WEBVTT - Bloomberg Wall Street Week - September 8th, 2023

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<v Speaker 1>This is Bloomberg Wall Street Week.

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<v Speaker 2>And we may not have an overall recession, we're having

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<v Speaker 2>a rolling recession. To Cone roll looks pretty strongly it

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<v Speaker 2>is when it comes to jobs.

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<v Speaker 3>The financial stories that shape our world.

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<v Speaker 2>Three major regional bank failures send shockwaves through the banking system.

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<v Speaker 2>We're all trying to figure out what to make of

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<v Speaker 2>generative AI.

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<v Speaker 1>Through the eyes of the most influential voices.

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<v Speaker 2>Welcome down, doctor Paul Krugman, Ryan moynihan, a Bank of America,

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<v Speaker 2>deebro Lair of the Paulson Institute, well then Hubbard of

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<v Speaker 2>the Columbia Business School.

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<v Speaker 1>Bloomberg Wall Street Week with David Weston from Bloomberg Radio.

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<v Speaker 2>Less oil that we thought it's more high end chips

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<v Speaker 2>than we expected, and trying to get our hopes for

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<v Speaker 2>the future just right given where we're headed. This is

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<v Speaker 2>Bloomberg Wall Street Week. I'm David Weston. This week Larry

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<v Speaker 2>coppege on his remarkable five years of turnaround for an

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<v Speaker 2>American icon and what comes next.

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<v Speaker 4>You're far better off being strong rather than just big,

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<v Speaker 4>you know.

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<v Speaker 2>Ferguson of the Hoover Institution on the promise and the

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<v Speaker 2>perils of artificial intelligence, and what we can learn from

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<v Speaker 2>the Cold War.

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<v Speaker 5>There were problems posed when nuclear fission club was developed.

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<v Speaker 5>It had both the destructive use atomic bombs and a

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<v Speaker 5>potentially very productive use as a source of energy.

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<v Speaker 2>And Pete Stavros of KKR, together with Kathy Vajos of

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<v Speaker 2>Chartered Next Generation on giving employees a true seat at

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<v Speaker 2>the corporate table.

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<v Speaker 6>We lay the foundation of a different type of culture,

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<v Speaker 6>which is ownership.

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<v Speaker 7>We normalize the fact that management and labor don't get along.

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<v Speaker 7>I want to flip the script on that.

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<v Speaker 2>Global Wall Street eased its way into fall this week

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<v Speaker 2>with continued disappointing economic news out of China, but a

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<v Speaker 2>discovery that Huawei may have found a way to make

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<v Speaker 2>high end microchips despite the US restrictions.

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<v Speaker 8>It shows that China can do mostly with domestic manufacturing

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<v Speaker 8>a lot of the advanced the chip making and development

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<v Speaker 8>for a smallphone.

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<v Speaker 2>Something President g won't have to answer questions about it

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<v Speaker 2>the G twenty meetings in India this weekend because he

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<v Speaker 2>decided not to go.

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<v Speaker 1>It just sticks away from the Shijen Bing's absence steaks

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<v Speaker 1>of the primacy in a way.

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<v Speaker 2>Saudi Arabia and then Russia announced extended restrictions on their

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<v Speaker 2>oil production, catching markets by surprise and raising the specter

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<v Speaker 2>of a return to higher oil prices.

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<v Speaker 7>The fact that was reached ninety dollars but barrel is

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<v Speaker 7>significant and it means that the whole commodity index pushes higher.

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<v Speaker 2>In the United States, everyone was looking for any scrap

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<v Speaker 2>of information to confirm the soft landing. Last week's jobs

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<v Speaker 2>numbers suggested, with the ISM services number coming in hot,

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<v Speaker 2>which made everyone fear more rate heights, while the Fed's

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<v Speaker 2>Beige Book pointed to subdued jobs growth and modest economic activity.

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<v Speaker 8>I think the Fed would be very unwise to raise

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<v Speaker 8>rates again just because of a short term spike and

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<v Speaker 8>enthusiasm and service sector and.

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<v Speaker 2>U US open headed toward its finals is driven by

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<v Speaker 2>new faces, the return of some real American contenders, and

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<v Speaker 2>a media showdown in the way of some people getting

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<v Speaker 2>to watch.

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<v Speaker 9>We just came out of this golden age of fifteen

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<v Speaker 9>years of Roger Rafa Novak, and the baton has not

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<v Speaker 9>only been passed.

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<v Speaker 3>If you think it's been thrown to Carlos Alcarez.

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<v Speaker 2>And the echoing markets this week certainly spend a lot

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<v Speaker 2>of their time trying to get their expectations in line

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<v Speaker 2>with reality, as the SNP five hundred lost one point

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<v Speaker 2>three percent in part because of rising oil prices, to

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<v Speaker 2>close it forty four to fifty seven, but that's still

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<v Speaker 2>well above the median year end call of our Bloomberg

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<v Speaker 2>elves of forty three hundred. The Nasdaq did even worse,

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<v Speaker 2>giving up one point nine three percent, But the one

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<v Speaker 2>clear winner was the dollar, with the Bloomberg Dollar Index

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<v Speaker 2>showing it up for the eighth week in a row.

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<v Speaker 2>That is the longest winning streak since January two thousand

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<v Speaker 2>and five. For her take on what we are seeing

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<v Speaker 2>in the markets, we welcome back now Christina Hooper. She

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<v Speaker 2>is a Vesco Global Market striss Christina. Always great to

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<v Speaker 2>have you with us. So what did you make of

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<v Speaker 2>this week? It doesn't seem to be in one straight line.

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<v Speaker 3>At the moment.

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<v Speaker 10>Well, David, I think this was really a story of

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<v Speaker 10>bad news is good news, good news is bad news,

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<v Speaker 10>and this week it was good economic data that raised

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<v Speaker 10>fears that the Fed may have to continue hiking rates,

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<v Speaker 10>and that's really all it was to it. But actually,

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<v Speaker 10>if we go through the data, not everything was that positive.

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<v Speaker 5>Right.

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<v Speaker 10>Yes, everyone sees on the ism services, but actually the

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<v Speaker 10>S and P services PMI wasn't as good. If we

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<v Speaker 10>look at initial jobless claims, yes, they're lower, get you know,

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<v Speaker 10>the lowest we've seen in a while, and it's been

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<v Speaker 10>on a trend for a few weeks. But other readings

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<v Speaker 10>suggest more tepid labor market, right what we saw from

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<v Speaker 10>the JOLT survey last week. So I think markets have

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<v Speaker 10>been concerned because of a few data points. But I've

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<v Speaker 10>always stressed that not every data point is going to

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<v Speaker 10>perfectly support the narrative of a displacetionary trend. But we

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<v Speaker 10>are very much in that disinflationary trend.

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<v Speaker 2>Disinflation. Are we on our route to two percent? And

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<v Speaker 2>if so, long is it going to take us to

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<v Speaker 2>get there?

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<v Speaker 10>I do believe that, and I'm happy you asked that

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<v Speaker 10>because the Chicago Fed economists just put out of paper

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<v Speaker 10>arguing that we are actually on that path and that

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<v Speaker 10>we will get to two percent inflation. Now, it will

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<v Speaker 10>take some time to get there, but that's okay because again,

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<v Speaker 10>typically we see significant period of time between when monetary

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<v Speaker 10>policy is enacted and when it shows up in the economy.

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<v Speaker 2>What does this say to investors? What do you do

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<v Speaker 2>in this sort of world of as you say, bumpy landing,

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<v Speaker 2>there's going to be some uncertainty even if it's not

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<v Speaker 2>going to go off a cliff. What does an.

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<v Speaker 10>Investor do well, Investors have to understand that there are

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<v Speaker 10>going to be shifts in leadership because markets are uncertain

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<v Speaker 10>right now.

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<v Speaker 2>Last week this week was.

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<v Speaker 10>A perfect example of that. We have a lot of

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<v Speaker 10>fear right now. But once we get clarity that the

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<v Speaker 10>FED really has ended its rate high cycle, that's when

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<v Speaker 10>markets can look ahead and start to discount in economic recovery.

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<v Speaker 10>So that would mean being positioned more in cyclicals, more

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<v Speaker 10>in smaller caps, but also looking outside the US. International

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<v Speaker 10>is going to be a lot more attractive as the

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<v Speaker 10>US dollar weekends, and while it has been strong, I

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<v Speaker 10>do believe that we will see it start to weaken

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<v Speaker 10>once we have that clarity that the FED has stopped

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<v Speaker 10>hiking rates.

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<v Speaker 2>Briefly, oil or persons did go up this week.

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<v Speaker 10>Certainly that's a concern, but it takes time to filter

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<v Speaker 10>into the rest of the economy to make it into core.

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<v Speaker 10>So if this is a relatively short burst, I'm not

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<v Speaker 10>that concerned about it.

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<v Speaker 2>Is the FED going to be concerned?

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<v Speaker 10>I don't think so, because the Fed's looking at a

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<v Speaker 10>mosaic of data, and again this is about a very

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<v Speaker 10>strong disinflationary trend that I think they can see, and

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<v Speaker 10>that was supported by what we heard anecdotally in the

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<v Speaker 10>Federal Reserve page book this week.

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<v Speaker 2>Christina's always such a treat to have you here, Thank

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<v Speaker 2>you so much. That's Christina Hooper of Investco. Generative Artificial

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<v Speaker 2>intelligence poses all sorts of opportunities and risks for investors

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<v Speaker 2>the world, and one of the founders of DeepMind, that's

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<v Speaker 2>the AI startup now part of Google, has written a book,

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<v Speaker 2>The Coming Wave Technology, Power in the twenty first Century's

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<v Speaker 2>Greatest Dilemma, in which he sets out the wonderful opportunities

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<v Speaker 2>as well as the terrifying threats posed by AI and

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<v Speaker 2>the need for nation states to develop structures to contain

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<v Speaker 2>this powerful new technology.

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<v Speaker 8>At this moment, we have to be optimistic and encouraging

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<v Speaker 8>of the nation state. This is a moment when the

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<v Speaker 8>state has to adapt and evolve, just as we all

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<v Speaker 8>have to evolve to these new technologies. There's no way

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<v Speaker 8>to put the genie back in the boggle. This really

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<v Speaker 8>is happening. So there art is going to be around

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<v Speaker 8>shaping it in the public interest and making sure that

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<v Speaker 8>our democratic governments remain in control.

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<v Speaker 2>The historian Neil Ferguson has written not just about economics

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<v Speaker 2>and money, but also about the politics of disaster in

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<v Speaker 2>his book Doom. He is a senior fellow at the

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<v Speaker 2>Hoover Institution as well as a Bloomberg opinion contributor. And

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<v Speaker 2>we welcome now back to Wall Street Wig. So, Neil,

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<v Speaker 2>thanks so much for being with us. I know you've

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<v Speaker 2>read the book because you call it Dazzling, a column

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<v Speaker 2>actually wrote for Bloomberg. Here give us your biggest takeaway

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<v Speaker 2>from this book. Why do you say something that no

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<v Speaker 2>one can afford not to read.

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<v Speaker 5>Well, Mustafa Silima knows what he's talking about. He was

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<v Speaker 5>really present at the creation of the big AI breakthroughs

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<v Speaker 5>in recent years, one of the founders of Deep Mind,

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<v Speaker 5>which has been a key pioneer in the field, and

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<v Speaker 5>so he comes to the subject with the really almost

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<v Speaker 5>unrivaled expertise. He was there in the room when they

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<v Speaker 5>built AIS that could beat world champions at chess and

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<v Speaker 5>then go So I respect him as a true authority

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<v Speaker 5>on the subject. Not everybody who writes about AIS nearly

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<v Speaker 5>as well versed as Mustafa is. And so when he

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<v Speaker 5>says we have a problem, and it's a problem that

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<v Speaker 5>today's nation states aren't really well set up to deal with, I.

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<v Speaker 11>Think we should all listen, because I don't find it

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<v Speaker 11>plausible that just let it writ as some people would advocate,

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<v Speaker 11>is prudent given the potentially very dangerous things that AI

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<v Speaker 11>is capable of doing.

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<v Speaker 2>Yeah, as you're saying, you know, he really sets out

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<v Speaker 2>wonderful things and dangerous things at the same time. You

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<v Speaker 2>were an historian, of course, and one of the things

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<v Speaker 2>that mister Silman talks about is the need for what

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<v Speaker 2>he calls containment, and he admits that that sort of

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<v Speaker 2>sounds like George Kennon's proposal for Jalla Soviet Union. As

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<v Speaker 2>you look back in history, are there analogies. They're always rough,

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<v Speaker 2>they're always imperfect. But have there been times when we

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<v Speaker 2>could get our arms around some potentially dangerous new technology

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<v Speaker 2>and really control it?

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<v Speaker 5>Well, you see, the interesting thing about the book is

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<v Speaker 5>that it has lots of interesting historical analogies. I mean,

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<v Speaker 5>the wilder enthusiasm for AI will tell you that it's

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<v Speaker 5>some combination of fire, the wheel, electrification, and nuclear weapons.

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<v Speaker 5>What was staff zeros In on is the analogy with

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<v Speaker 5>the Cold War, and I was tempted to suggests he

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<v Speaker 5>might turn out to be the Robert Oppenheimer of AI,

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<v Speaker 5>because he observes that there were problems posed when nuclear

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<v Speaker 5>fission was developed. It had both the destructive use atomic

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<v Speaker 5>bombs and potentially very productive use as a source of energy.

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<v Speaker 5>And he shows how some of the challenges of regulating

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<v Speaker 5>this new technology suggest ways in.

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<v Speaker 3>Which we might proceed today.

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<v Speaker 5>For example, he suggests that there should be arms control

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<v Speaker 5>talks on AI between the United States and China, which

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<v Speaker 5>are the only two superpowers really developing AI on a

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<v Speaker 5>massive scale.

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<v Speaker 2>Okay, thank you so much, Neil, really appreciate your insights

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<v Speaker 2>to this. Neil Ferguson of the Hoover Institution. Coming up,

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<v Speaker 2>Private Equity, Doing Well. By doing good, we talk with

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<v Speaker 2>KKR Global co head of private Equity, Pete Stavros and

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<v Speaker 2>Kathy Bojos, CEO of a company he has invested in

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<v Speaker 2>to explore the world of employee ownership. That's coming up

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<v Speaker 2>next on Wall Street Week on Bloomberg.

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<v Speaker 1>This is Bloomberg Wall Street Week with David Weston from

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<v Speaker 1>Bloomberg Radio.

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<v Speaker 2>This is Wall Street week. I'm David Weston. At the

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<v Speaker 2>beginning of the summer, we brought you a story putting

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<v Speaker 2>together two things we don't usually associate with one another,

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<v Speaker 2>private equity buyouts on the one hand, and employee stock

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<v Speaker 2>ownership on the other. But KKR has been putting them

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<v Speaker 2>together for some time now and has found some real success.

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<v Speaker 2>So we welcome back to the man behind the effort.

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<v Speaker 2>He is Peter Stavros, KKR Global co head of Private

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<v Speaker 2>Equity and someone who's been working with Pete to put

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<v Speaker 2>it into practice. Kathy Bolhost. She is CEO of Charter

0:11:47.000 --> 0:11:49.520
<v Speaker 2>and Next Generation. So welcome both you. Pete, welcome back.

0:11:49.600 --> 0:11:51.520
<v Speaker 2>Great to meet you. This is wonderful to have you, Kathy.

0:11:51.720 --> 0:11:52.080
<v Speaker 2>Thank you.

0:11:52.160 --> 0:11:52.840
<v Speaker 7>Great to be here.

0:11:52.920 --> 0:11:55.600
<v Speaker 2>Let's start with you, Pete. So we've talked about what

0:11:55.640 --> 0:11:57.840
<v Speaker 2>you've been doing at KKR, sort of the principles of

0:11:57.880 --> 0:12:02.319
<v Speaker 2>how it works, how specifically has applied in this specific instance.

0:12:02.880 --> 0:12:05.079
<v Speaker 6>So what we do each time, and what we've done

0:12:05.240 --> 0:12:07.760
<v Speaker 6>in the case of charternext Gen is we lay the

0:12:07.800 --> 0:12:10.679
<v Speaker 6>foundation of a different type of culture, which is ownership.

0:12:11.040 --> 0:12:14.600
<v Speaker 6>So we made every employee at charternext Gen a stockholder

0:12:14.640 --> 0:12:16.520
<v Speaker 6>in the company. It's important to note it was a

0:12:16.520 --> 0:12:19.560
<v Speaker 6>free and incremental benefit, so we're not asking workers to

0:12:19.600 --> 0:12:22.439
<v Speaker 6>invest out of pocket. We're not asking people to trade

0:12:22.440 --> 0:12:24.319
<v Speaker 6>off wages for stock, so it doesn't come out of

0:12:24.320 --> 0:12:25.960
<v Speaker 6>their page, has not come out of their paycheck. It's

0:12:25.960 --> 0:12:28.400
<v Speaker 6>a free, incremental benefit. It's also important to note it's

0:12:28.440 --> 0:12:31.360
<v Speaker 6>a meaningful amount of stock. So we are hoping at

0:12:31.440 --> 0:12:33.760
<v Speaker 6>Charter NextGen. Now, this is equity, its risk, it's not

0:12:33.800 --> 0:12:36.480
<v Speaker 6>a guarantee. But if we hit our plan that we

0:12:36.520 --> 0:12:38.720
<v Speaker 6>can show people a path to earning one hundred percent

0:12:38.760 --> 0:12:39.760
<v Speaker 6>of their income in stock.

0:12:39.880 --> 0:12:41.760
<v Speaker 2>Now that that's just the foundation.

0:12:42.160 --> 0:12:44.760
<v Speaker 6>Really, the purpose of it is to change the culture,

0:12:44.920 --> 0:12:48.160
<v Speaker 6>to get people more engaged on the job, to get

0:12:48.200 --> 0:12:52.160
<v Speaker 6>people to think like business owners, and over time get

0:12:52.160 --> 0:12:54.080
<v Speaker 6>the quit rate down and the engagement scores up.

0:12:54.120 --> 0:12:54.640
<v Speaker 2>And in the.

0:12:54.640 --> 0:12:57.480
<v Speaker 6>Short time we've been working together with charternext Gen, the

0:12:57.600 --> 0:12:59.839
<v Speaker 6>quit rates are down thirty three percent, the number of

0:13:00.040 --> 0:13:03.280
<v Speaker 6>gauged employees up twenty three percent. Safety has improved, So

0:13:03.520 --> 0:13:06.120
<v Speaker 6>even in the two years we've been at this, we're

0:13:06.160 --> 0:13:07.720
<v Speaker 6>starting to make real progress.

0:13:08.080 --> 0:13:10.760
<v Speaker 2>So Kathy, take it from your side of it, turn

0:13:10.800 --> 0:13:13.640
<v Speaker 2>our next Gennels. I understand it is a leading producer

0:13:13.720 --> 0:13:15.559
<v Speaker 2>of film used in packaging. A lot of the things

0:13:15.559 --> 0:13:16.959
<v Speaker 2>that we buy when we go to the zero market

0:13:17.120 --> 0:13:19.480
<v Speaker 2>has some of your film around it. You were a

0:13:19.480 --> 0:13:22.199
<v Speaker 2>successful company before Pete came along. It's not like you

0:13:22.240 --> 0:13:24.720
<v Speaker 2>were struggling about to go belly up. What did you

0:13:24.760 --> 0:13:27.000
<v Speaker 2>see in this opportunity otherwise you might not have seen

0:13:27.040 --> 0:13:27.720
<v Speaker 2>from somebody else.

0:13:28.440 --> 0:13:30.240
<v Speaker 7>Well, first of all, this this is a dream for

0:13:30.360 --> 0:13:33.760
<v Speaker 7>me to be able to offer equity ownership to every employee.

0:13:33.840 --> 0:13:37.080
<v Speaker 7>I look at it. Every single employee is part of

0:13:37.120 --> 0:13:38.120
<v Speaker 7>the success.

0:13:37.679 --> 0:13:38.319
<v Speaker 2>Of the company.

0:13:38.360 --> 0:13:40.960
<v Speaker 7>It's a team sport. So it doesn't make sense that

0:13:41.040 --> 0:13:43.760
<v Speaker 7>you would only reward the top executives the top five

0:13:43.800 --> 0:13:47.440
<v Speaker 7>percent with equity. So the opportunity to give equity to

0:13:47.559 --> 0:13:51.640
<v Speaker 7>everyone alliance the incentives. So now everyone has the same incentive,

0:13:52.000 --> 0:13:54.800
<v Speaker 7>which is to create value for the long term. You know,

0:13:54.840 --> 0:13:57.800
<v Speaker 7>when you give an employee who's living on an hourly

0:13:57.840 --> 0:14:02.720
<v Speaker 7>wage the opportunity to build that nest egg, that's life changing.

0:14:03.040 --> 0:14:05.320
<v Speaker 7>And that's our goal here, is to really have an

0:14:05.360 --> 0:14:09.000
<v Speaker 7>amazing outcome and give them that nest egg. Pensions have

0:14:09.200 --> 0:14:13.240
<v Speaker 7>largely gone away, so there's no opportunity to get ahead.

0:14:14.120 --> 0:14:17.600
<v Speaker 7>I think about the cash compensation, that's what you use

0:14:17.679 --> 0:14:20.280
<v Speaker 7>to pay your bills. The equity is what you use

0:14:20.360 --> 0:14:22.920
<v Speaker 7>to create wealth. And if you don't have an opportunity

0:14:22.920 --> 0:14:24.920
<v Speaker 7>for equity, how are you going to create wealth?

0:14:25.080 --> 0:14:27.720
<v Speaker 2>You mentioned you have some encourage in return. So far,

0:14:28.280 --> 0:14:29.760
<v Speaker 2>how far can the gets to go? I mean you

0:14:29.840 --> 0:14:31.280
<v Speaker 2>must believe in it, because I think you've got a

0:14:31.320 --> 0:14:34.160
<v Speaker 2>documentary in the process right that you're working on with GAT.

0:14:34.280 --> 0:14:37.360
<v Speaker 6>We've released two clips so far of the documentary film

0:14:37.400 --> 0:14:39.760
<v Speaker 6>and no pressure, but this has to be a big win.

0:14:39.840 --> 0:14:41.040
<v Speaker 2>That is exactly no.

0:14:41.440 --> 0:14:44.120
<v Speaker 7>I'm fully committed. I am going to do my best,

0:14:44.160 --> 0:14:46.840
<v Speaker 7>and I know our people will too. This has created

0:14:47.120 --> 0:14:49.680
<v Speaker 7>such a spree to core in the company, and you

0:14:49.760 --> 0:14:52.280
<v Speaker 7>know that what I think is really important as a

0:14:52.360 --> 0:14:56.200
<v Speaker 7>leader is to take the people metrics as seriously as

0:14:56.200 --> 0:14:58.960
<v Speaker 7>you take the business metrics. So much of the time

0:14:59.120 --> 0:15:03.200
<v Speaker 7>we focus on profit, focus on sales, focus on things

0:15:03.280 --> 0:15:06.720
<v Speaker 7>we can measure, but you know, for us, it's really

0:15:06.760 --> 0:15:11.120
<v Speaker 7>about focusing on engagement. Think about the fact that in

0:15:11.160 --> 0:15:16.280
<v Speaker 7>the US forty percent forty to fifty percent of manufacturing

0:15:16.320 --> 0:15:18.280
<v Speaker 7>companies face a turnover issue.

0:15:18.360 --> 0:15:20.880
<v Speaker 2>That's how many people quit. Forty to fifty.

0:15:20.600 --> 0:15:24.880
<v Speaker 7>Percent of employees quit their jobs every year. Think about

0:15:24.960 --> 0:15:28.240
<v Speaker 7>if you can reduce that down to five percent, the

0:15:28.320 --> 0:15:32.040
<v Speaker 7>value that you can unlock. So that's where we're focused now.

0:15:32.080 --> 0:15:35.040
<v Speaker 7>We also want to give our employees a voice, so

0:15:35.200 --> 0:15:39.840
<v Speaker 7>we've implemented things like employee directed capital. We give each

0:15:39.880 --> 0:15:42.640
<v Speaker 7>plant a budget. You decide how this capital is going

0:15:42.680 --> 0:15:44.520
<v Speaker 7>to be spent. You have to vote on it, you

0:15:44.600 --> 0:15:48.280
<v Speaker 7>have to agree. But then imagine spending this money to

0:15:48.320 --> 0:15:52.200
<v Speaker 7>improve your breakroom, making an outdoor eating area. When you

0:15:52.320 --> 0:15:56.280
<v Speaker 7>give the worker the decision around their work, that helps

0:15:56.280 --> 0:15:59.960
<v Speaker 7>to create engagement. We also let them decide what chare

0:16:00.040 --> 0:16:03.320
<v Speaker 7>aritable organizations we want to sponsor in their community. Can

0:16:03.360 --> 0:16:06.120
<v Speaker 7>they vote on it, and they decide what impact do

0:16:06.160 --> 0:16:09.480
<v Speaker 7>they want to have in the community with our charitable contributions.

0:16:09.960 --> 0:16:11.520
<v Speaker 2>PET. One of the things that's happened since you and

0:16:11.560 --> 0:16:14.520
<v Speaker 2>I last spoke actually as a fair amount of organized

0:16:14.600 --> 0:16:17.640
<v Speaker 2>labor activity as we have a strike right now with

0:16:17.720 --> 0:16:20.280
<v Speaker 2>the Writer's Guild and SAG after who knows what's going

0:16:20.320 --> 0:16:22.600
<v Speaker 2>to have with UAW doesn't look real good right now,

0:16:22.880 --> 0:16:24.840
<v Speaker 2>But as I listen to what Kathy's saying right now,

0:16:24.880 --> 0:16:28.280
<v Speaker 2>that's how world away from talking about hundreds of work

0:16:28.400 --> 0:16:31.360
<v Speaker 2>rules to say exactly who goes where what do these

0:16:31.360 --> 0:16:35.520
<v Speaker 2>two things fit together. Does employee ownership fit with organized labor?

0:16:36.440 --> 0:16:37.200
<v Speaker 2>I think it can.

0:16:37.720 --> 0:16:42.640
<v Speaker 6>I think historically organized labor took a skeptical eye understandably

0:16:42.680 --> 0:16:46.520
<v Speaker 6>to ownership, you know, because to union, the employees are

0:16:46.560 --> 0:16:49.480
<v Speaker 6>their members, not your employee, not your employees, right, so

0:16:50.040 --> 0:16:53.280
<v Speaker 6>when you start then aligning their members with your company,

0:16:53.280 --> 0:16:54.360
<v Speaker 6>that can be a conflict.

0:16:54.400 --> 0:16:55.320
<v Speaker 2>I think that's changing.

0:16:55.840 --> 0:16:59.240
<v Speaker 6>I think there's a real openness to new models and

0:16:59.320 --> 0:17:03.440
<v Speaker 6>aligning capital in labor. And as you note, we've gone

0:17:03.440 --> 0:17:05.840
<v Speaker 6>from a period of time where yeah, you saw some

0:17:06.000 --> 0:17:09.880
<v Speaker 6>strife in autos and manufacturing, but now you're seeing it everywhere,

0:17:10.600 --> 0:17:13.159
<v Speaker 6>and people they want to be a part of something.

0:17:13.200 --> 0:17:18.040
<v Speaker 6>They want shared gains, they want transparency around how we're

0:17:18.040 --> 0:17:21.159
<v Speaker 6>going to manage through all of this change driven by

0:17:21.200 --> 0:17:25.080
<v Speaker 6>technology AI, you know, in the case of the writer's strike,

0:17:25.280 --> 0:17:28.000
<v Speaker 6>transitions to EVS, in the case of UAW. There's a

0:17:28.040 --> 0:17:30.679
<v Speaker 6>lot of complicated questions we're going to have to answer,

0:17:30.720 --> 0:17:32.520
<v Speaker 6>and I think we're going to all do a lot

0:17:32.560 --> 0:17:34.639
<v Speaker 6>better if for in the boat together somewhere.

0:17:34.800 --> 0:17:37.240
<v Speaker 2>Finally, to you, we don't know how this will end up.

0:17:37.280 --> 0:17:38.879
<v Speaker 2>I guess we'll have to wait for the documentary to

0:17:38.920 --> 0:17:41.280
<v Speaker 2>find out what ends up. And I know you can't

0:17:41.320 --> 0:17:44.040
<v Speaker 2>predict what's happening, but how big a difference could this

0:17:44.160 --> 0:17:46.600
<v Speaker 2>make in some of your employees' lives. You mentioned before

0:17:46.920 --> 0:17:49.480
<v Speaker 2>you get a paycheck to pay the bills, but it's

0:17:49.600 --> 0:17:53.480
<v Speaker 2>very hard to amass capital, to amass wealth. How good

0:17:53.520 --> 0:17:55.240
<v Speaker 2>could this be for some of your employees? Do you

0:17:55.280 --> 0:17:57.119
<v Speaker 2>think or hope life changing?

0:17:57.400 --> 0:18:00.280
<v Speaker 7>I mean, when you're living paycheck to paycheck, you know

0:18:00.320 --> 0:18:04.119
<v Speaker 7>forty percent of Americans have less than four hundred dollars.

0:18:04.600 --> 0:18:09.080
<v Speaker 7>They're one car repair bill, one medical emergency away from

0:18:09.160 --> 0:18:13.280
<v Speaker 7>financial devastation. Think about building an estag of fifty thousand

0:18:13.280 --> 0:18:16.720
<v Speaker 7>dollars one hundred thousand dollars. There are employees who have

0:18:16.840 --> 0:18:21.159
<v Speaker 7>said this will end generational poverty in my family, and

0:18:21.240 --> 0:18:24.280
<v Speaker 7>I mean that's inspiring to me that you know, Yes,

0:18:24.400 --> 0:18:27.760
<v Speaker 7>I have been a private equity sponsored CEO for thirteen

0:18:27.840 --> 0:18:30.720
<v Speaker 7>years now, sold the company before. This one, to me

0:18:30.840 --> 0:18:33.119
<v Speaker 7>is the most special. This is the one that I

0:18:33.160 --> 0:18:35.000
<v Speaker 7>know I'm going to work the hardest on, and I

0:18:35.040 --> 0:18:36.800
<v Speaker 7>know my team is going to work the hardest on.

0:18:37.359 --> 0:18:40.879
<v Speaker 7>And it's really about breaking down that wall between the

0:18:40.880 --> 0:18:43.439
<v Speaker 7>plant and the office. When you talk about union.

0:18:43.600 --> 0:18:44.000
<v Speaker 2>That's it.

0:18:44.119 --> 0:18:47.760
<v Speaker 7>We normalize that, We normalize the fact that management and

0:18:47.840 --> 0:18:50.480
<v Speaker 7>labor don't get along. I want to flip the script

0:18:50.520 --> 0:18:51.320
<v Speaker 7>on that, and.

0:18:51.280 --> 0:18:52.199
<v Speaker 2>We're going to have to fix this.

0:18:52.760 --> 0:18:55.760
<v Speaker 6>So in manufacturing, we've now got six hundred thousand open jobs.

0:18:56.040 --> 0:18:58.880
<v Speaker 6>National Association Manufacturer says we're going to be short two

0:18:58.960 --> 0:19:02.119
<v Speaker 6>million workers by twenty thirty. When you talk to manufacturing

0:19:02.160 --> 0:19:04.760
<v Speaker 6>CEOs and you say what's your biggest concern, it's not

0:19:04.960 --> 0:19:07.080
<v Speaker 6>supply chain, it's not state of the economy, And my

0:19:07.160 --> 0:19:10.160
<v Speaker 6>number one concern CEOs in manufacturing stays I can't attract

0:19:10.320 --> 0:19:11.119
<v Speaker 6>and retain people.

0:19:11.440 --> 0:19:13.120
<v Speaker 2>So it's great.

0:19:12.920 --> 0:19:14.719
<v Speaker 6>At the company level, we're going to have to do

0:19:14.760 --> 0:19:18.719
<v Speaker 6>this or something like this at the economy level if

0:19:18.720 --> 0:19:20.080
<v Speaker 6>we're going to continue to be successful.

0:19:20.440 --> 0:19:23.440
<v Speaker 2>Many thanks to Kathy Ballhouse of Charter Next Generation and

0:19:23.520 --> 0:19:28.200
<v Speaker 2>Pete Stavros of KKR coming up. There was a day

0:19:28.280 --> 0:19:31.000
<v Speaker 2>when the very survival of General Electric was in question,

0:19:31.280 --> 0:19:34.280
<v Speaker 2>but that day was five years ago and today things

0:19:34.359 --> 0:19:36.880
<v Speaker 2>look very different. We sit down with the man who

0:19:36.920 --> 0:19:40.520
<v Speaker 2>oversaw the remaking of an American corporate icon, Larry Colt,

0:19:40.720 --> 0:19:42.160
<v Speaker 2>CEO of GE.

0:19:42.400 --> 0:19:45.919
<v Speaker 4>We couldn't be in a better position with respect to

0:19:45.960 --> 0:19:48.520
<v Speaker 4>the post pandemic recovery and aerospace.

0:19:49.720 --> 0:19:52.040
<v Speaker 2>That's next on Wall Street Week on Bloomberg.

0:19:53.240 --> 0:19:57.480
<v Speaker 1>This is Bloomberg Wall Street Week with David Weston from

0:19:57.600 --> 0:20:04.280
<v Speaker 1>Bloomberg Radio.

0:20:05.520 --> 0:20:09.200
<v Speaker 2>General Electric It was founded in eighteen ninety two when

0:20:09.240 --> 0:20:12.119
<v Speaker 2>Thomas Anderson put together his electric companies under the banner

0:20:12.119 --> 0:20:15.840
<v Speaker 2>of GE with the help of John Pierpont Morgan. It

0:20:15.880 --> 0:20:18.320
<v Speaker 2>grew to be one of the largest and most profitable

0:20:18.359 --> 0:20:21.840
<v Speaker 2>companies in the world, with a market capitalization approaching six

0:20:22.000 --> 0:20:28.080
<v Speaker 2>hundred billion dollars in two thousand. Its operations have spent plastics, appliances, computers,

0:20:28.080 --> 0:20:31.280
<v Speaker 2>and TV networks, and along the way it developed under

0:20:31.359 --> 0:20:35.720
<v Speaker 2>Jack Welch, a legendary reputation for management and grooming leadership

0:20:35.840 --> 0:20:36.359
<v Speaker 2>from within.

0:20:36.920 --> 0:20:41.360
<v Speaker 12>What you do with personnel around bad behavior does more

0:20:41.560 --> 0:20:46.600
<v Speaker 12>establish a culture and good behavior role model those behaviors

0:20:47.000 --> 0:20:49.520
<v Speaker 12>with great rewards for those that have the right culture

0:20:50.200 --> 0:20:51.920
<v Speaker 12>and public aatings for those that don't.

0:20:52.200 --> 0:20:55.600
<v Speaker 3>I was very fortunate to grow and be mentored by

0:20:55.680 --> 0:20:56.240
<v Speaker 3>Jack Welch.

0:20:56.400 --> 0:21:01.400
<v Speaker 4>And you know, Jack was laser focused on metrics, appropriate metrics.

0:21:01.600 --> 0:21:04.639
<v Speaker 2>But then the Great Financial Crisis hit and the conglomerate

0:21:04.680 --> 0:21:08.320
<v Speaker 2>mister Welch built was hit particularly hard, causing profits and

0:21:08.359 --> 0:21:12.240
<v Speaker 2>revenues to plummet as problems mounted, causing the market cap

0:21:12.280 --> 0:21:15.560
<v Speaker 2>to plummet to under seventy billion dollars by twenty eighteen.

0:21:16.000 --> 0:21:19.800
<v Speaker 9>We had good businesses, good people, good initiatives, but at

0:21:19.800 --> 0:21:23.840
<v Speaker 9>the end of the day, the stock price lagged. There

0:21:23.840 --> 0:21:26.879
<v Speaker 9>are some things that didn't work. We didn't get as

0:21:26.920 --> 0:21:29.080
<v Speaker 9>much value out of g capital as we could have.

0:21:30.520 --> 0:21:33.080
<v Speaker 9>We had tough in use markets. At the end of

0:21:33.119 --> 0:21:35.000
<v Speaker 9>my tenure, I gave the board a lot of things

0:21:35.040 --> 0:21:39.040
<v Speaker 9>to work on. So it's a complicated story, but I

0:21:39.080 --> 0:21:41.760
<v Speaker 9>think the way it's been told has been incomplete.

0:21:42.320 --> 0:21:45.040
<v Speaker 2>Then GE turned to a new CEO, one who had

0:21:45.119 --> 0:21:48.680
<v Speaker 2>led not at GE but at Danaher. Larry Culp took

0:21:48.720 --> 0:21:52.160
<v Speaker 2>over a CEO in October of twenty eighteen and undertook

0:21:52.160 --> 0:21:56.400
<v Speaker 2>a fundamental rethinking of the company, selling assets, paying down debt,

0:21:56.680 --> 0:21:59.199
<v Speaker 2>and ultimately leading the move to break the company up

0:21:59.240 --> 0:22:04.240
<v Speaker 2>into three independent companies focus on healthcare, power, and aerospace.

0:22:04.680 --> 0:22:07.800
<v Speaker 10>Well they'll have left of meaningful size is power, which

0:22:07.840 --> 0:22:08.399
<v Speaker 10>is a problem.

0:22:08.400 --> 0:22:10.400
<v Speaker 7>In aerospace, which is a terrific business.

0:22:10.840 --> 0:22:13.560
<v Speaker 10>If they get healthcare, everything else is really small.

0:22:13.800 --> 0:22:16.000
<v Speaker 2>Now the parts of GE add up to more than

0:22:16.000 --> 0:22:19.800
<v Speaker 2>the whole did before, with combined market capitalization of about

0:22:19.840 --> 0:22:23.400
<v Speaker 2>one hundred and fifty billion dollars, giving business schools once

0:22:23.440 --> 0:22:26.800
<v Speaker 2>again a case study in management and leadership, but this

0:22:26.960 --> 0:22:30.600
<v Speaker 2>time more in focus and execution and not so much

0:22:30.680 --> 0:22:36.919
<v Speaker 2>in a massing size. And to take us through that

0:22:37.080 --> 0:22:39.360
<v Speaker 2>saga of GE, we turn to the man himself. He's

0:22:39.400 --> 0:22:42.359
<v Speaker 2>Larry Kulp. He's the chairman and CEO of General Electric.

0:22:42.400 --> 0:22:44.080
<v Speaker 2>So welcome Larry. Great to have you here on Wall

0:22:44.119 --> 0:22:47.840
<v Speaker 2>Street week. Take us back five years, because it's almost

0:22:47.880 --> 0:22:50.680
<v Speaker 2>exactly five years now since you took over. It's some

0:22:50.800 --> 0:22:52.159
<v Speaker 2>idea of what what you're get into. You've been on

0:22:52.200 --> 0:22:54.719
<v Speaker 2>the board. Why did you take the job?

0:22:55.560 --> 0:22:55.840
<v Speaker 3>David?

0:22:56.080 --> 0:22:57.480
<v Speaker 4>Always good to be with you, and it's hard to

0:22:57.480 --> 0:22:59.320
<v Speaker 4>believe that it's been five years.

0:22:59.320 --> 0:23:01.040
<v Speaker 3>Here come first of October.

0:23:01.600 --> 0:23:04.919
<v Speaker 4>I think it was really in many respects simple GE,

0:23:05.680 --> 0:23:10.000
<v Speaker 4>an incredibly important company to our country into the world.

0:23:10.760 --> 0:23:14.119
<v Speaker 4>G a company that I had long admired through the

0:23:14.160 --> 0:23:18.240
<v Speaker 4>course of my career, and given what I had heard,

0:23:18.240 --> 0:23:22.320
<v Speaker 4>given what I had learned as a director, clearly a challenge,

0:23:22.320 --> 0:23:25.080
<v Speaker 4>perhaps the challenge of my generation. And it was really

0:23:25.080 --> 0:23:28.480
<v Speaker 4>those three reasons that ultimately led me to say, yes,

0:23:29.040 --> 0:23:31.960
<v Speaker 4>I'll put my uniform back on, and here we are.

0:23:32.320 --> 0:23:34.919
<v Speaker 2>So you put your uniform back on. What did you

0:23:35.200 --> 0:23:37.200
<v Speaker 2>set up to do first? What were your priorities? Is

0:23:37.240 --> 0:23:39.160
<v Speaker 2>you sat down the first day in that desk. So often,

0:23:39.160 --> 0:23:40.840
<v Speaker 2>even if you're close to the job, until you've had

0:23:40.840 --> 0:23:41.800
<v Speaker 2>the job, you haven't had it.

0:23:42.600 --> 0:23:45.600
<v Speaker 3>That's right. I don't remember sitting down much that first day. Right.

0:23:45.640 --> 0:23:50.280
<v Speaker 4>There was a lot happening, but I knew relatively quickly

0:23:50.800 --> 0:23:53.520
<v Speaker 4>that we had to do two things. One, we had

0:23:53.560 --> 0:23:56.480
<v Speaker 4>to get our arms around the balance sheet issues. We

0:23:56.560 --> 0:23:59.320
<v Speaker 4>had over one hundred and forty billion of debt outstanding

0:23:59.680 --> 0:24:02.280
<v Speaker 4>that was crushing load in a host of different ways.

0:24:03.160 --> 0:24:05.639
<v Speaker 4>And we needed to get to a better place in

0:24:05.720 --> 0:24:08.240
<v Speaker 4>terms of the day to day operation of the business.

0:24:08.520 --> 0:24:11.360
<v Speaker 4>And those turned out to be priorities that really took

0:24:11.440 --> 0:24:15.639
<v Speaker 4>us through the first couple of years deleveraging and running

0:24:15.640 --> 0:24:16.480
<v Speaker 4>the businesses better.

0:24:16.680 --> 0:24:17.679
<v Speaker 3>I'm subably that simple.

0:24:17.880 --> 0:24:19.359
<v Speaker 2>As I said, you were on the board for a

0:24:19.400 --> 0:24:21.800
<v Speaker 2>short time before it took over, so some of the

0:24:21.800 --> 0:24:25.200
<v Speaker 2>problems you knew about, but you couldn't anticipate Boeing seven

0:24:25.240 --> 0:24:28.160
<v Speaker 2>thirty seven, Max. You couldn't anticipate the pandemic, couldn't anticipate

0:24:28.240 --> 0:24:32.440
<v Speaker 2>supply chain or in Ukraine. Did that change your plan?

0:24:33.520 --> 0:24:37.000
<v Speaker 4>Well, I think early on we knew that we needed

0:24:37.359 --> 0:24:39.760
<v Speaker 4>the utmost sense emergency around the deleveraging.

0:24:41.240 --> 0:24:43.119
<v Speaker 3>When a number of us had joined the board.

0:24:43.200 --> 0:24:45.920
<v Speaker 4>Through the course of twenty eighteen, the plan a record

0:24:46.119 --> 0:24:49.960
<v Speaker 4>was to actually spin our healthcare business.

0:24:48.880 --> 0:24:50.480
<v Speaker 3>Much as we did earlier this year.

0:24:50.520 --> 0:24:53.320
<v Speaker 4>But I think we found as we dug into it

0:24:53.480 --> 0:24:55.760
<v Speaker 4>that while that was a good idea, we couldn't possibly

0:24:55.800 --> 0:24:58.679
<v Speaker 4>pull it off given the leverage level and given the

0:24:58.680 --> 0:25:01.400
<v Speaker 4>performance of the other businesses, which is why we made

0:25:01.440 --> 0:25:06.040
<v Speaker 4>the quick pivot through the fall into early twenty nineteen

0:25:06.080 --> 0:25:10.879
<v Speaker 4>to actually sell a small part of healthcare, our biopharma business,

0:25:10.920 --> 0:25:13.679
<v Speaker 4>for twenty billion dollars, And that was really the first

0:25:14.040 --> 0:25:17.520
<v Speaker 4>big step we took toward the deleveraging. All the while

0:25:18.680 --> 0:25:21.399
<v Speaker 4>I was spending time with the team, touring facilities, talking

0:25:21.400 --> 0:25:24.600
<v Speaker 4>to customers, trying to get my arms around in terms

0:25:24.680 --> 0:25:27.200
<v Speaker 4>of what we were doing day in and day out

0:25:27.240 --> 0:25:31.000
<v Speaker 4>and why we weren't anywhere close to our full potential operationally.

0:25:31.280 --> 0:25:33.520
<v Speaker 2>You've mentioned a couple of times improving the operations, which

0:25:33.560 --> 0:25:36.919
<v Speaker 2>sounds easy but in my experience it's really hard. So

0:25:37.160 --> 0:25:39.520
<v Speaker 2>how could you, as something of an outsider, come in

0:25:39.560 --> 0:25:42.280
<v Speaker 2>and understand where you needed to improve operations? And that,

0:25:42.359 --> 0:25:44.640
<v Speaker 2>of course is not just what people do, but who's doing.

0:25:44.480 --> 0:25:46.160
<v Speaker 3>It well, exactly right.

0:25:46.160 --> 0:25:48.480
<v Speaker 4>And for me, David, my approach has always been it's

0:25:48.480 --> 0:25:53.040
<v Speaker 4>about the team first and foremost. Fortunately we inherited I think,

0:25:53.280 --> 0:25:56.880
<v Speaker 4>a tremendous team at GE in each of the three

0:25:56.920 --> 0:26:00.399
<v Speaker 4>businesses at corporate up and down the org chart. So

0:26:00.440 --> 0:26:02.359
<v Speaker 4>what we did is we set about making sure we

0:26:02.840 --> 0:26:07.320
<v Speaker 4>knew where we were organizationally. We dove in deeply to

0:26:07.359 --> 0:26:10.520
<v Speaker 4>make sure we understood how we were running the businesses,

0:26:10.720 --> 0:26:12.960
<v Speaker 4>not just in the c suite, but all the way

0:26:12.960 --> 0:26:14.960
<v Speaker 4>down to the factory floor. And there were a host

0:26:14.960 --> 0:26:19.119
<v Speaker 4>of opportunities that we as a team identified.

0:26:18.720 --> 0:26:20.440
<v Speaker 3>Areas where we could do better. We could do better

0:26:20.440 --> 0:26:21.760
<v Speaker 3>for our customers.

0:26:21.480 --> 0:26:25.480
<v Speaker 4>Reduce cycle times, improve our delivery performance, all the while

0:26:25.520 --> 0:26:28.000
<v Speaker 4>taking a lot of waste out of the system. Wasted

0:26:28.080 --> 0:26:32.240
<v Speaker 4>often frankly, helped us improve our profitability and our cash flows.

0:26:32.880 --> 0:26:35.200
<v Speaker 3>It was a daily battle, it was a.

0:26:35.160 --> 0:26:37.520
<v Speaker 4>Game of inches, but over the course of time we

0:26:37.760 --> 0:26:42.080
<v Speaker 4>really were able to lay in our lean operating model

0:26:43.200 --> 0:26:46.760
<v Speaker 4>so that today we're able to perform at much higher

0:26:46.920 --> 0:26:50.679
<v Speaker 4>levels across General Electric in ways that I think are

0:26:50.680 --> 0:26:52.400
<v Speaker 4>going to serve all three of our businesses very well

0:26:52.400 --> 0:26:53.000
<v Speaker 4>going forward.

0:26:53.280 --> 0:26:55.880
<v Speaker 2>How did you bring your board along with you, because again,

0:26:56.000 --> 0:26:59.119
<v Speaker 2>g is just such an iconic company in the United States.

0:26:59.160 --> 0:27:02.520
<v Speaker 2>To break that up into three pieces is quite a move.

0:27:02.600 --> 0:27:04.159
<v Speaker 2>Did you expect to do that from the beginning when

0:27:04.200 --> 0:27:05.680
<v Speaker 2>you took the job? Did you think you'd break it up?

0:27:06.320 --> 0:27:06.480
<v Speaker 3>Well?

0:27:06.520 --> 0:27:08.960
<v Speaker 4>Again, a number of us that joined in twenty eighteen

0:27:09.040 --> 0:27:10.320
<v Speaker 4>knew about.

0:27:10.000 --> 0:27:11.239
<v Speaker 3>The healthcare.

0:27:12.480 --> 0:27:16.040
<v Speaker 4>Idea that we would spend healthcare and created an independent company,

0:27:16.040 --> 0:27:19.159
<v Speaker 4>and that made sense then, it made sense earlier this

0:27:19.280 --> 0:27:21.960
<v Speaker 4>year when we did it, but we really didn't have

0:27:22.040 --> 0:27:23.480
<v Speaker 4>the strategic degrees of freedom.

0:27:23.480 --> 0:27:24.879
<v Speaker 3>We didn't have the balance.

0:27:24.480 --> 0:27:28.520
<v Speaker 4>Sheet to do it so early on there when I

0:27:28.600 --> 0:27:30.520
<v Speaker 4>became CEO, of course, that was something that had never

0:27:30.560 --> 0:27:33.800
<v Speaker 4>happened in the company's history. We didn't necessarily do make

0:27:33.840 --> 0:27:37.080
<v Speaker 4>that move from a position of strengths. The board fortunately,

0:27:38.000 --> 0:27:40.600
<v Speaker 4>was focused on what we were focused on as a

0:27:40.600 --> 0:27:45.000
<v Speaker 4>management team, the deleveraging and improving our daily operations. But

0:27:45.119 --> 0:27:50.040
<v Speaker 4>that board then and now I think is one of

0:27:50.080 --> 0:27:52.080
<v Speaker 4>the best, if not the best boards in the country.

0:27:52.359 --> 0:27:55.119
<v Speaker 4>This is a group of people who really ran toward

0:27:55.160 --> 0:27:57.399
<v Speaker 4>the fire as we reset the board. There were a

0:27:57.400 --> 0:27:59.680
<v Speaker 4>lot of folks DAVI, but you'll recall didn't know have

0:27:59.760 --> 0:28:02.680
<v Speaker 4>G was going to make it ge of all companies.

0:28:03.240 --> 0:28:04.919
<v Speaker 4>And these were a number of people who joined the

0:28:04.920 --> 0:28:07.480
<v Speaker 4>board for many of the same reasons that I did.

0:28:08.760 --> 0:28:09.399
<v Speaker 3>They pitched in.

0:28:10.160 --> 0:28:13.640
<v Speaker 4>It wasn't about themselves, it wasn't about their reputations. They

0:28:13.680 --> 0:28:15.320
<v Speaker 4>just wanted to make sure that we did the right

0:28:15.359 --> 0:28:20.480
<v Speaker 4>thing for the business. But as time passed, we put

0:28:20.560 --> 0:28:24.520
<v Speaker 4>over one hundred billion dollars a debt aside. We improved

0:28:24.520 --> 0:28:27.199
<v Speaker 4>our operations so that we were serving customers better, we

0:28:27.200 --> 0:28:31.160
<v Speaker 4>were generating a respectable amount of free cash flow. When

0:28:31.200 --> 0:28:34.119
<v Speaker 4>the pandemic lifted or began to lift in the spring

0:28:34.160 --> 0:28:37.520
<v Speaker 4>of twenty one, we could see that we had more

0:28:37.600 --> 0:28:39.840
<v Speaker 4>degrees of strategic freedom. And it was really that summer

0:28:39.880 --> 0:28:43.040
<v Speaker 4>when we began to debate what's the best path forward

0:28:43.080 --> 0:28:46.200
<v Speaker 4>for these three outstanding businesses. And that's what led in

0:28:46.280 --> 0:28:48.680
<v Speaker 4>November of twenty one to the announcement that we made.

0:28:49.840 --> 0:28:52.760
<v Speaker 2>How did you manage ego, and I mean ego of

0:28:52.840 --> 0:28:54.720
<v Speaker 2>the company, of the people who worked there of the

0:28:54.760 --> 0:28:56.640
<v Speaker 2>board and even your own ego, because there are a

0:28:56.640 --> 0:28:58.880
<v Speaker 2>lot of CEOs, a lot of leaders say I want

0:28:58.880 --> 0:29:01.840
<v Speaker 2>to have the biggest company. G had been the biggest company,

0:29:02.400 --> 0:29:03.840
<v Speaker 2>and this is a decision. We're not going to be

0:29:03.880 --> 0:29:05.520
<v Speaker 2>the biggest company. We're never going to be the biggest

0:29:05.520 --> 0:29:08.040
<v Speaker 2>company again. How did you manage the egos involved?

0:29:08.560 --> 0:29:11.320
<v Speaker 4>Well, I think I've long believed that you're far better

0:29:11.440 --> 0:29:15.880
<v Speaker 4>off being strong rather than just big, and that was

0:29:15.920 --> 0:29:19.880
<v Speaker 4>a little bit of the evolution of our conversation. We're

0:29:19.880 --> 0:29:22.160
<v Speaker 4>not going to be an all singing, all dancing ge

0:29:22.320 --> 0:29:26.440
<v Speaker 4>going forward, but that doesn't mean we can't lead the

0:29:26.520 --> 0:29:29.080
<v Speaker 4>energy transition. That doesn't mean we can't be a leader

0:29:29.120 --> 0:29:32.080
<v Speaker 4>in precision healthcare. That doesn't mean we can't define the

0:29:32.120 --> 0:29:34.920
<v Speaker 4>future of flight. And that's what these three businesses can

0:29:34.920 --> 0:29:37.320
<v Speaker 4>do now. They'll do them on their own. But as

0:29:37.360 --> 0:29:41.720
<v Speaker 4>we looked forward, I think there was easy consensus that

0:29:41.800 --> 0:29:44.680
<v Speaker 4>each of these three businesses, on their own bottoms, were

0:29:44.680 --> 0:29:47.920
<v Speaker 4>going to be industry leaders. So when we went around

0:29:47.960 --> 0:29:50.080
<v Speaker 4>the table, it was an easy vote.

0:29:50.920 --> 0:29:53.000
<v Speaker 2>Geez Larry Cup was staying with us as we turned

0:29:53.000 --> 0:29:55.280
<v Speaker 2>to those three businesses and where they are going next.

0:29:55.320 --> 0:29:57.760
<v Speaker 2>That's why I'm next on Wall Street Week on Boomberg.

0:30:06.600 --> 0:30:08.600
<v Speaker 2>This is Wall Streaming Week. I'm David Weston and we

0:30:08.640 --> 0:30:11.960
<v Speaker 2>are back now with Larry Kulp, the head of GE. So, Larry,

0:30:12.160 --> 0:30:14.160
<v Speaker 2>we've talked about how you got to where you are, now,

0:30:14.240 --> 0:30:15.840
<v Speaker 2>let's talk about where you're going next.

0:30:16.280 --> 0:30:20.040
<v Speaker 4>We couldn't be in a better position with respect to

0:30:20.080 --> 0:30:24.920
<v Speaker 4>the post pandemic recovery in aerospace. You've seen the performance

0:30:25.000 --> 0:30:27.120
<v Speaker 4>thus far this year. We're really on a record pace

0:30:28.120 --> 0:30:32.000
<v Speaker 4>given both the return to flight really around the world

0:30:32.080 --> 0:30:35.000
<v Speaker 4>now is people see places they haven't been to and

0:30:35.080 --> 0:30:38.320
<v Speaker 4>at the same time they're looking to modernize and expand

0:30:38.360 --> 0:30:41.560
<v Speaker 4>their fleets. So we have tremendous backlogs with our major

0:30:41.600 --> 0:30:46.959
<v Speaker 4>airframers Boeing Airbus for example, the supply chain challenges are

0:30:47.000 --> 0:30:50.880
<v Speaker 4>significant and right alongside everything we're doing on the commercial side.

0:30:50.920 --> 0:30:53.760
<v Speaker 4>We've seen a really strong uptake in our defense business

0:30:54.640 --> 0:30:57.400
<v Speaker 4>is one would imagine both with fixed wing and in rotary.

0:30:57.480 --> 0:30:59.720
<v Speaker 4>So in terms of how big this business can be,

0:31:00.240 --> 0:31:03.040
<v Speaker 4>where I think on a path where we could be

0:31:03.080 --> 0:31:07.920
<v Speaker 4>growing in the mid single digit, high single digit range.

0:31:07.600 --> 0:31:08.160
<v Speaker 3>For some time.

0:31:08.200 --> 0:31:10.520
<v Speaker 4>That would put us well north of forty billion dollars

0:31:10.880 --> 0:31:14.440
<v Speaker 4>in but a few years, a lot of opportunity. We

0:31:14.520 --> 0:31:17.640
<v Speaker 4>have I think an ambuable position in propulsion. But again,

0:31:17.720 --> 0:31:20.280
<v Speaker 4>it's not about how big we get. It's about how

0:31:20.320 --> 0:31:22.520
<v Speaker 4>strong we are and are we serving our customers? Are

0:31:22.520 --> 0:31:26.040
<v Speaker 4>we taking care of our team? Are we doing well

0:31:24.960 --> 0:31:27.160
<v Speaker 4>by way of our shareholders.

0:31:27.240 --> 0:31:29.160
<v Speaker 3>It's optimistic that we will.

0:31:28.720 --> 0:31:31.160
<v Speaker 2>What's on the table. As the point, you've spent your

0:31:31.200 --> 0:31:34.320
<v Speaker 2>five years really redoing the balance sheet, really fixing the

0:31:34.360 --> 0:31:37.720
<v Speaker 2>cash flow situation, retiring a lot of debt. Capital allocation

0:31:37.840 --> 0:31:39.840
<v Speaker 2>maybe hasn't been so much of an issue because you're

0:31:39.880 --> 0:31:42.320
<v Speaker 2>just trying to retire to that debt. Going forward, you

0:31:42.360 --> 0:31:44.560
<v Speaker 2>may well have some capital to work with. So what

0:31:44.600 --> 0:31:47.240
<v Speaker 2>are the possibilities both in terms of acquisition but also

0:31:47.360 --> 0:31:48.840
<v Speaker 2>sail potentially well.

0:31:48.880 --> 0:31:51.200
<v Speaker 4>I think that we want to be why stewards of

0:31:51.240 --> 0:31:54.440
<v Speaker 4>that capital, right. I've long believed that investors give you

0:31:54.480 --> 0:31:57.680
<v Speaker 4>a license to reinvest in your business, and you need

0:31:57.720 --> 0:32:01.040
<v Speaker 4>to be careful with that license lest gets pulled. But

0:32:01.120 --> 0:32:02.600
<v Speaker 4>I think what we've tried to do is set up

0:32:02.600 --> 0:32:05.120
<v Speaker 4>all three of the businesses to be in a position

0:32:05.160 --> 0:32:09.720
<v Speaker 4>where they are well capitalized, investment grade, and we'll have

0:32:09.760 --> 0:32:13.760
<v Speaker 4>the opportunities to think through not only their organic options

0:32:14.880 --> 0:32:19.560
<v Speaker 4>be at M and a small mid size probably not

0:32:19.680 --> 0:32:23.080
<v Speaker 4>something large and headline breaking. But at the same time,

0:32:23.200 --> 0:32:25.360
<v Speaker 4>how do we think about buybacks, how do we think

0:32:25.400 --> 0:32:27.400
<v Speaker 4>about dividends? So I think you'll see each of the

0:32:27.400 --> 0:32:31.560
<v Speaker 4>three companies, once we spend giev Vernova sometime early next year,

0:32:32.000 --> 0:32:36.600
<v Speaker 4>be in a position where they'll have tailored, balanced capital

0:32:36.640 --> 0:32:40.200
<v Speaker 4>allocation policies that will be in effect. Confident all three

0:32:40.240 --> 0:32:43.320
<v Speaker 4>boards carry forward that responsibility.

0:32:43.360 --> 0:32:45.800
<v Speaker 2>Well, Larry, thank you so much for being wilture, with

0:32:45.920 --> 0:32:47.960
<v Speaker 2>really a pleasure to have you here. That's Larry Culp

0:32:48.200 --> 0:32:52.880
<v Speaker 2>of General Electric. Finally, one more thought, look deep into nature,

0:32:53.000 --> 0:32:56.960
<v Speaker 2>and then you will understand everything better, so wrote Albert

0:32:57.040 --> 0:33:00.320
<v Speaker 2>Einstein after the death of his sister in nineteen fifty one.

0:33:00.400 --> 0:33:03.120
<v Speaker 2>And these days there's plenty of nature demanding that we

0:33:03.280 --> 0:33:06.080
<v Speaker 2>look into it deeply, though it's not as clear that

0:33:06.120 --> 0:33:09.600
<v Speaker 2>we're understanding any better. It has been a summer of

0:33:09.680 --> 0:33:14.480
<v Speaker 2>extreme weather. Record heat hit Europe hard, bringing Greek wildfires

0:33:14.520 --> 0:33:17.320
<v Speaker 2>with it, while halfway around the world, an entire town

0:33:17.440 --> 0:33:20.760
<v Speaker 2>burned down to the ground in Hawaii, leaving hundreds dead

0:33:21.000 --> 0:33:24.120
<v Speaker 2>or missing. A once in a lifetime hurricane came ashore,

0:33:24.400 --> 0:33:27.880
<v Speaker 2>not in Florida, but in southern California, and a series

0:33:27.920 --> 0:33:31.960
<v Speaker 2>of typhoons pummeled Hong Kong, Taiwan and mainland China. Science

0:33:32.000 --> 0:33:35.200
<v Speaker 2>has warned that you cannot trace any single weather event

0:33:35.320 --> 0:33:38.480
<v Speaker 2>to climate change, but the degree and the frequency of

0:33:38.480 --> 0:33:42.440
<v Speaker 2>extreme weather overall is because of our warming globe, creating

0:33:42.440 --> 0:33:45.520
<v Speaker 2>what some call growing natural disaster risk.

0:33:45.920 --> 0:33:50.080
<v Speaker 7>What we're seeing now is just repeated examples of natural

0:33:50.120 --> 0:33:55.200
<v Speaker 7>disasters climate extremes happening at scales we haven't seen before

0:33:55.280 --> 0:33:56.760
<v Speaker 7>in places we haven't seen them.

0:33:57.320 --> 0:34:00.880
<v Speaker 2>Burning Man has never really build itself as an environmental movement.

0:34:01.120 --> 0:34:03.280
<v Speaker 2>It's an annual event in the middle of the desert

0:34:03.320 --> 0:34:08.440
<v Speaker 2>in northwest Nevada, celebrating art and self expression and self reliance.

0:34:08.960 --> 0:34:12.560
<v Speaker 2>But this year, whatever its purpose, nature crashed the Burning

0:34:12.600 --> 0:34:15.320
<v Speaker 2>Man party in a big way, putting to a test

0:34:15.440 --> 0:34:18.839
<v Speaker 2>all that talk about self reliance. While others stayed until

0:34:18.880 --> 0:34:21.440
<v Speaker 2>the bitter end for the ritual burning of the Giant

0:34:21.480 --> 0:34:24.319
<v Speaker 2>Man once the weather had cleared enough, and at least

0:34:24.360 --> 0:34:26.200
<v Speaker 2>some still consider it worth it.

0:34:26.200 --> 0:34:28.600
<v Speaker 12>Honestly think that this is the best burn ever.

0:34:29.239 --> 0:34:32.840
<v Speaker 7>Seriously like this has given us the opportunity to rise

0:34:32.880 --> 0:34:35.719
<v Speaker 7>to radical self reliance and to support each other in

0:34:35.800 --> 0:34:38.160
<v Speaker 7>the community, and I'm having the best time, all of.

0:34:38.120 --> 0:34:40.440
<v Speaker 2>Which brings home the need for us to look deeply

0:34:40.480 --> 0:34:43.960
<v Speaker 2>into nature, as Einstein suggested, and to try to understand

0:34:44.000 --> 0:34:47.560
<v Speaker 2>everything just a bit better. That does it for this

0:34:47.600 --> 0:34:50.520
<v Speaker 2>episode of Wall Street Week, I'm David Weston. This is Bloomberg.

0:34:50.760 --> 0:34:52.840
<v Speaker 2>See you next week.