1 00:00:00,240 --> 00:00:02,440 Speaker 1: This is Bloomberg Wall Street Week. 2 00:00:02,480 --> 00:00:04,400 Speaker 2: And we may not have an overall recession, we're having 3 00:00:04,400 --> 00:00:06,760 Speaker 2: a rolling recession. To Cone roll looks pretty strongly it 4 00:00:06,800 --> 00:00:08,000 Speaker 2: is when it comes to jobs. 5 00:00:07,720 --> 00:00:09,840 Speaker 3: The financial stories that shape our world. 6 00:00:09,960 --> 00:00:13,640 Speaker 2: Three major regional bank failures send shockwaves through the banking system. 7 00:00:13,680 --> 00:00:15,440 Speaker 2: We're all trying to figure out what to make of 8 00:00:15,600 --> 00:00:17,000 Speaker 2: generative AI. 9 00:00:16,920 --> 00:00:19,320 Speaker 1: Through the eyes of the most influential voices. 10 00:00:19,440 --> 00:00:22,400 Speaker 2: Welcome down, doctor Paul Krugman, Ryan moynihan, a Bank of America, 11 00:00:22,560 --> 00:00:25,279 Speaker 2: deebro Lair of the Paulson Institute, well then Hubbard of 12 00:00:25,280 --> 00:00:26,280 Speaker 2: the Columbia Business School. 13 00:00:26,280 --> 00:00:30,120 Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 14 00:00:30,280 --> 00:00:32,840 Speaker 2: Less oil that we thought it's more high end chips 15 00:00:32,840 --> 00:00:35,000 Speaker 2: than we expected, and trying to get our hopes for 16 00:00:35,040 --> 00:00:38,280 Speaker 2: the future just right given where we're headed. This is 17 00:00:38,280 --> 00:00:41,920 Speaker 2: Bloomberg Wall Street Week. I'm David Weston. This week Larry 18 00:00:41,960 --> 00:00:45,839 Speaker 2: coppege on his remarkable five years of turnaround for an 19 00:00:45,840 --> 00:00:48,080 Speaker 2: American icon and what comes next. 20 00:00:48,200 --> 00:00:52,360 Speaker 4: You're far better off being strong rather than just big, 21 00:00:52,720 --> 00:00:52,880 Speaker 4: you know. 22 00:00:52,960 --> 00:00:55,840 Speaker 2: Ferguson of the Hoover Institution on the promise and the 23 00:00:55,880 --> 00:00:59,000 Speaker 2: perils of artificial intelligence, and what we can learn from 24 00:00:59,000 --> 00:00:59,640 Speaker 2: the Cold War. 25 00:01:00,120 --> 00:01:04,720 Speaker 5: There were problems posed when nuclear fission club was developed. 26 00:01:04,959 --> 00:01:09,080 Speaker 5: It had both the destructive use atomic bombs and a 27 00:01:09,160 --> 00:01:12,759 Speaker 5: potentially very productive use as a source of energy. 28 00:01:13,080 --> 00:01:16,480 Speaker 2: And Pete Stavros of KKR, together with Kathy Vajos of 29 00:01:16,800 --> 00:01:20,319 Speaker 2: Chartered Next Generation on giving employees a true seat at 30 00:01:20,319 --> 00:01:21,320 Speaker 2: the corporate table. 31 00:01:21,120 --> 00:01:23,600 Speaker 6: We lay the foundation of a different type of culture, 32 00:01:23,640 --> 00:01:24,440 Speaker 6: which is ownership. 33 00:01:24,560 --> 00:01:28,279 Speaker 7: We normalize the fact that management and labor don't get along. 34 00:01:28,600 --> 00:01:30,039 Speaker 7: I want to flip the script on that. 35 00:01:42,880 --> 00:01:45,880 Speaker 2: Global Wall Street eased its way into fall this week 36 00:01:46,040 --> 00:01:49,000 Speaker 2: with continued disappointing economic news out of China, but a 37 00:01:49,080 --> 00:01:51,960 Speaker 2: discovery that Huawei may have found a way to make 38 00:01:52,040 --> 00:01:55,240 Speaker 2: high end microchips despite the US restrictions. 39 00:01:55,440 --> 00:01:59,000 Speaker 8: It shows that China can do mostly with domestic manufacturing 40 00:01:59,440 --> 00:02:02,720 Speaker 8: a lot of the advanced the chip making and development 41 00:02:02,760 --> 00:02:04,040 Speaker 8: for a smallphone. 42 00:02:03,680 --> 00:02:06,480 Speaker 2: Something President g won't have to answer questions about it 43 00:02:06,520 --> 00:02:09,160 Speaker 2: the G twenty meetings in India this weekend because he 44 00:02:09,240 --> 00:02:10,359 Speaker 2: decided not to go. 45 00:02:10,919 --> 00:02:15,240 Speaker 1: It just sticks away from the Shijen Bing's absence steaks 46 00:02:15,240 --> 00:02:17,440 Speaker 1: of the primacy in a way. 47 00:02:17,560 --> 00:02:21,320 Speaker 2: Saudi Arabia and then Russia announced extended restrictions on their 48 00:02:21,360 --> 00:02:24,480 Speaker 2: oil production, catching markets by surprise and raising the specter 49 00:02:24,639 --> 00:02:26,720 Speaker 2: of a return to higher oil prices. 50 00:02:27,320 --> 00:02:30,320 Speaker 7: The fact that was reached ninety dollars but barrel is 51 00:02:30,400 --> 00:02:34,320 Speaker 7: significant and it means that the whole commodity index pushes higher. 52 00:02:34,560 --> 00:02:37,440 Speaker 2: In the United States, everyone was looking for any scrap 53 00:02:37,480 --> 00:02:40,800 Speaker 2: of information to confirm the soft landing. Last week's jobs 54 00:02:40,880 --> 00:02:44,480 Speaker 2: numbers suggested, with the ISM services number coming in hot, 55 00:02:44,520 --> 00:02:47,919 Speaker 2: which made everyone fear more rate heights, while the Fed's 56 00:02:47,960 --> 00:02:52,519 Speaker 2: Beige Book pointed to subdued jobs growth and modest economic activity. 57 00:02:52,919 --> 00:02:55,040 Speaker 8: I think the Fed would be very unwise to raise 58 00:02:55,120 --> 00:02:58,200 Speaker 8: rates again just because of a short term spike and 59 00:02:58,320 --> 00:02:59,720 Speaker 8: enthusiasm and service sector and. 60 00:02:59,880 --> 00:03:02,640 Speaker 2: U US open headed toward its finals is driven by 61 00:03:02,680 --> 00:03:05,760 Speaker 2: new faces, the return of some real American contenders, and 62 00:03:05,840 --> 00:03:09,120 Speaker 2: a media showdown in the way of some people getting 63 00:03:09,160 --> 00:03:09,639 Speaker 2: to watch. 64 00:03:10,400 --> 00:03:12,760 Speaker 9: We just came out of this golden age of fifteen 65 00:03:12,919 --> 00:03:16,320 Speaker 9: years of Roger Rafa Novak, and the baton has not 66 00:03:16,360 --> 00:03:17,080 Speaker 9: only been passed. 67 00:03:17,080 --> 00:03:19,880 Speaker 3: If you think it's been thrown to Carlos Alcarez. 68 00:03:21,160 --> 00:03:23,679 Speaker 2: And the echoing markets this week certainly spend a lot 69 00:03:23,720 --> 00:03:25,600 Speaker 2: of their time trying to get their expectations in line 70 00:03:25,600 --> 00:03:27,919 Speaker 2: with reality, as the SNP five hundred lost one point 71 00:03:28,000 --> 00:03:30,480 Speaker 2: three percent in part because of rising oil prices, to 72 00:03:30,480 --> 00:03:32,359 Speaker 2: close it forty four to fifty seven, but that's still 73 00:03:32,400 --> 00:03:35,040 Speaker 2: well above the median year end call of our Bloomberg 74 00:03:35,080 --> 00:03:38,000 Speaker 2: elves of forty three hundred. The Nasdaq did even worse, 75 00:03:38,120 --> 00:03:40,440 Speaker 2: giving up one point nine three percent, But the one 76 00:03:40,560 --> 00:03:43,720 Speaker 2: clear winner was the dollar, with the Bloomberg Dollar Index 77 00:03:43,760 --> 00:03:46,280 Speaker 2: showing it up for the eighth week in a row. 78 00:03:46,320 --> 00:03:49,360 Speaker 2: That is the longest winning streak since January two thousand 79 00:03:49,360 --> 00:03:51,920 Speaker 2: and five. For her take on what we are seeing 80 00:03:51,960 --> 00:03:54,520 Speaker 2: in the markets, we welcome back now Christina Hooper. She 81 00:03:54,600 --> 00:03:57,240 Speaker 2: is a Vesco Global Market striss Christina. Always great to 82 00:03:57,280 --> 00:03:58,600 Speaker 2: have you with us. So what did you make of 83 00:03:58,600 --> 00:04:01,600 Speaker 2: this week? It doesn't seem to be in one straight line. 84 00:04:01,400 --> 00:04:01,920 Speaker 3: At the moment. 85 00:04:02,520 --> 00:04:05,320 Speaker 10: Well, David, I think this was really a story of 86 00:04:06,400 --> 00:04:09,040 Speaker 10: bad news is good news, good news is bad news, 87 00:04:09,040 --> 00:04:12,760 Speaker 10: and this week it was good economic data that raised 88 00:04:12,920 --> 00:04:16,280 Speaker 10: fears that the Fed may have to continue hiking rates, 89 00:04:16,320 --> 00:04:19,360 Speaker 10: and that's really all it was to it. But actually, 90 00:04:19,360 --> 00:04:23,880 Speaker 10: if we go through the data, not everything was that positive. 91 00:04:24,000 --> 00:04:24,200 Speaker 5: Right. 92 00:04:24,279 --> 00:04:27,599 Speaker 10: Yes, everyone sees on the ism services, but actually the 93 00:04:27,760 --> 00:04:31,560 Speaker 10: S and P services PMI wasn't as good. If we 94 00:04:31,600 --> 00:04:37,720 Speaker 10: look at initial jobless claims, yes, they're lower, get you know, 95 00:04:37,839 --> 00:04:40,280 Speaker 10: the lowest we've seen in a while, and it's been 96 00:04:40,320 --> 00:04:43,360 Speaker 10: on a trend for a few weeks. But other readings 97 00:04:43,520 --> 00:04:47,840 Speaker 10: suggest more tepid labor market, right what we saw from 98 00:04:47,880 --> 00:04:50,760 Speaker 10: the JOLT survey last week. So I think markets have 99 00:04:50,839 --> 00:04:53,520 Speaker 10: been concerned because of a few data points. But I've 100 00:04:53,560 --> 00:04:57,039 Speaker 10: always stressed that not every data point is going to 101 00:04:57,080 --> 00:05:00,960 Speaker 10: perfectly support the narrative of a displacetionary trend. But we 102 00:05:01,000 --> 00:05:03,200 Speaker 10: are very much in that disinflationary trend. 103 00:05:03,320 --> 00:05:05,640 Speaker 2: Disinflation. Are we on our route to two percent? And 104 00:05:05,680 --> 00:05:07,000 Speaker 2: if so, long is it going to take us to 105 00:05:07,000 --> 00:05:07,400 Speaker 2: get there? 106 00:05:07,560 --> 00:05:09,640 Speaker 10: I do believe that, and I'm happy you asked that 107 00:05:09,680 --> 00:05:12,720 Speaker 10: because the Chicago Fed economists just put out of paper 108 00:05:12,839 --> 00:05:16,159 Speaker 10: arguing that we are actually on that path and that 109 00:05:16,240 --> 00:05:19,360 Speaker 10: we will get to two percent inflation. Now, it will 110 00:05:19,400 --> 00:05:22,119 Speaker 10: take some time to get there, but that's okay because again, 111 00:05:22,279 --> 00:05:27,080 Speaker 10: typically we see significant period of time between when monetary 112 00:05:27,160 --> 00:05:31,120 Speaker 10: policy is enacted and when it shows up in the economy. 113 00:05:31,440 --> 00:05:33,039 Speaker 2: What does this say to investors? What do you do 114 00:05:33,120 --> 00:05:35,520 Speaker 2: in this sort of world of as you say, bumpy landing, 115 00:05:35,560 --> 00:05:37,440 Speaker 2: there's going to be some uncertainty even if it's not 116 00:05:37,440 --> 00:05:38,840 Speaker 2: going to go off a cliff. What does an. 117 00:05:38,800 --> 00:05:41,720 Speaker 10: Investor do well, Investors have to understand that there are 118 00:05:41,760 --> 00:05:45,799 Speaker 10: going to be shifts in leadership because markets are uncertain 119 00:05:45,880 --> 00:05:46,520 Speaker 10: right now. 120 00:05:46,880 --> 00:05:48,479 Speaker 2: Last week this week was. 121 00:05:48,480 --> 00:05:51,440 Speaker 10: A perfect example of that. We have a lot of 122 00:05:51,440 --> 00:05:55,000 Speaker 10: fear right now. But once we get clarity that the 123 00:05:55,160 --> 00:05:58,920 Speaker 10: FED really has ended its rate high cycle, that's when 124 00:05:58,960 --> 00:06:03,000 Speaker 10: markets can look ahead and start to discount in economic recovery. 125 00:06:03,240 --> 00:06:07,080 Speaker 10: So that would mean being positioned more in cyclicals, more 126 00:06:07,080 --> 00:06:11,760 Speaker 10: in smaller caps, but also looking outside the US. International 127 00:06:11,880 --> 00:06:14,600 Speaker 10: is going to be a lot more attractive as the 128 00:06:14,720 --> 00:06:17,680 Speaker 10: US dollar weekends, and while it has been strong, I 129 00:06:17,720 --> 00:06:19,760 Speaker 10: do believe that we will see it start to weaken 130 00:06:20,120 --> 00:06:22,320 Speaker 10: once we have that clarity that the FED has stopped 131 00:06:22,360 --> 00:06:22,960 Speaker 10: hiking rates. 132 00:06:23,000 --> 00:06:25,559 Speaker 2: Briefly, oil or persons did go up this week. 133 00:06:25,960 --> 00:06:28,799 Speaker 10: Certainly that's a concern, but it takes time to filter 134 00:06:28,920 --> 00:06:31,560 Speaker 10: into the rest of the economy to make it into core. 135 00:06:32,360 --> 00:06:35,520 Speaker 10: So if this is a relatively short burst, I'm not 136 00:06:35,520 --> 00:06:36,440 Speaker 10: that concerned about it. 137 00:06:36,480 --> 00:06:37,640 Speaker 2: Is the FED going to be concerned? 138 00:06:38,400 --> 00:06:40,360 Speaker 10: I don't think so, because the Fed's looking at a 139 00:06:40,360 --> 00:06:43,320 Speaker 10: mosaic of data, and again this is about a very 140 00:06:43,320 --> 00:06:45,640 Speaker 10: strong disinflationary trend that I think they can see, and 141 00:06:45,680 --> 00:06:48,080 Speaker 10: that was supported by what we heard anecdotally in the 142 00:06:48,080 --> 00:06:49,560 Speaker 10: Federal Reserve page book this week. 143 00:06:49,760 --> 00:06:51,640 Speaker 2: Christina's always such a treat to have you here, Thank 144 00:06:51,640 --> 00:06:55,760 Speaker 2: you so much. That's Christina Hooper of Investco. Generative Artificial 145 00:06:55,800 --> 00:06:59,680 Speaker 2: intelligence poses all sorts of opportunities and risks for investors 146 00:06:59,720 --> 00:07:02,480 Speaker 2: the world, and one of the founders of DeepMind, that's 147 00:07:02,520 --> 00:07:05,360 Speaker 2: the AI startup now part of Google, has written a book, 148 00:07:05,560 --> 00:07:08,560 Speaker 2: The Coming Wave Technology, Power in the twenty first Century's 149 00:07:08,600 --> 00:07:11,880 Speaker 2: Greatest Dilemma, in which he sets out the wonderful opportunities 150 00:07:11,920 --> 00:07:15,080 Speaker 2: as well as the terrifying threats posed by AI and 151 00:07:15,200 --> 00:07:17,800 Speaker 2: the need for nation states to develop structures to contain 152 00:07:17,880 --> 00:07:19,440 Speaker 2: this powerful new technology. 153 00:07:21,000 --> 00:07:24,720 Speaker 8: At this moment, we have to be optimistic and encouraging 154 00:07:24,920 --> 00:07:26,960 Speaker 8: of the nation state. This is a moment when the 155 00:07:26,960 --> 00:07:29,680 Speaker 8: state has to adapt and evolve, just as we all 156 00:07:29,680 --> 00:07:32,120 Speaker 8: have to evolve to these new technologies. There's no way 157 00:07:32,120 --> 00:07:34,440 Speaker 8: to put the genie back in the boggle. This really 158 00:07:34,560 --> 00:07:36,880 Speaker 8: is happening. So there art is going to be around 159 00:07:36,920 --> 00:07:39,920 Speaker 8: shaping it in the public interest and making sure that 160 00:07:39,960 --> 00:07:42,239 Speaker 8: our democratic governments remain in control. 161 00:07:42,600 --> 00:07:46,040 Speaker 2: The historian Neil Ferguson has written not just about economics 162 00:07:46,080 --> 00:07:48,600 Speaker 2: and money, but also about the politics of disaster in 163 00:07:48,680 --> 00:07:51,000 Speaker 2: his book Doom. He is a senior fellow at the 164 00:07:51,040 --> 00:07:53,920 Speaker 2: Hoover Institution as well as a Bloomberg opinion contributor. And 165 00:07:53,960 --> 00:07:56,280 Speaker 2: we welcome now back to Wall Street Wig. So, Neil, 166 00:07:56,280 --> 00:07:58,280 Speaker 2: thanks so much for being with us. I know you've 167 00:07:58,280 --> 00:08:00,920 Speaker 2: read the book because you call it Dazzling, a column 168 00:08:00,920 --> 00:08:05,160 Speaker 2: actually wrote for Bloomberg. Here give us your biggest takeaway 169 00:08:05,160 --> 00:08:07,160 Speaker 2: from this book. Why do you say something that no 170 00:08:07,200 --> 00:08:08,640 Speaker 2: one can afford not to read. 171 00:08:09,000 --> 00:08:12,360 Speaker 5: Well, Mustafa Silima knows what he's talking about. He was 172 00:08:12,440 --> 00:08:16,560 Speaker 5: really present at the creation of the big AI breakthroughs 173 00:08:16,600 --> 00:08:19,480 Speaker 5: in recent years, one of the founders of Deep Mind, 174 00:08:19,520 --> 00:08:22,880 Speaker 5: which has been a key pioneer in the field, and 175 00:08:22,920 --> 00:08:26,960 Speaker 5: so he comes to the subject with the really almost 176 00:08:27,120 --> 00:08:31,200 Speaker 5: unrivaled expertise. He was there in the room when they 177 00:08:31,280 --> 00:08:35,199 Speaker 5: built AIS that could beat world champions at chess and 178 00:08:35,720 --> 00:08:40,920 Speaker 5: then go So I respect him as a true authority 179 00:08:40,920 --> 00:08:44,680 Speaker 5: on the subject. Not everybody who writes about AIS nearly 180 00:08:44,720 --> 00:08:48,080 Speaker 5: as well versed as Mustafa is. And so when he 181 00:08:48,200 --> 00:08:51,160 Speaker 5: says we have a problem, and it's a problem that 182 00:08:51,200 --> 00:08:55,079 Speaker 5: today's nation states aren't really well set up to deal with, I. 183 00:08:55,040 --> 00:08:58,200 Speaker 11: Think we should all listen, because I don't find it 184 00:08:58,280 --> 00:09:03,400 Speaker 11: plausible that just let it writ as some people would advocate, 185 00:09:03,800 --> 00:09:07,680 Speaker 11: is prudent given the potentially very dangerous things that AI 186 00:09:07,800 --> 00:09:08,839 Speaker 11: is capable of doing. 187 00:09:09,120 --> 00:09:11,080 Speaker 2: Yeah, as you're saying, you know, he really sets out 188 00:09:11,280 --> 00:09:14,720 Speaker 2: wonderful things and dangerous things at the same time. You 189 00:09:14,720 --> 00:09:16,880 Speaker 2: were an historian, of course, and one of the things 190 00:09:16,880 --> 00:09:19,680 Speaker 2: that mister Silman talks about is the need for what 191 00:09:19,720 --> 00:09:21,880 Speaker 2: he calls containment, and he admits that that sort of 192 00:09:21,880 --> 00:09:25,280 Speaker 2: sounds like George Kennon's proposal for Jalla Soviet Union. As 193 00:09:25,320 --> 00:09:28,120 Speaker 2: you look back in history, are there analogies. They're always rough, 194 00:09:28,160 --> 00:09:30,960 Speaker 2: they're always imperfect. But have there been times when we 195 00:09:31,040 --> 00:09:34,240 Speaker 2: could get our arms around some potentially dangerous new technology 196 00:09:34,480 --> 00:09:35,440 Speaker 2: and really control it? 197 00:09:36,679 --> 00:09:40,240 Speaker 5: Well, you see, the interesting thing about the book is 198 00:09:40,240 --> 00:09:43,320 Speaker 5: that it has lots of interesting historical analogies. I mean, 199 00:09:43,400 --> 00:09:46,319 Speaker 5: the wilder enthusiasm for AI will tell you that it's 200 00:09:46,320 --> 00:09:52,319 Speaker 5: some combination of fire, the wheel, electrification, and nuclear weapons. 201 00:09:53,559 --> 00:09:57,520 Speaker 5: What was staff zeros In on is the analogy with 202 00:09:57,600 --> 00:10:00,600 Speaker 5: the Cold War, and I was tempted to suggests he 203 00:10:00,679 --> 00:10:03,959 Speaker 5: might turn out to be the Robert Oppenheimer of AI, 204 00:10:04,679 --> 00:10:09,680 Speaker 5: because he observes that there were problems posed when nuclear 205 00:10:09,720 --> 00:10:14,640 Speaker 5: fission was developed. It had both the destructive use atomic 206 00:10:14,720 --> 00:10:19,400 Speaker 5: bombs and potentially very productive use as a source of energy. 207 00:10:19,920 --> 00:10:23,479 Speaker 5: And he shows how some of the challenges of regulating 208 00:10:23,520 --> 00:10:25,959 Speaker 5: this new technology suggest ways in. 209 00:10:25,920 --> 00:10:27,920 Speaker 3: Which we might proceed today. 210 00:10:28,679 --> 00:10:32,319 Speaker 5: For example, he suggests that there should be arms control 211 00:10:32,440 --> 00:10:36,440 Speaker 5: talks on AI between the United States and China, which 212 00:10:36,440 --> 00:10:40,440 Speaker 5: are the only two superpowers really developing AI on a 213 00:10:40,440 --> 00:10:41,400 Speaker 5: massive scale. 214 00:10:41,559 --> 00:10:44,440 Speaker 2: Okay, thank you so much, Neil, really appreciate your insights 215 00:10:44,440 --> 00:10:49,400 Speaker 2: to this. Neil Ferguson of the Hoover Institution. Coming up, 216 00:10:49,440 --> 00:10:52,840 Speaker 2: Private Equity, Doing Well. By doing good, we talk with 217 00:10:52,920 --> 00:10:56,120 Speaker 2: KKR Global co head of private Equity, Pete Stavros and 218 00:10:56,200 --> 00:10:59,000 Speaker 2: Kathy Bojos, CEO of a company he has invested in 219 00:10:59,240 --> 00:11:04,520 Speaker 2: to explore the world of employee ownership. That's coming up 220 00:11:04,520 --> 00:11:06,400 Speaker 2: next on Wall Street Week on Bloomberg. 221 00:11:07,640 --> 00:11:11,880 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 222 00:11:11,960 --> 00:11:12,920 Speaker 1: Bloomberg Radio. 223 00:11:19,679 --> 00:11:22,080 Speaker 2: This is Wall Street week. I'm David Weston. At the 224 00:11:22,120 --> 00:11:24,360 Speaker 2: beginning of the summer, we brought you a story putting 225 00:11:24,360 --> 00:11:27,080 Speaker 2: together two things we don't usually associate with one another, 226 00:11:27,320 --> 00:11:29,960 Speaker 2: private equity buyouts on the one hand, and employee stock 227 00:11:30,040 --> 00:11:32,719 Speaker 2: ownership on the other. But KKR has been putting them 228 00:11:32,720 --> 00:11:35,440 Speaker 2: together for some time now and has found some real success. 229 00:11:35,800 --> 00:11:37,800 Speaker 2: So we welcome back to the man behind the effort. 230 00:11:37,800 --> 00:11:40,720 Speaker 2: He is Peter Stavros, KKR Global co head of Private 231 00:11:40,720 --> 00:11:43,520 Speaker 2: Equity and someone who's been working with Pete to put 232 00:11:43,520 --> 00:11:46,960 Speaker 2: it into practice. Kathy Bolhost. She is CEO of Charter 233 00:11:47,000 --> 00:11:49,520 Speaker 2: and Next Generation. So welcome both you. Pete, welcome back. 234 00:11:49,600 --> 00:11:51,520 Speaker 2: Great to meet you. This is wonderful to have you, Kathy. 235 00:11:51,720 --> 00:11:52,080 Speaker 2: Thank you. 236 00:11:52,160 --> 00:11:52,840 Speaker 7: Great to be here. 237 00:11:52,920 --> 00:11:55,600 Speaker 2: Let's start with you, Pete. So we've talked about what 238 00:11:55,640 --> 00:11:57,840 Speaker 2: you've been doing at KKR, sort of the principles of 239 00:11:57,880 --> 00:12:02,319 Speaker 2: how it works, how specifically has applied in this specific instance. 240 00:12:02,880 --> 00:12:05,079 Speaker 6: So what we do each time, and what we've done 241 00:12:05,240 --> 00:12:07,760 Speaker 6: in the case of charternext Gen is we lay the 242 00:12:07,800 --> 00:12:10,679 Speaker 6: foundation of a different type of culture, which is ownership. 243 00:12:11,040 --> 00:12:14,600 Speaker 6: So we made every employee at charternext Gen a stockholder 244 00:12:14,640 --> 00:12:16,520 Speaker 6: in the company. It's important to note it was a 245 00:12:16,520 --> 00:12:19,560 Speaker 6: free and incremental benefit, so we're not asking workers to 246 00:12:19,600 --> 00:12:22,439 Speaker 6: invest out of pocket. We're not asking people to trade 247 00:12:22,440 --> 00:12:24,319 Speaker 6: off wages for stock, so it doesn't come out of 248 00:12:24,320 --> 00:12:25,960 Speaker 6: their page, has not come out of their paycheck. It's 249 00:12:25,960 --> 00:12:28,400 Speaker 6: a free, incremental benefit. It's also important to note it's 250 00:12:28,440 --> 00:12:31,360 Speaker 6: a meaningful amount of stock. So we are hoping at 251 00:12:31,440 --> 00:12:33,760 Speaker 6: Charter NextGen. Now, this is equity, its risk, it's not 252 00:12:33,800 --> 00:12:36,480 Speaker 6: a guarantee. But if we hit our plan that we 253 00:12:36,520 --> 00:12:38,720 Speaker 6: can show people a path to earning one hundred percent 254 00:12:38,760 --> 00:12:39,760 Speaker 6: of their income in stock. 255 00:12:39,880 --> 00:12:41,760 Speaker 2: Now that that's just the foundation. 256 00:12:42,160 --> 00:12:44,760 Speaker 6: Really, the purpose of it is to change the culture, 257 00:12:44,920 --> 00:12:48,160 Speaker 6: to get people more engaged on the job, to get 258 00:12:48,200 --> 00:12:52,160 Speaker 6: people to think like business owners, and over time get 259 00:12:52,160 --> 00:12:54,080 Speaker 6: the quit rate down and the engagement scores up. 260 00:12:54,120 --> 00:12:54,640 Speaker 2: And in the. 261 00:12:54,640 --> 00:12:57,480 Speaker 6: Short time we've been working together with charternext Gen, the 262 00:12:57,600 --> 00:12:59,839 Speaker 6: quit rates are down thirty three percent, the number of 263 00:13:00,040 --> 00:13:03,280 Speaker 6: gauged employees up twenty three percent. Safety has improved, So 264 00:13:03,520 --> 00:13:06,120 Speaker 6: even in the two years we've been at this, we're 265 00:13:06,160 --> 00:13:07,720 Speaker 6: starting to make real progress. 266 00:13:08,080 --> 00:13:10,760 Speaker 2: So Kathy, take it from your side of it, turn 267 00:13:10,800 --> 00:13:13,640 Speaker 2: our next Gennels. I understand it is a leading producer 268 00:13:13,720 --> 00:13:15,559 Speaker 2: of film used in packaging. A lot of the things 269 00:13:15,559 --> 00:13:16,959 Speaker 2: that we buy when we go to the zero market 270 00:13:17,120 --> 00:13:19,480 Speaker 2: has some of your film around it. You were a 271 00:13:19,480 --> 00:13:22,199 Speaker 2: successful company before Pete came along. It's not like you 272 00:13:22,240 --> 00:13:24,720 Speaker 2: were struggling about to go belly up. What did you 273 00:13:24,760 --> 00:13:27,000 Speaker 2: see in this opportunity otherwise you might not have seen 274 00:13:27,040 --> 00:13:27,720 Speaker 2: from somebody else. 275 00:13:28,440 --> 00:13:30,240 Speaker 7: Well, first of all, this this is a dream for 276 00:13:30,360 --> 00:13:33,760 Speaker 7: me to be able to offer equity ownership to every employee. 277 00:13:33,840 --> 00:13:37,080 Speaker 7: I look at it. Every single employee is part of 278 00:13:37,120 --> 00:13:38,120 Speaker 7: the success. 279 00:13:37,679 --> 00:13:38,319 Speaker 2: Of the company. 280 00:13:38,360 --> 00:13:40,960 Speaker 7: It's a team sport. So it doesn't make sense that 281 00:13:41,040 --> 00:13:43,760 Speaker 7: you would only reward the top executives the top five 282 00:13:43,800 --> 00:13:47,440 Speaker 7: percent with equity. So the opportunity to give equity to 283 00:13:47,559 --> 00:13:51,640 Speaker 7: everyone alliance the incentives. So now everyone has the same incentive, 284 00:13:52,000 --> 00:13:54,800 Speaker 7: which is to create value for the long term. You know, 285 00:13:54,840 --> 00:13:57,800 Speaker 7: when you give an employee who's living on an hourly 286 00:13:57,840 --> 00:14:02,720 Speaker 7: wage the opportunity to build that nest egg, that's life changing. 287 00:14:03,040 --> 00:14:05,320 Speaker 7: And that's our goal here, is to really have an 288 00:14:05,360 --> 00:14:09,000 Speaker 7: amazing outcome and give them that nest egg. Pensions have 289 00:14:09,200 --> 00:14:13,240 Speaker 7: largely gone away, so there's no opportunity to get ahead. 290 00:14:14,120 --> 00:14:17,600 Speaker 7: I think about the cash compensation, that's what you use 291 00:14:17,679 --> 00:14:20,280 Speaker 7: to pay your bills. The equity is what you use 292 00:14:20,360 --> 00:14:22,920 Speaker 7: to create wealth. And if you don't have an opportunity 293 00:14:22,920 --> 00:14:24,920 Speaker 7: for equity, how are you going to create wealth? 294 00:14:25,080 --> 00:14:27,720 Speaker 2: You mentioned you have some encourage in return. So far, 295 00:14:28,280 --> 00:14:29,760 Speaker 2: how far can the gets to go? I mean you 296 00:14:29,840 --> 00:14:31,280 Speaker 2: must believe in it, because I think you've got a 297 00:14:31,320 --> 00:14:34,160 Speaker 2: documentary in the process right that you're working on with GAT. 298 00:14:34,280 --> 00:14:37,360 Speaker 6: We've released two clips so far of the documentary film 299 00:14:37,400 --> 00:14:39,760 Speaker 6: and no pressure, but this has to be a big win. 300 00:14:39,840 --> 00:14:41,040 Speaker 2: That is exactly no. 301 00:14:41,440 --> 00:14:44,120 Speaker 7: I'm fully committed. I am going to do my best, 302 00:14:44,160 --> 00:14:46,840 Speaker 7: and I know our people will too. This has created 303 00:14:47,120 --> 00:14:49,680 Speaker 7: such a spree to core in the company, and you 304 00:14:49,760 --> 00:14:52,280 Speaker 7: know that what I think is really important as a 305 00:14:52,360 --> 00:14:56,200 Speaker 7: leader is to take the people metrics as seriously as 306 00:14:56,200 --> 00:14:58,960 Speaker 7: you take the business metrics. So much of the time 307 00:14:59,120 --> 00:15:03,200 Speaker 7: we focus on profit, focus on sales, focus on things 308 00:15:03,280 --> 00:15:06,720 Speaker 7: we can measure, but you know, for us, it's really 309 00:15:06,760 --> 00:15:11,120 Speaker 7: about focusing on engagement. Think about the fact that in 310 00:15:11,160 --> 00:15:16,280 Speaker 7: the US forty percent forty to fifty percent of manufacturing 311 00:15:16,320 --> 00:15:18,280 Speaker 7: companies face a turnover issue. 312 00:15:18,360 --> 00:15:20,880 Speaker 2: That's how many people quit. Forty to fifty. 313 00:15:20,600 --> 00:15:24,880 Speaker 7: Percent of employees quit their jobs every year. Think about 314 00:15:24,960 --> 00:15:28,240 Speaker 7: if you can reduce that down to five percent, the 315 00:15:28,320 --> 00:15:32,040 Speaker 7: value that you can unlock. So that's where we're focused now. 316 00:15:32,080 --> 00:15:35,040 Speaker 7: We also want to give our employees a voice, so 317 00:15:35,200 --> 00:15:39,840 Speaker 7: we've implemented things like employee directed capital. We give each 318 00:15:39,880 --> 00:15:42,640 Speaker 7: plant a budget. You decide how this capital is going 319 00:15:42,680 --> 00:15:44,520 Speaker 7: to be spent. You have to vote on it, you 320 00:15:44,600 --> 00:15:48,280 Speaker 7: have to agree. But then imagine spending this money to 321 00:15:48,320 --> 00:15:52,200 Speaker 7: improve your breakroom, making an outdoor eating area. When you 322 00:15:52,320 --> 00:15:56,280 Speaker 7: give the worker the decision around their work, that helps 323 00:15:56,280 --> 00:15:59,960 Speaker 7: to create engagement. We also let them decide what chare 324 00:16:00,040 --> 00:16:03,320 Speaker 7: aritable organizations we want to sponsor in their community. Can 325 00:16:03,360 --> 00:16:06,120 Speaker 7: they vote on it, and they decide what impact do 326 00:16:06,160 --> 00:16:09,480 Speaker 7: they want to have in the community with our charitable contributions. 327 00:16:09,960 --> 00:16:11,520 Speaker 2: PET. One of the things that's happened since you and 328 00:16:11,560 --> 00:16:14,520 Speaker 2: I last spoke actually as a fair amount of organized 329 00:16:14,600 --> 00:16:17,640 Speaker 2: labor activity as we have a strike right now with 330 00:16:17,720 --> 00:16:20,280 Speaker 2: the Writer's Guild and SAG after who knows what's going 331 00:16:20,320 --> 00:16:22,600 Speaker 2: to have with UAW doesn't look real good right now, 332 00:16:22,880 --> 00:16:24,840 Speaker 2: But as I listen to what Kathy's saying right now, 333 00:16:24,880 --> 00:16:28,280 Speaker 2: that's how world away from talking about hundreds of work 334 00:16:28,400 --> 00:16:31,360 Speaker 2: rules to say exactly who goes where what do these 335 00:16:31,360 --> 00:16:35,520 Speaker 2: two things fit together. Does employee ownership fit with organized labor? 336 00:16:36,440 --> 00:16:37,200 Speaker 2: I think it can. 337 00:16:37,720 --> 00:16:42,640 Speaker 6: I think historically organized labor took a skeptical eye understandably 338 00:16:42,680 --> 00:16:46,520 Speaker 6: to ownership, you know, because to union, the employees are 339 00:16:46,560 --> 00:16:49,480 Speaker 6: their members, not your employee, not your employees, right, so 340 00:16:50,040 --> 00:16:53,280 Speaker 6: when you start then aligning their members with your company, 341 00:16:53,280 --> 00:16:54,360 Speaker 6: that can be a conflict. 342 00:16:54,400 --> 00:16:55,320 Speaker 2: I think that's changing. 343 00:16:55,840 --> 00:16:59,240 Speaker 6: I think there's a real openness to new models and 344 00:16:59,320 --> 00:17:03,440 Speaker 6: aligning capital in labor. And as you note, we've gone 345 00:17:03,440 --> 00:17:05,840 Speaker 6: from a period of time where yeah, you saw some 346 00:17:06,000 --> 00:17:09,880 Speaker 6: strife in autos and manufacturing, but now you're seeing it everywhere, 347 00:17:10,600 --> 00:17:13,159 Speaker 6: and people they want to be a part of something. 348 00:17:13,200 --> 00:17:18,040 Speaker 6: They want shared gains, they want transparency around how we're 349 00:17:18,040 --> 00:17:21,159 Speaker 6: going to manage through all of this change driven by 350 00:17:21,200 --> 00:17:25,080 Speaker 6: technology AI, you know, in the case of the writer's strike, 351 00:17:25,280 --> 00:17:28,000 Speaker 6: transitions to EVS, in the case of UAW. There's a 352 00:17:28,040 --> 00:17:30,679 Speaker 6: lot of complicated questions we're going to have to answer, 353 00:17:30,720 --> 00:17:32,520 Speaker 6: and I think we're going to all do a lot 354 00:17:32,560 --> 00:17:34,639 Speaker 6: better if for in the boat together somewhere. 355 00:17:34,800 --> 00:17:37,240 Speaker 2: Finally, to you, we don't know how this will end up. 356 00:17:37,280 --> 00:17:38,879 Speaker 2: I guess we'll have to wait for the documentary to 357 00:17:38,920 --> 00:17:41,280 Speaker 2: find out what ends up. And I know you can't 358 00:17:41,320 --> 00:17:44,040 Speaker 2: predict what's happening, but how big a difference could this 359 00:17:44,160 --> 00:17:46,600 Speaker 2: make in some of your employees' lives. You mentioned before 360 00:17:46,920 --> 00:17:49,480 Speaker 2: you get a paycheck to pay the bills, but it's 361 00:17:49,600 --> 00:17:53,480 Speaker 2: very hard to amass capital, to amass wealth. How good 362 00:17:53,520 --> 00:17:55,240 Speaker 2: could this be for some of your employees? Do you 363 00:17:55,280 --> 00:17:57,119 Speaker 2: think or hope life changing? 364 00:17:57,400 --> 00:18:00,280 Speaker 7: I mean, when you're living paycheck to paycheck, you know 365 00:18:00,320 --> 00:18:04,119 Speaker 7: forty percent of Americans have less than four hundred dollars. 366 00:18:04,600 --> 00:18:09,080 Speaker 7: They're one car repair bill, one medical emergency away from 367 00:18:09,160 --> 00:18:13,280 Speaker 7: financial devastation. Think about building an estag of fifty thousand 368 00:18:13,280 --> 00:18:16,720 Speaker 7: dollars one hundred thousand dollars. There are employees who have 369 00:18:16,840 --> 00:18:21,159 Speaker 7: said this will end generational poverty in my family, and 370 00:18:21,240 --> 00:18:24,280 Speaker 7: I mean that's inspiring to me that you know, Yes, 371 00:18:24,400 --> 00:18:27,760 Speaker 7: I have been a private equity sponsored CEO for thirteen 372 00:18:27,840 --> 00:18:30,720 Speaker 7: years now, sold the company before. This one, to me 373 00:18:30,840 --> 00:18:33,119 Speaker 7: is the most special. This is the one that I 374 00:18:33,160 --> 00:18:35,000 Speaker 7: know I'm going to work the hardest on, and I 375 00:18:35,040 --> 00:18:36,800 Speaker 7: know my team is going to work the hardest on. 376 00:18:37,359 --> 00:18:40,879 Speaker 7: And it's really about breaking down that wall between the 377 00:18:40,880 --> 00:18:43,439 Speaker 7: plant and the office. When you talk about union. 378 00:18:43,600 --> 00:18:44,000 Speaker 2: That's it. 379 00:18:44,119 --> 00:18:47,760 Speaker 7: We normalize that, We normalize the fact that management and 380 00:18:47,840 --> 00:18:50,480 Speaker 7: labor don't get along. I want to flip the script 381 00:18:50,520 --> 00:18:51,320 Speaker 7: on that, and. 382 00:18:51,280 --> 00:18:52,199 Speaker 2: We're going to have to fix this. 383 00:18:52,760 --> 00:18:55,760 Speaker 6: So in manufacturing, we've now got six hundred thousand open jobs. 384 00:18:56,040 --> 00:18:58,880 Speaker 6: National Association Manufacturer says we're going to be short two 385 00:18:58,960 --> 00:19:02,119 Speaker 6: million workers by twenty thirty. When you talk to manufacturing 386 00:19:02,160 --> 00:19:04,760 Speaker 6: CEOs and you say what's your biggest concern, it's not 387 00:19:04,960 --> 00:19:07,080 Speaker 6: supply chain, it's not state of the economy, And my 388 00:19:07,160 --> 00:19:10,160 Speaker 6: number one concern CEOs in manufacturing stays I can't attract 389 00:19:10,320 --> 00:19:11,119 Speaker 6: and retain people. 390 00:19:11,440 --> 00:19:13,120 Speaker 2: So it's great. 391 00:19:12,920 --> 00:19:14,719 Speaker 6: At the company level, we're going to have to do 392 00:19:14,760 --> 00:19:18,719 Speaker 6: this or something like this at the economy level if 393 00:19:18,720 --> 00:19:20,080 Speaker 6: we're going to continue to be successful. 394 00:19:20,440 --> 00:19:23,440 Speaker 2: Many thanks to Kathy Ballhouse of Charter Next Generation and 395 00:19:23,520 --> 00:19:28,200 Speaker 2: Pete Stavros of KKR coming up. There was a day 396 00:19:28,280 --> 00:19:31,000 Speaker 2: when the very survival of General Electric was in question, 397 00:19:31,280 --> 00:19:34,280 Speaker 2: but that day was five years ago and today things 398 00:19:34,359 --> 00:19:36,880 Speaker 2: look very different. We sit down with the man who 399 00:19:36,920 --> 00:19:40,520 Speaker 2: oversaw the remaking of an American corporate icon, Larry Colt, 400 00:19:40,720 --> 00:19:42,160 Speaker 2: CEO of GE. 401 00:19:42,400 --> 00:19:45,919 Speaker 4: We couldn't be in a better position with respect to 402 00:19:45,960 --> 00:19:48,520 Speaker 4: the post pandemic recovery and aerospace. 403 00:19:49,720 --> 00:19:52,040 Speaker 2: That's next on Wall Street Week on Bloomberg. 404 00:19:53,240 --> 00:19:57,480 Speaker 1: This is Bloomberg Wall Street Week with David Weston from 405 00:19:57,600 --> 00:20:04,280 Speaker 1: Bloomberg Radio. 406 00:20:05,520 --> 00:20:09,200 Speaker 2: General Electric It was founded in eighteen ninety two when 407 00:20:09,240 --> 00:20:12,119 Speaker 2: Thomas Anderson put together his electric companies under the banner 408 00:20:12,119 --> 00:20:15,840 Speaker 2: of GE with the help of John Pierpont Morgan. It 409 00:20:15,880 --> 00:20:18,320 Speaker 2: grew to be one of the largest and most profitable 410 00:20:18,359 --> 00:20:21,840 Speaker 2: companies in the world, with a market capitalization approaching six 411 00:20:22,000 --> 00:20:28,080 Speaker 2: hundred billion dollars in two thousand. Its operations have spent plastics, appliances, computers, 412 00:20:28,080 --> 00:20:31,280 Speaker 2: and TV networks, and along the way it developed under 413 00:20:31,359 --> 00:20:35,720 Speaker 2: Jack Welch, a legendary reputation for management and grooming leadership 414 00:20:35,840 --> 00:20:36,359 Speaker 2: from within. 415 00:20:36,920 --> 00:20:41,360 Speaker 12: What you do with personnel around bad behavior does more 416 00:20:41,560 --> 00:20:46,600 Speaker 12: establish a culture and good behavior role model those behaviors 417 00:20:47,000 --> 00:20:49,520 Speaker 12: with great rewards for those that have the right culture 418 00:20:50,200 --> 00:20:51,920 Speaker 12: and public aatings for those that don't. 419 00:20:52,200 --> 00:20:55,600 Speaker 3: I was very fortunate to grow and be mentored by 420 00:20:55,680 --> 00:20:56,240 Speaker 3: Jack Welch. 421 00:20:56,400 --> 00:21:01,400 Speaker 4: And you know, Jack was laser focused on metrics, appropriate metrics. 422 00:21:01,600 --> 00:21:04,639 Speaker 2: But then the Great Financial Crisis hit and the conglomerate 423 00:21:04,680 --> 00:21:08,320 Speaker 2: mister Welch built was hit particularly hard, causing profits and 424 00:21:08,359 --> 00:21:12,240 Speaker 2: revenues to plummet as problems mounted, causing the market cap 425 00:21:12,280 --> 00:21:15,560 Speaker 2: to plummet to under seventy billion dollars by twenty eighteen. 426 00:21:16,000 --> 00:21:19,800 Speaker 9: We had good businesses, good people, good initiatives, but at 427 00:21:19,800 --> 00:21:23,840 Speaker 9: the end of the day, the stock price lagged. There 428 00:21:23,840 --> 00:21:26,879 Speaker 9: are some things that didn't work. We didn't get as 429 00:21:26,920 --> 00:21:29,080 Speaker 9: much value out of g capital as we could have. 430 00:21:30,520 --> 00:21:33,080 Speaker 9: We had tough in use markets. At the end of 431 00:21:33,119 --> 00:21:35,000 Speaker 9: my tenure, I gave the board a lot of things 432 00:21:35,040 --> 00:21:39,040 Speaker 9: to work on. So it's a complicated story, but I 433 00:21:39,080 --> 00:21:41,760 Speaker 9: think the way it's been told has been incomplete. 434 00:21:42,320 --> 00:21:45,040 Speaker 2: Then GE turned to a new CEO, one who had 435 00:21:45,119 --> 00:21:48,680 Speaker 2: led not at GE but at Danaher. Larry Culp took 436 00:21:48,720 --> 00:21:52,160 Speaker 2: over a CEO in October of twenty eighteen and undertook 437 00:21:52,160 --> 00:21:56,400 Speaker 2: a fundamental rethinking of the company, selling assets, paying down debt, 438 00:21:56,680 --> 00:21:59,199 Speaker 2: and ultimately leading the move to break the company up 439 00:21:59,240 --> 00:22:04,240 Speaker 2: into three independent companies focus on healthcare, power, and aerospace. 440 00:22:04,680 --> 00:22:07,800 Speaker 10: Well they'll have left of meaningful size is power, which 441 00:22:07,840 --> 00:22:08,399 Speaker 10: is a problem. 442 00:22:08,400 --> 00:22:10,400 Speaker 7: In aerospace, which is a terrific business. 443 00:22:10,840 --> 00:22:13,560 Speaker 10: If they get healthcare, everything else is really small. 444 00:22:13,800 --> 00:22:16,000 Speaker 2: Now the parts of GE add up to more than 445 00:22:16,000 --> 00:22:19,800 Speaker 2: the whole did before, with combined market capitalization of about 446 00:22:19,840 --> 00:22:23,400 Speaker 2: one hundred and fifty billion dollars, giving business schools once 447 00:22:23,440 --> 00:22:26,800 Speaker 2: again a case study in management and leadership, but this 448 00:22:26,960 --> 00:22:30,600 Speaker 2: time more in focus and execution and not so much 449 00:22:30,680 --> 00:22:36,919 Speaker 2: in a massing size. And to take us through that 450 00:22:37,080 --> 00:22:39,360 Speaker 2: saga of GE, we turn to the man himself. He's 451 00:22:39,400 --> 00:22:42,359 Speaker 2: Larry Kulp. He's the chairman and CEO of General Electric. 452 00:22:42,400 --> 00:22:44,080 Speaker 2: So welcome Larry. Great to have you here on Wall 453 00:22:44,119 --> 00:22:47,840 Speaker 2: Street week. Take us back five years, because it's almost 454 00:22:47,880 --> 00:22:50,680 Speaker 2: exactly five years now since you took over. It's some 455 00:22:50,800 --> 00:22:52,159 Speaker 2: idea of what what you're get into. You've been on 456 00:22:52,200 --> 00:22:54,719 Speaker 2: the board. Why did you take the job? 457 00:22:55,560 --> 00:22:55,840 Speaker 3: David? 458 00:22:56,080 --> 00:22:57,480 Speaker 4: Always good to be with you, and it's hard to 459 00:22:57,480 --> 00:22:59,320 Speaker 4: believe that it's been five years. 460 00:22:59,320 --> 00:23:01,040 Speaker 3: Here come first of October. 461 00:23:01,600 --> 00:23:04,919 Speaker 4: I think it was really in many respects simple GE, 462 00:23:05,680 --> 00:23:10,000 Speaker 4: an incredibly important company to our country into the world. 463 00:23:10,760 --> 00:23:14,119 Speaker 4: G a company that I had long admired through the 464 00:23:14,160 --> 00:23:18,240 Speaker 4: course of my career, and given what I had heard, 465 00:23:18,240 --> 00:23:22,320 Speaker 4: given what I had learned as a director, clearly a challenge, 466 00:23:22,320 --> 00:23:25,080 Speaker 4: perhaps the challenge of my generation. And it was really 467 00:23:25,080 --> 00:23:28,480 Speaker 4: those three reasons that ultimately led me to say, yes, 468 00:23:29,040 --> 00:23:31,960 Speaker 4: I'll put my uniform back on, and here we are. 469 00:23:32,320 --> 00:23:34,919 Speaker 2: So you put your uniform back on. What did you 470 00:23:35,200 --> 00:23:37,200 Speaker 2: set up to do first? What were your priorities? Is 471 00:23:37,240 --> 00:23:39,160 Speaker 2: you sat down the first day in that desk. So often, 472 00:23:39,160 --> 00:23:40,840 Speaker 2: even if you're close to the job, until you've had 473 00:23:40,840 --> 00:23:41,800 Speaker 2: the job, you haven't had it. 474 00:23:42,600 --> 00:23:45,600 Speaker 3: That's right. I don't remember sitting down much that first day. Right. 475 00:23:45,640 --> 00:23:50,280 Speaker 4: There was a lot happening, but I knew relatively quickly 476 00:23:50,800 --> 00:23:53,520 Speaker 4: that we had to do two things. One, we had 477 00:23:53,560 --> 00:23:56,480 Speaker 4: to get our arms around the balance sheet issues. We 478 00:23:56,560 --> 00:23:59,320 Speaker 4: had over one hundred and forty billion of debt outstanding 479 00:23:59,680 --> 00:24:02,280 Speaker 4: that was crushing load in a host of different ways. 480 00:24:03,160 --> 00:24:05,639 Speaker 4: And we needed to get to a better place in 481 00:24:05,720 --> 00:24:08,240 Speaker 4: terms of the day to day operation of the business. 482 00:24:08,520 --> 00:24:11,360 Speaker 4: And those turned out to be priorities that really took 483 00:24:11,440 --> 00:24:15,639 Speaker 4: us through the first couple of years deleveraging and running 484 00:24:15,640 --> 00:24:16,480 Speaker 4: the businesses better. 485 00:24:16,680 --> 00:24:17,679 Speaker 3: I'm subably that simple. 486 00:24:17,880 --> 00:24:19,359 Speaker 2: As I said, you were on the board for a 487 00:24:19,400 --> 00:24:21,800 Speaker 2: short time before it took over, so some of the 488 00:24:21,800 --> 00:24:25,200 Speaker 2: problems you knew about, but you couldn't anticipate Boeing seven 489 00:24:25,240 --> 00:24:28,160 Speaker 2: thirty seven, Max. You couldn't anticipate the pandemic, couldn't anticipate 490 00:24:28,240 --> 00:24:32,440 Speaker 2: supply chain or in Ukraine. Did that change your plan? 491 00:24:33,520 --> 00:24:37,000 Speaker 4: Well, I think early on we knew that we needed 492 00:24:37,359 --> 00:24:39,760 Speaker 4: the utmost sense emergency around the deleveraging. 493 00:24:41,240 --> 00:24:43,119 Speaker 3: When a number of us had joined the board. 494 00:24:43,200 --> 00:24:45,920 Speaker 4: Through the course of twenty eighteen, the plan a record 495 00:24:46,119 --> 00:24:49,960 Speaker 4: was to actually spin our healthcare business. 496 00:24:48,880 --> 00:24:50,480 Speaker 3: Much as we did earlier this year. 497 00:24:50,520 --> 00:24:53,320 Speaker 4: But I think we found as we dug into it 498 00:24:53,480 --> 00:24:55,760 Speaker 4: that while that was a good idea, we couldn't possibly 499 00:24:55,800 --> 00:24:58,679 Speaker 4: pull it off given the leverage level and given the 500 00:24:58,680 --> 00:25:01,400 Speaker 4: performance of the other businesses, which is why we made 501 00:25:01,440 --> 00:25:06,040 Speaker 4: the quick pivot through the fall into early twenty nineteen 502 00:25:06,080 --> 00:25:10,879 Speaker 4: to actually sell a small part of healthcare, our biopharma business, 503 00:25:10,920 --> 00:25:13,679 Speaker 4: for twenty billion dollars, And that was really the first 504 00:25:14,040 --> 00:25:17,520 Speaker 4: big step we took toward the deleveraging. All the while 505 00:25:18,680 --> 00:25:21,399 Speaker 4: I was spending time with the team, touring facilities, talking 506 00:25:21,400 --> 00:25:24,600 Speaker 4: to customers, trying to get my arms around in terms 507 00:25:24,680 --> 00:25:27,200 Speaker 4: of what we were doing day in and day out 508 00:25:27,240 --> 00:25:31,000 Speaker 4: and why we weren't anywhere close to our full potential operationally. 509 00:25:31,280 --> 00:25:33,520 Speaker 2: You've mentioned a couple of times improving the operations, which 510 00:25:33,560 --> 00:25:36,919 Speaker 2: sounds easy but in my experience it's really hard. So 511 00:25:37,160 --> 00:25:39,520 Speaker 2: how could you, as something of an outsider, come in 512 00:25:39,560 --> 00:25:42,280 Speaker 2: and understand where you needed to improve operations? And that, 513 00:25:42,359 --> 00:25:44,640 Speaker 2: of course is not just what people do, but who's doing. 514 00:25:44,480 --> 00:25:46,160 Speaker 3: It well, exactly right. 515 00:25:46,160 --> 00:25:48,480 Speaker 4: And for me, David, my approach has always been it's 516 00:25:48,480 --> 00:25:53,040 Speaker 4: about the team first and foremost. Fortunately we inherited I think, 517 00:25:53,280 --> 00:25:56,880 Speaker 4: a tremendous team at GE in each of the three 518 00:25:56,920 --> 00:26:00,399 Speaker 4: businesses at corporate up and down the org chart. So 519 00:26:00,440 --> 00:26:02,359 Speaker 4: what we did is we set about making sure we 520 00:26:02,840 --> 00:26:07,320 Speaker 4: knew where we were organizationally. We dove in deeply to 521 00:26:07,359 --> 00:26:10,520 Speaker 4: make sure we understood how we were running the businesses, 522 00:26:10,720 --> 00:26:12,960 Speaker 4: not just in the c suite, but all the way 523 00:26:12,960 --> 00:26:14,960 Speaker 4: down to the factory floor. And there were a host 524 00:26:14,960 --> 00:26:19,119 Speaker 4: of opportunities that we as a team identified. 525 00:26:18,720 --> 00:26:20,440 Speaker 3: Areas where we could do better. We could do better 526 00:26:20,440 --> 00:26:21,760 Speaker 3: for our customers. 527 00:26:21,480 --> 00:26:25,480 Speaker 4: Reduce cycle times, improve our delivery performance, all the while 528 00:26:25,520 --> 00:26:28,000 Speaker 4: taking a lot of waste out of the system. Wasted 529 00:26:28,080 --> 00:26:32,240 Speaker 4: often frankly, helped us improve our profitability and our cash flows. 530 00:26:32,880 --> 00:26:35,200 Speaker 3: It was a daily battle, it was a. 531 00:26:35,160 --> 00:26:37,520 Speaker 4: Game of inches, but over the course of time we 532 00:26:37,760 --> 00:26:42,080 Speaker 4: really were able to lay in our lean operating model 533 00:26:43,200 --> 00:26:46,760 Speaker 4: so that today we're able to perform at much higher 534 00:26:46,920 --> 00:26:50,679 Speaker 4: levels across General Electric in ways that I think are 535 00:26:50,680 --> 00:26:52,400 Speaker 4: going to serve all three of our businesses very well 536 00:26:52,400 --> 00:26:53,000 Speaker 4: going forward. 537 00:26:53,280 --> 00:26:55,880 Speaker 2: How did you bring your board along with you, because again, 538 00:26:56,000 --> 00:26:59,119 Speaker 2: g is just such an iconic company in the United States. 539 00:26:59,160 --> 00:27:02,520 Speaker 2: To break that up into three pieces is quite a move. 540 00:27:02,600 --> 00:27:04,159 Speaker 2: Did you expect to do that from the beginning when 541 00:27:04,200 --> 00:27:05,680 Speaker 2: you took the job? Did you think you'd break it up? 542 00:27:06,320 --> 00:27:06,480 Speaker 3: Well? 543 00:27:06,520 --> 00:27:08,960 Speaker 4: Again, a number of us that joined in twenty eighteen 544 00:27:09,040 --> 00:27:10,320 Speaker 4: knew about. 545 00:27:10,000 --> 00:27:11,239 Speaker 3: The healthcare. 546 00:27:12,480 --> 00:27:16,040 Speaker 4: Idea that we would spend healthcare and created an independent company, 547 00:27:16,040 --> 00:27:19,159 Speaker 4: and that made sense then, it made sense earlier this 548 00:27:19,280 --> 00:27:21,960 Speaker 4: year when we did it, but we really didn't have 549 00:27:22,040 --> 00:27:23,480 Speaker 4: the strategic degrees of freedom. 550 00:27:23,480 --> 00:27:24,879 Speaker 3: We didn't have the balance. 551 00:27:24,480 --> 00:27:28,520 Speaker 4: Sheet to do it so early on there when I 552 00:27:28,600 --> 00:27:30,520 Speaker 4: became CEO, of course, that was something that had never 553 00:27:30,560 --> 00:27:33,800 Speaker 4: happened in the company's history. We didn't necessarily do make 554 00:27:33,840 --> 00:27:37,080 Speaker 4: that move from a position of strengths. The board fortunately, 555 00:27:38,000 --> 00:27:40,600 Speaker 4: was focused on what we were focused on as a 556 00:27:40,600 --> 00:27:45,000 Speaker 4: management team, the deleveraging and improving our daily operations. But 557 00:27:45,119 --> 00:27:50,040 Speaker 4: that board then and now I think is one of 558 00:27:50,080 --> 00:27:52,080 Speaker 4: the best, if not the best boards in the country. 559 00:27:52,359 --> 00:27:55,119 Speaker 4: This is a group of people who really ran toward 560 00:27:55,160 --> 00:27:57,399 Speaker 4: the fire as we reset the board. There were a 561 00:27:57,400 --> 00:27:59,680 Speaker 4: lot of folks DAVI, but you'll recall didn't know have 562 00:27:59,760 --> 00:28:02,680 Speaker 4: G was going to make it ge of all companies. 563 00:28:03,240 --> 00:28:04,919 Speaker 4: And these were a number of people who joined the 564 00:28:04,920 --> 00:28:07,480 Speaker 4: board for many of the same reasons that I did. 565 00:28:08,760 --> 00:28:09,399 Speaker 3: They pitched in. 566 00:28:10,160 --> 00:28:13,640 Speaker 4: It wasn't about themselves, it wasn't about their reputations. They 567 00:28:13,680 --> 00:28:15,320 Speaker 4: just wanted to make sure that we did the right 568 00:28:15,359 --> 00:28:20,480 Speaker 4: thing for the business. But as time passed, we put 569 00:28:20,560 --> 00:28:24,520 Speaker 4: over one hundred billion dollars a debt aside. We improved 570 00:28:24,520 --> 00:28:27,199 Speaker 4: our operations so that we were serving customers better, we 571 00:28:27,200 --> 00:28:31,160 Speaker 4: were generating a respectable amount of free cash flow. When 572 00:28:31,200 --> 00:28:34,119 Speaker 4: the pandemic lifted or began to lift in the spring 573 00:28:34,160 --> 00:28:37,520 Speaker 4: of twenty one, we could see that we had more 574 00:28:37,600 --> 00:28:39,840 Speaker 4: degrees of strategic freedom. And it was really that summer 575 00:28:39,880 --> 00:28:43,040 Speaker 4: when we began to debate what's the best path forward 576 00:28:43,080 --> 00:28:46,200 Speaker 4: for these three outstanding businesses. And that's what led in 577 00:28:46,280 --> 00:28:48,680 Speaker 4: November of twenty one to the announcement that we made. 578 00:28:49,840 --> 00:28:52,760 Speaker 2: How did you manage ego, and I mean ego of 579 00:28:52,840 --> 00:28:54,720 Speaker 2: the company, of the people who worked there of the 580 00:28:54,760 --> 00:28:56,640 Speaker 2: board and even your own ego, because there are a 581 00:28:56,640 --> 00:28:58,880 Speaker 2: lot of CEOs, a lot of leaders say I want 582 00:28:58,880 --> 00:29:01,840 Speaker 2: to have the biggest company. G had been the biggest company, 583 00:29:02,400 --> 00:29:03,840 Speaker 2: and this is a decision. We're not going to be 584 00:29:03,880 --> 00:29:05,520 Speaker 2: the biggest company. We're never going to be the biggest 585 00:29:05,520 --> 00:29:08,040 Speaker 2: company again. How did you manage the egos involved? 586 00:29:08,560 --> 00:29:11,320 Speaker 4: Well, I think I've long believed that you're far better 587 00:29:11,440 --> 00:29:15,880 Speaker 4: off being strong rather than just big, and that was 588 00:29:15,920 --> 00:29:19,880 Speaker 4: a little bit of the evolution of our conversation. We're 589 00:29:19,880 --> 00:29:22,160 Speaker 4: not going to be an all singing, all dancing ge 590 00:29:22,320 --> 00:29:26,440 Speaker 4: going forward, but that doesn't mean we can't lead the 591 00:29:26,520 --> 00:29:29,080 Speaker 4: energy transition. That doesn't mean we can't be a leader 592 00:29:29,120 --> 00:29:32,080 Speaker 4: in precision healthcare. That doesn't mean we can't define the 593 00:29:32,120 --> 00:29:34,920 Speaker 4: future of flight. And that's what these three businesses can 594 00:29:34,920 --> 00:29:37,320 Speaker 4: do now. They'll do them on their own. But as 595 00:29:37,360 --> 00:29:41,720 Speaker 4: we looked forward, I think there was easy consensus that 596 00:29:41,800 --> 00:29:44,680 Speaker 4: each of these three businesses, on their own bottoms, were 597 00:29:44,680 --> 00:29:47,920 Speaker 4: going to be industry leaders. So when we went around 598 00:29:47,960 --> 00:29:50,080 Speaker 4: the table, it was an easy vote. 599 00:29:50,920 --> 00:29:53,000 Speaker 2: Geez Larry Cup was staying with us as we turned 600 00:29:53,000 --> 00:29:55,280 Speaker 2: to those three businesses and where they are going next. 601 00:29:55,320 --> 00:29:57,760 Speaker 2: That's why I'm next on Wall Street Week on Boomberg. 602 00:30:06,600 --> 00:30:08,600 Speaker 2: This is Wall Streaming Week. I'm David Weston and we 603 00:30:08,640 --> 00:30:11,960 Speaker 2: are back now with Larry Kulp, the head of GE. So, Larry, 604 00:30:12,160 --> 00:30:14,160 Speaker 2: we've talked about how you got to where you are, now, 605 00:30:14,240 --> 00:30:15,840 Speaker 2: let's talk about where you're going next. 606 00:30:16,280 --> 00:30:20,040 Speaker 4: We couldn't be in a better position with respect to 607 00:30:20,080 --> 00:30:24,920 Speaker 4: the post pandemic recovery in aerospace. You've seen the performance 608 00:30:25,000 --> 00:30:27,120 Speaker 4: thus far this year. We're really on a record pace 609 00:30:28,120 --> 00:30:32,000 Speaker 4: given both the return to flight really around the world 610 00:30:32,080 --> 00:30:35,000 Speaker 4: now is people see places they haven't been to and 611 00:30:35,080 --> 00:30:38,320 Speaker 4: at the same time they're looking to modernize and expand 612 00:30:38,360 --> 00:30:41,560 Speaker 4: their fleets. So we have tremendous backlogs with our major 613 00:30:41,600 --> 00:30:46,959 Speaker 4: airframers Boeing Airbus for example, the supply chain challenges are 614 00:30:47,000 --> 00:30:50,880 Speaker 4: significant and right alongside everything we're doing on the commercial side. 615 00:30:50,920 --> 00:30:53,760 Speaker 4: We've seen a really strong uptake in our defense business 616 00:30:54,640 --> 00:30:57,400 Speaker 4: is one would imagine both with fixed wing and in rotary. 617 00:30:57,480 --> 00:30:59,720 Speaker 4: So in terms of how big this business can be, 618 00:31:00,240 --> 00:31:03,040 Speaker 4: where I think on a path where we could be 619 00:31:03,080 --> 00:31:07,920 Speaker 4: growing in the mid single digit, high single digit range. 620 00:31:07,600 --> 00:31:08,160 Speaker 3: For some time. 621 00:31:08,200 --> 00:31:10,520 Speaker 4: That would put us well north of forty billion dollars 622 00:31:10,880 --> 00:31:14,440 Speaker 4: in but a few years, a lot of opportunity. We 623 00:31:14,520 --> 00:31:17,640 Speaker 4: have I think an ambuable position in propulsion. But again, 624 00:31:17,720 --> 00:31:20,280 Speaker 4: it's not about how big we get. It's about how 625 00:31:20,320 --> 00:31:22,520 Speaker 4: strong we are and are we serving our customers? Are 626 00:31:22,520 --> 00:31:26,040 Speaker 4: we taking care of our team? Are we doing well 627 00:31:24,960 --> 00:31:27,160 Speaker 4: by way of our shareholders. 628 00:31:27,240 --> 00:31:29,160 Speaker 3: It's optimistic that we will. 629 00:31:28,720 --> 00:31:31,160 Speaker 2: What's on the table. As the point, you've spent your 630 00:31:31,200 --> 00:31:34,320 Speaker 2: five years really redoing the balance sheet, really fixing the 631 00:31:34,360 --> 00:31:37,720 Speaker 2: cash flow situation, retiring a lot of debt. Capital allocation 632 00:31:37,840 --> 00:31:39,840 Speaker 2: maybe hasn't been so much of an issue because you're 633 00:31:39,880 --> 00:31:42,320 Speaker 2: just trying to retire to that debt. Going forward, you 634 00:31:42,360 --> 00:31:44,560 Speaker 2: may well have some capital to work with. So what 635 00:31:44,600 --> 00:31:47,240 Speaker 2: are the possibilities both in terms of acquisition but also 636 00:31:47,360 --> 00:31:48,840 Speaker 2: sail potentially well. 637 00:31:48,880 --> 00:31:51,200 Speaker 4: I think that we want to be why stewards of 638 00:31:51,240 --> 00:31:54,440 Speaker 4: that capital, right. I've long believed that investors give you 639 00:31:54,480 --> 00:31:57,680 Speaker 4: a license to reinvest in your business, and you need 640 00:31:57,720 --> 00:32:01,040 Speaker 4: to be careful with that license lest gets pulled. But 641 00:32:01,120 --> 00:32:02,600 Speaker 4: I think what we've tried to do is set up 642 00:32:02,600 --> 00:32:05,120 Speaker 4: all three of the businesses to be in a position 643 00:32:05,160 --> 00:32:09,720 Speaker 4: where they are well capitalized, investment grade, and we'll have 644 00:32:09,760 --> 00:32:13,760 Speaker 4: the opportunities to think through not only their organic options 645 00:32:14,880 --> 00:32:19,560 Speaker 4: be at M and a small mid size probably not 646 00:32:19,680 --> 00:32:23,080 Speaker 4: something large and headline breaking. But at the same time, 647 00:32:23,200 --> 00:32:25,360 Speaker 4: how do we think about buybacks, how do we think 648 00:32:25,400 --> 00:32:27,400 Speaker 4: about dividends? So I think you'll see each of the 649 00:32:27,400 --> 00:32:31,560 Speaker 4: three companies, once we spend giev Vernova sometime early next year, 650 00:32:32,000 --> 00:32:36,600 Speaker 4: be in a position where they'll have tailored, balanced capital 651 00:32:36,640 --> 00:32:40,200 Speaker 4: allocation policies that will be in effect. Confident all three 652 00:32:40,240 --> 00:32:43,320 Speaker 4: boards carry forward that responsibility. 653 00:32:43,360 --> 00:32:45,800 Speaker 2: Well, Larry, thank you so much for being wilture, with 654 00:32:45,920 --> 00:32:47,960 Speaker 2: really a pleasure to have you here. That's Larry Culp 655 00:32:48,200 --> 00:32:52,880 Speaker 2: of General Electric. Finally, one more thought, look deep into nature, 656 00:32:53,000 --> 00:32:56,960 Speaker 2: and then you will understand everything better, so wrote Albert 657 00:32:57,040 --> 00:33:00,320 Speaker 2: Einstein after the death of his sister in nineteen fifty one. 658 00:33:00,400 --> 00:33:03,120 Speaker 2: And these days there's plenty of nature demanding that we 659 00:33:03,280 --> 00:33:06,080 Speaker 2: look into it deeply, though it's not as clear that 660 00:33:06,120 --> 00:33:09,600 Speaker 2: we're understanding any better. It has been a summer of 661 00:33:09,680 --> 00:33:14,480 Speaker 2: extreme weather. Record heat hit Europe hard, bringing Greek wildfires 662 00:33:14,520 --> 00:33:17,320 Speaker 2: with it, while halfway around the world, an entire town 663 00:33:17,440 --> 00:33:20,760 Speaker 2: burned down to the ground in Hawaii, leaving hundreds dead 664 00:33:21,000 --> 00:33:24,120 Speaker 2: or missing. A once in a lifetime hurricane came ashore, 665 00:33:24,400 --> 00:33:27,880 Speaker 2: not in Florida, but in southern California, and a series 666 00:33:27,920 --> 00:33:31,960 Speaker 2: of typhoons pummeled Hong Kong, Taiwan and mainland China. Science 667 00:33:32,000 --> 00:33:35,200 Speaker 2: has warned that you cannot trace any single weather event 668 00:33:35,320 --> 00:33:38,480 Speaker 2: to climate change, but the degree and the frequency of 669 00:33:38,480 --> 00:33:42,440 Speaker 2: extreme weather overall is because of our warming globe, creating 670 00:33:42,440 --> 00:33:45,520 Speaker 2: what some call growing natural disaster risk. 671 00:33:45,920 --> 00:33:50,080 Speaker 7: What we're seeing now is just repeated examples of natural 672 00:33:50,120 --> 00:33:55,200 Speaker 7: disasters climate extremes happening at scales we haven't seen before 673 00:33:55,280 --> 00:33:56,760 Speaker 7: in places we haven't seen them. 674 00:33:57,320 --> 00:34:00,880 Speaker 2: Burning Man has never really build itself as an environmental movement. 675 00:34:01,120 --> 00:34:03,280 Speaker 2: It's an annual event in the middle of the desert 676 00:34:03,320 --> 00:34:08,440 Speaker 2: in northwest Nevada, celebrating art and self expression and self reliance. 677 00:34:08,960 --> 00:34:12,560 Speaker 2: But this year, whatever its purpose, nature crashed the Burning 678 00:34:12,600 --> 00:34:15,320 Speaker 2: Man party in a big way, putting to a test 679 00:34:15,440 --> 00:34:18,839 Speaker 2: all that talk about self reliance. While others stayed until 680 00:34:18,880 --> 00:34:21,440 Speaker 2: the bitter end for the ritual burning of the Giant 681 00:34:21,480 --> 00:34:24,319 Speaker 2: Man once the weather had cleared enough, and at least 682 00:34:24,360 --> 00:34:26,200 Speaker 2: some still consider it worth it. 683 00:34:26,200 --> 00:34:28,600 Speaker 12: Honestly think that this is the best burn ever. 684 00:34:29,239 --> 00:34:32,840 Speaker 7: Seriously like this has given us the opportunity to rise 685 00:34:32,880 --> 00:34:35,719 Speaker 7: to radical self reliance and to support each other in 686 00:34:35,800 --> 00:34:38,160 Speaker 7: the community, and I'm having the best time, all of. 687 00:34:38,120 --> 00:34:40,440 Speaker 2: Which brings home the need for us to look deeply 688 00:34:40,480 --> 00:34:43,960 Speaker 2: into nature, as Einstein suggested, and to try to understand 689 00:34:44,000 --> 00:34:47,560 Speaker 2: everything just a bit better. That does it for this 690 00:34:47,600 --> 00:34:50,520 Speaker 2: episode of Wall Street Week, I'm David Weston. This is Bloomberg. 691 00:34:50,760 --> 00:34:52,840 Speaker 2: See you next week.