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- [00:00]
Narrator/Announcer
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IBM Representative
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Narrator/Announcer
Bloomberg Audio Studios Podcasts Radio news You're listening to
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Bloomberg Audio Studios Announcer
Bloomberg Businessweek with Carol Massar and Tim Stanvak on Bloomberg Radio.
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Host/Interviewer
Governor Gavin Newsom runs a state that is not just one of the largest economies in the world, but also one that's grown faster than China or Germany since the pandemic. Bloomberg Businessweek spoke with California Governor Gavin Newsom back on January 29th in a Bloomberg Newsmakers event.
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Guest Speaker/Commentator
We are the fourth largest economy in the world, not the sixth. We have more Fortune 500 companies than we did since 2019, by the way. Bloomberg data 49. Now it's 58. We dominate $405.6 billion output, 13.9% of the nation's manufacturing. No. 1 comes close $62.1 billion just as it relates to agriculture. We haven't been sitting back on some of these structural issues. I inherited the most blessed and cursed state in America.
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Host/Interviewer
That was Governor Gavin Newsom at a Bloomberg Newsmakers event back in January. The governor was also the Business Week cover story back in November. You can check out that story on the Bloomberg Terminal. Matt Winkler also spoke to the California governor for his most recent column. He joins us here in the Bloomberg Interactive Brokers studio. Matt is Bloomberg News editor in chief emeritus and he joins us here in New York. Matt, I was telling you I'm a Californian, so I love talking about California. I drive Carol crazy talking about California,
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Co-Host/Interviewer
but I love that state too.
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Host/Interviewer
I want to talk about the economic miracle that is right now and what you found in the data. But I want to start going back 150 years plus to the point about education that you make in your column because I think that's a good place to start when it comes to how successful California has been.
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Matt Winkler
Right. So California became a state in 1850 and just 16 years later legislated that everyone aged 8 to 14 had to have an education. It was compulsory and it was one of the first states to make it compulsory. Now put it on fast forward. Today California has something like 640 colleges and universities, includes community colleges. Of course, that dwarfs anything else in the US the next closest state is New York with 400 something. And then you've got Texas and then Florida. But California just dwarfs the landscape with higher education. And not just in the US I mean we're talking about much greater than the UK you could say the seed of learning in some ways. And Germany, where if you like, the Renaissance humanist tradition begins. And there's California by itself dominating graduates, more engineers than any other state in the country. And those engineers get higher paying wages in California than any other state in the country. So that's the education piece.
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Narrator/Announcer
All right.
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Co-Host/Interviewer
So that's over its history. And you think about, you know, the payoff of doing that and year after year after year. Let's talk about Gavin Newsom in terms of his tenure there because I think this is an individual, Matt, as you know, we've talked certainly around this table, other news organizations about, you know, what he does next and the impact he could have potentially if he runs, you know, for president of the United States. But talk about his impact specifically and kind of where California is today.
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Matt Winkler
You know, there's something called the hypocritical oath which is do no harm.
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Co-Host/Interviewer
Yeah.
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Matt Winkler
And so he begins in 2019. It just so happens that if you go from 2019 to the present, California, by every measure we have on the Bloomberg terminal, outperforms every state in the country in terms of GDP growth. But it's even better than that because if you look at the Philadelphia coincident indicators, which measures much more than just gdp, it measures employment, inflation, all these things that go into what is a well performing economy, and California again outperforms the US Right at the time that Gavin Newsom becomes governor. Okay, it wasn't that way before it happens coincident with his becoming governor. Now, I say better lucky than smart, right?
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Co-Host/Interviewer
He'd agree with me.
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Matt Winkler
But the fact of the matter is that by every measure you look at the surge in equity performance by California companies, you know, 40% appreciation. We're talking about an economy and a state that has less than 12% of the U.S. population. It accounts for 40% of the equity growth in the U.S. okay, so that's big and small companies alike. That's the Russell 3000. And if you look at things like health care, California's investment in health care and return on health care has surged to all time highs during Gavin Newsom's tenure. So all of these good things happened. You know, you could say he is lucky, but the fact is they're all happening at the same time. And in a political context, he is literally the opposite of the Republican Party led by Donald Trump. Literally the opposite. He was the biggest defender of Bidenomics, which now looks pretty good, doesn't it, everybody? And the whole time that, you know, Biden was being criticized, Gavin Newsom was there saying day after day, no, this is the economy that works. And he was referring to the US Economy, which California is a big part of.
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Co-Host/Interviewer
Well, can we just go like also on that? Because we're in this interesting time where it feels like there's a pushback on renewables and alternative energy. And California has always led the way, but they are still doing really well in that regard.
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Matt Winkler
Absolutely. Clean energy in particular, which is something that Gavin Newsom talks about a lot, as you would expect he would. Clean energy companies in California outperform the world. And there's nothing close in the US that comes close to the performance of clean energy companies. And we're talking about companies that are 100 million or more publicly traded. You know, this is significant.
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Host/Interviewer
And yet many companies in the last few years have moved out of California. You have Charles Schwab, you have Hewlett Packard Enterprise, you have Chevron a couple
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Matt Winkler
years, you have corporate headquarters, okay?
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Host/Interviewer
And you make this happen.
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Co-Host/Interviewer
We'll go there
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Matt Winkler
who work in Fremont, California. The most made in America car, okay, is a Tesla. And 23,000 people at least make that car in Fremont, California. So Elon Musk left, but you know what? He came back when he moved his corporate headquarters to Texas and R and D. And by the way, California is the leader in R and D headquarters worldwide. Okay? So it's not just US Companies that put their R and D in California. It's BMW. It's all the companies you've heard of. Okay? So a year later, Gavin Newsom gets a phone call which he says he'll never forget. He'll never forget. It's Elon Musk. And he says, I'm surprised you're picking up the phone, because he's been decrying California's taxes, regulation, prevailing media narrative over and over again that California doesn't work. And he says, I need your help. I can't find the talent that I need in Texas. I'm coming back to California.
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Host/Interviewer
And you include that in the piece. And I love that part of the piece because it speaks back to the education part of this, which is finding the right talent for these companies. But it does raise the question, Matt, I think, about why California and why Gavin Newsom have become this sort of boogeyman. Is it because he's the polar opposite of President Trump? Is it because maybe he has ambitions for the White House later in his career?
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Matt Winkler
You know, the California story precedes President Trump. Okay? You know, when Jerry Brown was governor, he was actually a champion and friend of Elon Musk, and, you know, famously did everything he could to help Tesla become the vehicle that it is with subsidies and everything else. So California, by policy, has supported clean energy long before many states did, has done lots of things that are part of the innovation story that we're talking about. And it goes back a long way. You know, if you asked, by the way, who leads California companies, you could go, you know, to Bloomberg, ask me artificial intelligence, and you'll find it's the immigrant. They get the job done. Well, and California is a destination for people around the world.
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Narrator/Announcer
Yeah, exactly.
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Co-Host/Interviewer
No, it's interesting. You know, we've done broadcasts at Stanford and so on and so forth. And you just think about, you know, that is a institution, and there's others that are so entrenched in the startup community and their student base is so much part of it, and those entities often become significant companies. I think it's just such a core of who.
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Matt Winkler
Okay, so here's an example. We had this really awful catastrophe called the Fire Wildfire in Los Angeles, which we all saw and which was in front of us for quite some time. Everybody's rebuilding. Nobody's leaving all these people in L. A who had homes there, they're rebuilding
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Host/Interviewer
and look at how much the lots are selling for. If people are selling lots.
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Matt Winkler
Yeah. So what does that tell you? And the other thing is that, you know, the population of California, 39 million, has been constant now for a couple years. It declined during the COVID if you like, debacle, but it would be so much greater if we weren't restricting immigration because this is where everybody in the world wants to.
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Host/Interviewer
What are the lessons that the rest of the country can learn from California?
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Matt Winkler
Well, one thing is that it's all about the diversity between your ears, not what's in the ground. The diversity between citizens ears in California accounts for its GDP for the most part. You could say fossil fuel maybe is a little more than a third of Texas in every respect. That's the difference. So innovation comes from human endeavor and that's what California has always been about. Of course it's blessed by natural resources, you know, 40 odd billion, I think it's 40 odd billion dollars comes from forestry, agriculture and so on.
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Co-Host/Interviewer
Right.
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Matt Winkler
And most the almonds consumed in the world are grown in California. So there is that piece of California that doesn't go away.
- [12:25]
Host/Interviewer
Is there a risk? And you know, this is beyond the scope of our discussion, but just because you're so focused on the state, I'm curious if there's a risk of incredibly wealthy people leaving in your view, California, because there's been a lot of haymade about a proposed billionaires tax. If the state loses that tax base, does the state take.
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Matt Winkler
There's no evidence, by the way, to suggest that high taxes are the cause of economic decline. That's the best way to put it. And I come from a state called New Jersey. Okay. And we have no it. Well, we have the highest. I think we have the highest taxes. Certainly feels that way. California and people just can't wait to buy a house in New Jersey as it keeps going up in value.
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Co-Host/Interviewer
Yeah, it's really interesting, you know, we talk so much, you know, what goes on in California, you know, often makes its way across the country. In doing this column just 30 seconds left. What's the takeaway you think for everyone?
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Matt Winkler
Well, with California the best is yet to come.
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Narrator/Announcer
Interesting.
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Co-Host/Interviewer
What about for Gavin Newsom? Did he tip his hat?
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Matt Winkler
Wouldn't surprise me actually, given where he is and what he's done and where he's positioned and given what the opposition is, he looks pretty good for for a Democratic candidate, which is why he's the betting favorite.
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Co-Host/Interviewer
Yeah, fascinating. Great read. Lots of stats like we love here at Bloomberg to really kind of put something in all about the data. Matt Winkler, thank you. Always appreciate it. He is of course Bloomberg News Editor in Chief Emeritus joining us right here in our Bloomberg Interactive Broker studio. His story it is on the Bloomberg. You can find it also@Bloomberg.com
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Guest Speaker/Commentator
when you're
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The Hartford Representative
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Bloomberg Audio Studios Announcer
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