Speaker 1: This is Bloomberg Business Week from Bloomberg Radio. Hi am
Speaker 1: Jason Kelley and I'm Carol Master. Welcome to the weekend
Speaker 1: edition of Bloomberg Business Week. This week it's all about
Speaker 1: the Bloomberg Global Business Forum. This is a gathering of
Speaker 1: high level individuals from both the public and private sector.
Speaker 1: So we're talking about world leaders, we're talking about leaders
Speaker 1: of corporations, and it's all about working together, collaborations. It's
Speaker 1: big conversations, but it's also not just talk. It's action.
Speaker 1: People really sort of presenting their bona fides about what
Speaker 1: they're doing to change the world, whether it's around social responsibility,
Speaker 1: whether it's about the climate, or whether it's about just
Speaker 1: trying to figure out what's next in the world. Among
Speaker 1: the interviews you will hear over the next couple hours
Speaker 1: from the GBF as we call it, John Gray, the
Speaker 1: president of Blackstone, Bruce Flatt, the CEO of Brookfield. Together Carol,
Speaker 1: they've got a trillion dollars in assets under management, and
Speaker 1: we've even talked to a queen. We did it, indeed.
Speaker 1: But first up, we're gonna bring you a wide ranging
Speaker 1: panel discussion with the CEO and chairman of Blackstone Group
Speaker 1: Steve Schwartzman. Of course, he's also a co founder of
Speaker 1: that firm, CEO and chairman of Bank of America Brian moynihan,
Speaker 1: and a non Mahindra chairman of Mahindra Group. Steve Schwartzman
Speaker 1: kicked off the conversation talking about what he's most worried about. Jeez,
Speaker 1: there's a lot to worry about, you know, because you know,
Speaker 1: first of all, just stepping back from it, uh, you know,
Speaker 1: the social media and the Internet are making it very
Speaker 1: difficult for almost any government to function. Uh if you
Speaker 1: come out with a plan, you have instant uh mobilization
Speaker 1: of opposition to anything you're doing. Even makes it difficult
Speaker 1: for companies uh sometime with sort of this roving band
Speaker 1: of opposition. Um. And and you know, financially, um, you know,
Speaker 1: sort of the you have a few weaknesses in the system.
Speaker 1: I think that European banking system isn't is uh strong
Speaker 1: certainly as the US, which is in great shape. You
Speaker 1: have um, private investments in the technology area which that
Speaker 1: we work uh. Um, you know, sort of non public
Speaker 1: offering has exposed as as being uh you know, really
Speaker 1: uh pretty inflated. When when you when you have an
Speaker 1: industry that more or less marks up its positions, uh,
Speaker 1: you know, in a closed circle among itself, and then
Speaker 1: it pops out into the real world. The real world says,
Speaker 1: what are you thinking that? That's usually, um, you know,
Speaker 1: sort of a wake up call, but it's you know
Speaker 1: that that part of the world isn't big. That's that's
Speaker 1: a relatively small uh set um And I guess any
Speaker 1: of us on the stage, and then I'll finish, because
Speaker 1: I don't want to dominating anything. When you have thirteen
Speaker 1: trillion dollars of negative interest rates, I don't even know
Speaker 1: what a negative interest rate is. And in other words,
Speaker 1: why would I take my money and give it to
Speaker 1: somebody and for the privilege of them holding it, I
Speaker 1: have to pay them like it's a storage unit. Um.
Speaker 1: And I'm supposed to get interest when I give people money.
Speaker 1: And as as interest rates go down, uh, most of
Speaker 1: those places that have those negative interest rates, it's not stimulative.
Speaker 1: Does this negative rate environment that we increasingly see around
Speaker 1: the globe tell you that there's some underlying weakness that
Speaker 1: maybe we're missing. We know the obvious problems that are
Speaker 1: out there, but is there something more substantial? Well, I
Speaker 1: think Steve's point is right. There's the monetary policy decision
Speaker 1: to take rates as low as possible to h to
Speaker 1: accommodate the economy, accommodate growth. And they're lower in this
Speaker 1: country than I've been historically, but they're still positive and
Speaker 1: other places are negative, and there's a significant amount of it.
Speaker 1: I think there's a debate whether it actually transmits the
Speaker 1: economy because if you look in some of the countries
Speaker 1: where the rate structure has been negative for five years,
Speaker 1: the banks still have to pay consumer depositors interest because
Speaker 1: to these point, they're not gonna give us a hundred
Speaker 1: dollars and get ninety five back and think it's a
Speaker 1: great thing. And so I think there's a great debate.
Speaker 1: The economists will hack out, but the reality is its
Speaker 1: showing a weakness and economies and armies. Probably more fiscal
Speaker 1: work done and more reform work done to stimulate those economies,
Speaker 1: and well, good luck with that, and good luck with that.
Speaker 1: The good news is in the US you already have
Speaker 1: an economy which is pretty flexible and work talent people, uh,
Speaker 1: lots of capital, deep capital markets, the banking system that
Speaker 1: restructured a set of rules that you can understand one
Speaker 1: law that covers an economy. It's the largest in the
Speaker 1: world as opposed to multiple laws. And so you're seeing
Speaker 1: the US continue to grow, unemployments low and consumers continue
Speaker 1: to spend well, and so and on. I put that
Speaker 1: to you, or we had a breaking point where we
Speaker 1: may see something snap here? Or can we continue on,
Speaker 1: especially from a consumer perspective, in a nice upward, gentle trajectory.
Speaker 1: Let me start in a lighter note first, because when
Speaker 1: you asked Steve this question, but what's on your mind?
Speaker 1: I do have a very weighty global problem on my
Speaker 1: mind right now, and that is I have a two
Speaker 1: year old grandson who lives in New York, whose father's
Speaker 1: Mexican American and speaks to him only in Spanish. So
Speaker 1: right now my major preoccupation is how to improve my
Speaker 1: Spanish so I can communicate with my grandchild. But if
Speaker 1: you look at it, that's a lighter note. But frankly,
Speaker 1: that to me is the real thing, that what is
Speaker 1: me about the world. You look at it from a
Speaker 1: human centered point. When you try to operate in a
Speaker 1: hundred countries language communication, keeping the core of your business
Speaker 1: and the governance and the values of people is a
Speaker 1: major problem. So I'm looking at more as a I'm
Speaker 1: not really wanted about growth. I think we have enough
Speaker 1: locuses of growth to come up. I'm really not worried
Speaker 1: about consumer demand coming in from different parts of the world.
Speaker 1: We just have to look around the world. All the
Speaker 1: focus has been on America, rightfully, but I think you're
Speaker 1: going to see an uptake and a lot of other
Speaker 1: parts of the world. And that's the CEO and chairman
Speaker 1: of the Blackstone Group, Steve Schwartzman, the CEO and chairman
Speaker 1: of Bank of America, Brian moynihan, and Mahindra Group chairman
Speaker 1: A Non Mahindra. And what's really interesting, Jason, about these
Speaker 1: three collectively, We're talking about three hundred billion dollars in
Speaker 1: market cap and they employ some nine hundred thousand people
Speaker 1: around the globe. So when you want to really know
Speaker 1: what's going on in the world, these folks together it's
Speaker 1: a huge global footprint. So let's continue our conversation with Blackstone,
Speaker 1: Steve Schwartzman, Bank of America's Brian moynihan, and Mahindra Groups
Speaker 1: A Non Mahindro. One of the things we wanted to
Speaker 1: know are we headed for a recession. Brian Mornihan waiting, First,
Speaker 1: if you look at all the consensus, you know, the
Speaker 1: thirty economists, and I talked to David. I said, look,
Speaker 1: there's nobody has a negative sign in front of any
Speaker 1: of their estimates. And so in the bottom five probably average,
Speaker 1: and the it's you know five point five for GDP
Speaker 1: US next year and stuff. So even though people saying
Speaker 1: the probability is going up, because that's the uncertain the
Speaker 1: question is no ways predicting it is going to happen.
Speaker 1: The fear you have is going to your point, it's
Speaker 1: only ones day and what's going on? Will you get
Speaker 1: the consumer confidence to to deteriorate right now? It's it's
Speaker 1: come up, it's come down a little bit, and we
Speaker 1: get deteriorate if that starts to happen, that's the word.
Speaker 1: You do not see that in your activity every day. Um,
Speaker 1: the the combination of housing price is still being constructive,
Speaker 1: which that part of the wealth is constructive, the stock
Speaker 1: market still being up, that part of their wealth is constructive.
Speaker 1: Their wages growing faster now than they have really since
Speaker 1: any any point of last eight nine years, the employment
Speaker 1: levels being high, so that's always the good news. The
Speaker 1: question is what breaks that? And that's what I worry about.
Speaker 1: The the psychology of business deteriorating somewhat again high high,
Speaker 1: still very high, but tipped over a little bit. One
Speaker 1: do the one does a business owner convey to their
Speaker 1: teammates that it might not be as good for you
Speaker 1: this next year by higher wages, a bigger bonus, you
Speaker 1: more incentive plans, whatever, or you get to keep your job.
Speaker 1: We don't not see that in our our middle market.
Speaker 1: Loans are growing on a faster clip now and they
Speaker 1: were in the last few years. So it's all okay.
Speaker 1: And that's the question that we said. And I think
Speaker 1: the fear could cause us to back up before the
Speaker 1: data will show you're there. So some of that fear
Speaker 1: and caution, Steve, comes from this dispute between the U.
Speaker 1: S and China. There are a few people who have
Speaker 1: done as much dare I say, shuttle diplomacy than you
Speaker 1: have between the leaders leaders of those two countries. You
Speaker 1: write about it in your book. Steve's book, by the way,
Speaker 1: is on sale now. I don't know if anybody has
Speaker 1: heard about what it takes um, but we'll have that
Speaker 1: commercial in a moment. But you do write extensively about
Speaker 1: China in the book Your experience there the Schwartzman Scholars,
Speaker 1: your relationship with President she How does this get resolved
Speaker 1: at least to the satisfaction that the CEO s that
Speaker 1: that Brian is talking about specifically feel good enough to
Speaker 1: start spending money again. Yeah, I'll talk about that in
Speaker 1: one second. But but just in terms of risk, Uh,
Speaker 1: I've always felt that, you know, the cycle when it
Speaker 1: comes to an end, won't do it uh from from
Speaker 1: normal you know, business cycle issues, because because that seems
Speaker 1: to be managed pretty well. Uh, it'll be some type
Speaker 1: of geopolitical uh type of incident or circumstance which which
Speaker 1: uh hits the confidence of consumers. It won't be over
Speaker 1: production of goods and things like that. I could be wrong,
Speaker 1: but I've been thinking about this for a few years,
Speaker 1: and we've got enough of these major things that that
Speaker 1: could change people's attitudes. You know, where full employment uh
Speaker 1: you know, so people have a good situation, but their
Speaker 1: behavior may change if they're scared of something. Uh. As
Speaker 1: as to China us um uh that's as it's an
Speaker 1: interesting situation because uh, basically driven but by the fact
Speaker 1: that you know, in the last presidential election, we discovered
Speaker 1: that that of Americans couldn't write a four check in
Speaker 1: an emergency. So so if you think about that, these
Speaker 1: are people who fundamentally don't have savings uh. And they
Speaker 1: don't earn much money. Uh. And their their education American
Speaker 1: education has really slipped dramatically over the last thirty to
Speaker 1: forty years. And those those people are very unhappy. Uh.
Speaker 1: And and they they in effect are demanding some type
Speaker 1: of change. And part of that change happens when they
Speaker 1: don't when they don't get satisfied with domestic solutions. Historically,
Speaker 1: with populism, um, you get angry at some foreign entity.
Speaker 1: And China's the target. And it was pretty obvious that
Speaker 1: it was going to be. And I talked to the
Speaker 1: Chinese about that right after the election, and they were
Speaker 1: not sensitive to that, and I told them, don't don't
Speaker 1: worry about it. We we didn't understand it either, uh,
Speaker 1: you know, which is why you know, we had a
Speaker 1: president elected that nobody thought would be elected except him. Uh.
Speaker 1: And and so we all learned something. I said, don't
Speaker 1: feel bad. You know, you didn't have bad staff work,
Speaker 1: but now you know, and they they said, Okay, well,
Speaker 1: you know, if that's the case, we're going to have
Speaker 1: to adjust to China for four years has been growing
Speaker 1: faster than any major country in history. Uh. And so
Speaker 1: this is like whatever practices they have which in history
Speaker 1: when you're you know, sort of a we used to
Speaker 1: call them, you know, developing countries or underdeveloped countries. Uh.
Speaker 1: Now we call them emerging markets. Uh. You know they
Speaker 1: in the United States did this in the nineteenth century.
Speaker 1: We hide behind terror falls, you protect your industries. Uh,
Speaker 1: you don't let foreigners in into certain things that you know,
Speaker 1: where they can compete. Uh. And and that world lives
Speaker 1: until you become a more mature country and then you integrate. Well,
Speaker 1: I think I think in China part of part of
Speaker 1: the interesting issue is they still think they're poor and
Speaker 1: we sort of think they're rich. And their their GDP
Speaker 1: per capita is ten thousand dollars ours is roughly sixty.
Speaker 1: But when they started this sprint forty years ago, I
Speaker 1: think it was like four of person. So so it's
Speaker 1: been enormous progress, but they're there's still you know, sort
Speaker 1: of like one six of us. And now we're demanding
Speaker 1: our bottom and effect. Uh. And also European countries don't
Speaker 1: like they have similar problems, uh that that we're asking
Speaker 1: China to like become a more mature country and join
Speaker 1: the rest of the world. Their attitude is we're still poor.
Speaker 1: So so okay, if we have to make adjustments, Um,
Speaker 1: it's it's not our favorite thing to do. What what
Speaker 1: do we do? And so what you've been seeing over
Speaker 1: the last two and a half years is the US
Speaker 1: wanting them, you know, it's sort of the leader of
Speaker 1: the developed world to come pretty far. And on the
Speaker 1: Chinese side, um, they're trying to figure out how far
Speaker 1: and how fast they want to get someplace. So so
Speaker 1: so you know, the two countries got quite close, um
Speaker 1: in a at at which point the Chinese just withdrew
Speaker 1: they you know, they had agreed to a variety of
Speaker 1: things we thought, uh, and then they looked at the
Speaker 1: whole and they said, uh, you know, my goodness, let's
Speaker 1: not do that. And now that's just starting again. And meanwhile,
Speaker 1: what's happened in this two and a half years is
Speaker 1: that the two countries have started um as a result
Speaker 1: of false starts and in a variety of other tactical stuff.
Speaker 1: You know, are are starting to decouple. We continue with
Speaker 1: our panel with CEO and Chairman of Blackstone Group, Steve Schwartzman,
Speaker 1: the CEO and Chairman of Bank of America, Brian moynihan,
Speaker 1: and Anon Mahindra, chairman of Mahindra Group. And Mahindra was
Speaker 1: so interesting because we wanted to talk about the US
Speaker 1: China trade war and he's got operations in a hundred countries,
Speaker 1: but he clearly thinks of the world from an Indian perspective.
Speaker 1: Here's his take on the trade war. I see it
Speaker 1: as a situation of enormous opportunity. I have to be mercenary,
Speaker 1: of course, absolutely because to be and I'm I'm just
Speaker 1: being truthful here that for a long time, it wasn't
Speaker 1: kosher for anyone in American policy positions to admit that
Speaker 1: there was a kind of conflict with China and that
Speaker 1: India in fact, could be one of the players in
Speaker 1: this game as a buffer against China. That was just
Speaker 1: no no. If you went to the Council on Foreign Relations,
Speaker 1: nobody would admit that. I think it's now it's in
Speaker 1: the open, and I think President Trump has even made
Speaker 1: it more in the open. I mean, going to Houston
Speaker 1: and listening to our Prime minister, I think made it
Speaker 1: very clear what kind of alliance he had. I think
Speaker 1: there's nothing but opportunity for India in this and we
Speaker 1: have to play our cards right and see that we
Speaker 1: are viewed now as a very very appropriate ally for
Speaker 1: the US as a buffer both in defense terms. Frankly,
Speaker 1: if you look at the number of defense exercises between
Speaker 1: the US and India, they're proliferating dramatically. Defense procurement from
Speaker 1: the from India is already burgeoning. We never used to
Speaker 1: buy the used to buy more from the Russians. And frankly,
Speaker 1: all the all the tenor of the relationship with India's right.
Speaker 1: This is a democratic country, the country that values I
Speaker 1: p R. There's a country that has scale and growth,
Speaker 1: so there is profit for global companies too over there.
Speaker 1: So I think India has nothing but a unique opportunity
Speaker 1: right now, and we have to just play those cards right.
Speaker 1: And I think it would be a win win for
Speaker 1: both the US and for India. So I actually agree.
Speaker 1: And having been with a bunch of CEOs with the
Speaker 1: Prime Minister's morning, all who are talking about their business
Speaker 1: expanding in India, it's been a natural recipient, and I
Speaker 1: think some of the bureocracy and things that were difficult
Speaker 1: to operate, they have been doubt what they can be improved,
Speaker 1: and everybody knows. I think the broader context here though,
Speaker 1: is is you know, global trade in and if you
Speaker 1: go back and say, if the China US situation will
Speaker 1: take longer, the questions what can resolve in the interim,
Speaker 1: And this is where, unfortunately I'm not sure what happens
Speaker 1: given the politics than the situation this week to U S,
Speaker 1: m c A and things like that, which are critical
Speaker 1: to get done. Because as much as India is a beneficiary,
Speaker 1: Mexico and Canada in a in a trade with US
Speaker 1: is a beneficiary in a sense or a way to operate.
Speaker 1: Let's make it simpler that wage scale in Mexico is
Speaker 1: actually lower than the parts of China. There's they could
Speaker 1: use the jobs. There's a lot of people can move
Speaker 1: to manufacturing there, there's already integrated manufacturing supply chains. Canada's
Speaker 1: a different situation. So I think to keep the US
Speaker 1: kind of moving forward, there are three or four things
Speaker 1: to knock out. Everybody hopes for China US, but there
Speaker 1: are a couple of things to knock out first and
Speaker 1: one of them as a U S M C A.
Speaker 1: I just don't know politically if they can push it through,
Speaker 1: even though I think both sides seem to want it,
Speaker 1: and if they could push that through, that would be
Speaker 1: good and give more time to work I think on China,
Speaker 1: so Bran I want to stick. It's something you said
Speaker 1: in the context of the meaning that you had with
Speaker 1: Prime Minister Modi, which is clearly CEOs are stepping into
Speaker 1: a brighter and maybe higher expectation type spotlight. We hear
Speaker 1: it over and over again. Do you feel a greater
Speaker 1: responsibility now, especially given what's going on in Washington, in
Speaker 1: London and capitals around the world, to speak out both
Speaker 1: on your own issues related to business but also social
Speaker 1: issues in the end of day especially our company has
Speaker 1: been around for two d and thirty plus years and
Speaker 1: so we've been around through all kinds of fun stuff
Speaker 1: if you think about it. But but the rounity is
Speaker 1: our job is to produce profits and make progress. So
Speaker 1: much society needs to do and so the idea of
Speaker 1: the purpose statement by the b r T, the work
Speaker 1: I do that we all do with the National Business
Speaker 1: Council and the world economics form leadership for years. The
Speaker 1: ideas we have to have companies can do both produce
Speaker 1: a great profit and make sustainable to make progress on
Speaker 1: the STGs. And so I think all of CEOs agree
Speaker 1: with that. And I so the attribute where people say
Speaker 1: we're speaking out publicly on an issue generally comes from
Speaker 1: the need on that second, but it also reverberates the first.
Speaker 1: If you have teammates working for you, and you went
Speaker 1: what we went through the last five or six years
Speaker 1: on Post Nightclub Charleston, Vegas, Houston, Parkland, and you had
Speaker 1: teammates in every one of the situations that led our
Speaker 1: team to say we ought to take a stand on something.
Speaker 1: It was not because we need to go out and
Speaker 1: make some policy statement. It was because if you think
Speaker 1: about to have great teammates to make that profit you
Speaker 1: have to make, you have to protect. On HB two,
Speaker 1: which was a North Carolina issue about we had to
Speaker 1: come out because it was our headquarters town are people
Speaker 1: would not travel there and so well, people are thinking
Speaker 1: this is about you know, me or something. It's not.
Speaker 1: It's about we have to represent the two hundred thousand
Speaker 1: teammates that five or six hundred thousand people in their
Speaker 1: families and ensure them well and pay them well. But
Speaker 1: also we need them to be six us well and
Speaker 1: to produce great profit and sustain progress on the STGs.
Speaker 1: And that and is a key. So let's continue our
Speaker 1: conversation with Blackstone Group, Steve Schwartzman, Brian moynihan from Bank
Speaker 1: of America, and Ann Mahindra from the Mahindra Group. This
Speaker 1: time around we hear from Steve Schwartzman addressing some of
Speaker 1: the criticisms of private equity. Private equity industry is comprised
Speaker 1: of a lot of different firms and but basically what
Speaker 1: we do is leaving other asset classes like real estate aside. Um,
Speaker 1: we buy companies and we try and make them grow
Speaker 1: faster because when you exit, you get to hire multiple
Speaker 1: for higher growth uh and and to do that, you
Speaker 1: have to invest in these businesses. They just don't grow
Speaker 1: faster because it's in your interest. So you put more
Speaker 1: capital in them. Uh and you come up with good
Speaker 1: strategies uh and you you drive growth. So when you
Speaker 1: own businesses, you typically need more people uh and and
Speaker 1: so um, this is sort of a virtuous circle. Uh
Speaker 1: And you know, from a financial risk perspective. Um, you know,
Speaker 1: we went through the global financial crisis, and private equity
Speaker 1: firms didn't didn't you know, have financial difficulties more than
Speaker 1: other kind of companies. So so so on the downside, Um,
Speaker 1: the industry hasn't really created much difficulties. UM. On the upside,
Speaker 1: you learned typically for your investors who were pension funds,
Speaker 1: the regular people, they're the fireman, the government employees, the
Speaker 1: corporate employees. You may double the stock market indexes. So
Speaker 1: so basically this is a really good model. Uh. In
Speaker 1: the nineteen eighties. Uh, it wasn't so much like that
Speaker 1: in the eighties. There were only a few firms and
Speaker 1: prices were so low in the eighties that you could
Speaker 1: buy something and just cut costs, uh, layoffs some people
Speaker 1: and you were successful. That world is just gone. With
Speaker 1: the kind of higher prices that you have to pay
Speaker 1: to buy anything today, you just can't be successful doing that.
Speaker 1: You you must grow your way out of uh, you know,
Speaker 1: the creation price and and so I think there's some
Speaker 1: leftover perceptions. They are also an occasional high profile type
Speaker 1: of situation, whether it's in the retail business. But but
Speaker 1: you must look at retail generally and Brian would know
Speaker 1: more than I do. But retail has been with the
Speaker 1: disintermediation of the Internet. The number of retail companies that
Speaker 1: have gone busted are huge. The same way, you could
Speaker 1: get a private equity company that owns a newspaper that
Speaker 1: was in this political treatise that one of the candidates
Speaker 1: came up with, what's happened to newspapers? I mean, the
Speaker 1: vast majority of them have gotten into trouble. So you
Speaker 1: can take one example and and make something out of it.
Speaker 1: But but just to give you context, right, there were
Speaker 1: sixty six There were roughly a hundred and fifty one
Speaker 1: million jobs in the United States. Uh. Sixty six million
Speaker 1: people change jobs in a given year. Right. US economy
Speaker 1: is unbelievable dynamic. The number of people who were fired
Speaker 1: in the United States was twenty one million. The number
Speaker 1: of total jobs in the private equity owned companies is
Speaker 1: eleven million. So when you look at the massive amount
Speaker 1: of companies, where do you get those twenty one million
Speaker 1: people who lost their jobs. It's not from private equity.
Speaker 1: It's a very small part of the whole economy. So
Speaker 1: so this this argument, it is wrong. UH, and it's
Speaker 1: sort of pyramids, mistake on mistake, and I think there's
Speaker 1: there's an ideology that goes with it, and also terrible
Speaker 1: marketing on the part of the private equity firms. You
Speaker 1: have to give them a d H for not being
Speaker 1: able to explain this. This is pretty simple explain what
Speaker 1: you're doing. So, because of where we are and all
Speaker 1: the discussions that we've had at this summit about climate
Speaker 1: and sustainability, I think it's fair to say that when
Speaker 1: we look back on this week, even this very newsy week,
Speaker 1: the star and I apologies to all of you, is
Speaker 1: going to be a sixteen year old Gretta Fundberg her
Speaker 1: statement about what the world is doing or not doing
Speaker 1: related to climate change. I'm just going to quote what
Speaker 1: she said to the heads of state. People are suffering,
Speaker 1: people are dying. Entire ecosystems are collapsing, where at the
Speaker 1: beginning of a mass extinction, and all you can talk
Speaker 1: about is money in fairy tales of endless economic growth.
Speaker 1: How dare you that's memorable? Is she right? Are we
Speaker 1: not doing enough as governments and as companies to really
Speaker 1: face this and our corporate leaders at least and non listening.
Speaker 1: I think they were. I was very pleasantly surprised to
Speaker 1: see the number of people who showed up at the
Speaker 1: climate events, the CEOs who signed up wearing that large,
Speaker 1: ungainly badge about the one point five degree ambition. That's
Speaker 1: not a pretty badge. So where that itself was not
Speaker 1: a fashion state, not a fashion statement. But people are committed,
Speaker 1: and you know, my I've had one statement I make
Speaker 1: about sustainability, and I've been repeating it with monotonous regularity.
Speaker 1: I don't really intend to get into the debate of
Speaker 1: whether climate change is real, who is the guilty party,
Speaker 1: who has not done it? Has the West polluted? Should
Speaker 1: the West be paying and India only benefit fitting? Should
Speaker 1: we be getting money? I stay out of that. My
Speaker 1: statement is it's very simple. This is the biggest profit
Speaker 1: opportunity for business people in the next few decades. Why
Speaker 1: are you even me wasting time arguing about who's right
Speaker 1: who's wrong, whether it's a sixteen year old or it
Speaker 1: is the president of the US. You know, frankly, somebody
Speaker 1: asked me the other day in a podcast. They said,
Speaker 1: do you have a message for governments and do you
Speaker 1: have a message for other companies? I said, yes, I
Speaker 1: do a little tongue in cheek, and I said to governments,
Speaker 1: I would say, please, don't fight climate change, don't invest
Speaker 1: in innovative technology. Let India do it. Let us get
Speaker 1: ahead of the game, and then you come in after
Speaker 1: we've put ourselves right on the top. And to my
Speaker 1: fellow company people in business, I would say, climate change
Speaker 1: isn't real. Just stay out of the game. Keep arguing
Speaker 1: with the sixteen year old girl. We are making money
Speaker 1: at everything we've done in renewables. Let Mahindra Group go out,
Speaker 1: they clean up the opportunities. You come in later. Because
Speaker 1: to me, the point I was making was this is
Speaker 1: a few tile and we are just creating almost a
Speaker 1: media created sensation of villain victim. And frankly, the winners
Speaker 1: are everybody because everything our group has done in sustainability
Speaker 1: has actually made money and the businesses we've started in
Speaker 1: the last five years are amongst the fastest going waste
Speaker 1: of energy solar. Why are we even wasting time on arguments?
Speaker 1: We agree? I'd agree that the time, the debate, the
Speaker 1: debate and arguments of what's going on scientifically and stuff
Speaker 1: are just don't help. And I agree that, but the
Speaker 1: non yeah, the reality is we have to make progress,
Speaker 1: and we have to make a lot of progress. It
Speaker 1: costs about two trillion dollars a year. UH is the
Speaker 1: estimate for the environmental part of the STGs six trillion. Overall.
Speaker 1: All the charity world's eight hundred billion a year. The
Speaker 1: US government budgets only four trillion a years. So there's
Speaker 1: only no government's going to solve this, and no charity
Speaker 1: is going to solve it. Who's going to solve it
Speaker 1: is capitalism and driving the change. So in a lot
Speaker 1: since two thousand seven to two thousand nineteen, we did
Speaker 1: a hundred twenty five billion dollars of stuff around the environment.
Speaker 1: In the next seven years ten years will do another
Speaker 1: three billion. That is you know green bonds. That is
Speaker 1: we're carbon neutral in twenty not five years from now.
Speaker 1: We're carbon neutral next year. UM. It is solar installations
Speaker 1: across the country of India, solar installations across UH, the
Speaker 1: Prologes warehouses of the United States, is a wind farm financing.
Speaker 1: There's a tremendous business opportunity, but it's time for capitalism
Speaker 1: to come to drive it because that's where the money
Speaker 1: will be. And so it's how we operate as a company,
Speaker 1: and all of us have companies you operate and driving
Speaker 1: them to carbon neutrality and making that commitment. It's how
Speaker 1: we then finance the build out. And it's the last
Speaker 1: part is the keeping and non mentionedance. We can't be
Speaker 1: in the western developed countries. We cannot be of a
Speaker 1: sort that we will not allow other countries to have
Speaker 1: the energy that they need to have to develop. We
Speaker 1: have to produce the right energy form that it was
Speaker 1: sustainable energy for all from the last two and a
Speaker 1: Secretary General where they figured out a plan and how
Speaker 1: much it costs. That is the critical thing is we
Speaker 1: can't be arrogant in the West or developed countries and
Speaker 1: say hey, you can't have the power. We have to
Speaker 1: sit there and say we will get you the power
Speaker 1: the right way. And that that is where we really
Speaker 1: got to watch what's going on with coal and other
Speaker 1: things in somebody these ecoutent We have to provide the replacement.
Speaker 1: EVA cost us all money, but I think the business
Speaker 1: opportunity actually takes care of it. That goes back to point.
Speaker 1: You can produce a profit and you can make the goals.
Speaker 1: And if you look at what we've done and this
Speaker 1: is this has become a large business force. And you
Speaker 1: know you asked about is greater right again about saying
Speaker 1: you're just focusing on money, I would just say, Greta,
Speaker 1: let it be about money. Don't make it about either,
Speaker 1: or you've got to dish that dichotomy. So the only
Speaker 1: arguments both. It's because she's making it sound like give
Speaker 1: up your ways of making money and what are you
Speaker 1: about the environment. I'm saying the real power is not that,
Speaker 1: So she is wrong. I'm saying, be a businessman, you're
Speaker 1: showing us the money. There is money there, and the
Speaker 1: pursuit of profit and capitalism is in fact one of
Speaker 1: the answers to this solution. So I would argue with
Speaker 1: her if I met her, that don't make it so
Speaker 1: you know, black and white, that CEO and Chairman of
Speaker 1: Blackstone Group, Steve Schwartzman, CEO and chairman of Bank of America,
Speaker 1: Brian moynihan, and Ann Mahindra, chairman of Hinder Group, and
Speaker 1: really a wide ranging conversation we had with them. We
Speaker 1: had a lot of fun, more fun maybe than people
Speaker 1: thought we would. It's such a serious discussion, but these
Speaker 1: guys surprisingly optimistic about the state of the world. That
Speaker 1: was certainly my takeaway. It was a wide ranging conversation.
Speaker 1: We talked about a lot of things, had some fun
Speaker 1: with these individuals, some great perspective on some of the
Speaker 1: troubles that America has certainly got on through its history.
Speaker 1: Some of these companies who have been around for two
Speaker 1: hundred years, like Bank of America, what it has had
Speaker 1: to deal with over its lifetime and how it's still survived,
Speaker 1: some great perspective, and can hear all of it on
Speaker 1: our Bloomberg Business Week Extra podcasts. And one of the
Speaker 1: big themes, obviously of the event is that it was
Speaker 1: all about looking at climate change. Certainly, the UN General
Speaker 1: Assembly address that issue as well, and so the conversations Jason,
Speaker 1: of course, we're saying we can address the concerns about
Speaker 1: climate change as well as run businesses and make investments.
Speaker 1: They don't have to be one or the other. We
Speaker 1: can do them hand in hand well, and a non
Speaker 1: Mahindra making that point very clearly, essentially saying this is
Speaker 1: one of the biggest opportunities we have before us. It's
Speaker 1: something he's investing heavily in in the renewable space. Jason.
Speaker 1: One of the things that I really took away from
Speaker 1: the event, and of course we had Indian Prime Minister Modi.
Speaker 1: They're really making a pitch saying India is open for business.
Speaker 1: But I do wonder in this time, when there's so
Speaker 1: much tension between the United States and China over trade policy,
Speaker 1: whether or not we're starting to see a shift in
Speaker 1: terms of where we might see manufacturing collaboration between businesses
Speaker 1: and looking at maybe the Indian market as as a
Speaker 1: place to really open up shop or do more business there. Well,
Speaker 1: we certainly put the global in global business for him,
Speaker 1: as you said, with so many heads of state and
Speaker 1: world leaders who think about the entire planet, and Brucelett
Speaker 1: is a great example of that. He's going to have
Speaker 1: about five hundred billion dollars in assets undermanaged. That that's
Speaker 1: half a trillion dollars once he combines Brookfield with oak Tree.
Speaker 1: That's coming up in the coming week. So we talked
Speaker 1: about Brexit, we talked about how the trade war is
Speaker 1: affecting what he's doing. But we actually caught up with
Speaker 1: John Gray. He's the president and CEO of Blackstone, so
Speaker 1: he's Steve Schwartzman's successor. Here's that conversation, just jumping into
Speaker 1: what feels like the big question right now, which is
Speaker 1: cautious businesses optimistic consumers. Help me understand. Is there a disconnect,
Speaker 1: is there a lag what's going on? Well, I think
Speaker 1: what you're seeing is you've got some uncertainty in the world.
Speaker 1: You certainly have some friction from the China trade, You've
Speaker 1: got the Brexit situation, and you just have some geo
Speaker 1: political concerns that are making everybody nervous. Businesses are responding
Speaker 1: by pulling back a bit. You see that in manufacturing,
Speaker 1: industrial data, capital investment, and you're beginning to see that
Speaker 1: in earnings from companies. So that's one side of the equation.
Speaker 1: On the other side of the equation, the consumers actually
Speaker 1: doing pretty well around the world, particularly here in the US.
Speaker 1: So I was talking to a friend about what I
Speaker 1: think of as the three threes, which are we have
Speaker 1: three point seven percent unemployment, wages are growing north of
Speaker 1: three percent, and home prices are growing north of three percent.
Speaker 1: So if you think about the consumer, they have a job,
Speaker 1: wages are going up, and the biggest assets appreciating in value.
Speaker 1: And that's why you see this bifurcation. So I'd say,
Speaker 1: when you add it together, I think what it leads
Speaker 1: to is not a recession, but a slowdown in growth globally,
Speaker 1: which is what we're experiencing. And so how much does
Speaker 1: it slow down? And when are we in that now?
Speaker 1: I think we're in that now. It's hard to say.
Speaker 1: The good news is central banks have decided, you know,
Speaker 1: that they're going to lower rates and continue to stimulate,
Speaker 1: which has helped soften the blow a bit. And it's
Speaker 1: possible that some of these issues like China trade or
Speaker 1: Brexit get resolved, which would take a little bit of
Speaker 1: this uncertainty away. I think as investors, though, you don't
Speaker 1: want to get too caught up in sort of the
Speaker 1: heat of the moment. You want to try to take
Speaker 1: a longer term view. So where are you spending money?
Speaker 1: I know your investors are asking you that every time
Speaker 1: they get on the phone with you. Where you to
Speaker 1: playing capital? You've got five plus billion dollars in assets, Well,
Speaker 1: that is the big question. I think in this point
Speaker 1: in the economy, where you have slow growth, you also
Speaker 1: have pretty high multiples. Right the low rate of interest rates,
Speaker 1: it's created expanded multiple So you have to be cautious
Speaker 1: on where you invest. What we're looking at our places
Speaker 1: where technology is creating a lot of change and where
Speaker 1: they're really in the path of growth. Industries in the
Speaker 1: path of growth, so globally and logistics, we've talked about
Speaker 1: it before. We've been the big buyer of warehouses around
Speaker 1: the world. Probably bought seventy billion dollars on the simple
Speaker 1: premise that goods are moving from physical retail to online retail.
Speaker 1: We're doing things around content creation as a result of
Speaker 1: the cost of distribution of media coming down. You want
Speaker 1: to service that industry software as a solution. Things migrating
Speaker 1: to the cloud. We bought a big business that does
Speaker 1: things in the human resource area online um India another
Speaker 1: area that's benefiting from I T services. So I think
Speaker 1: as the global economy transform, even though the overall growth
Speaker 1: rate isn't that high, trying to find those industries and
Speaker 1: sectors that have the wind at their back is really important.
Speaker 1: So you a net buyer are you a net seller
Speaker 1: at this point across all of your empire? You know,
Speaker 1: I would say it's a bit of both. I wouldn't say,
Speaker 1: you know, there's one clear path. I think when we
Speaker 1: find businesses that have stabilized and sort of our buy
Speaker 1: it fixed itsel at approach we exit. On the other hand,
Speaker 1: there are plenty of things that we still have conviction
Speaker 1: in and we hold. So you're seeing us sell, but
Speaker 1: at the same time deploy a lot of capital. We
Speaker 1: put out fifty six billion dollars of capital in the
Speaker 1: last twelve months, so we're still finding interesting things. I
Speaker 1: would say it's more selective and it tends to be
Speaker 1: in larger situations. Uh thirty seconds to go real estate.
Speaker 1: How are you feeling, especially in the United States, residential
Speaker 1: and commercial? I would say okay. The headwind is that
Speaker 1: prices are high, multiples are high for real estate, the
Speaker 1: economy slowed. The good news is that supply is pretty
Speaker 1: limited and rates remain low. I think again, you've got
Speaker 1: to focus on where do you see better growth, So
Speaker 1: West coast of the United States, more technology, more job creation.
Speaker 1: Warehouses again another area as opposed to retail, and then
Speaker 1: rental housing. The shortage of new home construction has led
Speaker 1: to strength and rental housing and single family homes. And
Speaker 1: that's John Gray, the president and CEO of the Blackstone Group,
Speaker 1: And what I liked about him is a little bit
Speaker 1: rapid fire. We're just trying to get so much done
Speaker 1: on that day, but basically weighing in on what businesses
Speaker 1: are thinking, what consumers are thinking, and essentially what investors
Speaker 1: are asking, which is how us and and all that money? Yeah, exactly,
Speaker 1: But he does see the economy slowing, so it's interesting
Speaker 1: to hear his perspective on that. So heads of state
Speaker 1: interacting with big global investors. One great example of that
Speaker 1: Bruce Flat He is the CEO of Brookfield. They are
Speaker 1: about to combine with oak Tree and that will make
Speaker 1: them really Blackstone in an interesting twist, they're going to
Speaker 1: have about half a trillion dollars in assets under management
Speaker 1: of their own. Yeah. Talk about perspective right in terms
Speaker 1: of what they're overseeing. Here's that conversation. So as you're
Speaker 1: moving around, not just this event, but around New York City,
Speaker 1: they're talking to a lot of heads of state, a
Speaker 1: lot of investors. It's a world of instability. It feels
Speaker 1: like fair to say, but how does it feel to
Speaker 1: a big investor. Look, I'd say politically many countries are
Speaker 1: up in the air and uh and and pretty extreme
Speaker 1: politics in those places. But on the ground, in business,
Speaker 1: actually it's pretty constructive. Most countries of the world are
Speaker 1: doing okay, and UH. As value investors, we look for
Speaker 1: places where you can put money for a long term,
Speaker 1: you can make decent returns in the fullness of time,
Speaker 1: and UH instability sometimes brings opportunity, so you just need
Speaker 1: to think long term in these situations. Well, let's talk
Speaker 1: about those opportunities, because, as you say, maybe some of
Speaker 1: this uncertainty drives valuations down, because valuations have been pretty high.
Speaker 1: It feels like for the past couple of years. Are
Speaker 1: you seeing that yet? Well not in in the in
Speaker 1: the developed markets, valuations are still high. So so our
Speaker 1: focus is special situations in those places. UM. But you
Speaker 1: know Europe is being driven by interest rates that are
Speaker 1: really low today. UM. India has uh UM a situation
Speaker 1: where the financial system needs capital, so there's a lot
Speaker 1: of opportunity there. In China, we're seeing more opportunities because
Speaker 1: of just the de leveraging going on in the country,
Speaker 1: and that's a positive and it creates opportunity. All right,
Speaker 1: So you mentioned China US China trade. Obviously, top of
Speaker 1: mind continues to be how does that play through, if
Speaker 1: at all, into your investments or into your thesis about
Speaker 1: the world. So our our business is about UM buying
Speaker 1: real things, real assets. We buy pipelines, toll roads, real estate,
Speaker 1: renewable power plants, and and their local investments in every country.
Speaker 1: So we're in thirty five countries in the world, but
Speaker 1: we're a local investor in every single country, So it's
Speaker 1: not Trade doesn't really affect on the margins. It does
Speaker 1: if it affects the country's economy. It obviously affects investments
Speaker 1: of effect, hits currencies, it affects your investment as a
Speaker 1: global investor. But we're on the ground investors, so trade
Speaker 1: isn't as important to us. Do you worry as someone
Speaker 1: who has to think about the whole world of the
Speaker 1: implications of a decoupling between the US and China or
Speaker 1: does that just mildly change what the landscape looks like? Look,
Speaker 1: I'd say again, as a long term value group, Um,
Speaker 1: we try to find great places in the world which
Speaker 1: have rule of law, functioning systems, respect for capital, operate
Speaker 1: with standards that we can operate with. We like to
Speaker 1: go there, and we invest for long periods of time. Yes.
Speaker 1: Does all do all these things affect us? Yes, in
Speaker 1: the short term. In the long term, not really. So
Speaker 1: let's talk about one specific local national situation, that's Brexit.
Speaker 1: You're a big landowner and in a big landlord I
Speaker 1: should say they're in London. Canary Wharf obviously has been
Speaker 1: a big project. You got a lot invested there. How
Speaker 1: does that play through? We do um, business has been
Speaker 1: good since Brexit happened. Every day that this gets extended
Speaker 1: and nothing happens, fewer decisions get made, and that's not
Speaker 1: helpful for business. In the fullness of time. I think
Speaker 1: just getting something resolved will be a good thing for everyone.
Speaker 1: And London is going to be a center of commerce
Speaker 1: for a long time and we just need a We
Speaker 1: just need a solution to it, that's all. Do you
Speaker 1: feel like, uh, folks are making or putting off decisions,
Speaker 1: you know, people who would be leasing from you or
Speaker 1: putting off decisions. Look, we had one building. Brexit happened.
Speaker 1: It was least it opens this month. It's a percent
Speaker 1: least at the rents we thought. So people make decisions.
Speaker 1: It takes longer and right now, why would you make
Speaker 1: a decision in this month, so you'll wait. But people
Speaker 1: do make decisions, they have to. Business goes on, life
Speaker 1: goes on, and when you think about the infrastructure of
Speaker 1: possibilities that are out there right now. That's clearly on
Speaker 1: the minds of a lot of people here in the
Speaker 1: guise of sustainability and where those sorts of investments are happening.
Speaker 1: You mentioned renewables. How has your strategy evolved even over
Speaker 1: the past few years in terms of the types of
Speaker 1: infrastructure deals you might be doing. Yes, so in renewables,
Speaker 1: where the I think the largest private owner of renewables
Speaker 1: in the world. We've always believed in it. We were
Speaker 1: a large hydro owner for many decades. Uh in the
Speaker 1: last ten years we've pushed in wind and solar and
Speaker 1: will continue to do that because we think it's it's
Speaker 1: for the future and and and why it's different today
Speaker 1: is that it's actually economically feasible to do it without
Speaker 1: without subsidies. Therefore, we're putting a much much more emphasis
Speaker 1: on that. Infrastructure in the world, though, is going to
Speaker 1: go and go into private hands. Governments are indebted, they
Speaker 1: need to provide services to their people, and more and more,
Speaker 1: and every country will be different, but more and more
Speaker 1: infrastructure will be funded by private by private entities, and
Speaker 1: we're one of them that can um put capital together
Speaker 1: for that. You've got a lot of big investment partners
Speaker 1: around the world who commit hundreds of billions of hundreds
Speaker 1: of millions, I should say, ultimately, and in the hundreds
Speaker 1: of billions that you've collected, what's their mood right now?
Speaker 1: If you can generalize across the big institutional investors, you know,
Speaker 1: I just say that everyone in the world is thinking
Speaker 1: about and especially people with large sums of money. UM.
Speaker 1: Japan went negative ten years ago, Europe to just gone negative.
Speaker 1: What that means is that there's only one place to
Speaker 1: get returns in sovereign credit, and that's in the United States.
Speaker 1: And that's obviously been pushing the yield curve UM down
Speaker 1: on the back end, but increasingly people are needing to
Speaker 1: put money into alternative to that, and it's just pushing
Speaker 1: money into credit. It's pushing money into alternatives, and that
Speaker 1: is going to keep happening UM going forward. If interest
Speaker 1: rates at this level. You mentioned credit, you're about to
Speaker 1: combine officially close the deal with oak Tree that combination.
Speaker 1: What should we expect in the near term in terms
Speaker 1: of the opportunities that that presents. Well, we've announced closing.
Speaker 1: It's on Monday. UM. We're excited and thrilled to partner
Speaker 1: with Howard Marks and Bruce carshon their team. They're going
Speaker 1: to run the business. We're gonna help them in any
Speaker 1: way we possibly can. We think it's an added benefit
Speaker 1: to our institutional clients to offer their products UM and UH.
Speaker 1: And in the world we're in where UM low rays
Speaker 1: are pushing money into alternatives I think are general private equity,
Speaker 1: real estate, infrastructure, franchise will benefit and and now we
Speaker 1: have a credit offering to add to that. That's Bruce Flat,
Speaker 1: CEO of Brookfield Asset Management. So Jason, Uh. You know,
Speaker 1: it's interesting because Brexit certainly has been in the headlines
Speaker 1: this week, and you guys talked about that. We talked
Speaker 1: a lot about it, in part because they've got a
Speaker 1: lot at stake there in London. They're a huge landowner
Speaker 1: and landlord and obviously they're looking far beyond that as well.
Speaker 1: As interesting, Bruce participated later on in the day in
Speaker 1: a panel with former President Bill Clinton and the current
Speaker 1: president of Columbia because he's a big asset manager in
Speaker 1: that country as well. So this guy's got the world
Speaker 1: on the string. Obviously, Jason, many leaders over at the
Speaker 1: Global Business Forum, but we also caught up with some royalty.
Speaker 1: We're talking about Queen Maxima of the Netherlands. She is
Speaker 1: the u N Secretary General's Special Advocate for Inclusive finance
Speaker 1: for development Well, and what I found so fascinating about
Speaker 1: catching up with her was this notion that we talked
Speaker 1: about developing markets all the time, but in developed markets,
Speaker 1: this notion of equality and inclusion is just as important.
Speaker 1: Here's that conversation. I feel like this is an important
Speaker 1: issue financial inclusion, because I do feel like in a
Speaker 1: world where there are it seems like a lot of
Speaker 1: inequalities being left out kind of of the financial framework
Speaker 1: and being left behind. That's a big deal that really
Speaker 1: changes your outcome in life. Absolutely. And you know, when
Speaker 1: I started doing this job, you know, everybody thought it
Speaker 1: was only for developing markets, and it's also for developed economies.
Speaker 1: I mean, we're talking about financial health is we're talking
Speaker 1: about sort of financial products that will really help you
Speaker 1: invest in your future, protect yourself like jokes in the
Speaker 1: case of a divorce or a death of a family member,
Speaker 1: but also you know, to be able to sort of
Speaker 1: go around the daily cashlow necessities of lives. Of course,
Speaker 1: the needs of an American city will be very different
Speaker 1: to a Nigerian citizen. Um, but it is extremely necessary.
Speaker 1: Is something that is universal. It helps you improve your income,
Speaker 1: it helps create jobs, it helps you get better education
Speaker 1: and say for that education have access to better health
Speaker 1: and also you know in general helps the economy and
Speaker 1: improve your income. So um, yeah, very good. Well, and
Speaker 1: it's important that you're here in many ways at the
Speaker 1: global business for them, because it feels like you need
Speaker 1: obviously the buy in as it were from heads of
Speaker 1: state and governments, but you also really need the buy
Speaker 1: in of corporate leaders as well. Tell us about the
Speaker 1: response you've gotten from the the corporate side around this issue.
Speaker 1: It's very good that you say that you differentiate, you know,
Speaker 1: sort of basically have to get the buy in other
Speaker 1: governments and the regulators because without the good regulation environment
Speaker 1: and without some help sometimes of the government, um, it
Speaker 1: will not be possible to make this true. Not at
Speaker 1: the same time, this can only be done by the
Speaker 1: private sector. I mean, this is not cr this is
Speaker 1: a business. It's just we have to make it make
Speaker 1: sense to make this a business also to giving it
Speaker 1: to poor people. So for that is very important to
Speaker 1: actually have innovation and partnerships and thinking the business in
Speaker 1: a different way. And that sense, technology has been a
Speaker 1: very important role. You know, we're not talking about having
Speaker 1: a bank branch, you know, going into somewhere rural Ghana
Speaker 1: to do this big forever. Yeah, you would never be
Speaker 1: financially sustainable. So today we have so many people with
Speaker 1: a mobile phone, but they don't have a bank account,
Speaker 1: so we could actually reach them with a bank account
Speaker 1: just in the phone and they can actually make transfers,
Speaker 1: they can say, they can see how much they've saved,
Speaker 1: you know, have an insurance, make the claim on the insurance. Oh,
Speaker 1: with the little power you have in your hand, and
Speaker 1: that has really made a big difference. Now we see
Speaker 1: for example, in Kenya, I mean a huge amount of
Speaker 1: people twenty one million people have now a mobile account
Speaker 1: and that it's done, We're done by a telecom operator.
Speaker 1: So that is one private sector that actually do a
Speaker 1: huge work for financial inclusion. Banks have actually done a
Speaker 1: huge and financial inclusion. So I think that the private
Speaker 1: sector is essential to actually make this come true. And
Speaker 1: the one thing that we do see is that we
Speaker 1: need to have dialogue between regulators and innovators in this
Speaker 1: financial sector arena so that you know, we can actually
Speaker 1: make this happen, because otherwise it's not gonna happen. I
Speaker 1: thought it was interesting to Bob Iger of the Watersney
Speaker 1: Company was here at one of the panels and making this.
Speaker 1: You know, he was asked about, you know, doing business
Speaker 1: in different countries, and because I don't really think of countries,
Speaker 1: I think of cultures, and I do think about looking
Speaker 1: at a particular area, thinking about the people, you know,
Speaker 1: very individualized in terms of maybe how what kind of
Speaker 1: financial systems they need. And I'm assuming that you're you
Speaker 1: guys are looking at that and trying to figure out
Speaker 1: what makes sense in a different or specific region around
Speaker 1: the world. Now, absolutely, if you look at India, for example,
Speaker 1: I mean, yeah, that's a host that's a huge market,
Speaker 1: so you can actually have a lot of competitors, so
Speaker 1: you can have a little systems running, you know, alongside
Speaker 1: of each others. To actually have a scalable, you know,
Speaker 1: sector in very small countries, probably a lot of the
Speaker 1: public goods or of payment systems have to be common
Speaker 1: because not one company will be able to afford to
Speaker 1: make such a big investment. Because a vaseball market, if
Speaker 1: you have, want to have a competitive so one size
Speaker 1: does not fit all, but we do know certain things
Speaker 1: and the one thing that we always have to have
Speaker 1: is that the regulatory framework is prone to innovation that
Speaker 1: actually speaks to companies, so that you know, they can
Speaker 1: readjust innovation, um the regulation to innovation. And at the
Speaker 1: same time, all these new technologies have fantastic opportunities, but
Speaker 1: they also have new risks. The data privacy breaches, they
Speaker 1: could be exclusion from algorithms that actually exclude more to include.
Speaker 1: You could actually have cybersecurity attacks. They need of actually
Speaker 1: have very interoperable systems. They need to have ideas that
Speaker 1: are digital and unique and biometrical. So all these issues
Speaker 1: need to be taught between the public and the private
Speaker 1: sector in order to make this sort of sustainable not
Speaker 1: on the financial time in the private sector, but also
Speaker 1: from the consumer perspective. And that's Queen Maxima of the
Speaker 1: Netherlands so impressive. She's been working on this for a
Speaker 1: number of years. This is not a fly by night
Speaker 1: assignment for her. She's really gone deep and she's there
Speaker 1: every year at the Global Business Forum, engaging with not
Speaker 1: only her fellow world leaders but also heads of companies
Speaker 1: because they've ultimately got to be a big part of
Speaker 1: the solution. Well, one of the major themes of the
Speaker 1: Global Business Forum is all about public private partnerships, and
Speaker 1: she approaches financial inclusion from that perspective, who she can
Speaker 1: work with, who she can bring together to get this done.
Speaker 1: One of the big corporate leaders at the Global Business
Speaker 1: Forum Carol was Carlos Brito Burrito is what everybody calls
Speaker 1: him inside the company and around the world. They've got
Speaker 1: a global footprint, of course, and from the perspective of sustainability,
Speaker 1: he's very practical because what he says is no water,
Speaker 1: no beer. Here's that conversation. So Carlos, here at the
Speaker 1: Global Business Form we're obviously taking a huge amount of
Speaker 1: out sustainability. Where is the rubber really meeting the road
Speaker 1: for you? What are the numbers that you can share
Speaker 1: with surround how that manifests through a B N Beth Well,
Speaker 1: great question because we often say it because it is
Speaker 1: the case that sustainability is not just a part of
Speaker 1: our business, and add on it is our business. Sustainability
Speaker 1: is our business. Reasons very simple. Without water, there's no beer,
Speaker 1: without healthy farming, in quality farming, there are no raw materials,
Speaker 1: and without communities that are environmentally sound, I cannot get
Speaker 1: those materials from. So for us, stainability has always been
Speaker 1: front and center in our business. For example, the importance
Speaker 1: of water is on the main raw material nine beers water,
Speaker 1: So I mean it's very important for us to guarantee
Speaker 1: um source UM that's uh, that's of high quality, that
Speaker 1: has constant availability, so it can place assets closal sources uh.
Speaker 1: So for beer, water has been some thing that's always
Speaker 1: in our mind. And most of the water that we
Speaker 1: consume is not really in the four walls of our brewery.
Speaker 1: It's in the egg business and bigger culture what we
Speaker 1: draw the raw materials from. That's why we have a
Speaker 1: big connection with the farmers we've always had, and more
Speaker 1: and more with technology, trying to exchange best practice given
Speaker 1: your type of soil, your microclimate, your kind of seed.
Speaker 1: One went to water, went to harvest, went to seed.
Speaker 1: Because those things make a huge difference on the impact
Speaker 1: or not that you have on the natural sources are
Speaker 1: you're using, and has it changed sort of where and
Speaker 1: how you spend money from a CAPEX perspective in terms
Speaker 1: of going after those sustainability goals that you've set out
Speaker 1: well within the four walls of the brewer. There's a
Speaker 1: lot of technology that has allowed us, for example, in
Speaker 1: the last ten years, to reduce the consumption of water
Speaker 1: by up for leader of beer produced, So that's huge.
Speaker 1: On the field, it's much more about things that we've
Speaker 1: that have always been part of has always been part
Speaker 1: of our business, like seed development that are more resistant
Speaker 1: to this kind of microclimate combination with soil. But it's
Speaker 1: more about best practice sharing. It's more about being closer
Speaker 1: to farmers. So it's sometimes in some of Morgian markets,
Speaker 1: more about training farmers so they go from subsistence levels
Speaker 1: sometimes to a commercial level and they get more yields
Speaker 1: from the same acreage that they that they manage. All Right,
Speaker 1: talk to me about the global consumer right now, because
Speaker 1: it feels like businesses overall, if I had to generalize
Speaker 1: or a little bit cautious, we've got a trade war
Speaker 1: going on, etcetera. And yet the consumer globally, certainly here
Speaker 1: in the United States, feels very healthy. You are at
Speaker 1: people's table, you're in the bar, you're in the restaurants.
Speaker 1: How does the consumer feel to you? Well, if you
Speaker 1: look at our half one, this year has been a
Speaker 1: very good year for US half one. And if you
Speaker 1: look at our main countries you asked, Brazil, Mexico, China,
Speaker 1: South Africa. I mean in Brazil constumers have been a
Speaker 1: little under pressure the last three or four years now
Speaker 1: getting better. South af Coast a little bit under pressure,
Speaker 1: but that was not different than two or three years ago.
Speaker 1: But in general, because we're a global business, we see,
Speaker 1: uh um, a good environment for our business. You know,
Speaker 1: it's not without challenges, but that's always the case. So
Speaker 1: we don't see that what we read sometimes in papers
Speaker 1: the other things that our production is very much localized.
Speaker 1: So a lot of these things about restrictions about trade,
Speaker 1: about the flow of goods that doesn't really necessarily affect us,
Speaker 1: always affects a little bit. But n of what we
Speaker 1: produce we sourced locally. We brew locally, we sell locally,
Speaker 1: so it's a bit different, right, So we're brewers, so
Speaker 1: we're always paying attention to what's happened to our consumer.
Speaker 1: We're not economists, so I don't have an opinion on
Speaker 1: some of the trade conversations. But if it's good for
Speaker 1: our consumers, we're happy. And what are they drinking right now?
Speaker 1: What's different? Uh new We talked about or you talk
Speaker 1: about premium is zation. Yeah, so what does that actually mean?
Speaker 1: Does that translate into top line of bottom line? Well,
Speaker 1: that's very interesting because in the old days you would
Speaker 1: expect privialization to be happening in more mature markets, more
Speaker 1: developed markets. Today, primeuanization is a global phenomena because middle
Speaker 1: classes surging everywhere, especially the Morger markets. And when people
Speaker 1: you know, go from um this kind of income to
Speaker 1: this kind of income, they change habits and they start
Speaker 1: affording things that they couldn't afford before. And that's the
Speaker 1: whole idea of primutization. Primetization is a latecomer to beer
Speaker 1: when you think about wine, spirits, cars, technology, so many
Speaker 1: of the things primetization has been there forever. In beer
Speaker 1: is a more recent phenomena. But because it's recent, it's
Speaker 1: too long, long way to go. So that's the good
Speaker 1: news for beer about primumization. And it's everywhere, morgor markets,
Speaker 1: more mature markets everywhere. And how much are you developing
Speaker 1: that in the house? How much of that may come
Speaker 1: from m and A activity, Well, now mostly come from organic.
Speaker 1: We have an amazing uh full of global beers. We
Speaker 1: have Corona, we have Star dwell, we have Budweiser or
Speaker 1: Flagship Rent and those brands they travel well, they complement
Speaker 1: the child in terms of positioning, and they sell an
Speaker 1: improvement price. And that's pretty much how we built our company.
Speaker 1: It was always this idea of let's build brands that
Speaker 1: commanded premium so we can have the kind of margins
Speaker 1: we have, so we can afford and attract kind of
Speaker 1: people we have, so we can continue to not only
Speaker 1: do that, but continue to reinvest in their business organically
Speaker 1: and also from time to time in organically. Let's talk
Speaker 1: about Asia. You pulled off an i p O there
Speaker 1: after one false start, you got it out, second biggest
Speaker 1: i PO outside of Uber, only behind Uber this year.
Speaker 1: What does that tell you about that market and what
Speaker 1: does it tell us about the strategy going forward. Well,
Speaker 1: our business and Asia is an amazing business with the
Speaker 1: number one brewer, especially in the premium segment in Asia
Speaker 1: overall in China with the number three in volume, but
Speaker 1: the number one profitability by a wide margin. And that's
Speaker 1: because the premium brands will sell their commanded premium and
Speaker 1: horror margins. So the idea of the I p O
Speaker 1: has always been to establish and to create a local
Speaker 1: champion that could be a vehicle for other consolidations and
Speaker 1: other things we could do in Southeast Asia mainly. Um.
Speaker 1: And that's done now, it's in the process shares or
Speaker 1: start trading next Monday. Um And yeah. So we're very
Speaker 1: happy to be where we are. And so is that
Speaker 1: a playbook that you might use in other places around
Speaker 1: the world, say in Africa, maybe the you know, the
Speaker 1: sort of model that you set out in Asia or
Speaker 1: is this a different sort of thing. No, that's very
Speaker 1: much a mirror of what we have in Latin America.
Speaker 1: We had Latin America for many years in which we
Speaker 1: had a local champion and BATH that's listed controlled by
Speaker 1: US and m Bath was an amazing vehicle to talk
Speaker 1: and uh get the deals with local families in different
Speaker 1: countries and really expand within the region. We think that
Speaker 1: same magic could happen now in Asia. And when you
Speaker 1: think about, you know, part of the reason to to
Speaker 1: do this deal was to pay down some debt. How
Speaker 1: far along are you in the in that process and
Speaker 1: what are some other moves you might consider to to
Speaker 1: keep on that track. The main reason for the prelay
Speaker 1: was ready to create the local champion because as we
Speaker 1: said from day one, we don't need that to get
Speaker 1: to our target of being not that to be below
Speaker 1: four times by the end of the next year, but
Speaker 1: we felt we needed a local champion there to mirror
Speaker 1: what we have in Latin America. But of course the
Speaker 1: proceeds that were getting five to five plus bidden will
Speaker 1: be used of course to to pay down that, as
Speaker 1: with the proceeds that will come from the Australia sale
Speaker 1: around dollars. Got it. Uh, One last question for you
Speaker 1: when you think about the cannabis market. You and I've
Speaker 1: been talking about this for a couple of years. Now,
Speaker 1: tell me where you are and sort of testing uh
Speaker 1: that out. You've got a relationship I believe with til Red.
Speaker 1: How is that going? What do we expect to see next?
Speaker 1: Well to this day, what we have is this, we
Speaker 1: have a relationship joint venture with til Ray in Canada
Speaker 1: and for Canada only because that's where it's legal. At
Speaker 1: this point, we're only doing R and D. We're not
Speaker 1: commercializing anything. We haven't made a decision to commercialize anything,
Speaker 1: so only trying to solve some issues in terms of beverages,
Speaker 1: non acal beverages infused mainly with CBD that we're studying,
Speaker 1: but we haven't made a decision yet to go to commercialization.
Speaker 1: But again it's only for Canada where it's legal, where
Speaker 1: you can do R and d um. We're still waiting
Speaker 1: for the beverages to be legal, so we cannot do anything,
Speaker 1: not even in Canada. But it's not for the rest
Speaker 1: of the world, not for the US. Only Canada, you're
Speaker 1: seeing any impact on the sort of blooming cannabis market
Speaker 1: on beer sales at all. It's amazing enough stweet, it's
Speaker 1: too earthy to call. Well, we're following that, trying to
Speaker 1: understand the occasions, consumer needs and all that, but it's
Speaker 1: too earthy to call. We still have we still need
Speaker 1: more data points and more time to understand all the
Speaker 1: different interact that's Carlos Brito, chairman and CEO of a
Speaker 1: b in Bev. And what's interesting too, in this time
Speaker 1: of so many trade wars, it feels like in heightened
Speaker 1: trade tensions, I mean, they do a lot of their
Speaker 1: business locally, right, so that's a way of avoiding it, right,
Speaker 1: and they really do have to think about the ecosystem
Speaker 1: literally in figuratively, the land, the agriculture, the people on
Speaker 1: the ground who are actually producing their products. And that
Speaker 1: wraps up Bloomberg Business Week's weekend podcast. Thanks so much
Speaker 1: for joining us. I'm Jason Kelly and I'm Carol Masster.
Speaker 1: Be sure to tune into Bloomberg Business Week Radio Live
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