1 00:00:02,520 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:07,840 --> 00:00:10,600 Speaker 2: Thank you all so much for joining for this conversation. Ken, 3 00:00:10,680 --> 00:00:12,720 Speaker 2: Thank you so much for sitting down with me this evening. 4 00:00:13,320 --> 00:00:16,040 Speaker 1: It is it is great to be here today, and 5 00:00:16,160 --> 00:00:18,200 Speaker 1: it is such a pleasure to be in your particularly 6 00:00:18,280 --> 00:00:19,200 Speaker 1: during this time of year. 7 00:00:20,200 --> 00:00:23,439 Speaker 2: Should we start with that, because perhaps everyone will have 8 00:00:23,520 --> 00:00:27,400 Speaker 2: noticed it's two Americans speaking in Europe. Ken, it feels 9 00:00:27,440 --> 00:00:30,320 Speaker 2: like recently there's been a lot of American barbs, let's say, 10 00:00:30,400 --> 00:00:34,320 Speaker 2: thrown at Europe. President Trump warning about end of civilization 11 00:00:34,400 --> 00:00:38,360 Speaker 2: because of Europe's overreliance on America, Jamie diamond saying it's 12 00:00:38,360 --> 00:00:41,720 Speaker 2: a region that's anti business, that has a lack of innovation. 13 00:00:42,600 --> 00:00:46,280 Speaker 2: Are those most dire of forecasts for Europe? Are they correct? 14 00:00:47,040 --> 00:00:50,720 Speaker 1: What a cheery way to start today. And I feel 15 00:00:50,760 --> 00:00:52,280 Speaker 1: like I was just handing the hot potato quest. 16 00:00:52,320 --> 00:00:54,360 Speaker 2: Yes, I'm sorry, Ken, you were indeed. So. 17 00:00:54,760 --> 00:00:57,200 Speaker 1: First of all, you know, President Trump is a bit 18 00:00:57,440 --> 00:01:02,560 Speaker 1: prone to heaperballe and having said that, there's no doubt 19 00:01:03,560 --> 00:01:09,039 Speaker 1: that the Western world needs Europe to be more successful. 20 00:01:09,880 --> 00:01:12,840 Speaker 1: We need to see higher economic growth in Europe, we 21 00:01:12,880 --> 00:01:15,800 Speaker 1: need to see more innovation, we need to see more 22 00:01:15,800 --> 00:01:19,680 Speaker 1: consumer demand, for goods and services, because the Western world 23 00:01:19,720 --> 00:01:22,880 Speaker 1: will only be strong and prosperous if we have a 24 00:01:22,920 --> 00:01:25,440 Speaker 1: strong and prosperous Europe. 25 00:01:26,200 --> 00:01:28,520 Speaker 2: What does the road ahead to get that strong and 26 00:01:28,560 --> 00:01:29,800 Speaker 2: prosperous Europe look like? 27 00:01:29,920 --> 00:01:32,880 Speaker 1: How do we get there? Look, I think Mario Dragi 28 00:01:32,920 --> 00:01:37,280 Speaker 1: did a fantastic job putting forth a playbook for how 29 00:01:37,319 --> 00:01:41,200 Speaker 1: to revitalize Europe. And I would say that, you know, 30 00:01:41,360 --> 00:01:43,600 Speaker 1: I'll agree with eighty or ninety percent of what he wrote, 31 00:01:43,840 --> 00:01:46,399 Speaker 1: but rather than regurgitate what he wrote, and he wrote 32 00:01:46,520 --> 00:01:50,480 Speaker 1: really thoughtfully. I think the sailing points are Europe needs 33 00:01:50,520 --> 00:01:55,640 Speaker 1: to create a culture of entrepreneurism. Far too much the 34 00:01:55,720 --> 00:02:00,840 Speaker 1: world's innovation takes place in the United States, in China, 35 00:02:01,680 --> 00:02:06,280 Speaker 1: and Europe, having such an incredibly well educated population, should 36 00:02:06,360 --> 00:02:10,480 Speaker 1: have far more entrepreneurial success stories than it does. So 37 00:02:10,520 --> 00:02:13,040 Speaker 1: that's a really big issue that Europe needs to address. 38 00:02:13,080 --> 00:02:16,440 Speaker 1: It's a cultural issue. And the second is that Europe's 39 00:02:16,440 --> 00:02:20,720 Speaker 1: capital markets simply aren't deep and robust enough. The venture 40 00:02:20,760 --> 00:02:23,440 Speaker 1: capital community of the United States, the depth of the 41 00:02:23,480 --> 00:02:26,200 Speaker 1: private equity markets, the depth of the growth equity markets, 42 00:02:26,240 --> 00:02:30,079 Speaker 1: the depth of the public markets makes it much easier 43 00:02:30,720 --> 00:02:35,639 Speaker 1: to organize to secure capital and to grow a business 44 00:02:35,680 --> 00:02:36,760 Speaker 1: than it is here in Europe. 45 00:02:37,600 --> 00:02:40,560 Speaker 2: Let's talk about leadership in the US because it's also 46 00:02:40,600 --> 00:02:44,040 Speaker 2: been a moment of questions in the early elections, local 47 00:02:44,080 --> 00:02:48,079 Speaker 2: electionsment governor elections. The trend has been very clear. When 48 00:02:48,080 --> 00:02:51,880 Speaker 2: Democrats run on affordability, they had been winning. Twenty twenty 49 00:02:51,919 --> 00:02:56,040 Speaker 2: six is a midterm year. Do the Republicans risk losing 50 00:02:56,120 --> 00:02:57,040 Speaker 2: the American public? 51 00:02:57,639 --> 00:02:59,959 Speaker 1: So, you know, it's really it's quite ironic to see 52 00:03:00,080 --> 00:03:03,280 Speaker 1: how the tables have turned because just twelve months ago 53 00:03:03,840 --> 00:03:07,880 Speaker 1: President Trump and the Republicans swept into office on the 54 00:03:07,919 --> 00:03:12,600 Speaker 1: issue of inflation, and the Democrats have rebranded the problem 55 00:03:12,680 --> 00:03:16,560 Speaker 1: of inflation as the issue of affordability, and they are 56 00:03:16,600 --> 00:03:19,799 Speaker 1: now well poised to return to control of the House, 57 00:03:20,440 --> 00:03:23,320 Speaker 1: and there's even discussion of them retaking the Senate on 58 00:03:23,400 --> 00:03:27,280 Speaker 1: the back of how the affordability issue strikes accord with 59 00:03:27,320 --> 00:03:31,239 Speaker 1: the American public. And the big picture is the American 60 00:03:31,320 --> 00:03:36,240 Speaker 1: consumer is tired of the persistent and sticky inflation. They 61 00:03:36,320 --> 00:03:39,680 Speaker 1: feel like they can't get ahead in a world where 62 00:03:39,720 --> 00:03:44,680 Speaker 1: their savings and their wages are constantly deprecated by the 63 00:03:44,720 --> 00:03:45,920 Speaker 1: impact of inflation. 64 00:03:46,960 --> 00:03:49,600 Speaker 2: Why aren't Republicans speaking to that is it an issue 65 00:03:49,600 --> 00:03:52,920 Speaker 2: of not having the policies, of not communicating the policies correctly. 66 00:03:53,400 --> 00:03:56,400 Speaker 1: So I think it's actually fairly complicated. I think that 67 00:03:56,440 --> 00:04:00,920 Speaker 1: the Republicans struggle with the reality that many of their 68 00:04:01,000 --> 00:04:05,720 Speaker 1: policies which they ran on, for example, ending illegal immigration 69 00:04:05,920 --> 00:04:10,840 Speaker 1: into the United States, are actually pro inflationary. Right when 70 00:04:10,880 --> 00:04:14,560 Speaker 1: you end illegal immigration, you reduce the size the available workforce. 71 00:04:15,280 --> 00:04:19,359 Speaker 1: That's proneflation. And so the Republicans are grappling with tariffs 72 00:04:19,600 --> 00:04:24,039 Speaker 1: another case study. You impose a tariff, it's a regressive 73 00:04:24,080 --> 00:04:27,840 Speaker 1: tax on consumers. It's proneflation. So some of the very 74 00:04:27,920 --> 00:04:31,680 Speaker 1: policies that the Republicans have put forth and have been 75 00:04:31,680 --> 00:04:35,640 Speaker 1: successful in implementing, are actually the very policies that tend 76 00:04:35,640 --> 00:04:40,320 Speaker 1: to be proneflation. Some of the other policies, for example, deregulation, 77 00:04:40,920 --> 00:04:44,520 Speaker 1: are just going to take longer to play out. And ultimately, 78 00:04:45,400 --> 00:04:50,800 Speaker 1: ultimately deregulation, which should unleash productivity gains, will create will 79 00:04:50,839 --> 00:04:54,560 Speaker 1: create a reduction inflation, a very healthy reduction. But we 80 00:04:54,680 --> 00:04:56,279 Speaker 1: need to get to that point in time. 81 00:04:56,400 --> 00:05:01,120 Speaker 2: It's a timing issue. And President Trump said something similar, 82 00:05:01,240 --> 00:05:03,880 Speaker 2: not exactly what you're saying, Ken, but he had spoken 83 00:05:03,880 --> 00:05:06,560 Speaker 2: to the Wall Street Journal just this week saying that 84 00:05:06,640 --> 00:05:09,680 Speaker 2: the reason the American public hasn't realized his policies are 85 00:05:09,720 --> 00:05:12,360 Speaker 2: working is just because they take time to take effect, 86 00:05:12,400 --> 00:05:16,040 Speaker 2: and what Americans are experiencing now is democrat led inflation. 87 00:05:16,720 --> 00:05:19,000 Speaker 2: It seems like you would maybe take issue with the 88 00:05:19,040 --> 00:05:22,400 Speaker 2: latter that maybe it's current policies leading to some of 89 00:05:22,400 --> 00:05:23,040 Speaker 2: the stickiness. 90 00:05:23,400 --> 00:05:26,360 Speaker 1: Look, I think there's no doubt that the President inherited 91 00:05:27,400 --> 00:05:30,919 Speaker 1: an environment that was still struggling with inflation. But the 92 00:05:30,960 --> 00:05:34,880 Speaker 1: easiest parts of his agenda to implement were, unfortunately, when 93 00:05:34,880 --> 00:05:36,640 Speaker 1: it comes to the issue before to build through the 94 00:05:36,680 --> 00:05:42,240 Speaker 1: issue of inflation, were those policy choices that actually most 95 00:05:42,320 --> 00:05:46,680 Speaker 1: fuel inflation. Right, the curtailing of the labor markets, the 96 00:05:46,760 --> 00:05:50,480 Speaker 1: clear cut inflationary pressure of tariffs. Those were easy things 97 00:05:50,520 --> 00:05:54,200 Speaker 1: for the President to implement, and unfortunately they have continued 98 00:05:54,240 --> 00:05:56,359 Speaker 1: to lead to this inflationary environment that we live in. 99 00:05:56,520 --> 00:05:59,480 Speaker 2: Well, you have seen the White House try to backtrack 100 00:05:59,520 --> 00:06:02,320 Speaker 2: on some of it, be it tariffs on Brazil because 101 00:06:02,320 --> 00:06:05,000 Speaker 2: of the impact on agricultural goods and the bills that 102 00:06:05,040 --> 00:06:08,400 Speaker 2: Americans face in the groceries. We're looking at tariffs now 103 00:06:08,640 --> 00:06:12,400 Speaker 2: making their way through the Supreme Court. Is it too late, though. 104 00:06:13,040 --> 00:06:15,720 Speaker 1: So I think it's gonna be hard to roll back 105 00:06:15,960 --> 00:06:21,599 Speaker 1: tariffs writ large unless the Supreme Court makes a pretty 106 00:06:21,600 --> 00:06:24,520 Speaker 1: bold decision. And I only say that because the Supreme 107 00:06:24,560 --> 00:06:28,000 Speaker 1: Court is going to face the challenge doesn't want to 108 00:06:28,040 --> 00:06:31,320 Speaker 1: take on the President with respect to one of his 109 00:06:31,520 --> 00:06:36,279 Speaker 1: single most important policy wins from the perspective of the 110 00:06:36,279 --> 00:06:39,599 Speaker 1: White House, Right, does the Supreme Court really want to 111 00:06:39,600 --> 00:06:42,479 Speaker 1: take that issue on as a matter of law. I 112 00:06:42,520 --> 00:06:44,039 Speaker 1: hope they do, and I hope they take it on 113 00:06:44,160 --> 00:06:47,080 Speaker 1: with a very thoughtful and reasoned opinion. But that's going 114 00:06:47,160 --> 00:06:49,000 Speaker 1: to be a tough call for the Supreme Court to 115 00:06:49,040 --> 00:06:53,960 Speaker 1: make now. Having said that, we have seen the rollback 116 00:06:54,000 --> 00:06:58,279 Speaker 1: of tariffs, in particular in products that consumers put in 117 00:06:58,360 --> 00:07:02,120 Speaker 1: their grocery cart. The President's getting the message from the 118 00:07:02,120 --> 00:07:05,240 Speaker 1: front lines, from the Congress people that serve our people 119 00:07:05,800 --> 00:07:08,600 Speaker 1: that the voters are angry about inflation and they're looking 120 00:07:08,640 --> 00:07:12,160 Speaker 1: for ways, they're looking for ways to help to address 121 00:07:12,160 --> 00:07:14,960 Speaker 1: the issues of affordability. You know, it was very interesting. 122 00:07:15,040 --> 00:07:17,880 Speaker 1: I was with a group of business executives and the President. 123 00:07:18,480 --> 00:07:23,560 Speaker 1: He was very much listening for ideas on how to 124 00:07:23,600 --> 00:07:27,080 Speaker 1: address the issues of affordability in America. He cares about 125 00:07:27,080 --> 00:07:27,800 Speaker 1: this issue. 126 00:07:28,480 --> 00:07:30,840 Speaker 2: Maybe it's too late for some of the local elections though, 127 00:07:30,960 --> 00:07:33,720 Speaker 2: in getting to the American public. New York a big 128 00:07:33,800 --> 00:07:36,760 Speaker 2: change for the city with a Democratic socialist Miami too, 129 00:07:36,800 --> 00:07:40,240 Speaker 2: your hometown Ken where you have the first Democrat in 130 00:07:40,280 --> 00:07:44,000 Speaker 2: three decades. You've praised the leadership of Florida many times. 131 00:07:44,320 --> 00:07:46,720 Speaker 2: Does that change your outlook at all? To have the 132 00:07:46,760 --> 00:07:50,160 Speaker 2: local election in Florida also shift in terms of who's 133 00:07:50,200 --> 00:07:50,600 Speaker 2: leading it. 134 00:07:51,000 --> 00:07:54,200 Speaker 1: Well, Miami Dade County has had a Democratic mayor actually 135 00:07:54,280 --> 00:07:57,560 Speaker 1: for quite a bit of time now, and Miami just 136 00:07:57,680 --> 00:08:00,080 Speaker 1: recently elected a Democrat to be the mayor of the 137 00:08:00,080 --> 00:08:03,400 Speaker 1: City of Miami. And I think there's a stark contrast 138 00:08:03,480 --> 00:08:07,640 Speaker 1: between the Democratic leader elect of Miami and the leader 139 00:08:07,680 --> 00:08:10,760 Speaker 1: elect of New York City. The elect of New York 140 00:08:10,800 --> 00:08:13,360 Speaker 1: City ran on a set of policies that will either 141 00:08:13,400 --> 00:08:16,360 Speaker 1: be impossible to implement or that will come with a 142 00:08:16,440 --> 00:08:19,280 Speaker 1: draconian long term cost to the City of New York. 143 00:08:20,080 --> 00:08:22,240 Speaker 1: You know, for example, if you want to address the 144 00:08:22,280 --> 00:08:26,640 Speaker 1: issue of housing affordability, you need to build more homes. 145 00:08:27,320 --> 00:08:30,880 Speaker 1: And when you're talking about rent control, all you're doing 146 00:08:31,000 --> 00:08:35,640 Speaker 1: is telling developers and big neon lights don't build in 147 00:08:35,679 --> 00:08:39,040 Speaker 1: New York City. Now, contrast that with the incoming mayor 148 00:08:39,040 --> 00:08:42,960 Speaker 1: of Miami. She has a long history of being pragmatic 149 00:08:43,480 --> 00:08:47,079 Speaker 1: with respect to policy choices that will improve the lives 150 00:08:47,120 --> 00:08:49,440 Speaker 1: of the people who live in Miami. She very much 151 00:08:49,480 --> 00:08:54,160 Speaker 1: wants to accelerate the permitting process for builders to create 152 00:08:54,360 --> 00:08:57,800 Speaker 1: more housing stock. She wants to help release lands into 153 00:08:57,840 --> 00:09:02,080 Speaker 1: the private market to help and create available housing. She 154 00:09:02,280 --> 00:09:06,240 Speaker 1: wants to address the issue of housing affordability with thoughtful, 155 00:09:06,640 --> 00:09:11,160 Speaker 1: time tested, and proven policies rather than the fantasy that's 156 00:09:11,200 --> 00:09:14,040 Speaker 1: being espoused by mayor elect for New York City. 157 00:09:14,160 --> 00:09:16,880 Speaker 2: Are you confident that Americans will continue to elect in 158 00:09:17,360 --> 00:09:20,040 Speaker 2: people of positions of power like you're describing with common 159 00:09:20,040 --> 00:09:22,440 Speaker 2: sense policy or do you look at New York as 160 00:09:22,480 --> 00:09:24,000 Speaker 2: a red flag for twenty twenty six? 161 00:09:24,240 --> 00:09:27,600 Speaker 1: Look? I think that New York City is a red 162 00:09:27,600 --> 00:09:31,760 Speaker 1: flag because people put aside good sense and common sense 163 00:09:32,240 --> 00:09:35,240 Speaker 1: to lect somebody who is incredibly charismatic, who ran a 164 00:09:35,280 --> 00:09:40,240 Speaker 1: really powerful campaign on social media, but who ultimately doesn't 165 00:09:40,360 --> 00:09:43,040 Speaker 1: have the ability to deliver on the promises that he 166 00:09:43,160 --> 00:09:47,319 Speaker 1: set forth. In contrast, I think the mayor elect of Miami, 167 00:09:48,040 --> 00:09:52,040 Speaker 1: she ran on a much less powerful set of campaign messages. 168 00:09:52,520 --> 00:09:55,120 Speaker 1: But do you know what she'll deliver on the promises 169 00:09:55,120 --> 00:09:56,640 Speaker 1: that she made to the voters of Miami. 170 00:09:57,160 --> 00:09:58,920 Speaker 2: You still have a good chunk of your business in 171 00:09:58,960 --> 00:10:01,680 Speaker 2: New York. Would you reath think just how much exposure 172 00:10:01,720 --> 00:10:03,080 Speaker 2: you have to the city at the moment. 173 00:10:03,360 --> 00:10:06,400 Speaker 1: Look, I think every business executive is thinking through the 174 00:10:06,440 --> 00:10:10,319 Speaker 1: magnitude of exposure they have to New York. And there's 175 00:10:10,360 --> 00:10:17,439 Speaker 1: a very common talking point on this we survived to Blasio, is. 176 00:10:17,360 --> 00:10:18,240 Speaker 2: That enough comfort? 177 00:10:18,559 --> 00:10:23,040 Speaker 1: Well that's the talking point, and unfortunately you know that. 178 00:10:23,080 --> 00:10:25,199 Speaker 1: I think there's some truth to that. New York took 179 00:10:25,240 --> 00:10:28,360 Speaker 1: a big set back during the Deblasio days, and I 180 00:10:28,400 --> 00:10:30,600 Speaker 1: hope that Mandamie starts to think about how to pivot 181 00:10:30,640 --> 00:10:33,920 Speaker 1: to a more thoughtful set of policies that will allow 182 00:10:34,000 --> 00:10:37,240 Speaker 1: New York City to maintain its position. Not only is 183 00:10:37,240 --> 00:10:39,000 Speaker 1: one of the greatest cities in America, but one of 184 00:10:39,040 --> 00:10:40,559 Speaker 1: the greatest cities in the world. 185 00:10:41,200 --> 00:10:43,480 Speaker 2: I'm struck that it's not just the American populist that's 186 00:10:43,520 --> 00:10:47,560 Speaker 2: thinking about affordability or inflation, it's markets too. Since the 187 00:10:47,559 --> 00:10:50,720 Speaker 2: FED started its cutting cycle, cutting seventy five basis points 188 00:10:50,760 --> 00:10:54,079 Speaker 2: so far this year, thirty year boniarlds are up eighty 189 00:10:54,120 --> 00:10:57,920 Speaker 2: basis points. Ten year boniolds are up thirty basis points 190 00:10:57,920 --> 00:11:01,360 Speaker 2: of fifty. Rather, it's not the move that you would expect. 191 00:11:02,040 --> 00:11:03,680 Speaker 2: Is there signal in that? 192 00:11:04,200 --> 00:11:09,400 Speaker 1: Well, Unfortunately, the bond markets are expressing their anxiety about inflation. 193 00:11:09,960 --> 00:11:11,800 Speaker 1: And when you look at the ten year yell point 194 00:11:11,800 --> 00:11:14,359 Speaker 1: to the thirty year yell point, what you're really observing 195 00:11:15,760 --> 00:11:20,160 Speaker 1: is how much risk premium, How much like insurance premium 196 00:11:20,520 --> 00:11:26,000 Speaker 1: does the market demand for higher inflation? Because remember, you're 197 00:11:26,080 --> 00:11:28,600 Speaker 1: lending the money to the US government for ten or 198 00:11:28,640 --> 00:11:32,080 Speaker 1: thirty years at a time at a fixed rate. So 199 00:11:32,800 --> 00:11:34,880 Speaker 1: you want to think very long and hard about what 200 00:11:34,960 --> 00:11:37,520 Speaker 1: rate do you lend money to the US government which 201 00:11:37,559 --> 00:11:42,360 Speaker 1: is running a staggering deficit, that is now running very 202 00:11:43,080 --> 00:11:46,760 Speaker 1: very easy monetary policy relative to the inflationary pressures that 203 00:11:46,800 --> 00:11:50,920 Speaker 1: we're facing. What risk premium do you demand to do so? So, 204 00:11:51,480 --> 00:11:55,400 Speaker 1: although the FED has brought short term interest rates down, 205 00:11:57,040 --> 00:12:00,880 Speaker 1: what is really done. It is unnerved a bond market 206 00:12:01,120 --> 00:12:04,240 Speaker 1: community that invests or commits capital for ten years or 207 00:12:04,280 --> 00:12:06,360 Speaker 1: thirty years at a time. And why is that matter? 208 00:12:07,000 --> 00:12:12,400 Speaker 1: Because capital formation building a new factory is funded with 209 00:12:12,600 --> 00:12:16,920 Speaker 1: ten and thirty year debt. So the hope that will 210 00:12:17,120 --> 00:12:20,880 Speaker 1: we will stimulate the economy, that we will encourage the 211 00:12:20,920 --> 00:12:24,240 Speaker 1: investments that we need in America that are all funded 212 00:12:24,240 --> 00:12:28,520 Speaker 1: with long term debt are actually being undermined by the 213 00:12:28,600 --> 00:12:30,560 Speaker 1: easy monetary policy at the Fed. Today. 214 00:12:31,200 --> 00:12:33,480 Speaker 2: Markets are incredibly sanguine on this idea that we're going 215 00:12:33,559 --> 00:12:35,200 Speaker 2: to run it hot, we're going to cut, we're going 216 00:12:35,240 --> 00:12:39,000 Speaker 2: to get stimulus. Are you essentially saying that markets are 217 00:12:39,080 --> 00:12:40,680 Speaker 2: underpricing a clear risk. 218 00:12:40,760 --> 00:12:44,880 Speaker 1: Well, there's two markets. There's the fixed income market, which 219 00:12:44,920 --> 00:12:48,520 Speaker 1: is anxious about this journey, and there's the equity market. 220 00:12:49,160 --> 00:12:53,880 Speaker 1: The equity market loves an easy money story. So what 221 00:12:53,880 --> 00:12:56,439 Speaker 1: we're seeing is a tale of two very different worlds 222 00:12:56,800 --> 00:13:00,719 Speaker 1: from the perspective of two very different investor groups. Your 223 00:13:00,720 --> 00:13:05,600 Speaker 1: fixed income investor doesn't participate directly in the easy money policies. 224 00:13:05,600 --> 00:13:08,079 Speaker 1: In fact, they're adverse to that. They're anxious about that 225 00:13:08,480 --> 00:13:11,040 Speaker 1: how much will inflation erode the value the dollar that 226 00:13:11,080 --> 00:13:14,280 Speaker 1: I lend to the government today. The equity market thrives 227 00:13:14,280 --> 00:13:14,760 Speaker 1: on this. 228 00:13:15,160 --> 00:13:15,920 Speaker 2: It's going to be right. 229 00:13:18,080 --> 00:13:22,400 Speaker 1: Well, Unfortunately, I think that the fixed income markets probably 230 00:13:22,800 --> 00:13:25,800 Speaker 1: has its head screw done better here that we do 231 00:13:25,880 --> 00:13:30,480 Speaker 1: have an issue with stickiness and inflation, goods deflation. The 232 00:13:30,520 --> 00:13:35,360 Speaker 1: story of our adult life fuel by globalization is over. 233 00:13:36,600 --> 00:13:40,160 Speaker 1: It's over for now. Maybe in ten years, as robotics 234 00:13:40,160 --> 00:13:43,960 Speaker 1: continue to accelerate, we'll have another big wave of goods deflation. 235 00:13:44,480 --> 00:13:48,079 Speaker 1: But the goods deflation that we've enjoyed from globalization is over. 236 00:13:48,400 --> 00:13:53,160 Speaker 1: Supply chains are being re architected, Manufacturing has been moved 237 00:13:53,160 --> 00:13:56,920 Speaker 1: into higher cost jurisdictions. That's going to end the goods 238 00:13:56,960 --> 00:14:00,439 Speaker 1: deflation that's been the theme of our lifetime. With that, 239 00:14:01,120 --> 00:14:04,080 Speaker 1: you have more pressure on services, inflation and the cost 240 00:14:04,120 --> 00:14:09,000 Speaker 1: of housing flowing through the inflationary picture that American households face. 241 00:14:09,200 --> 00:14:10,720 Speaker 2: So just to kind of paint the picture of what 242 00:14:10,760 --> 00:14:12,960 Speaker 2: this actually looks like on the ground, If you get 243 00:14:13,000 --> 00:14:15,360 Speaker 2: a FED that continues to cut, maybe supported by a 244 00:14:15,400 --> 00:14:18,079 Speaker 2: candidate that President Trump puts in place who is loyal 245 00:14:18,120 --> 00:14:21,360 Speaker 2: to him, the FED continues to cut, you get this 246 00:14:21,400 --> 00:14:24,120 Speaker 2: real pressure where bond yields go up. What does that 247 00:14:24,160 --> 00:14:26,840 Speaker 2: look like? Does it look like risk markets crashing? Does 248 00:14:27,040 --> 00:14:30,960 Speaker 2: the business environment which America has enjoyed, does it get curtailed? 249 00:14:31,320 --> 00:14:33,480 Speaker 2: Just how dramatic of an impact or reachalking. 250 00:14:33,520 --> 00:14:35,720 Speaker 1: I don't think we're actually looking at a scenario like that, 251 00:14:36,080 --> 00:14:38,360 Speaker 1: all right, I think you're looking at higher bondials as 252 00:14:38,360 --> 00:14:41,680 Speaker 1: a possibility. But remember the easy money will fuel the 253 00:14:41,720 --> 00:14:45,920 Speaker 1: stock market boom. Right, There's two different investor communities here, 254 00:14:46,200 --> 00:14:49,320 Speaker 1: and the stock market investors when they see lower interest 255 00:14:49,400 --> 00:14:53,120 Speaker 1: rates bid up for stocks. That's just the propensity of 256 00:14:53,120 --> 00:14:56,080 Speaker 1: that community is easy money means higher prices. 257 00:14:57,040 --> 00:14:59,440 Speaker 2: I mentioned the FED maybe playing a role in here. 258 00:14:59,440 --> 00:15:01,360 Speaker 2: In About three months ago, you wrote an op ed 259 00:15:01,440 --> 00:15:02,920 Speaker 2: in the Wall Street Journal. I'd love to read a 260 00:15:02,960 --> 00:15:05,280 Speaker 2: line from it because it was really important and timely. 261 00:15:05,360 --> 00:15:07,920 Speaker 2: You wrote that pressuring the Central Bank to adopt a 262 00:15:07,920 --> 00:15:14,000 Speaker 2: more permissive stance toward inflation carries deep costs. Can Since then, 263 00:15:14,200 --> 00:15:16,720 Speaker 2: we've seen a NEC director Kevin Hassett, emerge as the 264 00:15:16,720 --> 00:15:19,560 Speaker 2: front runner from the FED. There's reporting overnight that there's 265 00:15:19,600 --> 00:15:23,640 Speaker 2: been some pushback in Trump's inner circle. Is that pushback warranted? 266 00:15:23,680 --> 00:15:27,160 Speaker 2: Would you support a Kevin Hassett as leading the FED, 267 00:15:27,200 --> 00:15:29,320 Speaker 2: someone who's seen as very loyal to the president? 268 00:15:30,120 --> 00:15:34,160 Speaker 1: Look, I think the most important move the President and 269 00:15:34,200 --> 00:15:37,280 Speaker 1: the incoming FED chairman can make or chairwoman is the 270 00:15:37,280 --> 00:15:42,200 Speaker 1: case maybe is to separate, is to create distance between 271 00:15:42,240 --> 00:15:45,800 Speaker 1: the White House and the FED because the most difficult 272 00:15:45,960 --> 00:15:49,760 Speaker 1: job the FED has is the job of raising rates 273 00:15:49,760 --> 00:15:54,680 Speaker 1: to combat inflation, which can result in higher unemployment. It's 274 00:15:54,720 --> 00:15:58,520 Speaker 1: a politically unpopular decision to have to make. The White 275 00:15:58,520 --> 00:16:01,000 Speaker 1: House having distance from the FED gives the FED more 276 00:16:01,120 --> 00:16:04,880 Speaker 1: latitude to make the tough calls you need to make 277 00:16:05,400 --> 00:16:08,440 Speaker 1: to protect the long term stability of the dollar and 278 00:16:08,520 --> 00:16:12,720 Speaker 1: to protect the long term interests of the economy. And 279 00:16:12,840 --> 00:16:17,640 Speaker 1: sometimes the long term interest the economy involves short term 280 00:16:17,720 --> 00:16:21,800 Speaker 1: pain and misery. Vulgar experienced this back when he was 281 00:16:21,800 --> 00:16:24,760 Speaker 1: FED chairman. This is a real issue. And when the 282 00:16:24,760 --> 00:16:29,080 Speaker 1: White House usurps control the FED, even if they don't 283 00:16:29,120 --> 00:16:32,400 Speaker 1: actually have it as a practical matter, if they're perceived 284 00:16:32,440 --> 00:16:37,760 Speaker 1: to control the FED, then if inflation rears its ugly head, 285 00:16:38,360 --> 00:16:42,040 Speaker 1: the President can't blame the chair of the FED. The 286 00:16:42,080 --> 00:16:45,000 Speaker 1: buck stops on his desk. So I don't know why 287 00:16:45,040 --> 00:16:48,840 Speaker 1: President Trump wants to take that risk in an environment 288 00:16:48,880 --> 00:16:52,960 Speaker 1: where the outlook for inflation is so difficult to forecast 289 00:16:53,080 --> 00:16:56,680 Speaker 1: or predict. And there is again a lot of pro 290 00:16:56,720 --> 00:17:01,680 Speaker 1: inflationary pressures that have been created by the change labor markets, 291 00:17:02,160 --> 00:17:07,639 Speaker 1: the high fiscal deficits, that is, fiscal stimulus, and of 292 00:17:07,720 --> 00:17:10,880 Speaker 1: course right now, the relatively easy monetary policy. 293 00:17:11,119 --> 00:17:12,959 Speaker 2: Well, I mean you started this with mentioning you'd been 294 00:17:12,960 --> 00:17:15,159 Speaker 2: in Washington, DC with some of their business leaders with 295 00:17:15,160 --> 00:17:19,159 Speaker 2: the Trump administration looking at solutions for affordability. Did you 296 00:17:19,200 --> 00:17:21,520 Speaker 2: get a word in and who your pick would be 297 00:17:21,560 --> 00:17:22,400 Speaker 2: for FED chair? 298 00:17:22,880 --> 00:17:23,560 Speaker 1: You said, who you. 299 00:17:23,880 --> 00:17:25,960 Speaker 2: Perhaps the characteristics of who you don't want it to be, 300 00:17:25,960 --> 00:17:27,600 Speaker 2: who would make sense for this job. 301 00:17:27,920 --> 00:17:30,120 Speaker 1: I think the President has a number of really good 302 00:17:30,119 --> 00:17:33,120 Speaker 1: people to choose from for the role. I don't think 303 00:17:33,160 --> 00:17:36,120 Speaker 1: throwing my sort of choice into the mix helps to 304 00:17:36,320 --> 00:17:39,479 Speaker 1: add anything to the argument or decision at hand. I 305 00:17:39,480 --> 00:17:42,840 Speaker 1: think the President will hopefully make a decision from the 306 00:17:42,960 --> 00:17:48,080 Speaker 1: perspective of who will give the global markets and the 307 00:17:48,119 --> 00:17:52,879 Speaker 1: American investing public and the American consumer the greatest peace 308 00:17:52,920 --> 00:17:55,640 Speaker 1: of mind that we will manage inflation in. 309 00:17:55,560 --> 00:17:58,399 Speaker 2: America, and someone not from the White House ideally is 310 00:17:58,440 --> 00:17:58,960 Speaker 2: what you're saying. 311 00:17:59,119 --> 00:18:01,639 Speaker 1: I actually don't think that that's as important as the 312 00:18:01,800 --> 00:18:05,479 Speaker 1: ability of that candidate to make it clear to the 313 00:18:05,480 --> 00:18:08,840 Speaker 1: House of Representatives or the Senate in this case, and 314 00:18:08,960 --> 00:18:13,919 Speaker 1: the American people that they will make the decisions that 315 00:18:14,080 --> 00:18:16,640 Speaker 1: need to be made to protect the long term interest 316 00:18:16,680 --> 00:18:17,600 Speaker 1: to the US economy. 317 00:18:18,320 --> 00:18:21,520 Speaker 2: So ken, if reducing rates is one thing that's excited 318 00:18:21,600 --> 00:18:24,080 Speaker 2: risk markets, we'd be remiss if we didn't talk about 319 00:18:24,080 --> 00:18:26,399 Speaker 2: the other thing that's been talked about all day today, 320 00:18:26,680 --> 00:18:30,320 Speaker 2: and that is an AI. In twenty twenty three, you 321 00:18:30,400 --> 00:18:32,080 Speaker 2: said that there was a lot of hype, maybe too 322 00:18:32,160 --> 00:18:34,520 Speaker 2: much hype in AI. In the past two and a 323 00:18:34,560 --> 00:18:39,200 Speaker 2: half years, we have seen advancements, better jobs at producing images, 324 00:18:39,400 --> 00:18:43,480 Speaker 2: better voice recognition, and a whole slew of businesses at 325 00:18:43,560 --> 00:18:47,439 Speaker 2: least they say that they're adopting AI. Have you reassessed 326 00:18:47,520 --> 00:18:49,040 Speaker 2: in the past two and a half years or do 327 00:18:49,080 --> 00:18:50,440 Speaker 2: you still think there's too much hype? 328 00:18:50,720 --> 00:18:53,560 Speaker 1: No? I think actually we've been pretty spot on with 329 00:18:53,640 --> 00:18:58,560 Speaker 1: that forecast so far. Now, what has happened over the 330 00:18:58,640 --> 00:19:02,479 Speaker 1: last two years is, actually, though a very important and 331 00:19:02,520 --> 00:19:08,199 Speaker 1: powerful story in the C suite of corporate America, is 332 00:19:08,240 --> 00:19:12,520 Speaker 1: a greater focus on how do you use technology to 333 00:19:12,880 --> 00:19:17,280 Speaker 1: increase productivity. It may not be generative AI, but there's 334 00:19:17,320 --> 00:19:21,400 Speaker 1: a reawakening to the importance of using technology to empower 335 00:19:21,520 --> 00:19:24,720 Speaker 1: business outcomes. I was with a group of international business 336 00:19:24,760 --> 00:19:28,560 Speaker 1: executives about a year and change ago, and everybody who 337 00:19:28,600 --> 00:19:31,239 Speaker 1: was excited around the dinner table talking about AI, and 338 00:19:31,600 --> 00:19:35,360 Speaker 1: I thought, you know what, let's all share a story 339 00:19:35,480 --> 00:19:39,000 Speaker 1: as to how we're using AI to make our businesses better. 340 00:19:40,119 --> 00:19:44,520 Speaker 1: And I heard five or six really interesting stories of 341 00:19:44,640 --> 00:19:51,840 Speaker 1: how corporations were transforming their businesses through the use of technology, 342 00:19:51,960 --> 00:19:55,600 Speaker 1: but not one story involved generative AI. 343 00:19:56,760 --> 00:19:59,280 Speaker 2: If you are one of these players, then that exists. 344 00:19:59,320 --> 00:20:02,960 Speaker 2: In this eco system where Hyperscalers has spent two hundred 345 00:20:02,960 --> 00:20:06,199 Speaker 2: and thirty billion dollars just in twenty twenty five, with 346 00:20:06,280 --> 00:20:10,440 Speaker 2: projections to go somewhere near three trillion over the next decade. 347 00:20:11,480 --> 00:20:13,680 Speaker 2: That seems a little bit worrying ken that people aren't 348 00:20:13,680 --> 00:20:16,959 Speaker 2: finding uses for AI, that they're instead just finding uses 349 00:20:16,960 --> 00:20:20,320 Speaker 2: for other technology and maybe wrapping it in an AI bo. 350 00:20:20,400 --> 00:20:23,000 Speaker 1: Well, I mean, first of all, like I said, these 351 00:20:23,000 --> 00:20:26,720 Speaker 1: corporate executives shared really great stories, like how they increased 352 00:20:26,720 --> 00:20:31,720 Speaker 1: their ability to put fifteen percent more cargo onto a 353 00:20:31,800 --> 00:20:36,240 Speaker 1: train onto a shipping vessel. I mean, that's just money 354 00:20:36,320 --> 00:20:40,639 Speaker 1: right to the bottom line, less environmental impact, higher margins, 355 00:20:40,800 --> 00:20:44,719 Speaker 1: that's good business. So the upshot of this is that 356 00:20:44,760 --> 00:20:48,680 Speaker 1: Corporate America is securing gains from the use of technology. Again, 357 00:20:49,240 --> 00:20:51,680 Speaker 1: I think they're just securing a greater share of those 358 00:20:51,720 --> 00:20:56,280 Speaker 1: gains from the uses of more traditional technologies optimization technology, 359 00:20:56,840 --> 00:21:00,760 Speaker 1: long standing machine learning technology. Most of their gains are 360 00:21:00,760 --> 00:21:04,639 Speaker 1: coming from generative AI. Now, having said that, with the 361 00:21:04,800 --> 00:21:07,119 Speaker 1: enormity of the investment that's being made in the field 362 00:21:07,119 --> 00:21:10,840 Speaker 1: of artificial intelligence, I think there is some chance that 363 00:21:10,880 --> 00:21:15,240 Speaker 1: we will see meaningful progress in this field that will 364 00:21:15,320 --> 00:21:18,720 Speaker 1: change the calculation that I'm or calculus that I'm setting forth. 365 00:21:19,560 --> 00:21:22,080 Speaker 1: There are so many bright people in their twenties and 366 00:21:22,119 --> 00:21:28,600 Speaker 1: thirties trying to unlock trying to unlock true intelligence that 367 00:21:28,680 --> 00:21:31,760 Speaker 1: this does create the environment in which a breakthrough may happen. 368 00:21:32,280 --> 00:21:34,720 Speaker 1: But I think that generative AI as we know today 369 00:21:35,440 --> 00:21:39,960 Speaker 1: will have a very pointed, but relatively limited impact on 370 00:21:40,000 --> 00:21:44,640 Speaker 1: the broader economy. Call centers are being completely re architected 371 00:21:44,680 --> 00:21:50,200 Speaker 1: by jenerative AI, translation of documents between languages completely re 372 00:21:50,400 --> 00:21:54,360 Speaker 1: architected by generative AI, but most of the white collar work, 373 00:21:54,400 --> 00:21:57,920 Speaker 1: for example, that we do at Citadel very modest impacts 374 00:21:58,000 --> 00:22:00,800 Speaker 1: so far. In fact, Harvard Business Review did a great 375 00:22:00,840 --> 00:22:04,840 Speaker 1: piece on this, and it was called AI WORKSLOP, which 376 00:22:04,920 --> 00:22:07,880 Speaker 1: basically you find that the younger generation tends to use 377 00:22:07,920 --> 00:22:12,520 Speaker 1: AI to create work product that more seasoned professionals look 378 00:22:12,560 --> 00:22:16,520 Speaker 1: at and go, that's just wrong, and the net perctivity 379 00:22:16,520 --> 00:22:20,000 Speaker 1: gain is therefore deminimous because you go back and have 380 00:22:20,080 --> 00:22:23,439 Speaker 1: to redo the work with more senior people. I was 381 00:22:23,480 --> 00:22:25,360 Speaker 1: with one of my partners and we were going through 382 00:22:25,760 --> 00:22:28,520 Speaker 1: an interesting problem and he handed me a report and 383 00:22:28,560 --> 00:22:32,520 Speaker 1: the first few sentences were very insightful, and then the 384 00:22:32,560 --> 00:22:35,159 Speaker 1: rest was just gibberish. And I said, so, how did 385 00:22:35,160 --> 00:22:39,720 Speaker 1: this come to be chat GPT? And that was frightening 386 00:22:39,800 --> 00:22:41,879 Speaker 1: because if I know, if I did not have the 387 00:22:41,920 --> 00:22:45,160 Speaker 1: domain expertise that I had, I probably would have accepted 388 00:22:45,160 --> 00:22:48,040 Speaker 1: the totality the product right. Like I said, the first 389 00:22:48,040 --> 00:22:52,320 Speaker 1: few sentences were really insightful, and then it just evolved 390 00:22:52,320 --> 00:22:55,960 Speaker 1: into gibberish that the average person in the field would 391 00:22:56,040 --> 00:22:57,800 Speaker 1: not necessarily have known or appreciated. 392 00:22:58,119 --> 00:23:00,919 Speaker 2: And it feels like there's this really tension between the 393 00:23:00,960 --> 00:23:04,520 Speaker 2: promise of AI being priced into markets spending, like the 394 00:23:04,520 --> 00:23:08,359 Speaker 2: promise of AI is coming in the actual reality. Does 395 00:23:08,400 --> 00:23:12,040 Speaker 2: that end with pain for someone the people have been overspending, 396 00:23:12,280 --> 00:23:14,040 Speaker 2: the focus firms that have been investing in. 397 00:23:14,000 --> 00:23:16,600 Speaker 1: This look the Internet bubble. Just to go back to 398 00:23:16,760 --> 00:23:18,480 Speaker 1: a time in our life that we all know well 399 00:23:19,160 --> 00:23:23,560 Speaker 1: saw some enormous misallocations of capital and also a number 400 00:23:23,600 --> 00:23:27,800 Speaker 1: of really important transformative changes for the economy. And again, 401 00:23:27,920 --> 00:23:31,840 Speaker 1: I believe that this current revisiting technology by corporate America 402 00:23:32,400 --> 00:23:36,480 Speaker 1: is creating some incredible lasting value in our economy. It's 403 00:23:36,560 --> 00:23:39,119 Speaker 1: just what will be the role of generative AI in 404 00:23:39,160 --> 00:23:41,840 Speaker 1: that story. You know, one of the large firms, I'll 405 00:23:41,920 --> 00:23:47,800 Speaker 1: leave them nameless, in their advertising campaign for AI, laid 406 00:23:47,800 --> 00:23:52,760 Speaker 1: out three key principles for the successful implementation of generative 407 00:23:52,760 --> 00:23:57,240 Speaker 1: AI in the workplace, and the very first point was, 408 00:23:57,359 --> 00:24:02,600 Speaker 1: in essence, used this moment to rethink and re architect 409 00:24:02,640 --> 00:24:08,800 Speaker 1: your business processes. That's timeless advice. Every business has to 410 00:24:08,880 --> 00:24:11,959 Speaker 1: episodically go back and re underwrite how it does what 411 00:24:12,000 --> 00:24:13,840 Speaker 1: it does to do things better. 412 00:24:14,520 --> 00:24:16,560 Speaker 2: We've seen a lot of that though, of companies saying 413 00:24:16,560 --> 00:24:19,880 Speaker 2: they're laying off people and have specifically cited AI. Are 414 00:24:19,880 --> 00:24:23,320 Speaker 2: you saying that's more of an excuse at the stage, then, look. 415 00:24:23,359 --> 00:24:27,640 Speaker 1: I think the AI driven layoffs, if one may use 416 00:24:27,680 --> 00:24:30,320 Speaker 1: that choice of words, Number one is when businesses do 417 00:24:30,440 --> 00:24:33,640 Speaker 1: go back and re architect their processes, they realize often 418 00:24:34,000 --> 00:24:37,359 Speaker 1: they can do things with fewer people, whether or not 419 00:24:37,400 --> 00:24:41,159 Speaker 1: they use gender AI. We've made a huge push in 420 00:24:41,440 --> 00:24:44,240 Speaker 1: using technology, it's stated all over the last several years, 421 00:24:44,760 --> 00:24:48,080 Speaker 1: to streamline and automated processes. Now we haven't had to 422 00:24:48,119 --> 00:24:51,280 Speaker 1: lay people off because of that. We're rapidly growing, so 423 00:24:51,320 --> 00:24:54,440 Speaker 1: those people are put into other new areas of work 424 00:24:54,480 --> 00:24:57,400 Speaker 1: for us. But we've taken a lot of labor onto 425 00:24:57,440 --> 00:24:59,439 Speaker 1: what we do each and every day in our business. 426 00:25:00,200 --> 00:25:03,679 Speaker 1: America is doing this everywhere. The second dynamic that's happening 427 00:25:03,800 --> 00:25:06,679 Speaker 1: right now is some of the labor hoarding of the 428 00:25:06,720 --> 00:25:11,320 Speaker 1: pandemic era is ending. And it's much easier to tell 429 00:25:11,359 --> 00:25:17,800 Speaker 1: your employees because of AI, we're reducing headcount than to say, 430 00:25:18,320 --> 00:25:21,600 Speaker 1: because we've maintained a fair number of people on our 431 00:25:21,640 --> 00:25:25,000 Speaker 1: team that we really didn't have good work for, we're 432 00:25:25,080 --> 00:25:31,080 Speaker 1: reducing our workforce. Right One depersonalizes a decision. It's a 433 00:25:31,240 --> 00:25:35,600 Speaker 1: technological transformation that's out of my control and I'm sorry 434 00:25:35,680 --> 00:25:39,760 Speaker 1: this is happening, whereas admitting that you hoarded labor for 435 00:25:39,840 --> 00:25:43,280 Speaker 1: years is just a very different message one that people 436 00:25:43,280 --> 00:25:45,120 Speaker 1: don't want to make state or hear. 437 00:25:46,040 --> 00:25:48,720 Speaker 2: There have been plenty of surveys that younger people coming 438 00:25:48,720 --> 00:25:51,040 Speaker 2: out of college feel a lot of anxiety, and maybe 439 00:25:51,040 --> 00:25:53,600 Speaker 2: it's because the headlines that are driven by executives saying 440 00:25:53,600 --> 00:25:57,359 Speaker 2: this ken, What advice would you give to someone who's 441 00:25:57,560 --> 00:26:02,280 Speaker 2: newly graduating and considering pursuing a field in finance somewhere? 442 00:26:02,320 --> 00:26:05,359 Speaker 2: Do they need to drastically rethink of what they study, 443 00:26:05,480 --> 00:26:08,360 Speaker 2: how they enter the field, and what their jobs exactly 444 00:26:08,400 --> 00:26:11,520 Speaker 2: will be because of changes in technology or because of 445 00:26:11,520 --> 00:26:12,719 Speaker 2: the state of a labor market. 446 00:26:12,800 --> 00:26:15,840 Speaker 1: Look, I think the most important advice I can give 447 00:26:15,920 --> 00:26:18,760 Speaker 1: is not the person who just graduated. It's the person 448 00:26:18,800 --> 00:26:25,240 Speaker 1: who's just starting college. Pursue a course of study where 449 00:26:25,280 --> 00:26:29,880 Speaker 1: you will learn to be a good problem solver. Pursue 450 00:26:30,560 --> 00:26:33,760 Speaker 1: a course of study in which you will have the toolkit, 451 00:26:34,680 --> 00:26:39,159 Speaker 1: the mathematical skills, the statistics background to really be highly 452 00:26:39,200 --> 00:26:42,680 Speaker 1: employable in this global economy we live in today. There's 453 00:26:42,760 --> 00:26:46,680 Speaker 1: still a huge deficit in the Western world of individuals 454 00:26:46,680 --> 00:26:51,160 Speaker 1: with backgrounds and STEM degrees. It's really important that you 455 00:26:51,200 --> 00:26:54,679 Speaker 1: think about your college years as doing two things. It 456 00:26:54,720 --> 00:26:57,960 Speaker 1: creates for you the foundation to be a lifetime learner, 457 00:26:58,800 --> 00:27:01,359 Speaker 1: because whether you just graduate from college or you're just 458 00:27:01,359 --> 00:27:04,320 Speaker 1: starting college, you're going to have to learn for the 459 00:27:04,359 --> 00:27:07,679 Speaker 1: rest of your life. Because what you learn in college 460 00:27:07,840 --> 00:27:10,560 Speaker 1: or just learned in college, will soon be antiquated. And 461 00:27:10,600 --> 00:27:13,280 Speaker 1: if you're not a lifetime learner, you've got a really 462 00:27:13,359 --> 00:27:16,679 Speaker 1: rough road ahead of you. And then number two is 463 00:27:16,880 --> 00:27:19,960 Speaker 1: the world will always value people who can solve problems. 464 00:27:20,680 --> 00:27:22,119 Speaker 1: If you can put your hand up and say I 465 00:27:22,119 --> 00:27:24,840 Speaker 1: will take that challenge on, you will always have a 466 00:27:24,920 --> 00:27:26,680 Speaker 1: job in the Western economy. 467 00:27:27,520 --> 00:27:30,840 Speaker 2: Can we talk about a young Ken, entrepreneurial Ken in 468 00:27:30,880 --> 00:27:33,760 Speaker 2: college coming out of college in nineteen eighty seven, when 469 00:27:33,760 --> 00:27:36,560 Speaker 2: you started your first fund at nineteen years of age 470 00:27:36,880 --> 00:27:39,000 Speaker 2: and you made an absolute killing because you were short 471 00:27:39,119 --> 00:27:43,040 Speaker 2: the market going into Black Monday? Should you be in 472 00:27:43,040 --> 00:27:46,119 Speaker 2: that scenario now? Do you think that there's something you 473 00:27:46,160 --> 00:27:49,800 Speaker 2: could bet against in this market currently that you could 474 00:27:50,040 --> 00:27:52,480 Speaker 2: create the magic of what happened in that year? 475 00:27:52,760 --> 00:27:56,480 Speaker 1: It would be the good luck, Hey, good. 476 00:27:56,359 --> 00:27:58,159 Speaker 2: Luck anything you think would give you a little bit 477 00:27:58,160 --> 00:27:59,840 Speaker 2: of skill in achieving that good luck. 478 00:28:00,080 --> 00:28:02,639 Speaker 1: So you know, it's funny. I look back at the 479 00:28:02,680 --> 00:28:05,440 Speaker 1: crash of eighty seven and I was long a portfolio 480 00:28:05,480 --> 00:28:09,200 Speaker 1: cordal bonds, and the uncertainty and how that portfolio would 481 00:28:09,200 --> 00:28:12,679 Speaker 1: behave in a bear market was high, So for choice, 482 00:28:12,680 --> 00:28:14,320 Speaker 1: I was short a bit more stock than I should 483 00:28:14,320 --> 00:28:17,600 Speaker 1: have been. Risk management's about trying to deal with the 484 00:28:17,720 --> 00:28:20,920 Speaker 1: unknown when things go wrong, and because of that, I 485 00:28:21,080 --> 00:28:24,240 Speaker 1: was a bit more short than one might mathematically have 486 00:28:24,240 --> 00:28:27,840 Speaker 1: said would be optimal. So that was the good fortune 487 00:28:27,840 --> 00:28:33,679 Speaker 1: of nineteen eighty seven. Look, I think that we really 488 00:28:33,720 --> 00:28:37,479 Speaker 1: spend our time at Citadel playing offense where will value 489 00:28:37,520 --> 00:28:40,240 Speaker 1: be created? And then of course we take the time 490 00:28:40,280 --> 00:28:42,640 Speaker 1: to think about how do we risk manage the portfolio 491 00:28:43,360 --> 00:28:48,160 Speaker 1: that we're building. But the story, the success story of 492 00:28:48,200 --> 00:28:53,200 Speaker 1: America is a success story written by optimists. And I 493 00:28:53,240 --> 00:28:57,440 Speaker 1: think that in building a business or in building your career, 494 00:28:57,920 --> 00:29:02,720 Speaker 1: it's really important that you bring optimist first and foremost 495 00:29:03,040 --> 00:29:04,960 Speaker 1: each and every day to what you do in life. 496 00:29:05,280 --> 00:29:08,040 Speaker 1: So we're always looking for how do you create value? 497 00:29:08,200 --> 00:29:12,360 Speaker 1: And then, having said that, survival is about having their 498 00:29:12,400 --> 00:29:16,600 Speaker 1: realistic paranoia that the world will go through difficult times 499 00:29:16,920 --> 00:29:19,760 Speaker 1: and how do you create the risk management to get 500 00:29:19,840 --> 00:29:22,800 Speaker 1: through those difficult times. But we come to work as 501 00:29:22,840 --> 00:29:30,000 Speaker 1: optimists first, paranoid pessimists making sure we can survive difficult times. Second, 502 00:29:30,320 --> 00:29:30,720 Speaker 1: can I just. 503 00:29:30,760 --> 00:29:32,640 Speaker 2: Quickly ask, because we're almost out of time, A lot 504 00:29:32,640 --> 00:29:36,080 Speaker 2: of folks have expressed paranoia and that shift and a 505 00:29:36,080 --> 00:29:39,400 Speaker 2: lot of risk from public markets has shifted into private markets. 506 00:29:39,600 --> 00:29:42,960 Speaker 2: Does that hit the list of your paranoia at all? 507 00:29:43,040 --> 00:29:45,840 Speaker 1: Look, I think there's a lot of virtues to the 508 00:29:45,960 --> 00:29:49,040 Speaker 1: rise and depth of the private markets in the United States. 509 00:29:49,640 --> 00:29:52,560 Speaker 1: You have a tremendous number of mid sized companies or 510 00:29:52,600 --> 00:29:56,360 Speaker 1: even large companies owned by privacy firms, and you have 511 00:29:56,560 --> 00:29:59,400 Speaker 1: very tight agency between the owner of the business and 512 00:29:59,400 --> 00:30:05,280 Speaker 1: the management business. That's been very instrumental in increasing American productivity. 513 00:30:06,160 --> 00:30:09,560 Speaker 1: I think that's the great strength of the private equity 514 00:30:09,560 --> 00:30:12,480 Speaker 1: system that we have in the United States. The downside 515 00:30:12,480 --> 00:30:15,280 Speaker 1: in private markets, one of the downsides is you don't 516 00:30:15,320 --> 00:30:18,280 Speaker 1: have good price discovery, and price discovery is one of 517 00:30:18,280 --> 00:30:21,479 Speaker 1: the ways that you, as a management team have an 518 00:30:21,480 --> 00:30:25,680 Speaker 1: appreciation for how the world values what you're doing, and 519 00:30:26,240 --> 00:30:29,240 Speaker 1: that investors are able to use as a metric or 520 00:30:29,280 --> 00:30:33,760 Speaker 1: milestone in measuring their own skills as an investor. You know, 521 00:30:33,800 --> 00:30:36,880 Speaker 1: one of my concerns with private credit, for example, the 522 00:30:36,960 --> 00:30:41,360 Speaker 1: vast majority of companies will never default. You invest your 523 00:30:41,360 --> 00:30:44,840 Speaker 1: money today in a company's credit, you won't know for 524 00:30:44,880 --> 00:30:47,320 Speaker 1: five or seven years if you made a good investment, 525 00:30:48,080 --> 00:30:50,560 Speaker 1: which means that a substantial portion of your career will 526 00:30:50,560 --> 00:30:54,800 Speaker 1: have slipped through your fingers before you learn whether or 527 00:30:54,880 --> 00:30:58,000 Speaker 1: not you made a good underwriting decision. And as we 528 00:30:58,040 --> 00:31:00,320 Speaker 1: go back to the start of the story, one of 529 00:31:00,400 --> 00:31:04,600 Speaker 1: the distinguishing factors of the American success story is the 530 00:31:04,640 --> 00:31:08,600 Speaker 1: depth and efficiency of our capital markets. And as we 531 00:31:08,760 --> 00:31:12,800 Speaker 1: move more into the private realm, we take away some 532 00:31:12,840 --> 00:31:16,720 Speaker 1: of the learning experiences that have driven the vitality and 533 00:31:16,760 --> 00:31:18,640 Speaker 1: success of the American capital markets.