Bloomberg Businessweek Weekend - March 27th, 2026

Summary

Bloomberg Businessweek Weekend – March 27th, 2026
Hosts: Carol Massar & Tom Keene
Guests: Sheila Khayalu (Jefferies), Ray Takeyh (Council on Foreign Relations), Wilbur Ross (Former US Secretary of Commerce), Max Chafkin (Bloomberg Businessweek)

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Episode Overview

This episode of Bloomberg Businessweek explores the immense and rising cost of the US-Israeli war in Iran, its implications for defense spending, the evolving landscape of global security, and the societal reckoning with elite trust and accountability in the wake of the Epstein files. Insightful interviews with top analysts examine both the economic realities shaping today’s geopolitics and the public’s shifting attitudes toward business and political leaders.

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Key Segments & Discussion Points

1. The Soaring Price Tag of War and Surge in Defense Spending

(Segment starts: 02:04)

Theme:
The show opens by setting the week’s geopolitical backdrop: ongoing hostilities in the US-Israeli war in Iran and the market’s whipsaw reactions to fragile ceasefire hopes. Hosts Carol Massar and Tom Keene focus on the enormous price of these conflicts and how it’s driving historically high US defense spending.

Key Points:

• The financial toll of the Iran conflict has surpassed $25 billion five weeks in.
• US Secretary of Defense requesting an additional $200 billion—a record sum since Covid relief budgets.
• The anticipated fiscal 2027 defense budget request: $1.5 trillion (a 50% boost).
• Growing consensus in government that $1 trillion annual defense budgets may become the new normal.
• Rising production guarantees on key missile systems (e.g., Raytheon's PAC-3 scaling from 600 to 2,000 units/year over 7 years).

Notable Quote:

"The bottom line is we're talking about lots of money, big increases… the idea of $1 trillion budgets annually for defense is maybe something that we could be seeing for years to come." – Tom Keene (04:15)

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2. Interview: Sheila Khayalu (Jefferies) – Defense Industry Outlook

(Segment starts: 04:55 – 14:38)

Insights:

• Missile Production & Supply Chain:
  • Government is guaranteeing large, multi-year procurement frameworks.
  • Major primes like Raytheon and Lockheed Martin boosting capacity and capex.
  • Supply chain primarily domestic, with government pushing for dual sourcing to ensure against bottlenecks.
  • Not just about well-known defense brands; suppliers and component makers stand to benefit (e.g., Woodward, Heiko).
  • Growth opportunities across dozens of missile types—"missiles is the best part of the market in terms of growth." (05:36)
• Pricing & Margins:
  • Guaranteed revenues don’t yet mean guaranteed profit margins.
  • Primes must fund significant capex, often at the expense of share buybacks.
  • Investor upside is uncertain absent more margin clarity.
• Drones & New Warfare:
  • The US seeks more advanced drones—maneuverable, scalable, equipped for electronic warfare.
  • "Readiness, scalability, and affordability" (11:55) are emerging themes; can’t keep spending $5 million to shoot down $50,000 threats.
  • Rise of defense tech startups supported by government (e.g., Anduril, Voyager).
• Programs at Risk:
  • If budgets aren’t approved, legacy programs like the F-35 or helicopters might be targeted for cuts.
  • Ironically, use in current engagements like Iran is reviving investor interest in these platforms.
• Aviation Side Effects:
  • Middle East airline capacity slashed by 80%; repercussions for global air traffic, aftermarket demand, and traveler costs.

Notable Quotes:

"What the Department of War has done... is to put forward frameworks on missile production, saying over the next seven years, we'll guarantee you production increases... from 600 units a year to 2,000 units a year. That's a big revenue bump."
– Sheila Khayalu (05:49)

"There isn't unlimited supply. And what we do manufacture from a missile perspective is quite expensive. We're doing it in low quantities, so we have to do it in larger quantities and also find ways of manufacturing cheaper munitions and missiles."
– Sheila Khayalu (06:17)

"We can't manufacture shoot down objects with $5 million missiles when they have $50,000 missiles."
– Sheila Khayalu (11:55)

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3. Iran Post-War: Geopolitics, Regime Change & Nuclear Ambitions

(Segment with Ray Takeyh: 18:21 – 22:58)

Insights:

• Diplomatic Endgame:
  • Both the US and Iran may be seeking an "off-ramp" but posturing continues.
  • Previous negotiations have often been precursors to renewed hostilities.
• Regional Response:
  • Gulf Arab states likely didn’t plan for war; now trying to balance alliances with the US and avoid antagonizing Iran in the aftermath.
  • Expect a return to cautious balancing, rather than dramatic regional realignment.
• Iran’s Internal Transformation:
  • The regime will fundamentally change post-war, not least due to the loss of senior leadership ("large scale decapitation").
  • Power is shifting to a new, less experienced generation—"their formative experience was not the 1979 revolution" but the Syrian Civil War.
  • Emerging elite likely to be "more militant but also more brittle… less competent in statecraft."

Notable Quote:

"The Islamic Republic that survives this war is going to be very different than the one that went in before... more militant but also more brittle in a sense that the elite that's coming to power are less competent in statecraft and management."
– Ray Takeyh (21:22)

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4. Interview: Wilbur Ross – The US ‘Waking Dragon’ & Global Power Dynamics

(Segment: 23:07 – 32:02)

Insights:

• US Military Power as Deterrent:
  • The Iran war signals US willingness to use its force—reversing perceptions of previous "paper tiger" administrations.
  • Belief that "the best way to avoid a war is if everybody knows you’re fully prepared not only to pursue it, but to win." (24:03)
• Impact on Other Powers:
  • Russia and China are now "on notice."
  • US support for Taiwan and repatriation of semiconductor production add to deterrence.
• Rapid Success in Iran:
  • Surprise at speed and effectiveness, including air superiority and crippling of Iran’s defenses.
  • Minimal US casualties kept domestic opposition at bay.
  • The destruction of Russian-made defense systems in Venezuela and Iran sends a warning to Moscow.
• Economy & National Security:
  • Restoring manufacturing, especially in tech and AI, is critical for future defense.
  • Education must keep pace with a more technical and innovation-driven economy.
  • "A very, very key component of defense strategy is economic power." (30:31)

Notable Quotes:

"This war will make less likely armed conflict elsewhere because people have now seen that at least under President Trump, U.S. is willing to use its enormous military strength to deal with threats."
– Wilbur Ross (24:03)

"The most remarkable and fortunate part is that there have been so few American casualties in the war. Now, even one casualty is a horrible thing... But when you consider everything, it’s been very, very small."
– Wilbur Ross (27:52)

"Any future war is going to be fought in space and in cyber... a very, very key component of defense strategy is economic power."
– Wilbur Ross (30:31)

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5. Max Chafkin on the Epstein Files Crisis and the Elite’s Trust Reckoning

(Segment: 35:21 – 46:20)

Insights:

• Erosion of Public Trust:
  • Broad, bipartisan hostility toward “elites” (business, universities, media, government) at new highs.
• The ‘Bomb’ of Epstein Files:
  • New data dump exposes embarrassing, venal behavior among top business and political leaders.
  • Public trust further battered by perception of a hermetically sealed, unaccountable “Epstein class.”
• Consequences and Lack of Accountability:
  • Unlike in some countries, US elites rarely face full social or financial consequences ("a lack of accountability").
  • A few resignations (e.g., Larry Summers at Harvard, Kathy Ruemmler at Goldman Sachs), but many remain untouched.
• Broader Social Impact:
  • Fallout is affecting companies with even tangential connections (e.g., Apollo’s subsidiary facing boycotts).
  • Will likely reverberate into politics, elections, and evolving consumer attitudes.
• Why Did People Stick With Epstein?
  • Access and money, but also a failure in moral compass and judgment.
  • Private communications reveal a self-serving, insulated culture ("a little private club").
• Reckoning Ahead:
  • Those who confront past associations head-on may recover; evasive responses only fuel cynicism.
  • Lasting reforms require more than PR fixes—public wants amends and real accountability.

Notable Quotes:

"This is like a bomb going off in the relationship that Americans and people all around the world have with their business leaders. And it's going to take a long time... to rebuild trust."
– Max Chafkin (36:13)

"There is a sense of... a lack of accountability. Right. A bunch of the people... have resigned... but there are still people who are in their jobs. What I would just say is I think we're at the very early stages of this process."
– Max Chafkin (38:16)

"What's so damaging about these files is... this little private club and people who seem only interested in maneuvering within that clique in ways that are just embarrassing."
– Max Chafkin (40:11)

"At some point, people are gonna have to confront it head on rather than trying to get around it with these kind of evasive statements."
– Max Chafkin (43:57)

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Noteworthy Quotes (with Timestamps)

• "Missiles is the best part of the market in terms of growth to invest in for investors." (Sheila Khayalu, 05:36)
• "We can't manufacture shoot down objects with $5 million missiles when they have $50,000 missiles." (Sheila Khayalu, 11:55)
• "The Islamic Republic that comes out of this war... is likely to be more militant but also more brittle." (Ray Takeyh, 21:22)
• "The best way to avoid a war is if everybody knows you're fully prepared not only to pursue it, but to win." (Wilbur Ross, 24:03)
• "This is like a bomb going off in the relationship that Americans... have with their business leaders." (Max Chafkin, 36:13)
• "These files... show an incredible lack of judgment. And we're talking about people who are supposed to be professional judges of... capital." (Max Chafkin, 41:35)

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Key Timestamps

• 02:04 — War in Iran and market reactions; defense spending headlines
• 04:55 — Sheila Khayalu details defense sector outlook; missile ramp-up
• 11:44 — Cost of war; military readiness & new tech priorities
• 18:21 — Ray Takeyh on Iran’s regime, Gulf reactions, and future scenarios
• 23:07 — Wilbur Ross on US global strategy, Iran war’s lessons, China & Russia deterrence
• 35:21 — Max Chafkin on Epstein files, crumbling elite trust, and the public’s sense of accountability

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Conclusion

This episode delivers an in-depth look at the intersection of war, economics, and society in 2026—from the Federal budget battles driving the next era of US defense procurement, to the future of Iran’s regime, to the trust crisis confronting global elites. The hosts, joined by top experts, connect the dots between battlefield tactics, Wall Street investments, and the broader fabric of public trust and accountability.

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For more Businessweek analysis, watch and listen to Bloomberg Businessweek LIVE weekdays from 2–5 PM ET on YouTube, or subscribe to the Bloomberg Businessweek Daily Podcast.

Transcript

[Tom Keene]

They told us to expect change.

[Sheila Khayalu]

They warned us about the transition, but honestly, they forgot the best part.

[Tom Keene]

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[Sheila Khayalu]

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[Tom Keene]

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[Sheila Khayalu]

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[Carol Massar]

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[Sheila Khayalu]

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[Carol Massar]

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[Sheila Khayalu]

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[Tom Keene]

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[Carol Massar]

Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily podcast with Carol Massar and Tim Stanback on Bloomberg Radio Hi everyone.

[Tom Keene]

Welcome to the Bloomberg BusinessWeken podcast. Another week where the U.S. and Israeli war in Iran dominated headlines, much of it over whether or not actions were happening to bring it to an end, maybe a ceasefire even as all sides continued with military attacks. And Tim, that really was the back and forth all week and there were times the markets kind of bought into something that maybe an end was near and then there were times they just didn't believe it. And that was kind of our our backdrop.

[Carol Massar]

And watching them react in real time was really what told us what people thought was or is going to happen. That's how markets work. One area we wanted to focus on is a world where defense spending is a priority for many countries to protect against a changing and I think surprising geopolitical environment. For more on that and the US Defense spend, we caught up with noted defense and aerospace analyst Sheila Kialu to talk numbers and weapons Also on the

[Tom Keene]

war regime change in Iran, what the people there may really want and, you know, their nuclear ambitions post war. I mean, these are things that still are questions going forward. We talked about that with Ray Takei from the Council of Foreign Relations, plus

[Carol Massar]

a former Trump insider who served as secretary of Commerce during the first Trump White House. We're talking about Wilbur Ross on awakening the sleeping giant that is the US

[Tom Keene]

and then later on the leaders in business and finance and politics and lots of parts of our world and why it might be time for them to make amends. Bloomberg's Max Chaffkin breaks down the ongoing crisis for the Epstein elite.

[Carol Massar]

All that to come. We begin, though, with the soaring price tag of war. With the conflict in Iran now in its fifth week, the financial toll is already surpassing $25 billion, with US Secretary of Defense Pete Hegseth recently defending a request for an additional $200 billion from Congress. If that's approved, that spending bill would be the largest since the 2020 Covid relief bill. That's according to the Congressional Budget Office. So for some context here, $153 billion was given to defense this year in the one big beautiful bill and an anticipated $1.5 trillion is requested for fiscal 2027. That's a more than 50% boost from the most recent budget.

[Tom Keene]

Yeah, I think the bottom line is we're talking about lots of money, big increases. And I know in reading in for this and writing this, the two of us coming across things too, where folks were saying in the government that the idea of $1 trillion budgets annually for defense is maybe something that could we could be seeing for years to come. So it's a lot of money. Now, someone who understands this space is Sheila Khayalu. She's managing director in equity research over at Jefferies. She covers aerospace, defense and airline sectors. We caught up with her a bit more than a week ago just after her recent trip to Washington, D.C. for a hearing from senior leadership at the Department of of Defense. You were in D.C. this week, right,

[Sheila Khayalu]

at a big event? Yeah, we attended a conference called the Macalies Conference. Jim Macalies is an expert in bringing folks from the Department of War together, whether it's army, secretary, Navy, Air Force and critical weapons systems. And the theme there, very, you know, clearly all appointed by the administration. So there's a view there, $1.5 trillion budget is going to come out from the president's request at the end of April and May. That's kind of new. It's delayed, we thought any day now, but we know it's going to be at the end of May, end of April, and they're stick to their 1.5 trillion. And I don't know how Democrats will align with that, with that. You know, President Trump's comments, I don't know if we're at unlimited stocks of missiles and munitions, but that's one thing that's clear from all the DOD employees is all the Department of War folks is that missiles is the best part of the market in terms of growth to invest in for investors. And that's why you're seeing, you know, 4x production increases. So what the Department of War has done, working with multiple primes like Raytheon, like Lockheed in, is to put forward frameworks on missile production, saying over the next seven years, we'll guarantee you production increases on a PAC3 missile from 600 units a year to 2,000 units a year, which is a big revenue bump. And we will guarantee that for the next seven years. So can you build enough capacity to do that?

[Tom Keene]

Can they?

[Sheila Khayalu]

Well, they're working on it. And I think that's a theme that the Department of War more than anything could align on, whether it's Republicans or Democrats, is that, you know, there isn't unlimited supply. And what we do, manufacture from a missile perspective is quite expensive. We're doing it in low quantities, so we have to do it in larger quantities and also find ways of manufacturing cheaper munitions and missiles.

[Carol Massar]

The President's comments about what Raytheon is doing, building four factories, Lockheed building five or six factories, does that align with what these companies have said publicly?

[Sheila Khayalu]

Yeah, we're seeing 30% increases in CapEx for basically 15 to 20% of their revenues. We continue to see 8% even though we're hold rated 8% upside in our estimates. If Raytheon and Lockheed could actually meet these frameworks, and those are only three that have been announced thus far, I think you'll see more to come. There's dozens of offensive and defensive missiles. We put out a missile primer today and folks were emailing me, well, you missed this one. While you missed this one, I was like, well, there's so many opportunities to continue to invest and I think that's one thing the government will agree on.

[Tom Keene]

I mean, it's a whole supply chain, right? It's the suppliers. I mean, when you look at it, we obviously talk about the big defense companies, whether it's Lockheed Martin, whether it's rtx, but there's a ton of American companies, right, that are going to be impacted by this.

[Sheila Khayalu]

We're trying to find ways that might not be as obvious that have also really great margins associated with it and might not have to have the massive capital expenditures without the share repurchases. So like Woodward is a great way to play it. Solid rocket motor providers, you know, even Heiko that does missile components, Albert in Israel. So there's a whole slew of ways to play missile defense and offensive missiles.

[Tom Keene]

So not just us, obviously global.

[Sheila Khayalu]

And like, you know, I would say helmet and Woodward are great ways to play it that traditionally people might not think of.

[Tom Keene]

Can I just ask you, what is the supply chain like for defense companies? Is it a global one?

[Sheila Khayalu]

No, it's mostly in the, it's mostly in the U.S. but what the government's trying to do is source a dual source IT in the US So having multiple suppliers because the capacity increases are going to be pretty significant.

[Carol Massar]

So I hear you talking about the opportunity that these primes have ahead of them. Yet you, as you mentioned you still have a hold rating on rtx, Northrop Grumman, Lockheed Martin, we what would prompt you to change those to buy ratings?

[Sheila Khayalu]

I think the Department of War, one of the things that they've done is, has guaranteed the top line but they haven't guaranteed margins associated with it. On top of that, the primes have to invest their own capital, cut their repurchases in order to invest in the capex themselves. So at the end of the day it doesn't change their EPS algorithm much. It actually keeps it the same even though they're investing for the Department of War much more. And that was part of the executive order President Trump put in at the start of this year. He said I'll give you these frameworks, I'll boost the budget, but we haven't seen margins associated with it. And of course some visibility as they finally have five seven year contracts should be helpful in margins then they don't have to renegotiate a contract term every year.

[Tom Keene]

Having said that, we have an administration that when it identifies something as important to national security, they get kind of more aggressively involved, whether it's the semiconductor space, whether it's rare, you know, earths and rare minerals. And I just wonder, is there something more that we would anticipate from the administration? This administration, when it comes to defense companies, whether it's taking a stake, making some further investments. I'm just curious what you are hearing.

[Sheila Khayalu]

I think they'll continue to do that, whether it's providing frameworks so they'll allocate the dollars. So that'll be big contracts. So the primes will have no choice but to invest. It won't be, you know, kind of wishy washy, like we're only going up 5, it'll be 600 to 2,000. So the capex investment is needed, is critical. There's a seven year time horizon. So first we'll see more long term frameworks. Second, I think you could see some stakes. We've seen some of it already.

[Tom Keene]

Yeah.

[Sheila Khayalu]

Of course these primes don't have infinite capital and like they're already spending a big chunk of their capex now associated with missiles. So if there's more and more needed, you could see the government get involved.

[Tom Keene]

Can I just ask to shift to drones or more drones? Like I think this war has been fascinating. Well, fascinating is a bad word to use because it seems the way that

[Carol Massar]

it's fought different than previous wars.

[Tom Keene]

Yeah, like is there a shift in terms of the kind of weapons that these companies want to be working on or are working on in the future or does that kind of get sidelined as a result of these orders from the government?

[Sheila Khayalu]

There's so much going on. Right. So with Russia and Ukraine, I think you've seen 70% of the fatalities associated with drones, but that's not the kind of drone warfare the US might use. So we'll need more maneuverability, more electronic warfare with drones. But the key I think whether it's missiles, munitions or drones, is ability to manufacture it today, readiness and scalability, doing it in the hundreds of thousands, not only 100 or 200 or 2,000 units even, which is what we've seen from at least Russia, Ukraine, Iran is they manufacture missiles in the thousands, not, not smaller quantities like we do.

[Carol Massar]

How are you looking at magazine depth in the context of comments that we heard from the Secretary of Defense, he said in the Oval Office, missiles being shot down. Shot are down over 90% since the beginning. One way attack drones down over 90% since the beginning. The US is going after Iran's industrial base. Does that mean a lot of the munitions that we've used up or have used those will not be used in the coming weeks or months depending on how long this goes. Just because Iran's capabilities have changed.

[Sheila Khayalu]

You know, I'm not sure how Iran's stockpiles look, but what we're doing is very expensive. I don't know how much the war is costing, but it could be 10 billion of debt.

[Carol Massar]

So 200 billion more is what?

[Sheila Khayalu]

Yeah. So over the last 18 days, I mean it's very expensive what we're doing. So we have to a theme is like readiness, scalability, and also affordability. We can't manufacture shoot down objects with $5 million missiles when they have $50,000 missiles. So we have to come up with ways. And that's what's really driven. Like this administration has been super supportive of startups, the defense tech names in the world. It's led by Anduril, that's more publicly known. But there's a whole bunch of names we cover like Voyager, that are out there trying to take a piece of the pie that was previously not given to them.

[Tom Keene]

Hey, I want to bring in a question from our Wayne Sanders, who we talk to a lot about. He's down in Washington and part of our Bloomberg intelligence team. But he said, which programs are most at risk of funding versus revenue due to execution or industrial bottleneck?

[Sheila Khayalu]

That's such an interesting question because I asked Jules hurst, who's the DOD comptroller, so think of him as the DOD CFO managing about 1.5 trillion. And this week I asked him, what do you think is going to get cut if the Democrats don't approve your 1.5 trillion budget? And he's like, I had a hard time getting to 1.5 trillion. I had to cut to get there. And I was like, the budget today is 1 trillion for context. So 1.5 is a significant increase. So the Republicans are going for full steam increases across everything, essentially. And I think historically what's been thought of as areas that will be reduced is F35 a fighter of the past, or helicopter spending? And we're seeing that obviously come into the forefront of conflicts like Venezuela and even Iran, right, where we're using older aircraft and the need for it, it's kind of reignited that need.

[Carol Massar]

Can you believe we're Talking about the F35 as being something of the past, given how much we spent on it?

[Sheila Khayalu]

For investors, it was something of the past, but it's actually driven a revival in Lockheed stock, which has been leading the primes in terms of performance as we've seen it used multiple times. So it's had a bit of a rebirth.

[Tom Keene]

Okay, all right.

[Carol Massar]

Do we have time for a question on airline airlines?

[Tom Keene]

Like what do we need to know right now?

[Sheila Khayalu]

I think, you know, basically this is a month of COVID for airlines in the Middle East. You know, you're seeing capacity cut 80%. So a lot of work is being done on what does that, how does that impact global air traffic up 5% Mideast accounts for 10. How does that hit number one? Global air traffic, global aftermarket demand. And then how does that hit sticker shock for folks buying airline tickets in the US as oil goes to wherever it's going to go?

[Tom Keene]

Yeah, we talked about a lot of travelers like buying tickets in advance before this stuff. Kind of.

[Sheila Khayalu]

I've been doing that.

[Tom Keene]

Lock the doors. We're not letting her go. We're just going to continue. We're going to, as Tom Keene would say, we're going to rip up the script. You are a Jeff, thank you so much.

[Sheila Khayalu]

Thanks.

[Tom Keene]

Sheila Khayalu, she's managing director and equity research over at Jefferies. Just a must when it comes to defense and airlines. They told us to expect change.

[Sheila Khayalu]

They warned us about the transition, but honestly, they forgot the best part.

[Tom Keene]

This is the chapter where we finally focus on us.

[Sheila Khayalu]

LifeMD delivers expert menopause and midlife care right from your home. From hormone health to holistic wellness, LifeMD

[Tom Keene]

helps you feel your best for the best years of your life.

[Sheila Khayalu]

LifeMD it's just getting good. Visit LifeMD.com good life support for the

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[Tom Keene]

You might say this past week we saw the US Warner on in a constant state of high stakes escalation diplomacy with both sides seemingly signaling a desire to end the conflict. And yet they continued attacks from all sides.

[Carol Massar]

On that, we wanted to bring you two conversations that really got us thinking about after the US War in Iran is over and what might be the future of the country, regime change, nuclear ambitions. Also it got us thinking about the US Role in the world.

[Tom Keene]

I feel like there's a lot of questions about longer term this US War and Israeli war in Iran. What's the longer term impact? So let's start with Iran's future and we did that with Ray Takei, Senior Fellow for Middle East Studies at the Council on Foreign Relations.

[Ray Takei]

On the American side, the President may be looking for an off ramp with everything that has happened in the markets and so on. However, with President Trump, there's always a large number of options that he can consider. There's a lot of military deployments taking place in the region and so what we have seen in previous rounds of negotiations in June and in March, in February, they were usually preludes to war. So this may be another one. What the President is saying about discussions doesn't meet the manpower that he's deploying, but he may be looking for off ramp from a war that is proving more complex than he thought. I suspect that Iranians, despite their narrative of success and triumph, are also looking for a way out of this. They have suffered a great deal and they may be essentially trying to figure out how to extricate themselves from this conflict as well. So we'll see if this mediation is real and we see if it can produce some sort of agreement not to settle the conflict between the two nations, but at least some sort of an armistice for now that allows everybody to return to their corners.

[Tom Keene]

All right, so let's throw on top of that, Ray, about Iran's biggest Gulf Arab neighbors considering joining the U. S. Israeli war. I'm trying to understand that. And help me out here in your understanding or thinking and your knowledge of this region. Did the region know, did Saudi Arabia know that Donald Trump was going to do this, was willing to go along, and maybe this is part of a bigger strategy, a plan, or are they just looking at it and saying, wait, this could actually be an opportunity for us to change the direction of the Middle east going forward? I'm just trying to understand the steps here. Or is it all just kind of happening in real time with no big strategy?

[Ray Takei]

I suspect the latter. I'm not quite sure if this is a very synchronized, thought out plan. And in terms of the Gulf states before the war, they were essentially having a policy of detente with Iran and actually pressuring the administration not to engage in the conflict because the Iranians were quite clear about what they would do should there be an attack on them. They said they would regionalize the war and they would also target energy supplies as well as the passage to the Gulf of Orom, to the, to the Persian Gulf. So there was nothing surprising about what the Iranians did. There are some reports that the Gulf states are becoming more aggressive, but honestly, I suspect at the end of this war, whatever it is, they will return to their practice of trying to balance the two sides, having a relationship with the United States as close, but also not necessarily being antagonistic to the neighbor in the north, which would be aggrieved, injured and quite angered.

[Carol Massar]

Well, the implication of what you just said, Ray, is that we don't see a very changed Iran following the end of this conflict.

[Ray Takei]

Oh, no, Iran will certainly change after this conflict. The Islamic Republic that survives this war is going to be very different than the one that went in before. For one thing, a large number of highly senior officials have been decapitated. And one of the things that has happened with this large scale decapitation is you're beginning to finally see a generational shift where you began to see a new group of people gradually coming to power in terms of the military services, the Revolutionary Guards and others. You begin to see these second tier officials coming to power. And for them, their formative experience was not the 1979 revolution. They were too young for that. Wasn't even Iran Iraq war. They may have participated in this last latter stages. For a lot of them, their most formative experience was a Syrian civil war. A large number of the Iranian military officials rotated through that Syrian civil war. About thousand died. And the lesson they drawn from the Syrian conflict that what was built for a long period of time collapsed in a matter of three weeks. So they're likely to be more vicious in protection of their patrimony at home. The Islamic Republic that comes out of this war should have survived, which I suspect it will, is likely to be more militant but also more brittle in a sense that the elite that's coming to power are less competent in statecraft and management and so forth. So Islamic Republic is going to be very different.

[Tom Keene]

Always appreciate your insight, Ritika. He is senior fellow for Middle East Studies at the Council on Foreign Relations. Of course understands this region former at the State Department.

[Carol Massar]

I also want to bring on former U.S. secretary of Commerce Wilbur Ross. He's well known to the Bloomberg audience and to to Wall Street. A longtime distressed investor, he has restructured over $400 billion of assets, everything ranging Carol, from airline apparel to auto parts, homebuilding, insurance, marine transport, oil, gas, shipyard steel, textile, trucking industries and more.

[Tom Keene]

Yeah, certainly understands a global market and certainly geopolitics and more and politics here in the U.S. wilbur, so good to have you. He is chairman, president, CEO of Ross Acquisition Corporation. He joins us from Florida. Great to have you back on Bloomberg and to be talking with you again. Big picture. You told our Scarlet Fu. Wilbur, the action in Iran is long overdue. You're not alone in that thinking. We've heard other people on Bloomberg say that you also believe that this war is temporary in nature, even if we don't exactly know when it ends. What do you believe is the long term impact of this war when it comes to geopolitics, when it comes to global markets? How do you think about it?

[Wilbur Ross]

I think this war will make less likely armed conflict elsewhere because people have now seen that at least Under President Trump, U.S. is willing to use its enormous military strength to deal with threats. That was not at all clear under the Biden administration nor under the Obama. So I think part of the reason so much trouble boiled up was that they viewed us as a paper tiger. But with what happened in Venezuela, what's happening now in Iran and what's probably going to happen very quickly in Cuba, I think people have seen the Sleeping Dragon is no longer sleeping. Sleeping Dragon is perfectly ready to put its Fangs wherever they're needed. So I think the old saying holds true. The best way to avoid a war is if everybody knows you're fully prepared not only to pursue it, but to win.

[Carol Massar]

You mentioned Venezuela, you mentioned Cuba, you mentioned Iran. At this point, Secretary, who else has been put on notice?

[Wilbur Ross]

Well, everybody's been put on notice. I think ultimately China and Russia are unnoticed. Well, we haven't done much about invading Russia and probably won't initiate anything like that. We have provided support of one kind or another to Ukraine, and we certainly have been arming Taiwan. And even more importantly, we've been moving a lot of the semiconductor technology from Taiwan to the United States. So we're becoming both less vulnerable in the event something happens on Taiwan, and yet also showing that we're very interested in it.

[Tom Keene]

You know, I find it interesting, Wilbur, that you went to Russia, and I just think, you know, and maybe you can give some insight into President Trump, because I think there are things that are said that seem to indicate a friendship, a camaraderie with a certain leader, be it President Putin. And yet it sounds like, from what you said, that Russia needs to be kind of on guard when it comes to the United States. Help us understand President Trump and who he sees as true allies and who he sees as foes.

[Wilbur Ross]

Well, in terms of Russia, my point is a very simple one. Russia has had a terrible struggle with Ukraine, a much smaller, much weaker country. And in fact, lately, the last report I've seen, The Ukrainians regained 125 square miles of territory that Russia had previously occupied there. So clearly, the Russian war, after all these years, all these vast numbers of debt, all this destruction both to Russia and Ukraine, they haven't really gotten as far as they thought. I think if Russia had had any idea that the Ukrainian war would go the way it has, I don't think they would have gone in. They thought it would be an easy cakewalk, and they were wrong. Now, roll that forward.

[Tom Keene]

Well, is that the same with how you see that maybe the US Approach on Iran? Forgive me for interrupting, but I'm just. I think there was a thinking that this was going to be a lot easier. Easier? Do you agree?

[Wilbur Ross]

No, I don't think so.

[Tom Keene]

Okay.

[Wilbur Ross]

I think, in fact, it has gone better than our. Any expectation we could have had. Who would have thought that within the first couple of weeks we would get total air superiority? Who would have thought we could have knocked out 100 and some odd vessels, virtually the whole series of vessels that Iran has? Who would have thought we could have done as much damage to the missile site and to the nuclear facilities as we have. So I think the war has gone much more rapidly than we could have thought. And I think the most remarkable and fortunate part is that there have been so few American casualties in the war. Now, even one casualty is a horrible thing. And I would have felt a heck of a lot better without it. But when you consider everything, it's been very, very small. My big fear had been American soldiers coming home in body bags week after week after week. I think that would have caused a lot of unrest within our population. But the other big strategic message, we knocked out their air defense mechanism pretty quickly. Iran is essentially defenseless against our attack. And if you roll back to Venezuela, they knock that out within a few minutes. And guess whose defense system that was? That was the Russian defense system. So you ask, why would Russia give second thought? I think they would give second thoughts because they've just seen what it means to have the US Pushed too far.

[Carol Massar]

Right. We're speaking with Wilbur Ross, chairman, president, CEO of Ross Acquisition Corp. Also former U.S. secretary of Commerce. Mr. Secretary, you mentioned the movement of chip production from Taiwan to the United States. States. That's happening very slowly and analysts don't know if it can ever happen completely. But you are known for your investments in industries that were once thought long gone, especially in the US Steel plants, textile mills. The President certainly wants to bring back that type of manufacturing to the United States and build it up here. I'm curious on your view about how national security concerns are changing that globally. Apart from semiconductors, how are you thinking about some of these other industries that the President is supporting?

[Wilbur Ross]

Well, he's supporting all technology and I think that's the right direction to go because any future war is going to be fought in space and in cyber. So I think directionally he could not be more correct than what he's doing. I also think that he is correct in fostering AI because AI is what will produce more productivity and therefore more economic growth. Every big technological innovation has always had the longer term effect of adding jobs, but it redefines them. So we need to be sure that our educational system can keep up with the needs for an increasingly technical economy. And as long as it does, I think we'll be there. Now, why is that important? The way we won World War II and the way I believe Reagan won the Cold War was the Russian military and the Russian civilian economy could not keep up with him. And therefore, at the end of the day, a very, very key component of defense Strategy is economic power.

[Tom Keene]

We have to leave it there. Wilbur, we appreciate your time so much. Wilbur Ross He's Chairman, President CEO of Ross Acquisition Corporation of course, former US Consultants Commerce Secretary during President Trump's first term.

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[Max Chaffkin]

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[Carol Massar]

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[Sheila Khayalu]

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[Carol Massar]

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[Tom Keene]

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[Sheila Khayalu]

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[Carol Massar]

IBM. You're listening to the Bloomberg BusinessWeek Daily podcast. Catch us live weekday afternoons from 2 to 5pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. The sense of growing hostility toward business leaders and others empowers everywhere you look. It's in polls that show sinking opinions of large companies, universities, the media, churches, in virtually every major institution.

[Tom Keene]

We talk about this a lot.

[Carol Massar]

We do.

[Tom Keene]

Like people have lost faith.

[Carol Massar]

Well, it's coincided with dueling populist political movements. You've got on the right, President Trump's attacks on a shadowy global elite. On the left by Zora and Mamdani's broadside against billionaires. The question that Max Chaffkin writes, he's Bloomberg businessweek senior reporter, how did business leaders get so crosswise with the public? There are a lot of reasons, including the sense that our business leaders themselves, Max writes, are part of the problem. Max Chaffkin is co host of the Everybody's Business podcast. He's the author of the Contrarian, Peter Thiel and Silicon Valley's Pursuit of Power. He joins us here in the Bloomberg Interactive Broker Studio. What I read from that entire sort of first portion of your piece does not include the name Jeffrey Epstein. But the connection that you make is this is illustrated in the Justice Department's release of the Epstein files. Make that connection for us.

[Max Chaffkin]

Yeah, I think that there was already in the background, as just as you said, Tim, a lot of hostility towards, quote, unquote, elites, towards business people, not just business people, but people in the media and so on. And then you filtered this scandal on top of it and sort of some of the unique contours, one of which is it matches with an existing conspiracy theory, which is that there were already a lot of people on the Internet primed to believe that there was a global cabal of pedophiles. You have this thing that it's not exactly that, of course, but it does have some contours there. Jeffrey Epstein, of course, was accused of trafficking teenagers. So there's that aspect of it. And then on top of that, you just have this massive data dump. For better or worse, there are now 3 million, 3.5 million documents that anyone can go look and you can see some of the wealthiest and most respected People in the world sort of bickering and doing things that are very, very embarrassing. And that is a thing that I think we're gonna be talking about for years, if not decades. This is like a bomb going off in the relationship that Americans and people all around the world have with their business leaders. And it's gonna take a long time for business leaders, and not just business leaders, politicians and so on, to rebuild trust. And you have this ongoing conspiracy theorizing politicians are using it. It's going to be a thing we're going to be talking about for a long time.

[Tom Keene]

Is it really a bomb going off? And I just think about, certainly for the people who are cited in these files, I think that's something that it's kind of wild, interesting to watch. And we've talked about what's happened in the UK with some officials. It was a joke at the academy of what about, you know, UK officials get taken down and, you know, you don't necessarily see the mighty falling. You do a little bit, but you do wonder, are they ostracized from society? Do they lose their wealth?

[Carol Massar]

And other countries, you see them fall in the U.S. it's kind of like not so much.

[Max Chaffkin]

I mean, that's one of the things that I would argue is making this bad is that there is a sense of a lack of accountability. Right. A bunch of the people. There are some people who have resigned from their job. So Larry Summers stepped down from Harvard. Kathy Rumler has said she's stepping down from Goldman Sachs at the end of June, although still in her job.

[Carol Massar]

And Goldman Sachs would have been, it seemed like, would have been fine if she stayed. That's, that's the impression.

[Max Chaffkin]

I mean, it's hard. It's hard to know what's going on behind the scenes. But they had definitely supported her, said she wasn't doing anything professionally inappropriate.

[Tom Keene]

So Bill Gates is still a very.

[Max Chaffkin]

Well, Bill Gates is still connected to Microsoft. Reid Hoffman, who's also Microsoft board member, is all over these files. So. So there is a sense that of, I think from, from critics of a lack of accountability. What I would just say is I think we're at the very early stages of this process and it's. And it's easy to say that there's. That there's been no accountability. You know, six weeks after this, this document dump happened. But we will see. I mean, because ultimately voters and consumers have a say in this, and they are going to start to make those. Those, their voices heard. And we're seeing that in sort of Subtle ways already. The company LifeTouch, which is a school photography company, no real connection to Jeffrey Epstein. They were, they were bought by Apollo, which is connected to Epstein via Leon Black after Epstein had died. They're dealing with. With Boycott, so they say. So you're seeing places where there isn't even a really close connection to Epstein, where they're where. Where companies are suffering. And it's going to be this kind of like, background thing. You know, there's a lot of. In terms of our politics right now in the primary. Epstein is coming up, I think, more than people realize with voters. This is going to be like one of these things where when we look at populist electoral results, you know, at the end of this midterm two years from now, I think it'll be one of the things people point to.

[Carol Massar]

How do you connect it to the way that people view the structure of society right now? Like the way people view elites, the way people view capitalism or the system that we have?

[Max Chaffkin]

I mean, what's so damaging about these files is, you see, it's not only that. It's not only the alleged crimes of Jeffrey Epstein, as I mentioned, accused of sex trafficking, also pled guilty to a sex crime in 2008. It's the sense of this little private club and a little clique and people who seem only interested in maneuvering within that clique in ways that are just embarrassing. And I mean, this sounds kind of small, but you read some of these emails. They're not grammatical, they're venal. They're all the things that people are when they're speaking in private. It's just you layer that on this very upsetting sex scandal. And then you layer on a wealth gap, like a massive, massive discontent that has been bubbling really since the great financial crisis.

[Sheila Khayalu]

And.

[Max Chaffkin]

And that becomes a stew that I think could lead to some significant social changes.

[Tom Keene]

I also think, Right. You know, we always talk about gaps in the economy, K shaped economy, inequalities and so on and so forth. But you have these individuals who say, well, I didn't really know him, or like, we didn't really have that close a relationship. But you go through those emails and they seem very, very familiar. And so, like, once again, you're like, well, wait a minute, these folks get a pass somehow. And how did they know. Not know, Especially when you look at the timing of the emails, how did they not know what this guy was about?

[Max Chaffkin]

Yeah, and I should say, you know, being in these files doesn't mean you were complicit. With Jeffrey Epstein's crimes, it doesn't even necessarily mean that these people knew everything that was going on, but it does show an incredible lack of judgment. And we're talking about people who are supposed to be professional judges of, you know, professional allocators of capital, you know, professional technology prognosticators and, you know, a

[Tom Keene]

lot of moral code.

[Max Chaffkin]

Yeah. And, you know, you look at, for instance, polling around how people feel about AI, there's this huge gap right now between the way, like, Americans and people around the world talk about AI and executives. And I think that you're seeing the impact of that lack of trust. A lot of people are really down on this technology, and we're like, why are they down on it? Well, they're down on it, but because they don't trust it and they don't trust the people who are running it. And that's going to create problems for businesses down the road for this year, next year, and so forth.

[Carol Massar]

But apart from voting, the people who have this discontent or who maybe even tell pollsters that they're unhappy with the system as is, what power do they have?

[Max Chaffkin]

I mean, they have power as consumers. And I think that, I mean, we don't know how, again, AI companies have yet to really turn a profit selling these. Selling these chatbots. Right. They're going to need to sell, ultimately to sell products to people. And I think that is going to, you know, that there. This is going to be a thing that hangs over any company that has an Epstein connection. And I think it will continue to hang there for a long time because there are all these redactions in the Epstein files. We're going to have hearings. Some of these people that I've mentioned are going to testify in Congress. Bill Gates has said he would testify in Congress. So this is just gonna be a sort of story that goes on essentially forever. There was probably an opportunity years ago to kind of create a sense of finality and justice and that. And because it was dragged out for such a long time between, you know, wrangling over the Epstein files and so on, that it feels like that that opportunity has. Is basically passed.

[Tom Keene]

You know, you end and you talk about some of these. Well, as you say, you know, there's a code of elite silence, there's an Epstein class. But you kind of write saying that, you know, maybe what we start to need to see from these tarnished leaders is making real amends. And, like, do we need to have that? Like, do we need to say, yeah, I kind of. I kind of screwed up I think

[Max Chaffkin]

that the people who are able to. Who navigate, who will. Who will be able to move past this, are going to be the ones that confront it head on. And because what we have seen in instead for most of these people is a sort of shifting story that is tailored to suit whatever information has already been released. And we've seen that with people saying, oh, well, I didn't. I only met him, or I only met him once, or whatever. And turns out it's more times than that. Or you have somebody like Elon Musk saying, I didn't go to the island. Which leaves out the fact that you can look up this email where he's. He may have not gone to the island, but he was certainly sending Jeffrey Epstein emails, like, asking to go to the island. So I think it's technically not wrong. No, no, no. Factually. But feels like it's not the whole story. And I think at some point, again, being in this group doesn't necessarily mean you did anything criminal or even necessarily wrong. But I think that at some point, people are gonna have to confront it head on rather than trying to sort of get around it with these kind of evasive statements and so on.

[Carol Massar]

You know, I'm pulling up another story that your story reminded me of, and it's a story that came out for Bloomberg Business, but Courtney Rubin and Dina Shanker about Peter Attia, the doctor and the Epstein revelation that is upending his longevity empire. And your two pieces really got me thinking, Max. What in your view, drew people to him even after he served prison time?

[Max Chaffkin]

Well, I think it's. I think if you're being. I mean, you could just say a lack of a moral compass or something like that. These people just didn't care. That would maybe, if you wanted to be more charitable, I think you would say access and money. So in the case of Peter Attia, he was trying to build this wellness empire. And from the emails and from the story that Courtney and Dina wrote, you can see him sort of trying to use Epstein as an entree into that world. That is how Epstein promoted himself. And somewhere along the way, Peter Attia became friends with Jeffrey Epstein. At least he's denied that they were friend friends. But. But, you know, you see a relationship, and I think that happened in a lot of cases.

[Tom Keene]

Listen, it's kind of how the world often works, right? Power and being close to it and relationships and so on and so forth. It's a brilliant read and a brilliant write. Max Chaffkin, co host of the Everybody's Business Podcast and the author of the Contrarian. He is, of course, part of the Bloomberg businessweek team. He's senior Reporter.

[Carol Massar]

This is the Bloomberg Bloomberg Business Week daily podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm 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.