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Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jai Ley. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg in Bramer.

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Speaker 1: You write a group founder and president alongside Thomas at

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Speaker 1: Bobell Access CEO. So Thomas talked to me about this report,

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Speaker 1: what have we learned and what I've been working on

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Speaker 1: with you write a group. So we're doing this report

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Speaker 1: every year, which is basically asking many many people around

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Speaker 1: the world, what are the top risks? And since we

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Speaker 1: feel that the risk landscape has changed, we really wanted

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Speaker 1: to have a partner that is also looking at the

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Speaker 1: geopolitical dimension, because what you see is that the top

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Speaker 1: risks remained the same climate, technology, geopolitical tensions, but what

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Speaker 1: new is that they are interlinked and that there is

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Speaker 1: a very big geopolitical component to it, which makes the

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Speaker 1: combination of the two of us very interesting to understand

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Speaker 1: these risks and see what can we do with them.

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Speaker 1: Part of the risk is the financial risk. We've got

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Speaker 1: the banks coming out right now in America, you have

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Speaker 1: a massive sprawl of financial realities, and part of that

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Speaker 1: is the actual assumption is coming down all those liabilities

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Speaker 1: you about further our butter stuff against the low rate environment.

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Speaker 1: How do you take the financial risk of this study

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Speaker 1: in with the new actual assumption that's out there. The

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Speaker 1: financial risk is very much linked to the third risk,

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Speaker 1: which is the geopolitical risk because if you look and

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Speaker 1: the social risk, if you look the low interest rate

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Speaker 1: drive the fragmentation of society since uh, it is all

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Speaker 1: about the retirement of people and how they can live

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Speaker 1: going forward. Um, this touch is very much that topic.

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Speaker 1: I mean, this is heart and center. I mean, the

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Speaker 1: low economic growth, the low terminal whose we have all

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Speaker 1: comes back to populism and the social discontent you have

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Speaker 1: in this report now, I mean it's not a happy

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Speaker 1: report in the sense that we know that the geopolitical risks,

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Speaker 1: the technological risks, and the climate risks are all at

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Speaker 1: very elevated levels. But they're hitting at a time when

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Speaker 1: the economy is starting to slow really for the first

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Speaker 1: time since the largest recession we've experienced in many decades.

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Speaker 1: That that combination is going to make for a lot

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Speaker 1: of crises, mostly inside countries, mostly making it harder for

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Speaker 1: governments to respond effectively, but some across borders. And John

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Speaker 1: with you to go up and f Yesterday, I just

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Speaker 1: did a down the study of the I m F data.

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Speaker 1: Only two countries have any kind of flat up vector,

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Speaker 1: the United States and Spain. And other than that, it's

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Speaker 1: a pretty ugly synchronized growth Slowan We'll take a look

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Speaker 1: at Germany and Europe right now, it's onomably the weak economy,

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Speaker 1: the weakest link in the U sign at the moment.

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Speaker 1: And ye know to just aggressively loud Thomas speak to that.

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Speaker 1: R US. We have many people come on this program

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Speaker 1: and talk about how low rates are a problem, negative

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Speaker 1: yields or an issue. You run acca just how much

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Speaker 1: of an issue is this right now? No, it's it's

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Speaker 1: a it's a big issue for the whole industry. I

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Speaker 1: mean on our side as act, we have moved away

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Speaker 1: from financial risks quite early on, So about three or

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Speaker 1: four years ago we changed our portfolio from being eighty

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Speaker 1: percent focused on financial markets to being eighty percent focused

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Speaker 1: on technical risks, so buildings, health protection and so on.

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Speaker 1: We are less we are less touched by it now.

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Speaker 1: But when you look at the whole industry. It's a

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Speaker 1: massive issue for the industry, but also for the states

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Speaker 1: because the reaction power of the Europeans, if you're talking

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Speaker 1: about Europe towards a new crisis, will be much lower

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Speaker 1: than it used to be in two thousand night. Have

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Speaker 1: you been able to lobby the European Central Bank its all?

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Speaker 1: Have you had any discussions with policy makers? Have you've

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Speaker 1: given them your perspective on what do you think the

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Speaker 1: current monetary policy setting actually means for this business? Certainly,

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Speaker 1: but the issue is, to my mind, a different one.

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Speaker 1: The monetary policy is just a question of do I

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Speaker 1: give enough room and free space for the states to

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Speaker 1: actually pursue structural reforms. What we see today is that

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Speaker 1: many of the European states have not pursued the structural

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Speaker 1: reforms necessary, and therefore we come to an end of

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Speaker 1: the monitor of policy. Ian. Then this is the geopolitics,

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Speaker 1: and right now it's an upper we'll come back and

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Speaker 1: talk about this in our next section. Right now, have

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Speaker 1: you ever seen it like this? Are we just so

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Speaker 1: benumb that we you know, it's this thing, this thing,

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Speaker 1: this thing, this thing. Have you ever seen it like? No?

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Speaker 1: Not in my lifetime, and it's in part of it's

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Speaker 1: because inside governments you have such polarization that's really challenging

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Speaker 1: the existing institutional framework of the country to so many

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Speaker 1: countries country, but also because the U. S. China relationship

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Speaker 1: has hit a tipping point. I mean, we've had twenty

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Speaker 1: five plus year is where we haven't had to worry

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Speaker 1: about the basic geopolitical fabric of the world. That's not true.

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Speaker 1: And your Meredith Sumter has been outstanding. What is her

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Speaker 1: latest on John? I mean, I don't even know where

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Speaker 1: are you still in trade talks with China? I believe

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Speaker 1: we're still in a guy shading face. No deal is

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Speaker 1: no deal will phase one Phase A no deal is happening,

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Speaker 1: But more importantly than no deal happening, the Chinese going

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Speaker 1: increasingly their own way on technology, on supply chain, on standards,

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Speaker 1: recognizing that the future, irrespective of who the American president is,

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Speaker 1: is going to be discermined in their space by their rules.

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Speaker 1: That's not a good place to be a global investor.

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Speaker 1: We're gonna come back with Ian Bremer and Thomas Burrow

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Speaker 1: here on our five Things you Need to Know really

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Speaker 1: wrap it around their good research and report, but John,

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Speaker 1: this is breaking news. The teenager Harvey Elliott of Liverpool

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Speaker 1: banded fourteen days suspended outrage time out here for his

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Speaker 1: impersonation of Mr Kane of the Todds Gina who sponsors Liverpool. No,

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Speaker 1: I don't the gentleman sitting next to me, but I

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Speaker 1: feel like you knew that already. Are we going to

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Speaker 1: do this in the commercial break? Are we doing this live? Live?

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Speaker 1: In the next segment, Alison Williams dropped behind in charge

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Speaker 1: of all of banking analysis for Bloomberg. That's like a

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Speaker 1: ginormous job. And she has joins us right now, two madmen,

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Speaker 1: And there was the beginning of an adward of Hurts

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Speaker 1: and Avis. My amateur take is JP Morgan is Hurts

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Speaker 1: and Bank of America's Avis. What does Brian moynihan need

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Speaker 1: to do to competitively find the ratios, the stock performance,

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Speaker 1: the financial excellence of his her competitor. I think what

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Speaker 1: he's showing is that he's getting there. So so wou'd say,

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Speaker 1: you know, so JP Morgan is is executing at the

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Speaker 1: top of all the banks. They have leading profitability, right, um,

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Speaker 1: they are leaders and across all their businesses and so um,

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Speaker 1: you know to your analogy. Others, UM are sort of

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Speaker 1: on the path. I think for Bank of America, they

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Speaker 1: the positives this quarter were one expense progress and two

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Speaker 1: market share gains. And that's that's really what we're looking

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Speaker 1: for in this environment because the revenue environment execution, it

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Speaker 1: looks like really solid execution. UM. We see it elsewhere

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Speaker 1: in selective businesses. UM. So UM. You know, there were

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Speaker 1: there were some positives I think in City Groups quarter,

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Speaker 1: but I think you know, if you look at City

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Speaker 1: Group and Wells, I think the disappointment there is on

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Speaker 1: the cost side. And so you know, both of those

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Speaker 1: banks coming in a little higher than expected on costs

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Speaker 1: and you know, looking to the future, whereas we're seeing

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Speaker 1: you know, a Bank of America it happening UM today

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Speaker 1: coming in below their guidance. JP Morgan yesterday also lowering

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Speaker 1: their guidance on costs. And you know, we talked about costs,

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Speaker 1: we talked about branches. But you know, to me, one

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Speaker 1: of the interesting metrics that that shows us really what's

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Speaker 1: happening is UM. You know, digital, We know that the

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Speaker 1: cost of mobile banking is so much lower, and we're

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Speaker 1: actually seeing an uptick in digital growth at both bank

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Speaker 1: America and JK we went your market share. And you're

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Speaker 1: too young to remember this, but I remember when they

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Speaker 1: combined and merge banks and they were regionally distinct in separate.

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Speaker 1: Is the future of market share that Bank of America

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Speaker 1: will compete with JP Morgan for the same geography in

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Speaker 1: Ohio or will they continue to partition out market share.

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Speaker 1: I think that we are UM converging to broad coverage. Right.

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Speaker 1: So to your point years ago, the way to get

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Speaker 1: there was acquisition the bank you bought, Fleet Bank or whatever.

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Speaker 1: The UM and especially Bank America has sort of a

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Speaker 1: storied history of being built through UM acquisition. JP Morgan

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Speaker 1: is sort of a couple of bigger combinations. But anyway,

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Speaker 1: I think in a way the tax gift to banks,

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Speaker 1: if you will, was that UM. With that announcement, we

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Speaker 1: did get two major plans from JP Morgan Bank America saying, look,

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Speaker 1: we're looking at what markets are we not in, what

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Speaker 1: markets are we going in? And they're going into that

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Speaker 1: market UM. And I think you know what's telling is

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Speaker 1: our regional bank analysts saying that he is seeing share

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Speaker 1: accruing to these bigger banks. And listen, just a final

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Speaker 1: question on what is happening with the right sensitivity of

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Speaker 1: some of these banks. Many of them were looking for

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Speaker 1: two right cuts this year. So far, that's what we've had.

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Speaker 1: We may well have more. How are the businesses holding up?

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Speaker 1: What do the net interest margins look like? What does

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Speaker 1: net interest income look like? So that was again another

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Speaker 1: story of Bank America that holds holding up more positive

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Speaker 1: And I think what we're seeing for Bank America and

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Speaker 1: JP Morgan as well is as we're seeing a pick

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Speaker 1: up on the consumer side of things, those are higher

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Speaker 1: yielding assets. Um Also they tend to have a different

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Speaker 1: uh sensitivity to rates, if you will, and so that

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Speaker 1: is really helping them interest margins and net interest income

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Speaker 1: hold up better. At the fact that we're getting better

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Speaker 1: consumer loan ground. So when Tom puts his rent on

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Speaker 1: his credit account at the end of each month, his

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Speaker 1: interest rights aren't going down. That's essentially at Tom, they

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Speaker 1: still high. You're interest right at the end of the month?

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Speaker 1: Is still han your credit count? Yeah, it's like jen,

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Speaker 1: I mean, it's like wicked genormous. Is it a record high? Now?

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Speaker 1: Is that safe to say? I don't believe. Actually it's

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Speaker 1: it's a record How I'll have to look and circle

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Speaker 1: back with you. But what I would say is that

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Speaker 1: when you look at those prices, they're inelastic, right, So

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Speaker 1: even if they're not, you know, historic high versus their

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Speaker 1: own history, they're certainly the highest across products. And as

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Speaker 1: rates go up and down, you'll get things like commercial

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Speaker 1: loans repricing a meeting you know very closely, whereas the

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Speaker 1: car it is much more in as quick question is

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Speaker 1: operating income in the middle of the income statement? Do

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Speaker 1: you see that growth continuing forward the last five years

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Speaker 1: recovery has been extraordinary? But does it still for these

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Speaker 1: major banks continue to grow? Grow, grow, It should still

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Speaker 1: continue to grow. The one question that we have, the

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Speaker 1: one thing that would interrupt it relates to credit costs.

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Speaker 1: Credit is solid. We barely even touch on it um

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Speaker 1: over the last few earnings because it's been such a

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Speaker 1: great story. Um. But you know a recession is coming

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Speaker 1: one day, um and at that point, well we're going

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Speaker 1: to have to see, you know, I guess how long

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Speaker 1: out is it and how severe. Alison Williams always great

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Speaker 1: to get your insight. Blimbag Intelligence is semior analyst on

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Speaker 1: the US banks. As we get more bank earnings from

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Speaker 1: the United States of America over the last twenty four

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Speaker 1: hours and the next twenty four hours to bank America

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Speaker 1: up in a pre market song by a little more

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Speaker 1: than two percentage point. Tom Keenan John Farrow, had we

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Speaker 1: now celebrate a new book out there, all of you

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Speaker 1: know that listened to me every day. My joy of

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Speaker 1: the Leader's bookshelf James trevidis from four or five six

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Speaker 1: years ago. It was my book of the year at

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Speaker 1: the time. Within it packed from generals, from admirals are

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Speaker 1: forty fifty even sixty books you should read. If you

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Speaker 1: read ton of them, you're a changed person. The adiral

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Speaker 1: now has outdone himself. James Trevidis on Sailing True North.

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Speaker 1: Ten Admirals and the Voyage of Character. It reminded me

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Speaker 1: so much, Jim of Eric Larrabie's Commander in Chief, his

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Speaker 1: wonderful book on f dr in all of his generals.

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Speaker 1: But you take the admirals over time. You begin long

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Speaker 1: ago and far away. How far back do you need

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Speaker 1: to go to find an admiral of character? I think,

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Speaker 1: to really a survey the seascape time, you've really got

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Speaker 1: to go back over two thousand years ago, and you

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Speaker 1: have to go to the ancient Greeks and the Battle

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Speaker 1: of Solemnists, where the Greeks turned back the Persian invaders

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Speaker 1: in a massive sea battle. And the admiral's name was

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Speaker 1: the Mysticles. You bring it forward, and let's go right

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Speaker 1: to where Larabie was in World War two, the extraordinary

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Speaker 1: Nimits full disclosure, Nimits was worshiped in my house. Let's

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Speaker 1: begin with what Nimitz wrought with spruance and the others

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Speaker 1: after the debris of Pearl Harbor. The thing to understand

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Speaker 1: about Chester nimitz Is is incredible resilience, which springs from

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Speaker 1: deep reserves of character. Here's a man who has labored

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Speaker 1: his way up the career ladder finally gets the call

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Speaker 1: to take command of the most powerful military instrument on

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Speaker 1: the planet, the Pacific Fleet of the United States. Yet

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Speaker 1: the day he takes command, tom as you know, the

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Speaker 1: fleet is smoking ruin in front of him in Pearl Harbor.

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Speaker 1: The beautiful battleships sunk, the carriers are on the move

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Speaker 1: out at sea to win the Japanese. He's forced to

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Speaker 1: take demand on the deck of a diesel submarine, a

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Speaker 1: tiny little diesel. He's not wearing those beautiful choker whites.

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Speaker 1: He's wearing rumb tacks. He squares the shoulders, builds a

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Speaker 1: team and takes on the Japanese Empire, Jans trevinas and

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Speaker 1: we celebrate with the animal sailing true North. Let me

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Speaker 1: bring in Captain Pharaoh. Did you call the admiral? Jim's

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Speaker 1: called the Admiral Jim and the royalty checks I've gotten

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Speaker 1: from can Jim? Can I just clean this up? Because

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Speaker 1: he never really asks? Is it okay to call you Jim?

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Speaker 1: We're going to call you Jim. He's also a bloom

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Speaker 1: Bug opinion columnist. Now, I didn't know that you've written

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Speaker 1: a really interesting piece Jim recently, a survivor's guy to

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Speaker 1: testify in Congress, and imagine there might be some people

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Speaker 1: in Washington, d C. That need to read that. So

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Speaker 1: walk me through what your story is and the latest

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Speaker 1: Bloomberg Opim in piece. Um, it's about the character and

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Speaker 1: about the need for those who are facing a very

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Speaker 1: a very changing moment in their lives. They're being called

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Speaker 1: to testify in front of Congress, and they have to

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Speaker 1: follow the truth without fear or favor wherever it goes.

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Speaker 1: And some of these people will meet that challenge, and

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Speaker 1: some of them will not will know so much more

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Speaker 1: as a result of this unfolds in front of us.

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Speaker 1: But what we're seeing is a tempt of character. The

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Speaker 1: line Admiral Stevens and sailing true north is to sail

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Speaker 1: true east across the Mediterranean to where there's a Russian

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Speaker 1: navy at the end of the Mediterranean. The navy has

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Speaker 1: nothing to do with Turkey and Syria, and yet it's

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Speaker 1: got everything to do with Turkey and Syria. Tell me

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Speaker 1: first of all about the Russian navy at the in Syria?

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Speaker 1: Is it Lataki? Is that correct? It is? This is

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Speaker 1: one of the boards on uh, the Syrian coast. But

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Speaker 1: this uh, this portion of the Russian navy, tom as

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Speaker 1: I think you know, comes down from the Black Sea.

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Speaker 1: They have long had ambitions to dominate the eastern Mediterranean.

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Speaker 1: They are launching cruise missiles ashore. They have marines ashore,

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Speaker 1: just like we send our marines ashore. They provide air defense,

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Speaker 1: they're part of the logistics chain that moves supplies to

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Speaker 1: the Russian forces. They are very much integral to what

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Speaker 1: is happening in Syria today. How how is our navy

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Speaker 1: responding to this? I mean do we show the flag

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Speaker 1: through the Bosphorus? I mean, folks, this is ancient stuff.

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Speaker 1: This is like Crimean War eighteen fifty six amerals Tavitas.

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Speaker 1: How does our navy respond to showing the flag? After

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Speaker 1: the events of the last fourteen days, we are deploying

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Speaker 1: a carrier battle group, which is an aircraft carrier and

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Speaker 1: half a dozen ships through that eastern Mediterranean. Some of

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Speaker 1: those ships, the destroyers, will break off and go through

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Speaker 1: the Bosphorus into the Axe. As you know, aircraft carriers

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Speaker 1: are not permitted to do so under the Montro Convention.

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Speaker 1: So we'll send those smaller destroyers into the Black Sea

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Speaker 1: show of force. We will be surveilling the Russian fleet

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Speaker 1: off the coast. We'll be operating with our allies partners

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Speaker 1: in France. This is really a NATO mission. The Mediterranean

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Speaker 1: is our largest maritime border to the south, so you

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Speaker 1: know those ways, Tom will continue to be very engaged

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Speaker 1: from the sea in the Syrian crisis. What is the

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Speaker 1: damage to our Pentagon by what we have seen from

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Speaker 1: President Trump? Or is that overwrought by a media? Uh

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Speaker 1: not without a proclivity to President Trump. Is there tangible

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Speaker 1: damage to the Pentagon? I think there is. Unfortunately, and

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Speaker 1: let's face it, in terms of damage to the president,

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Speaker 1: this is a subject upon which you have agreement between

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Speaker 1: Bernie Sanders and Lindsey Graham, between Mitch McConnell and Nancy Pelosi.

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Speaker 1: This is not the left wing of the Democratic Party

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Speaker 1: coming after President Trump. This is a failure of American's

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Speaker 1: foreign policy. And it's pretty clearly understood that walking away

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Speaker 1: from our allies in a scenario like this will have

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Speaker 1: long term consequence. I mean, how do we walk this back?

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Speaker 1: And I say this folks with great respect for say Cyprus,

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Speaker 1: where the Turks and the Greeks for any number of

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Speaker 1: time over three hundred years, have been able to walk

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Speaker 1: back the tensions to some form of peace. I know

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Speaker 1: they did this, Admiral, I believe in the nineteen eighties

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Speaker 1: to good effect with Mr pap Andrea. But but how

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Speaker 1: do we walk back the damage that you perceive in

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Speaker 1: the last number of days. I would say we begin

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Speaker 1: by trying to re establish US engagement in this crisis.

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Speaker 1: And here I commend the Trump administration tomorrow to anchor Go,

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Speaker 1: the Vice President and the Secretary of State. The Turks

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Speaker 1: appreciate that kind of high level delegation that may help. Secondly,

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Speaker 1: we use the NATO Alliance. Turkey values its membership in

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Speaker 1: the NATO Alliance. They don't want to damage their standing

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Speaker 1: in the alliance, so we need all of the NATO

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Speaker 1: nations to contribute to putting pressure on Turkey. And third

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Speaker 1: and finally, Tom, I think at this point economic sanctions

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Speaker 1: plus keep a residual force at least in southern Syria

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Speaker 1: and see if we can get to as ceasefire and

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Speaker 1: move forward with the events. I'm sorry that we did

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Speaker 1: not focus completely on Sailing True North. We'll have Admiral

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Speaker 1: James Travitas on with us again. I really can't say

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Speaker 1: enough of this. If there's one book that must be

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Speaker 1: a required read out of his, the Leader's bookshelf as

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Speaker 1: Larabee's Commander in Chief, on the fractious generals that FDR

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Speaker 1: had to stare down with General Marshall and General Eisenhower

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Speaker 1: at times. In the Admiral drives forward that conversation with

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Speaker 1: ten admirals and the voyage of character Sailing True North.

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Speaker 1: And we look forward to a further conversation on this

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Speaker 1: with Bloomberg Opinion columnist James astra Vitas. This is a Joy.

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Speaker 1: It has been far too long. We have to wait

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Speaker 1: for him to wander out with a new book. And

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Speaker 1: he's not writing. You know. It's not Nancy Drew. He's

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Speaker 1: not He's not writing every six months. To back up,

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Speaker 1: more than a decade ago, a guy named Bennett Galibo's

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Speaker 1: got a shingle out of Black Rock, I believe still

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Speaker 1: and Leo Tillman wrote a book Risk Management, which absolutely

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Speaker 1: changed how we approach risk, in the thinking of risk,

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Speaker 1: the intelligence of risk. It was hugely Matthew paul I

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Speaker 1: would go over every coefficient and go can they add

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Speaker 1: any more Greek letters to this equation? Mr Tillman has

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Speaker 1: going on to us a storied career and consulting two

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Speaker 1: companies on how to execute all the sixty thousand foot

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Speaker 1: mumbo jumbo everybody talks about. With General Charles Jacoby, he

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Speaker 1: has written Agility, How to Navigate the Unknown and Sees

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Speaker 1: Opportunity in a world of disruption. Leo, it's another boring

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Speaker 1: book on leadership, but what's great about it is you

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Speaker 1: overlay it with this strange thing called execution. How do

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Speaker 1: congratulations on agility? How do you execute all the fancy stuff?

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Speaker 1: All these consultants talk about Well, first of all, it's

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Speaker 1: it's such a pleasure to be here. As you said,

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Speaker 1: we the our conversations on these subjects go back decades,

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Speaker 1: and this is the latest thinking on what it takes

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Speaker 1: to adapt to changing environments, adapting in terms of economic cycles,

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Speaker 1: in terms of risk, etcetera. So when you think about agility,

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Speaker 1: we define it as a three step process that is

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Speaker 1: applicable to every company every investor, detect, assess, and respond

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Speaker 1: to change. So when you talk about execution, it's about response,

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Speaker 1: and that response has to be well thought out, and

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Speaker 1: the company needs to be unified around a common objective.

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Speaker 1: And then everybody needs to be part of the same team.

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Speaker 1: And you've got a military feel to this with General Jacoba.

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Speaker 1: You end the book with the leadership at Normandy and

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Speaker 1: what it took to create organization at that hillacious moment.

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Speaker 1: That's not the drama of corporate America, but the reality

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Speaker 1: of corporate America's everybody talks to talk, but nobody does

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Speaker 1: the doing, which you're acclaimed for. How do you get

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Speaker 1: from the talk to the doing in agility and leadership, Well,

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Speaker 1: amazingly enough, Invasion of Normandy was the combination of both

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Speaker 1: strategic and tactical agility because by the time the D

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Speaker 1: day came around, there were many years of preparation and

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Speaker 1: planning in vision. So first part of it belongs to

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Speaker 1: executives and boards of directors. What is your vision of

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Speaker 1: this environment, what is your planning for this environment? And

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Speaker 1: then when the execution comes, you need to make sure

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Speaker 1: that your entire organization is empowered, that they unified around

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Speaker 1: the same purpose and they're all growing in the same direction.

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Speaker 1: So Normandy is one of the most unbelievable examples where

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Speaker 1: that combination strategic agility, strategic top down planning and vision

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Speaker 1: come together with decentralized execution. So there are there certain

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Speaker 1: industries that lend themselves to being agile versus maybe not

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Speaker 1: so agile. Well, look, we wrote the book that is

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Speaker 1: applicable to any organization. We truly believe that this combination

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Speaker 1: of strategic and tactical agility must be practiced in adapted

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Speaker 1: at any organization that wants to thrive or even survive

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Speaker 1: in this environment. Now, different components of it applied to

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Speaker 1: different organizations. For instance, for smaller entrepreneurial companies, it's the

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Speaker 1: strategic agility that matters most. Is their ability to detect

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Speaker 1: what's going on the environment and quickly change. But for

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Speaker 1: established companies, tactical agility, the ability of the entire organization

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Speaker 1: to watch what's going on the environment and innovate and improvise,

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Speaker 1: that's important. So the the the proportion changes, but the

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Speaker 1: principles remain the same. And it seems like technology has

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Speaker 1: brought about this whole concept of disruption, Tom and I

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Speaker 1: hear it all the time when these new companies come

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Speaker 1: public there disrupting this business or disrupting that business. Um,

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Speaker 1: it would just seem like more so now technology makes

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Speaker 1: agility on the part of a corporation much more critical

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Speaker 1: than it's ever been. Absolutely, and and not only that,

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Speaker 1: but technology works both ways. We go all the way

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Speaker 1: back to cloud, schwitz uh, fog and friction by describing

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Speaker 1: the environment. So on the one hand, technology helps us

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Speaker 1: penetrate the uncertainty and ambiguity of this environment. On the

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Speaker 1: other hand, technology enables our advers area is to really

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Speaker 1: disrupt our plans, both in terms of intelligence gathering and

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Speaker 1: in terms of our businesses. So it goes both ways.

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Speaker 1: I don't mean to cut you off. I I just

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Speaker 1: want to say Leo Tillman with us. The book is Agility.

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Speaker 1: It's wonderfully brief, but in its density really really interesting

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Speaker 1: on this How's it changed generationally? How's it change when

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Speaker 1: you overlay agility within a small business or a giant

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Speaker 1: fortune one company. You've got to deal with a lot

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Speaker 1: of young people who have a different tone, Many of

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Speaker 1: them have only lived the financial crisis in terms of

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Speaker 1: their business careers. How do you do agility with suspect

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Speaker 1: millennials and those a little bit older. So, first of all,

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Speaker 1: the ideas of agility go back to Napoleon and claud

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Speaker 1: Schwitz there two hundred years old, all about how you

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Speaker 1: empower organizations across cultures across time. So that's one general

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Speaker 1: theme that these are to enmless lessons and timeless principles.

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Speaker 1: On the other hand, U. S. Army and US Armed

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Speaker 1: Forces present a great example of how you take people

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Speaker 1: from all walks of life and h k them of

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Speaker 1: what it means to have these common values and unify

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00:26:14,880 --> 00:26:17,960
Speaker 1: them around these common values. So I think the experience

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00:26:18,000 --> 00:26:22,000
Speaker 1: of U. S. Army in creating cultures that last is

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00:26:22,000 --> 00:26:24,720
Speaker 1: a great example of how you can take many different

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Speaker 1: generations across different cultures and backgrounds and unify them around

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Speaker 1: what Bill George calls true North. Let's let's come back

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00:26:31,760 --> 00:26:34,840
Speaker 1: well and and uh we we've had Bill George on

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Speaker 1: any number of times. Let's come back, Leo. Tell me

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00:26:37,520 --> 00:26:39,480
Speaker 1: where thrilled you can stay around with us. The book

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00:26:39,520 --> 00:26:42,959
Speaker 1: is agility. It's it's just the right. It's airplane size,

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00:26:43,560 --> 00:26:46,359
Speaker 1: airplane size, airplane size, it's actually yeah, I mean this

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00:26:46,480 --> 00:26:48,439
Speaker 1: is a I can rip through this one over a weekend,

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00:26:48,480 --> 00:26:51,639
Speaker 1: one or seven with some great ext The thing I

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00:26:51,720 --> 00:26:54,080
Speaker 1: love about it is it's an awful lot about execution,

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00:26:54,640 --> 00:26:58,320
Speaker 1: not not you know, the industry babble, but like that

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Speaker 1: to do as well. We're gonna come back Leo Tilman.

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Speaker 1: I want to talk to him, take him back to

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00:27:02,280 --> 00:27:05,359
Speaker 1: risk management, a classic from ten years ago or so,

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Speaker 1: and talk to him about how we're managing risk within

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Speaker 1: the new fixed income space of negative interest rates. Did

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Speaker 1: you know what a negative interest rate was? When you

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00:27:14,840 --> 00:27:18,080
Speaker 1: and I first met again, they were considered and they

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00:27:18,119 --> 00:27:22,520
Speaker 1: were considered to be theoretically impossible, So you got that.

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Speaker 1: That's how long we have been around. This is gonna

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00:27:24,760 --> 00:27:27,040
Speaker 1: be a treat for Global Wall Street. Leo Tillman on

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00:27:27,119 --> 00:27:30,840
Speaker 1: the theoretical impossibility of negative interest rates will do that

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00:27:30,920 --> 00:27:49,080
Speaker 1: here in a bit. So we are right in the

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Speaker 1: middle of the investment banks kind of rolling out their numbers.

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00:27:52,160 --> 00:27:56,240
Speaker 1: Yesterday was just a ridiculous day, plethora, okay, and today

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Speaker 1: we have a a Bank of America a little bit uh,

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Speaker 1: a little bit more reasonable for the bank invest There's

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Speaker 1: some bank reporters out there, including Nali Boston could covers

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00:28:04,040 --> 00:28:07,200
Speaker 1: all things financial for Bloomberg News Socnale, let's step away

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00:28:07,240 --> 00:28:09,200
Speaker 1: just a little bit. We were talking here about Global

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Speaker 1: Wall Street and you know how some of these companies

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00:28:11,520 --> 00:28:15,120
Speaker 1: are adapting. What's is there a key takeaway we have

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00:28:15,359 --> 00:28:18,480
Speaker 1: for Global Wall Street given all the results we've seen

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00:28:18,520 --> 00:28:20,480
Speaker 1: over the last twenty four hours. Maybe it's just because

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00:28:20,480 --> 00:28:22,320
Speaker 1: in my mind because Tom was talking about it, but

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Speaker 1: why does Goldman Sacks now want to be a consumer bank?

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00:28:25,200 --> 00:28:28,520
Speaker 1: It lowers your funding costs? Right, You're going into an

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00:28:28,560 --> 00:28:31,480
Speaker 1: interest rate environment that is continuing to be very low,

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00:28:31,760 --> 00:28:33,960
Speaker 1: which is very unfortunate for banks that make their money

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00:28:34,000 --> 00:28:36,359
Speaker 1: off of net interest income. And so we're seeing a

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00:28:36,400 --> 00:28:38,960
Speaker 1: new normal here where Bank of America makes twelve billion

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00:28:39,000 --> 00:28:42,120
Speaker 1: dollars a quarter. Uh, and with pressure on interest rates

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00:28:42,160 --> 00:28:45,920
Speaker 1: is you know that's that's the most of their income. Right,

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00:28:46,000 --> 00:28:47,840
Speaker 1: And so if they don't make money from interest rates,

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00:28:47,840 --> 00:28:50,160
Speaker 1: where else do you get it from? Right? Um? For

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00:28:50,240 --> 00:28:52,920
Speaker 1: Bank of America that got very lucky for investment banking fees,

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00:28:53,360 --> 00:28:58,080
Speaker 1: big ticket deals are lower now the really big mergers

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00:28:58,120 --> 00:29:00,160
Speaker 1: don't want to I don't want to go through for

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00:29:00,240 --> 00:29:03,440
Speaker 1: regulatory reasons or whatnot. But that doesn't need smaller firms

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00:29:03,480 --> 00:29:06,000
Speaker 1: aren't merging. It just popped up my head. Let's look forward.

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Speaker 1: How big a deal is a RAMCO? I mean, the

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00:29:09,160 --> 00:29:11,960
Speaker 1: media makes a big deal about a big fat fee,

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00:29:12,440 --> 00:29:15,840
Speaker 1: But does it actually move the needle for these major banks? Yes,

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00:29:16,040 --> 00:29:18,680
Speaker 1: whether or not it happens, actually because the thing about

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00:29:18,720 --> 00:29:21,600
Speaker 1: it is, you know the American consumer. Fine, you're they're healthy,

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00:29:21,600 --> 00:29:24,200
Speaker 1: and they're driving costs forward. But all of these banks

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00:29:24,240 --> 00:29:27,200
Speaker 1: want to be global. All of the European banks are struggling.

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00:29:27,240 --> 00:29:30,760
Speaker 1: Bank of America they want to be Did you learn

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00:29:30,840 --> 00:29:33,680
Speaker 1: that profit is global? I mean, I mean they're global.

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00:29:33,720 --> 00:29:37,000
Speaker 1: Banking is profitable. You know, it's not even just that.

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00:29:38,160 --> 00:29:40,080
Speaker 1: It's not even just about making money from one deal

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00:29:40,440 --> 00:29:44,000
Speaker 1: with Saudi Arabia p if they've deployed money here there

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00:29:44,000 --> 00:29:46,200
Speaker 1: in soft bank they're in Uber there and we were.

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00:29:46,280 --> 00:29:49,120
Speaker 1: We told Leo, Leo can't talk math. Leo can't talk

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00:29:49,160 --> 00:29:50,880
Speaker 1: math to me, do you have a question from miss

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00:29:50,920 --> 00:29:53,800
Speaker 1: bassk Well, it's a question and in a in a

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00:29:53,840 --> 00:29:58,560
Speaker 1: common um, the funding costs is super important, of course, um,

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Speaker 1: But going back to our we just got on Goldman,

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00:30:01,120 --> 00:30:03,080
Speaker 1: it's also a question of a business model. How do

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00:30:03,160 --> 00:30:06,280
Speaker 1: you compete? Do you compete on ideas as a standalone

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00:30:06,360 --> 00:30:10,000
Speaker 1: investment bank or do you bring in a huge balance

510
00:30:10,040 --> 00:30:14,120
Speaker 1: sheet and compete on that? Questions you are asking my

511
00:30:14,200 --> 00:30:17,880
Speaker 1: favorite question. Every banker on Wall Street believes that they're

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00:30:17,920 --> 00:30:20,000
Speaker 1: the most important thing that exists to their bank and

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00:30:20,000 --> 00:30:21,960
Speaker 1: that you can win on ideas. What did you learn

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00:30:22,000 --> 00:30:25,000
Speaker 1: in the Golden Sex conference called or Mr Tillman's comments, Well,

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00:30:25,040 --> 00:30:28,000
Speaker 1: their investment banking revenue is not winning, so obviously the

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00:30:28,040 --> 00:30:29,960
Speaker 1: greatest minds in the world are not breaking it in.

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00:30:31,720 --> 00:30:35,440
Speaker 1: Is the golden sacks of Lloyd Blank find gone? Yes?

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00:30:36,240 --> 00:30:40,920
Speaker 1: And what's replaced it? Do you think so? Well, they're

519
00:30:40,920 --> 00:30:43,080
Speaker 1: trying to figure it out. I mean, what Leo is

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00:30:43,160 --> 00:30:45,760
Speaker 1: just bringing up here is that can you win on ideas?

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00:30:45,800 --> 00:30:48,440
Speaker 1: Old school advisory advising somebody on how to do a

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00:30:48,440 --> 00:30:51,320
Speaker 1: big merger or raise more money. But what they're trying

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00:30:51,360 --> 00:30:54,360
Speaker 1: to do, you're right, is bring in more technology that

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00:30:54,400 --> 00:30:57,680
Speaker 1: will appeal to the American consumer, make a digital bank,

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00:30:57,880 --> 00:31:01,600
Speaker 1: have people own a fancy Apple call hard and is

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00:31:01,640 --> 00:31:04,040
Speaker 1: that going to be enough? We don't know. The markets

527
00:31:04,080 --> 00:31:08,920
Speaker 1: not buying it quite yet. So again reminding of how

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00:31:08,960 --> 00:31:11,960
Speaker 1: old we all are, it was looking at it was

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00:31:12,320 --> 00:31:14,360
Speaker 1: I am not looking at you at all. I'm looking

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00:31:14,360 --> 00:31:18,800
Speaker 1: in the mirror um back in the mid two thousand's.

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00:31:18,840 --> 00:31:22,360
Speaker 1: I will never forget a annual report from Goldman Sact

532
00:31:22,480 --> 00:31:25,520
Speaker 1: that sets something like this. You can never win on

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00:31:25,640 --> 00:31:29,640
Speaker 1: ideas anymore. You have to be simultaneously an advisor, co

534
00:31:29,920 --> 00:31:32,920
Speaker 1: investor and FIRS here going all the way back. This

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00:31:32,960 --> 00:31:35,200
Speaker 1: is great when you sell the movie rights to Agility,

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00:31:35,240 --> 00:31:37,240
Speaker 1: We're gonna have you back room as Basska and we could.

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Speaker 1: This has been a great Seriously, this has been a

538
00:31:39,600 --> 00:31:45,120
Speaker 1: great conversation. Thanks for listening to the Bloomberg Surveillance podcast.

539
00:31:45,480 --> 00:31:50,520
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

540
00:31:50,560 --> 00:31:55,360
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keane.

541
00:31:55,840 --> 00:31:59,480
Speaker 1: Before the podcast, you can always catch us worldwide. I'm

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Speaker 1: Bloomberg radio