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Speaker 1: Member s I p C. Welcome to the Bloomberg Surveillance Podcast.
Speaker 1: I'm Tom Keene with David Gura. Daily we bring you
Speaker 1: insight from the best in economics, finance, investment and international relations.
Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com and
Speaker 1: of course on the Bloomberg We don't speak to one
Speaker 1: of the truly great voices and important voices of the
Speaker 1: meetings of the World Economic Forum, and that is Ray
Speaker 1: del Yo. You may know him among any other things,
Speaker 1: including someone who has given generously an interview time to
Speaker 1: Bloomberg Surveillance, but far more for running and investing money
Speaker 1: over the years in all different conditions and of course
Speaker 1: strapping it over from Bridgewater to an analysis of economics.
Speaker 1: I want to get to an in a moment, Ray
Speaker 1: Delia Daio, good morning, Thank you for being with us.
Speaker 1: How was the year for Bridgewater? Can you can you
Speaker 1: say given the cocopany out there, the systemic risk, the
Speaker 1: challenges of epsilon. Can you go into this year with
Speaker 1: the momentum? Well, last year we're up, depending on the account,
Speaker 1: somewhere between a couple of percent and about twelve percent.
Speaker 1: It was a lot better than others. Well that's not
Speaker 1: the best point in comparison, but anyway, it was a
Speaker 1: social year. Let's get to the panel, Francie Laqua holding
Speaker 1: court as you and any number of people disagreed. You know,
Speaker 1: I say, folks, the elite me degree. Well, that didn't
Speaker 1: happen with Ray Deelio. It's your panel. Professor Summers talks
Speaker 1: about a time of economic creationism, the new economics of
Speaker 1: the President elect. Where do you and Mr Summers disagree
Speaker 1: most in America's economics? Um, I think it's about populism.
Speaker 1: Um that the possibility that this can be effective, the
Speaker 1: possibility of bringing about economic revitalization business. It's okay to
Speaker 1: make a lot of money by bringing in businesses from
Speaker 1: other countries, I think the United States. There's a lot
Speaker 1: of positives in this. I think the big question is
Speaker 1: whether it will be well navigated. There's a populism going on.
Speaker 1: So let's let's label this around the world as a
Speaker 1: phenomenon called populism. It exists in Brexit, it existed in
Speaker 1: the thirties. We have to understand what it is. It
Speaker 1: represents a population that needs to be represented. The question
Speaker 1: is whether it's done intelligently or not intelligently. Now the
Speaker 1: words the revitalization of of of making money. So I
Speaker 1: think that this could be very good. It'll stimulate growth
Speaker 1: where the growth where there was a malaising growth before.
Speaker 1: The question is whether it's done thoughtfully and intelligently, whether
Speaker 1: this is going to require an engineering exercise. I love
Speaker 1: that idea, and this, of course uh comes from your uh,
Speaker 1: you know, your middle class upbring. I guess I would
Speaker 1: call it within Long Island years ago. Within that radio
Speaker 1: and within the need for engineering is the idea that
Speaker 1: we get a frontloaded benefit that dissipates one year out
Speaker 1: or three year out. Is that a tangible risk. I
Speaker 1: think that this could be sustained or it could be nothing,
Speaker 1: depending on how it is. Let me tell you what
Speaker 1: I think it is. I think we're in a period
Speaker 1: that's very similar to nineteen eighty transition between the left
Speaker 1: and the right, between more government and less government. Um,
Speaker 1: it was a time him when Ronald Reagan it would
Speaker 1: be more like supply side economics. It was a period
Speaker 1: that's quite like that, but different in that we don't
Speaker 1: have the capacity upboard capacity to grow in the same
Speaker 1: way because we were in a deep percession then, and
Speaker 1: we don't have the capacity to lower interest rates. So
Speaker 1: the new growth that could take place by new investment
Speaker 1: and new animal spirits um has to be very well
Speaker 1: engineered to find out where the capacity lies to invent
Speaker 1: invest correctly to make this To pull this off is
Speaker 1: going to require engineering, and I think the real question
Speaker 1: will be whether there's the skill and the patience to
Speaker 1: engineer a unique recovery when the economy is where it is.
Speaker 1: Let's bring in David Gurr in New York City. David
Speaker 1: Gurrow this morning with Ray Delio and Davos. Do you
Speaker 1: have a better sense of what the blueprint is going
Speaker 1: to look like? You've written about trying to understand how
Speaker 1: that the leverages will be moved in with the outcome
Speaker 1: of moving them is likely to produce. You wrote that
Speaker 1: shortly after the U. S presidential election. Are we any
Speaker 1: closer to getting a sense of what that engineering mechanism
Speaker 1: is going to look like? I think we know all
Speaker 1: the broad senses, and I don't think we know any
Speaker 1: of the details. When when you think that like the
Speaker 1: devil is in the details, I mean, I think we
Speaker 1: know that there is going to be UM more protection,
Speaker 1: is more UH capital investment, more tax benefits for companies,
Speaker 1: more changes in tax rates. We know that there's going
Speaker 1: to be uh a lot of things, but we don't
Speaker 1: know how it's going to be paid for, or how
Speaker 1: it's where the capacity is going to exist with the
Speaker 1: tightness in capacity. We don't know how it's going to
Speaker 1: be financed. We don't know even how those decisions are
Speaker 1: going to be made. We don't know the particular people
Speaker 1: and their interactions. We don't know a lot. We don't
Speaker 1: know what. Most importantly, I think we know that Donald
Speaker 1: Trump UM is a businessman and aggressive businessman, And what
Speaker 1: we don't know is whether he's going to be aggressive
Speaker 1: and thoughtful or aggressive and reckless. This is going to
Speaker 1: require a surgery, uh and whether there's good surgeons and
Speaker 1: executing this well. To pull off the sort of environment
Speaker 1: that we had from nineteen eighty to ninety five when
Speaker 1: Ronald Reagan came in is going to require skilled talent.
Speaker 1: We don't know yet how that will work. Again, I
Speaker 1: draw back to to what you wrote after the election.
Speaker 1: You said that the craziness factor may have been overestimated
Speaker 1: when it comes to to Donald Trump. He might be
Speaker 1: a less erratic leader than than many feared now a
Speaker 1: few years, a few months. Hence, do you feel do
Speaker 1: you feel the same way you see the tweets as
Speaker 1: we do every morning here, do you get the sense
Speaker 1: that that he's changing as a leader. I think he's
Speaker 1: chosen people around him who are buying large, thoughtful, respectable,
Speaker 1: intelligent people. Um. I think that's telling. And again I
Speaker 1: think that we don't know how those interactions are going
Speaker 1: to be. That's the uncertainty that's out there. Has Bridgewater
Speaker 1: had to adjust its investment stance because within my theme,
Speaker 1: we're living within uncertainty amid and uncertainty. How do you
Speaker 1: deal with it day to day? I think the important
Speaker 1: thing is to know what you know and you know
Speaker 1: what you don't know. Most of my success has come
Speaker 1: from me knowing what I don't know and how to
Speaker 1: deal with it. So we've been basically trying to be
Speaker 1: neutral to this whole thing. So we've been positioned pretty neutral.
Speaker 1: E in other words, is a way to diversify yourself
Speaker 1: away from this. I don't want to take bets on
Speaker 1: on this right now, Ragelio, thank you so much with
Speaker 1: Bridgewater this morning with us here at the meetings of
Speaker 1: the World Economic Forum in Davas, David Kerr in New York.
Speaker 1: I tell keenan Davos, Switzerland, the meetings of the World
Speaker 1: Economic Forum. And now a quick annual visit with Michael
Speaker 1: Porter of Harvard University. He took aerospace and mechanical engineering
Speaker 1: degrees at a school in New Jersey a few years ago,
Speaker 1: and it's of course held court at Harvard Business School. Uh,
Speaker 1: you came out of a school in New Jersey, darkened
Speaker 1: the door in Cambridge and you're acclaimed. Professor sent you
Speaker 1: a note and said Mr Porter joined the conversation. Speak up,
Speaker 1: young Porter. Is there too much conversation nowadays? Do we
Speaker 1: have a president elect who's just perhaps talking a little
Speaker 1: too much? Well, Tom, I I I hesitate to judge
Speaker 1: whether it's too much or too little. I think it's
Speaker 1: the wrong kind of conversation, it's the wrong tone of conversation.
Speaker 1: I think, Uh, the president uh is going to have
Speaker 1: to learn how to be a leader. Um, and leaders
Speaker 1: inspire leaders. Uh, bring together, not divide. Uh. Leaders build
Speaker 1: confidence in the future, not fear. Uh. Leaders um also
Speaker 1: think about people as human beings and neighbors that are
Speaker 1: gonna coexist together over time. And uh uh you know,
Speaker 1: we have a we have a program that we do
Speaker 1: for major company CEOs at Harvard. It's a boot camp
Speaker 1: and and we talk a lot about what makes an
Speaker 1: effective leader and uh we one of the poignant moments
Speaker 1: in that program is we uh it we go back
Speaker 1: to Aristotle and and it turns out that the Greek's
Speaker 1: society was the first society in history where actually leaders
Speaker 1: had to had to motivate people and bring them more.
Speaker 1: Before that, it was all power and military and birth
Speaker 1: right exactly. And um, great communication and great leadership is
Speaker 1: the combination of three things. One is logic, or what
Speaker 1: they call logos. Uh. Uh. You've got to be logical.
Speaker 1: It's got to make sense. Uh And frankly we stretch
Speaker 1: that in today's society, a lot of this stuff actually
Speaker 1: isn't logical, but most citizens really don't understand it isn't.
Speaker 1: The Second thing that great leaders have is in a
Speaker 1: sense of emotion. There's an emotion of of hope and
Speaker 1: opportunity and a little bit of nervousness. And but but
Speaker 1: you can't have too much fear. Uh, you have to
Speaker 1: have some sense of hope and opportunity. You've got to
Speaker 1: put those two together. And and then third, and the
Speaker 1: most important of all is UH is what's called ethos. Values.
Speaker 1: The great leaders get across values that people aspire to
Speaker 1: and want to be part of it. And I think
Speaker 1: the conversation now is missing the point. Can this administration
Speaker 1: take porter one oh one, which we just heard, thank
Speaker 1: you for laying it out so nicely, and retain their
Speaker 1: core American audience that wants an angry populism right now?
Speaker 1: How do you do both? I don't. I don't. I
Speaker 1: kind of reject the idea that that America wants angry populism.
Speaker 1: I think America has been taught uh to want angry populism.
Speaker 1: That's the political discourse that we've evolved and and it's
Speaker 1: grown and grown over the last ten or twenty years.
Speaker 1: We've been taught that to get something you want, you
Speaker 1: have to punish or dismiss what somebody else wants. UH.
Speaker 1: We're looking at almost every issue in society in a
Speaker 1: simplistic way. It's not that we want trade or we
Speaker 1: don't want trade. You know, we we want the nice
Speaker 1: combination of the good parts of trade, but we want
Speaker 1: to get away from the best parts of trade. Uh.
Speaker 1: It's not that we want, you know, small government or
Speaker 1: big government. We want an interesting combination of getting government
Speaker 1: in the right place at the right time, with the
Speaker 1: right resources, focusing on the right thing. So I think
Speaker 1: what's happened is we've we've had a societal discourse that's
Speaker 1: been I think led by our political process that is
Speaker 1: educated people. Uh, that that populism has any legitimacy. I mean,
Speaker 1: I think in America we were the uniquely the country
Speaker 1: where people got along. I mean in my colleague David
Speaker 1: Gore in New York City, David very quickly here. I
Speaker 1: wonder if the more as of how we regard leadership
Speaker 1: stand to change here with Donald Trump in office. I
Speaker 1: think of how carefully executives cultivate their social media presence
Speaker 1: and profiles, and we see what the president elect is doing.
Speaker 1: Do you think that's gonna perhaps a liberate executives in
Speaker 1: some way the expectations will change that they'll have to
Speaker 1: be seen as more straight shooters than they have been. Well,
Speaker 1: I think that that's a very hopeful, positive interpretation. And
Speaker 1: I do believe that all leaders of complex enterprise or
Speaker 1: complex the society's have to now communicate in more ways
Speaker 1: than they did historically. UM. You know that said UM,
Speaker 1: I think that the fundamental uh problem that the Trump
Speaker 1: administration has is um, they have to ultimately be perceived
Speaker 1: as a an administration for America and for a good
Speaker 1: society and for a better place to live, and for
Speaker 1: a better place to work and raise your kids. And
Speaker 1: a society where everybody's yelling at each other and thinks
Speaker 1: the other guys the enemy down the street is not
Speaker 1: a good society that ultimately is going to motivate and
Speaker 1: and uh and succeed. We would be honored to speak
Speaker 1: to you again at one hundred days of this new administration,
Speaker 1: because if I know one message from this valley, nobody
Speaker 1: knows where we're gonna be in a hundred days, white
Speaker 1: set of opinions. Michael Porter of Harvard Business School, I
Speaker 1: can't say the benefit he has created over the years here, Boy,
Speaker 1: have I been looking forward to this as as Mr
Speaker 1: Gurry in New York, he is a four star Admiral
Speaker 1: of the U. S. Navy. He is out of the
Speaker 1: Fletcher School tuss University. But far more than that, he's
Speaker 1: served a tour of duty for four years with NATO.
Speaker 1: James Travitiz has given us so much value in the
Speaker 1: recent years and joins us here in dubas Admiral. When
Speaker 1: you NATO to me is a concept to most of
Speaker 1: our listeners. When you where do you walk into NATO
Speaker 1: when you walk in the door. Is it in Brussels? Uh?
Speaker 1: The NATO political headquarters is in Brussels, tom and what
Speaker 1: you would think of as the pentagon of the NATO
Speaker 1: is about an hour south in a small town called Mons.
Speaker 1: That access from Brussels to Mons is the heart of NATO.
Speaker 1: So you get the pointed. Is the leader the commander
Speaker 1: of NATO? The brass is shined. What happens when you
Speaker 1: walk in the door. Is an American running NATO as
Speaker 1: the supreme Allied commander. You ought to remember you are
Speaker 1: an American, but your deputy is a brit Your chief
Speaker 1: of staff is a German, your deputy chief of staff
Speaker 1: is French. All twenty eight countries have senior positions across
Speaker 1: the Alliance. So there's American leadership, but it's not American
Speaker 1: direction or American hegena. What does Mr Trump want? How
Speaker 1: do you synthesize the comments of the last fourteen days
Speaker 1: You've been out in the me you but I want
Speaker 1: you to say for the surveillance audience now, is NATO ancient?
Speaker 1: Is it an artifact? Not at all? And I spent
Speaker 1: about an hour with President elect Trump and Trump Tower
Speaker 1: on December eighth, so just a few weeks ago, and
Speaker 1: I made the case and I think he accepted it
Speaker 1: to a reasonable degree, that NATO is good return on investment.
Speaker 1: As Bloomberg listeners would think of it as follows. US
Speaker 1: spend six billion a year, China spends a hundred and
Speaker 1: fifty billion a year, Russia spends eighty billion a year.
Speaker 1: But the rest of NATO, European NATO tom spends three
Speaker 1: hundred billion dollars a year, more than Russia and China combined.
Speaker 1: We would not want to walk away and leave that
Speaker 1: money on the table. It's a good investment. Yesterday, the
Speaker 1: Vice President Joe Biden delivered a speech in Davos calling
Speaker 1: on the preservation of the Liberal order, talking about the
Speaker 1: relationship between the US and Europe, a very passionate speech
Speaker 1: about the importance of that relationship. Do you get the
Speaker 1: sense that we're going to hear the same kind of
Speaker 1: passion from this next administration. I think that's not likely,
Speaker 1: but I do think there's a kind of a grudging
Speaker 1: respect by President Trump. He actually said to me, as
Speaker 1: he said at the tail end of his NATO is
Speaker 1: obsolete comments, that NATO is very important to the United States.
Speaker 1: He understands that. And I'll tell you who really understands
Speaker 1: it is General Jim Maddis, who is the new Secretary
Speaker 1: of Defense designate, assuming he's confirmed. He will be a
Speaker 1: very strong advocate for NATO. He's saying during his hearing,
Speaker 1: if we did not have NATO today, we'd need to
Speaker 1: create it, I believe. Let me ask you about something
Speaker 1: we heard a few moments ago. Jonathan Bernstein, one of
Speaker 1: our bloom Review commentators, talking about how many jobs are
Speaker 1: yet to be filled and watched in DC. There have
Speaker 1: been reports of how in the national security space in particularly,
Speaker 1: there are a lot of jobs that haven't been filled.
Speaker 1: How worried about that are you? How worried are you
Speaker 1: about how this transition has been proceeding, especially when it
Speaker 1: comes to filling jobs in the Pentagon and the State Department,
Speaker 1: the National Security Council. Let's say I'm concerned, but I
Speaker 1: haven't quite hit the point of deep worry as yet.
Speaker 1: Let's give him about another month. If they don't start
Speaker 1: at filling those second and third tier jobs, particularly at Defense,
Speaker 1: State and the NSC staff, then I think it's time
Speaker 1: to worry. David. I want you to jump in here,
Speaker 1: but I've got to cut in and and make this
Speaker 1: is such an important question. Do you have any indication
Speaker 1: that oldline Republican foreign policy people want to work for
Speaker 1: this administration. I think they are willing to do so,
Speaker 1: and I think that maybe part of what's at delay
Speaker 1: here is the Trump transition team is obviously cognizant of
Speaker 1: people who signed petitions never Trump, or if people were
Speaker 1: unsupportive of Trump but maybe didn't go as far as
Speaker 1: signing the petition, etcetera, etcetera. So there's a little bit
Speaker 1: more I would say, internal vetting going on Tom and
Speaker 1: that's probably slowed it down a bit. I'm sure there's
Speaker 1: an old home quality to going to the World Economic
Speaker 1: for manual meeting. You're probably running into people that you
Speaker 1: knew from your tour of duty as the Supreme Allied
Speaker 1: Commander of NATO. What are they saying to you about
Speaker 1: the the alliance there? You don't have to name names,
Speaker 1: but generally speaking, what's the tone, what's the temperature of
Speaker 1: their sense of of of the strength of that relationship.
Speaker 1: Right now, I would categorize it as very hopeful on
Speaker 1: the European side that we will see continued strong US
Speaker 1: support in the alliance. And I did a panel here
Speaker 1: on the future of the Transatlantic Alliance and the question
Speaker 1: was is the Alliance at a tipping point? And my
Speaker 1: answer is no, but we might be at a slipping point.
Speaker 1: In other words, I don't think it's gonna fall over
Speaker 1: and collapse, but we need to be careful that it
Speaker 1: doesn't slip down in importance. We're all gonna know more
Speaker 1: in about six months when we see the first set
Speaker 1: of policy positions that the new administration takes. I think
Speaker 1: a theme to our conversations this week has been about
Speaker 1: the future of multilateralism, and I'll ask you who's going
Speaker 1: to make the case for that going forward. I think
Speaker 1: you have a lot of people who are disillusioned with multilateralism.
Speaker 1: There is a tendency now to look more inward than
Speaker 1: we have in the past. Who's going to take up
Speaker 1: the mantle, who's going to make the case for multiladeralism
Speaker 1: going forward. Well, I'm hoping, despite some rhetoric coming out
Speaker 1: of Washington, that the US will continue to do that
Speaker 1: because it's fundamentally in our interest. But I think two
Speaker 1: other nations that come to mind, one in Europe and
Speaker 1: one in Asia are Germany and Japan. And it's interesting
Speaker 1: to note that these are both not quite superpowers but
Speaker 1: certainly uh well established players in the international field who
Speaker 1: are emerging into the geopolitical world. Both of those leaders,
Speaker 1: Shinzo Abe and Angela Merkel, talk a great deal about multilateralism.
Speaker 1: And then I don't think we can completely overlook President
Speaker 1: g who came here and effectively signed up to multilateralism
Speaker 1: as the foundational piece of the world order. But critically,
Speaker 1: if he came here and addressed multilateralism, can that be
Speaker 1: affected with a communist society. Well that's the billion dollar question, Tom,
Speaker 1: and I think that my own view is that China
Speaker 1: can be a multilateral actor, that they can participate in
Speaker 1: all of these Internet sational forums despite having an internal
Speaker 1: political system that is one of communists as a base philosophy.
Speaker 1: But we like to say in the United States politics
Speaker 1: ends at the water line. Perhaps that will be the
Speaker 1: approach from China. Did it end of the waterline in Wisconsin?
Speaker 1: The main Mr Trump was elected by a body of
Speaker 1: people who are distrustful of domestic China. In the application
Speaker 1: I would suggest Asian particularly to the United States. I
Speaker 1: agree with all that. And in addition, there is enormous
Speaker 1: Middle East fatigue in the United States. So I think
Speaker 1: those are the twin pillars of challenge for the Trump administration.
Speaker 1: How do you square the circle with China without breaking
Speaker 1: the global economy with a trade war? And how do
Speaker 1: you take a leadership position in this very fractious Middle
Speaker 1: East despite enormous fatigue in our country. David jumping here
Speaker 1: with the one more question with animals to Venus because
Speaker 1: they had a navy question. Just a quick question about
Speaker 1: this transition and how different it is from the ones
Speaker 1: that we've seen in the past. You have a lot
Speaker 1: of positions that are can go un filled. We read
Speaker 1: the stories about how ambassadors are being pulled back. There's
Speaker 1: not going to be any continuity there until the replacements
Speaker 1: are found. Is there a risk there and having such
Speaker 1: a clean break to you understand why the president elect
Speaker 1: is doing that. I think there is risk in the timing.
Speaker 1: Every president, in every administration has every right to withdraw
Speaker 1: the old and in place the new. But the sooner
Speaker 1: that happens in national security, the better, because the whole
Speaker 1: world is kind of waiting on pause, and the longer
Speaker 1: you wait, the greater the spread of risk. And now
Speaker 1: almost vitus. It is a first Bloomberg surveillance that we're
Speaker 1: honored that you were us. He's out of uniform today, folks,
Speaker 1: he's styling in the Patagonias silver vest in the bright
Speaker 1: pink tie. Uh, Admiral, have you ever visited with a
Speaker 1: Swiss navy They have They have aquarious class patrol boats
Speaker 1: Type A D that are actually a serious flotilla of
Speaker 1: their lake bordering other nations. I have been aboard the
Speaker 1: Swiss Navy craft in Lake Geneva with Lieutenant General Andre Blautman,
Speaker 1: the chief in Defense of Switzerland. I have nothing but
Speaker 1: admiration for the Swiss military. And here's another one time.
Speaker 1: Did you know that the Swiss military has a bicycle regiment.
Speaker 1: They have some unique features. No, but this is from
Speaker 1: from before World War Two. There exact clara here it
Speaker 1: is and as universal conscription terrific. Must thank you so
Speaker 1: much for the clinic on the Swiss Navy, brought you
Speaker 1: by Bank of America. Mary Lynch. Dedicated to bringing our
Speaker 1: clients insights and solutions to meet the challenges of a
Speaker 1: transforming world. That's the power of global connections, Mary Lynch,
Speaker 1: Pierce feder In Smith Incorporated, Member s I p Z.
Speaker 1: It is an important interview in Davos with someone from Laffyette, Indiana,
Speaker 1: who demanded he would not come on surveillance till the
Speaker 1: Cubs won the World Series. So finally we welcome Christopher
Speaker 1: Ice Gruber. He was the twentieth president of a college
Speaker 1: in New Jersey called Princeton University, and all celebrated upon
Speaker 1: his UH sainthood here because of the path he has
Speaker 1: taken as an undergraduate at Princeton, including a Rhodes scholar
Speaker 1: working at Chicago Law and ample career UH and teaching
Speaker 1: of the law. The real reason that Dr Ice Gruber
Speaker 1: is here today is reported by Kristin tout Uh Kristen
Speaker 1: Tout of the Daily Princetonian. A sewer oder mistaken for
Speaker 1: gas leak at the First Campus Center. I suspected gas
Speaker 1: leak at First Campus Center was really a smelly sewer drain,
Speaker 1: and the president said, I'm getting out of dodge, so
Speaker 1: he came to know. It's never a dull moment on campus,
Speaker 1: is tom Uh, No, it's not. It's uh. It's always exciting,
Speaker 1: whether I'm on campus or off campus. And it's a
Speaker 1: pleasure to be here with you. And how much time
Speaker 1: do you spend raising money versus talking to undergraduates to
Speaker 1: motivate them forward? Yeah, you know, I'm on the road
Speaker 1: about sixty days a year. Some of that's talking to alumni,
Speaker 1: some of that, uh, fundraising, some of it's the kind
Speaker 1: of outreach we're doing now when I'm on the campus,
Speaker 1: which is the great majority of the time. A lot
Speaker 1: of it's talking with our undergraduates, are supporting what they're
Speaker 1: doing and what our faculty is doing. I want to
Speaker 1: go to our theme today, which is the can't out
Speaker 1: right now that you don't need to go to college.
Speaker 1: Peter Till greatly associated. Let me bring this in and
Speaker 1: have my colleague David Gura jump on it. Mr Till
Speaker 1: would suggest for many students, college is a waste of
Speaker 1: time I have trouble with that. They don't care what
Speaker 1: I think. Please address that that topic. For any student
Speaker 1: who can get a four year degree, a college degree,
Speaker 1: a four year college degree is going to be almost
Speaker 1: certainly the best investment that they make or that their
Speaker 1: parents make in their lifetime. So this is a financial news,
Speaker 1: uh network of the compounding return on a college degree,
Speaker 1: and we're talking now, any for your college degree is
Speaker 1: estimated to be somewhere between around seven and a half percent.
Speaker 1: That's at the low end of the spectrum to for
Speaker 1: most students, that's gonna be the best investment of their lifetime.
Speaker 1: And that's taking into account the tuition payments that they make,
Speaker 1: the room and board that they make, and the foregone earnings.
Speaker 1: And that's looking only at the economic value. So there
Speaker 1: may be some kids for whom it's not a good
Speaker 1: idea to go to college, but in general, that's the
Speaker 1: wrong advice to give somebody who is not going to Princeton.
Speaker 1: You'd like to see go to Princeton. Not talking about
Speaker 1: David Gurray here who couldn't hack it, But you've got
Speaker 1: a lot of people who want to go there. They're applying,
Speaker 1: they're getting in what what part of the population is
Speaker 1: not applying. Even it doesn't know to apply to Princeton.
Speaker 1: How are you gonna get them to apply? Yeah, you
Speaker 1: know are One of our major efforts over the last
Speaker 1: uh decade or so has been to increase the socioeconomic
Speaker 1: diversity at Princeton. I'm very pleased that we have a
Speaker 1: twenty one pel eligible population on the campus. Those are
Speaker 1: students eligible for federal pell grants going to the least
Speaker 1: well off students. That's triple what it was about a
Speaker 1: decade ago. So we want to see more socio economic diversity,
Speaker 1: and uh we also want to see geographic diversity. You've
Speaker 1: got your your colleague at Yale talking about expanding that campus.
Speaker 1: There is so many students who want to go they're
Speaker 1: gonna build two colleges, I believe, to new colleges. How
Speaker 1: much do you think about the size of Princeton and
Speaker 1: preserving that and how do you balance that with the
Speaker 1: need to educate more and more people who want to
Speaker 1: go to college. David, I actually think it is imperative
Speaker 1: that we expand as well. Princeton expanded over the uh
Speaker 1: last decade or so. We began an expansion in two
Speaker 1: thousand and one, Uh add a hundred and twenty five
Speaker 1: students to each class, so five hundred of the overall
Speaker 1: undergraduate student body. Our board of trustees last year, with
Speaker 1: my enthusiastic endorsement and support, announced that we two would
Speaker 1: build an additional residential college once again and expand the
Speaker 1: number of basis. But even that's not going to meet
Speaker 1: the demand um for high quality education in the United States. Uh.
Speaker 1: And I'm very glad to see Yale and Stanford both
Speaker 1: expanding right now too. You were a pioneer. Princeton was
Speaker 1: a pioneer in offering need based aid, need blind aid,
Speaker 1: making it so that you could go to Prince and
Speaker 1: not pay a dime if you fit into a certain demographic.
Speaker 1: Are you surprised that hasn't been replicated more? There's a
Speaker 1: lot of talk of the size of endowments and a
Speaker 1: number of colleges in the in the US. Why hasn't
Speaker 1: that been replicated more? Do you think? Well? I? I
Speaker 1: actually think David, that while we're very proud to have
Speaker 1: been the pioneers on that, we did see people uh
Speaker 1: follow us over the last decade or so. UM. What
Speaker 1: you rightly say is that Princeton went to a financial
Speaker 1: aid policy that was all grants, so that nobody is
Speaker 1: required to take out a loan, and we don't consider
Speaker 1: home equity in determining student need. And the consequence of
Speaker 1: that is that at Princeton now sixty six zero percent
Speaker 1: of the student body is on financial aid, and the
Speaker 1: average scholarship is roughly equal to the tuition price. So
Speaker 1: of our students are graduating with zero debt or so
Speaker 1: take out alone voluntarily, and they end up graduating with
Speaker 1: a medium debt of under six thousand dollars. I would
Speaker 1: suggest many parents of many different schools will look at
Speaker 1: you and go, you've got rocks in your head because
Speaker 1: most of the schools don't have such a program. Why
Speaker 1: are you looking at and be like yeah, Rachel, oh,
Speaker 1: personal experience, David, I want to point out that the
Speaker 1: Princeton women's hockey team tied Big Red Hockey. Let me
Speaker 1: finish up here with the most important question, how do
Speaker 1: you retain faculty like John McPhee, How do you retain
Speaker 1: faculty in this day of price war for stars within
Speaker 1: the faculty? How do you do it? Yeah? So, uh,
Speaker 1: it's a great question because one of the things that
Speaker 1: I and uh my dean of the faculty. Debbut Prentice
Speaker 1: worry about on a daily basis is literally daily, right,
Speaker 1: that is what there are. We've got a terrific faculty.
Speaker 1: And that means that when other places are looking at
Speaker 1: whom would they like to lure away, gonna look at
Speaker 1: Princeton University and a and a few of our peers.
Speaker 1: And some of that means making sure that we pay
Speaker 1: competitive compensation packages. Even more important, I would say, is
Speaker 1: making sure that we are providing the research support that
Speaker 1: our faculty needs so that they're able to do what
Speaker 1: they need to do in order to produce great scholarship
Speaker 1: or in the case of someone like John McPhee, great writing.
Speaker 1: And we feel supported in the classroom. And then we
Speaker 1: need community that make community that keeps it together, keeps
Speaker 1: it together. Christopher Ice Cuber is the Prince President of
Speaker 1: Princeton David Curry in New York on tuck Keenan Davis
Speaker 1: and joining us now at these meetings of the World
Speaker 1: Economic Forum is Nicholas Stern. That is, without question and
Speaker 1: name of debate within the environment, within our climate, but
Speaker 1: far more than that is his contribution to economics and
Speaker 1: of course his work for many years at the London
Speaker 1: School of Economics. Lord Stern, thank you so much for
Speaker 1: coming by this morning. It's a pleasure to be with
Speaker 1: you again. Tom. You gave a panel here which made
Speaker 1: immediate headlines and the tinge of this is an adapting
Speaker 1: climate policy in Washington. The world can cut emissions and
Speaker 1: double gross domestic product in twenty years. Since Nicholas Stern,
Speaker 1: if you were to say that to President Trump, how
Speaker 1: would you follow up to convince him that we could
Speaker 1: double GDP in twenty years? I'd say, how you do it?
Speaker 1: But I'd also put in front of that that this
Speaker 1: is the growth story. This is about strong, sustainable infrastructure investment.
Speaker 1: And President Trump's in favor of infrastructure investment, and we
Speaker 1: assume that he means modern, clean and small infrastructure that
Speaker 1: boost your output. Over these next five years or so,
Speaker 1: you trigger a tremendous wave of innovation and discovery, much
Speaker 1: of it on the way, but it could go much faster,
Speaker 1: and that will take you through twenty years of strong growth,
Speaker 1: and it will be cleaner and quieter and safer, and
Speaker 1: we'll have cities where you can move and breathe. And
Speaker 1: how do you do it? Well, it's renewable sources of power,
Speaker 1: strong dose of energy efficiency. We can do much better.
Speaker 1: You expand your electrical system so much more. The transport
Speaker 1: is electrical runoff of course clean electricity. You move some coal,
Speaker 1: most your cold to gas, and you're much more careful
Speaker 1: with your forests. That's how you do it. You have
Speaker 1: enjoyed with a Stern Report of years ago, very large
Speaker 1: criticism that it was much more of a political document
Speaker 1: than an environmental or science document. How do you update
Speaker 1: that and respond today? Not to climate deniers, but people
Speaker 1: that just go, wait a minute, I sort of like
Speaker 1: the internal combustion engine and it's working for me right now.
Speaker 1: How do you respond to that group of beauty? Well,
Speaker 1: first and foremost, the Stern Review was ten years ago,
Speaker 1: and I think it's absolutely stood the test at time.
Speaker 1: In fact, the science there that we reported on, if
Speaker 1: you look how that's changed over ten years, it looks
Speaker 1: still more worrying. Most of the effects that we were
Speaker 1: talking about have come through faster than we anticipated, so
Speaker 1: I underplayed the costs of inaction, and technical progress has
Speaker 1: been faster than we anticipate anticipated, so I underplayed the
Speaker 1: costs of action. So the costs of inaction will higher
Speaker 1: and the costs of action in a sense a much
Speaker 1: lower because so much more is possible. So absolutely, I
Speaker 1: think it stood the test of time. If you're wedded
Speaker 1: to the internal combustion engine, well, the great engineering forces,
Speaker 1: much of them United States, have made enormous progress with electricity,
Speaker 1: and electric engines are much more efficient than the internal
Speaker 1: combustion engine. Bring my colleague in New York, David David,
Speaker 1: let's try. I was lending an ear to the confirmation
Speaker 1: hearings in Washington yesterday and Scott Pruett, who's up to
Speaker 1: be the head of Environmental Protection Agency, was testifying, and
Speaker 1: we can we can talk about his politics, but let's
Speaker 1: just talk about a broader theme he introduced. He said,
Speaker 1: we must reject as a nation the false paradigm that
Speaker 1: if you're pro energy, your anti environment, and if your
Speaker 1: pro environment your anti energy. Let's take a step back.
Speaker 1: Using that as a as a jumping off point here,
Speaker 1: how are you going to get people who aren't interested
Speaker 1: in climate change, aren't interested in caring about climate change,
Speaker 1: maybe don't believe in climate change to care about it,
Speaker 1: to believe in it, how do you how do you
Speaker 1: bridge that disconnect? Well, I think Mr Pruitt is right
Speaker 1: in that we have to break the relationship between energy
Speaker 1: and output on the one hand, and things damaging from
Speaker 1: the environment on the other, and we know how to
Speaker 1: do it. We know how to do things in much
Speaker 1: more efficient, cleaner ways. So I really think we can
Speaker 1: overcome that in a very direct way because these things
Speaker 1: are so attractive. They give you cities where you can
Speaker 1: move and breathe. And in the United Kingdom we kill
Speaker 1: twenty more twenty times through air pollution that we do
Speaker 1: from road accidents. This is a story which is much
Speaker 1: more attractive. So if you want to see your economy
Speaker 1: more productive, who want you see your cities better places,
Speaker 1: use your energy, organize your transport in different ways, and
Speaker 1: then you break that relationship. So in a sense, Mr
Speaker 1: Pruitt is asking the right questions. When we talk about trade,
Speaker 1: we see the Transpacific partnership follow the wayside, and we
Speaker 1: wonder what role China is going to play in multilateral
Speaker 1: trade going forward. How about in the climate space. It
Speaker 1: was a big deal when China came on board with
Speaker 1: that Climate accord. Is trying to taking a leadership role
Speaker 1: going forward here to you anticipate that they're going to
Speaker 1: continue leading when it comes to climate change, or was
Speaker 1: that a one off old China has been I've been
Speaker 1: working in China for at thirty years now, and the
Speaker 1: way China has moved in the last five or six
Speaker 1: years is quite remarkable. Coal peaked in China about two
Speaker 1: years ago. At the end of last year two thousand
Speaker 1: and sixteen, China put on hold a hundred gigawatts of
Speaker 1: coal fire power station construction plans, some of which had
Speaker 1: already begun. They're investing enormously in renewables. They're taking energy
Speaker 1: efficiency very seriously. They worried deeply about pollution and congestion
Speaker 1: in their cities, and they actually have got quite good
Speaker 1: at producing the products which give you this more efficient,
Speaker 1: cleaner world. So the Chinese commitment, because they see the
Speaker 1: problems of their cities, because they see the problems of
Speaker 1: climate change, and though they're very big, and because they
Speaker 1: see the attractions and making the new goods that people
Speaker 1: are going to use in this new economy, their commitment
Speaker 1: is long term and serious, and it gets ills longer.
Speaker 1: Lord Stern, you had the privilege of studying with Merlis.
Speaker 1: I've heard a number of pronunciations James Merliss of Scotland
Speaker 1: a long, long time ago. He owns the modern study
Speaker 1: of incentives. How do we incentivize people in policy to
Speaker 1: do what you and others are talking about. There seems
Speaker 1: to be a massive reluctance to use intelligent incentives to
Speaker 1: change behavior. How do we do that? If you will
Speaker 1: excuse compliments to the interviewer, that's the first time that
Speaker 1: my PhD supervisor has been put to me in an interview.
Speaker 1: So we do with surveillance. He's one of my heroes.
Speaker 1: He is the Marres sent and it was a moment
Speaker 1: he was He was absolutely terrific in his work on incentives.
Speaker 1: I was working with him at the time that he
Speaker 1: was doing that work which got him the Nobel Prize.
Speaker 1: The incentives are at the heart of this thing. And
Speaker 1: I was with a Mantrees sent on Monday night at
Speaker 1: the LC where we would talking about democracy and responsiveness
Speaker 1: and public discussion and persuasion. So those two things are
Speaker 1: part of my answer. Tom. The first thing is to
Speaker 1: get incentives right. There are various things you can do.
Speaker 1: Carbon pricing is important at the moment people emit and
Speaker 1: damage their children's future and their grandchildren's future through greenhouse gases.
Speaker 1: They do it mostly for free, and we need good
Speaker 1: incentives so that markets works are carbon price is one story,
Speaker 1: but regulation is also very important too. We need to
Speaker 1: continue this discussion in London, Lordstern, thank you so much,
Speaker 1: Nicholas turn Nick Stern, the London School of Economics, David
Speaker 1: Kerr and New York and Tom KENA Davis and not
Speaker 1: joining us is a woman with one of those storied
Speaker 1: careers in economics. Of course, her work with Kenneth Rogoff
Speaker 1: this time as different as what people talk about what
Speaker 1: they don't talk about. As he showed up from Havana,
Speaker 1: Cuba with three suitcases a few years ago, went to
Speaker 1: a two year school in Florida and moved on without
Speaker 1: blinking an eye to the top levels of American economics.
Speaker 1: Carmen Reinhardt. Carmen, your expertise as a dollar, it's front center.
Speaker 1: I've never heard a president elector a president say we
Speaker 1: want a week dollar. How will Trump strong dollar policy
Speaker 1: be unique and original? Well? Uh uh President elect Trump
Speaker 1: has uh made it very much a point that he
Speaker 1: wants to restore US manufacturing. At the same time, Uh,
Speaker 1: the dollar has been strengthening steadily and we're reaching a
Speaker 1: point where one may wonder, given the prospects of UH
Speaker 1: interest rate hikes, UH, how long be for it? Elicits
Speaker 1: a reaction, and by a reaction, I mean possibly something
Speaker 1: we haven't seen in years, UH intervention in the foreign
Speaker 1: exchange markets. Dude, this is a present electro for better
Speaker 1: worth worse wants to see immediate results. And of course
Speaker 1: he did mention the dollar in a tweeter to this week,
Speaker 1: as Tom mentioned, how much power a basic question here
Speaker 1: and how much power does the president have to influence
Speaker 1: the strength of the dollar. We we understand the dollar,
Speaker 1: The dollar, any exchange rate is difficult to predict and
Speaker 1: even more difficult, possibly to control. But what UH is
Speaker 1: driving this dollar strength? UH is a double whammy. It
Speaker 1: is the widening and spreads owing from changes in monetary
Speaker 1: policy UH, the U s tight tightening at a much
Speaker 1: faster clip UH than any other major UH central bank,
Speaker 1: and number two, expectations of a rebound in US economy.
Speaker 1: So what control can a president have? Look? As I said,
Speaker 1: the US has been a committed floating exchange rate country
Speaker 1: since the breton Wood system broke down in the early seventies. However,
Speaker 1: when it has felt that the dollar has UH gotten
Speaker 1: far out of UH control or far out of alignment.
Speaker 1: UM intervention has been a tool, and it the tool
Speaker 1: is widely debated among academics and policymakers whether it's effective
Speaker 1: or not. But it's a signaling device, that's about all
Speaker 1: you can say. It's signals UH that maybe we're willing
Speaker 1: to do more on whatever margins we have UH to
Speaker 1: turn it around. Tom will often invoke the Plaza Chord
Speaker 1: on this program, and I wonder if you think that
Speaker 1: we're headed for something like that, a new Plaza chord.
Speaker 1: What's different, very different this time, is the Plastic chord
Speaker 1: was all about policy coordination. The US didn't go at
Speaker 1: it alone. Alongside UH cooperating was Japan and Germany. Now,
Speaker 1: I would argue and have argued, that the conditions for
Speaker 1: that kind of cooperation today are just not there. UH.
Speaker 1: In the case of Japan, UH ebonomics is very much
Speaker 1: entwined with trying to weaken the end and get inflation
Speaker 1: expectations up and try to move Japan out of deflation.
Speaker 1: So UH an agreement of a stronger yend doesn't seem plausible.
Speaker 1: Now we could turn to Germany and say, look, Germany
Speaker 1: is recording record or near record surpluses in its current accounts,
Speaker 1: so it could be poised UH to tolerate a stronger currency. However,
Speaker 1: the Bundesbank is no longer the what's in control here,
Speaker 1: and the e c B worried about still a very
Speaker 1: fragile perifer. Europe can't can't commit what is your belief
Speaker 1: instability or instability right now? And I say this totally
Speaker 1: different than I would have a hundred and eighty days ago,
Speaker 1: and that my theme today is there is an uncertainty
Speaker 1: within the uncertainty here at Davos. If I've got that
Speaker 1: level of uncertainty and first derivatives of uncertainty, do you
Speaker 1: believe we're in a stable environment or are there just
Speaker 1: some significant instabilities out there? I think there's tom I
Speaker 1: I couldn't agree with you. More uncertainty has been I
Speaker 1: think the theme that I have taken away from from
Speaker 1: from this UH World Economic Forum because you could have potentially,
Speaker 1: potentially UH a fairly favorable environment in which the rhetoric
Speaker 1: on protectionism doesn't quite materialize in its most negative form.
Speaker 1: The US has a growth boost, and the economy, we're
Speaker 1: global economy marches long and even picks up momentum. Um,
Speaker 1: then you could have a really extreme on the other side,
Speaker 1: in which UH China and the US UH confront and
Speaker 1: this sends the protectionists whistles around the world and UH trade,
Speaker 1: which as you know, is already never really recovered from
Speaker 1: the global financial crisis. I would point out that if
Speaker 1: you look at the couple of decades before the global
Speaker 1: financial crisis, world exports were growing at six percent. Since
Speaker 1: the crisis has been growing at three. So it's already
Speaker 1: you know. Brexit and the trade war, of course, are
Speaker 1: what brings the possibility of the very worst outcome that
Speaker 1: leaves you with uncertainty. Dad, I can't help but look
Speaker 1: back on a worry we're last year around this time,
Speaker 1: especially with regard to the Chinese currency, and I wonder
Speaker 1: what your observations are at this point of how the
Speaker 1: Chinese government is handling its currency right now here in
Speaker 1: two thousand seventeen. I'm so glad you asked that because
Speaker 1: I mentioned Japan, I mentioned Germany. I did not mention
Speaker 1: the elephant in the room was which is China? And
Speaker 1: um the Chinese right now? UH. If if you were
Speaker 1: to ask this question not a year ago, but three
Speaker 1: years ago, when reserve accumulation was still the mode, the
Speaker 1: REMEMBER was on a path of strengthening, they had capital inflows.
Speaker 1: I would say they would have been poised to make
Speaker 1: agreements uh to allow the Remember UH perhaps to strengthen.
Speaker 1: But right now what the People's Republic Bank of China
Speaker 1: is doing is fighting a depreciation. If they haven't, if
Speaker 1: they hadn't intervened as massively as they have, right we
Speaker 1: would have seen a depreciation. And so the capital flight
Speaker 1: that's going on there is not entirely in their control.
Speaker 1: A story to continue, Carben Ryner, thank you so much,
Speaker 1: of course, with the Kennedy School at Harvard. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm out on Twitter at Tom Keene. David Gura is
Speaker 1: at David Gura. Before the podcast, you can always catch
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