Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: And we may not have an overall recession, we're having
Speaker 2: a rolling recession. To kind of roll looks pretty strongly
Speaker 2: is when it comes to jobs.
Speaker 1: The financial stories that shape our world.
Speaker 2: Three major regional bank failures send shockwaves through the banking system.
Speaker 2: We're all trying to figure out what to make of
Speaker 2: generative AI.
Speaker 1: Through the eyes of the most influential voices.
Speaker 2: Welcome down, Doctor Paul Krugman, Ryan moynihan, AM Bank of America,
Speaker 2: Zebro Lair of the Paulson Institute, well then Hubbard of
Speaker 2: the Columbia Business School.
Speaker 1: Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: The chair goes to the hill, voters go to the polls,
Speaker 2: and the jobs market, well, it just keeps on going.
Speaker 2: This is Bloomberg Wall Street Week. I'm David Weston. This
Speaker 2: make Larry Kulp of GE joins the newly minted CEO
Speaker 2: of spinoff Vernova, Scott Strazek, to take us through the
Speaker 2: last steps in the restructure of an iconic company.
Speaker 3: Given that the capital markets clearly liked the businesses but
Speaker 3: didn't like them together, it was actually an easy decision.
Speaker 4: Sustainability really is at the heart of everything we're doing.
Speaker 2: Ill as Sally Crotcheck on the massive wealth trans to women,
Speaker 2: we're about to see.
Speaker 5: Women are going to inherit tens of trillions of dollars
Speaker 5: over the next couple of decades.
Speaker 2: And Economist editor Zanni Minton Bedos on a US China
Speaker 2: economic competition that goes to the heart of two very
Speaker 2: different systems.
Speaker 6: I think it's only a slight exaggeration to say that
Speaker 6: China has sort of become uninvestable for outsiders in many sectors.
Speaker 2: But we begin with the number one issue that's been
Speaker 2: on the mind of Global Wall Street since inflation numbers
Speaker 2: first shot up back in twenty twenty, something our special
Speaker 2: contributor Larry Summers warned us about at the time.
Speaker 7: I think there's a real possibility that within the year
Speaker 7: we're going to be dealing with the most serious incipient
Speaker 7: inflation problem that we have faced in the last forty years.
Speaker 2: Throughout the three year battle of them, and there's been
Speaker 2: a question whether it could be tamed without higher unemployment.
Speaker 8: I've said that I'd be surprised if we get to
Speaker 8: the two percent inflation target without an unemployment rate that
Speaker 8: approaches or exceeds six percent.
Speaker 2: But on Friday this week we got the latest jobs numbers,
Speaker 2: and unemployment stayed under four percent, even as inflation continues
Speaker 2: to moderate, something that's led Larry to reassess the possibility
Speaker 2: of a so called soft landing, one where inflation comes
Speaker 2: back in line without a lot of people losing their jobs.
Speaker 8: Things did come back in a way that was more
Speaker 8: favorable than standard models would have expected, though I'm much
Speaker 8: less prepared to declare that it's all over.
Speaker 2: And we are joined once again by our very special
Speaker 2: contributor here on Wall Street Week. He is Larry Summers
Speaker 2: of Harvard Luri, thanks so much for being with us.
Speaker 2: On Friday, we got the jobs numbers out. They were
Speaker 2: a little lower than some people expect that and particularly
Speaker 2: when you look at the revisions from last month. What
Speaker 2: did you make of these jobs numbers?
Speaker 8: I don't think they changed anybody's picture very fundamentally of
Speaker 8: the economy. We've got a strong economy. Inflation has come down,
Speaker 8: inflation is not yet at the FEDS two percent target,
Speaker 8: but job growth, even on a slower basis, remains considerably
Speaker 8: more rapid than underlying population growth. So we've got a
Speaker 8: relatively strong economy.
Speaker 2: Well, and that raises the question what does that mean
Speaker 2: for monetary policy. I mean, one question we ask sometimes
Speaker 2: if people at the FED is why are we talking
Speaker 2: about rate cuts right now when economy seems to be
Speaker 2: doing so well and weathering this five and a half
Speaker 2: percent rate.
Speaker 8: There's something very fundamental that has happened that I'm not
Speaker 8: sure that the FED has fully realized. I think the
Speaker 8: neral interest straight is way above the two and a
Speaker 8: half percent that the FED likes to talk about. I think,
Speaker 8: given the experience of the last several years, that the
Speaker 8: market perceives normal inflation as probably being somewhat above two percent,
Speaker 8: at least on a CPI basis. And I think that
Speaker 8: huge deficits more spending to come, substantial investments in renewables,
Speaker 8: substantial investments in resilience, substantial capital costs of various kinds
Speaker 8: associated with artificial intelligence and aging population meaning more dissavers
Speaker 8: less capital flow coming from abroad. I think all of
Speaker 8: that means a much higher neutral real interest rate. So
Speaker 8: I think when the FED compares five percent with the
Speaker 8: two and a half percent neutral rate, it sees and
Speaker 8: people say that monetary policy is substantially restrictive. That's wrong.
Speaker 8: The neutral rate is much higher than that, and so
Speaker 8: monetary policy is much less restrictive than is generally supposed.
Speaker 8: And the clear evidence of that is that we have
Speaker 8: this supposedly really restrictive monetary policy and still have a
Speaker 8: quite robust economy. So I think the FED needs to
Speaker 8: be very careful in its judgments about what would be
Speaker 8: anypocl shift from the regime we've had for the last
Speaker 8: several years to a regime of easing monetary policy. They've
Speaker 8: moved substantially since December. Market used to be expecting six
Speaker 8: cuts in twenty twenty four. Now the market's expecting three cuts,
Speaker 8: and the Fed's carried that off skillfully. There hasn't been
Speaker 8: much disruption or dislocation as that change has taken place,
Speaker 8: But I think that's going to be there with us
Speaker 8: for the next while. And my own guests is probably
Speaker 8: that there's a little more adjustment to come and the
Speaker 8: FED may end up not deciding to cut quite as
Speaker 8: much as markets are now expecting. But I do think
Speaker 8: we need to get ourselves to an idea that neutral
Speaker 8: rates are closer to having a four handle than they
Speaker 8: are to having a two handle.
Speaker 2: We had Torsten Slock of Apollo this week come out
Speaker 2: and say he doesn't think they're gonna be any cuts
Speaker 2: this year for some of the reasons you suggest. I'm
Speaker 2: not asking you to commit on what will happen, but
Speaker 2: does that seem plausible to you?
Speaker 8: Yeah. I think I said on the show maybe a
Speaker 8: month ago, that several weeks ago, that there was a
Speaker 8: fifteen percent chance that we wouldn't have cuts this year.
Speaker 8: I think, if anything, that fifteen percent may have drifted
Speaker 8: slightly upwards, and markets are kind of consistent with that
Speaker 8: if you look at options markets. So I think the
Speaker 8: base or presumptive case is probably that the next move
Speaker 8: is going to be down. But I think it'd be
Speaker 8: a real mistake for people to regard that as any
Speaker 8: kind of certainty.
Speaker 2: Okay, Larry, thank you so very much for being back
Speaker 2: with us. That's Larry Summers, our very special contributor here
Speaker 2: on Wall Street Week. China has been holding its fourteenth
Speaker 2: National People's Congress this week. Of slower growth than in
Speaker 2: the recent past, it has set it's GDP growth target
Speaker 2: at five percent for this year, but has yet to
Speaker 2: give us much information about how it's going to achieve
Speaker 2: that goal. To help us understand where China may be heading.
Speaker 2: Welcome back now, Zanny Minton Bedos. She's the editor of
Speaker 2: The Economist. Sandy, great to have you back on walls.
Speaker 6: Reree really great to be here.
Speaker 2: So you have actually a piece right now and the
Speaker 2: Economist about China. What do you make of what's going
Speaker 2: on economically right now in China? What do we know?
Speaker 6: Well, right now, the Chinese economy is really not in
Speaker 6: very good shape. We know that it's in the middle
Speaker 6: of a very big property bust. Growth has been slowing,
Speaker 6: it's slipped into deflation. There's a tremendous loss of confidence investment,
Speaker 6: Foreign investment has collapsed, domestic confidence has collapsed. It feels
Speaker 6: pretty bad. And so there were a lot of signals,
Speaker 6: a lot of questions with this week coming of, you know,
Speaker 6: would there be some sign that there'd be a big
Speaker 6: stimulus from the government to try and kind of get
Speaker 6: the economy going again. And as you said, what we
Speaker 6: got was an ambitious growth target five percent, which is
Speaker 6: the same that they had last year. But last year,
Speaker 6: remember China was coming out of its really strict pandemic lockdown,
Speaker 6: and there was an expectation that the economy would rebound
Speaker 6: as controls were lifted, it didn't actually rebound that much
Speaker 6: this year. No one's quite sure how they're going to
Speaker 6: get to five percent, particularly because there was not much
Speaker 6: detail of any sort about a big stimulus package, in
Speaker 6: fact the opposite, And so increasingly I think there's a
Speaker 6: lot of worry about the depth of the problem that
Speaker 6: the Chinese economy is in.
Speaker 2: Is this, you know, is this a kind of.
Speaker 6: Japan style multi year, perhaps multi decade malaise. Is it
Speaker 6: something they can fix in the short term. No one
Speaker 6: really knows. And compound that with the fact that Jijingping
Speaker 6: has you know, amassed ever more power around himself. One
Speaker 6: of the really striking things about this week's gathering and
Speaker 6: this is this gets into kind of crimininology of what's
Speaker 6: going on in China. But the premiere, who traditionally gives
Speaker 6: a press conference at the end of this meeting, this
Speaker 6: time that's not going to happen. No one apparently can speak,
Speaker 6: you know, other than you know, the word of using Ping,
Speaker 6: and the the working report of what was what's coming
Speaker 6: for the Chinese economy has more and more references to Jijinping,
Speaker 6: So he's asserting a lot of control. There are ambitious targets,
Speaker 6: not clear how to get there, and this is an
Speaker 6: environment where the economy is really very weak and consumer
Speaker 6: confidence is very very low. So it's pretty bad.
Speaker 2: Actually, no news characters has had this year, but I
Speaker 2: think they also indicate they're not going to have one
Speaker 2: until further notice.
Speaker 9: Yeah, I mean they're not.
Speaker 6: And you know, kind of what do you make of that?
Speaker 6: Because one of the interesting things in China, and I'm
Speaker 6: not a China expert, although I have a fantastic China team,
Speaker 6: but I go there pretty regularly. I'm going there again
Speaker 6: next month. All through the years that I've been going there,
Speaker 6: it has been true that the kind of technocratic competence
Speaker 6: of Chinese economic policymakers has been really exemplary. And if
Speaker 6: you think back, you think back to the Great Financial Crisis,
Speaker 6: when China did a really big stimulus, they were technocratically
Speaker 6: really clear about what they needed to do to keep
Speaker 6: their economy going, to keep it strong, and there were
Speaker 6: those years of tremendous growth. Growth obviously has now slowed,
Speaker 6: but there was still a view that kind of technically
Speaker 6: they knew what to do to achieve the growth targets
Speaker 6: because in the end, the kind of legitimacy of this
Speaker 6: regime has always hinged on the fact that it has
Speaker 6: provided for material prosperity. And you know, the social contract,
Speaker 6: if you will, had always been you put up with
Speaker 6: an authoritarian government, you put up with all of those strictures.
Speaker 6: But you have China is being made great again, and China,
Speaker 6: Chinese prosperity is rising. That's really shifted. I mean, and
Speaker 6: you see it, for example, with the high levels of
Speaker 6: unemployment amongst young people. You sense a sense of disillusionment.
Speaker 6: People young Chinese now know that they are not going
Speaker 6: to see the remarkable increase in living standards that their
Speaker 6: parents saw, so there's a sense of loss of confidence.
Speaker 6: At the same time, there's this very clear clampdown from
Speaker 6: using Ping not only a massing power around himself, but
Speaker 6: really shifting the focus towards national security, towards a you know,
Speaker 6: a great Chinese state in conflict with or at least
Speaker 6: confrontation with the United States. That's what he's focused on.
Speaker 6: He is not I don't think he's not really interested
Speaker 6: in economics. He's very statist, he doesn't believe in stimulus.
Speaker 6: He's got a very kind of you might even say,
Speaker 6: I mean economically illiterate view of what the economy needs.
Speaker 6: But he's not focused on that. And so the question is,
Speaker 6: is all of these ingredients together, how does China actually
Speaker 6: get out of its malaise?
Speaker 2: Zenny is such a treat having on Wall Street Week.
Speaker 2: Thank you that as any mitten Bellows of the economists
Speaker 2: coming up. There is a massive transfer of wealth on
Speaker 2: the horizon, and it's not just to the next generation.
Speaker 2: We talk with Sally Kratchek of Eloves about the rising
Speaker 2: role of women investors. This is Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. Global. Wall
Speaker 2: Street is on the cusp of a major transfer in wealth,
Speaker 2: as aging men who amassed capital pass from the scene
Speaker 2: most oftens. This is described as a generational issue, but
Speaker 2: Elvius has released a new study showing that there will
Speaker 2: also be a gender component to it, as great wealth
Speaker 2: is put in the hands of women around the world.
Speaker 2: We talked to the founder and CEO of l of Us,
Speaker 2: Sally Krotchik, about what they.
Speaker 5: Found the baby boomers have built and on his historically
Speaker 5: unprecedented amount of wealth. Baby boomers are hitting eighty this year,
Speaker 5: and as they begin to pass away, that money gets
Speaker 5: passed down. And you talk to most people and you
Speaker 5: say who's the money going to? And they say the millennials.
Speaker 5: The bottom line is is going to women because it
Speaker 5: goes to the widows first, average age of widowhood by
Speaker 5: the way, late fifties, goes to the women first and
Speaker 5: then goes on to the kids. And so the Great
Speaker 5: Wealth Transfer is about to do something that Leanan did not,
Speaker 5: which is get to women. The majority of wealth in
Speaker 5: this country. Women are going to inherit tens of trillions
Speaker 5: of dollars over the next couple of decades.
Speaker 2: Well that's a big shift, potentially a big shift. Yeah,
Speaker 2: But what do you think of the consequences of that?
Speaker 2: I mean, how are women different from men when they invest?
Speaker 5: Well, so let's back up, because it does tend to
Speaker 5: change everything. One of the big findings you and were
Speaker 5: talking about earlier is we tend to think women don't
Speaker 5: invest as much as men do. It's because they don't
Speaker 5: have the money confidence that men do. What this survey
Speaker 5: has shown is it's not they don't have the confidence
Speaker 5: so they don't have the money. It's they don't have
Speaker 5: the money, so they don't have the confidence. You put
Speaker 5: that money in the hands of women, their confidence sorees.
Speaker 5: It goes from something like forty five percent of women
Speaker 5: are confident around money to eighty one percent after they
Speaker 5: get an inheritance or a wealth transfer, become more confident
Speaker 5: than men. The other thing that changes marriages. Marriages something
Speaker 5: like double the amount of women who get in inheritance
Speaker 5: get a wealth transfer, you know, say that they could
Speaker 5: leave relationships that they don't want to be in, which
Speaker 5: is really significant. You see it for young millennial and
Speaker 5: Gen Z women who three times the number of them
Speaker 5: say they'll leave a relationship as those who don't get
Speaker 5: an inheritance.
Speaker 2: So as we look around the industry today, I mean
Speaker 2: it's certain my experience looking at it, we don't have
Speaker 2: many women in the senior most leadership roles in sort
Speaker 2: of global Wall Street correct. And maybe it's gotten better,
Speaker 2: but I'm not sure how much better it's gotten. What's
Speaker 2: causing that?
Speaker 5: Do you think, yeah, it's gotten better, It hasn't gotten
Speaker 5: better enough. When you consider that women are fifty one
Speaker 5: percent of the population. You know, it's inertia. You know,
Speaker 5: an object in motion stays in motion, and object at
Speaker 5: rest stays at rest. But it's truly important, and it's
Speaker 5: truly important beyond the g I wish there were a
Speaker 5: handful of women who get to senior roles and do
Speaker 5: well good. Yes, that matters. What really matters is the
Speaker 5: financial services is, of course the lifeblood of our economy,
Speaker 5: and the research shows you the diversity is a driver
Speaker 5: of superior performance. The homogeneity conversely means take you trust
Speaker 5: each other too much, you take on more risk thinking
Speaker 5: subprime crisis here right when you don't have that diversity
Speaker 5: thought perspective background. So we should all care about diversity
Speaker 5: in financial services because it is again the life blood
Speaker 5: of the economy. And we should also care because of
Speaker 5: if we are a woman, we want to be reflected.
Speaker 5: If we're fathers and we have daughters, we want them
Speaker 5: to be reflected. And the industry needs to do and
Speaker 5: will do with more diversity, a better job for women again,
Speaker 5: who are coming into a ton of money with a
Speaker 5: great wealth transfer.
Speaker 2: In your experience, do you think that the leadership of
Speaker 2: the large financial institutions, and by that I mean the CEO,
Speaker 2: the c suite and the board understand what you just said,
Speaker 2: because over the last few months we've seen why dof
Speaker 2: you senior women leave their roles. Now maybe we just
Speaker 2: noticed it more, but it feels like there are a
Speaker 2: lot of senior women moving on. Yeah.
Speaker 5: You know, look, I think everybody believes in the power
Speaker 5: of you know, having a team that is diverse and
Speaker 5: can debate. I mean, forget about this blowback on DEI.
Speaker 5: But if you're in senior leadership, you know sort of
Speaker 5: understanding that you want these different perspectives. I think it
Speaker 5: can be hard to overcome corporate culture. What I do
Speaker 5: think is men do not see the great wealth transfer
Speaker 5: coming and do not fully understand the difference it's going
Speaker 5: to make. And how do I know that? In the
Speaker 5: l of S survey we ask men, we said, here's
Speaker 5: this great wealth transfer. Who do you think is going
Speaker 5: to benefit? Just fourteen percent said women.
Speaker 2: Oh, most people said the next generation. Me.
Speaker 5: I think it's going to be bed you know, and
Speaker 5: look at what we saw this summer where women kept
Speaker 5: the country out of recession, you know, through going to
Speaker 5: see Barbie, through going to see you know, Taylor Swift
Speaker 5: and Beyonce and all all of the economic power that
Speaker 5: generated and you say, look, this is a world this
Speaker 5: beginning to change.
Speaker 2: Just over two years ago now GE announced plans to
Speaker 2: divide its business into three publicly traded companies focused on healthcare,
Speaker 2: energy and aviation. GE Healthcare was spun off just over
Speaker 2: a year ago, and early next month the last piece
Speaker 2: will fall into place when GE separates in the GE
Speaker 2: Aerospace and GE Vernova, encompassing its energy business. We sat
Speaker 2: with the GE CEO who has overseen the restructuring from
Speaker 2: the start, Larry Kulp, and the man who will be
Speaker 2: CEO of g Vernova, Scott Straisik.
Speaker 3: If you go back five years, we really were, I think,
Speaker 3: tasked with two simple objectives. One was a significantly leveraging
Speaker 3: of our balance sheet. Secondly, we needed to execute an
Speaker 3: operational turnaround across the business, but it was particularly acute
Speaker 3: in our power segment, particularly the gas power business that
Speaker 3: Scott ran at the time. So you fast forward, we
Speaker 3: reduced our debtload by over one hundred billion dollars. Scott
Speaker 3: and the team really executed I think a phenomenal turn
Speaker 3: in gas power and then with the rest of our
Speaker 3: power segment. And we were sitting there as the pandemic
Speaker 3: was beginning to lift. We could see the merger of
Speaker 3: our aircraft leasing business with one of our key competitors,
Speaker 3: air Cap, coming to a quick close, and we really
Speaker 3: had to decide what's the go forward structure for GE,
Speaker 3: And given we had had so much success with the decentralization,
Speaker 3: given that the capital markets clearly liked the businesses but
Speaker 3: didn't like them together, it was actually an easy decision
Speaker 3: when we took a little over two years ago to
Speaker 3: say it take us a couple of years to pull
Speaker 3: this off, but when the dust settles, GE Healthcare, Chievranova,
Speaker 3: and GE Aerospace will all be on their own bottoms.
Speaker 2: You may have just answered that in your answer, which
Speaker 2: is why'd you pick Scott not to speak to you?
Speaker 2: What about your presence Scott? But how'd you pick Scott?
Speaker 2: Is it because of the role he had turnaround?
Speaker 3: Most definitely. I met Scott back August of eighteen. I
Speaker 3: wasn't even in this chair yet. It was the first
Speaker 3: GE business that I had visited down in Atlanta, and
Speaker 3: I came away thinking this is a really strong team,
Speaker 3: but there's some things that we're doing that probably are
Speaker 3: working against us. So we began the pivot to focus
Speaker 3: more on the businesses as opposed to the segment. Scott
Speaker 3: was running gas Power Services at the time we asked
Speaker 3: him to step up into a big job to run
Speaker 3: all of gas Power. We knew that was job one
Speaker 3: with respect to the overall operational turnaround at GE, and
Speaker 3: he and the team I think executed near flawlessly through that,
Speaker 3: and then he picked up additional responsibility with the rest
Speaker 3: of the power segment and then in turn the renewables businesses.
Speaker 3: And at each step of the way, Scott stepped up
Speaker 3: delivered built teams that did the same. So when it
Speaker 3: came time to think about the next CEO for this
Speaker 3: business as a public entity, Scott was an easy choice.
Speaker 2: So Scott, and now you've got the big job. What
Speaker 2: in your experience in GE and specifically in that turnaround,
Speaker 2: really do you think prepares you for this big new role.
Speaker 4: Well, I mean GE has always been a great laboratory
Speaker 4: to learn and experiment, and we've always had great people.
Speaker 4: But I think over the last five to five and
Speaker 4: a half years, really the lean operating system that we've
Speaker 4: been implementing and really started with gas right in nineteen
Speaker 4: where we were on a monthly cadence with Larry and
Speaker 4: really focusing a team that always had great ambition, but
Speaker 4: did we really have an ability to focus on the
Speaker 4: critical few customer KPIs every day while also protecting for
Speaker 4: the long term breakthroughs and the ability to multitask those
Speaker 4: things our teams weren't always great with. And that's really
Speaker 4: a lot of what we were focused on in nineteen
Speaker 4: into twenty together is to build that rhythm that we
Speaker 4: could prioritize what mattered most to get it's a short
Speaker 4: term right, but not at the expense of also investing
Speaker 4: for the long term. And that's a lot of what
Speaker 4: we worked on in gas Power together in nineteen and
Speaker 4: that was really foundational for gas Power and it's really
Speaker 4: what we've been extrapolating across the rest of Vernova.
Speaker 2: At the center of Vernova's strategy is growing its energy
Speaker 2: business in the midst of a massive transition to more
Speaker 2: sustainable energy around the world. It's chief sustainability Officer, Roger Martella,
Speaker 2: gives us an example how Vernova will set its priorities
Speaker 2: in building out the electrical grid in a way that
Speaker 2: is both good business and good for the climate.
Speaker 10: We know we're going to deploy the technology and run
Speaker 10: businesses to develop technology to electrify the grid. But from
Speaker 10: a sustainability perspective, we want to do more than just
Speaker 10: put capacity on the grid. We want to focus on
Speaker 10: where are we putting that capacity. How are we helping
Speaker 10: countries that are struggling to provide affordable, reliable, sustainable electricity.
Speaker 10: Can we double click on those countries and make sure
Speaker 10: we're not just going where the phone's ringing, but how
Speaker 10: can we affirm that we reach out to places in
Speaker 10: the world to enhance sustainability When it comes to electrification.
Speaker 4: Sustainability really is at the heart of everything we're doing,
Speaker 4: and for us, we define sustainability as the complement it
Speaker 4: both together keeping the lights on while decreasing the carbon
Speaker 4: intensity the install base every day. And it'd be wonderful
Speaker 4: if we could wave a magic wand and have no carbon,
Speaker 4: but the reality is that's not the world we live in.
Speaker 4: So how do we sustainably electrify the world while making
Speaker 4: it cleaner every day?
Speaker 9: They really go together, and to do that it really.
Speaker 4: Does require a complement of technologies, and that's where Vernova
Speaker 4: is somewhat unique because we've got the power generation technologies
Speaker 4: with things like gas, nuclear, wind, but we also play
Speaker 4: across the grid at both moving electrons orchestrating the grid,
Speaker 4: and the system's becoming more complicated, and our ability to
Speaker 4: serve our customers with all of those solutions gives us
Speaker 4: a unique vantage point.
Speaker 2: So Larry, as somebody who's about to turn over the keys,
Speaker 2: if I can put that way to power assess their
Speaker 2: opportunities going forward, I mean, what are the really growth
Speaker 2: opportunities for Vernova?
Speaker 3: Well, I think you just hit on it, David in
Speaker 3: the question and Scott talking about all the different dimensions
Speaker 3: of the energy transition. We have excellent exposure, leadership positions
Speaker 3: really and almost all the ones that matter. So I
Speaker 3: don't really worry about the top line environment in this business,
Speaker 3: and that we couldn't have said that four or five
Speaker 3: years ago, but the world over, I think we really
Speaker 3: are set in that regard, so we need to make
Speaker 3: sure we execute.
Speaker 2: How does wind fit into what you're doing, because that's
Speaker 2: been more of a struggle not just for GE but
Speaker 2: for others as well as opposed to gas power. How
Speaker 2: do you see wind playing out?
Speaker 9: You bet? It has been an industry wide challenge.
Speaker 4: But if you take a step back and think about
Speaker 4: the world today gets about seven percent of its power
Speaker 4: from electricity from wind most projections believed by twenty forty
Speaker 4: that needs to be closer to twenty five percent.
Speaker 9: So wind matters.
Speaker 4: But the reality is is we need to industrialize at
Speaker 4: scale the wind products to a.
Speaker 9: Level that it can actually reach those levels.
Speaker 4: And that's really what we're focused on right now is
Speaker 4: building workhorse products that we can do at scale.
Speaker 9: We're seeing real progress with that.
Speaker 4: We've turned our on shore wind business back to profitability
Speaker 4: the second half of last year, with momentum to follow.
Speaker 4: We're working on doing much of the same with our
Speaker 4: offshore wind business.
Speaker 2: Today, coming up more with Larry Culp and Scott Strasik
Speaker 2: as we focus on ge Aerospace and the common DNA
Speaker 2: of the two companies. That's next on Wall Street Week
Speaker 2: on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David Weston. We continue
Speaker 2: the conversation with Larry Culp and Scott Strasik, taking up
Speaker 2: Larry's role as CEO of ge Aerospace and the Common
Speaker 2: hair it will continue to share with Jie Vernova after
Speaker 2: the spinoff.
Speaker 3: We have a tremendous visibility both with respect to our
Speaker 3: service business, which represents about seventy percent of our revenue,
Speaker 3: simply because the airlines are back well above twenty nineteen
Speaker 3: activity levels and they need us to support the engines
Speaker 3: that propel all of that traffic. And at the same
Speaker 3: time they're looking to expand and modernize their fleets, both
Speaker 3: in single aisle and wide body configurations. So in order
Speaker 3: for a new plane today, a new engine probably isn't
Speaker 3: fulfilled until twenty thirty. So we have tremendous demand potential
Speaker 3: both in services and in new units.
Speaker 9: We need to make sure.
Speaker 3: We're delivering and delivering profitably over the next several years.
Speaker 2: I'm not sure how many people understand. I'm not sure
Speaker 2: I understood. And the extent of your defense contracting, I
Speaker 2: mean a substantial portion, not a majority, but a substantial
Speaker 2: portion is defense. How does that figure a new future plan?
Speaker 3: Well, our defense business we talked about that this week
Speaker 3: with we're going to call that segment Defense and Propulsion Technologies.
Speaker 3: That's a nine billion dollar business primarily in defense, large
Speaker 3: position here in the US, particularly with rotorcraft, I think helicopters,
Speaker 3: the apaches and the Blackhawks in addition to combat fighter aircraft,
Speaker 3: and as those assets are being used with more frequency,
Speaker 3: we contribute to the readiness of those assets. And in turn,
Speaker 3: as our war fighters need more capability, be it in
Speaker 3: a rotocraft or at a combat jet, that's where the
Speaker 3: next generation of gerospace technology has a role to play.
Speaker 2: As we look around the world right now, one of
Speaker 2: the things we hear repeatedly is that geopolitical risk has
Speaker 2: gone up substantially. We've got a ground war in Europe,
Speaker 2: We've got conflict in the Middle East, we've got issues
Speaker 2: with the South Side at sea. We're not sure what's
Speaker 2: going they're on as you look out, Does that suggest
Speaker 2: to you that there's going to be a continuing rising
Speaker 2: tide on your defense contractor.
Speaker 9: We believe so, David.
Speaker 3: Now, obviously there's a little bit of political dysfunction relative
Speaker 3: to the budget currently in Washington, but what we shared
Speaker 3: with investors was very much that same geopolitical backdrop. Unfortunately
Speaker 3: that may not get better before it gets more tense.
Speaker 3: And again, both here in the US and around the world,
Speaker 3: our business supports the warfighter both in both configurations, and
Speaker 3: we know that there are advanced technologies that governments want
Speaker 3: to deploy or be ready to deploy over time, and
Speaker 3: that's where we're investing from an R and D perspective.
Speaker 2: So I think a lot of people would hear that
Speaker 2: and say, well, that's really good news for the shareholders.
Speaker 2: At the same time and also indicates you don't see
Speaker 2: a lot of great investment opportunities out there for that capitol,
Speaker 2: because if you did, you'd keep the capital invested.
Speaker 3: Well, I think that we have reserved the right to
Speaker 3: explore those inorganic opportunities. But in many respects David, the
Speaker 3: best investment that we can make is in ge aero
Speaker 3: space and that's what you see with that capital allocation framework.
Speaker 2: What about your capital allocation? What are you looking at,
Speaker 2: s Gun.
Speaker 9: A lot of organic growth opportunities.
Speaker 4: Again, when we think about the grid and the substantial
Speaker 4: modernization needed of grid, we're going to invest substantially in
Speaker 4: capacity additions to do that. There is still new technology
Speaker 4: that needs to be advanced and things like direct air capture,
Speaker 4: things like small modular reactors in the grid.
Speaker 9: Software that's critical to the future.
Speaker 2: You cannot talk about the future of the aviation business
Speaker 2: without talking about the future of aviation itself, and ge
Speaker 2: Aerospace VP of Engineering Muhammad Ali has some bold thoughts
Speaker 2: about what that future may hold.
Speaker 11: Our purpose statement is we invent the future flight, lift
Speaker 11: people up and bring them home safely, And we believe
Speaker 11: it starts with bringing people home safely, and that earns
Speaker 11: us the right to lift people up, which in turn
Speaker 11: earns us the right to invent the future flight. I
Speaker 11: think Rice has this beautiful open fan technology which attracts
Speaker 11: all the attention see a lot of the questions, but
Speaker 11: bide behind that hyper electric capable, state of the art
Speaker 11: high pressure temperature capability HGH, pressure serbon capability that we
Speaker 11: are designing using state of the art supercomputing. We are
Speaker 11: also at significant advances in materials that we are putting
Speaker 11: in there, and sustainable aviation fuel capable from day one.
Speaker 3: This is a business that has really been built developing
Speaker 3: generational improvements in sustainability in jet engines over time, but
Speaker 3: we often not referred to it as sustainability. We've really
Speaker 3: referred to it as efficiency. But every time a next
Speaker 3: generation aircraft comes forward, it's really the result of a
Speaker 3: next generation engine technology coming to market.
Speaker 2: The same question you when it comes to power technological
Speaker 2: development what are you looking at? What is out on
Speaker 2: the horizon for GE, for Nova, There's.
Speaker 4: A lot of exciting things. Direct air capture, how do
Speaker 4: we manage carbon. We've got a prototype right now that's
Speaker 4: pulling carbon.
Speaker 9: Out of the air as we speak.
Speaker 4: Small modular reactor three hundred mego op blocks of power
Speaker 4: that will commission this decade that we think can transform
Speaker 4: the nuclear industry. Robotics and inspection technology with our wind
Speaker 4: business that ensures that every blade that leaves our factory
Speaker 4: has been fully inspected to get quality right the first time.
Speaker 4: Grid software, our grid OS grid Orchestration system as we
Speaker 4: say it, to really help our customers deal with the
Speaker 4: complexities and the grid today as more folks put solar
Speaker 4: panels on their homes and charge evs at night, and
Speaker 4: there's more bidirectional flows of electricity, all opportunities, so a
Speaker 4: long list.
Speaker 2: Even as aerospace and energy separated GE there is a
Speaker 2: deeply shared DNA going all the way back to Thomas
Speaker 2: Edison shared DNA. None of the sister companies wants to
Speaker 2: give up.
Speaker 11: We absolutely have shared heritage, and actually that shared heritage
Speaker 11: goes all the way back to Thomas Edison who founded
Speaker 11: General ECNC company and that shared heritage. There is a
Speaker 11: statement that's written at the entrance to many our facilities,
Speaker 11: including our aerospace research facility, that says that quote from
Speaker 11: Thomas Edison that said, I find what the world needs
Speaker 11: and I go about inventing it. And that's exactly what
Speaker 11: we would be doing in g Aerospace, and I am
Speaker 11: confident that that's what the GeV Vernova teve is going
Speaker 11: to be doing as well.
Speaker 10: One thing I'd say about working at giev Ornova you
Speaker 10: come to work every day and you feel like you're
Speaker 10: in awe of history. We have eighty thousand employees with
Speaker 10: these incredibly diverse backgrounds, all around the world, doing so
Speaker 10: many different things. This is the one thing we have
Speaker 10: in common. We're motivated by this purpose, this purpose built
Speaker 10: company of electrification and decarbonization. So that's what inspires us
Speaker 10: every day.
Speaker 3: When I reflect on the last five and a half years,
Speaker 3: it really has been about the team. David Scott talked
Speaker 3: about what we take forward. We take a lot of
Speaker 3: technology forward, but this is an immensely talented, resilient, ambitious team.
Speaker 9: That I couldn't be more proud of.
Speaker 3: Go back to twenty eighteen, there were a lot of
Speaker 3: people who wanted to give up on our company.
Speaker 9: We didn't, and there were a.
Speaker 3: Lot of folks that came into our boardroom and into
Speaker 3: the management ranks who understood just how good these businesses
Speaker 3: can be, how strong this team is day in day out.
Speaker 3: We just needed a little bit of time to work
Speaker 3: through some of those issues. Scott and I know our
Speaker 3: companies go back to Edison. A lot of us over
Speaker 3: time have studied the GE management playbook. Scott grew up
Speaker 3: in that environment. I grew up looking in from the outside.
Speaker 3: So we're proud of that history and everything that so
Speaker 3: many people have contributed to our company over time. We're
Speaker 3: the stewards of the business at this point in time,
Speaker 3: and even though we go forward as three, we'll share
Speaker 3: that brand, we'll share that DNA, and I'm sure Edison
Speaker 3: and everybody else looking down will be proud of what
Speaker 3: they see the three businesses on an independent basis going forward.
Speaker 2: Many thanks to Larry Kulp of GE Aerospace and Scott
Speaker 2: Strasik of GeV Vernova. According to the ancient Greek philosopher Epicurus,
Speaker 2: no age is too early or too late for the
Speaker 2: health of the soul, which may well be true when
Speaker 2: it comes to our soul, but life proves that we
Speaker 2: can be too early or too late for the health
Speaker 2: of our economy, our businesses, or our politics. I learned
Speaker 2: this the hard way back in two thousand when I
Speaker 2: was running ABC News and we joined the other networks
Speaker 2: in calling the election way too early, which earned all
Speaker 2: of US news presidents a day of hearings before a
Speaker 2: Congressional committee to explain ourselves and what we were going
Speaker 2: to do to make sure it never happened again. We
Speaker 2: learned just about a year ago now that the FED
Speaker 2: was far too late in pursuing the questions its examiners
Speaker 2: had raised about Silicon Valley Bank, resulting in the bank's
Speaker 2: failure and the need for the FDIC to step in.
Speaker 6: The FED had plenty of authority to prevent Silicon Valley Bank.
Speaker 2: It looks to me like the regulator do the problem,
Speaker 2: but nobody dropped the hammer. Just About everyone agrees that
Speaker 2: it's still too early to judge just how big an
Speaker 2: effect the generative AI will have on business, jobs, and
Speaker 2: the economy, despite some early indications that it could be huge.
Speaker 8: I can think of almost no area of human activity,
Speaker 8: almost no area of economic endeavor that is not going
Speaker 8: to be profoundly affected by these technologies.
Speaker 2: And one thing we already know is that in Nvidia
Speaker 2: did not move too early and getting a big jump
Speaker 2: on the market.
Speaker 12: So it's in Vidia, but it's not just in Nvidia
Speaker 12: per se, because what in Vidio represents is the next
Speaker 12: growth leg of corporate America, of productivity and of earnings
Speaker 12: for the fastest growing companies in America.
Speaker 2: When it comes to politics, President Biden says his economic
Speaker 2: policies have arrived just on time to create jobs and
Speaker 2: to spur growth.
Speaker 13: The share of working age Americans in the workforce is
Speaker 13: as high as has been in thirty years. Remember they
Speaker 13: used to say, bid spend all this money to keep
Speaker 13: people from working. People are off the sidelines.
Speaker 2: But there are others who contend that Bidenomics may be
Speaker 2: both too early and too late. Too early in fiscal
Speaker 2: stimulus triggering the inflation that has a lot of voters upset.
Speaker 14: Voters are going to be voting on the passion of
Speaker 14: what's happening on main street. And if you look at
Speaker 14: what those interest rates are for a small business get alone,
Speaker 14: at twelve percent, nothing's happening, So that's not going to
Speaker 14: change that drastically between now and November, and they feel.
Speaker 2: It, but perhaps too late for voters to see the
Speaker 2: real effects in their lives of the long term investments
Speaker 2: in infrastructure and clean energy and new chip manufacturing.
Speaker 15: President Biden today thirty eight percent of Americans say he
Speaker 15: should be re elected. We looked at his three year average,
Speaker 15: his approval on the three averages thirty nine point eight.
Speaker 15: He's behind every single president except Jimmy Carter at this
Speaker 15: point in their presidencies.
Speaker 2: And maybe that's the hardest part of this too early,
Speaker 2: too late business. At the time, it's just about impossible
Speaker 2: to know whether we're moving too quickly or too slowly.
Speaker 2: Just as pro golfer Adrian Morank last Sunday, he was
Speaker 2: playing in an lv golf tournament in Jetta. When he
Speaker 2: lined up for his second shot on the final hole,
Speaker 2: he had a lot on the line. He was vying
Speaker 2: for fifth place, which would have earned him seven hundred
Speaker 2: and fifty thousand dollars in prize money, so it's understandable
Speaker 2: that he didn't want to rush it. He stood over
Speaker 2: that shot for more than two minutes and was assessed
Speaker 2: a penalty stroke, making his birdy into a par and
Speaker 2: losing him two hundred and forty thousand dollars. A pretty
Speaker 2: example of where being too late does more than just
Speaker 2: affect the health of the epicurean soul. Right now, we're
Speaker 2: seeing an agonizing choice between being too early and too late,
Speaker 2: with a lot more at stake than two hundred and
Speaker 2: forty thousand dollars. As the Federal Reserve tries to decide
Speaker 2: on rate cuts. Pretty much everyone agrees that the Fed
Speaker 2: was too slow on the way up, which results than
Speaker 2: that unpleasant inflation that we're fighting. I am confident that
Speaker 2: they understand the problem correctly.
Speaker 11: Now.
Speaker 2: The wishful thinking is all gone. Now the question is
Speaker 2: how to avoid being neither too early nor too late
Speaker 2: in coming back down.
Speaker 16: I do think we were a little slow to adjust
Speaker 16: rates when inflation was getting strength. But at this point
Speaker 16: we have policy in a good place. We can adjust
Speaker 16: the policy rate down if the economy calls for it.
Speaker 2: That does it. For this episode of Wall Street Week,
Speaker 2: I'm David Weston. This is Bloomberg. See you next week.