WEBVTT - Businessweek Extra - Morgan Stanley's James Gorman 0:00:02.520 --> 0:00:06.760 This is Bloomberg Business Week from Bloomberg Radio Jason Kelly 0:00:06.800 --> 0:00:09.600 and I'm Carol Master. Welcome to the Bloomberg Business Week Extra. 0:00:09.720 --> 0:00:11.720 It's a weekly podcast we bring you an in depth 0:00:11.760 --> 0:00:14.400 interview you will not hear anywhere else. And indeed, this 0:00:14.400 --> 0:00:17.160 week we had an exclusive with the chairman and CEO 0:00:17.360 --> 0:00:21.040 of Morgan Stanley, James Gorman, a well listen to voice 0:00:21.200 --> 0:00:24.040 on Wall Street, and it was a wide ranging conversation. 0:00:24.200 --> 0:00:27.080 It was cool to catch him at this moment, in 0:00:27.160 --> 0:00:29.680 part because of everything going on in the world, but 0:00:29.840 --> 0:00:32.680 we were also catching him candidly coming off chatting with 0:00:32.840 --> 0:00:35.880 students at his alma mater, and he was thinking back 0:00:35.880 --> 0:00:38.360 to his time, you know, living in the International House, 0:00:38.440 --> 0:00:41.720 borrowing a ton of money at high interest rates to 0:00:41.920 --> 0:00:45.000 get into Columbia, and it was a game changer for him, right, 0:00:45.040 --> 0:00:46.760 And I really think it was a gut check because 0:00:46.760 --> 0:00:49.760 we talked so much about some major macro issues, whether 0:00:49.840 --> 0:00:52.400 it's interest rates or U S. China trade or the 0:00:52.400 --> 0:00:56.080 I P. O market. Uh, And he really had some thoughtful, 0:00:56.240 --> 0:00:59.360 insightful things to say. Here's that conversation and you're with 0:00:59.400 --> 0:01:01.800 some students just a few minutes ago to take you 0:01:01.840 --> 0:01:04.600 back to your early days. Yeah, maybe jealous, I mean 0:01:05.200 --> 0:01:08.080 apart from the sirens, right, but uh yeah, it was 0:01:08.080 --> 0:01:10.480 like Columbia in the mid eighties and U it was 0:01:10.600 --> 0:01:12.039 you know, it was a great experience. So it was 0:01:12.120 --> 0:01:13.600 it was fun. I just did a lunch and learned 0:01:13.600 --> 0:01:15.759 class for about a hundred and fifty kids. And they 0:01:15.760 --> 0:01:18.440 are kids there, they went born when I was a 0:01:18.480 --> 0:01:20.440 business school here. What do you want to know from 0:01:20.480 --> 0:01:22.080 them when you're talking with them, because I feel like 0:01:22.120 --> 0:01:24.319 the world that so many different industries, your industry also 0:01:24.360 --> 0:01:25.800 going through lots of changes. What do you want to 0:01:25.840 --> 0:01:28.280 hear from that? Well, it's what kind of cultural what 0:01:28.400 --> 0:01:30.960 kind of company they're really looking to work out? I mean, 0:01:30.959 --> 0:01:34.320 what what what matters to this generation different from my generation. 0:01:34.360 --> 0:01:37.200 You know, I grew up at a time when Solomon 0:01:37.240 --> 0:01:39.440 Brothers and Drexel and you know that was all the 0:01:39.520 --> 0:01:42.520 rage on Wall Street. Is a very sort of hyper 0:01:42.520 --> 0:01:46.240 intense environment. I mean, these uh young folks, they are 0:01:46.319 --> 0:01:50.320 much more interested in social impact, um, in the values 0:01:50.360 --> 0:01:53.560 of the organization and and just trying to share in exchange. 0:01:53.600 --> 0:01:56.000 How we think about our role in society as as 0:01:56.080 --> 0:01:59.000 an obviously global bank. Well, let's go all the way 0:01:59.000 --> 0:02:02.640 back to your arrived well here on campus. This was 0:02:03.440 --> 0:02:06.160 after this so long ago, but it was a big move. 0:02:06.400 --> 0:02:09.400 I mean there, it was defining in a lot of ways. 0:02:09.480 --> 0:02:13.600 What do you remember most about arriving? And then what 0:02:13.639 --> 0:02:16.400 did you take? Because you came from Australia and you 0:02:16.440 --> 0:02:18.639 were a lawyer already, right, yeah, I came. I came 0:02:18.680 --> 0:02:21.040 here to sort of change careers. What I remember most 0:02:21.240 --> 0:02:26.560 is the interest rate on my student loan, which I 0:02:26.680 --> 0:02:29.359 think is a world of record, right, And I thought 0:02:29.360 --> 0:02:32.320 I'd died and gone to have them because America welcomed 0:02:32.400 --> 0:02:36.080 me to come here to learn, to grow, and and 0:02:36.200 --> 0:02:38.400 I just it was unbelievable. I arrived on a very 0:02:38.440 --> 0:02:43.360 hot August day. August was that classic New York's sweltering heat, 0:02:43.960 --> 0:02:45.680 and it just it was on you. It was just 0:02:45.760 --> 0:02:49.080 it was so exciting on the campus this university, which 0:02:49.160 --> 0:02:53.320 is you know, extraordinary. Um, I couldn't I couldn't have 0:02:53.360 --> 0:02:56.040 been happier, honestly to be given that chance. And that's 0:02:56.040 --> 0:02:59.480 why I think, you know, immigration, welcoming foreigners, giving them 0:02:59.480 --> 0:03:02.240 an oportune to contribute. And I'm still here, right, you know, 0:03:02.360 --> 0:03:05.360 thirty past years later, because you had an experience living 0:03:05.400 --> 0:03:08.840 in international house, I believe, and so many people are 0:03:08.840 --> 0:03:10.880 exposed to many different cultures. I mean, you were living 0:03:10.880 --> 0:03:13.200 in it in a lot of ways. How did that 0:03:13.280 --> 0:03:15.960 affect sort of your world view? I used to play 0:03:16.400 --> 0:03:19.400 chess every Sunday night with UM, a Danish guy who 0:03:19.440 --> 0:03:22.640 listened to Frank Sinatra with candles on, you know, in 0:03:22.680 --> 0:03:25.200 the dark, and it was so you know, and one 0:03:25.240 --> 0:03:27.799 of my closest friends, uh, I was a guy from 0:03:27.880 --> 0:03:31.639 Leon in France and another guy from Morocco. Uh. So 0:03:31.760 --> 0:03:34.920 you you you learned to experience the cultures and the 0:03:35.000 --> 0:03:37.240 diversity that this world has. And one of the great 0:03:37.280 --> 0:03:40.360 things about a university like this is it brings people 0:03:40.440 --> 0:03:44.240 like that together who all motivated, they've all they're obviously uh, 0:03:44.280 --> 0:03:47.080 they're talented, uh, and they want to move forward. So 0:03:47.200 --> 0:03:50.600 I thought it was a tremendous experience. Well, having said that, James, 0:03:50.640 --> 0:03:52.320 I do wonder what you think about kind of the 0:03:52.320 --> 0:03:55.520 pushback that we're getting, UM from the current administration when 0:03:55.520 --> 0:03:58.000 it comes to folks coming in from other countries to 0:03:58.040 --> 0:04:00.760 study here, maybe start companies here. But it's not that 0:04:00.920 --> 0:04:04.760 happy an environment or hospitable environment for them right now. Yeah, 0:04:04.800 --> 0:04:08.960 I mean I think UM this country has always been 0:04:09.000 --> 0:04:13.240 a country of immigrants, and uh celebrating and welcoming those 0:04:13.280 --> 0:04:16.120 immigrants and seeing how they've contributed to this society here. 0:04:16.160 --> 0:04:18.960 I mean, it's it's been one of the great elixas 0:04:19.000 --> 0:04:22.359 of what's made America different is most countries people are 0:04:22.360 --> 0:04:24.159 trying to move out of to get a better life. 0:04:24.600 --> 0:04:26.320 This is one of the few countries in the world 0:04:26.320 --> 0:04:28.200 in Australia was like that where a lot of people 0:04:28.200 --> 0:04:31.400 are trying to get into and I think welcoming those 0:04:31.440 --> 0:04:35.200 immigrants providing opportunities for them. Obviously having sensible border control, 0:04:35.240 --> 0:04:38.640 which I support. People shouldn't come here illegally, right, I 0:04:38.680 --> 0:04:41.560 didn't you come through passport control. You earn your way 0:04:41.560 --> 0:04:44.120 into this country. You set the tests you I became 0:04:44.120 --> 0:04:45.840 a citizen. I mean, you do it the right way. 0:04:46.160 --> 0:04:48.359 But having as many people as you can bring in 0:04:48.400 --> 0:04:50.080 talent into the US, I think has been one of 0:04:50.080 --> 0:04:53.240 the great hallmarks of the success of last century. When 0:04:53.279 --> 0:04:56.280 you think about talent as well, you know, it used 0:04:56.320 --> 0:04:58.560 to be a much more prescribed path. That feels like 0:04:58.560 --> 0:05:01.080 at a business school you went to of the consulting company, 0:05:01.440 --> 0:05:03.359 you went to Wall Street. You know, you talked about 0:05:03.360 --> 0:05:05.719 hearing from the students. When to have a social impact, 0:05:05.920 --> 0:05:08.560 what do you draw in terms of student and talent 0:05:08.600 --> 0:05:11.839 from a business school like Columbia, And what's the case 0:05:11.880 --> 0:05:14.240 you make to them for working on Wall Street right now? Well, 0:05:14.279 --> 0:05:16.320 there there are. There are great careersm Wall Street. There 0:05:16.320 --> 0:05:18.200 always have been. I mean, things have and flow. I 0:05:18.200 --> 0:05:20.960 think the largest recruiter I don't know for sure, but 0:05:21.000 --> 0:05:22.640 I think Amazon might be the largest or one of 0:05:22.680 --> 0:05:25.760 the largest at the business school now. So at different points, 0:05:25.760 --> 0:05:28.880 the sort of cadence and flow and focus changes as 0:05:29.480 --> 0:05:33.240 society is changing and as business opportunities are changing. Listen, 0:05:33.480 --> 0:05:40.080 Wall Street is highly sophisticated, very intellectually interesting, very dynamic 0:05:40.120 --> 0:05:42.000 because you're in the markets. As you guys know, this 0:05:42.120 --> 0:05:44.799 is what you do. Um so for a lot of people, 0:05:44.880 --> 0:05:47.520 not everybody, for a lot of people, who remains an 0:05:47.520 --> 0:05:51.080 extremely attractive career option. So let's talk about the market 0:05:51.320 --> 0:05:53.000 you're in it. We obviously watch a day in and 0:05:53.080 --> 0:05:54.960 day out. There's so many big macro stories that are 0:05:54.960 --> 0:05:57.960 out there, whether it's Brexit, whether it's US China trade. 0:05:57.960 --> 0:06:00.000 How do you see the market, the global market environment 0:06:00.080 --> 0:06:03.440 right now? You know, it's it's a conundrum at one level, 0:06:03.480 --> 0:06:08.440 we've got record low unemployment. We do still have global growth. 0:06:08.720 --> 0:06:11.080 The U S economy, the most important economy in the world, 0:06:11.720 --> 0:06:16.400 is performing strongly. China is still performing strongly. Um Europe. 0:06:16.440 --> 0:06:19.040 Europe is obviously mixed, but it's been mixed for two 0:06:19.080 --> 0:06:22.760 decades now. UM So one level, the fundamentals are actually 0:06:22.880 --> 0:06:25.839 quite strong. Uh. At the other level, the sense of 0:06:26.000 --> 0:06:28.400 confidence there isn't the confidence and there's a sense of 0:06:28.440 --> 0:06:31.120 inevitability where at the end of a cycle, you know 0:06:31.400 --> 0:06:34.520 it doesn't have to be you don't. I mean, statistically 0:06:34.520 --> 0:06:36.880 there is a recession every seven years, right, each year 0:06:36.920 --> 0:06:39.520 you begin with the fift chance of recession, but it 0:06:39.600 --> 0:06:41.640 doesn't have to be. You know, in Australia they haven't 0:06:41.640 --> 0:06:43.640 had a recession for twenty eight years in a row. 0:06:44.400 --> 0:06:46.600 So what is there so much pressure though then on 0:06:46.640 --> 0:06:50.839 the Federal Reserve to continue cutting race? Does that make sense? Well, 0:06:50.880 --> 0:06:53.600 because the economy is slowing. The economy is slowing, and 0:06:53.680 --> 0:06:55.279 you know the job of the Fed is to sort 0:06:55.279 --> 0:06:59.440 of balance monetary policy with economic outlook and fiscal policy, 0:06:59.839 --> 0:07:02.760 and you know they should feather rates obviously when the 0:07:02.760 --> 0:07:05.040 economy is getting hot, their job is to raise raids 0:07:05.040 --> 0:07:07.839 slow it down and the reverse. So you know, I've 0:07:07.839 --> 0:07:11.240 supported the latest FED rate cut, and I suspect they'll 0:07:11.280 --> 0:07:14.760 do one or two more. But then it's time for 0:07:14.920 --> 0:07:17.960 pose and really absorb this because the problem with cutting 0:07:18.040 --> 0:07:20.600 is it's one of the few tools you've got. So 0:07:20.640 --> 0:07:22.960 if you give it away too easily, what do you 0:07:22.960 --> 0:07:24.800 have if we have a real problem. I want to 0:07:24.840 --> 0:07:26.320 go back to something you said a minute ago. It's 0:07:26.320 --> 0:07:29.000 sort of squaring some of the different elements out there, 0:07:29.040 --> 0:07:33.800 and especially businesses that certainly seem more cautious with a 0:07:33.880 --> 0:07:38.480 consumer that isn't showing much signs of caution at all. 0:07:38.640 --> 0:07:41.000 How do you square those things as you talk to 0:07:41.040 --> 0:07:43.600 your customers? And what do you see out there that 0:07:43.600 --> 0:07:46.720 that could help explain that dichotomy as it were, Well, 0:07:46.800 --> 0:07:48.160 we're you know, we're we're in a bit of an 0:07:48.160 --> 0:07:50.480 echo chamber. If you're a business leader, you go to 0:07:50.520 --> 0:07:52.760 business leadership meetings, we all talk to each other, We 0:07:52.880 --> 0:07:54.680 sort of, you know, we bounce off each other. So 0:07:54.720 --> 0:07:57.160 a little bit of it is, Gee, we must be 0:07:57.240 --> 0:07:59.400 at the end of the cycle the FEDS cutting rates. 0:07:59.440 --> 0:08:01.560 We must be about to have a recession. By the way, 0:08:01.600 --> 0:08:03.720 we've had an inverted YOL curve, which has been highly 0:08:03.760 --> 0:08:07.360 predictive of a recession. So there's some hard evidence that 0:08:07.440 --> 0:08:10.760 things are more likely to slow down than accelerat at 0:08:10.760 --> 0:08:12.440 this point, I don't think there's any doubt about that. 0:08:12.520 --> 0:08:15.000 So as executives, his job is to think about capital 0:08:15.080 --> 0:08:19.120 investment over multi years, you would be prudent and being 0:08:19.120 --> 0:08:21.840 cautious at this point. There's nothing wrong with that. Consumers 0:08:21.840 --> 0:08:25.240 aren't yet experiencing that they've got very cheap debt. Housing 0:08:25.240 --> 0:08:28.360 is starting to recover their consumer consumer credit apart from 0:08:28.360 --> 0:08:31.560 student loan sadly, is in very strong shape. So the 0:08:31.600 --> 0:08:34.720 consumer balance sheet is still very strong, and that's why 0:08:34.760 --> 0:08:37.920 it's lagging where the corporate balance sheet and corporate attitudes are. 0:08:37.920 --> 0:08:41.000 There implications though, from having rates at such a low 0:08:41.880 --> 0:08:46.760 level for such a protracted time. I mean, it's all 0:08:46.800 --> 0:08:50.720 about finding equilibrium between economic growth and the cost of money. 0:08:50.920 --> 0:08:53.960 So I mean there are only implications if it creates 0:08:53.960 --> 0:08:57.800 a bubble, right, that's a cheap money eventually will create 0:08:57.840 --> 0:09:00.199 a bubble. We're a long way from that now. See 0:09:00.200 --> 0:09:03.360 any of that. I'm seeing no bubbles. And how do 0:09:03.440 --> 0:09:07.400 you manage your business given all of those different inputs 0:09:07.440 --> 0:09:10.400 and and outputs? Then where do you hire, where do 0:09:10.440 --> 0:09:14.960 you maybe stay steady? Where do you invest? Across the 0:09:15.160 --> 0:09:22.920 Empire of Morgan Stanley Empire. Never thought about it. We're 0:09:23.000 --> 0:09:27.640 just a simple business. Um. You know, firstly, you were 0:09:27.760 --> 0:09:31.040 very long the US A wealth management business is I 0:09:31.040 --> 0:09:35.200 think ercent us um and at least half a securities 0:09:35.200 --> 0:09:37.280 business here. So that's a good thing, right. This is 0:09:37.280 --> 0:09:40.400 an eighteen treeion dollar economy, strongest economy in the world, 0:09:40.480 --> 0:09:42.599 most important economy in the world. I'm happy to be 0:09:42.640 --> 0:09:46.040 along in the US UM where obviously, you know, we've 0:09:46.080 --> 0:09:48.840 been aggressively building our Asia business, which is now I 0:09:48.840 --> 0:09:51.680 think fourteen percent or sell of the company. With the 0:09:51.679 --> 0:09:55.520 trade talks, things have slowed clearly across parts of Asia, 0:09:56.240 --> 0:09:58.240 so let's be played out. But but our job is 0:09:58.280 --> 0:10:03.199 to try and look past one three six months hiccups 0:10:03.280 --> 0:10:06.760 or slowdowns. Our job, certainly, my job is to think 0:10:06.800 --> 0:10:10.120 out five plus years, and you know, traders are thinking 0:10:10.120 --> 0:10:13.000 every five minutes. I'm trying to think five years and 0:10:13.080 --> 0:10:15.400 can do that in this environment though, because it does 0:10:15.440 --> 0:10:17.800 feel like we've been going back and forth on let's 0:10:17.800 --> 0:10:20.680 say you've got to we've been around three d five years. 0:10:20.760 --> 0:10:23.920 I mean, we're managing uh, two point six three into 0:10:23.920 --> 0:10:27.360 people's money. They're not all selling into the market on 0:10:27.360 --> 0:10:29.600 one day and all buying on the next day. No, things, 0:10:29.880 --> 0:10:33.520 things actually move in in small increments. It's it's more 0:10:33.600 --> 0:10:36.400 things like the public markets and companies going public that 0:10:36.520 --> 0:10:38.600 you know, or M and A transactions happening or not. 0:10:39.000 --> 0:10:43.360 But most of our core businesses are relatively immune to 0:10:43.440 --> 0:10:45.880 what's going on right now. You wouldn't see the impact 0:10:45.920 --> 0:10:48.680 on our wealth management business greatly at all. Well, let's 0:10:48.679 --> 0:10:51.040 talk about the public markets, because it's been quite a 0:10:51.120 --> 0:10:57.079 year for you really did just like up there. I mean, 0:10:57.120 --> 0:10:59.600 the public markets have really done something to watch, to 0:10:59.720 --> 0:11:03.480 say the least, and especially talk about cognitive dissonance. You 0:11:03.480 --> 0:11:07.920 know between sort of private market valuations and public market valuations. 0:11:08.120 --> 0:11:11.160 What do you see going on there? Why is that happening? Well, 0:11:11.160 --> 0:11:14.400 on the other hand, the public markets are record highs, right, 0:11:14.480 --> 0:11:17.240 so where is the dissonances the dissonances in the I 0:11:17.360 --> 0:11:19.600 P O markets? And in some ways, you know, some 0:11:19.640 --> 0:11:23.000 of these unicorn mega unicorn companies going public. Yeah, I 0:11:23.040 --> 0:11:26.840 mean listen, there's there's rounds of fundraising. Companies have tended 0:11:26.880 --> 0:11:30.200 to go public later and don you know, four or 0:11:30.200 --> 0:11:34.280 five six rounds. Um. With that comes some risk obviously, 0:11:34.360 --> 0:11:36.360 because you've got a lot of investors have come in 0:11:36.400 --> 0:11:39.600 relatively late before you go to full public. Uh, Mike, 0:11:39.679 --> 0:11:41.240 And I think we've seen that in some of you know, 0:11:41.360 --> 0:11:42.880 some of these companies that look like they're going to 0:11:42.920 --> 0:11:45.040 go public now lower than what the last couple of 0:11:45.160 --> 0:11:48.480 rounds were raising. Um, that's unusual. We haven't seen that 0:11:48.600 --> 0:11:52.280 for a long time. Um. It's also a function. There 0:11:52.360 --> 0:11:56.120 was some very frothy money floating around in the early rounds. 0:11:56.200 --> 0:11:57.880 Has that changed? Do you think do you think the 0:11:58.080 --> 0:12:01.560 private money is get getting smarter at the market's pretty efficient? Yeah, 0:12:01.679 --> 0:12:03.960 you know, these people aren't stupid. Who are who are 0:12:03.960 --> 0:12:06.880 making these investments? These are very savvy people. And and 0:12:06.960 --> 0:12:09.240 listen that this is this is sort of the corrective 0:12:09.240 --> 0:12:11.600 mechanisms that occur. They see a couple of companies go 0:12:11.720 --> 0:12:14.559 public at lower than whatever their last valuation was. That's 0:12:14.559 --> 0:12:17.360 a good corrective mechanism. That's okay. Back to the bubble 0:12:17.440 --> 0:12:20.400 question that starts that pin pricks the bubbles that are 0:12:20.440 --> 0:12:22.560 out there. But some of those that have come public 0:12:22.600 --> 0:12:24.439 this year, whether it's an uber, whether it's a lift, 0:12:24.800 --> 0:12:26.439 you know, came out with a bang, but then it 0:12:26.559 --> 0:12:28.439 pulled back. So it's the market telling you will, wait 0:12:28.440 --> 0:12:30.400 a minute, you weren't worth that much or or what 0:12:30.600 --> 0:12:32.400 is it? Does? It take some time. With these companies 0:12:32.400 --> 0:12:33.800 that have been around for a while, they are still 0:12:33.800 --> 0:12:35.920 not profitable. But I've been around for a long time. 0:12:36.080 --> 0:12:38.120 How do you make sense of that? Uh? You know, 0:12:38.240 --> 0:12:41.800 the market can be very stupid in the short run. Um, 0:12:42.240 --> 0:12:44.320 in the medium term, it occasionally gets things wrong, and 0:12:44.320 --> 0:12:46.120 the long term you're the one who is stupid, right, 0:12:46.640 --> 0:12:52.520 So uh you know when yeah, totally when Facebook when public, Um, 0:12:52.559 --> 0:12:54.840 I went on TV. I can't remember if it was 0:12:54.920 --> 0:12:57.280 with you guys or not. Let's just say what it 0:12:57.400 --> 0:13:01.680 was obviously was you know, I said, this is a great, 0:13:01.840 --> 0:13:05.280 great new company that has been formed by incredibly innovative 0:13:05.320 --> 0:13:08.199 people who have created something that didn't exist before. That 0:13:08.240 --> 0:13:11.200 should be celebrated. The fact that traded at a value 0:13:11.200 --> 0:13:13.439 in the weeks and months after went public below what 0:13:13.520 --> 0:13:16.600 people wanted on the day of the issue. Okay, that happens, 0:13:16.640 --> 0:13:18.439 but look at it. Give it time, give it a year, 0:13:18.440 --> 0:13:21.880 and now it's it's something like six times the valuation, 0:13:22.000 --> 0:13:24.000 you know, in a relatively short credit of time. So 0:13:24.080 --> 0:13:26.640 we should all wish to have Facebook's problem. So I 0:13:27.120 --> 0:13:29.160 give this, I give this a little bit of time. 0:13:29.200 --> 0:13:32.000 I'm not I wouldn't be too too wound up about it. 0:13:32.040 --> 0:13:35.720 Are you seeing more issues that your team? Are you 0:13:35.800 --> 0:13:37.840 talking to more people who want to bring more companies 0:13:37.840 --> 0:13:40.720 to public? How active is it right now? Are they? 0:13:40.760 --> 0:13:42.640 Are they not bringing them public? Because of this? I 0:13:42.679 --> 0:13:47.120 think it's making people more realistic about valuations. You know, 0:13:47.240 --> 0:13:49.280 for some of these unicorns, I think there's a little 0:13:49.280 --> 0:13:52.560 reality checkers gone into the system, and that's that's okay. 0:13:52.720 --> 0:13:54.680 This is what the market does, you know. Fact, to 0:13:54.679 --> 0:13:56.600 my point, the market in the long run gets it right. 0:13:57.200 --> 0:13:59.719 The short run is how you find opportunities. When you 0:14:00.000 --> 0:14:03.560 think about this, uh, maybe overstate a little bit, this 0:14:03.600 --> 0:14:07.280 negative yield world that that we're living in. How does 0:14:07.320 --> 0:14:10.520 that change your view of the market. How does it 0:14:10.640 --> 0:14:13.240 change the way you may deploy some assets and may 0:14:13.400 --> 0:14:16.480 deploy some of your teams around the world. Well, I firstly, 0:14:16.520 --> 0:14:18.720 I've been very surprised at where rates are. I'll just 0:14:18.720 --> 0:14:20.960 say that up front, I felt the tenure at this point. 0:14:21.240 --> 0:14:23.040 I'd expected by the end of this year the tenure 0:14:23.080 --> 0:14:27.560 would be around three percent. I was dead wrong. Okay. Um, So, 0:14:28.600 --> 0:14:31.760 you know, a negative yield curve has been historically highly 0:14:31.800 --> 0:14:35.840 predictive of recession, but as Janet Yellen former Chure Yelling said, uh, 0:14:35.920 --> 0:14:39.680 it's not necessarily so it doesn't necessarily lead to a recission. 0:14:40.400 --> 0:14:42.960 Uh So, how does it change our business? It doesn't. 0:14:43.040 --> 0:14:45.880 You know, We're we run our business based upon what 0:14:45.960 --> 0:14:48.520 we see going on in the broader economy rather than 0:14:48.520 --> 0:14:51.160 where rates are trading on any particular day. And I 0:14:51.160 --> 0:14:53.240 think in the last week you've seen the tenure recover 0:14:53.280 --> 0:14:55.760 about ten fifteen basis points, so you know, we'll see 0:14:56.320 --> 0:15:00.440 you know, I'm curious too about the role of technology finance. 0:15:00.480 --> 0:15:03.000 We see it increasingly, so talked us a little bit about, 0:15:03.040 --> 0:15:06.200 you know, the incorporation of it at Morgan Stanley and 0:15:06.240 --> 0:15:07.920 where you see it kind of all going, because it's 0:15:07.920 --> 0:15:09.920 certainly a big part of what they're being you know, 0:15:09.960 --> 0:15:11.840 taught at the Columbia Business School and more and more so, 0:15:11.920 --> 0:15:15.760 whether it's algorithms, whether it's engineers coming in and coding, 0:15:16.080 --> 0:15:17.880 where do you see it all playing out? It's interesting. 0:15:18.000 --> 0:15:20.560 I just came from our monthly Risk committee meeting to 0:15:20.640 --> 0:15:22.880 our meeting this morning, and we had a whole section 0:15:22.920 --> 0:15:26.040 on electronic trading and um, what we're doing in that 0:15:26.080 --> 0:15:28.680 space and how it's bleeding from equities into the fixed 0:15:28.720 --> 0:15:32.400 income space. Um. You know, the technology has been driving 0:15:32.440 --> 0:15:35.280 Wall Street dirty little secret for a very long time. 0:15:35.800 --> 0:15:38.280 You know. We set up our first electronic trading businesses 0:15:38.320 --> 0:15:41.680 in the mid nineties, and it's like everybody suddenly discovered 0:15:41.720 --> 0:15:45.240 technology because of fintech. Um, there's a lot of innovation 0:15:45.280 --> 0:15:47.560 going on in the fintech sector for sure, and we're 0:15:47.600 --> 0:15:50.320 partnering with a lot of those companies. But we are 0:15:50.360 --> 0:15:52.920 you know, we spend upwards of four b and all 0:15:52.920 --> 0:15:57.640 of some technology. We have centers of competence in machine learning, robotics, 0:15:57.800 --> 0:16:02.960 artificial intelligence, cloud computing, the data management. Obviously, our cyberspace 0:16:03.040 --> 0:16:06.240 is huge, so we have the resources and I think 0:16:06.280 --> 0:16:09.400 the intellectual horsepower to be at the forefront of a 0:16:09.480 --> 0:16:12.120 lot of the new technology development, but not all of 0:16:12.120 --> 0:16:14.560 it we want to do in house. So we're actively 0:16:14.600 --> 0:16:18.120 looking to partner with larger and small companies, whether it's 0:16:18.120 --> 0:16:22.400 in software development, in data management in particular, and you know, 0:16:22.480 --> 0:16:24.800 embrace it. So it's it's very much a part of 0:16:24.800 --> 0:16:28.360 everything we do. Digital currencies as well. Uh, yeah, we're 0:16:28.400 --> 0:16:33.120 helping clients hedge and manage their exposures to digital currencies. 0:16:33.120 --> 0:16:36.520 We haven't been, um, you know, we haven't set up 0:16:36.520 --> 0:16:40.160 a digital business unit focused on you know, the various 0:16:40.200 --> 0:16:43.000 forms of cryptos. Per see much more interested in the 0:16:43.000 --> 0:16:45.960 blockchain technology. I don't know what. It's just another form 0:16:46.000 --> 0:16:49.080 of stored value to me, and I'm you know, people 0:16:49.840 --> 0:16:52.239 maybe I'm dead wrong about this. Have been quite conservative 0:16:52.240 --> 0:16:54.880 on this for a long time. UM, I see much 0:16:54.920 --> 0:16:57.720 more value around the blockchain technology supporting the currency in 0:16:57.800 --> 0:17:01.520 the currency itself. You mentioned sort of various partnerships, especially 0:17:01.560 --> 0:17:04.280 on the fintech side. From a competitive standpoint, where do 0:17:04.280 --> 0:17:07.200 you see the most competition across your line of business 0:17:07.200 --> 0:17:13.720 at this point? Um? Well, in wealth management clearly, you 0:17:13.760 --> 0:17:16.359 know the online space, but but that's not new. I 0:17:16.400 --> 0:17:18.520 mean schwab and E Trade and Merrige Trade being around 0:17:18.560 --> 0:17:22.399 an awfully long time. They have been doing online you know, 0:17:22.560 --> 0:17:25.280 digital business. It was just called something different, which was 0:17:25.359 --> 0:17:29.200 direct brokerage, right, had a different name. Uh So that's 0:17:29.240 --> 0:17:34.080 always been competitive, I think. UM. In the asset management space, 0:17:34.080 --> 0:17:36.760 obviously the challenge of a lot of the package e 0:17:36.920 --> 0:17:42.159 T F indexing versus the traditional long earning active managed, 0:17:42.480 --> 0:17:46.360 but a lot of our businesses are very complex, required 0:17:46.400 --> 0:17:50.600 global capability, you know, hedging, uh, you know a currency 0:17:50.640 --> 0:17:56.080 exposure in Japan, being long, certain rate securities in Australia. 0:17:56.119 --> 0:17:58.560 I mean we're twenty four hours. It's a lot of 0:17:58.600 --> 0:18:02.680 it is UM. It's it's not that it's not challenge competitively, 0:18:02.760 --> 0:18:05.359 but most of our challenge comes from our traditional competitors, 0:18:05.400 --> 0:18:08.159 the big banks. James, I'm always curious, you know, we 0:18:08.240 --> 0:18:11.959 spend our time so much talking about FED policy, yield curves. 0:18:12.480 --> 0:18:14.439 He was trying to tread policy. What is it that 0:18:14.480 --> 0:18:16.960 you folks that Morgan are spending so much time having 0:18:16.960 --> 0:18:19.399 conversations about? What is it that we're not talking about 0:18:19.400 --> 0:18:24.120 that really deserve a little bit more attention. Leadership culture 0:18:25.280 --> 0:18:30.200 UM creating an organization where diverse employees don't feel included, 0:18:30.240 --> 0:18:34.000 but feel not just included, but feel they belong. That's 0:18:34.040 --> 0:18:36.800 something I've felt very strongly about the whole diversity inclusion 0:18:36.800 --> 0:18:39.520 discussion in place. Somebody invited you into the room, Now 0:18:39.520 --> 0:18:41.919 I want you to belong. It's your room. So we 0:18:42.000 --> 0:18:45.320 talk about a lot of the qualities that get at 0:18:45.920 --> 0:18:49.040 h Do employees respect your institution, want to be part 0:18:49.040 --> 0:18:50.960 of your institution want to make their careers and lives 0:18:50.960 --> 0:18:55.879 there that the macro stuff it blows right, I mean, okay, 0:18:56.000 --> 0:18:57.720 rates for two and a half percent. Now the one 0:18:57.760 --> 0:19:01.040 a half percent is Morgan's any fundamentally engine strategy because 0:19:01.040 --> 0:19:03.480 of that, of course not. But if we can't attract 0:19:04.080 --> 0:19:06.960 really talented, committed people who do things the right way 0:19:06.960 --> 0:19:09.120 you have the right vegas, then then we're going nowhere. 0:19:09.480 --> 0:19:12.080 So I'm very Once your strategy is in place, and 0:19:12.119 --> 0:19:14.560 I think we have a really sound strategy, it's all 0:19:14.640 --> 0:19:18.119 about reaffirming the cultural values and putting the leadership in 0:19:18.160 --> 0:19:20.520 place for the next ten and fifteen years who can 0:19:20.600 --> 0:19:22.360 drive those dues. Are we're making in roads. I want 0:19:22.359 --> 0:19:24.119 to ask about diversity because I feel like we've been 0:19:24.160 --> 0:19:28.680 talking about diversity parody women, you know, issues on Wall 0:19:28.720 --> 0:19:31.280 Street for a long long time, and we're still struggling 0:19:31.960 --> 0:19:34.160 and we will be talking about it for a long 0:19:34.200 --> 0:19:37.960 long time. I share one fact with you, uh this year, 0:19:38.000 --> 0:19:40.960 and this wasn't by design. That was an outcome this year, 0:19:41.000 --> 0:19:43.600 For the first time ever, more than fifty of our 0:19:43.640 --> 0:19:46.439 intern class, which is a thousand interns globally, we're women 0:19:46.760 --> 0:19:50.240 first time ever, ahead of China, as a woman, Head 0:19:50.240 --> 0:19:52.680 of Europe, Middle East Africa as a woman, co head 0:19:52.680 --> 0:19:54.320 of Investment banking as a woman, the head of our 0:19:54.359 --> 0:19:56.920 bank as a woman. I mean, we have senior leadership 0:19:56.960 --> 0:19:59.760 women in multiple roles, but are they representative of the 0:19:59.840 --> 0:20:02.919 role of women in society? No, they're not. Right. So 0:20:03.000 --> 0:20:07.080 we've we've we've we've made steps, but it starts with 0:20:07.160 --> 0:20:09.560 the pipeline at the beginning, and then finding ways in 0:20:09.600 --> 0:20:12.640 which you can keep those folks through all the transitions 0:20:12.680 --> 0:20:16.919 we make in life. Have uh terrific careers of Morgan Stanleys. 0:20:16.960 --> 0:20:20.960