1
00:00:02,080 --> 00:00:06,840
Speaker 1: This is Master's in Business with Barry Ridholds on Bloomberg

2
00:00:06,960 --> 00:00:11,720
Speaker 1: Radio this week on the podcast strap yourself in for

3
00:00:11,800 --> 00:00:16,799
Speaker 1: another fantastic conversation. What can I say about Mark Weedman,

4
00:00:16,880 --> 00:00:21,720
Speaker 1: who has pretty much done everything at Blackrock. He started

5
00:00:21,760 --> 00:00:25,279
Speaker 1: there setting up the Financial Markets Advisory Group, working with

6
00:00:25,880 --> 00:00:30,360
Speaker 1: all sorts of giant institutions, before he ended up running

7
00:00:30,720 --> 00:00:35,760
Speaker 1: the I Shares Group, which is responsible for the ETF

8
00:00:35,880 --> 00:00:40,040
Speaker 1: and index business, which is just huge. It's a third

9
00:00:40,120 --> 00:00:45,040
Speaker 1: of the ten trillion dollars that Blackrock manages. He was

10
00:00:45,080 --> 00:00:49,319
Speaker 1: there from twenty eleven, running it to twenty nineteen, an

11
00:00:49,360 --> 00:00:54,880
Speaker 1: explosive period of growth, and now he basically does everything

12
00:00:55,640 --> 00:00:59,520
Speaker 1: as head of Global Client Business, where he works with

13
00:00:59,560 --> 00:01:05,280
Speaker 1: black Rock's largest institutional clients, pretty much helping them map

14
00:01:05,319 --> 00:01:10,600
Speaker 1: out strategy using Blackrock not just its products, but its

15
00:01:10,680 --> 00:01:14,440
Speaker 1: tools and strategies. I found this to be an absolutely

16
00:01:14,480 --> 00:01:19,320
Speaker 1: fascinating conversation, and I think you will also full disclosure

17
00:01:19,600 --> 00:01:23,200
Speaker 1: My Farm Results Wealth Management not only owns ETFs and

18
00:01:23,280 --> 00:01:26,880
Speaker 1: mutual funds from Blackrock, but last year we purchased a

19
00:01:26,920 --> 00:01:30,559
Speaker 1: division of the company called Future Advisor with no further

20
00:01:30,600 --> 00:01:32,280
Speaker 1: ado Blackrocks.

21
00:01:32,760 --> 00:01:35,720
Speaker 2: Mark Redman, Gary it's a great pleasure. And you didn't

22
00:01:35,760 --> 00:01:38,279
Speaker 2: mention that we also grew up in the same basic

23
00:01:38,319 --> 00:01:39,520
Speaker 2: hood we did.

24
00:01:39,640 --> 00:01:42,720
Speaker 1: I we'll talk. We'll get to that a little later.

25
00:01:43,120 --> 00:01:47,200
Speaker 1: Let's talk about schools, because we went to different schools.

26
00:01:48,160 --> 00:01:50,000
Speaker 1: You got a law degree from Yale. I got a

27
00:01:50,040 --> 00:01:53,520
Speaker 1: law degree from a different school after a bachelor's degree

28
00:01:53,520 --> 00:01:58,040
Speaker 1: in social studies. How does social studies and law lead

29
00:01:58,120 --> 00:01:59,680
Speaker 1: you to a career in finance?

30
00:02:00,160 --> 00:02:03,160
Speaker 2: So I think the great thing about how American education

31
00:02:03,640 --> 00:02:06,960
Speaker 2: college education is set up is it's less about what

32
00:02:07,000 --> 00:02:09,360
Speaker 2: you learn. It's more that you learn how to learn.

33
00:02:10,320 --> 00:02:13,720
Speaker 2: So when I think about actually what shaped how my

34
00:02:14,440 --> 00:02:17,040
Speaker 2: mind at least works, it was two things. It was

35
00:02:17,080 --> 00:02:19,960
Speaker 2: one social studies, which is a department. I went to

36
00:02:20,280 --> 00:02:25,000
Speaker 2: the undergrad that focuses on books, great books in the

37
00:02:25,040 --> 00:02:30,000
Speaker 2: social sciences, and you learn how to read and write

38
00:02:30,600 --> 00:02:35,400
Speaker 2: about a text. So I really studied, for example, Max

39
00:02:35,440 --> 00:02:39,239
Speaker 2: Weber and Meil Durkhim, these are great sociologists, John Stuart

40
00:02:39,320 --> 00:02:42,519
Speaker 2: Mill understanding their text, their concepts, and being able to

41
00:02:42,560 --> 00:02:46,079
Speaker 2: write short, concise papers. Went to law school. But I'll

42
00:02:46,080 --> 00:02:48,280
Speaker 2: tell you, Barry, the thing that actually I learned the

43
00:02:48,280 --> 00:02:50,880
Speaker 2: most from was not law school. It was clerking for

44
00:02:50,919 --> 00:02:54,120
Speaker 2: a judge. After law school, I worked for a judge

45
00:02:54,120 --> 00:02:56,880
Speaker 2: in Chicago on the Federal Appellate Court there or the

46
00:02:56,880 --> 00:03:00,760
Speaker 2: Seventh Circuit, and that's where I learned really how to write.

47
00:03:01,360 --> 00:03:04,239
Speaker 2: Watch it because now you're writing for a proper audience,

48
00:03:04,360 --> 00:03:07,600
Speaker 2: which is like the litigants, but also actually all the

49
00:03:07,639 --> 00:03:09,359
Speaker 2: other judges who are trying to figure out what does

50
00:03:09,360 --> 00:03:11,960
Speaker 2: this case mean? Figuring out how to be clear and concise?

51
00:03:12,840 --> 00:03:16,400
Speaker 1: Really interesting. I had a similar experience. The thing that

52
00:03:16,440 --> 00:03:19,519
Speaker 1: I took away from law school is how to think

53
00:03:19,919 --> 00:03:23,720
Speaker 1: logically and clearly and then express it in the written word,

54
00:03:23,800 --> 00:03:25,560
Speaker 1: which is always a challenge.

55
00:03:25,639 --> 00:03:29,840
Speaker 2: I'd actually argue that that ability to to write, not

56
00:03:29,880 --> 00:03:33,120
Speaker 2: to speak, but to write clearly and concisely, is almost

57
00:03:33,160 --> 00:03:36,640
Speaker 2: the foundation of civilization. It is how we move forward

58
00:03:36,720 --> 00:03:41,360
Speaker 2: is actually putting things in categories. Being precise and memos

59
00:03:41,480 --> 00:03:45,480
Speaker 2: that boring topic are actually how you build civilization.

60
00:03:46,360 --> 00:03:50,560
Speaker 1: Really interesting. You join the firm, You joined black Rock

61
00:03:50,560 --> 00:03:53,200
Speaker 1: in two thousand and four where you set up the

62
00:03:53,240 --> 00:03:56,840
Speaker 1: Financial Markets Advisory Group. Tell us a little bit about

63
00:03:56,880 --> 00:04:01,120
Speaker 1: what led to that. Obviously a huge success for Blackrock,

64
00:04:01,680 --> 00:04:05,720
Speaker 1: how did your prior employment lead to this new division?

65
00:04:05,840 --> 00:04:07,400
Speaker 1: Within Blackrock Barry.

66
00:04:07,440 --> 00:04:10,840
Speaker 2: Frankly, it didn't. I got hired to do a job

67
00:04:10,880 --> 00:04:14,720
Speaker 2: I didn't want and I wasn't qualified for. Okay, but

68
00:04:15,160 --> 00:04:18,960
Speaker 2: I a mentor of mine, a guy named Peter Fisher,

69
00:04:19,160 --> 00:04:21,480
Speaker 2: who later ran fixed income for Blackrock, had been my

70
00:04:21,560 --> 00:04:25,680
Speaker 2: boss at the US Treasury, and he went to Blackrock

71
00:04:25,760 --> 00:04:27,640
Speaker 2: and said, why don't you just come and meet some people.

72
00:04:28,279 --> 00:04:31,000
Speaker 2: I came over and it was the best management team.

73
00:04:31,120 --> 00:04:34,760
Speaker 2: I met Larry Fink, I met Rob Capedo, our president,

74
00:04:34,839 --> 00:04:38,120
Speaker 2: I met Sue Wagner, who's on our board, and these people.

75
00:04:38,160 --> 00:04:40,520
Speaker 2: I walked out and I said, you know, this is

76
00:04:40,600 --> 00:04:42,120
Speaker 2: the best team I've met. I'm in.

77
00:04:42,480 --> 00:04:44,240
Speaker 1: Doesn't matter what I'm going to do. I just want

78
00:04:44,279 --> 00:04:45,119
Speaker 1: to work with these people.

79
00:04:45,320 --> 00:04:46,920
Speaker 2: Just want to work with these people. I figure I'll

80
00:04:47,000 --> 00:04:48,840
Speaker 2: learn because you really can't predict how the future is

81
00:04:48,839 --> 00:04:50,480
Speaker 2: going to go. You really don't know. But if you

82
00:04:50,560 --> 00:04:53,680
Speaker 2: work with great people, that temps to work out. So

83
00:04:53,720 --> 00:04:56,120
Speaker 2: what we started doing was building something which is basically

84
00:04:56,120 --> 00:05:00,359
Speaker 2: advising financial institutions on balance sheet problems that were of

85
00:05:00,400 --> 00:05:03,719
Speaker 2: a capital markets nature. So what does that mean? It means,

86
00:05:04,279 --> 00:05:06,520
Speaker 2: for example, that imagine you were a global bank that

87
00:05:06,560 --> 00:05:10,040
Speaker 2: had a huge toxic mortgage book during the financial crisis,

88
00:05:10,320 --> 00:05:12,120
Speaker 2: or perhaps you were the New York Fed which got

89
00:05:12,120 --> 00:05:16,120
Speaker 2: sattled with books like that from AIG and from bear Stearns.

90
00:05:16,760 --> 00:05:18,839
Speaker 2: We helped work all that out. That's the kind of

91
00:05:18,880 --> 00:05:21,440
Speaker 2: work that was a few years later, but that's conceptually

92
00:05:21,440 --> 00:05:23,400
Speaker 2: what we were doing, which is helping our clients figure

93
00:05:23,400 --> 00:05:26,760
Speaker 2: out how to manage complicated capital markets exposures.

94
00:05:27,200 --> 00:05:31,200
Speaker 1: And when you say clients, this is government, sovereign wealth funds,

95
00:05:31,200 --> 00:05:33,320
Speaker 1: central banks, financial institutions.

96
00:05:33,680 --> 00:05:36,440
Speaker 2: This is the biggest of the big Yeah, we worked

97
00:05:36,440 --> 00:05:39,240
Speaker 2: for and this is years ago, but we worked for

98
00:05:39,360 --> 00:05:42,719
Speaker 2: and the business still continues at black Rock. When you

99
00:05:42,800 --> 00:05:46,600
Speaker 2: work for anybody who has a big, massive exposure. We

100
00:05:46,600 --> 00:05:50,279
Speaker 2: were particularly good at mortgages and structured finance. That turned

101
00:05:50,320 --> 00:05:52,039
Speaker 2: out to be pretty handy in two thousand and seven

102
00:05:52,120 --> 00:05:55,440
Speaker 2: into two thousand and eight, and basically, you know, when

103
00:05:55,440 --> 00:05:57,760
Speaker 2: we started it, my question was what in the world

104
00:05:58,000 --> 00:06:01,200
Speaker 2: do we have to offer to these institutions And it

105
00:06:01,320 --> 00:06:05,040
Speaker 2: was pretty simple. One clear thinking, and two we had

106
00:06:05,040 --> 00:06:08,159
Speaker 2: a risk management platform called Aladdin. That's the foundation of

107
00:06:08,160 --> 00:06:10,120
Speaker 2: how we manage money at plock Rock, and we were

108
00:06:10,200 --> 00:06:13,159
Speaker 2: able to actually run other people's assets through it and

109
00:06:13,200 --> 00:06:15,040
Speaker 2: actually get some order out of chaos.

110
00:06:16,320 --> 00:06:21,680
Speaker 1: So, since you mentioned the financial crisis, not long afterwards,

111
00:06:22,040 --> 00:06:25,640
Speaker 1: after Freddie Mack and Fannie May did the face plan,

112
00:06:26,120 --> 00:06:29,200
Speaker 1: Blackrock helped or is it you that helped the creation

113
00:06:29,360 --> 00:06:32,760
Speaker 1: of Pennymac in two thousand and eight, which today is

114
00:06:32,920 --> 00:06:36,000
Speaker 1: the number two mortgage bank in the US.

115
00:06:36,480 --> 00:06:38,680
Speaker 2: It is so, this is a company, it's based out

116
00:06:38,720 --> 00:06:41,880
Speaker 2: of California that we started. We did it as a

117
00:06:41,960 --> 00:06:44,760
Speaker 2: joint venture with another firm, a guy who became a

118
00:06:44,760 --> 00:06:49,120
Speaker 2: close friend of mine. It started off with a whiteboard exercise.

119
00:06:49,520 --> 00:06:54,520
Speaker 2: The financial crisis had swept aside all the incumbent mortgage players,

120
00:06:54,600 --> 00:06:58,479
Speaker 2: including Fanny and Freddy, and we thought, what is going

121
00:06:58,520 --> 00:07:02,120
Speaker 2: to come like the little little mammals after the dinosaurs

122
00:07:02,120 --> 00:07:05,320
Speaker 2: have been swept away, what will evolve afterwards? And we

123
00:07:05,360 --> 00:07:08,440
Speaker 2: did a whiteboard exercise around a mortgage insure. We thought

124
00:07:08,480 --> 00:07:12,440
Speaker 2: about a credit rating agency dot dot and we concluded

125
00:07:13,280 --> 00:07:16,720
Speaker 2: actually where the money would be made, where clients could

126
00:07:16,760 --> 00:07:19,840
Speaker 2: be served, was actually in buying distress mortgages. And that

127
00:07:19,920 --> 00:07:22,080
Speaker 2: was the origin of what now is Pennymac.

128
00:07:22,280 --> 00:07:25,000
Speaker 1: And it's become pretty.

129
00:07:24,360 --> 00:07:30,520
Speaker 2: Large to the number two independent mortgage company. After quickened

130
00:07:30,520 --> 00:07:38,160
Speaker 2: Loans and they focused on basically rebuilding efficient access to credit.

131
00:07:39,000 --> 00:07:42,440
Speaker 2: After the financial crisis when most of the big banks retreated,

132
00:07:42,680 --> 00:07:44,400
Speaker 2: most of the big banks just left the market.

133
00:07:44,640 --> 00:07:46,920
Speaker 1: So we'll talk a little bit about I Shares, which

134
00:07:46,920 --> 00:07:49,440
Speaker 1: you ran for quite a while. But later in the

135
00:07:49,480 --> 00:07:53,160
Speaker 1: decade twenty nineteen to twenty twenty two, you were head

136
00:07:53,160 --> 00:07:58,040
Speaker 1: of International in corporate strategy. Sounds like a pretty big title.

137
00:07:58,160 --> 00:08:02,320
Speaker 1: What is the head of national and corporate strategy do well?

138
00:08:02,320 --> 00:08:07,360
Speaker 2: Effectively, it was minister without portfolio. My job really, I

139
00:08:07,400 --> 00:08:12,160
Speaker 2: had other formal duties, but the real job was handling, managing,

140
00:08:12,320 --> 00:08:15,000
Speaker 2: organizing the things that had no owner at the firm,

141
00:08:15,120 --> 00:08:15,600
Speaker 2: as we.

142
00:08:15,520 --> 00:08:18,480
Speaker 1: Did utility outfielders at it, that.

143
00:08:18,720 --> 00:08:23,280
Speaker 2: Utility outfielder somewhere, you know, things that were not properly

144
00:08:23,400 --> 00:08:27,040
Speaker 2: organized and marshaled. Somebody needs to step up in an

145
00:08:27,120 --> 00:08:30,280
Speaker 2: organization and put it together. And that means, for example,

146
00:08:31,080 --> 00:08:36,079
Speaker 2: a great example, we launched a joint venture with a

147
00:08:36,240 --> 00:08:39,120
Speaker 2: singapore Ian entity called Tomasik, which is effectively like a

148
00:08:39,160 --> 00:08:42,520
Speaker 2: sovereign wealth fund. It's actually not, but it's what they do,

149
00:08:43,160 --> 00:08:45,560
Speaker 2: and what we did with them is build a joint

150
00:08:45,600 --> 00:08:48,440
Speaker 2: venture to have our first growth equity strategy. There was

151
00:08:48,480 --> 00:08:51,080
Speaker 2: no natural place for that to sit anywhere in black Rock.

152
00:08:51,760 --> 00:08:54,960
Speaker 2: It's called Decarbonization Partners. We raised one point four billion

153
00:08:55,160 --> 00:08:57,840
Speaker 2: in the midst of gale force wins against growth equity

154
00:08:58,360 --> 00:09:00,439
Speaker 2: over the last couple of years. That all started because

155
00:09:00,480 --> 00:09:02,280
Speaker 2: I had the free time to be allocated to that

156
00:09:02,679 --> 00:09:05,480
Speaker 2: minister without portfolio. Organizations need them.

157
00:09:05,720 --> 00:09:08,760
Speaker 1: That's interesting. I use that phrase for something else. It's

158
00:09:09,200 --> 00:09:11,440
Speaker 1: the talking head you see on TV that don't manage

159
00:09:11,440 --> 00:09:12,320
Speaker 1: money but hold well.

160
00:09:12,760 --> 00:09:15,440
Speaker 2: Well, there's a bit of that too, Barry's you wonder

161
00:09:15,480 --> 00:09:17,880
Speaker 2: when you were sitting in a seat like that, Am

162
00:09:17,880 --> 00:09:19,400
Speaker 2: I just talking? Am I doing.

163
00:09:19,320 --> 00:09:23,960
Speaker 1: Anything that's really interesting? And then, at this point in

164
00:09:24,000 --> 00:09:27,319
Speaker 1: your career you have twenty years of experience in finance,

165
00:09:28,240 --> 00:09:31,600
Speaker 1: you start teaching finance at various schools, at Princeton, at Stanford,

166
00:09:31,640 --> 00:09:35,280
Speaker 1: at Yale, and at Beijing. How did you get interested

167
00:09:35,280 --> 00:09:38,080
Speaker 1: in becoming a professor of finance?

168
00:09:38,600 --> 00:09:41,960
Speaker 2: Well, Barry, what I actually really love doing is teaching

169
00:09:42,000 --> 00:09:45,720
Speaker 2: and growing people. And so I've always either hit the

170
00:09:45,760 --> 00:09:48,480
Speaker 2: lottery or simply got sacked. I think teaching would play

171
00:09:48,480 --> 00:09:51,160
Speaker 2: an important part in my future. What I love about

172
00:09:51,200 --> 00:09:53,880
Speaker 2: teaching is about something that I know about. I've typically

173
00:09:53,920 --> 00:09:57,440
Speaker 2: taught about either something around exchange traded funds and the

174
00:09:57,440 --> 00:10:00,920
Speaker 2: capital markets, or around the financial crisis. People are interested

175
00:10:00,920 --> 00:10:03,640
Speaker 2: in that. It is basically is, how do you get

176
00:10:03,679 --> 00:10:08,640
Speaker 2: across the core understanding of something very complicated, but make

177
00:10:08,679 --> 00:10:11,839
Speaker 2: it simple, not simplistic. And if you can do that,

178
00:10:11,960 --> 00:10:15,240
Speaker 2: people walk out understanding that a financial crisis is nothing

179
00:10:15,240 --> 00:10:18,880
Speaker 2: other than an overdone bank run. If you really get

180
00:10:18,920 --> 00:10:21,440
Speaker 2: down to it, it all comes down to people borrowing

181
00:10:21,480 --> 00:10:25,040
Speaker 2: too much money with too short maturity. And if you

182
00:10:25,160 --> 00:10:29,240
Speaker 2: understand that, then other crises, other panics, all make more sense.

183
00:10:29,320 --> 00:10:30,880
Speaker 2: That's why I like teaching. I think it's fun.

184
00:10:31,200 --> 00:10:33,640
Speaker 1: And Beijing, were you doing this remote or were you

185
00:10:33,760 --> 00:10:34,320
Speaker 1: in China?

186
00:10:34,480 --> 00:10:37,160
Speaker 2: So I lived in Beijing in nineteen ninety nine. I

187
00:10:37,280 --> 00:10:42,040
Speaker 2: taught two courses, one on American business law, nothing extraordinary there.

188
00:10:42,280 --> 00:10:44,440
Speaker 2: But I taught another class on the rule of law.

189
00:10:44,760 --> 00:10:47,560
Speaker 2: And I have to say, twenty five years later, it

190
00:10:47,640 --> 00:10:51,240
Speaker 2: is unbelievable that I taught a class at what was

191
00:10:51,440 --> 00:10:55,880
Speaker 2: formerly a Communist Party training school in the rule of law.

192
00:10:56,240 --> 00:10:59,360
Speaker 2: It is literally impossible to imagine that this would happen today.

193
00:11:00,160 --> 00:11:03,280
Speaker 2: Back then, really, nobody bothered me as long as I

194
00:11:03,320 --> 00:11:06,600
Speaker 2: didn't fement dissent. I wasn't. I just was doing academic

195
00:11:06,679 --> 00:11:09,560
Speaker 2: teaching of what does the rule of law mean, what

196
00:11:09,600 --> 00:11:13,240
Speaker 2: does an independent judiciary mean? The roots, for example, even

197
00:11:13,280 --> 00:11:16,199
Speaker 2: in Chinese traditions. And I did this at a time

198
00:11:16,720 --> 00:11:19,760
Speaker 2: when China was opening up. We in the West had

199
00:11:19,800 --> 00:11:22,000
Speaker 2: the view that if we just trade enough with them,

200
00:11:22,040 --> 00:11:24,480
Speaker 2: they'll liberalize and become at least a kind of quasi

201
00:11:24,520 --> 00:11:27,480
Speaker 2: democratic society. Didn't quite work out that way.

202
00:11:27,679 --> 00:11:29,520
Speaker 1: You never know when a strong man is going to

203
00:11:29,559 --> 00:11:32,720
Speaker 1: take over a country, even one that is moving towards

204
00:11:32,800 --> 00:11:35,360
Speaker 1: Western ideals. So tell us a little bit about the

205
00:11:35,400 --> 00:11:39,520
Speaker 1: work you do. Focusing Capital on the Long Term or FCLT.

206
00:11:40,040 --> 00:11:42,160
Speaker 2: So this is a group that brings together a set

207
00:11:42,160 --> 00:11:46,239
Speaker 2: of asset owners, meaning like pension plans, some asset managers,

208
00:11:46,280 --> 00:11:49,560
Speaker 2: and actually some companies. And the question is how do

209
00:11:49,640 --> 00:11:52,720
Speaker 2: we in the public markets and in the private markets,

210
00:11:53,120 --> 00:11:57,000
Speaker 2: how do we get investors the whole ecosystem focused on

211
00:11:57,200 --> 00:12:01,760
Speaker 2: the companies focused on making money over the long term.

212
00:12:02,000 --> 00:12:06,079
Speaker 2: Our financial markets, with daily marked to markets, do encourage

213
00:12:06,520 --> 00:12:10,400
Speaker 2: a lot of very short term thinking. Companies are very

214
00:12:10,400 --> 00:12:13,600
Speaker 2: focused on the next quarter's earnings. How do you get

215
00:12:13,600 --> 00:12:18,880
Speaker 2: companies investors, asset managers to think years and years into

216
00:12:18,920 --> 00:12:20,760
Speaker 2: the future, and how do you set up incentives to

217
00:12:20,800 --> 00:12:22,200
Speaker 2: achieve that. That's what the group does.

218
00:12:22,600 --> 00:12:26,120
Speaker 1: It seems like there are thousands of C level executives

219
00:12:26,160 --> 00:12:29,960
Speaker 1: and millions of people running businesses. So the question is,

220
00:12:30,440 --> 00:12:32,600
Speaker 1: you know who's your audience. If you're a tailor swift,

221
00:12:32,600 --> 00:12:36,200
Speaker 1: your audience is global. If you're running a mid size

222
00:12:36,240 --> 00:12:40,040
Speaker 1: publicly traded company, well, your audience is much more narrow.

223
00:12:40,520 --> 00:12:42,439
Speaker 2: Well, there's a couple different angles can go in this start.

224
00:12:42,679 --> 00:12:45,840
Speaker 2: If you're basically saying like, there's lots and lots of

225
00:12:45,880 --> 00:12:49,199
Speaker 2: people in commerce who are making money at the upper echelon,

226
00:12:49,320 --> 00:12:52,760
Speaker 2: including with stock options, as value creation happens within the

227
00:12:52,800 --> 00:12:55,880
Speaker 2: stock market, So I think that's true. I think we

228
00:12:56,040 --> 00:12:58,320
Speaker 2: just have to step back and like, how much do

229
00:12:58,440 --> 00:13:00,720
Speaker 2: we think that the most success for people in a

230
00:13:00,720 --> 00:13:05,559
Speaker 2: society should be able to take home. It's an open question.

231
00:13:05,440 --> 00:13:07,600
Speaker 1: And there's a lot of moving parts to that. It's

232
00:13:07,800 --> 00:13:11,440
Speaker 1: long dated stock options versus some shorter term stock options,

233
00:13:11,480 --> 00:13:16,120
Speaker 1: it's broad tax policy. There's a million moving pieces there,

234
00:13:16,160 --> 00:13:19,440
Speaker 1: and I think generally it's a much longer conversation that

235
00:13:19,520 --> 00:13:22,400
Speaker 1: you and I want to have today. But I don't

236
00:13:22,400 --> 00:13:25,520
Speaker 1: believe we disagree. I think we both think this is

237
00:13:25,520 --> 00:13:27,200
Speaker 1: a really complicated issue.

238
00:13:27,400 --> 00:13:29,559
Speaker 2: Is complicated. I think stock options are part of it.

239
00:13:29,640 --> 00:13:33,240
Speaker 2: I think having restricted stock units that basically tie you

240
00:13:33,280 --> 00:13:35,400
Speaker 2: to the actual stock price, even so it's always in

241
00:13:35,440 --> 00:13:38,080
Speaker 2: the money, is important. And I think we also have

242
00:13:38,160 --> 00:13:41,520
Speaker 2: to remember that anything that ties people to long term

243
00:13:41,600 --> 00:13:45,880
Speaker 2: value creation is ultimately in the interest of the shareholders.

244
00:13:46,520 --> 00:13:49,920
Speaker 2: It's probably also in the interest of the employees and

245
00:13:49,960 --> 00:13:52,640
Speaker 2: in the communities they operate. The danger is when you

246
00:13:52,679 --> 00:13:57,360
Speaker 2: have short dated trickery from compensation structures that aren't long dated.

247
00:13:57,760 --> 00:13:59,880
Speaker 2: That's a place where I think, actually, as an investor,

248
00:14:00,120 --> 00:14:00,840
Speaker 2: need to be careful.

249
00:14:00,920 --> 00:14:04,720
Speaker 1: Yeah. Absolutely. Let's talk a little bit about I shares,

250
00:14:04,840 --> 00:14:10,240
Speaker 1: which I have argued could be the stealthiest and greatest

251
00:14:10,480 --> 00:14:14,920
Speaker 1: corporate acquisition of all time, certainly relative to the cost.

252
00:14:15,400 --> 00:14:18,960
Speaker 1: So tell us a little bit about the division I

253
00:14:19,080 --> 00:14:22,680
Speaker 1: shares and index investments that you were running from twenty

254
00:14:22,680 --> 00:14:26,520
Speaker 1: eleven to twenty nineteen when it's growth exploded.

255
00:14:26,960 --> 00:14:29,440
Speaker 2: So if you go back to twenty eleven, what you'd

256
00:14:29,480 --> 00:14:33,480
Speaker 2: see is a world where the ETF, the exchange traded fund,

257
00:14:33,520 --> 00:14:36,240
Speaker 2: which is nothing other than an index fund, bundled up

258
00:14:36,280 --> 00:14:41,120
Speaker 2: as a stock was a small part of many people's portfolios.

259
00:14:41,440 --> 00:14:46,080
Speaker 2: It was small in or non existent in most wealth portfolios.

260
00:14:46,120 --> 00:14:50,240
Speaker 2: Most advisors weren't using ETFs. Most institutions weren't using ETFs

261
00:14:50,280 --> 00:14:53,800
Speaker 2: back then somewhere, but most weren't. And what happened over

262
00:14:53,840 --> 00:14:58,000
Speaker 2: the coming decade is pretty simple. Two forces drove the

263
00:14:58,040 --> 00:15:01,920
Speaker 2: growth of ETFs and the ice business. The first was

264
00:15:02,040 --> 00:15:05,440
Speaker 2: low cost investing. The basic recognition, as Warren Buffett has

265
00:15:05,440 --> 00:15:08,520
Speaker 2: said quite publicly, most people are probably going to be

266
00:15:08,520 --> 00:15:10,920
Speaker 2: better off just buying the S and P five hundred,

267
00:15:11,040 --> 00:15:13,280
Speaker 2: and the cheapest way to do that is buying an

268
00:15:13,280 --> 00:15:17,120
Speaker 2: I share, not what he named another product, buying a

269
00:15:17,240 --> 00:15:19,960
Speaker 2: simple ETF that gives them access to the capital markets

270
00:15:20,040 --> 00:15:22,880
Speaker 2: at a low price. The second force, and this is

271
00:15:23,000 --> 00:15:25,960
Speaker 2: much more inside baseball and technical, but is actually really

272
00:15:25,960 --> 00:15:28,240
Speaker 2: interesting if you're in the capital markets, is that it

273
00:15:28,320 --> 00:15:32,080
Speaker 2: allows you to trade risk between a buyer and a

274
00:15:32,120 --> 00:15:35,080
Speaker 2: seller without an investment bank being in between. So the

275
00:15:35,120 --> 00:15:38,520
Speaker 2: market that has been revolutionized by the ETF, it's actually

276
00:15:38,520 --> 00:15:41,360
Speaker 2: not the equity market, because that actually agency trading on

277
00:15:41,440 --> 00:15:44,240
Speaker 2: exchanges has been here for a long time. The market

278
00:15:44,240 --> 00:15:47,640
Speaker 2: that ETF's revolutionized was the bond market. The bond market

279
00:15:47,680 --> 00:15:50,680
Speaker 2: was always an over the counter market where you went

280
00:15:50,720 --> 00:15:53,720
Speaker 2: through a dealer always. And what the ETF does by

281
00:15:53,760 --> 00:15:57,280
Speaker 2: bundling up risk in effectively like a set, is you

282
00:15:57,280 --> 00:16:00,760
Speaker 2: can sell that set of bonds to somebody else out

283
00:16:00,760 --> 00:16:03,640
Speaker 2: there in the world who wants that risk, but not

284
00:16:03,760 --> 00:16:06,080
Speaker 2: have to go through a bank. And what that means,

285
00:16:06,240 --> 00:16:09,720
Speaker 2: especially is that in times of stress or as banks

286
00:16:09,720 --> 00:16:12,280
Speaker 2: get smaller and smaller as they are in their trading books,

287
00:16:13,040 --> 00:16:15,680
Speaker 2: what that means is you can trade risk efficiently with

288
00:16:15,760 --> 00:16:19,440
Speaker 2: a transparent price on exchange in a way that fifteen

289
00:16:19,480 --> 00:16:23,200
Speaker 2: years ago was literally impossible. So it was those two forces,

290
00:16:23,680 --> 00:16:28,680
Speaker 2: the securitization of risk in bundles, combined with low cost indexing,

291
00:16:29,080 --> 00:16:31,720
Speaker 2: that's driven the Ice Shares business to three and a

292
00:16:31,720 --> 00:16:34,080
Speaker 2: half trillion dollars today, up from about three hundred and

293
00:16:34,160 --> 00:16:36,960
Speaker 2: fifty billion when we bought it when the firm bought

294
00:16:37,000 --> 00:16:38,280
Speaker 2: it back in two thousand and nine.

295
00:16:38,760 --> 00:16:42,320
Speaker 1: Ten x. That's real. That's really quite amazing. So you're

296
00:16:42,360 --> 00:16:47,120
Speaker 1: talking about bonds, but in my own practice at my firm,

297
00:16:47,600 --> 00:16:53,840
Speaker 1: the fascinating thing is the superiority of ETFs to mutual funds,

298
00:16:54,000 --> 00:16:58,680
Speaker 1: especially in non qualified accounts. Taxable accounts because you get

299
00:16:58,720 --> 00:17:03,880
Speaker 1: these phantom capital gains from mutual funds that you don't

300
00:17:03,920 --> 00:17:08,440
Speaker 1: get in ETFs. And we found our best practices are

301
00:17:08,840 --> 00:17:11,240
Speaker 1: mutual funds are great for four oh one k's or

302
00:17:11,280 --> 00:17:16,960
Speaker 1: iras or any tax deferred vehicle, but for a taxable portfolio,

303
00:17:17,800 --> 00:17:20,520
Speaker 1: it's hard not to go all ETFs.

304
00:17:21,320 --> 00:17:25,480
Speaker 2: Fair point very that's a thoughtful observation about the tax

305
00:17:25,520 --> 00:17:28,679
Speaker 2: efficiency of the ETF. So one reason that people that

306
00:17:28,720 --> 00:17:32,480
Speaker 2: buy ETFs is they're cheaper than a traditional mutual fund.

307
00:17:32,560 --> 00:17:34,480
Speaker 2: Sometimes there are great mutual funds with great managers, and

308
00:17:34,520 --> 00:17:36,840
Speaker 2: they may be worth holding on that basis alone. But

309
00:17:37,000 --> 00:17:41,040
Speaker 2: generally clients have shifted out of active mutual funds and

310
00:17:41,080 --> 00:17:43,359
Speaker 2: they moved in dtfs because they get better value for money.

311
00:17:43,520 --> 00:17:47,680
Speaker 2: But you're getting at is that you also avoid paying taxes.

312
00:17:47,720 --> 00:17:52,200
Speaker 2: You postponed paying taxes effectively until the moment that you sell.

313
00:17:52,320 --> 00:17:54,840
Speaker 2: The way it basically works is along the way with

314
00:17:54,880 --> 00:17:57,600
Speaker 2: the mutual fund, you're paying all the taxes incurred by

315
00:17:57,600 --> 00:18:00,879
Speaker 2: the underlying PM. Underlying portfolio manager he or she is

316
00:18:01,000 --> 00:18:04,000
Speaker 2: generating the tax gains or losses, and the gains is

317
00:18:04,000 --> 00:18:06,120
Speaker 2: what we're worried about. They come through and you pay

318
00:18:06,160 --> 00:18:08,520
Speaker 2: them that year, as opposed to if you're holding them

319
00:18:08,520 --> 00:18:10,600
Speaker 2: for fifteen twenty years, you pay the capital gains when

320
00:18:10,600 --> 00:18:14,200
Speaker 2: you ultimately sell the fund. The ETF takes those gains

321
00:18:14,240 --> 00:18:16,440
Speaker 2: and puts it off to the future. And of course

322
00:18:16,480 --> 00:18:18,720
Speaker 2: there's always the happy story where you die and your

323
00:18:18,760 --> 00:18:20,840
Speaker 2: basis gets stepped up, so joke, you don't want it.

324
00:18:20,880 --> 00:18:27,040
Speaker 1: So arguably you're compounding more in identical ETF versus identical

325
00:18:27,119 --> 00:18:27,800
Speaker 1: mutual funds.

326
00:18:27,840 --> 00:18:30,600
Speaker 2: And in theory if because of the tax bass step

327
00:18:30,680 --> 00:18:33,640
Speaker 2: up at death, ultimately you may be limiting all those

328
00:18:33,640 --> 00:18:36,320
Speaker 2: capital gains to boil it down. You don't get those

329
00:18:36,359 --> 00:18:38,880
Speaker 2: annoying capital gains charges at the end of the year

330
00:18:38,920 --> 00:18:40,920
Speaker 2: for a fund you didn't buy or sell.

331
00:18:40,880 --> 00:18:44,560
Speaker 1: Right, you recontrol, take control over the selling and the

332
00:18:44,600 --> 00:18:45,120
Speaker 1: timing of.

333
00:18:45,080 --> 00:18:46,360
Speaker 2: The timing of the taxes.

334
00:18:46,400 --> 00:18:49,520
Speaker 1: So I totally appreciate what you were saying about the

335
00:18:49,560 --> 00:18:55,560
Speaker 1: bond side, and towards that ends, Blackrock has become one

336
00:18:55,600 --> 00:18:59,000
Speaker 1: of the biggest bond trading shops on the street, the

337
00:18:59,040 --> 00:19:01,840
Speaker 1: bond side of black I know most people think of

338
00:19:01,960 --> 00:19:05,240
Speaker 1: ey shares, think of equities, but you guys are every

339
00:19:05,280 --> 00:19:07,560
Speaker 1: bit as huge in bonds as you are in stocks,

340
00:19:08,119 --> 00:19:08,760
Speaker 1: We do.

341
00:19:08,640 --> 00:19:12,000
Speaker 2: A tremendous amount in bonds in ETFs. We do it

342
00:19:12,040 --> 00:19:15,280
Speaker 2: in active strategies, which are still very popular, and we

343
00:19:15,320 --> 00:19:18,800
Speaker 2: actually manage huge sums of money for institutions. So there'll

344
00:19:18,840 --> 00:19:21,840
Speaker 2: be huge insurance companies that will come to us and say,

345
00:19:22,240 --> 00:19:23,960
Speaker 2: you know what, we think it might be more efficient

346
00:19:24,000 --> 00:19:26,040
Speaker 2: for you just to manage our balance sheet for us

347
00:19:26,119 --> 00:19:28,840
Speaker 2: the asset side. So we'll take over the entire balance

348
00:19:28,840 --> 00:19:32,119
Speaker 2: sheet and manage all the bonds, the corporate bonds, the treasuries,

349
00:19:32,160 --> 00:19:35,160
Speaker 2: the agencies that sit on those books. All that gets

350
00:19:35,200 --> 00:19:38,360
Speaker 2: managed at a one big central book, and we get

351
00:19:38,560 --> 00:19:41,760
Speaker 2: maximum efficiency for our clients as we trade, because there's

352
00:19:41,760 --> 00:19:44,199
Speaker 2: really no other beast on the street that's bigger, and

353
00:19:44,240 --> 00:19:46,240
Speaker 2: so therefore you can get the best possible returns for

354
00:19:46,280 --> 00:19:46,800
Speaker 2: your clients.

355
00:19:47,040 --> 00:19:50,240
Speaker 1: So, out of the ten trillion that black Rock is managing,

356
00:19:50,280 --> 00:19:51,639
Speaker 1: how much of that is fixed income?

357
00:19:51,720 --> 00:19:53,840
Speaker 2: I'm going to say it's around two to two and

358
00:19:53,840 --> 00:19:56,159
Speaker 2: a half trillion. I don't know the number offhand, something

359
00:19:56,160 --> 00:19:56,560
Speaker 2: around that.

360
00:19:56,680 --> 00:20:00,120
Speaker 1: Yeah, that's kind of bullpark what I was thinking, Not

361
00:20:00,119 --> 00:20:01,919
Speaker 1: not too shabby, two and a half trillion dollars.

362
00:20:02,400 --> 00:20:06,239
Speaker 2: It's again, remember most of those portfolios are long term portfolio. Yes,

363
00:20:06,440 --> 00:20:09,760
Speaker 2: that where clients have basically said build a portfolio. Individuals

364
00:20:09,760 --> 00:20:12,159
Speaker 2: can come to us to actually say, build me a

365
00:20:12,240 --> 00:20:16,119
Speaker 2: laddered munibook. Institutions come to us and hey, manage a

366
00:20:16,160 --> 00:20:18,840
Speaker 2: hedge fund for us. So it's a broad broad range

367
00:20:18,840 --> 00:20:21,639
Speaker 2: of clients. But fundamentally, bond trading is something where you

368
00:20:21,640 --> 00:20:24,959
Speaker 2: do get economies of scale by bringing more and more together.

369
00:20:25,080 --> 00:20:27,280
Speaker 2: The best bond houses tend to be quite large. Our

370
00:20:27,280 --> 00:20:28,880
Speaker 2: best competitors are quite large.

371
00:20:29,000 --> 00:20:33,520
Speaker 1: So let's stay with that idea because you're anticipating my

372
00:20:33,560 --> 00:20:36,679
Speaker 1: next question. So you're now the largest asset manager in

373
00:20:36,680 --> 00:20:40,400
Speaker 1: the world, but there are a lot of big competitors

374
00:20:40,400 --> 00:20:44,760
Speaker 1: in low cost indexing and ETFs. What does Blackrough do

375
00:20:44,920 --> 00:20:49,520
Speaker 1: to distinguish itself to differentiate itself from other low cost

376
00:20:49,720 --> 00:20:51,600
Speaker 1: ETF or index providers.

377
00:20:52,000 --> 00:20:55,720
Speaker 2: So it's a great question because clients never buy from

378
00:20:55,760 --> 00:20:58,280
Speaker 2: you because your firm is big. They buy because your

379
00:20:58,320 --> 00:21:01,520
Speaker 2: product is good. So it's got to be each individual

380
00:21:01,560 --> 00:21:04,399
Speaker 2: product has to be the best that the client can find. Now,

381
00:21:04,400 --> 00:21:06,240
Speaker 2: part of that is a brand they trust. So we've

382
00:21:06,280 --> 00:21:10,200
Speaker 2: reg recently launched the Bitcoin ETF. We've raised about six

383
00:21:10,240 --> 00:21:12,600
Speaker 2: and a half billion dollars more than anyone else.

384
00:21:12,560 --> 00:21:15,680
Speaker 1: So quickly too, in like thirty days. It was amazing.

385
00:21:16,040 --> 00:21:20,159
Speaker 2: So why because it's a brand that clients trust. The

386
00:21:20,240 --> 00:21:23,160
Speaker 2: pricing was also quite attractive. That's another part of what

387
00:21:23,240 --> 00:21:25,320
Speaker 2: you have to be thinking about always in every product,

388
00:21:25,320 --> 00:21:28,000
Speaker 2: but especially in the ETF world. And then last, you

389
00:21:28,040 --> 00:21:30,640
Speaker 2: have to be thinking, how can you help clients build portfolios.

390
00:21:31,119 --> 00:21:34,560
Speaker 2: Many financial advisors turn to us to help us figure

391
00:21:34,560 --> 00:21:37,440
Speaker 2: out how to build their overall portfolios for their clients.

392
00:21:37,880 --> 00:21:40,200
Speaker 2: We'll work with them on asset allocations. We'll give them

393
00:21:40,240 --> 00:21:42,800
Speaker 2: what we call model portfolios. It's basically literally a model

394
00:21:43,080 --> 00:21:48,080
Speaker 2: filled with ETFs, active strategies, RS and sometimes other peoples

395
00:21:48,440 --> 00:21:50,960
Speaker 2: all in a mix, and it allows them to actually

396
00:21:51,000 --> 00:21:53,359
Speaker 2: focus on what they do best, which is working with

397
00:21:53,400 --> 00:21:56,639
Speaker 2: their clients. So that's another aspect of why clients might

398
00:21:56,680 --> 00:21:58,520
Speaker 2: work with us, which is we help them actually build

399
00:21:58,520 --> 00:21:59,359
Speaker 2: their own businesses.

400
00:22:00,000 --> 00:22:02,000
Speaker 1: I want to talk a little bit about the growth

401
00:22:02,040 --> 00:22:04,840
Speaker 1: that you've experienced over the past couple of years. A

402
00:22:04,960 --> 00:22:08,399
Speaker 1: research report out of Morgan Stanley last year predicted in

403
00:22:08,560 --> 00:22:13,320
Speaker 1: five years Black Rocks AUM would be fifteen trillion dollars.

404
00:22:13,080 --> 00:22:18,320
Speaker 1: That's a fifty percent gain, pretty heady numbers pretty substantial.

405
00:22:18,840 --> 00:22:21,760
Speaker 1: How do you get there? Is this by growing market share?

406
00:22:22,200 --> 00:22:26,240
Speaker 1: Does the overall pie get bigger some combination? How do

407
00:22:26,320 --> 00:22:29,199
Speaker 1: you fulfill those heady expectations?

408
00:22:29,560 --> 00:22:32,480
Speaker 2: You start by recognizing how small we are relative to

409
00:22:32,520 --> 00:22:36,120
Speaker 2: the universe. You talk about ten trillion dollars. I'd actually

410
00:22:36,160 --> 00:22:40,000
Speaker 2: think in terms of revenue. Revenue is where you're getting

411
00:22:40,000 --> 00:22:44,040
Speaker 2: client's attention. Okay, we are our only three percent of

412
00:22:44,040 --> 00:22:48,760
Speaker 2: global asset management. In almost any other comparable industry like

413
00:22:49,160 --> 00:22:52,200
Speaker 2: sales and trading and investment banking, for example, the leader

414
00:22:52,240 --> 00:22:56,120
Speaker 2: there would be fifteen or sixteen percent. We're small. We're

415
00:22:56,240 --> 00:22:59,360
Speaker 2: small fish in a very, very big ocean. So how

416
00:22:59,359 --> 00:23:03,000
Speaker 2: do you get there? You recognize one, you're still small. Two,

417
00:23:03,480 --> 00:23:05,440
Speaker 2: you've got to figure out the products your clients need

418
00:23:05,480 --> 00:23:07,959
Speaker 2: in every individual market, and it differs. What clients want

419
00:23:08,000 --> 00:23:09,720
Speaker 2: to buy in Swetzowan is not going to be the

420
00:23:09,760 --> 00:23:13,320
Speaker 2: same as what they want to buy in Tokyo. And Third,

421
00:23:13,400 --> 00:23:15,080
Speaker 2: you figure out how do you bring the strengths of

422
00:23:15,119 --> 00:23:19,199
Speaker 2: the firm, our knowledge for global brand, global economies of

423
00:23:19,240 --> 00:23:22,480
Speaker 2: scale all together to serve clients. How do you figure

424
00:23:22,480 --> 00:23:24,960
Speaker 2: that out and yet make each client feel like she

425
00:23:25,160 --> 00:23:28,560
Speaker 2: or he is important? As an individual financial advisor or

426
00:23:28,600 --> 00:23:30,840
Speaker 2: a pension plan or serving well fund.

427
00:23:30,880 --> 00:23:33,400
Speaker 1: So that's the trick. So you sound like the head

428
00:23:33,400 --> 00:23:37,280
Speaker 1: of global client business, I hope. So, so what's a

429
00:23:37,359 --> 00:23:40,119
Speaker 1: day in the life of the head of global client

430
00:23:40,160 --> 00:23:42,480
Speaker 1: business at Blackrock? Like?

431
00:23:42,960 --> 00:23:46,480
Speaker 2: So, the passions I have are the things that make

432
00:23:46,520 --> 00:23:49,360
Speaker 2: me get up in the morning. Pretty simple. I love

433
00:23:49,480 --> 00:23:52,600
Speaker 2: seeing clients, I love seeing teams, and I love working

434
00:23:52,640 --> 00:23:55,119
Speaker 2: on problems that are really pretty interesting. So what I

435
00:23:55,200 --> 00:23:58,920
Speaker 2: mean clients I sit down, for example, with the chief

436
00:23:58,920 --> 00:24:02,640
Speaker 2: investment officer of a big global insurer. I can sit

437
00:24:02,680 --> 00:24:05,879
Speaker 2: down with a financial advisor. I might be sitting down

438
00:24:06,200 --> 00:24:10,199
Speaker 2: with somebody running even actually interesting competitors. A lot of

439
00:24:10,200 --> 00:24:12,639
Speaker 2: competitors use our products. I learn a lot from talking

440
00:24:12,680 --> 00:24:14,840
Speaker 2: to them. I actually think the top job of any

441
00:24:14,880 --> 00:24:18,080
Speaker 2: executive is actually building great leaders behind him or her,

442
00:24:18,640 --> 00:24:22,000
Speaker 2: and so actually spending time in meetings, but also individually

443
00:24:22,000 --> 00:24:25,280
Speaker 2: growing them as leaders, helping them make great decisions. And

444
00:24:25,320 --> 00:24:27,399
Speaker 2: then the last part is something I'm very interested in,

445
00:24:27,800 --> 00:24:30,360
Speaker 2: is investing in the transition to the low carbon economy.

446
00:24:30,600 --> 00:24:34,119
Speaker 2: What I mean by that is for various forces macroeconomic,

447
00:24:34,200 --> 00:24:41,840
Speaker 2: microeconomic policy, consumer preferences. We are slowly decarbonizing our economy

448
00:24:42,000 --> 00:24:44,880
Speaker 2: in the United States, in Europe, in Japan, actually also

449
00:24:45,000 --> 00:24:48,320
Speaker 2: in China. And what's happening is that day by day,

450
00:24:48,400 --> 00:24:52,920
Speaker 2: small investment decisions are moving future hydrocarbon expenditures in other words,

451
00:24:52,960 --> 00:24:55,520
Speaker 2: spending on oil and gas in some future state, moving

452
00:24:55,560 --> 00:24:58,440
Speaker 2: it today in terms of capital investments. And that's where

453
00:24:58,480 --> 00:25:02,040
Speaker 2: we come in. Clients need us to actually invest capital

454
00:25:02,400 --> 00:25:05,160
Speaker 2: into the transition. Long data cash flows that they can

455
00:25:05,200 --> 00:25:08,439
Speaker 2: get that will pay for twenty years, thirty years for

456
00:25:08,480 --> 00:25:10,760
Speaker 2: their pension plans. How do we help them invest in

457
00:25:10,800 --> 00:25:14,080
Speaker 2: the right products, the right investments so they can get

458
00:25:14,080 --> 00:25:17,120
Speaker 2: that money and meet their own financial objectives. And this

459
00:25:17,160 --> 00:25:19,000
Speaker 2: transition to a low carbon economy is one of the

460
00:25:19,000 --> 00:25:23,320
Speaker 2: biggest trends in the whole investment world. It will consume

461
00:25:23,560 --> 00:25:26,920
Speaker 2: trillions and trillions of capital doing it thoughtfully consciously. It's

462
00:25:26,920 --> 00:25:29,720
Speaker 2: why we just recently bought a company called GIP. It's

463
00:25:29,720 --> 00:25:32,879
Speaker 2: a big infrastructure firm. It's our biggest acquisition in fifteen years.

464
00:25:33,040 --> 00:25:37,080
Speaker 2: Because we see this trend of clients investing in infrastructure,

465
00:25:37,280 --> 00:25:40,680
Speaker 2: especially around this transition to a low carbon economy. That's

466
00:25:40,720 --> 00:25:42,680
Speaker 2: the place where we want to work with clients. I

467
00:25:42,760 --> 00:25:46,240
Speaker 2: love that stuff. I love figuring out new products, new teams,

468
00:25:46,440 --> 00:25:47,720
Speaker 2: new things we can do with clients.

469
00:25:47,760 --> 00:25:50,480
Speaker 1: We're going to talk about mega forces in a little while.

470
00:25:50,520 --> 00:25:53,280
Speaker 1: That comes up in that space. I want to talk

471
00:25:53,320 --> 00:25:56,240
Speaker 1: about some of the trends that have been changing that

472
00:25:56,880 --> 00:25:59,080
Speaker 1: have to be a challenge for your clients as well

473
00:25:59,119 --> 00:26:04,639
Speaker 1: as Blackriduck. How do you help clients navigate market environments

474
00:26:04,680 --> 00:26:07,920
Speaker 1: like we've seen so twenty twenty two we have inflation,

475
00:26:08,440 --> 00:26:11,879
Speaker 1: stocks and bonds down double digits. Twenty twenty three we

476
00:26:11,960 --> 00:26:15,919
Speaker 1: have disinflation and the Nasdaq is up fifty percent, the

477
00:26:16,000 --> 00:26:19,639
Speaker 1: SMP is up twenty five percent. That throws a monkey

478
00:26:19,640 --> 00:26:22,280
Speaker 1: wrench to a lot of people's thoughts about the future.

479
00:26:22,760 --> 00:26:25,560
Speaker 2: So we've just gone through the biggest rate shock of

480
00:26:25,600 --> 00:26:29,560
Speaker 2: our professional careers. If you live and work in finance,

481
00:26:29,960 --> 00:26:32,800
Speaker 2: the first principle, the most important thing is what's the

482
00:26:32,880 --> 00:26:35,679
Speaker 2: discount rate? What are the cash flows in the future

483
00:26:35,720 --> 00:26:39,400
Speaker 2: worth today? That's what interest rates are. As that transformation

484
00:26:39,720 --> 00:26:42,000
Speaker 2: happened in the last couple of years, where the rate

485
00:26:42,040 --> 00:26:46,480
Speaker 2: shock and from central banks is inflation served. That has

486
00:26:47,080 --> 00:26:51,840
Speaker 2: totally altered client's portfolios. In twenty twenty two, stocks and

487
00:26:51,880 --> 00:26:55,480
Speaker 2: bonds we're both down about twenty percent globally, huge drop.

488
00:26:56,000 --> 00:26:59,600
Speaker 2: What that led to is clients going into almost a shock.

489
00:27:00,240 --> 00:27:02,040
Speaker 2: And actually, for the last couple of years, if you

490
00:27:02,080 --> 00:27:06,840
Speaker 2: look net global clients, global investors have at least from

491
00:27:06,880 --> 00:27:10,640
Speaker 2: what we can see in funds, actually invested negative amounts

492
00:27:10,640 --> 00:27:13,919
Speaker 2: and equities. Now somebody obviously bought some, but broadly the

493
00:27:13,960 --> 00:27:18,240
Speaker 2: broad investor has actually reduced his equity position. He's even

494
00:27:18,520 --> 00:27:21,639
Speaker 2: he's moved some into ETFs, but a lot into cash,

495
00:27:22,080 --> 00:27:24,880
Speaker 2: a lot into cash, And so where clients have moved

496
00:27:24,960 --> 00:27:27,240
Speaker 2: is in cash and saying when do I come back

497
00:27:27,240 --> 00:27:30,080
Speaker 2: in now? Ironically, actually the market was up SMP was

498
00:27:30,119 --> 00:27:33,560
Speaker 2: up hugely, largely fueled by the AI boom in the

499
00:27:34,080 --> 00:27:37,240
Speaker 2: last year. So many clients of ours miss that. The

500
00:27:37,320 --> 00:27:39,240
Speaker 2: question is how do you help them? It's the biggest

501
00:27:39,320 --> 00:27:42,240
Speaker 2: challenge of their wealth manager like yourself faces. How do

502
00:27:42,320 --> 00:27:46,160
Speaker 2: you help clients stay invested when they get afraid. That's

503
00:27:46,160 --> 00:27:47,960
Speaker 2: one of the biggest questions we have is how do

504
00:27:48,000 --> 00:27:49,480
Speaker 2: you work with them and figure out when to be

505
00:27:49,520 --> 00:27:51,639
Speaker 2: in the markets and when not to jump out of

506
00:27:51,640 --> 00:27:54,920
Speaker 2: the markets because they're a little, little, little nervous.

507
00:27:55,000 --> 00:27:59,080
Speaker 1: Let's talk a little bit about the blackrock investment Institute

508
00:27:59,320 --> 00:28:02,960
Speaker 1: which public wish this wonderful bit of research on the

509
00:28:03,040 --> 00:28:08,639
Speaker 1: mega forces that are affecting everything, big structural changes that

510
00:28:08,680 --> 00:28:12,159
Speaker 1: affect investing now and will be felt far off in

511
00:28:12,200 --> 00:28:17,280
Speaker 1: the future. This creates major opportunities and risks for investors.

512
00:28:17,359 --> 00:28:20,280
Speaker 1: Let's talk a little bit about this. What led to

513
00:28:20,560 --> 00:28:23,320
Speaker 1: looking to identify mega forces?

514
00:28:23,680 --> 00:28:28,280
Speaker 2: Barry? If you look around anywhere, every newspaper, every bank,

515
00:28:28,320 --> 00:28:31,320
Speaker 2: they'll give you lots of guidance on stocks up, bonds down.

516
00:28:31,720 --> 00:28:35,520
Speaker 2: Who knows, maybe this stock op whatever. The question is

517
00:28:35,520 --> 00:28:38,480
Speaker 2: for a long term investor building a portfolio, where are

518
00:28:38,640 --> 00:28:42,880
Speaker 2: there underlying economic forces that are shifting where value is

519
00:28:42,920 --> 00:28:45,760
Speaker 2: created in an economy? Can you keep an eye on that.

520
00:28:45,760 --> 00:28:47,320
Speaker 2: That doesn't mean you'll make money on it, because you

521
00:28:47,360 --> 00:28:49,080
Speaker 2: have to actually also think it is already priced in.

522
00:28:49,680 --> 00:28:52,360
Speaker 2: But understanding what are those big drivers? And we came

523
00:28:52,440 --> 00:28:56,160
Speaker 2: up with a few that are driving the world. Clearly,

524
00:28:56,240 --> 00:28:58,960
Speaker 2: central bank activity is huge, that's not what we mean.

525
00:28:59,080 --> 00:29:00,760
Speaker 2: What we mean is something that has a ten to

526
00:29:00,800 --> 00:29:04,479
Speaker 2: twenty year horizon. So we're talking about the aging of

527
00:29:04,560 --> 00:29:08,480
Speaker 2: societies all over the world, huge impact on productivity. We're

528
00:29:08,520 --> 00:29:11,640
Speaker 2: talking about the transition to low carbon economy and the

529
00:29:11,720 --> 00:29:15,520
Speaker 2: huge capital sums that will be involved as we ultimately

530
00:29:15,920 --> 00:29:18,719
Speaker 2: move a lot of future expenditure on oil and gas

531
00:29:19,080 --> 00:29:22,400
Speaker 2: to actually investing in things like heat pumps and batteries.

532
00:29:22,440 --> 00:29:26,720
Speaker 2: Today we're talking about dbanking, and we're talking about here

533
00:29:26,960 --> 00:29:30,800
Speaker 2: banks actually getting smaller, their balance sheets getting smaller due

534
00:29:30,800 --> 00:29:34,880
Speaker 2: to regulation, especially Basil three, and therefore actually where does

535
00:29:34,880 --> 00:29:38,960
Speaker 2: that credit go? And we're talking about artificial intelligence, which

536
00:29:39,000 --> 00:29:43,440
Speaker 2: we do see as a transformative technology that ultimately will

537
00:29:43,480 --> 00:29:46,440
Speaker 2: give the rise of new industries. So these are the

538
00:29:46,480 --> 00:29:48,560
Speaker 2: kind of forces where does capital go to work? And

539
00:29:48,600 --> 00:29:53,840
Speaker 2: then also geopolitical fragmentation as we see supply chains moving

540
00:29:53,880 --> 00:29:58,440
Speaker 2: away from high dependence on China to an minimum having

541
00:29:58,440 --> 00:30:03,320
Speaker 2: an alternative in some cases actually saying let's invest much closer,

542
00:30:03,520 --> 00:30:06,280
Speaker 2: like in Mexico, to a core market like the United States.

543
00:30:06,520 --> 00:30:09,160
Speaker 2: These are forces that are actually like transforming our world,

544
00:30:09,240 --> 00:30:12,040
Speaker 2: but they're day to day. They're not shocks, they're step

545
00:30:12,080 --> 00:30:14,480
Speaker 2: by step. So when we talk about megal forces, we're

546
00:30:14,480 --> 00:30:16,840
Speaker 2: talking about things that are changing our world's day to day.

547
00:30:17,400 --> 00:30:19,240
Speaker 2: But you might miss it if you just pay attention

548
00:30:19,280 --> 00:30:20,320
Speaker 2: to today's headlines.

549
00:30:20,760 --> 00:30:23,720
Speaker 1: A little bit of Hemingway's suddenly than all at once right,

550
00:30:23,800 --> 00:30:27,200
Speaker 1: You don't see it happen until hey, what look, how

551
00:30:27,240 --> 00:30:28,040
Speaker 1: the world's changed.

552
00:30:28,400 --> 00:30:31,760
Speaker 2: That refers to bankruptcy. Happily we're talking here about long

553
00:30:31,840 --> 00:30:33,000
Speaker 2: term capital appreciation.

554
00:30:33,280 --> 00:30:36,400
Speaker 1: But yes, it refers to bankruptcy. But it's apple to

555
00:30:36,600 --> 00:30:39,280
Speaker 1: so many other things. I have so many examples where

556
00:30:39,800 --> 00:30:42,400
Speaker 1: you don't notice the change and then suddenly you're in

557
00:30:42,440 --> 00:30:43,240
Speaker 1: a different place.

558
00:30:43,720 --> 00:30:47,240
Speaker 2: I think the toughest thing for a reader or a

559
00:30:47,360 --> 00:30:51,560
Speaker 2: listener to media like this is sorting out what is

560
00:30:51,600 --> 00:30:55,600
Speaker 2: today's hot topic that tomorrow people won't even be talking about,

561
00:30:55,920 --> 00:30:59,480
Speaker 2: and where are there underlying seismic shifts that other people

562
00:30:59,520 --> 00:31:00,800
Speaker 2: haven't paid a lot of attention to.

563
00:31:01,280 --> 00:31:04,400
Speaker 1: The late great Laslo Burini used to put out this

564
00:31:05,000 --> 00:31:09,680
Speaker 1: bound book of newspaper headlines and stories from the previous year,

565
00:31:10,200 --> 00:31:12,280
Speaker 1: and things that you read in the moment that are

566
00:31:12,320 --> 00:31:15,240
Speaker 1: so emotional and so important. You look back a few

567
00:31:15,280 --> 00:31:19,120
Speaker 1: months later, it's ephemeral, empty nonsense. You just it was

568
00:31:19,160 --> 00:31:23,760
Speaker 1: the emotion that grabbed you, not the line underneath it was.

569
00:31:24,280 --> 00:31:28,320
Speaker 1: It's one of my favorite publications because it forces you

570
00:31:28,400 --> 00:31:31,840
Speaker 1: to completely reevaluate how you think about things. It's really amazing.

571
00:31:32,080 --> 00:31:35,360
Speaker 2: Sometimes I think of markets like Dory the Fish with

572
00:31:35,480 --> 00:31:39,120
Speaker 2: a very short term memory. Dorry can't keep much in

573
00:31:39,200 --> 00:31:41,720
Speaker 2: her head at any one time. Markets are a bit

574
00:31:41,920 --> 00:31:45,440
Speaker 2: like that. They're very focused on rates right now. Two

575
00:31:45,520 --> 00:31:49,040
Speaker 2: years ago, no one was talking about rates. Suddenly everyone's

576
00:31:49,080 --> 00:31:52,520
Speaker 2: talking about rates. That's the nature of markets. I think

577
00:31:52,560 --> 00:31:55,520
Speaker 2: it's relevant to be thinking about You have to know

578
00:31:55,560 --> 00:31:58,880
Speaker 2: what's happening in the flow. But a long term great

579
00:31:58,880 --> 00:32:01,760
Speaker 2: investor is thinking about the trends that are a little

580
00:32:01,760 --> 00:32:05,360
Speaker 2: bit below the waterline, that actually fundamentally are where the

581
00:32:05,400 --> 00:32:08,720
Speaker 2: boat is moving. The current is shifting the entire fleet.

582
00:32:08,920 --> 00:32:12,120
Speaker 1: Right. You can't be a dog thinking squirrel, which is

583
00:32:12,360 --> 00:32:17,160
Speaker 1: often how the markets react. It's like just total squirrel, right, squirrel,

584
00:32:17,480 --> 00:32:18,960
Speaker 1: it's just solely distracting.

585
00:32:19,720 --> 00:32:23,560
Speaker 2: You talked about distractions. I think that much of the

586
00:32:23,600 --> 00:32:28,480
Speaker 2: investment universe is set up to actually attract, like look

587
00:32:28,480 --> 00:32:30,920
Speaker 2: at the shiny ball. Look at the shiny ball, because

588
00:32:30,960 --> 00:32:33,600
Speaker 2: a lot of long term investing is actually not that

589
00:32:33,720 --> 00:32:37,600
Speaker 2: interesting day to day. It's putting aside a diversified portfolio

590
00:32:37,840 --> 00:32:41,320
Speaker 2: and holding and not freaking out if you do that

591
00:32:41,720 --> 00:32:44,640
Speaker 2: over the long haul, especially in US equities, has worked

592
00:32:44,640 --> 00:32:45,480
Speaker 2: out pretty well.

593
00:32:46,120 --> 00:32:48,280
Speaker 1: To say the very least. Let's talk about some of

594
00:32:48,320 --> 00:32:52,600
Speaker 1: these ten to twenty year mega forces, starting with digital

595
00:32:52,640 --> 00:32:57,040
Speaker 1: disruption and artificial intelligence. Where on earth is that going?

596
00:32:57,160 --> 00:33:02,959
Speaker 2: So artificial intelligence is got to be the single biggest exciting,

597
00:33:03,400 --> 00:33:07,080
Speaker 2: zesty thing of the day. We've got an active debate

598
00:33:07,160 --> 00:33:09,640
Speaker 2: inside our firm on this question. On the one hand,

599
00:33:10,040 --> 00:33:13,880
Speaker 2: artificial intelligence is a generalized technology that can spread throughout

600
00:33:13,920 --> 00:33:17,000
Speaker 2: the entire economy quite quickly because of the Internet already.

601
00:33:16,640 --> 00:33:18,880
Speaker 1: Has I mean, it's been used for so long people

602
00:33:18,920 --> 00:33:20,640
Speaker 1: and it just didn't see the front end of it.

603
00:33:20,680 --> 00:33:23,200
Speaker 2: Well, actually it's already been used from It's been used

604
00:33:23,200 --> 00:33:26,680
Speaker 2: for many years actually in our own quantitative strategies. So

605
00:33:26,800 --> 00:33:30,600
Speaker 2: large language models in investing is nothing new, Okay, we

606
00:33:31,160 --> 00:33:33,320
Speaker 2: and competitors have been doing this for a long time.

607
00:33:33,760 --> 00:33:38,280
Speaker 2: But how people interact and how we're facilitated by using AI,

608
00:33:38,480 --> 00:33:41,000
Speaker 2: that is new. We're going to see what the impact is.

609
00:33:41,080 --> 00:33:43,840
Speaker 2: There's one school of says it's going to completely change

610
00:33:43,840 --> 00:33:47,440
Speaker 2: the world very quickly, and that's of course why stocks

611
00:33:47,520 --> 00:33:50,400
Speaker 2: like in Nvidia have had a huge run. There's another

612
00:33:50,440 --> 00:33:54,560
Speaker 2: school which says, take the long view that whether it's electricity,

613
00:33:54,920 --> 00:33:59,760
Speaker 2: the telegraph, the telephone, the airplane, the car, the fax machine,

614
00:33:59,840 --> 00:34:03,520
Speaker 2: or the Internet. It took decades for these technologies to

615
00:34:03,560 --> 00:34:06,960
Speaker 2: actually really change the real economy and to actually have

616
00:34:07,040 --> 00:34:10,160
Speaker 2: a real impact on how people work with each other,

617
00:34:10,160 --> 00:34:13,760
Speaker 2: how they make things, how they trade. We'll see big debate.

618
00:34:13,880 --> 00:34:17,719
Speaker 2: There is a there is a view that actually, while exciting,

619
00:34:18,080 --> 00:34:21,440
Speaker 2: there is a view that investors are over emphasizing some

620
00:34:21,640 --> 00:34:27,040
Speaker 2: distant fantasies around AI, when actually the real applications are

621
00:34:27,080 --> 00:34:29,399
Speaker 2: going to take a long time for companies to figure out.

622
00:34:29,760 --> 00:34:30,239
Speaker 2: We don't know.

623
00:34:30,560 --> 00:34:33,800
Speaker 1: So there's a contingency of people who insists on calling

624
00:34:33,880 --> 00:34:37,799
Speaker 1: AI a bubble. What would you say to them if

625
00:34:39,000 --> 00:34:42,000
Speaker 1: you know there they think it's just another shiny object.

626
00:34:42,480 --> 00:34:46,160
Speaker 2: Time's going to tell I don't think it's all nonsense. Importantly,

627
00:34:46,480 --> 00:34:49,920
Speaker 2: we do see the transformation of the economy through AIS

628
00:34:49,960 --> 00:34:53,200
Speaker 2: a real long term force. When we saw a huge

629
00:34:53,239 --> 00:34:57,960
Speaker 2: crypto boom a few years ago, are my view was

630
00:34:58,200 --> 00:35:00,480
Speaker 2: we're in the midst of a bubble. Want to start

631
00:35:00,480 --> 00:35:03,400
Speaker 2: growing some tulips. Like the Dutch in the seventeenth century,

632
00:35:03,440 --> 00:35:06,040
Speaker 2: this is different. The question is when do the cash

633
00:35:06,040 --> 00:35:14,040
Speaker 2: flows start moving for data centers, for processing manufacturing, processor manufacturing,

634
00:35:14,400 --> 00:35:17,319
Speaker 2: when is start getting applied in real businesses and how

635
00:35:17,320 --> 00:35:21,880
Speaker 2: they change their own operations. The answer is actually data

636
00:35:21,880 --> 00:35:25,040
Speaker 2: centers are booming everywhere. People are trying to figure out

637
00:35:25,040 --> 00:35:28,800
Speaker 2: how to use these chips. Whose businesses will rise and fall?

638
00:35:29,120 --> 00:35:33,799
Speaker 2: Will firms like Bloomberg or Blackrock be disrupted by some

639
00:35:33,920 --> 00:35:38,279
Speaker 2: attacker who uses AI as an attack vector. We don't know.

640
00:35:39,560 --> 00:35:43,200
Speaker 2: We'll see. So there can be a lot of early enthusiasm,

641
00:35:43,239 --> 00:35:45,200
Speaker 2: maybe even hype, But I wouldn't call it a bubble.

642
00:35:45,239 --> 00:35:48,000
Speaker 2: To me, a bubble sounds like you're selling tulips. I

643
00:35:48,000 --> 00:35:50,759
Speaker 2: don't think that's what's going on here. We're seeing a transformation.

644
00:35:51,320 --> 00:35:55,520
Speaker 2: But we've also saw with the railroads in the eighteen forties, fifties, sixties,

645
00:35:55,520 --> 00:36:00,000
Speaker 2: seventies that as they started to transform continental economies, all

646
00:36:00,000 --> 00:36:02,680
Speaker 2: a lot of money was lost as investors got very excited.

647
00:36:02,960 --> 00:36:06,399
Speaker 2: So it's a real economic transformation. What are the right

648
00:36:06,440 --> 00:36:08,480
Speaker 2: investments that's a much trickier question.

649
00:36:08,920 --> 00:36:10,920
Speaker 1: In people sort of lose sight of that, whether it's

650
00:36:10,960 --> 00:36:15,279
Speaker 1: automobiles or internet companies. Even if you know, hey, this

651
00:36:15,360 --> 00:36:17,440
Speaker 1: is going to change everything, it doesn't mean you know

652
00:36:17,480 --> 00:36:19,600
Speaker 1: which is the company that's going to be the winner

653
00:36:19,680 --> 00:36:20,000
Speaker 1: from it.

654
00:36:20,400 --> 00:36:22,319
Speaker 2: You don't know which company, and you don't know when

655
00:36:22,360 --> 00:36:27,680
Speaker 2: to buy. The railroad was obviously a transformational technology, clearly,

656
00:36:27,840 --> 00:36:31,360
Speaker 2: I don't think anybody really disputed that. The question is

657
00:36:31,400 --> 00:36:35,000
Speaker 2: how do you make money from it? That's not so obvious.

658
00:36:35,280 --> 00:36:38,400
Speaker 2: Going back to the dot com boom, the Internet was

659
00:36:38,440 --> 00:36:42,880
Speaker 2: a transformational technology, but many of the companies that sprouted

660
00:36:42,920 --> 00:36:45,879
Speaker 2: back then were complete failures. On the other hand, there

661
00:36:45,960 --> 00:36:49,000
Speaker 2: was one small company called Amazon that did actually manage

662
00:36:49,040 --> 00:36:51,920
Speaker 2: to get out of just book selling into something slightly larger.

663
00:36:52,280 --> 00:36:55,400
Speaker 1: So sometimes it's just bad timing. Pets dot Com famously

664
00:36:55,440 --> 00:36:57,959
Speaker 1: blew up pets dot Com, but a few years later

665
00:36:58,200 --> 00:37:01,520
Speaker 1: Chewy is doing great, and it's it's essentially a variation

666
00:37:01,600 --> 00:37:02,680
Speaker 1: of the same business model.

667
00:37:02,880 --> 00:37:05,560
Speaker 2: The tough part here. You can be really right about

668
00:37:05,560 --> 00:37:07,839
Speaker 2: the long term trend, but if you get in at

669
00:37:07,840 --> 00:37:10,600
Speaker 2: the wrong time, too early or too late, you can

670
00:37:10,640 --> 00:37:12,279
Speaker 2: miss that. That's the tricky part in what we do.

671
00:37:12,360 --> 00:37:13,399
Speaker 2: It's also what makes it fun.

672
00:37:13,520 --> 00:37:17,120
Speaker 1: So let's talk a little bit about geopolitical fragmentation and

673
00:37:17,320 --> 00:37:23,000
Speaker 1: economic competition. You know, obviously Russia, the EU, China big

674
00:37:23,120 --> 00:37:27,160
Speaker 1: aspects of the global economy, but what about South America

675
00:37:27,280 --> 00:37:30,640
Speaker 1: or Africa, which seems to have been left behind in

676
00:37:30,920 --> 00:37:35,839
Speaker 1: the economic competition and when you talk about fragmentation, what

677
00:37:35,840 --> 00:37:39,720
Speaker 1: does that mean in terms of global trade and relations.

678
00:37:39,960 --> 00:37:43,239
Speaker 2: So for global investors, the big question is how do

679
00:37:43,280 --> 00:37:46,239
Speaker 2: you build a global portfolio in a world that is fragmenting.

680
00:37:47,040 --> 00:37:50,000
Speaker 2: Five seven years ago, even as recent as that, you

681
00:37:50,080 --> 00:37:53,560
Speaker 2: built a global portfolio, and you could be an individual

682
00:37:53,560 --> 00:37:57,160
Speaker 2: financial advisor, an individual investor, or a giant sovereign wealth fund.

683
00:37:57,560 --> 00:38:03,000
Speaker 2: You built a global portfolio, sifying, looking for opportunities everywhere,

684
00:38:03,239 --> 00:38:06,640
Speaker 2: and you didn't think much about political risk. Today a

685
00:38:06,680 --> 00:38:09,680
Speaker 2: global portfolio has to put political risk at the center

686
00:38:10,080 --> 00:38:12,760
Speaker 2: of his or her portfolio. You've got to be thinking,

687
00:38:13,400 --> 00:38:16,800
Speaker 2: is this market actually too risky for the current price

688
00:38:17,080 --> 00:38:20,000
Speaker 2: because of geopolitical events, whether it be war, we all

689
00:38:20,040 --> 00:38:25,200
Speaker 2: live through a pandemic. These are forces that have rent

690
00:38:25,400 --> 00:38:28,960
Speaker 2: at the globe fabric of global trade and of global investments.

691
00:38:29,560 --> 00:38:35,360
Speaker 2: So five years ago China, China was the second hottest

692
00:38:35,400 --> 00:38:39,280
Speaker 2: bell at the ball. First was the United States. Today,

693
00:38:39,680 --> 00:38:44,680
Speaker 2: global investors they have no bid for China. Why Mostly

694
00:38:44,760 --> 00:38:49,760
Speaker 2: domestic issues in China, but also US Chinese trade tensions,

695
00:38:50,000 --> 00:38:54,120
Speaker 2: technology conflict. These are reasons where global investors are saying, hmm,

696
00:38:54,680 --> 00:38:57,400
Speaker 2: perhaps I don't want to invest in China. They weren't

697
00:38:57,440 --> 00:39:00,920
Speaker 2: thinking about political risk five six years ago, seven years ago.

698
00:39:01,200 --> 00:39:03,080
Speaker 2: Now it's front and center. Not quite as big as

699
00:39:03,280 --> 00:39:06,080
Speaker 2: as interest rates, but almost there. And so the question

700
00:39:06,200 --> 00:39:08,799
Speaker 2: is how can you actually invest to make money from this.

701
00:39:09,239 --> 00:39:12,520
Speaker 2: We're seeing clients around the world interested in investing in

702
00:39:12,520 --> 00:39:15,040
Speaker 2: infrastructure and the winner countries who are the winter countries

703
00:39:15,239 --> 00:39:18,920
Speaker 2: from China's ultimately losing some of its almost monopoly status

704
00:39:18,920 --> 00:39:24,799
Speaker 2: in manufacturing. We're seeing Mexico, Vietnam, Indonesia, We're seeing India.

705
00:39:24,960 --> 00:39:26,759
Speaker 2: All of these countries are trying to figure out how

706
00:39:26,840 --> 00:39:29,120
Speaker 2: they capture it some of that mantle. I think as

707
00:39:29,480 --> 00:39:34,560
Speaker 2: US investors looking at mexico's particularly appealing. It's nearby, it

708
00:39:34,640 --> 00:39:39,200
Speaker 2: is relatively politically stable, and they have privileged access to

709
00:39:39,239 --> 00:39:42,760
Speaker 2: the US markets and lower cost of production for stuff

710
00:39:42,760 --> 00:39:45,000
Speaker 2: that would otherwise have been done in China. And we're

711
00:39:45,000 --> 00:39:48,440
Speaker 2: seeing lots of clients want to invest into Mexico to

712
00:39:48,520 --> 00:39:52,760
Speaker 2: actually participate, whether in infrastructure or manufacturing. We're seeing companies

713
00:39:52,920 --> 00:39:55,520
Speaker 2: wanting to move investments there because it's close to the

714
00:39:55,520 --> 00:39:58,000
Speaker 2: Great American market, but it's not China.

715
00:39:58,120 --> 00:40:03,239
Speaker 1: So I'm kind of fascinated by outside non domestic Chinese investors,

716
00:40:03,239 --> 00:40:08,640
Speaker 1: so US investors' European investors investing in China public stocks

717
00:40:08,640 --> 00:40:11,920
Speaker 1: over the past twenty thirty years, returns haven't been great.

718
00:40:11,960 --> 00:40:17,160
Speaker 1: At a certain point, it's going to become attractive, assuming

719
00:40:17,880 --> 00:40:21,640
Speaker 1: outside investors are not treated as second class citizens with

720
00:40:21,760 --> 00:40:23,840
Speaker 1: the B shares the way they have been over these years.

721
00:40:24,000 --> 00:40:26,280
Speaker 1: But at a certain point China is going to become

722
00:40:26,320 --> 00:40:29,040
Speaker 1: a screaming by We're just noway near that point.

723
00:40:28,880 --> 00:40:31,760
Speaker 2: Yet, So by definition, you never know when the bottom

724
00:40:31,920 --> 00:40:34,960
Speaker 2: is what i'd say is and perhaps this is a

725
00:40:34,960 --> 00:40:38,960
Speaker 2: by signal. When I talk to global investors, sophisticated investors

726
00:40:38,960 --> 00:40:43,080
Speaker 2: with major investments in China, they're scaling back, They're not

727
00:40:43,200 --> 00:40:47,240
Speaker 2: scaling up. When I talk to our own teams in China,

728
00:40:47,840 --> 00:40:51,000
Speaker 2: the general mood there is pretty dark. Again, It's mostly

729
00:40:51,120 --> 00:40:55,279
Speaker 2: dark for domestic reasons. Property crisis, the wealth effect of

730
00:40:55,400 --> 00:41:01,040
Speaker 2: declining property prices on consumption, consumer sentiment is terrible, and

731
00:41:01,239 --> 00:41:04,439
Speaker 2: you see increasing concerns for young people getting jobs. These

732
00:41:04,480 --> 00:41:08,520
Speaker 2: are actual things that dampen people's investment appetite, and they

733
00:41:08,520 --> 00:41:11,239
Speaker 2: tend to actually go to cash or bank deposits, and

734
00:41:11,320 --> 00:41:15,320
Speaker 2: so what we're seeing is very little bid for For example,

735
00:41:15,440 --> 00:41:19,120
Speaker 2: Chinese equities from either inside of China or globally. However,

736
00:41:19,239 --> 00:41:22,000
Speaker 2: at some point the falling knife hits the floor, and

737
00:41:22,040 --> 00:41:24,719
Speaker 2: the question is when do you buy great question. I'd

738
00:41:24,760 --> 00:41:26,880
Speaker 2: keep an eye as a global investor on that question

739
00:41:27,080 --> 00:41:31,360
Speaker 2: because at some point China does actually become an attractive buy.

740
00:41:31,120 --> 00:41:33,959
Speaker 1: So you were hinting at demographics, Let's talk a little

741
00:41:33,960 --> 00:41:37,440
Speaker 1: bit about that. We see not just China, but Japan

742
00:41:37,680 --> 00:41:42,239
Speaker 1: and Europe with flat or negative negative growth rates. The

743
00:41:42,320 --> 00:41:45,840
Speaker 1: United States growth rate has slowed but is still barely positive.

744
00:41:46,320 --> 00:41:49,719
Speaker 1: How do you look at aging populations around the world?

745
00:41:49,800 --> 00:41:53,000
Speaker 1: What does this mean for investors off in the future.

746
00:41:53,520 --> 00:41:57,120
Speaker 2: So everywhere that is rich, women want to have fewer kids,

747
00:41:58,280 --> 00:42:00,720
Speaker 2: even in the United States if you take outgration, barry

748
00:42:00,920 --> 00:42:04,680
Speaker 2: or actually have a declining population. And in countries that

749
00:42:04,800 --> 00:42:07,800
Speaker 2: don't have immigration or have much lower levels of immigration,

750
00:42:07,920 --> 00:42:11,399
Speaker 2: Japan being most extreme, or South Korea or China, you're

751
00:42:11,480 --> 00:42:14,600
Speaker 2: seeing birth rates plummet. So, for example, in China today

752
00:42:15,160 --> 00:42:20,000
Speaker 2: the birth rate is approximately one baby per woman and

753
00:42:20,160 --> 00:42:22,680
Speaker 2: replacement rate is more like two point two. So we're

754
00:42:22,680 --> 00:42:25,400
Speaker 2: going to see a future where China in the end

755
00:42:25,440 --> 00:42:28,200
Speaker 2: of the century will probably have I'm going to guess

756
00:42:28,400 --> 00:42:30,720
Speaker 2: fewer people than the United States, because the US.

757
00:42:30,640 --> 00:42:33,360
Speaker 1: Population contain by the end of this century.

758
00:42:33,520 --> 00:42:35,960
Speaker 2: By the end of this century, we may live in

759
00:42:36,000 --> 00:42:39,040
Speaker 2: a world where there, let's say, six hundred million Chinese.

760
00:42:39,440 --> 00:42:41,320
Speaker 2: Do I think there will be six hundred million Americans

761
00:42:41,360 --> 00:42:45,000
Speaker 2: in twenty one hundred, probably, So we're living in a

762
00:42:45,080 --> 00:42:48,280
Speaker 2: world where these demographics are changing the long term destiny

763
00:42:48,360 --> 00:42:53,000
Speaker 2: of nations, where having enough kids is actually like a

764
00:42:53,160 --> 00:42:56,960
Speaker 2: long term question of productivity of staffing. Now, it's not

765
00:42:57,080 --> 00:43:00,279
Speaker 2: all bad. If you look at GDP per capita, not

766
00:43:00,560 --> 00:43:03,879
Speaker 2: just GDP, you'd see that actually the Japanese have done

767
00:43:04,000 --> 00:43:06,480
Speaker 2: just fine for the last ten or fifteen years. But

768
00:43:06,640 --> 00:43:08,200
Speaker 2: it does mean that you've got to look to a

769
00:43:08,280 --> 00:43:12,120
Speaker 2: future where not only will there be fewer kids per adult,

770
00:43:12,640 --> 00:43:14,920
Speaker 2: but also where robots are going to have to pick

771
00:43:15,000 --> 00:43:17,600
Speaker 2: up some of the work. That's why I think robotics

772
00:43:17,719 --> 00:43:20,040
Speaker 2: is being driven by demographic change. Is actually one of

773
00:43:20,040 --> 00:43:23,000
Speaker 2: the most attractive places for long term investment, because one

774
00:43:23,040 --> 00:43:26,480
Speaker 2: thing we know is demographics is destiny. If you have

775
00:43:26,640 --> 00:43:29,760
Speaker 2: fewer babies today, you're going to have fewer workers tomorrow.

776
00:43:30,239 --> 00:43:32,839
Speaker 2: This is a huge force we have to look at

777
00:43:32,880 --> 00:43:36,040
Speaker 2: as relative among nations, there are some countries that still

778
00:43:36,120 --> 00:43:39,719
Speaker 2: have demographic growth. India is the most prominent among them.

779
00:43:40,000 --> 00:43:42,120
Speaker 2: Africa I put in a different sub Saharan Africa is

780
00:43:42,160 --> 00:43:44,919
Speaker 2: in a different category because there's still continued population growth

781
00:43:44,960 --> 00:43:47,480
Speaker 2: that's well over above replacement rate. The problem is there

782
00:43:47,560 --> 00:43:50,880
Speaker 2: isn't actually any feasible path for economic growth to match that.

783
00:43:51,000 --> 00:43:53,759
Speaker 2: That's a problem for the future. But for investors looking

784
00:43:53,800 --> 00:43:56,920
Speaker 2: at the companies, the robotics companies that will serve the

785
00:43:57,000 --> 00:44:01,880
Speaker 2: elderly Japanese of the twenty fifties, my peers I hopefully

786
00:44:02,040 --> 00:44:04,480
Speaker 2: of that age. Who are those companies? How will they

787
00:44:04,560 --> 00:44:07,759
Speaker 2: make money? I think that's a really interesting trend. The

788
00:44:07,840 --> 00:44:11,479
Speaker 2: second healthcare healthcare for all these folks. And then also

789
00:44:11,719 --> 00:44:14,880
Speaker 2: which societies figure out how to either attract through immigrants

790
00:44:15,760 --> 00:44:19,080
Speaker 2: or through automation or able to elevate their productivity and

791
00:44:19,200 --> 00:44:23,760
Speaker 2: which ones can't. Will actually help distinguish countries that actually

792
00:44:23,800 --> 00:44:26,080
Speaker 2: have economic growth those versus those as shrink.

793
00:44:26,320 --> 00:44:28,880
Speaker 1: So let's talk a little bit about the future of finance.

794
00:44:29,480 --> 00:44:32,799
Speaker 1: We're in an unusual world. So not only did zero

795
00:44:32,880 --> 00:44:36,600
Speaker 1: interest rate policy and QE end, but at the same

796
00:44:36,719 --> 00:44:41,920
Speaker 1: time we've seen the rise of decentralization, all sorts of

797
00:44:42,000 --> 00:44:45,120
Speaker 1: interesting apps taking place in the world of finance. I

798
00:44:45,200 --> 00:44:47,759
Speaker 1: could venmo you money without a bank in between. That

799
00:44:47,920 --> 00:44:53,040
Speaker 1: was unimaginable. I built a car in South America and

800
00:44:53,200 --> 00:44:57,680
Speaker 1: I was using remitly to send cash to Columbia. That

801
00:44:57,880 --> 00:45:02,279
Speaker 1: was unthinkable five ten years ago. You couldn't do that.

802
00:45:02,920 --> 00:45:05,560
Speaker 1: So you talk about as one of the five mega

803
00:45:05,640 --> 00:45:08,840
Speaker 1: forces the future of finance. Where do you see this

804
00:45:09,000 --> 00:45:12,560
Speaker 1: go and how does private credit fit into that?

805
00:45:13,200 --> 00:45:15,640
Speaker 2: A couple of big forces, one of which is the

806
00:45:16,080 --> 00:45:20,359
Speaker 2: relentless growth of the capital markets relative to banks over time.

807
00:45:21,000 --> 00:45:25,719
Speaker 2: This is largely different by regulation. Basel three an arcane term,

808
00:45:25,800 --> 00:45:27,880
Speaker 2: but it just means that banks have to hold more capital.

809
00:45:29,080 --> 00:45:31,000
Speaker 2: One of the things that regulators did after the financial

810
00:45:31,040 --> 00:45:33,200
Speaker 2: crisis to say, yeah, we're not letting that happen again,

811
00:45:33,719 --> 00:45:36,560
Speaker 2: and actually I give them big credit. Most big banks

812
00:45:36,680 --> 00:45:40,080
Speaker 2: hold lots of capital. A's where despite an energy shock,

813
00:45:40,280 --> 00:45:43,320
Speaker 2: a war in Europe, and a huge rate shock, the

814
00:45:43,360 --> 00:45:46,440
Speaker 2: biggest in forty years, actually no major bank failed.

815
00:45:46,480 --> 00:45:46,600
Speaker 1: Of that.

816
00:45:46,719 --> 00:45:48,759
Speaker 2: We had a few smaller banks that were underregulated in

817
00:45:48,760 --> 00:45:51,359
Speaker 2: the United States, but the large global banks which caused

818
00:45:51,360 --> 00:45:53,160
Speaker 2: such a mass speck in two thousand and seven and

819
00:45:53,239 --> 00:45:57,280
Speaker 2: eight actually came through fine. The problem is the credit

820
00:45:57,360 --> 00:46:00,399
Speaker 2: that they create is gradually having to move some or else.

821
00:46:00,719 --> 00:46:03,480
Speaker 2: It's moving into the capital markets. And one of the

822
00:46:03,560 --> 00:46:05,880
Speaker 2: winners in that is what I would call private credit

823
00:46:06,040 --> 00:46:09,520
Speaker 2: simply instead of actually in bond form, we're talking about

824
00:46:10,000 --> 00:46:13,440
Speaker 2: a pension plan, an insurance company, or an individual investor,

825
00:46:13,480 --> 00:46:16,160
Speaker 2: a wealthy individual investor who's invested into a so called

826
00:46:16,200 --> 00:46:20,920
Speaker 2: private credit strategy, which simply means lending money out to

827
00:46:21,040 --> 00:46:25,120
Speaker 2: some ultimate user, usually a company, and that money ultimately

828
00:46:25,360 --> 00:46:27,440
Speaker 2: is a replacement for what otherwise probably would have been

829
00:46:27,480 --> 00:46:29,960
Speaker 2: a bond. So insurance companies buy a lot of this.

830
00:46:30,560 --> 00:46:32,839
Speaker 2: And where's why is this happening. It's because these loans

831
00:46:32,880 --> 00:46:35,120
Speaker 2: are coming off of bank balance sheets and they're coming

832
00:46:35,239 --> 00:46:38,040
Speaker 2: into this private credit strategies. This is going to be

833
00:46:38,080 --> 00:46:41,040
Speaker 2: the big driver of the next five years of how

834
00:46:41,120 --> 00:46:43,920
Speaker 2: the bank shrink and the capital markets grow. Private credit,

835
00:46:44,760 --> 00:46:47,600
Speaker 2: I think your payments is something big. It's not where

836
00:46:48,000 --> 00:46:52,799
Speaker 2: we directly participate as a firm, but payments, I think

837
00:46:52,920 --> 00:46:54,960
Speaker 2: is the place where you have massive revolution. And you

838
00:46:55,040 --> 00:47:00,160
Speaker 2: already mentioned the possibility of inter country transfers. That that's

839
00:47:00,160 --> 00:47:03,480
Speaker 2: a place is massively inefficient. If you think about all

840
00:47:03,719 --> 00:47:07,400
Speaker 2: of those immigrant workers, legal immigrant workers who are actually

841
00:47:07,520 --> 00:47:10,560
Speaker 2: remitting funds back to their home countries, many of them

842
00:47:10,600 --> 00:47:13,879
Speaker 2: are getting scalped on the way out. Imagine a world

843
00:47:14,080 --> 00:47:19,560
Speaker 2: where instead of paying seven eight percent to some chain

844
00:47:19,600 --> 00:47:23,719
Speaker 2: of intermediaries, instead they're actually paying almost nothing directly to

845
00:47:23,800 --> 00:47:26,839
Speaker 2: transfer the funds back to their parents, their families, whatever.

846
00:47:27,400 --> 00:47:30,600
Speaker 2: I actually think that the payments efficiency, that's a step

847
00:47:30,680 --> 00:47:31,680
Speaker 2: forward in human liberation.

848
00:47:32,280 --> 00:47:35,839
Speaker 1: So our last question on mega forces is, let's get

849
00:47:35,880 --> 00:47:40,320
Speaker 1: into the details on the transition to low carbon. How's

850
00:47:40,360 --> 00:47:44,360
Speaker 1: that going. I know that a lot of the solar

851
00:47:44,440 --> 00:47:47,400
Speaker 1: panels and wind turbines are made in China. We're not

852
00:47:47,520 --> 00:47:51,280
Speaker 1: really competing there, but it does seem we're making progress

853
00:47:51,360 --> 00:47:54,600
Speaker 1: with coal and other things. Tell us about the transition

854
00:47:54,719 --> 00:47:56,280
Speaker 1: to low carbon, it's.

855
00:47:56,160 --> 00:47:58,760
Speaker 2: Pretty simple, Barry. If you look back at the energy system,

856
00:47:59,000 --> 00:48:02,080
Speaker 2: what we're seeing is is because of the simple efficiency

857
00:48:02,120 --> 00:48:05,359
Speaker 2: of renewables and batteries, just the simple efficiency not doing

858
00:48:05,440 --> 00:48:09,800
Speaker 2: God's work, just simply efficiency, lowest cost production. We're seeing

859
00:48:09,920 --> 00:48:13,600
Speaker 2: that coal plants are coming out of production very rapidly

860
00:48:13,800 --> 00:48:16,040
Speaker 2: here in the United States, a little bit less quickly

861
00:48:16,120 --> 00:48:19,240
Speaker 2: in Europe. We're seeing them being replaced by a mixture

862
00:48:19,920 --> 00:48:24,680
Speaker 2: of natural gas, which is lower carbon emitting, and batteries

863
00:48:24,800 --> 00:48:28,120
Speaker 2: with wind and solar, and this combination is actually just

864
00:48:28,200 --> 00:48:31,839
Speaker 2: simply cheaper than operating a coal plant. That's why coal plants,

865
00:48:31,880 --> 00:48:35,360
Speaker 2: which are very, very carbon intensive, are disappearing. We're seeing

866
00:48:35,640 --> 00:48:40,560
Speaker 2: in transport cars that as evs get more and more efficient,

867
00:48:41,360 --> 00:48:44,120
Speaker 2: that they actually and the costs of batteries drop step

868
00:48:44,160 --> 00:48:47,840
Speaker 2: by step. We're seeing, for example, that in China today

869
00:48:48,520 --> 00:48:51,520
Speaker 2: more than twenty five percent, almost a third of all

870
00:48:51,600 --> 00:48:54,800
Speaker 2: cars sold last year, we're actually evs.

871
00:48:55,000 --> 00:48:55,239
Speaker 1: Wow.

872
00:48:56,200 --> 00:48:58,840
Speaker 2: Europe is trending in that same way. US actually charges

873
00:48:58,920 --> 00:49:02,120
Speaker 2: few lower gas tax and so actually it's slower here,

874
00:49:02,239 --> 00:49:04,680
Speaker 2: but it's still growing. So what you're seeing are all

875
00:49:04,719 --> 00:49:08,920
Speaker 2: these steps that are actually moving hydrocarbon intensive activities in

876
00:49:08,920 --> 00:49:11,120
Speaker 2: other words, things that burn or use oil and gas,

877
00:49:11,520 --> 00:49:15,200
Speaker 2: and actually shifting things to something that is electrified and

878
00:49:15,320 --> 00:49:18,840
Speaker 2: lower carbon. So that transformation consumes a lot of capital.

879
00:49:19,080 --> 00:49:21,919
Speaker 2: Investors around the world want to participate, but it means

880
00:49:22,000 --> 00:49:25,840
Speaker 2: building pipelines, it means build deepening the electric grid, putting

881
00:49:25,920 --> 00:49:28,080
Speaker 2: up battery storage were actually built. The largest battery in

882
00:49:28,120 --> 00:49:31,800
Speaker 2: the world is in Australia. It's a grid stabilizer outside

883
00:49:31,840 --> 00:49:34,880
Speaker 2: of Sydney. We're working with clients who want to invest

884
00:49:35,040 --> 00:49:38,560
Speaker 2: in startup companies, growth equity companies to build something like

885
00:49:38,600 --> 00:49:40,600
Speaker 2: a heat battery. I don't even know this existed. A

886
00:49:40,680 --> 00:49:45,000
Speaker 2: heat battery is for industrial processes often use a lot

887
00:49:45,080 --> 00:49:47,160
Speaker 2: of heat. Typically, the only way you could do that

888
00:49:47,360 --> 00:49:50,800
Speaker 2: is burn oil or gas right there to get that

889
00:49:51,000 --> 00:49:53,160
Speaker 2: kind of intense heat, very hard to do with electricity.

890
00:49:53,400 --> 00:49:58,560
Speaker 2: A heat battery takes the heat generated through renewables electric

891
00:49:59,040 --> 00:50:02,840
Speaker 2: electricity coming in converted into heat stored away as a

892
00:50:02,880 --> 00:50:06,840
Speaker 2: heat sink, and then releases the heat as needed directly

893
00:50:06,920 --> 00:50:10,280
Speaker 2: into industrial processes. We just invested in a small company

894
00:50:10,520 --> 00:50:13,600
Speaker 2: that actually builds these batteries. If somebody can figure out

895
00:50:13,600 --> 00:50:16,000
Speaker 2: how to do that at scale, perhaps this company, it'll

896
00:50:16,040 --> 00:50:19,600
Speaker 2: actually transform a whole bunch of industrial processes that today

897
00:50:19,800 --> 00:50:23,239
Speaker 2: have no alternative to using hydrocarbons. And one of the advantages,

898
00:50:23,360 --> 00:50:25,680
Speaker 2: especially for non Americans, because America has a lot of

899
00:50:25,719 --> 00:50:28,360
Speaker 2: oil and gas. If you're a European or a Japanese,

900
00:50:28,440 --> 00:50:32,000
Speaker 2: if you can find ways of actually reducing your dependence

901
00:50:32,080 --> 00:50:35,720
Speaker 2: on imported oil and gas, you increase your national security

902
00:50:36,400 --> 00:50:39,960
Speaker 2: so these are all coming together as forces that are

903
00:50:40,040 --> 00:50:42,960
Speaker 2: decarbonizing the economy and investors can actually make a lot

904
00:50:43,000 --> 00:50:43,799
Speaker 2: of money along the way.

905
00:50:44,080 --> 00:50:49,160
Speaker 1: Last decarbonization question. We all always focus on transportation because

906
00:50:49,200 --> 00:50:52,520
Speaker 1: it's so visible, but what is that fifteen percent of

907
00:50:52,640 --> 00:50:57,480
Speaker 1: our emissions and private cars are half of that, so really,

908
00:50:58,120 --> 00:51:01,280
Speaker 1: you know, even if everybody goes ev great at seven percent,

909
00:51:02,080 --> 00:51:04,879
Speaker 1: what about agriculture that seems to be a really big

910
00:51:05,000 --> 00:51:11,000
Speaker 1: source of carbon emissions and other problems that have environmental impacts.

911
00:51:11,680 --> 00:51:17,520
Speaker 2: Very super astute question. Agriculture is the most underappreciated aspect

912
00:51:18,120 --> 00:51:22,160
Speaker 2: of where we as a society emit lots and lots

913
00:51:22,160 --> 00:51:25,759
Speaker 2: of carbon and methane. So the question is how do

914
00:51:25,800 --> 00:51:31,800
Speaker 2: you decarbonize agriculture massively fragmented by definition fields for pasture

915
00:51:31,960 --> 00:51:35,560
Speaker 2: or using up land that otherwise would be for trees

916
00:51:35,719 --> 00:51:39,520
Speaker 2: or other carbon stores. A lot of people encourage eating

917
00:51:39,640 --> 00:51:42,880
Speaker 2: less beef. Frankly, I find that hard love beef, but

918
00:51:43,000 --> 00:51:45,960
Speaker 2: that is one piece. What we're finding is there are

919
00:51:46,040 --> 00:51:49,840
Speaker 2: ways of capturing the methane emissions from cows, for example,

920
00:51:50,719 --> 00:51:55,880
Speaker 2: and actually using those methane emissions to actually create energy elsewhere.

921
00:51:55,920 --> 00:51:58,959
Speaker 2: So we've invested, for example in a company that picks

922
00:51:59,040 --> 00:52:01,440
Speaker 2: up cow chips. All right, Long Island, we didn't have

923
00:52:01,520 --> 00:52:04,160
Speaker 2: cow chips, but that means cow dung. And you actually

924
00:52:04,200 --> 00:52:06,359
Speaker 2: figure out how do you actually take that cow dung,

925
00:52:06,840 --> 00:52:11,319
Speaker 2: pick it up basically a nuisance for the farmer, turn

926
00:52:11,360 --> 00:52:14,879
Speaker 2: it into a biomethane, and then ultimately you can use

927
00:52:14,920 --> 00:52:17,279
Speaker 2: that methane that otherwise just simply would have admitted you

928
00:52:17,440 --> 00:52:21,680
Speaker 2: burn it to create electricity, to create heat. That is

929
00:52:21,719 --> 00:52:24,359
Speaker 2: an example of the ways that we can decarbonize agriculture.

930
00:52:24,680 --> 00:52:28,080
Speaker 2: But you're absolutely right, agriculture is the trickiest part of

931
00:52:28,160 --> 00:52:29,919
Speaker 2: the global economy to decarbonize.

932
00:52:30,520 --> 00:52:34,000
Speaker 1: So let's jump to our favorite questions we ask all

933
00:52:34,080 --> 00:52:36,920
Speaker 1: our guests our speed rounds, and we'll get you out

934
00:52:36,920 --> 00:52:39,960
Speaker 1: of here in a couple of minutes. Starting with what's

935
00:52:40,040 --> 00:52:42,560
Speaker 1: keeping you entertained these days? What are you watching or

936
00:52:42,680 --> 00:52:46,080
Speaker 1: listening to, either on Netflix or podcasts or whatever.

937
00:52:47,160 --> 00:52:54,120
Speaker 2: So I am listening to Dune, the nineteen sixties novel

938
00:52:54,520 --> 00:52:57,880
Speaker 2: by Frank Herbert, because it's still one of my favorite books,

939
00:52:58,360 --> 00:53:01,040
Speaker 2: and Dune Emperor is coming out in just a couple

940
00:53:01,080 --> 00:53:01,400
Speaker 2: of weeks.

941
00:53:02,400 --> 00:53:04,200
Speaker 1: So I didn't know think of you as a sci

942
00:53:04,320 --> 00:53:04,719
Speaker 1: fi head.

943
00:53:04,840 --> 00:53:07,960
Speaker 2: Is that your I confess to a big science fiction

944
00:53:08,120 --> 00:53:09,759
Speaker 2: and fantasy enthusiasm.

945
00:53:10,360 --> 00:53:12,920
Speaker 1: Tell us about your mentors who helped shape your career.

946
00:53:14,040 --> 00:53:16,200
Speaker 2: I think my biggest mentors were Peter Fisher, who was

947
00:53:16,239 --> 00:53:19,040
Speaker 2: my boss at the US Treasury. Sue Wagner is one

948
00:53:19,080 --> 00:53:22,840
Speaker 2: of the founders of Blackrock, and Larry Fink has actually

949
00:53:22,840 --> 00:53:25,840
Speaker 2: played a pretty big role in kicking me around and

950
00:53:25,920 --> 00:53:26,320
Speaker 2: growing me.

951
00:53:27,360 --> 00:53:29,320
Speaker 1: Let's talk books. What are some of your favorites. What

952
00:53:29,360 --> 00:53:30,480
Speaker 1: are you reading right now?

953
00:53:32,160 --> 00:53:35,120
Speaker 2: Well, my favorite business book of all time is a

954
00:53:35,160 --> 00:53:39,040
Speaker 2: book called My Years with General Motors by Alfred Sloan.

955
00:53:39,480 --> 00:53:42,000
Speaker 2: He's the man who actually really built the modern General

956
00:53:42,040 --> 00:53:45,000
Speaker 2: Motors and actually really the modern global company. I'd recommend

957
00:53:45,040 --> 00:53:50,000
Speaker 2: reading that for anybody, anybody interested in business. I am

958
00:53:50,160 --> 00:53:55,239
Speaker 2: met reading Dune, and I have to say Pride and

959
00:53:55,320 --> 00:53:58,680
Speaker 2: Prejudice one of my favorites. Reread it during the pandemic.

960
00:53:59,040 --> 00:54:01,040
Speaker 2: Always great that, mister Darcy.

961
00:54:02,960 --> 00:54:06,120
Speaker 1: We're down to our final two questions. What sort of

962
00:54:06,200 --> 00:54:09,200
Speaker 1: advice would you give a recent college grad who is

963
00:54:09,400 --> 00:54:12,880
Speaker 1: interested in a career in either investing or finance.

964
00:54:13,880 --> 00:54:17,919
Speaker 2: Be curious about the world. Read the Economist, learn about

965
00:54:17,960 --> 00:54:20,719
Speaker 2: something bigger than the microtechnical thing you're being asked to

966
00:54:20,760 --> 00:54:23,520
Speaker 2: do long term. That pays off in having a broader mind,

967
00:54:23,680 --> 00:54:26,719
Speaker 2: because fundamentally, fans is nothing other than thinking about the

968
00:54:26,760 --> 00:54:28,400
Speaker 2: future and the cash flows in the future.

969
00:54:29,080 --> 00:54:31,600
Speaker 1: And our final question, what do you know about the

970
00:54:31,680 --> 00:54:35,080
Speaker 1: world of investing today you wish you knew thirty or

971
00:54:35,160 --> 00:54:37,760
Speaker 1: so years ago when you were first getting started.

972
00:54:38,360 --> 00:54:44,680
Speaker 2: Investing in public markets involves two separate mental moves. The

973
00:54:44,800 --> 00:54:48,160
Speaker 2: first is thinking about where ultimate long term value is

974
00:54:48,200 --> 00:54:51,239
Speaker 2: going to be created and then second thinking about who's

975
00:54:51,280 --> 00:54:54,440
Speaker 2: going to pay for it tomorrow, and those are very

976
00:54:54,520 --> 00:54:57,400
Speaker 2: different things. The first is really a private investing question.

977
00:54:58,160 --> 00:55:02,360
Speaker 2: The second is what makes great public investors great. And

978
00:55:03,520 --> 00:55:07,239
Speaker 2: understanding that distinction, I think actually is we talk often

979
00:55:07,280 --> 00:55:10,279
Speaker 2: in investments as if actually it's just the first one,

980
00:55:10,360 --> 00:55:12,600
Speaker 2: but the truth is that second one is actually what

981
00:55:12,800 --> 00:55:14,960
Speaker 2: drives a lot of portfolio returns when you get in

982
00:55:15,080 --> 00:55:17,920
Speaker 2: and out of security. Understanding that from the beginning, I

983
00:55:17,960 --> 00:55:19,480
Speaker 2: think that would have been helpful to understand better.

984
00:55:19,680 --> 00:55:23,480
Speaker 1: Huh, really really interesting. Thanks Mark for being so generous

985
00:55:23,520 --> 00:55:26,680
Speaker 1: with your time. We have been speaking with Mark Weedman.

986
00:55:26,800 --> 00:55:31,600
Speaker 1: He is Black Rocks head of Global Client Business. If

987
00:55:31,680 --> 00:55:34,520
Speaker 1: you enjoy this conversation, well check out any of the

988
00:55:34,600 --> 00:55:39,160
Speaker 1: five hundred plus discussions we've had over the past nearly

989
00:55:40,239 --> 00:55:44,920
Speaker 1: ten years. You can find those at iTunes, Spotify, YouTube,

990
00:55:45,120 --> 00:55:48,920
Speaker 1: wherever you find your favorite podcast, and be sure and

991
00:55:49,040 --> 00:55:53,239
Speaker 1: check out my new podcast, At the Money, short ten

992
00:55:53,320 --> 00:55:58,640
Speaker 1: minute conversations with experts about issues that matter for your money,

993
00:55:59,320 --> 00:56:02,640
Speaker 1: making it, spending it, and investing it. At the Money.

994
00:56:03,120 --> 00:56:05,839
Speaker 1: You can find it in your master's and business feed

995
00:56:06,640 --> 00:56:09,000
Speaker 1: I would be remiss if I did not thank our

996
00:56:09,160 --> 00:56:12,719
Speaker 1: crack team that helps put these conversations together each week.

997
00:56:12,840 --> 00:56:16,120
Speaker 1: Sarah Livesey is my audio engineer at Tika. Val Brunt

998
00:56:16,320 --> 00:56:20,600
Speaker 1: is my project manager. Sean Russo is my researcher. Anna

999
00:56:20,680 --> 00:56:24,200
Speaker 1: Luke is my producer. Sage Bauman is ahead of podcasts

1000
00:56:24,239 --> 00:56:27,920
Speaker 1: at Bloomberg and I'm Burrier Adults and you've been listening

1001
00:56:28,040 --> 00:56:30,840
Speaker 1: to Masters in Business on Bloomberg Radio.