Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're here every day bringing you the latest
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Speaker 1: also listen to our radio show weekdays at two pm
Speaker 1: Eastern only on Bloomberg Radio. We are live at Harvard
Speaker 1: Business School in Boston. This is pretty exciting. It's very exciting,
Speaker 1: right when you think about top ranked business schools. I mean,
Speaker 1: this is it. And so we're gonna be hearing more
Speaker 1: about the community, about the teaching, some of the classes
Speaker 1: that they're doing, and we're going to talk to some
Speaker 1: of the prominent alumb But before we do that, we've
Speaker 1: got to bring in the editor of Bloomberg Business Week,
Speaker 1: Joel Weber. Because Joel, I mean Business Week magazine. They
Speaker 1: are known for their business school ranking. Yeah, that's been
Speaker 1: like one of the core competencies of the magazine for
Speaker 1: almost for more than thirty years now, right, and we've
Speaker 1: only tried to make it that ranking be more dynamic
Speaker 1: Ammack every year and it's gotten incredibly good now. And
Speaker 1: you have the ability to personalize it based on your interests, right,
Speaker 1: what's important to you, which just speaks to like what
Speaker 1: you know exactly what you would expect to get from
Speaker 1: something that's this dynamic. So you can bring something like
Speaker 1: that to bear in a place like Harvard, And it's
Speaker 1: just amazing to be here, you know, I'm like up
Speaker 1: in this Baker Library and there's a table over there
Speaker 1: that's been there for a hundred and fifty years. It's
Speaker 1: just incredible to have this kind of pedigree here. And
Speaker 1: when we think about what what what we try and
Speaker 1: do a business week, a lot of it is to
Speaker 1: take the story of modern business and then tell it
Speaker 1: with a lens that I kind of think of as
Speaker 1: like a pop business kind of way of interacting with it.
Speaker 1: And when you interact with people at the business schools
Speaker 1: where some of our curriculum enters that classroom, it's sort
Speaker 1: of an incredible experience for them because they can tell
Speaker 1: it's almost like law and order. We're like ripping it
Speaker 1: straight out of the headlines and bringing it into classrooms
Speaker 1: and helping people understand what modern business really great point well,
Speaker 1: and I also love the fact that this is a
Speaker 1: year long franchise. I mean, I feel like back in
Speaker 1: the day it was all about the rankings, but some
Speaker 1: of the continent and have this week really you know,
Speaker 1: you survey the students as you as you were talking about,
Speaker 1: it's very dynamic. It never ends, and this is an
Speaker 1: interest for people ongoing. It's not like it just is
Speaker 1: like once a year. So what we've come come to
Speaker 1: is this cadence that we can't stop talking about this
Speaker 1: stuff enough. And this week's data from the survey that
Speaker 1: we leaned into revealed actually some really interesting stuff about
Speaker 1: student debt, which is usually something we associate more with
Speaker 1: undergrad than graduate schools, and yet we're looking at data
Speaker 1: reveals that the survey respondents have, you know, six figures
Speaker 1: of debt coming out straight out of business school and
Speaker 1: then it hovers there. It's funny that you say that,
Speaker 1: because I think that's actually one of the things we're
Speaker 1: going to dig into with UM. One of the individuals
Speaker 1: who's involved with the NBA NBA program here at Harvard
Speaker 1: about the future of the NBA. You know what is needed?
Speaker 1: What is it that you know, the business community to
Speaker 1: ultimate they want and to bring it back. You know,
Speaker 1: this is the thing that you always hear about. Here
Speaker 1: is going to be r O I right and return investment.
Speaker 1: But what's the initial value and really what is the
Speaker 1: career trajectory that that degree might help you accomplish that
Speaker 1: you wouldn't accomplish without it, Right, That's ultimately why you
Speaker 1: do it. And also because as a place like Harvard reveals,
Speaker 1: there's a network, yes, right, and that network is really
Speaker 1: what it ends up being. All well, it's funny, I mean,
Speaker 1: just to make it a little bit personal for me.
Speaker 1: I mean, I'm back here. I lived here in nineteen
Speaker 1: eighty and eighty one when my dad was a student
Speaker 1: here and I was about five six years old. I
Speaker 1: went to David L. Barrett Elementary School around the corner,
Speaker 1: and I still have public school, and I still do
Speaker 1: think about, you know, the people kiddily that my dad
Speaker 1: keeps in touch with from those days. And I was
Speaker 1: talking about that with some of the faculty. For sure,
Speaker 1: we gotta ask you about this week's issue because it's
Speaker 1: super dynamic. The cover is devoted to Pride. Pride so
Speaker 1: this month bride month, uh, fifty years after Stonewall, So
Speaker 1: we wanted you know that that anniversary is just coming
Speaker 1: up in a matter of days. So this was a
Speaker 1: way to mark that moment, uh and talk about not
Speaker 1: only the progress that's been made, but also some of
Speaker 1: some of the fragility that remains with sort of the
Speaker 1: gay rights. And there's a number of court cases that
Speaker 1: we talked about that will be heard in front of
Speaker 1: the Supreme Court. And you know, every everyone might take
Speaker 1: this for granted that everything's you know, safety these days,
Speaker 1: and it's not. That's what really surprised me to all
Speaker 1: that I thought that there had been so much progress
Speaker 1: on the legal front. You think about the Supreme Court decision,
Speaker 1: and yet there is still a lot of legal framework
Speaker 1: out there that that really restricts the l g B
Speaker 1: t Q community. And then and we're talking about it
Speaker 1: on a federal level, right, there's nothing that really protects it.
Speaker 1: And it's a state by state level at this point,
Speaker 1: and some states obviously have made much more progress than others.
Speaker 1: And that's what you know, you can't take any of
Speaker 1: this for granted. So fifty years later, a lot has
Speaker 1: been done. A lot of the package of stories, and
Speaker 1: especially the cover that we talk about is how far
Speaker 1: businesses come and championing their their workers to make sure
Speaker 1: their workers have rights. But the US is in any
Speaker 1: ways even an anomaly compared to the rest of the world.
Speaker 1: So there's this international aspect that we brought to bear
Speaker 1: on it. And then I thought one of the things
Speaker 1: that was really interesting was this idea of rainbow vacation
Speaker 1: of rainbows on everything all of a sudden right, and
Speaker 1: there's a lot of businesses that deserve that, and also
Speaker 1: ones that are carrying something that there that they made.
Speaker 1: And let's talk about what I think is my favorite
Speaker 1: story in the issue, and we're talking about it over
Speaker 1: dinner at my house last night, which is the Ellen Walmart.
Speaker 1: I think this one is just the perfect concapsulation of it.
Speaker 1: Ben Steverman and Matt Boyle wrote it, and it really
Speaker 1: looks at Ellen who has become almost the Oprah of
Speaker 1: the day, and this it's really phenomenal, how big of
Speaker 1: a business empire she's built, she owns daytime television. It's
Speaker 1: just amazing. And this is a woman when she came
Speaker 1: out as a lasbian basically was dropped. Business didn't want
Speaker 1: to associate with herout all there were bomb threats on
Speaker 1: the studios, and here we are not so not along
Speaker 1: after all that, and in America's biggest retailer is now
Speaker 1: partnered with her to bring out an Ellen line, and
Speaker 1: a retailer that has had a complicated history with this issue.
Speaker 1: For every step forward they've taken, it's at least half
Speaker 1: a step back over time. I think that's really what
Speaker 1: makes the story that compelling is that Walmart Arkansas had
Speaker 1: this real, real legacy that especially in the gay rights community,
Speaker 1: it was not a champion of right. But over time
Speaker 1: it's changed and Walmart has had to wrestle with that.
Speaker 1: And if you're if you're Walmart and you're up against
Speaker 1: the Amazon Amazons of the world, you need every advantage
Speaker 1: you can get. And when you look at Ellen and
Speaker 1: what I mean she is so family friendly, right, That's
Speaker 1: one of the quotes that we got in that story.
Speaker 1: You just associate at every age level this is a
Speaker 1: person who actually just brings goodwill into business and moves
Speaker 1: products product. That's why all together here we are at
Speaker 1: Harvard Business School and I think about so well known
Speaker 1: for their case studies like Walmart alone own and how
Speaker 1: far they've come on this issue in particular, that's a
Speaker 1: case study in its own, a case study that you're
Speaker 1: reading Bloomberg Business Week. Yeah, exactly there, all right, Joel Webber,
Speaker 1: thank you so much, of course. Joell Webber, editor of
Speaker 1: Bloomberg Business Week magazine, which is hitting newsstands as we speak,
Speaker 1: and find the stories to on the Bloomberg and at
Speaker 1: Bloomberg dot com. This is Bloomberg Business Week with Carol
Speaker 1: Messer and Jason Kelly on Bloomberg Radio. We have a
Speaker 1: special guest, Scott Spirling. He's co president of th h L.
Speaker 1: Nice to have you here with us. Thank you and
Speaker 1: your class of nine one? I am class of Was
Speaker 1: that just a couple of years ago? Yes, you know,
Speaker 1: it's so funny. The inflation rate was more than ten
Speaker 1: percent back there than the Lorian cars were just making
Speaker 1: their debut. What do you remember of that era? I
Speaker 1: do remember a couple of years later after I graduated
Speaker 1: and I met my wife here and she was a
Speaker 1: year behind me at school, and we borrowed two thousand
Speaker 1: dollars to buy our first condo, and the interest rate
Speaker 1: was seventeen on the mortgage different iceper square foot was
Speaker 1: about a tenth what it is today, So it was
Speaker 1: a very different time than this today. What was your
Speaker 1: biggest takeaway from from going to school here. You came
Speaker 1: here after graduating undergrad from Purdue, right, So I came
Speaker 1: directly from undergrad from the Midwest. So I had no
Speaker 1: idea what an investment bank did. I had no idea
Speaker 1: what a consulting firm did. I took a summer job
Speaker 1: at McKenzie not because I knew what they did, but
Speaker 1: because it was the highest paying job I could find,
Speaker 1: and I had a lot of student loans. So it
Speaker 1: was a real education for me to come to this place.
Speaker 1: Uh them, the nature of the education here is really
Speaker 1: spectacular and it has been consistent for such a long
Speaker 1: period of time. And the teaching methodology, the case method,
Speaker 1: is one that I think really leave students with the
Speaker 1: ability to start to think about things on their own,
Speaker 1: be willing to engage in that verbal combat if you will.
Speaker 1: I think they've toned it down a little bit, but
Speaker 1: the verbal combat that prepared you for whatever came next.
Speaker 1: When I took first job after graduation at the Boston
Speaker 1: consulting group. Once they here in Boston. One of the
Speaker 1: first things I remarked upon is when where's the case
Speaker 1: where's all the data? And they said, well, that's what
Speaker 1: you have to do. You have to go put that together.
Speaker 1: But the methodology work still use it today. It's interesting. Well,
Speaker 1: and I'm curious about the case studies that are being
Speaker 1: written about some of the company's going public today and
Speaker 1: that they can stay private for so much longer. What
Speaker 1: do you make of that environment? Well, I think there's
Speaker 1: been a real willingness on the part of private investors,
Speaker 1: that particularly venture capital in late stage venture capital firms
Speaker 1: to invest enormous sums of money in these younger companies.
Speaker 1: If you go back years ago, the whole game was
Speaker 1: startup venture capital, and the amount of total capital available
Speaker 1: for a company was constrained in ways that are very
Speaker 1: different in the world of today. So when you have
Speaker 1: a soft bank out there with the Vision Fund willing
Speaker 1: to invest billions of dollars that would have been enormous
Speaker 1: relative to the public market in public offering providing capital.
Speaker 1: So it's been able to fund business models that are
Speaker 1: highly capital consumptive. Now, the valuations that are being put
Speaker 1: on these companies with the business models not yet fully proven.
Speaker 1: You know, I can't really opene on that. I'll let
Speaker 1: my colleagues on the public markets do that, but they
Speaker 1: do have the ability to stay uh private longer. I
Speaker 1: would also note that, well, it's probably a good thing
Speaker 1: for many of the models that are utilizing huge amounts
Speaker 1: of capital um because for a very long time, in
Speaker 1: order to go public, you had to show that you
Speaker 1: were at least uh a little bit free cash flow positive.
Speaker 1: Now you clearly don't have to do that. And so
Speaker 1: how does it change your mode of buying and selling
Speaker 1: at this For us, we're trying to we're buying companies.
Speaker 1: We've always been investors in growth oriented companies. So if
Speaker 1: you go back in our fourty year history, over the
Speaker 1: time I've been with the firm, we've looked for the
Speaker 1: um sectors that have better than GDP growth. We try
Speaker 1: to find sectors that have very good long term secular
Speaker 1: growth drivers to them and try to invest in these
Speaker 1: companies in order to build them into a much better enterprise.
Speaker 1: So we're buying companies that are already proven to be
Speaker 1: free cash flow generative. We're trying to buy them and
Speaker 1: then work with the management teams, bringing our own operating
Speaker 1: expertise to bear so that we can improve all of
Speaker 1: the key business processes of these companies in ways that
Speaker 1: allow them to take market share in order to grow
Speaker 1: their revenues more rapidly and hopefully to be more efficient
Speaker 1: in generating various metrics of profitability, whether it's IBADA, free
Speaker 1: cash flow or net income. And so in this market,
Speaker 1: giving every given everything that's going on in the world,
Speaker 1: do you a buyer a seller? Net? So we're both
Speaker 1: net is hard to say. It depends on the quarter
Speaker 1: that we're looking at. We've been enormous sellers UH. It's
Speaker 1: been a good time to be selling, but we really
Speaker 1: target just a few sectors for buying, and again it's
Speaker 1: sectors that we think have very strong secular growth drivers
Speaker 1: to them right now. And so UM we just announced
Speaker 1: the acquisition of company in the automation space. UM. We
Speaker 1: have acquired a series of companies in that UH space.
Speaker 1: We think that's a twenty year secular growth trend. It's
Speaker 1: been a very lucrative area for us in terms of returns.
Speaker 1: UH Fintech has been an area that we've been very
Speaker 1: big in for a very long period of time. Well,
Speaker 1: what did you Having said that, what do you think
Speaker 1: about Facebook this week? In terms of talking about the cryptocurrency.
Speaker 1: I've never been that big a believer, to be frank,
Speaker 1: in cryptocurrency, which has largely been seen as an investment
Speaker 1: vehicle as opposed to truly a mode of currency exchange. Uh,
Speaker 1: And I think that's the differentiation they're trying to make,
Speaker 1: and we'll see if that works for them. I've you know,
Speaker 1: I'm old fashioned, going back to the night day one
Speaker 1: that I've always believed sovereigns should be the ones who
Speaker 1: issue currency. And but what do I know, what's it
Speaker 1: like raising money out there? Now? What are you hearing
Speaker 1: from investors in general? What's the mood of the institutions
Speaker 1: as it relates to private equity. I think private equity
Speaker 1: has been a really strong performer. You know, we've all
Speaker 1: seen the data. It's outperformed every asset class over uh
Speaker 1: intermediate to long term. It outperforms in periods of extreme
Speaker 1: economic difficulty. So that has increased the popularity of private
Speaker 1: equity over the course of the last decade, in particularly
Speaker 1: over the last four or five years. So um uh,
Speaker 1: you know, it's not been a bad time when we
Speaker 1: put it that way, to be a investor in private equity,
Speaker 1: got just got about thirty seconds here that all the
Speaker 1: macro issues does it shape how you're buying or selling?
Speaker 1: So for six years I've been thinking more within two
Speaker 1: years of a recession, I make all our people, Yeah,
Speaker 1: I make all of our deal teams incorporated a recession
Speaker 1: into their base case. They've been laughing at me because
Speaker 1: I've clearly been wrong. Uh. It seems that we keep
Speaker 1: we see more in more difficult macro issues, and the
Speaker 1: market just tends to get over it really quickly. So again,
Speaker 1: I'm not smart enough to know, you know, whether that's
Speaker 1: a good or a bad thing. But tech did you well? Well.
Speaker 1: Here at Harvard Business School, we're gonna be talking a
Speaker 1: lot about the case method and the educational backbone of
Speaker 1: Harvard Business School. But someone who's really thinking around the
Speaker 1: corner about education is sal Con. He is the founder
Speaker 1: of con Academy. He is an alum of this fine institution,
Speaker 1: and his success in really teaching has led to an
Speaker 1: enormous uptake in the con Academy. He joins us on
Speaker 1: the phone from Mountain View. Sound great to have you
Speaker 1: with us. Thanks for having me. Alright, So so tell
Speaker 1: me a little bit about your experience here at HBS
Speaker 1: and sort of how it's set you on on your
Speaker 1: you know, my my whole decision to go to HBS was, uh,
Speaker 1: you know, I was working in tech. My original background
Speaker 1: was in math and computer science, so I was working
Speaker 1: out in Silicon Valley and then the first dot com
Speaker 1: bubble burst and I thought, hey, it might be a
Speaker 1: good idea to have to spend a couple of years
Speaker 1: and think about my my life and what I want
Speaker 1: to do with my career. And I also wanted to
Speaker 1: broaden what what people kind of thought of me, uh,
Speaker 1: you know, they think could be more than just a techie.
Speaker 1: And so I went to HBS, and I have to
Speaker 1: say it was it was exactly what I hoped it
Speaker 1: would be. It was a very broadening experience and it
Speaker 1: and it really gave me not only the background, but
Speaker 1: I would say the confidence to to to to think
Speaker 1: about how to make make change in systems. Well, you
Speaker 1: definitely have made change. And you know, before we got going, Jason,
Speaker 1: I were talking about I know my daughter has loved
Speaker 1: going to kN Academy looking at videos, especially for math.
Speaker 1: Many times you've had some eighteen million learners use kN
Speaker 1: Academy every month. You're also doing um some new things
Speaker 1: with n W e A talked to us little bit
Speaker 1: about what you guys are up to. Yeah, as you mentioned,
Speaker 1: your daughter is is one of many millions that come
Speaker 1: on a monthly basis. A lot of them just want
Speaker 1: help with one concept or another. But we're seeing more
Speaker 1: frequently teachers using us as a core part of their curriculum.
Speaker 1: And we're seeing if students even put in forty five
Speaker 1: minutes a week, that they're growing faster than than they
Speaker 1: otherwise would have, which is pretty significant. And so we've
Speaker 1: been forging partnerships with various folks. We famously did the
Speaker 1: partnership with College Board a few years ago where a
Speaker 1: con Academy is now the official practice for the S
Speaker 1: A T and the p s A T Exam, which
Speaker 1: most American students take. When we took it, it was
Speaker 1: just this random test. Now it acts as a diagnostic
Speaker 1: for personalized practice on con Academy and math and in
Speaker 1: English and language arts, and then we can we can
Speaker 1: figure out how it helps those students as they go
Speaker 1: from the p s A D through kN Academy to
Speaker 1: the S A T. And so the partnership that you
Speaker 1: just alluded to this is we're trying to do a
Speaker 1: similar notion, but do it at lower grade levels. So
Speaker 1: the N double E A map exam it's not as
Speaker 1: much of a household name as the S A T,
Speaker 1: but it's taken by of all grades three through eight
Speaker 1: students in the country. And uh, until today or recently,
Speaker 1: it was it was just it was a standardized test
Speaker 1: that students would take to benchmark where they are. But
Speaker 1: now it'll act as a diagnostic for con academy and
Speaker 1: then those classrooms are going to be able to put
Speaker 1: hopefully at least at forty five minutes or hour a week,
Speaker 1: and then the districts, the principles of teachers are going
Speaker 1: to get information on where their students are and what
Speaker 1: kind of interventions they can they can make above and
Speaker 1: beyond the software. So we're excited because we think it'll
Speaker 1: you know, our goal is a not for profit, is
Speaker 1: just to move the dial for as many students as possible,
Speaker 1: and we think this is going to be an important
Speaker 1: factor for that. Well. And sal it does feel like
Speaker 1: it's fair to say this has been revolutionary for for
Speaker 1: a lot of families mine included as well in many friends.
Speaker 1: Are we at some sort of catalytic tipping point in
Speaker 1: terms of online learning? What have you sort of learned,
Speaker 1: as it were, from your experience about where we may
Speaker 1: be going in the short term? You know, I do
Speaker 1: think we are at a tipping point. And it's hard
Speaker 1: to say how fast things will tip. You know, they
Speaker 1: tend to to start to tip a little slower than expected,
Speaker 1: but once the tipping happens, it tends to happen quite fast.
Speaker 1: I think you're going to see. So there's the work
Speaker 1: that's happening in classrooms, and I have to sit you know,
Speaker 1: over the last ten years, we have seen you know,
Speaker 1: I used to preach this whole idea of mastery learning
Speaker 1: that the reason why most students are struggling, it has
Speaker 1: nothing to do with their needibility, has nothing to do
Speaker 1: with the concept. It's because a traditional academic model, you
Speaker 1: push students together together at a fixed pace. You get
Speaker 1: a seventy percent on an exam you didn't know thirty
Speaker 1: percent material too bad. You move on to the next concept,
Speaker 1: which builds on that gap, and that keeps happening. And
Speaker 1: that's why we have a situation where seventy percent of
Speaker 1: the kids in America have to take remedial math when
Speaker 1: they show up at at a community college, which is
Speaker 1: a euphemism for for sixth or seventh grade math. And
Speaker 1: so you know as oh, go ahead, no, no, no,
Speaker 1: please finish. Oh. So you know, one of the values
Speaker 1: we think of a con academy is definitely access. Anyone
Speaker 1: in the world could now access things that might have
Speaker 1: been behind closed doors before. And not only can they
Speaker 1: access it, but they should be able to access in
Speaker 1: the ways so they can learn their own time and face.
Speaker 1: So you only know seventy of a concept, don't move
Speaker 1: on to the next one. Take the time necessary to
Speaker 1: get of that concept. So we think we can move
Speaker 1: the dial there. And I think the other tipping point
Speaker 1: is what's going to happen in credentials. Obviously everyone's talking
Speaker 1: about a trillion and a half in the student loans
Speaker 1: that aren't cancelable by bankruptcy. People are questioning the value
Speaker 1: of a college degree, and I think there's going to
Speaker 1: be um we are we are talking to employers about, hey,
Speaker 1: what kind of signals do you need that we can
Speaker 1: provide that that can be as good or better than
Speaker 1: a college degree. Yeah, it's definitely a strong conversation that
Speaker 1: everybody's having right now. Cell Con, thank you so much,
Speaker 1: founder of con Academy, on the phone from California. This
Speaker 1: is Bloomer Business Week with Carol Masser and Jason Kelly
Speaker 1: on Bloomberg Radio Live at Harvard Business School, and we're
Speaker 1: here with John Compson. He runs Bain Capital, a little
Speaker 1: shop we've heard of it, a little over a hundred
Speaker 1: billion dollars under management. Thanks for having us in your hometown.
Speaker 1: Thank you, adopted hometown, I should say, so, take us
Speaker 1: back to your time here at HBS. It's twenty five
Speaker 1: years ago. I guess you know, you forget a lot
Speaker 1: from twenty five years ago, but you don't. You don't
Speaker 1: forget HBS. UM. I remember in the very first class
Speaker 1: I had, I was amazed at global diversity. I mean,
Speaker 1: this is twenty five years ago, UM, And I was
Speaker 1: in a class with people from Korea and China and
Speaker 1: in Africa and of course Europe and Japan and and
Speaker 1: so I was just amazed at the fact that they
Speaker 1: could attract these type of people, UM, from all over
Speaker 1: to sort of get an education altogether in the same
Speaker 1: spot where I learned from their experiences which were quite
Speaker 1: different than mine, having grown up here in the US.
Speaker 1: And I always think about something, John, like those educational
Speaker 1: experiences like the one you had here. You know what,
Speaker 1: what stays with your how it's shaped kind of where
Speaker 1: you are years later. You know, It's it's funny because
Speaker 1: you know, Harvard has a very specific way of doing things. Um.
Speaker 1: They try to take all of their cases and they're
Speaker 1: the case approach, um, And everything is from the prism
Speaker 1: of a leader. Here I am twenty six years old.
Speaker 1: I'm not a leader at least I didn't think of
Speaker 1: myself as a leader. UM. But those cases that you
Speaker 1: do over and over again every day, and all these
Speaker 1: different environments and all these different types of operations, strategy, globalization,
Speaker 1: all these things that we did. Um. We had to
Speaker 1: become a leader every day in that classroom with eighty
Speaker 1: nine other classmates looking at you, challenging you. UM. And
Speaker 1: that that ability to to be able to think on
Speaker 1: your feet, uh, to be able to take a position,
Speaker 1: to have a voice, to have a point of view,
Speaker 1: to back it up with facts. I think those types
Speaker 1: of skills are incredibly important in the in the business
Speaker 1: world as a leader today, for me and it stayed
Speaker 1: with me for the entire time. It's interesting, he said,
Speaker 1: we caught up yesterday with Tony James over a blackstone,
Speaker 1: and the way he said it is, you got to
Speaker 1: learn to hold your own you know, and he was
Speaker 1: about you know, he was about your age when when
Speaker 1: he came through as well, you know, came he came
Speaker 1: right out of underground. And so it's a maturing uh
Speaker 1: for sure. So let's talk a little bit about the
Speaker 1: world that we're living in right now, because it is
Speaker 1: an interesting one to say. At least you're a global investor, Uh,
Speaker 1: you see all sorts of cross winds. I would imagine
Speaker 1: as you look around a week that we hear from
Speaker 1: the Fed, we're looking ahead to to the G twenty.
Speaker 1: How did geopolitics figure into your investment thesis right now? Well,
Speaker 1: it's it's complicated. I mean, I think the level of
Speaker 1: disruption that might arise by virtue of the direction of
Speaker 1: of different sovereign nations about what they intend to do
Speaker 1: to protect IP the trade war courses is on everybody's
Speaker 1: minds um. The element of the overall economic policies of
Speaker 1: of what is going to happen with central banks? You know,
Speaker 1: these were fairly stable over the thirty year career I've
Speaker 1: had in private equity, but they're they're pretty comp located
Speaker 1: today and frankly, the valuations that we've seen haven't really
Speaker 1: incorporated some of that complication. Why is that? Is it
Speaker 1: because there's a lot of money out there time. I
Speaker 1: think there's a ton of money and there's a lot
Speaker 1: of hope um. And I think generally, you know, even
Speaker 1: back when I started in private equity in nine people
Speaker 1: talked about the fear of what was going to transpire,
Speaker 1: but it takes a while before that really to take
Speaker 1: take hold and get reset and valuations UM. So it
Speaker 1: wasn't until where we really solid recession, we really saw
Speaker 1: the downturn, that it actually began to be realized in valuation. UM.
Speaker 1: We saw it in pockets China first quarter of two
Speaker 1: thousand and eighteen. We saw it obviously in the fourth
Speaker 1: quarter last year as well in the US and the
Speaker 1: rest of the global market. So it's out there was
Speaker 1: that evaluation. Everybody's saying, Okay, things are overdone or was
Speaker 1: it a missque by the Fed, or was it? What
Speaker 1: was it? I think there's a lot of short term
Speaker 1: orientation to it, But there's enough fear out there were
Speaker 1: ten years into the to the cycle, and and certainly
Speaker 1: there are these disruptive factors that are out there. Um
Speaker 1: So I do think that people do have fear. So
Speaker 1: when they hear some things that are disruptive, UM, I
Speaker 1: think valuations get reset pretty quickly. And so with that backdrop,
Speaker 1: are you sitting around with your partners and saying, you
Speaker 1: know what, we may need to lean into selling things
Speaker 1: right now or to continue to sell things. Where's the
Speaker 1: balance there? Well? First of all, I believe that the
Speaker 1: valuations peaked certainly the private markets a couple of years ago,
Speaker 1: because the rates have come up to some degree um
Speaker 1: in the U S at least UM. And I do
Speaker 1: think that the industrial cycle, particularly in auto for instance,
Speaker 1: in certain areas of industrials has reset um And certainly
Speaker 1: with the public market reset and valuations for for industrials,
Speaker 1: we're seeing that in the private markets as well. Um
Speaker 1: So we're seeing a great deal of industrial pipeline that's
Speaker 1: coming into to to evaluate. But it's also tricky because
Speaker 1: there will be a cycle during our investment horizons, so
Speaker 1: you need to build that into your investment thesis. Where
Speaker 1: are you guys fying opportunities. I knew you just did it.
Speaker 1: Was it like a nine nine hundred million dollar fund,
Speaker 1: a second fund for life sciences, And I know that's
Speaker 1: something you look at very closely. Yeah, healthcare is a
Speaker 1: big area for us. We invest early stage, we invest
Speaker 1: late stage, we invest through our credit funds, and so
Speaker 1: healthcare has always been a big, big part of our
Speaker 1: of our strategy, but actually healthcare itself in each of
Speaker 1: our verticals, we're going deeper and deeper. So life science
Speaker 1: as an example where we want to be not just
Speaker 1: a biotech early stage investor, we want to be in
Speaker 1: the inflection capital business. So we did this strategic relationship
Speaker 1: with with Visor where we took their entire CNS platform,
Speaker 1: carved it out, put it into a new company, and
Speaker 1: now we're building a company with Visor that's going to
Speaker 1: be a leading CNS player. You don't see biotech venture
Speaker 1: capitalists do that. You don't see private equity traditionally do that.
Speaker 1: But because we're so deep in life sciences, we have
Speaker 1: those capabilities to do late stage inflection capital for left
Speaker 1: science and scale of capital, both the capabilities to understand it,
Speaker 1: capabilities to build companies and then capabilities to deploy large
Speaker 1: scale capital behind that. What are you avoiding right now?
Speaker 1: Anything high priced? Where are you finding things most high priced? No,
Speaker 1: I think that we have been of the view that
Speaker 1: ever since the recovery, where a lot of money has
Speaker 1: gone into UM you know, stability kind of deals, deals
Speaker 1: that are kind of low growth UM deals that basically
Speaker 1: don't have discontinuity and change. They're actually pretty stable. A
Speaker 1: lot of people are going to those safe havens and
Speaker 1: paying up for that stability and leveraging it to very
Speaker 1: high levels, higher and higher every year. And so from
Speaker 1: that perspective, we think there's a real rerating risk for
Speaker 1: stable assets that have been overpriced because of all the liquidity,
Speaker 1: because of all the credit support that they've gotten from
Speaker 1: central banks. So Harvard has one of the largest NBA
Speaker 1: programs in the world. Involved in shaping and running that
Speaker 1: program is our next guest. Jam Rifkin is Senior Associate Dean,
Speaker 1: Chair of the NBA program, professor of the Strategy Unit
Speaker 1: here at Harvard Business School and with us on site
Speaker 1: at Harvard. So nice to be here. Thank you, Carol,
Speaker 1: and welcome to Harvard Business Schools. To treat and welcome
Speaker 1: you both to the campus and thanks for bringing the
Speaker 1: show here. Thank you so much, it's really a delight
Speaker 1: for us. And talk to us a little bit about
Speaker 1: when you do shape the NBA program. We talk so much,
Speaker 1: Jason and I about the world, so many industries, so
Speaker 1: much of what we do, the processes are being disrupted.
Speaker 1: How do you guys apply that to what's going on
Speaker 1: here and what you want to teach your student body. Now,
Speaker 1: it's a great question. Can I put it in the
Speaker 1: context of overall Harvard Business School and what's going on
Speaker 1: in the NBA program. It's very much our flagship, but
Speaker 1: there's a lot of other things going on here that
Speaker 1: I think will help address your question. Um. So, the
Speaker 1: NBA is indeed the flagship about eighteen hundred and fifty students,
Speaker 1: but in addition, we welcome about eleven thousand executives to
Speaker 1: campus each year to hone their leadership skills. We've got
Speaker 1: a doctoral program that trains the next generation of faculty.
Speaker 1: We've got our publishing arm that takes ideas out into
Speaker 1: the world through vehicles like Harvard Business Review and case
Speaker 1: studies to go around the world. And our newest venture,
Speaker 1: which is Harvard Business School Online too. Learners around the
Speaker 1: world as well. I was actually checking that out last week.
Speaker 1: It's really amazing, like more and more people want to
Speaker 1: learn that way. Yeah, and we're trying our best to
Speaker 1: make sure that that is just as engaging. That's what
Speaker 1: happens in our classrooms with case studies. So and how
Speaker 1: do you do that? I mean because that because so
Speaker 1: much of this we hear about business school is about
Speaker 1: that human connection about you know, we just heard from
Speaker 1: John Contenting about being in the room and sort of
Speaker 1: being with those other students. How do you sort of
Speaker 1: transfer that? So I think the key is to make
Speaker 1: sure that there's not just a talking head that is
Speaker 1: coming at you as you see the most massive open
Speaker 1: online courses. Instead, there's a degree of interaction with the
Speaker 1: online content but also with other learners around the world.
Speaker 1: So the interaction with human beings I think is crucial
Speaker 1: to any learning experience. Yeah, that's interesting too, And I
Speaker 1: do think about you know, we increasingly technology kind of
Speaker 1: rolls into everything we do that relationship. I was just
Speaker 1: talking with various CEOs and some leaders at an event
Speaker 1: back at Bloomberg and that whole idea of how technology
Speaker 1: can kind of take you away from having those one
Speaker 1: on one, face to face relationships, and that is so
Speaker 1: crucial today's world. And actually, when we look at the
Speaker 1: priorities we've gone for the direction like what do we
Speaker 1: need to do next for our students, it turns out
Speaker 1: that two of those three, maybe all three of our
Speaker 1: main priorities have to do with relationships human beings. It's
Speaker 1: not sound so simple, and it is about the people
Speaker 1: in a very fundamental way, I think. And so when
Speaker 1: you think about what happens after they leave here career placement,
Speaker 1: I believe also you work up very closely and as
Speaker 1: well a lot of people make a big investment to
Speaker 1: come here in some form or fashion, whether it's as
Speaker 1: an NBA or executive or even you know, learning online.
Speaker 1: How has that changed over time and what are you
Speaker 1: seeing in that evolution in terms of careers. So probably
Speaker 1: the most interesting thing I see among our students is
Speaker 1: that they are interested in purpose in their careers. It's
Speaker 1: not all about the paycheck. The paycheck is important, I do,
Speaker 1: but they're trying to have both purpose and a decent paycheck,
Speaker 1: and I think that changes how they think about their
Speaker 1: careers and how they think about what they're going to
Speaker 1: do here as well. So has that changed the type
Speaker 1: of company that you're inviting onto campus or has it
Speaker 1: changed that part of the equation or now so we
Speaker 1: look for a broad range of companies. Our students actually
Speaker 1: lead us in this. They tell us what they're looking for,
Speaker 1: and we do see significant shifts and how they're searching
Speaker 1: for jobs. So as recently as five years ago, about
Speaker 1: seventy of our students found their jobs through the on
Speaker 1: campus recruiting, the traditional recruiting. Today that's down to about
Speaker 1: and I expect it will go down even lower. So
Speaker 1: they're looking for things that are very much targeted their interests,
Speaker 1: and they're willing to look and create the job search
Speaker 1: themselves to a network search, often through our alumni base,
Speaker 1: define the thing that matches their needs. One they I
Speaker 1: want to ask you, and we picked it off with
Speaker 1: our Joel Weber, editor of Bloomberg Business Magazine. We've got
Speaker 1: a story online this week that's just talking about student
Speaker 1: debt and specifically NBA candidates. And I do think I'm
Speaker 1: curious about the conversations you folks are having here at
Speaker 1: Harvard Business School and Harvard at large. You know, in
Speaker 1: terms of return on investment, where students are looking the
Speaker 1: amount of debt that they have to take on to
Speaker 1: go to a great institution like the Harvard Business School.
Speaker 1: Tell me what you guys are are talking about. So,
Speaker 1: for sure, our students has questions about return on the
Speaker 1: NBA investment and we like that, right. We'd like to
Speaker 1: have people here are thinking about what's the return on investments.
Speaker 1: And they've had good reasons to question the tuition cost
Speaker 1: of risen over time UM. And they also have to
Speaker 1: take off two years two years out of the workforce
Speaker 1: in order to come here. So we have to make
Speaker 1: every day count and we've done a few things to
Speaker 1: try to make sure that we have the NBA program
Speaker 1: being accessible to anyone with its talent and drive to
Speaker 1: be admitted, right, and it's important that we bring in
Speaker 1: anyone who has that down and drive. So we have
Speaker 1: very generous financial aid UM. The typical students, about half
Speaker 1: our students have financial aid. The typical package is about
Speaker 1: eighty thou dollars for the two years they're here and
Speaker 1: UM the revenue of the NBA program is about a
Speaker 1: hundred and forty million dollars. We almost immediately get forty
Speaker 1: million back in financial aid. The other thing we've done
Speaker 1: recently this year is we have frozen the tuition and
Speaker 1: increase financial aid in order to make sure that the
Speaker 1: NBA is affordable and accessible and particularly get the great
Speaker 1: diversity we need on our campus. A lot of what
Speaker 1: our students are doing when they leave here is managing
Speaker 1: diverse workforces, the fire bases, customer bases. We did that
Speaker 1: those human differences reflected in our campus. We're hearing as
Speaker 1: we talked to your alone here on our program today. Yeah. Well,
Speaker 1: and I want to add skew about the product the
Speaker 1: curriculum a little bit, because you guys have stuck to
Speaker 1: this sort of general management approach, not going down the
Speaker 1: specialty route that other of your competitors have. Why so,
Speaker 1: a lot of our competitors have launched these specialized, shorter
Speaker 1: master's programs in data analytics, supply chain management, financial engineering,
Speaker 1: and I think those are great products for a particular
Speaker 1: type of learner. Harvard Business School our mission is to
Speaker 1: educate and used to make a difference in the world.
Speaker 1: And just as you said, Jason, our focus has been
Speaker 1: on general managers, the people who set the overall direction
Speaker 1: of enterprises, and in that context, what we're doing basically,
Speaker 1: as the world zags were zigging, and we're zigging harder
Speaker 1: than ever. The bet. The bet is essentially as specialized
Speaker 1: knowledge becomes more important, the value of managers who can
Speaker 1: look across those specialties and knit the pieces together, the
Speaker 1: value that they have individually, and the value they can
Speaker 1: create in the world. It's bigger and bigger. We do, though,
Speaker 1: I have to say that we do. We do a
Speaker 1: couple our expertise in general management here but with programs
Speaker 1: elsewhere at hard So just yesterday we announced the new
Speaker 1: Masters and Life Sciences, for instance. So you're mixing and
Speaker 1: mounting among the differendum. Jen, thank you so much, great
Speaker 1: to get some into the program overall, thanks for having us.
Speaker 1: Welcome for you here beautiful space. Jan Rifkin is Senior
Speaker 1: Associate Dean and Chair of the NBA program here at
Speaker 1: Harvard Business Corp. You're listening to Bloomberg Business Week with
Speaker 1: Carol Masser and Jason Kelly on Bloomberg Radio. All right, Well,
Speaker 1: our next guest has a fascinating remit of swords, and
Speaker 1: as we've learned a lot about him, I've gotten more
Speaker 1: excited about more and more excited about talking to George
Speaker 1: Seraphim is here. He's a professor here at the Harvard
Speaker 1: Business School, professor of Business Administration. It's been teaching and
Speaker 1: he focuses a lot of his work on E s G.
Speaker 1: And first of all, great to have you here with us.
Speaker 1: Thank you very much, a pleasure to be here. So
Speaker 1: before we get to s G, though, I actually want
Speaker 1: to go to something that's been recently uh in Harvard
Speaker 1: Business it's about money laundering and and and corruption and
Speaker 1: white color crime. And we've talked a lot about that
Speaker 1: on our show and written a lot about it in
Speaker 1: Bloomberg Business Week. It feels like we're at a moment
Speaker 1: where there's a lot of this happening. Why a lot
Speaker 1: of this is happening and no research we have found
Speaker 1: that this is primarily a cultural problem and the leadership problem.
Speaker 1: It is not a compliance and control systems problem. So
Speaker 1: what we have found is that leaders really they don't
Speaker 1: create the type of culture inside an organization where people
Speaker 1: can acting with integrity. Let me give you a very
Speaker 1: concrete example of that. For example, one of the things
Speaker 1: that we have found is that there's a very with
Speaker 1: which perpetrators of white color crime they're punished in side down.
Speaker 1: An organization is declining with the seniority of the perpetrators,
Speaker 1: so more senior people are getting more linear punishments. And
Speaker 1: that is especially true for male perpetrators, but not for
Speaker 1: female perpetrators. So how can you expect to create a
Speaker 1: culture of integrity inside the organization if you're actually playing favorites.
Speaker 1: This is just a simple example of howard physically we're
Speaker 1: coiled um. So many different places to go first I
Speaker 1: want to go to. I would have thought, I guess
Speaker 1: I would have hoped that after the financial crisis that
Speaker 1: we would all be rethinking leadership and we would think
Speaker 1: about a moral compass and we would think about ethics
Speaker 1: and doing the right thing. Has nothing changed after the crisis.
Speaker 1: I do think we're making progress and we're moving the
Speaker 1: right direction. And just to give we're not making progress.
Speaker 1: If men get off and women don't, we're not making
Speaker 1: enough anyway. Absolutely, I think we have long ways to
Speaker 1: go to get there. But I do think that there
Speaker 1: is an increased realization inside business, inside organizations, that these
Speaker 1: are issues that we really need to pay attention and tackle.
Speaker 1: And this is what's happening here at Harvard Business School
Speaker 1: as well. So, for example, In the course that I
Speaker 1: teach with my colleague, Professor Rebecca Henderson, that's called Reimagining Capitalism,
Speaker 1: Business and Big Problems. We introduce to students many of
Speaker 1: those dialemmas and problems and we really make them think
Speaker 1: hard about how they would act and how they will
Speaker 1: manage those types of problems inside organizations. This is a
Speaker 1: course that has gone from two students to three students.
Speaker 1: This is an indication of how we are training a
Speaker 1: new generations. But I have to say that I would
Speaker 1: think that most of us in a study group or
Speaker 1: in an academic situation would do the right thing. But
Speaker 1: what that's adorable, I know, but I really do think.
Speaker 1: But what happens too when you're in this setting and
Speaker 1: then you get out in the real world and everybody
Speaker 1: kind of not everybody, but people forget to do the
Speaker 1: right thing. And this is absolutely a problem of sitting
Speaker 1: in a classroom and say it and trying to make
Speaker 1: the right thing, and then facing all the constraints and
Speaker 1: the realities and you're making a very different choice. Actually,
Speaker 1: this is the part of the case method and putting
Speaker 1: a person in the suits of a protagonist and having
Speaker 1: also the protagonists of the case in the classroom, but
Speaker 1: then you can reflect and have a discussion about what
Speaker 1: is happening. So, for example, in this HBr article, we
Speaker 1: have an interview with eric Usmunsen, who is the CEO
Speaker 1: of the largest waste management company in Norway. We have
Speaker 1: written a case on him and how he was facing
Speaker 1: with ground level and systemic corruption inside the organization. What
Speaker 1: did he do when he took over to turn around
Speaker 1: the organization. So these are the real life situations that
Speaker 1: are getting exposed to and they can be done. And
Speaker 1: that is the case method, right, I mean you're you
Speaker 1: have to look at real life examples. It's not hypothetical.
Speaker 1: Well let's talk a little e. S G. Because you know,
Speaker 1: we heard from Jen Ritkin, the senior says Dean here
Speaker 1: that you are attracting a population that is very interested
Speaker 1: in jobs that allow them to do good. Uh, how
Speaker 1: do they how do they do that? Where are they,
Speaker 1: where they going and what are they learning in order
Speaker 1: to enable them to get there. There are multiple career paths.
Speaker 1: One of them is at the corporate sector. So increasingly
Speaker 1: many more companies are having real integrated corporate as ability
Speaker 1: strategies that they are trying to drive financial performance while
Speaker 1: trying to drive also social impact. Another avenue is within
Speaker 1: the impact investing in s the investing space in the
Speaker 1: investment markets. What started from a niche, I would say,
Speaker 1: and specialized market now has exploded to be within the
Speaker 1: heads fund industry and the private tect of the industry
Speaker 1: and so forth. And of course a third career path
Speaker 1: would be within the consulting world. Right, so all the
Speaker 1: big consulting firms are developing practices and many more that
Speaker 1: I can keep going on, George, we just have about
Speaker 1: thirty forty seconds left here. I do think E s
Speaker 1: G has gone from a niche and just being kind
Speaker 1: of the right or feel good way of investing to
Speaker 1: actually showing performance. Are we seeing that more and more
Speaker 1: war that you can do do good invest in E
Speaker 1: s G but also see those performances that are comparable
Speaker 1: to other asset classes. Yes, And I think the key
Speaker 1: and the key concept is materiality. How those E s
Speaker 1: G issues are becoming financially material and as a result
Speaker 1: affecting the value creational process and the competitiveness of economies,
Speaker 1: of corporations and in general organizations. And this is what
Speaker 1: we have found in our research, that those are becoming
Speaker 1: financially material and as a result, they are affecting growth rates,
Speaker 1: cost of capital, and profitability. Magic, fascinating conversation. Thank you
Speaker 1: so much. Sounds like you have fun teaching and student
Speaker 1: body towards. Seraphim is Professor of Business Administration at Harvard
Speaker 1: Business School. Joining us on site at Harvard. This is
Speaker 1: Bloomberg Business Week with Carol Masser and Jason Kelly on
Speaker 1: Bloomberg Radio. We're live at Harvard Business School and we've
Speaker 1: gotten a chance, Carol to talk to some I'm just
Speaker 1: gonna say, it's a very distinguished alumni here. We're so
Speaker 1: excited to have one here with us in the Baker Library.
Speaker 1: So beautiful here. Kelly Morrel. She's a managing director. She
Speaker 1: works in the Tactical Opportunities Group at Blackstone down in
Speaker 1: New York. She's here with us in Boston. Kelly, great
Speaker 1: to have you with us. Thank you so much for
Speaker 1: having me. All Right, So I have to say we've
Speaker 1: talked to some other alum but you're one who is
Speaker 1: actually here in this century. And not only that, but
Speaker 1: you were here during the financial crisis. I was what
Speaker 1: was that like? So it's an incredibly unique experience. I
Speaker 1: feel like our class in particular, coming out of HBS
Speaker 1: in two thousand nine, you know, there weren't that many
Speaker 1: sort of traditional job opportunities, and so you saw people
Speaker 1: really doing incredibly innovative, slightly different things. A number of
Speaker 1: my classmates ended up starting really sort of renowned companies.
Speaker 1: I did something very very different, took my financial services experience,
Speaker 1: moved down to Washington, d C. And ended up joining
Speaker 1: the Obama administration, where he worked on the bailouts of
Speaker 1: Chrysler and GM during that period of time. Phenomenal experience,
Speaker 1: really sort of unprecedented hopefully once in a lifetime portunity
Speaker 1: to talk about that though, from going from the classroom
Speaker 1: right then also then all of a sudden going to
Speaker 1: the government the practical and having to figure stuff out.
Speaker 1: What was that like? What did you have to think about? Absolutely?
Speaker 1: And so I think, you know, prior to going to HBS,
Speaker 1: you know, I really had spent a lot of time
Speaker 1: working on financial institutions. I was an investment banker of
Speaker 1: Goldman Sachs, and going down to Washington at that point
Speaker 1: in time, it was a really unique experience because you
Speaker 1: had a number of people from different backgrounds, Republicans, independents
Speaker 1: Democrats who really brought their sort of financial and Wall
Speaker 1: Street experience to solving pretty tough problems that no one
Speaker 1: really had the answer to. And so I was part
Speaker 1: of a small team that took GM and Chrysler through bankruptcy.
Speaker 1: When the company's emerged from bankruptcy, I ended up being
Speaker 1: the point person on Chrysler, which basically meant that I
Speaker 1: partnered very very closely with the CEO, the late Sergio
Speaker 1: Marchioni UM and Richard Palmer, who was the CFO at
Speaker 1: that point in time, helping them think through, you know,
Speaker 1: their strategy, their viability plan, how ultimately they were going
Speaker 1: to be successful, and really figure out how do you
Speaker 1: drive value for the shareholders which really were the American
Speaker 1: taxpayers at that point in time. And you stay in
Speaker 1: the essentially the distress restructuring business that when you got
Speaker 1: a c I t a well known name to a
Speaker 1: lot of folks on Wall Street, what was that like?
Speaker 1: And then how do you ultimately get to Blackstone? Sure?
Speaker 1: So I really liked this intersection of working on complex
Speaker 1: strategic problems that really sort of had an M and
Speaker 1: a component to them where you could affect change, and
Speaker 1: so I was looking for an opportunity when my time
Speaker 1: at the government came to an end, um to really
Speaker 1: work for a new CEO who had worked on a
Speaker 1: company that also is experiencing, you know, a really strong
Speaker 1: sort of transformation at that point in the company's sort
Speaker 1: of corporate history. So I joined C I T, where
Speaker 1: I worked for the CEO, John Than. C I T
Speaker 1: had gone through bankgrups here during the financial crisis, was
Speaker 1: one of the largest lenders to small and medium sized businesses.
Speaker 1: I joined as part of the management team really to
Speaker 1: effectuate the turnaround. I was the chief strategy officer. We
Speaker 1: ended up doing a ton of really sort of innovative things,
Speaker 1: restructuring the bad and sheet building an internet bank from scratch,
Speaker 1: taking it from zero dollars in deposits to fifteen billion
Speaker 1: in deposits. We exited a number of non core markets UM,
Speaker 1: including exiting twenty six different geographies. UM. We bought a
Speaker 1: bank on the West Coast, and one of the last
Speaker 1: things that I did was sell a large aircraft leasing business. Uh.
Speaker 1: And I think I can say this, but Blackstone tac
Speaker 1: Ops actually was a bitter on it. They didn't win UM,
Speaker 1: but I got to know the team really well during
Speaker 1: that time, but they got you when the deal closed,
Speaker 1: perhaps the best prize. When the deal closed, they actually
Speaker 1: called me and persuaded me to join their team. And
Speaker 1: so you're you're working for David Blitzer, who we've actually
Speaker 1: had on our program in the context of you know,
Speaker 1: this little basketball team owns down in Philadelphia, but also
Speaker 1: in the context of tactical opportunities. It's a different sort
Speaker 1: of group within Blackstone, it is, and so we really
Speaker 1: think of ourselves a sort of Blackstones opportunistic investing platform.
Speaker 1: And so the fund was founded in really on the
Speaker 1: heels of the financial crisis to take advantage of sort
Speaker 1: of an imbalance and the supply and demand of certain
Speaker 1: types of assets. The banks at that point in time
Speaker 1: had a lot of non core assets that they were
Speaker 1: looking to sell. Traditional buyers of those assets were like
Speaker 1: the prop desks of Goldman, Sacks and Morgan Stanley, which
Speaker 1: really had been sort of eliminated or heavily regulated out
Speaker 1: following Dodd Frank in the Vocal Rule, and so Blacks
Speaker 1: And at that point in time, partnering with one of
Speaker 1: our large LPs, saw a really interesting and unique opportunity
Speaker 1: to take advantage of that type of dislocation and thus
Speaker 1: tack ops was born. Well, so in this environment today,
Speaker 1: I mean, what are the opportunities for you folks? Are
Speaker 1: you buying new companies to add to the existing portfolio
Speaker 1: with the environment lest sure? Something about seconds? Sure? So
Speaker 1: I think it's interesting to note that tack ops actually
Speaker 1: looks at a number of different market dislocations. So we're
Speaker 1: seeing things not only in sort of traditional private equity
Speaker 1: looking at smaller growth oriented companies. We're also seeing a
Speaker 1: lot of interesting opportunities looking at preferred equity and different
Speaker 1: sizes of the capital structure that are differentiating and unique.
Speaker 1: Kelly Morella is still with US managing director, head of
Speaker 1: asset Management and the Tactical Operations Group Opportunities Group. I
Speaker 1: should say at black don't just call it TAPS, it's
Speaker 1: so where are the opportunities right now? Sure? So you know,
Speaker 1: we're actually saying a number of different sort of market
Speaker 1: dislocations across the investment spectrum. So one of the unique
Speaker 1: things about tach ops that we really have a very
Speaker 1: flexible investment mandate. You can go in a lot of
Speaker 1: different places. Exactly, we can invest in any industry, any geography,
Speaker 1: and really any part of the capital structure. So we're
Speaker 1: finding really unique sort of differentiate opportunities, not necessarily looking
Speaker 1: at common equity or at debt, but really looking at
Speaker 1: sort of preferred or other very heavily structured securities that
Speaker 1: provide us downside protection. Does it matter the industry or
Speaker 1: it doesn't necessarily matter the industry across the board and
Speaker 1: you guys, I mean one of the flexibilities you have
Speaker 1: too is you get money sometimes for longer durations, and
Speaker 1: you have these partnerships with your investors that are a
Speaker 1: little bit different. We do, Yeah, we do have a
Speaker 1: number of sort of separately managed accounts which are slightly
Speaker 1: different than some of the traditional private equity funds. But
Speaker 1: you're right, we can hold some of our investments for
Speaker 1: a longer duration. Um, we can do things in terms
Speaker 1: of co invests that are always a little bit slightly different.
Speaker 1: Not one of the benefits of tack ops, Kelly, I
Speaker 1: think about how much time at Bloomberg we talk about
Speaker 1: these big macro issues that are out there, whether it's
Speaker 1: trade with the Fed's going to do with the economic
Speaker 1: situation is going to be. How does that factor into
Speaker 1: your discussions that you guys have It back at Black
Speaker 1: absolutely so. I think one of the challenges actually and
Speaker 1: having a portfolio as large as the one that we
Speaker 1: have in tac OPS and really as diverse as it is.
Speaker 1: You know, we touch a number of different geographies, everything
Speaker 1: from Argentina to Indonesia to New Zealand Australia. Busy keeps
Speaker 1: you quite busy. But because of that, we're always monitoring
Speaker 1: a number of different macro factors, whether it's GDP, growth,
Speaker 1: effects rates, you know, what's happening in the oil markets,
Speaker 1: because all of those ultimately will impact our existing portfolio,
Speaker 1: but they also create opportunities for us on the investment side. Right,
Speaker 1: Kelly Morele, Managing Director, works in the tac OPS group
Speaker 1: over at Black Stand down to New York with us
Speaker 1: here at Harvard Business School, her alma Manity or Double Harvard. Right,
Speaker 1: great to have you with us here in Boston. You're
Speaker 1: listening to Bloomberg Business Week with Carol Masser and Jason
Speaker 1: on Bloomberg Radio. We're live at Harvard Business School. What
Speaker 1: a day it has been. We've had a veritable parade
Speaker 1: of alum and faculty experts and we're not done yet.
Speaker 1: Bill Kerr is Professor of Business Administration here at HBS.
Speaker 1: He's on site with us in the gorgeous Baker Library built.
Speaker 1: Great to have you with us, Thank you. Yeah, we
Speaker 1: love it. I don't think I've ever seen this amount
Speaker 1: of equipment. Well, so tell us a little bit about
Speaker 1: the workplace, because I think we spend a lot of
Speaker 1: time talking about artificial intelligence, we talk about machine learning.
Speaker 1: You know, what impact will this have on our world
Speaker 1: when it comes to work? How do you see it?
Speaker 1: How do you teach about it? Yeah? I think we
Speaker 1: we start with actually two trends that are impacting the workplace.
Speaker 1: One is the technology side, artificial intelligence, advanced cognitive technologies,
Speaker 1: increasingly robots and how they're going to enter the service
Speaker 1: sector and so forth. The other one big one is
Speaker 1: for us to demographics, so an aging workforce and the
Speaker 1: challenges that's going to pose on the number of workers
Speaker 1: we have and the responsibilities that they look at. So
Speaker 1: we're trying to think about things in both the short
Speaker 1: run horizon, what are companies doing right now to increase
Speaker 1: their access to workers and then over that twenty thirty
Speaker 1: year period, how is it going to likely reshape the workplace?
Speaker 1: And then what can businesses start to do to get
Speaker 1: a bit ahead of that curve. So one of the
Speaker 1: things that we've talked a lot about, and it's very
Speaker 1: familiar to you, is the case method here at HBS.
Speaker 1: It's not hypothetical, it's not theoretical. You're teaching real examples.
Speaker 1: How do you teach this in real examples? What are
Speaker 1: some cases that you look at? But I think we're
Speaker 1: still finding our way to the Opton way of teaching
Speaker 1: that true to Harvard Business Schools form. A lot of
Speaker 1: our work is set inside a company, an organization is
Speaker 1: this could be a vote of phone, It could be
Speaker 1: a Procter and Gamble, could be an a T and T,
Speaker 1: a Walmart. It starts with what are some of the
Speaker 1: things that they are seeing on the horizon, and then
Speaker 1: how are they starting to make actions right now towards
Speaker 1: things like the gig economy, towards access to workforces, towards
Speaker 1: the adoption of technolo alogy into various processes. And then
Speaker 1: what do they see on the horizon and how are
Speaker 1: they getting ready for that future? Well, Bill, I do
Speaker 1: wonder you know, we don't go through a conversation without
Speaker 1: somehow often bringing up the Amazon factor. And I do
Speaker 1: wonder in your teaching. Are you often using that Amazon
Speaker 1: and Jeff Bezos as the benchmark? We don't use I
Speaker 1: mean the Amazon, how do you The Amazon factor certainly
Speaker 1: comes up, as is the whole reshaping of the future
Speaker 1: of commerce. You can start with the implications for the
Speaker 1: stores and the retailers and go work your way all
Speaker 1: the way back up the supply chains. The manufacturers look
Speaker 1: for a place where the data and analytics and the
Speaker 1: sort of predictive power of technologies reshaping things. The supply
Speaker 1: chain going into retail is a big one that that
Speaker 1: shadow looms large. But a lot of times we want
Speaker 1: to not think about what Amazon should or shouldn't do
Speaker 1: does come up. We're instead looking at companies that have
Speaker 1: fifty hundred thousand or maybe ten thousand workers, and they
Speaker 1: are being impacted by the technologies that are coming to life,
Speaker 1: the chat bots, the futures of AI analytics, the robots
Speaker 1: that are going to be entering the fast food front
Speaker 1: front restaurants in the future gig economy. So how are
Speaker 1: they where they can't really funnily shape the technology, but
Speaker 1: are instead needing to keep up with it and transform
Speaker 1: their workplace. Well, and I feel like we're having some
Speaker 1: pretty blood societal discussions about this. Right now, back to education.
Speaker 1: You know, we were talking with SALCN earlier about how
Speaker 1: people are educated. He's a proud HBS alum, as you know.
Speaker 1: So there's that factor of it. And and how do
Speaker 1: you think about educating workers in real time? Because I
Speaker 1: would imagine one of the things you're talking about is
Speaker 1: essentially retraining a workforce in real time. Yeah, I think
Speaker 1: you're I think you're hitting it right on the head.
Speaker 1: You go out to we got a lot of big
Speaker 1: questions is to are we gonna, you know, have five
Speaker 1: million jobs more? Are we going to be down to
Speaker 1: billion jobs? Very smart people can come to very different
Speaker 1: conclusions about that. But if you start to come back
Speaker 1: to doay A, there's two things that we know for certain.
Speaker 1: One is that it's going to be very pervasive and ubiquitous.
Speaker 1: This isn't technological change is happening in one sector and
Speaker 1: it's an isolated issue across all sectors were experiencing this.
Speaker 1: And second, it's coming at a pace that we've not
Speaker 1: experienced before, and so we don't have the institution set
Speaker 1: up to make that workforce transition the way we have
Speaker 1: in the past, where the next generation learned this, you know,
Speaker 1: the technology, and then they went into the workplace, and
Speaker 1: then we sort of retooled. Over the next twenty years,
Speaker 1: businesses are going to have to take a much more
Speaker 1: direct role in workplace reskilling and training for their own
Speaker 1: self interests, but also for society, and they're gonna have
Speaker 1: to work a lot more with the partners in the ecosystem,
Speaker 1: the community, colleges, universities to make sure that they're producing
Speaker 1: the graduates that they need. Bill, what kind of jobs
Speaker 1: are we not going to need people to do anymore
Speaker 1: in the future. I don't know, there's five years, I
Speaker 1: don't know, it's ten years. What jobs do you look
Speaker 1: at that say there's no longer we're gonna need a
Speaker 1: person to do that. It's very hard to actually pick
Speaker 1: it out in a job by job. We tend to
Speaker 1: think of it more as a task by task kind
Speaker 1: of role. So what kind of tasks? Yeah, So if
Speaker 1: you think about technology would change over the last century,
Speaker 1: the task that it was most principally connected to are
Speaker 1: things that were at a very either routine or kind
Speaker 1: of manual roll to it. And then with the computer,
Speaker 1: it really went into things that are calculations, you know
Speaker 1: that they had to be crunched, the number crunching. As
Speaker 1: we look at the next wave of technologies, they're gonna
Speaker 1: increase me going into non routine cognitive tasks, so things
Speaker 1: that require an element of you know, calculating the predictions
Speaker 1: of something or what are some likely scenarios that stuff
Speaker 1: that the machine is going to be able to do
Speaker 1: better and better likewise some forms of first line customer service,
Speaker 1: networking optimization, so forth, the machines is going to become
Speaker 1: better at at handling those things. And then kind of
Speaker 1: the next level the arc is going to be going
Speaker 1: in add a little roticts to that that can come
Speaker 1: more into the service sectors and in other ways that
Speaker 1: in a physical relationship or manual tasks. It starts to
Speaker 1: impact us. But I think if you go through all
Speaker 1: those points, it's not that we're really going to see
Speaker 1: too many occupations entirely disappear. The work's going to change, right,
Speaker 1: So I'm gonna steal a page for the playbook of
Speaker 1: our colleague Tom Keene here, and I want to go
Speaker 1: back to your your dissertation, your PhD dissertation where you
Speaker 1: talked about you find it a little bit of research.
Speaker 1: But I mean it's interesting to think about because I'm
Speaker 1: going to read the tide the role of immigrant scientists
Speaker 1: and entrepreneurs and international technology transfer. That is very relevant
Speaker 1: right now as we think about global talent, and I
Speaker 1: know you've recently written a book about global talent as well,
Speaker 1: The Gift of Global Talent. Talk to us about that,
Speaker 1: especially in the world we're living in politically. Yeah, so
Speaker 1: you can think part of our workplace is thinking about
Speaker 1: how do we make sure frontline workers have the opportunities
Speaker 1: for the future. There's another level of thinking about the innovators,
Speaker 1: the people that are coming up with these new technologies
Speaker 1: and shaping that. How well positioned are we to be
Speaker 1: grabbing that workforce and engaging them for the best uses.
Speaker 1: So a few numbers back actually when I when I
Speaker 1: first started this journey with that thesis, about one out
Speaker 1: of every ten inventors at that point was for and born.
Speaker 1: Today the numbers won't have every three and a half.
Speaker 1: So it is a big contribution that's happening across many
Speaker 1: different technology fields. And so we have to make sure
Speaker 1: we have an immigration structure that is able to you know,
Speaker 1: attract and bring in and thank prank is not as
Speaker 1: crude as the immigration structure we have today. And then
Speaker 1: if you are a business, if you think about your
Speaker 1: ability to stay at that frontier of technology, it's moving
Speaker 1: so fast and so important, how are you going to
Speaker 1: make sure you understand and have access to the places
Speaker 1: that this is creatible? So then how do you see,
Speaker 1: especially when we talk so much now it feels like
Speaker 1: about a US China tech cold war, how do you
Speaker 1: see it playing out and what my China's role be
Speaker 1: in the future. I think we're gonna first see an
Speaker 1: ever increasing role of China in the global economy. They
Speaker 1: have been on a on ascendency for for a while.
Speaker 1: I don't look at the future and say that we
Speaker 1: necessarily have to be at loggerhead with each other. In
Speaker 1: some places like the internet domains, it's clear that some
Speaker 1: different ecosystems have developed, and if you're in the Ali
Speaker 1: Bob or the ten cent kind of ecosystems, that's different
Speaker 1: than if you're in so the U S and Western Europe.
Speaker 1: Parts of those are going to continue to advance, and
Speaker 1: I think we can allow for various, you know, shots
Speaker 1: on goals of how things are gonna are gonna work there.
Speaker 1: More importantly for us is that today about one of
Speaker 1: every tent of our inventors has a Chinese ethnicity or background.
Speaker 1: A lot of that is immigration of some of its
Speaker 1: second generation. And so we need to understand how we
Speaker 1: can be attractive to people that we want to migrate
Speaker 1: towards the United States and towards towards the Western economies,
Speaker 1: and think about the ways that they can be influence
Speaker 1: on our our labs and our universities, also our startup
Speaker 1: companies and so forth. Well, you think about the economic momentum, right,
Speaker 1: I mean, this is where it comes from. Yeah, it's uh.
Speaker 1: I mean, in the long run, innovation is the main
Speaker 1: thing that moves the economy forward, really creates that progress.
Speaker 1: You get some things like capital accumulation finally a matter,
Speaker 1: but those are more in the short run things. The
Speaker 1: innovation is the long run horizon, and this is the
Speaker 1: real catalyst that's pushing them. Statistics are amazing. Bill Kerr,
Speaker 1: Professor of Business Administration here at Harvard Business School. His
Speaker 1: book The Gift of Global Talent, How Migration Shapes Business,
Speaker 1: Economy and Society incredibly timely, as is your thesis right now,
Speaker 1: going back to your m I t days. This is
Speaker 1: Bloomberg Business Week with Carol Messer and Jason Kelly on
Speaker 1: Bloomberg Radio. You are listening to Bloomberg Business Week. We're
Speaker 1: live at Harvard Business School. What a day it has been.
Speaker 1: We've had a veritable parade of alum and faculty experts,
Speaker 1: and we're not done yet. Bill Kerr is Professor of
Speaker 1: Business Administration here at HBS. He's on site with us
Speaker 1: in the gorgeous Baker Library built. Great to have you
Speaker 1: with us. Thank you. Yeah, we love it. I don't
Speaker 1: think I've ever seen this amount of equipment. So I
Speaker 1: tell us a little bit about the workplace, because I
Speaker 1: think we spend a lot of time talking about artificial intelligence.
Speaker 1: We talk about machine learning. You know, what impact will
Speaker 1: this have on our world when it comes to work?
Speaker 1: How do you see it? How do you teach about it? Yeah?
Speaker 1: I think we we start with actually two trends that
Speaker 1: are impacting the workplace. One is the technology side, artificial intelligence,
Speaker 1: advanced cognitive technologies, increasingly robots and how they're going to
Speaker 1: enter the service sector and so forth. The other one
Speaker 1: big one is for us to demographics, so an aging
Speaker 1: workforce and the challenges that's going to impose on the
Speaker 1: number of workers we have and the responsibilities that they
Speaker 1: look at. So we're trying to think about things in
Speaker 1: both the short run horizon. What are companies doing right
Speaker 1: now to increase their access to workers? And then over
Speaker 1: that twenty thirty year period, how is it going to
Speaker 1: likely reshape the workplace? And then what can businesses start
Speaker 1: to do to get a bit ahead of that curve.
Speaker 1: So one of the things that we've talked a lot about,
Speaker 1: and it's very familiar to you, is the case method
Speaker 1: here at HBS. It's not hypothetical, it's not theoretical. You're
Speaker 1: teaching real examples. How do you teach this in real poles?
Speaker 1: What are some cases that you look at? Well, I
Speaker 1: think we're still finding our way to the opten way
Speaker 1: of teaching that true to Harvard Business Schools form. A
Speaker 1: lot of our work is set inside a company, an
Speaker 1: organization is This could be a vote of phone, It
Speaker 1: could be a Procter and gamble, could be an a
Speaker 1: T and T, a Walmart. It starts with what are
Speaker 1: some of the things that they are seeing on the horizon,
Speaker 1: and then how are they starting to make actions right
Speaker 1: now towards things like the gig economy, towards access to workforces,
Speaker 1: towards the adoption of technology into various processes, and then
Speaker 1: what do they see on the horizon and how are
Speaker 1: they getting ready for that future? Well, Bill, I do wonder.
Speaker 1: You know, we don't go through a conversation without somehow
Speaker 1: often bringing up the Amazon factor. And I do wonder
Speaker 1: in your teaching, are you often using that Amazon and
Speaker 1: Jeff Bezos as the benchmark? We don't use I mean
Speaker 1: the Amazon? How do you The Amazon factor certainly comes up,
Speaker 1: as is the whole reshaping of the future of commerce.
Speaker 1: You can start with the implications for the stores and
Speaker 1: the retailers and go work your way all the way
Speaker 1: back up the supply chains to the manufacturers. Look for
Speaker 1: a place where the data and analytics and the sort
Speaker 1: of predictive power of technologies reshaping things. The supply chain
Speaker 1: going into retail is a big one that that shadow
Speaker 1: looms large. But a lot of times we want to
Speaker 1: not think about what Amazon should or shouldn't do does
Speaker 1: come up. We're instead looking at companies that have fifty
Speaker 1: thou a hundred thousand, or maybe ten thousand workers and
Speaker 1: they are being impacted by the technologies that are coming
Speaker 1: to life, the chat bots, the futures of AI analytics,
Speaker 1: the robots that are going to be entering the fast
Speaker 1: food front front restaurants in the future, gig economy. So
Speaker 1: how are they where they can't really funnily shape the technology,
Speaker 1: but are instead needing to keep up with it and
Speaker 1: transform their workplace. Well, and I feel like we're having
Speaker 1: some pretty blood societal discussions about this right now. Back
Speaker 1: to education. You know, we were talking with salcn earlier
Speaker 1: about how people are educated. He's a proud HBS alum
Speaker 1: as you know, So there's that factor of it. And
Speaker 1: and how do you think about educating workers in real time?
Speaker 1: Because I would imagine one of the things that you're
Speaker 1: talking about is essentially retraining a workforce in real time. Yeah,
Speaker 1: I think you're I think you're hitting it right on
Speaker 1: the head. You go out to we got a lot
Speaker 1: of big questions is to are we gonna, you know,
Speaker 1: have five million jobs more? Are we going to be
Speaker 1: down to billion jobs? Very smart people can come to
Speaker 1: very different conclusions about that. But if you start to
Speaker 1: come back to today, there's two things that we know
Speaker 1: for certain. One is that it's going to be very
Speaker 1: pervasive and ubiquitous. This isn't technological change is happening in
Speaker 1: one sector and it's an isolated issue across all sectors
Speaker 1: were experiencing this. And second, it's coming at a pace
Speaker 1: that we've not experienced before, and so we don't have
Speaker 1: the institution set up to make that workforce transition the
Speaker 1: way we have in the past, where the next generation
Speaker 1: learned this, you know, the technology, and then they went
Speaker 1: into the workplace and then we sort of retooled. Over
Speaker 1: the next twenty years, businesses are going to have to
Speaker 1: take a much more direct role in workplace reskilling and
Speaker 1: training for their own self interests, but also for society,
Speaker 1: and they're gonna have to work a lot more with
Speaker 1: the partners in the ecosystem, the community, colleges, universities to
Speaker 1: make sure that they're producing the graduates that they need. Bill,
Speaker 1: what kind of jobs are we not going to need
Speaker 1: people to do anymore in the future. I don't know,
Speaker 1: there's five years, I don't know, it's ten years. What
Speaker 1: jobs do you look at that say there's no longer
Speaker 1: we're gonna need a person to do that. It's very
Speaker 1: hard to actually pick it out in a job by job.
Speaker 1: We tend to think of it more as a task
Speaker 1: by task kind of role. So what kind of tasks? Yeah,
Speaker 1: so if you think about technology would change over the
Speaker 1: last century, the task that it was most principally connected
Speaker 1: to were things that were at a very either routine
Speaker 1: or kind of manual role to it. And then with
Speaker 1: the computer, it really went into things that are calculations,
Speaker 1: you know that they had to be crunched, the number crunching.
Speaker 1: As we look at the next wave of technologies, they're
Speaker 1: gonna increase me going into non routine cognitive tasks, So
Speaker 1: things that require an element of you know, calculating the
Speaker 1: predictions of something or what are some likely scenarios. That's
Speaker 1: stuff that the machine is going to be able to
Speaker 1: do better and better likewise some forms of first line
Speaker 1: customer service, networking optimization, so forth, the machines is going
Speaker 1: to become better at handling those things. And then kind
Speaker 1: of the next level the arc is going to be
Speaker 1: going in add a little rotics to that that can
Speaker 1: come more into the service sectors and in other ways
Speaker 1: that in a physical relationship or manual task it starts
Speaker 1: to impact us. But I think if you go through
Speaker 1: all those points. It's not that we're really going to
Speaker 1: see too many occupations entirely disappear. The work's going to change,
Speaker 1: right So I'm gonna steal a page for the playbook
Speaker 1: of our colleague Tom Keene here, and I'm gonna go
Speaker 1: back to your your dissertation, your PhD dissertation where you
Speaker 1: talked about as you find it, well, a little bit
Speaker 1: of research, but I mean it's interesting to think about
Speaker 1: because I'm gonna read the tide the role of immigrant
Speaker 1: scientists and entrepreneurs and international technology transfer. That is very
Speaker 1: relevant right now as we think about global talent, and
Speaker 1: I know you've recently written a book about global talent
Speaker 1: as well, The Gift of Global Talent. Talk to us
Speaker 1: about that, especially in the world we're living in politically. Yeah,
Speaker 1: So you can think part of our workplace is thinking
Speaker 1: about how do we make sure frontline workers have the
Speaker 1: opportunities for the future. There's another level of thinking about
Speaker 1: the innovators, the people that are coming up with these
Speaker 1: new technologies and shaping that. How well positioned are we
Speaker 1: to be grabbing that workforce and engaging them for the
Speaker 1: best uses. So a few numbers back, Actually, when I
Speaker 1: when I first started this journey with that thesis. About
Speaker 1: one out of every ten inventors at that point was
Speaker 1: for and born. Today the numbers won't have every three
Speaker 1: and a half. So it is a big contribution that's
Speaker 1: happening across many different technology fields. And so we have
Speaker 1: to make sure we have an immigration structure that is
Speaker 1: able to you know, attract and bring in and thank Frank,
Speaker 1: is not as crude as the immigration structure we have today.
Speaker 1: And then if you are a business, if you think
Speaker 1: about your ability to stay at that frontier of technology,
Speaker 1: it's moving so fast and so important. How are you
Speaker 1: going to make sure you understand and have access to
Speaker 1: the places that this is creating? Well? So, then how
Speaker 1: do you see, especially when we talk so much now
Speaker 1: it feels like about a US China tech cold war,
Speaker 1: how do you see it playing out? And what might
Speaker 1: China's role be in the future. I think we're gonna
Speaker 1: first see an ever increasing role of China in the
Speaker 1: global economy. They have been on a on ascendency for
Speaker 1: for a while. I don't look at the future and
Speaker 1: say that we necessarily have to be at loggerheads with
Speaker 1: each other in some places like the internet domains, It's
Speaker 1: clear that some different ecosystems have developed, and if you're
Speaker 1: in the Ali Bab or the ten cent kind of ecosystems,
Speaker 1: that's different than if you're in the U S and
Speaker 1: Western Europe. Parts of those are going to continue to advance,
Speaker 1: and I think we can allow for various, you know,
Speaker 1: shots on goals of how things are gonna are going
Speaker 1: to work there. More importantly for us is that today
Speaker 1: about one of every tent of our inventors has a
Speaker 1: Chinese ethnicity or back out. A lot of that is
Speaker 1: immigration of some of its second generation. And so we
Speaker 1: need to understand how we can be attractive to people
Speaker 1: that are want to migrate towards the United States and
Speaker 1: towards towards the Western economies, and think about the ways
Speaker 1: that they can be influence on our our labs and
Speaker 1: our universities, also our startup companies and so forth. Well,
Speaker 1: you think about the economic momentum, right, I mean, this
Speaker 1: is where it comes from. Yeah, it's I mean, in
Speaker 1: the long run, innovation is the main thing that moves
Speaker 1: the economy forward, really creates that progress. You get some
Speaker 1: things like capital accumulation, find they matter, but those are
Speaker 1: more the short run things. The innovation is the long
Speaker 1: run horizon, and this is the real catalyst that's pushing them.
Speaker 1: Statistics are amazing. Bill Kerb, Professor of Business Administration here
Speaker 1: at Harvard Business School. His book The Gift of Global Talent,
Speaker 1: How Migration Shapes Business, Economy and Society, incredibly timely, as
Speaker 1: is your thesis right now, going back to your m
Speaker 1: I T days. Great to have you with us. Well,
Speaker 1: coming up, we have got a very special conversation with
Speaker 1: a notable alumnus of this fine institution, Jonathan Nelson Providence Equity.
Speaker 1: We're going to talk to him about his time here.
Speaker 1: He has been awarded accolades by this school, has also
Speaker 1: made his way into some very impressive deals of his values.
Speaker 1: In part that's something we want to dig into. We
Speaker 1: also want to talk about the media world with him
Speaker 1: in the telecom. There's so much happening at this point,
Speaker 1: so we'll get into that. We will, indeed, but first
Speaker 1: let's get back to Charlie Pellett. He's got an update
Speaker 1: on what's going on in the world of business. Hey Charlie, Well,
Speaker 1: hello there, I thank you very much. Great conversation. We've
Speaker 1: got the dial, the SMP and NES stank all moving
Speaker 1: higher today. Record on the SMP up twenty seven to
Speaker 1: twenty nine fifty four. That was a gain of one percent.
Speaker 1: The Dow up nine tenths of one percent today up
Speaker 1: by two hundred forty nine points now, the stack up
Speaker 1: sixty four, that was a gain of eight tenths of
Speaker 1: one percent. Tenure down one thirty second. The yield now
Speaker 1: two point zero two percent. Gold up two percent today,
Speaker 1: surging twenty seven dollars the ounce to eighty seven. West
Speaker 1: Texas Intermedia Crude up six percent fifty seven twenty one
Speaker 1: um West Texas Intermedia Crude. Chevron phil Ups Chemical Company,
Speaker 1: a joint venture between Chevron and Phillip sixty six, has
Speaker 1: offered to acquire Nova Chemicals Corps for more than fifteen
Speaker 1: billion dollars including debt. This is a Reuter's report which
Speaker 1: signs people familiar with the matter of the Index of
Speaker 1: Leading Economic Indicators any KG on the economic outlook flatlined
Speaker 1: in May. And with that story, here's Bloomberg's vinnidel Judais.
Speaker 1: The leading indicators showed no change the first month, without
Speaker 1: an increase since January, reflecting week factor you order swooning
Speaker 1: stocks and bouncy jobless claims a sustained pattern of flat
Speaker 1: negative readings, and we're nowhere near that good signal recession ahead.
Speaker 1: The last time we saw that pattern in two thousand seven,
Speaker 1: just before the Great Recession. Bloomberg Radio City Group CEO
Speaker 1: Michael Corbatt says he would consider joining Facebook's Libra cryptocurrency projects.
Speaker 1: Speaking at a Fortune magazine conference, Corbatt said, quote, to
Speaker 1: my knowledge, the social media company did not approach any
Speaker 1: of City's banking competitors on the project. Again, recapping here
Speaker 1: on a search for oil today up six percent, fifty
Speaker 1: seven twenty two for a barrel of West Texas enemy
Speaker 1: to accrude, and a record for the SMP five index
Speaker 1: up twenty seven points. Hired today by one. I'm Charlie Pellett,
Speaker 1: and that's Bloomberg Business Flash. All right. We welcome everybody
Speaker 1: on Bloomberg Television. Of course, our listeners to at Bloomberg Radio.
Speaker 1: A real treat someone who doesn't talk a lot to
Speaker 1: the media about Luckily we have him here at Harvard
Speaker 1: Business School. He's a Harvard Business School alum. Jonathan Nelson
Speaker 1: is founder and CEO of Providence Equity. Nice to have
Speaker 1: you here with us. Yes, thanks, thanks for having me
Speaker 1: on campus. Failed do you come back often? Uh? Well, uh,
Speaker 1: as part of responsibilities for the Board of Dean's Advisors. Yes,
Speaker 1: although I have to tell you we do not meet
Speaker 1: in the library where we are sitting pretty neat and uh,
Speaker 1: it's probably more I haven't been in a library in
Speaker 1: a long time. Sadly. That may be more comment of
Speaker 1: m point in career as opposed to what's happened in
Speaker 1: media generally. But it could be either, Well, we know
Speaker 1: you were back in because you were recognized with an
Speaker 1: Alumni Achievement award, and it was that was largely around
Speaker 1: sort of the values with which you have carried yourself
Speaker 1: since you have left here. Talk about that and talk
Speaker 1: about what you learned here and how you translated it
Speaker 1: into your career. Well, first, the award, you know, I
Speaker 1: was humbled by it and surprised. The Dean was clear
Speaker 1: that UM. It was not because Prominence Equity had succeeded
Speaker 1: in my role in that UM as its founder, UM,
Speaker 1: but the values that I had expressed UM in life
Speaker 1: and in business. And I was so impressed by HBO
Speaker 1: that A they were keeping track of such things uh,
Speaker 1: and be that they were um acknowledging it, rewarding it,
Speaker 1: and so I was for those reasons. I was very
Speaker 1: proud of of the war to particularly when I saw
Speaker 1: the people that had come before me or with me
Speaker 1: that year, and so I'm I hope my kids are
Speaker 1: happy about it and it did bring them here. Well,
Speaker 1: you know, in this world where I think people are
Speaker 1: questioning the values of various individuals, whether it's political leaders,
Speaker 1: whether it's corporate leaders, tell us about those values and
Speaker 1: how um, Jonathan, it's impacted your investment strategy? Oh gosh, well, UM,
Speaker 1: it's probably never been a good business rategy talk about politics,
Speaker 1: but you are asking in part at large? Yeah, well now,
Speaker 1: but there is that there are some serious issues better
Speaker 1: here because um uh CEOs and their boards are wondering. Uh.
Speaker 1: And by the way, I think justifiably, so how do
Speaker 1: they fit in UM as leaders influencers? And you know,
Speaker 1: we have political leaders UM which without being partisan, is
Speaker 1: UM tending to more divisive than uniting. And that's troublesome. UM.
Speaker 1: There are other forms of leadership. It could be faith
Speaker 1: based for some, it could. There are plenty of worthy
Speaker 1: social causes we are and then companies are figuring out
Speaker 1: their own path. You see some very large companies that
Speaker 1: are actually taking positions on important issues problematic These are
Speaker 1: not easy for big companies. Many of them are on
Speaker 1: the defensive, so that it's hard, particularly in the areas
Speaker 1: media and technology and communications educated. It's it's tricky, UM.
Speaker 1: And then I think the vast majority of the eos
Speaker 1: are doing it quietly. They are making their mark. They're
Speaker 1: doing it UH in their companies and and how they
Speaker 1: spend their time out. UM. That's the model that I
Speaker 1: subscribe to. I'm proud of the work of our portfolio
Speaker 1: companies UH and my partners. We are fortunate that in UH,
Speaker 1: in the media business where we focus and have for
Speaker 1: thirty years. Actually this is our thirty anniversary UM, that
Speaker 1: we have a chance to convene people to UM get
Speaker 1: a message out. UH we do. The Ambassador Theater Group
Speaker 1: is a good example. We this is live theater. But
Speaker 1: by the way, that in itself is remarkable in a
Speaker 1: world where media is fast paced and digital that is
Speaker 1: the other end of the spectrum. But we regularly every
Speaker 1: day of the week convene people. And I look at
Speaker 1: the causes that we have increased awareness, whether it refugee camps,
Speaker 1: in Europe. A program that UM we've run in one
Speaker 1: of our theaters which has had high impact, whether it's
Speaker 1: improving the acting on affordability of tickets so that younger
Speaker 1: audiences can go and experience theater, which is I think
Speaker 1: it's very important affordability of tickets. Were setting aside tickets
Speaker 1: for every show in Europe so that we can increase
Speaker 1: UM audience participation. And by the way, when you go
Speaker 1: to a theater that is UM, it's both a modern
Speaker 1: and a time honored version of community. I mean literally
Speaker 1: experienced it unlike all other media, well except for sports,
Speaker 1: which we hope we talk about this afternoon as a group,
Speaker 1: we'll talk about live entertainment because that's an area where
Speaker 1: you see a lot of opportunities. And I was thinking,
Speaker 1: for the first year, I went to two Broadway shows
Speaker 1: with my family. I haven't done it a long time, No,
Speaker 1: I know, but I mean, what is it And you
Speaker 1: see that though as an investment opportunity live entertainment, Well,
Speaker 1: we have UM twenty seconds at background where we started
Speaker 1: in media, and it's still one of the three legs
Speaker 1: on the stool of providence. It was in distribution. So
Speaker 1: if you think of media. There is distribution, which is satellite,
Speaker 1: cable television and now telcos and and streaming, which probably
Speaker 1: can't have a conversation without talking about director consumer. And
Speaker 1: then we moved into content, and so we're still in both.
Speaker 1: We're still in distribution, which is today mobile and cable.
Speaker 1: We were in satellite and in content. Uh. Content. For us,
Speaker 1: the white hot center of valuable content is not just
Speaker 1: TV or and by the way, those definitions really are
Speaker 1: stretched because you typically don't watch on a TV. It's
Speaker 1: a tablet um is sports. Sports is most valuable live,
Speaker 1: which is interesting because you can't time shifted. The value
Speaker 1: of a program drops off dramatically when you don't air
Speaker 1: it at the time it's played. Many of us have
Speaker 1: tried to go in a cocoon when you couldn't watch
Speaker 1: a sport, and you know, I want the game, and
Speaker 1: so you don't look at your phone. Typically I don't
Speaker 1: want to know the score, and even if you succeed
Speaker 1: in isolating yourself, the experience is not the same. You
Speaker 1: know that all the fans that you share a passion
Speaker 1: with already know the answer, and so it's devalued. We
Speaker 1: love that about sports um because of its power it's
Speaker 1: passion and it's like one of the antidotes to UM
Speaker 1: piracy because by the way, just like live theater, you
Speaker 1: can pirate it and it's not worth anything. Sports is
Speaker 1: like that. And so you've invested experientially in really interesting ways.
Speaker 1: Iron Man, you know something that that we've talked a
Speaker 1: lot about diving certification. That's a great interest to Carol Masser,
Speaker 1: a very good UH diver. So what's next? How do
Speaker 1: you continue this investment thesis and experiences? You know, it's
Speaker 1: it's unending. UM. There's no such thing as figuring out
Speaker 1: what's around the corner and then go, you know, I
Speaker 1: figured that out and so I'm done. That's been an
Speaker 1: unending exercise. Uh. We've been pretty good at that. But
Speaker 1: you can't stand still. And by the way you're leaning in,
Speaker 1: I can't say what I think is right around the corner.
Speaker 1: We're working on it now. Live is obviously a big
Speaker 1: part of it, that's no secret. UH. And I think
Speaker 1: that this notion that UH media will belong to only
Speaker 1: the largest companies, uh No, what is true and often
Speaker 1: confused with as franchise. What it takes to be of
Speaker 1: scale has increased, but there's plenty of room for disruptors,
Speaker 1: because if you us a CEO of a franchise media company,
Speaker 1: their leadership will tell you privately that they feel threatened
Speaker 1: as they never have been before. Franchises are fragile, and
Speaker 1: that's good news for folks like us who are starting
Speaker 1: companies or investing in small companies and need to compete
Speaker 1: with bohemus. And sometimes it's mutualistic, it works well together.
Speaker 1: That's been true in content and distribution for us. It's
Speaker 1: true even in new media, so it's pretty exciting for us.
Speaker 1: Our basic thesis is that as networks get better and better,
Speaker 1: so that's phones as tablets, it's our life, that's what
Speaker 1: you mean. Yeah, that's what I mean by network. Yes,
Speaker 1: so that's how you consume. Used to be a TV
Speaker 1: in the living room going back decades, but just to
Speaker 1: make the point, and today it's anywhere doing anything, commuting
Speaker 1: at home. Actually most viewing at home is now on
Speaker 1: a on a untethered tablet. Interesting. Uh, that in our
Speaker 1: view has to raise the value of content that is
Speaker 1: easier to access whenever, wherever it's convenient. It's relatively inexpensive. Uh,
Speaker 1: content should be increase in value in the same way
Speaker 1: that networks are more valuable. So think of it this way.
Speaker 1: Netflix will spend fifteen billion dollars on original content this year.
Speaker 1: That's an astounding number. That number was zero. So it's
Speaker 1: good to be in content creation. So do you invest
Speaker 1: on the content side or the distribution side, or both both,
Speaker 1: both heavily weighted towards one or the other, or equally.
Speaker 1: Now it has varied over time. I mean many years
Speaker 1: ago it was exclusively distribution. Today it's about um there
Speaker 1: is And we've been on both sides of this fence
Speaker 1: for a long time, and it's very interesting to talk
Speaker 1: to participants who historically have only been in content creation,
Speaker 1: not in distribution or vice versa. And of course the
Speaker 1: grass is always greener on the other side. To a CEO,
Speaker 1: I really want to be doing that, not just what
Speaker 1: I'm doing. The truth is that while they're different disciplines,
Speaker 1: the relationship is mutualistic. Think of network. Think of mobile,
Speaker 1: which is going from four G to five G. It
Speaker 1: is not worth much just because it's faster. It's only
Speaker 1: worth as much as the value of the content writing
Speaker 1: on that network. Now, in the beginning, it was just
Speaker 1: a conversation, it was voice, and then it became data,
Speaker 1: and then it became then pictures and then video. But
Speaker 1: now that it's high death multiple angle screens, that makes
Speaker 1: your network more valuable. That's the reason you invest. You're
Speaker 1: looking for a return on that investment, and so that
Speaker 1: sounds like a good thing for the network. And dependent
Speaker 1: on content. Content is the same phenomenon. From the opposite perspective.
Speaker 1: Your content, I believe is worth more. The easier, the better, faster,
Speaker 1: more convenient it is for consumers, it opens it increases
Speaker 1: your reachable audience. That has to be a good thing.
Speaker 1: You learned that lesson with Hulu r We learned that
Speaker 1: lesson in spades in Hulu. What do you think that Hulu?
Speaker 1: All right? You would early investor helped make it happen
Speaker 1: multiple owners. Now it's back under one owner. How do
Speaker 1: you is that good? What do you think of that? Well? Uh,
Speaker 1: it feels like the child that left home early but
Speaker 1: before we were ready. Uh no, it is. We're actually
Speaker 1: very uh proud of what we've done there. I saw
Speaker 1: Jason Carlier, the first CEO we recruited not from the
Speaker 1: world of tv UM, who did a great job and
Speaker 1: it was pioneering work. When we started, everyone told us.
Speaker 1: We were nuts. Uh, it wouldn't work. By the way,
Speaker 1: that doesn't That's often associated with things that work out well.
Speaker 1: But it doesn't mean you're that's a good strategy because
Speaker 1: it doesn't always work out. It's often Uh what about
Speaker 1: T Mobile? You were also early investor in a company
Speaker 1: that ultimately became T Mobile. Um, you know the government,
Speaker 1: the Justice Department, is pushing for it to get rid
Speaker 1: of some assets. What do you think about that? Is
Speaker 1: that necessary in terms of competition? Well, by the way,
Speaker 1: I'm really proud of the work we did. Whether there
Speaker 1: was a little company is called Voice Dream and we
Speaker 1: started literally when I when I say we start companies,
Speaker 1: we do that. We're unafraid of it in our spaces
Speaker 1: that where we are focused. We don't do it regularly,
Speaker 1: but we do it. And just about every fun you'll
Speaker 1: find one or two, uh greenfield total startups. Hulu was one,
Speaker 1: what became Tiboo was another. And we literally went up
Speaker 1: against the biggest telcos in the country buying spectrum its.
Speaker 1: Starting from scratch, we had the number of employees that
Speaker 1: could count on one hand became twenty thousand by the
Speaker 1: time we sold to George Telecom. But that was fun.
Speaker 1: It really was. Honestly, we have to leave it there.
Speaker 1: Oh okay, disappointed. Disappointed means are gonna have to come back.
Speaker 1: I'm gonna have to come back. And it's nice to
Speaker 1: be bad. Thanks for listening to Bloomberg Business Week. You
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