withdrawing bank reserves too slowly, thereby leading to higher inflation.
But it also might err by withdrawing reserves too quickly, thereby stunting the
recovery and leading to deflation. I fail to see why advocates of price stability
should worry about one sort of error but not the other.
The Fed is well aware of the exit
problem. It is planning for it,
is competent enough to carry out its responsibilities and has committed itself
to an inflation target of just under 2 percent. Of course, none of that assures
us that the Fed will hit the bull’s-eye. It might miss and produce, say, inflation
of 3 percent or 4 percent at the end of the crisis — but not 8 or 10 percent.
The Fed will start the exit process
when the economy is still below full employment and inflation is below target. So some modest rise in inflation will be welcome. The Fed
won’t have to clamp down hard.
Read Why Inflation Isn't the Danger here.
The Department of Labor has new employment figures out for May. The national unemployment rate now sits at 9.4%. That's up from 8.9% in April, and from 5.5% in May 2008. The state figures look something like this:
From the Bureau of Labor Statistics release:
In May, nonfarm payroll employment decreased in 39 states
and increased in 11 states and the District of Columbia. The largest over-the-month decrease in the
level of employment occurred in California (-68,900), followed by Florida
(-61,000), Texas (-24,700), and Michigan (-23,900). Arizona and Florida experienced the largest
over-the-month percentage decreases in employment (-0.8 percent each), followed
by Oklahoma (-0.7 percent) and Arkansas, Kentucky, and Michigan (-0.6 percent
each). The largest over-the-month
increases in employment occurred in Massachusetts (4,900), Connecticut (3,600),
North Dakota (3,000), and Alaska (2,900).
Alaska (+0.9 percent) experienced the largest over-the-month percentage
increase, followed by North Dakota (+0.8 percent) and Connecticut,
Massachusetts, and New Mexico (+0.2 percent each). Over the year, nonfarm employment decreased in
48 states and the District of Columbia, increased in 1 state, and remained
unchanged in 1 state. The largest
over-the-year percentage decreases occurred in Arizona (-7.4 percent), Michigan
(-7.2 percent), Nevada (-6.1 percent), Idaho (-5.5 percent), Oregon (-5.4
percent), and Florida (-5.3 percent).
Only North Dakota (+1.4 percent) reported an over-the-year percentage increase,
and Alaska (0.0 percent) reported no over-the-year percent-age change.
Read the full release here.
Avner Ronen knows how to make a splash with a startup. In launching his new online video company, Boxee, Ronen has disrupted the TV industry and drawn a lot of attention. Heavy hitter media owners NewsCorp and GE are troubled by Boxee's emergence, and seem inclined to make Ronen's life a little more difficult. But in this economy there is no time to waste. Worry about the long term later. There are no "angels" out there, Ronen says in this BigThink video, so entrepreneurs have to be quick, fast, and agile:
Christina Romer, chair of the President's Council of Economic Advisers, has a guest article in the latest Economist. Romer, who has been bullish on the Obama Administration's economic recovery plan, writes that we need to look back to 1937 to understand why, in her view, the stimulus spending is the right antidote for this recession. During FDR's first four years in office, the economy rebounded from the Depression in "rapid" fashion--"annual GDP growth averaged 9%." Unemployment dropped significantly in that period. But come 1937, unemployment surged (see chart at right from the Economist), as the country went into a deeper downturn. Romer:
...The fundamental cause of this second recession was an unfortunate, and largely inadvertent, switch to contractionary fiscal and monetary policy. One source of the growth in 1936 was that Congress had overridden Mr Roosevelt’s veto and passed a large bonus for veterans of the first world war. In 1937, this fiscal stimulus disappeared. In addition, social-security taxes were collected for the first time. These factors reduced the deficit by roughly 2.5% of GDP, exerting significant contractionary pressure.
Also important was an accidental switch to contractionary monetary policy. In 1936 the Federal Reserve began to worry about its “exit strategy”. After several years of relatively loose monetary policy, American banks were holding large quantities of reserves in excess of their legislated requirements. Monetary policymakers feared these excess reserves would make it difficult to tighten if inflation developed or if “speculative excess” began again on Wall Street. In July 1936 the Fed’s board of governors stated that existing excess reserves could “create an injurious credit expansion” and that it had “decided to lock up” those excess reserves “as a measure of prevention”. The Fed then doubled reserve requirements in a series of steps. Unfortunately it turned out that banks, still nervous after the financial panics of the early 1930s, wanted to hold excess reserves as a cushion. When that excess was legislated away, they scrambled to replace it by reducing lending. According to a classic study of the Depression by Milton Friedman and Anna Schwartz, the resulting monetary contraction was a central cause of the 1937-38 recession.
Red the full article here.
Inc. Magazine’s Max Chafkin has a comprehensive profile of Y
Combinator founder Paul Graham, who “funds more startups in a year than most
venture capitalists fund in a decade,” according to the article. Y Combinator is an incubator for
startups—Inc. calls it a “hybrid venture capital fund and business
school”. Forty businesses get some seed
money—up to $25,000—and Graham’s guidance and help in finding investors. They also get a boost from starting their
companies with a community of entrepreneurs.
Chafkin writes that this approach fits the economic times, as it
encourages smarter, faster, leaner strategies to get companies out of the gate.
...Falling bandwidth costs, improvements in open-source
software, and the emergence of cloud computing have made it much cheaper to get
a company off the ground. But it wasn't clear just how cheap it had become
until Graham launched Y Combinator, in 2005. His plan was to gather together a
group of smart kids, give them just enough money to keep them in instant
noodles and Wi-Fi, and help them bring their ideas from napkins to fully formed
companies. (A "y combinator" is a mathematical function that makes
other functions, just as Y Combinator is a company that makes other companies.)
The program was founded in Cambridge, Massachusetts, but has since moved to
Silicon Valley, where Graham hosts two groups of about 20 start-ups a year, in
January and in June, for three months at a time.
It's too early to say for sure how successful Y Combinator
will become. Early-stage investors expect a return within five to 10 years; if
Y Combinator has indeed financed the next Google, it could be a decade before
anybody knows. Still, the results so far are impressive. Of the 145 companies
Graham has funded, seven have been acquired and two have merged with other Y
Combinator start-ups. Just 27 -- less than 20 percent of the total number --
have failed, and the rest continue to operate. A quick survey of start-up
activity in Silicon Valley yields dozens of Graham's offspring -- red-hot Web
2.0 companies such as Scribd, Xobni, and Loopt. Meanwhile, funds modeled on Y
Combinator have sprung up in a dozen cities, including Boulder, Colorado; New
York City; London; and Greenville, South Carolina.
Read the full profile here.
And here’s a shot of Graham with some of his prize pupils.
Click here and then scroll over the photo for details.
Chris Anderson, Editor in Chief of Wired Magazine, says "free"--or "Free!"--is "the future of business." Sure, free products have been with us for ages--but, as in the case of giving away cookbooks to encourage housewives to buy Jell-O, "free" hasn't always been free. But while the 20th Century notion of "free" was a marketing strategy, Anderson says in the 21st Century "free" moves beyond a psychological tool.
We are living "in the world of Moore's Law." Everything gets cheaper and cheaper (following Moore's law, the cost of processing power--or the cost of a transistor--goes down by 50% every 18 months). And the marginal cost of productivity goes down to zero. So "free" has become truly free. And this is bringing radical change to the marketplace. Soon, "anything that becomes digital will be available in a free version."
Anderson has new book coming out titled Free: The Future of a Radical Price, and he spoke on the subject as the keynote speaker at Wired's Disruptive by Design conference earlier this week:
You can read Anderson's article on the subject from Wired here.
Austan Goolsbee jumped from Chicago, where he taught economics at the Booth School of Business, to Washington, where he was tapped to be chief economist for the President's Recovery Advisory Board. And on Monday he jumped into the fray with Stephen Colbert. Goolsbee defended the Obama Administration's approach to fighting the recession, its handling of the General Motors bankruptcy, and he told the Comedy Central host, "A year from now, we will be in a very happy place."
(h/t Justin Wolfers at the Freakonomics blog.)
Could a dropoff in movie-going be a postive economic indicator? Hollywood rode a wave of strong attendance figures through the first quarter of this year, lending credence to the notion that when economic times get tough, Americans seek the comfort of a cineplex seat. But now, according to Pamela McClintock of Variety, there is a bit of a cooling off for the summer box office:
When schedules revealed there was no tentpole for most of June, studios and theater owners quietly worried that traffic would take a dive. And they were right, sort of.
There's been a dip in moviegoing in each of the past three weekends, but not enough to drag down the bottom line. Much of that is thanks to breakout hits "The Hangover" and "Up," as well as booming weekday biz.
Summer revenues to date are running essentially even with last year, although attendance is running behind by 3%. The slight downturn is narrowing overall gains made this year in revenue and attendance, but those numbers routinely fluctuate.
Nothing staggering here, and the year-to-date figures remain strong. And certainly there are many factors at play other than the audience's perception of the economy's recovery. But as McLintock writes: "The summer frame will be an important test of whether the B.O.'s growth spurt was a knee-jerk reaction to the gloomy economic news or a long-term trend."
The White House is set to announce a new financial regulation plan today. A draft of the plan is available here, and as Stephen Labaton writes in the New York Times, if the final edition is in line with this draft, the Fed and the FDIC will soon have expanded regulatory powers:
The plan the president will formally announce on Wednesday would give the Federal Reserve greater supervisory authority over large financial institutions whose problems pose potential risks to the economic system. It would separately expand the reach of the Federal Deposit Insurance Corporation to seize and break up troubled financial institutions. And it would create a council of regulators, led by the Treasury secretary, to fill in regulatory gaps.
In doing so, the plan seeks to give Washington the tools to police the shadow system of finance that has grown up outside the government’s purview, and to make it easier for regulators to head off problems at large, troubled institutions or take control of them if they fail.
Labaton also points out that the plan has many contributors: many "government officials, financial experts, lawmakers, industry executives and lobbyists" weighed in on the proposed plan. The Times's John Harwood asked President Obama yesterday whether he chose to put forward a plan that has a greater chance of political support rather than one that might be more comprehensive:
The President also sat down with the Wall Street Journal yesterday to discuss financial regulation, and he again stressed that his desire is for the federal government to have a "light touch" when it comes to regulation. Here is a transcript of that interview.