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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in

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Speaker 1: Business with Barry Ritholts on Bloomberg Radio.

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Speaker 2: This week on the podcast Wow, this is another banger.

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Speaker 2: Strip yourself in Mike Pile, deputy head of black Rocks

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Speaker 2: Portfolio Management Group. They oversee about five trillion dollars in

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Speaker 2: client assets. Not only is its systematic and discretionary investment strategies,

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Speaker 2: but he also oversees the black Rock Investment Institute as

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Speaker 2: well as their hedge funds. You may not know Blackrock

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Speaker 2: globally is one of the top ten hedge fund over

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Speaker 2: portfolio managers about ninety four billion dollars. One little note,

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Speaker 2: we're recording this on Tuesday, April seventh. Supposedly something is

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Speaker 2: happening tonight eight o'clock. You'll know what happened by the

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Speaker 2: time you hear this.

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Speaker 3: We want.

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Speaker 2: We don't know if something terrible is happening or if

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Speaker 2: it's another Taco Tuesday, but we'll find out soon enough.

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Speaker 2: In the meantime, with no further ado, my conversation with

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Speaker 2: Mike Pyle, deputy head of black Rocks Portfolio Management Group.

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Speaker 2: Before we get into both your market and government experience,

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Speaker 2: let's let's take a look at your background. You graduate

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Speaker 2: summa cum laude and economics from Dartmouth, You get a

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Speaker 2: j d from Yale, and then a master's an LLM

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Speaker 2: from Cambridge.

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Speaker 3: What was the original career plan?

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Speaker 4: So I maybe go back before higher education. You know,

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Speaker 4: I'm from a little town in the Midwest and six

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Speaker 4: hundred people in the middle of Illinois, no stop whites

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Speaker 4: in the little town where I grew up. And you know,

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Speaker 4: I had a sense from a pretty early age that

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Speaker 4: I wanted to do something out beyond the horizon, help

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Speaker 4: pass the fields. And I was lucky enough when I

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Speaker 4: was in high school there was this competition sponsored by

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Speaker 4: the local community college called Running the US Economy, where

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Speaker 4: you could set monetary policy. You'd set government spending levels,

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Speaker 4: you'd set taxation rates, basically the big tools of monetary

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Speaker 4: and fiscal policy, and over a ten year period you'd

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Speaker 4: set those variables and you'd see what came out the

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Speaker 4: other side in terms of GDP growth, in terms of unemployment,

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Speaker 4: in terms of the stock market. And for me, I

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Speaker 4: had never really grappled with a more interesting set of

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Speaker 4: problems than that. When I was fourteen, fifteen, sixteen years

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Speaker 4: old and I didn't really have the words to express

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Speaker 4: what it is that would take me to but I

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Speaker 4: knew that problems at the heart of economic policy, what

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Speaker 4: that meant for ordinary people, what that meant for markets,

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Speaker 4: were the most fascinating things that ever encountered. And how

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Speaker 4: I wanted to spend my career.

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Speaker 2: Huh, And how you spent your career is moving back

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Speaker 2: and forth between government and the private sector. You have

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Speaker 2: two instants at Blackrock, including the current one. You were

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Speaker 2: in the Obama administration, you were in the Biden administration.

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Speaker 3: How do you.

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Speaker 2: Shift back and forth between these two worlds? And how

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Speaker 2: does working in government affect how you perceive investing risk

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Speaker 2: policy from the private side.

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Speaker 4: Yeah, so I'd say I try to view my time

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Speaker 4: in government and my time as an investor in a

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Speaker 4: black Rock is really two sides of the same coin.

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Speaker 4: You know, the job in government, at least as I

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Speaker 4: understood it, was to whether through economic policy or national

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Speaker 4: security policy, had the pleasure to work on both of

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Speaker 4: those through the years, you know, provide a predictable, stable

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Speaker 4: foundation for prosperity for the US and hopefully the world beyond,

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Speaker 4: and recognize that the job in government is to provide

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Speaker 4: that stable foundations, So businesses, so families, so individuals can

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Speaker 4: you know, live their lives, make their choices economically, can

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Speaker 4: take risks in the economy to build businesses, expand businesses,

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Speaker 4: invest and grow knowing that there's some basic stability and

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Speaker 4: predictability that they get from government. And so for me,

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Speaker 4: like I said, you know that that time in government

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Speaker 4: was one side of that coin. That time as an

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Speaker 4: investor is the other side of that coin. How do

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Speaker 4: you try to take that output from policymakers and make

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Speaker 4: sense of the world, makes sense of the economy, makes

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Speaker 4: sense of markets, and then make sound choices for clients.

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Speaker 2: We're going to talk a little later about the state

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Speaker 2: of government policy. I want to just stick with your

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Speaker 2: background before we get into the nitty gritty. So you

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Speaker 2: are at the Treasury and the White House from two

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Speaker 2: thousand and nine to twenty thirteen, really the midst of

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Speaker 2: the Great Financial Crisis recovery. Tell us about that experience.

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Speaker 3: What was that like?

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Speaker 4: So it's a pretty extraordinary thing to be a part of,

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Speaker 4: had a chance to learn from, be seasoned by, you know,

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Speaker 4: a set of extraordinary and my judgment, policymakers, whether that

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Speaker 4: was Secuary Geitner, Liil Brainer, Peter Orzag, Jason Furman, others

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Speaker 4: folks that early in my career, you know, I just

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Speaker 4: learned a lot about what it meant to make sound

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Speaker 4: policy choices, consider policy choices in the midst of crisis.

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Speaker 2: You know.

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Speaker 4: I think one of the things I also took away

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Speaker 4: from that experience is this recognition that you know, there's

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Speaker 4: there's kind of there's no other room that you know,

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Speaker 4: these are very accomplished policy makers making choices with imperfect information,

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Speaker 4: with not enough time, with incredibly high stakes, and there's

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Speaker 4: no other room where the hyper confident people who know

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Speaker 4: everything and have the luxury of time are. There's just

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Speaker 4: the human being sitting in front of you, and you've

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Speaker 4: got to do your role to support them in the

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Speaker 4: way you can. And you know, for me, that was

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Speaker 4: a very you know, empowering experience or recognition that from

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Speaker 4: an early stage in my career I needed to take responsibility.

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Speaker 4: I needed to offer my best day in and day out, because,

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Speaker 4: like I said, there's no other room with the hyper

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Speaker 4: confident people. There's just the role you get to play

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Speaker 4: with people acting with not enough time and not enough

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Speaker 4: information to make high consequence judgments.

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Speaker 2: So let's talk about those judgments. What do you think

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Speaker 2: policymakers got right and what was the biggest mistake would

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Speaker 2: we get wrong as a nation?

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Speaker 4: So, I mean, I think that the I think one

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Speaker 4: of the principal lessons coming out of the Global Financial

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Speaker 4: Crisis is that in the face of a large economics

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Speaker 4: a shock that impacts the balance sheets of households and businesses,

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Speaker 4: the government needs to act speedily and with size to

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Speaker 4: prevent the labor market damage, the economic damage from being

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Speaker 4: an overhang that lasts for a long time. And I

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Speaker 4: think one of the things that a lot of policymakers

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Speaker 4: concluded coming out of the GFC is we just didn't

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Speaker 4: do enough quickly enough, and as a result, we had

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Speaker 4: a very slow recovery, you know, that didn't last just

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Speaker 4: a couple of years, but ten twelve years, and had

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Speaker 4: labor market damage that lasted for longer than it needed

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Speaker 4: to because we didn't ask with the force and speed

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Speaker 4: that we needed to.

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Speaker 2: So when you say we didn't do enough, the FED

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Speaker 2: was at zero, every type of credit, alphabet, soup of

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Speaker 2: organizational government entities came into effect. Are you referring to

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Speaker 2: the fiscal side, Because it felt like the fiscal stimulus

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Speaker 2: was very, very modest. About a third was temporary tax cuts,

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Speaker 2: a third was temporary extension of unemployment shovel ready stuff

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Speaker 2: was one hundred, one hundred and eighty billion dollars. It

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Speaker 2: almost seems like we overcompensated in the start of the

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Speaker 2: pandemic and went huge to make up for that. But

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Speaker 2: I'm assuming you're talking about a very underfunded fiscal stimulus.

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Speaker 4: I think that's principle A. Yes, you know what I mean.

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Speaker 4: I mean, I think one thing I would you know

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Speaker 4: highlight here is in some ways the United States only

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Speaker 4: got out of the dol drums post the GFC during

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Speaker 4: the first Trump administration. And you know President Trump and

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Speaker 4: that that Republican Congress passed that the twenty seventeen tax bills. Now,

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Speaker 4: coming from where I come from, I wouldn't necessarily have

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Speaker 4: signed off on every particular of that bill. But I

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Speaker 4: think what you saw was fiscal stimulus at size going

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Speaker 4: through the economy as a result of those uh as,

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Speaker 4: there's all that tax bill, and as a result, an

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Speaker 4: economy that long last began to see full employment, began

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Speaker 4: to see that higher velocity, began to see really the

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Speaker 4: US get out of those post GFC doldrums. Again, not

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Speaker 4: how I would have necessarily designed the fiscal stimulus myself,

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Speaker 4: but I think the fact that that's really perhaps the

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Speaker 4: moment when we came out of the Droit doldrums highlights

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Speaker 4: that that fiscal lever was one that perhaps we should

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Speaker 4: have pulled sooner and at greater size earlier post the crisis.

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Speaker 2: Really interesting. So let's talk about some of your other

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Speaker 2: roles within government.

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Speaker 3: You were a law clerk from Merrick Garland. That's fascinating.

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Speaker 3: Tell us about that experience.

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Speaker 4: Yes, so Judge Garland was my very first boss in Washington,

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Speaker 4: you know, in some ways the perfect way to begin

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Speaker 4: a career, somebody that I continue to regard as the

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Speaker 4: model of public servant. I say, listen, I learned three

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Speaker 4: things from the judge. I learned what it meant to

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Speaker 4: love the law. I learned that I didn't love the

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Speaker 4: law the way the judge did. And that three, I

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Speaker 4: needed to find something that I loved as much as

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Speaker 4: Judge Garland loved being a lawyer being a judge. And

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Speaker 4: so that brought me back to what I'd done talking

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Speaker 4: about a moment ago in high school when you know,

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Speaker 4: I really fell in love with economics, economic policy, the

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Speaker 4: impact on people and markets, what I'd studied as an

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Speaker 4: undergrad and a graduate school, and so what I really

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Speaker 4: took away from that experience is I wanted there to

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Speaker 4: be a strong public service component to what I did,

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Speaker 4: and also that I needed to put myself to work

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Speaker 4: in a space that I really loved and felt passion for,

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Speaker 4: and that was the space of economics, domestic economic policy,

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Speaker 4: international economic policy, and working to make the US and

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Speaker 4: the world more prosperous place.

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Speaker 2: So you were the President's personal envoy to groups like

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Speaker 2: the G seven, the G twenty, Apex summits. When you

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Speaker 2: look around the world and see US channel relations, the

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Speaker 2: Russia's war in the Ukraine, Israel and America's war with

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Speaker 2: Imran Ai and just energy security, trade and investment in tariffs,

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Speaker 2: all these things, it seems like it's just an overwhelming

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Speaker 2: amount of things taking place. How effective are these global organizations,

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Speaker 2: what do they actually accomplish? It just seems like the

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Speaker 2: fire hose is so overwhelming it's impossible to know where

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Speaker 2: to even begin.

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Speaker 4: Yeah, So you know, I work for two years as

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Speaker 4: President Biden's deputy National Security Advisor. I think President Biden

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Speaker 4: started from the place of believing that, you know, the

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Speaker 4: I in the United States acts with greatest impact in

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Speaker 4: the world when it acts alongside our close to stallies

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Speaker 4: and partners. And I think that's part of the reason

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Speaker 4: why the G seven during the years I was serving,

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Speaker 4: was perhaps at the height of its impact and influence

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Speaker 4: across time. I mean, I think of two things that

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Speaker 4: really highlight this. You know, one was after a Russia's

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Speaker 4: invasion of Ukraine, really acting with force with one voice,

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Speaker 4: not just as the United States, but as a set

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Speaker 4: of allies, to put a historic set of sanctions on Russia,

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Speaker 4: to put historic economic pressure on Russia, and to do

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Speaker 4: that in a way that made sure that it wasn't

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Speaker 4: just the United States acting, but all of our allies

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Speaker 4: and partners together around the world, acting in concert, delivering

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Speaker 4: a stronger force a policy than the United States, for

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Speaker 4: all of its power and might, could have delivered by itself. Similarly,

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Speaker 4: I think with respect to you know, a kind of

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Speaker 4: different type of problem, you know, thinking about our the

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Speaker 4: United States competition with China, like in domains such as

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Speaker 4: technology and artificial intelligence, the type of thing that's very

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Speaker 4: front of mine today. You know, a lot of our

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Speaker 4: European allies came to that with with more skepticism. They

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Speaker 4: have a different perspective on their relations with China than

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Speaker 4: you know, we had in the United States, had both

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Speaker 4: across frankly, the Trump administration and the Bide administration. And

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Speaker 4: it was you know, the hard diplomatic work day in,

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Speaker 4: day out, week in week out, you know, persuading skeptical

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Speaker 4: allies to join us in some of the policy steps

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Speaker 4: that we thought were important to protect our technologies, to

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Speaker 4: protect the national security applications that they offered, to protect

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Speaker 4: our economic well being against that competitive threat, and bringing

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Speaker 4: those allies along through. Like I said, the hard work

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Speaker 4: of diplomacy, through the hard work of persuasion day and

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Speaker 4: day out, week and week out, I think was ultimately

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Speaker 4: quite fruitful. And you know something that was an important

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Speaker 4: part of how I spent those years.

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Speaker 2: So, given all that policy experience and being in the

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Speaker 2: room where it happens, how does that affect how you

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Speaker 2: look at markets and investing? Did your government experience affect

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Speaker 2: how you think about risk, uncertainty and various opportunities?

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Speaker 3: Yeah?

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Speaker 4: So, I mean I would say a couple of things there,

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Speaker 4: you know. One, you know, I do think that investing

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Speaker 4: and policy making are different exercises and need to be

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Speaker 4: kept separate. Policy Making is an exercise of attempting to

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Speaker 4: make a world as you want it to be, or

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Speaker 4: at least as the people's elected representatives want it to be.

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Speaker 4: Investing as exercise of taking the world as it is,

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Speaker 4: uh and making sound judgments about how to invest client

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Speaker 4: capital that is their capital, that is their savings on

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Speaker 4: their behalf. UH. So it's to help them achieve what

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Speaker 4: they've set out to achieve. And so to me, the

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Speaker 4: framework I've used to think about investing is, you know,

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Speaker 4: kind of comes back to some of the blocking and

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Speaker 4: tackling of of of active management. I think about, you know,

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Speaker 4: my my mentor at black Rock, Ron con uh one

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Speaker 4: of the authors of the literally the Bible of quantitative

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Speaker 4: investing in the fundamental of law of active management, and

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Speaker 4: you know, it's really all about making forecasts that are

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Speaker 4: right about the world, having a wide set of those

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Speaker 4: forecasts so you can build a diversified portfolio, and then

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Speaker 4: translating those insights efficiently into portfolios through the assets you own.

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Speaker 4: So again, for me, these these these these these exercises

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Speaker 4: overlapped to some degree, but I really try to keep

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Speaker 4: the distinct because one's about the world as you might

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Speaker 4: hope it to be, and the other is about the

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Speaker 4: world as it is. And being sure that you don't

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Speaker 4: confuse those two things is really part and parcel of

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Speaker 4: what it means. I think to do you know the job,

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Speaker 4: you're meant to do.

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Speaker 2: It each that I like that framework between the two.

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Speaker 2: Coming up, we continue our conversation with Mike Pile, deputy

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Speaker 2: head at black Rocks PMG, discussing the Portfolio Management Group.

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Speaker 3: I'm Barry Ritholts.

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Speaker 2: You're listening to Masters in Business on Bloomberg Radio.

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Speaker 3: I'm Barry D Halts.

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Speaker 2: You're listening to Masters in Business on Bloomberg Radio. My

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Speaker 2: extra special guest today is Mike Pile. He is the

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Speaker 2: deputy head of black Rocks Portfolio Management Group. The group

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Speaker 2: overseas ninety four billion dollars in hedge fund assets and

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Speaker 2: another three hundred and ninety four billion in systematic investments.

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Speaker 2: So let's talk a little bit about the Portfolio management Group.

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Speaker 2: So let's talk a little bit about the Portfolio Management Group.

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Speaker 3: Tell us about the various strategies you oversee. What does

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Speaker 3: the deputy head of PMG actually do Yeah.

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Speaker 4: So the Portfolio Management Group, as you talked about, is

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Speaker 4: really the organization within Blackrock that oversees our active investing

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Speaker 4: strategies in public markets. You know, been entrusted with over

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Speaker 4: just about five trillion dollars and client assets to manage

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Speaker 4: through those strategies, but really spans asset classes, fixed income, equities,

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Speaker 4: multi assets, span styles as you say, both discretionary and systematic,

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Speaker 4: spans both long only as well as long short, hedge

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Speaker 4: fund and liquid alternative strategies. So really it's it's it's

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Speaker 4: that full umbrella of active strategies in public markets. You know,

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Speaker 4: in terms of what do I do well, I directly

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Speaker 4: oversee what we do on the hedge funds and look

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Speaker 4: at alternative side, directly oversee our efforts and fundamental equities,

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Speaker 4: and directly oversee our internal think tank, the black Rock

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Speaker 4: Investment Institute. But what does that mean, you know day

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Speaker 4: to day? You know, I'd say it's a mix, you know,

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Speaker 4: with some share my time, I am working with our

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Speaker 4: portfolio managers, working with our lead researchers to try to

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Speaker 4: offer what I can to help them frame what's happening

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Speaker 4: in the world to help them. As we talked about

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Speaker 4: understand the world as it is and what that might

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Speaker 4: meet from markets and help them think about the choices

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Speaker 4: they're making in portfolios on behalf of clients. But you know,

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Speaker 4: really the lion share of my time is about making sure,

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Speaker 4: you know, we've got the right portfolio managers and teams,

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Speaker 4: the right strategies, the right investment process and research process

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Speaker 4: sitting beneath those teams so that we can deliver for

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Speaker 4: clients and a lot of respects. It's, you know, about

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Speaker 4: a lot more about being the GM or the coach

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Speaker 4: than being the player.

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Speaker 2: Uh.

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Speaker 4: And I think that's a it's a it's a pretty

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Speaker 4: exciting mix of things that I get to do as

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Speaker 4: a result.

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Speaker 2: So I think everybody understands what hedge funds are, what

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Speaker 2: are liquid alternatives?

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Speaker 3: Explain that a little bit.

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Speaker 4: Yeah, sure, So maybe to take a take a step back,

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Speaker 4: you know, if I think about the challenge that investors

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Speaker 4: face today, and this is true whether we're talking about

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Speaker 4: the most sophisticated large asset owners on the planet or

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Speaker 4: you know, mom and pop investors saving for their retirement,

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Speaker 4: it's where can they find a versification?

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Speaker 2: You know?

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Speaker 4: A Obviously one of the core precepts of investing is

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Speaker 4: the free lunch of diversification, the value of diversification, and

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Speaker 4: yet uh, it is increasingly hard to find out there.

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Speaker 4: And I think that's true in a couple of ways.

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Speaker 4: You know. One, you know, traditionally we think about government

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Speaker 4: bonds being an important hedge against stocks in a portfolio.

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Speaker 4: When stocks go down, bonds go up in value. You know,

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Speaker 4: that's not what we saw in twenty twenty two, that's

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Speaker 4: not what we saw in March of this year. And

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Speaker 4: so finding tools that can help diversify portfolios in a

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Speaker 4: world where bonds aren't perhaps serving that role as well

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Speaker 4: as they have at different points in history. And secondly,

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Speaker 4: on the equity side, you know, feacing markets that are

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Speaker 4: increasingly concentrated. You know, we see what a large share

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Speaker 4: of indices, you know, those big megacap tech names are today.

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Speaker 4: That means that when you own the index, you're owning

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Speaker 4: a less diversified equity portfolio than has historically been the case.

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Speaker 4: So what does that mean about where liquid alternatives step in?

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Speaker 4: You know, I think one of the ways in which

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Speaker 4: investors can find diversification is by having exposures that are

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Speaker 4: neutral to broad markets, neutral to those beta in stocks

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Speaker 4: and bonds that drive the line and share of portfolios,

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Speaker 4: and being neutral to the markets means having strategies that

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Speaker 4: can be long and short in an asset class that

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Speaker 4: can be long, individual stocks can be short individual stocks

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Speaker 4: the same on the bond side, in order to generate alpha,

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Speaker 4: an investment return that is independent of the movements in

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Speaker 4: the broad markets. Liquid alternatives are our vehicles that have

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Speaker 4: exactly those types of strategies. They're very similar in this

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Speaker 4: respect to the types of strategies that we deploy in

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Speaker 4: our direct hedge funds and offer similar types of uncorrelated return.

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Speaker 4: Now an important difference between something like a direct hedge

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Speaker 4: fund and a liquid alternative. These are different types of

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Speaker 4: vehicles meant for different types of investors. They offer daily

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Speaker 4: liquidity as opposed to hedge funds, which have different liquidity terms.

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Speaker 4: That means, you know, running strategies that at their core

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Speaker 4: are the same across liquid alts and hedge funds, but

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Speaker 4: are designed to be in daily liquid vehicles that are

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Speaker 4: designed to be run with much less leverage to recognize

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Speaker 4: the types of clients and the types of needs that

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Speaker 4: those clients have, which are for greater diversification but also

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Speaker 4: liquidity transparency availability that is different from an institutional hedge

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Speaker 4: fund clients help.

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Speaker 2: So from your seat, what sort of trends are you observing,

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Speaker 2: either in hedge funds or liquid alts. What kind of

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Speaker 2: strategies are resonating with investors?

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Speaker 4: Yeah, so I think that exactly as we were talking about,

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Speaker 4: what's resonating is the availability of diversification, of diversifying the diversifiers.

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Speaker 2: Meaning beyond just sixty forty, just beyond just stocks and

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Speaker 2: bonds exactly.

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Speaker 4: And I think you know, some war that my colleagues,

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Speaker 4: the Blackrock Investment Institute, did you know, highlighted the type

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Speaker 4: of world that we're investing in now, and they basically

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Speaker 4: made the point which goes to why we don't see

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Speaker 4: the diversification across stocks and bonds we have historically that

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Speaker 4: you know, some of the macroeconomic and the macro underpinnings

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Speaker 4: of markets have become unmoored in recent years. It is

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Speaker 4: a less predictable framework, whether it's around trends on growth

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Speaker 4: of inflation, trends around monetary and fiscal policy frameworks, the

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Speaker 4: geopolitical environment and the like. And as a result, hedge

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Speaker 4: funds and liquid alternative strategies provide tools that allow managers

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Speaker 4: to navigate that environment either you know, like with my

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Speaker 4: colleagues on the systematic side, you know, running strategies that

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Speaker 4: are not just market neutral, but neutral to broad market

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Speaker 4: factors like momentum, like low volatility, like some of these

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Speaker 4: other kind of well known factor exposures, and really focusing

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Speaker 4: on you know, true uncorrelated alpha and also macroeconomic strategies,

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Speaker 4: macro strategies where skilled managers are navigating a much more

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Speaker 4: complicated macrotomic environment to deliver alpha through that skillful navigation.

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Speaker 4: Those from our research are the two types of strategies

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Speaker 4: that are perhaps best poised to offer that different type

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Speaker 4: of return, that different type of diversification. And that's what

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Speaker 4: we're seeing not just in the firmat across the industry.

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Speaker 4: The places that are attracting client interest are systematic strategies,

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Speaker 4: are macro strategies, and we think precisely because they best

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Speaker 4: correspond to the opportunity set that markets are offering us.

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Speaker 2: So let's talk a little bit about that systematic approach.

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Speaker 2: That team began in nineteen eighty five with a grand

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Speaker 2: total of three investment signals, used more than a thousand

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Speaker 2: investment signals I'm kind of fascinated. This came along with

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Speaker 2: the BGI acquisition in nine which everybody room members for

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Speaker 2: I shares, but this is still almost foe hundred billion OS.

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Speaker 2: This is a substantial chunk of capital. Tell us a

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Speaker 2: little bit about how the systematic team thinks about adding

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Speaker 2: a signal, how they integrate all these various signals, And

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Speaker 2: I'm legally obligated to ask, how is AI contributing to

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Speaker 2: these signals?

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Speaker 4: Yeah, I mean so, I'd take a couple of things.

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Speaker 4: I mean one, you know, this is a team that

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Speaker 4: really is at the forefront of pulling in a bunch,

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Speaker 4: you know, taking advantage of the fact that the availability

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Speaker 4: of data in the world, structured data, unstructured data, you know,

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Speaker 4: is step wise different than it has been ever before

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Speaker 4: in history. And the techniques available to analyze, process, identify consistent,

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Speaker 4: valuable investment signals from that data is also given expanded

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Speaker 4: compute given the changes in techniques, including around generative and

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Speaker 4: agentic AI, you know, to make sense of that data

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Speaker 4: and bring order to it. You know, this is you know,

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Speaker 4: really at the heart of what our systematic researchers do

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Speaker 4: in building signals and portfolios. I sort of add a

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Speaker 4: couple of additional points. I mean one, building on what

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Speaker 4: you said, they've been at this for now forty one years,

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Speaker 4: so you know they are not new to using data

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Speaker 4: using tools of AI machine learning to generate you know,

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Speaker 4: alpha for clients. This is something they've been at really

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Speaker 4: defining the frontier for four decades. You know, they were

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Speaker 4: doing natural language processing more than ten years ago. They

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Speaker 4: were doing portfolio optimization with machine learning more than ten

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Speaker 4: years ago. This is not a Johnny Come Lately story

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Speaker 4: of the moment. This is a story of a crude

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Speaker 4: excellence and expertise built over decades. The everything I'd say,

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Speaker 4: and maybe it's funny to talk about it with respect

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Speaker 4: to a quant team, to a you know, a kind

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Speaker 4: of hardcore systematic team, but I think one of the

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Speaker 4: things that really sets it apart, you know, within Blackrock

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Speaker 4: within the industry is, you know, the culture that they've built.

437
00:27:12,200 --> 00:27:14,720
Speaker 4: This is you know, a core set of investors and

438
00:27:14,760 --> 00:27:18,040
Speaker 4: researchers that, as you say, have been together for decades,

439
00:27:18,080 --> 00:27:22,080
Speaker 4: that have been together in many cases since before BGI

440
00:27:22,280 --> 00:27:26,480
Speaker 4: became a part of Blackrock became Blackrock Systematic, and so

441
00:27:26,600 --> 00:27:29,879
Speaker 4: there's that kind of continuity, that legacy across time, and

442
00:27:29,960 --> 00:27:35,240
Speaker 4: at the same time, they're also every year adding young professionals,

443
00:27:35,359 --> 00:27:39,640
Speaker 4: young researchers fresh off their PhD, with new perspectives, new

444
00:27:39,680 --> 00:27:42,400
Speaker 4: innovative techniques, new ways of looking at the data, new

445
00:27:42,400 --> 00:27:44,720
Speaker 4: ways of looking at AI. And I think that really

446
00:27:44,760 --> 00:27:50,960
Speaker 4: special balance between experience, continuity, depth of knowledge built over

447
00:27:51,040 --> 00:27:55,880
Speaker 4: decades with new voices, new perspectives, new ways of solving

448
00:27:55,960 --> 00:28:00,520
Speaker 4: hard computational and hard data problems. That's what's pretty special

449
00:28:00,560 --> 00:28:01,920
Speaker 4: about the culture they built as well.

450
00:28:02,400 --> 00:28:06,679
Speaker 2: So you guys sit very much at an intersection between

451
00:28:06,760 --> 00:28:12,720
Speaker 2: quantitative and fundamental data. Become quantitative and fundamental investors. When

452
00:28:12,720 --> 00:28:19,320
Speaker 2: you're thinking about systematic signals, how do you manage when

453
00:28:20,240 --> 00:28:25,159
Speaker 2: what comes out of out of the data conflicts with

454
00:28:26,119 --> 00:28:29,320
Speaker 2: the fundamental narrative that seems to be driving most of

455
00:28:29,359 --> 00:28:30,320
Speaker 2: the conversations.

456
00:28:31,480 --> 00:28:34,280
Speaker 3: How do you contextualize that? Who wins that debate?

457
00:28:36,000 --> 00:28:38,680
Speaker 4: I think it's a great question. I'd say a few observations.

458
00:28:38,720 --> 00:28:44,000
Speaker 4: I mean, one, you know, Blackrock, we believe in individual

459
00:28:44,040 --> 00:28:47,880
Speaker 4: pms and teams that are empowered to make you know

460
00:28:48,080 --> 00:28:50,840
Speaker 4: judgments that they are accountable for, and so it may

461
00:28:50,880 --> 00:28:54,280
Speaker 4: be that our systematic investors are coming to a different

462
00:28:54,360 --> 00:28:57,760
Speaker 4: view on markets on a range of stocks than our

463
00:28:57,800 --> 00:29:01,560
Speaker 4: fundamental teams are. That's okay. You know, we believe in

464
00:29:01,680 --> 00:29:04,760
Speaker 4: empowered like I said, portfolio managers who are making the

465
00:29:04,800 --> 00:29:08,320
Speaker 4: best decisions they can for our clients, but are armed

466
00:29:08,360 --> 00:29:11,320
Speaker 4: with a common set of tools to come to judgments.

467
00:29:11,760 --> 00:29:14,800
Speaker 4: But I think, to abstract away from that further, i'd say,

468
00:29:15,320 --> 00:29:18,040
Speaker 4: you know, I really do think that in some pretty

469
00:29:18,080 --> 00:29:22,960
Speaker 4: important ways, what systematic investors do is just a different

470
00:29:23,160 --> 00:29:26,479
Speaker 4: kind of thing altogether from what fundamental investors do. If

471
00:29:26,480 --> 00:29:30,040
Speaker 4: I think about the work that our fundamental investors do, it's,

472
00:29:30,280 --> 00:29:35,600
Speaker 4: you know, really harnessing all potential sources of insight to

473
00:29:35,800 --> 00:29:41,440
Speaker 4: go as deep as humanly possible, as technologically possible with

474
00:29:41,480 --> 00:29:45,520
Speaker 4: respect to understanding an individual company, an individual asset, and

475
00:29:45,600 --> 00:29:48,840
Speaker 4: its likelihood of outperforming or underperforming the market in the

476
00:29:48,920 --> 00:29:53,760
Speaker 4: years ahead. That's different than the type of I think

477
00:29:53,800 --> 00:29:57,440
Speaker 4: insight that our systematic investors tend to kind of think about.

478
00:29:58,280 --> 00:30:01,960
Speaker 4: They think about sort of what they call high breadth insights,

479
00:30:02,240 --> 00:30:06,960
Speaker 4: so insights that you know, basically apply to a wide

480
00:30:07,040 --> 00:30:09,640
Speaker 4: range of stocks three hundred, four hundred and five hundred stocks.

481
00:30:09,760 --> 00:30:11,960
Speaker 4: You know, we found an insight that we think on

482
00:30:12,120 --> 00:30:15,760
Speaker 4: balance over time across the universe of many hundreds of

483
00:30:15,760 --> 00:30:19,920
Speaker 4: stocks is going to outperform. That's not about deep research

484
00:30:20,360 --> 00:30:22,920
Speaker 4: in one company and coming to a highly convicted view

485
00:30:22,960 --> 00:30:25,920
Speaker 4: on one company. That's coming to a view about what

486
00:30:26,080 --> 00:30:28,680
Speaker 4: is statistically likely to be the case across the full

487
00:30:28,800 --> 00:30:32,280
Speaker 4: universe of stocks on balance across time. Now, where do

488
00:30:32,360 --> 00:30:34,719
Speaker 4: I think these things can be complementary to one another?

489
00:30:35,080 --> 00:30:37,200
Speaker 4: You know? One I would say is, you know, these

490
00:30:37,200 --> 00:30:40,480
Speaker 4: are just kind of pretty different sources of insight. And

491
00:30:40,520 --> 00:30:43,440
Speaker 4: again we've talked about diversification. You know, putting yourself in

492
00:30:43,480 --> 00:30:46,320
Speaker 4: a place to put different types of insights into a

493
00:30:46,360 --> 00:30:50,280
Speaker 4: single portfolio can be additive, can be diversifying, can mean

494
00:30:50,280 --> 00:30:53,960
Speaker 4: that the alpha that you're generating is more diversified and resilient.

495
00:30:54,360 --> 00:30:56,680
Speaker 4: I'd say another thing, and this is something we're spending

496
00:30:56,680 --> 00:30:59,680
Speaker 4: a lot of time on with our fundamental teams by

497
00:31:00,360 --> 00:31:05,320
Speaker 4: virtue of what systematic investors do insights that apply across

498
00:31:05,320 --> 00:31:09,160
Speaker 4: many hundreds of stocks, packaging as you talked about many hundreds,

499
00:31:09,160 --> 00:31:12,800
Speaker 4: if not a thousand, types of signals into one portfolio.

500
00:31:13,160 --> 00:31:15,880
Speaker 4: They think a lot about portfolio construction. They think a

501
00:31:15,920 --> 00:31:19,440
Speaker 4: lot about how do I take those different insights and

502
00:31:19,600 --> 00:31:22,080
Speaker 4: size them versus one another to come up with a

503
00:31:22,120 --> 00:31:26,000
Speaker 4: portfolio that is optimized to achieve client results. I think

504
00:31:26,040 --> 00:31:29,560
Speaker 4: that taking some of those lessons of portfolio construction into

505
00:31:29,600 --> 00:31:31,600
Speaker 4: the fundamental realm with a set of investors that, at

506
00:31:31,600 --> 00:31:33,680
Speaker 4: the end of the day, I think unbalanced view themselves

507
00:31:33,720 --> 00:31:38,280
Speaker 4: of having conviction about companies more than portfolios and having

508
00:31:38,280 --> 00:31:41,320
Speaker 4: them kind of take some of those portfolio optimization frames

509
00:31:41,320 --> 00:31:43,400
Speaker 4: of mind and apply it to how they build portfolios

510
00:31:43,440 --> 00:31:45,479
Speaker 4: on the fundamental side. There, I think is also a

511
00:31:45,520 --> 00:31:47,880
Speaker 4: real source of complementarity and something we're spending a lot

512
00:31:47,880 --> 00:31:49,320
Speaker 4: of time on in PMG.

513
00:31:50,680 --> 00:31:55,479
Speaker 2: And the black Rock Investment Institute also sits under your umbrella.

514
00:31:56,120 --> 00:32:00,360
Speaker 2: Tell us about what sort of research they produce, Who

515
00:32:00,440 --> 00:32:03,480
Speaker 2: consumes the output of this? Is it internal? Is it external?

516
00:32:03,560 --> 00:32:05,840
Speaker 3: Is it both? Give us a little color on the

517
00:32:05,880 --> 00:32:08,160
Speaker 3: Blackrock Investment Institute.

518
00:32:08,360 --> 00:32:12,560
Speaker 4: Yeah, I mean, it's a really powerful tool at Blackrock.

519
00:32:12,600 --> 00:32:15,720
Speaker 4: I mean I think maybe to take a step back,

520
00:32:15,760 --> 00:32:17,640
Speaker 4: as I've been doing a couple times in this conversation,

521
00:32:18,240 --> 00:32:21,400
Speaker 4: you know, I think one of our observations about the

522
00:32:21,440 --> 00:32:24,440
Speaker 4: asset management industry, the hedge fund industry over the last

523
00:32:24,480 --> 00:32:28,320
Speaker 4: ten or fifteen years is that ten or fifteen years ago,

524
00:32:29,080 --> 00:32:33,960
Speaker 4: people viewed hedge fund alpha alpha more broadly, perhaps as

525
00:32:34,080 --> 00:32:39,560
Speaker 4: the province of small, niche players who understood some corner

526
00:32:39,560 --> 00:32:42,720
Speaker 4: of the market deeper and better than anybody else. I

527
00:32:42,760 --> 00:32:45,520
Speaker 4: think ten or fifteen years on, I think we've come

528
00:32:45,560 --> 00:32:50,800
Speaker 4: to see that alpha is more the province of scale.

529
00:32:50,880 --> 00:32:53,040
Speaker 4: This is the story of the rise of the multi

530
00:32:53,080 --> 00:32:56,200
Speaker 4: strategy hedge funds of the Citadel's millenniums. But we think

531
00:32:56,240 --> 00:32:58,680
Speaker 4: it's also true of the asset management industry at large

532
00:32:58,680 --> 00:33:01,239
Speaker 4: that there are a lot of benefits of scale that

533
00:33:01,360 --> 00:33:05,080
Speaker 4: come from you know, insight that come from risk management,

534
00:33:05,160 --> 00:33:08,520
Speaker 4: that come from trading, and liquidity that come from operational backbone.

535
00:33:08,680 --> 00:33:10,800
Speaker 4: And you know, a big piece of that is something

536
00:33:10,880 --> 00:33:14,280
Speaker 4: like the Blackrock Investment Institute that's able to you know,

537
00:33:14,480 --> 00:33:17,480
Speaker 4: really dedicate itself to the question of how do we

538
00:33:18,480 --> 00:33:22,920
Speaker 4: research and source valuable insight across a full platform and

539
00:33:22,960 --> 00:33:25,520
Speaker 4: deliver that to our portfolio managers. And so the purpose

540
00:33:25,560 --> 00:33:29,080
Speaker 4: of the Blackrock Investment Ensuit is one to inform those

541
00:33:29,520 --> 00:33:34,160
Speaker 4: helpha research discussions, to really inform and drive the investment

542
00:33:34,160 --> 00:33:37,560
Speaker 4: debate within the firm, but then also to you know,

543
00:33:37,640 --> 00:33:40,000
Speaker 4: open up the curtain and let our clients see and

544
00:33:40,080 --> 00:33:43,680
Speaker 4: consume a lot of the research that our portfolio managers

545
00:33:43,720 --> 00:33:46,600
Speaker 4: are using day in and day out to inform their

546
00:33:46,640 --> 00:33:50,680
Speaker 4: own thinking, their own investment decision making. So to answer

547
00:33:50,720 --> 00:33:53,720
Speaker 4: your question, it's a little both, and it's about driving

548
00:33:53,760 --> 00:33:57,160
Speaker 4: the investment debate, driving the alpha discussion within the firm,

549
00:33:57,400 --> 00:34:00,560
Speaker 4: but then saying we've benefited from this, we want our

550
00:34:00,600 --> 00:34:04,240
Speaker 4: clients to benefit from it too, and let's produce work

551
00:34:04,280 --> 00:34:07,080
Speaker 4: that based on what we use internally allows our clients

552
00:34:07,120 --> 00:34:09,600
Speaker 4: to enjoy the fruits of that research as well.

553
00:34:10,160 --> 00:34:11,320
Speaker 3: Really interesting.

554
00:34:11,760 --> 00:34:15,759
Speaker 2: Coming up, we continue our conversation with Mike Pile, Deputy

555
00:34:15,800 --> 00:34:20,080
Speaker 2: head of black Rocks Portfolio Management Group, discussing the state

556
00:34:20,239 --> 00:34:24,040
Speaker 2: of the world economy and markets in an era of

557
00:34:24,280 --> 00:34:26,120
Speaker 2: geopolitical uncertainty.

558
00:34:26,640 --> 00:34:27,760
Speaker 3: I'm Bury Redults.

559
00:34:27,760 --> 00:34:43,880
Speaker 2: You're listening to Masters in Business on Bloomberg Radio.

560
00:34:44,320 --> 00:34:45,280
Speaker 3: I'm Barry Dults.

561
00:34:45,360 --> 00:34:48,759
Speaker 2: You're listening to Masters in Business on Bloomberg Radio. My

562
00:34:48,920 --> 00:34:52,360
Speaker 2: extra special guest today is Mike Pile, deputy head of

563
00:34:52,400 --> 00:34:57,200
Speaker 2: black Rocks Portfolio Management Group, responsible for I don't know

564
00:34:57,239 --> 00:35:02,359
Speaker 2: about five trillion dollars in inves assets. So we are

565
00:35:02,480 --> 00:35:08,919
Speaker 2: living through an era, especially under this administration of seemingly

566
00:35:10,360 --> 00:35:16,480
Speaker 2: challenging geopolitical turmoil and unexpected policy shifts. I want to

567
00:35:16,480 --> 00:35:19,359
Speaker 2: start with something positive, which was a quote from you.

568
00:35:20,680 --> 00:35:25,759
Speaker 2: US resilience is underestimated. So tell us what that means.

569
00:35:25,840 --> 00:35:29,759
Speaker 2: What does the market miss price about the US economy

570
00:35:30,320 --> 00:35:33,840
Speaker 2: or the US markets? And we're recording this in the

571
00:35:33,880 --> 00:35:37,680
Speaker 2: first week in April. You know, despite everything that's happened

572
00:35:37,760 --> 00:35:41,720
Speaker 2: tariffs and war in Iran, markets are barely five percent

573
00:35:41,760 --> 00:35:46,439
Speaker 2: off their recent highs. Tell us a little bit about

574
00:35:46,560 --> 00:35:47,400
Speaker 2: US resilience.

575
00:35:48,480 --> 00:35:52,200
Speaker 4: Sure, well, you know, first i'd say, we're taping this

576
00:35:52,360 --> 00:35:54,920
Speaker 4: on Tuesday midday.

577
00:35:54,560 --> 00:35:55,560
Speaker 3: Eight o'clock tonight.

578
00:35:55,640 --> 00:35:57,719
Speaker 2: Who knows what will happen, And for all we know

579
00:35:57,800 --> 00:35:59,640
Speaker 2: that's a misdirection and it's going to start as soon

580
00:35:59,680 --> 00:36:00,400
Speaker 2: as it gets stark.

581
00:36:00,680 --> 00:36:03,680
Speaker 4: Who knows we will We will all find out together.

582
00:36:05,200 --> 00:36:09,400
Speaker 4: But I do think that this point about US resilience

583
00:36:09,840 --> 00:36:13,279
Speaker 4: is an important one. You know, we've seen it on

584
00:36:13,320 --> 00:36:17,359
Speaker 4: display in many moments over the past number of years,

585
00:36:17,400 --> 00:36:21,879
Speaker 4: including the last twelve months. You know, the you know, diversity,

586
00:36:22,520 --> 00:36:26,719
Speaker 4: the breadth, the innovative potential of the US economy, the

587
00:36:26,840 --> 00:36:30,279
Speaker 4: quality of our corporate sector. You know, these are all

588
00:36:30,360 --> 00:36:33,440
Speaker 4: things that are are pretty extraordinary. I think one of

589
00:36:33,480 --> 00:36:36,000
Speaker 4: the things that I would highlight in the here now

590
00:36:36,680 --> 00:36:39,640
Speaker 4: with respect to you know, what I think is fairly

591
00:36:39,719 --> 00:36:44,320
Speaker 4: described as a historic energy set shock, a energy shock,

592
00:36:44,480 --> 00:36:46,960
Speaker 4: the dimensions of which I think are going to only

593
00:36:47,000 --> 00:36:50,240
Speaker 4: become even more clear in the weeks and months ahead.

594
00:36:50,239 --> 00:36:53,200
Speaker 4: And we're seeing physical supply disruptions in a way that

595
00:36:53,320 --> 00:36:56,000
Speaker 4: for example, we didn't you know, see in twenty twenty

596
00:36:56,000 --> 00:36:59,800
Speaker 4: two post Russia's invasion. And this is a global shock,

597
00:37:00,080 --> 00:37:02,640
Speaker 4: this is a global supply chain shock. It is going

598
00:37:02,680 --> 00:37:05,920
Speaker 4: to have impacts on the United States. But I do

599
00:37:05,960 --> 00:37:09,320
Speaker 4: think it's fair to say that in a real economic sense,

600
00:37:09,719 --> 00:37:14,200
Speaker 4: the US is relatively more insulated from this shock than

601
00:37:14,640 --> 00:37:17,279
Speaker 4: other economies around the world, whether that's in Europe, whether

602
00:37:17,320 --> 00:37:20,120
Speaker 4: that's in East and Southeast Asia, whether that's in the

603
00:37:20,160 --> 00:37:24,200
Speaker 4: emerging markets broadly. You know, and and you know, you

604
00:37:24,200 --> 00:37:26,840
Speaker 4: can look at you know, one number which which you

605
00:37:26,880 --> 00:37:29,080
Speaker 4: know I spend a fair amount of time looking at

606
00:37:29,120 --> 00:37:31,799
Speaker 4: and marveling at in some respects, which is, you know,

607
00:37:31,840 --> 00:37:33,839
Speaker 4: the price of natural gas in the US. And if

608
00:37:33,880 --> 00:37:36,040
Speaker 4: you look at a chart of the last three four

609
00:37:36,080 --> 00:37:38,920
Speaker 4: months of the natural gas contract in the US, basically

610
00:37:38,960 --> 00:37:41,600
Speaker 4: hasn't Budge, you would be hard pressed to identify where

611
00:37:41,640 --> 00:37:46,239
Speaker 4: on that chart the military intervention in Iran began. And

612
00:37:46,239 --> 00:37:48,839
Speaker 4: I think that highlights, you know, the extent to which

613
00:37:48,920 --> 00:37:52,080
Speaker 4: this critical input to electricity production the United States, this

614
00:37:52,160 --> 00:37:54,880
Speaker 4: critical input to industrial production in the United States, this

615
00:37:54,920 --> 00:37:58,920
Speaker 4: critical input to the way houses kind of heat themselves

616
00:37:58,920 --> 00:38:01,239
Speaker 4: and cook. You know, all of this is you know,

617
00:38:01,320 --> 00:38:05,480
Speaker 4: basically untouched by what we've seen in the war over

618
00:38:05,480 --> 00:38:07,839
Speaker 4: the last five weeks. Again, I think that's in some

619
00:38:07,840 --> 00:38:11,920
Speaker 4: ways the most dramatic data point, but it highlights the

620
00:38:11,960 --> 00:38:14,360
Speaker 4: extent to which, even in the face of this global shock,

621
00:38:14,400 --> 00:38:17,080
Speaker 4: there are very important dimensions of the US that look

622
00:38:17,480 --> 00:38:21,840
Speaker 4: different than other economies around the world and makes us, unbalance,

623
00:38:21,920 --> 00:38:24,200
Speaker 4: more resilient than than those other commies.

624
00:38:24,719 --> 00:38:28,880
Speaker 2: That guest tends to be moved around by pipeline, and

625
00:38:29,080 --> 00:38:30,040
Speaker 2: it's more local.

626
00:38:31,040 --> 00:38:33,120
Speaker 4: Unlike oil, it is not a globally integrated.

627
00:38:32,840 --> 00:38:35,600
Speaker 2: Right and right before we stepped in here, I checked

628
00:38:35,640 --> 00:38:38,719
Speaker 2: the price of crude was one hundred and thirteen. So

629
00:38:38,760 --> 00:38:40,919
Speaker 2: by the time this comes out, it's either much higher

630
00:38:40,960 --> 00:38:42,440
Speaker 2: and much lower or.

631
00:38:42,320 --> 00:38:46,560
Speaker 3: Maybe the same. But you mentioned supply, let's delve into that.

632
00:38:47,200 --> 00:38:50,120
Speaker 2: You know, we saw a giant supply chain shock during

633
00:38:50,120 --> 00:38:54,080
Speaker 2: the pandemic, the war with Iran, and the straight offmuz

634
00:38:54,200 --> 00:38:57,839
Speaker 2: is creating a new energy supply shock. This seems to

635
00:38:57,880 --> 00:39:01,440
Speaker 2: be an ongoing issue. You would have thought by now

636
00:39:01,960 --> 00:39:04,759
Speaker 2: we would have solved this problem, but it continues to

637
00:39:04,800 --> 00:39:07,719
Speaker 2: be significant to the global economy.

638
00:39:07,800 --> 00:39:09,520
Speaker 3: To tell us your views on this.

639
00:39:10,280 --> 00:39:12,600
Speaker 4: Yeah, I mean you asked about the role that the

640
00:39:12,600 --> 00:39:15,120
Speaker 4: Blackrock investment ins to two plays. I mean, I think

641
00:39:15,760 --> 00:39:19,040
Speaker 4: one of the things that they have done and built

642
00:39:19,040 --> 00:39:22,360
Speaker 4: on over the last four years, you know, is a

643
00:39:22,360 --> 00:39:24,399
Speaker 4: piece of work they did back in twenty twenty two

644
00:39:24,440 --> 00:39:28,560
Speaker 4: called a World Shape by Supply, which basically talked about

645
00:39:28,600 --> 00:39:31,080
Speaker 4: the ways in which you know, the twenty tens in particular,

646
00:39:32,400 --> 00:39:35,640
Speaker 4: you know, is a world defined by agrit demand. I mean,

647
00:39:35,640 --> 00:39:37,400
Speaker 4: this goes back to the very start of our conversation

648
00:39:37,480 --> 00:39:40,160
Speaker 4: when we talked about the struggles that the US and

649
00:39:40,200 --> 00:39:43,880
Speaker 4: global economy had after the GFC because perhaps of the

650
00:39:44,000 --> 00:39:48,359
Speaker 4: lack of a forceful fiscal policy lever being pulled. That's

651
00:39:48,360 --> 00:39:50,759
Speaker 4: a story about agrit demand. That's a story about there

652
00:39:50,800 --> 00:39:55,440
Speaker 4: being insufficient demand in the macroeconomy to achieve full employment

653
00:39:55,719 --> 00:39:59,880
Speaker 4: and inflation at target. The story post COVID is not

654
00:40:00,080 --> 00:40:03,200
Speaker 4: that it's a world as they've said, you know, shape

655
00:40:03,239 --> 00:40:05,719
Speaker 4: by supply, and you know, I think that wasn't true.

656
00:40:05,960 --> 00:40:09,440
Speaker 4: That was true, not just in twenty twenty one, twenty

657
00:40:09,480 --> 00:40:13,440
Speaker 4: twenty two, after COVID, after Russia's invasion, you know, it's

658
00:40:13,680 --> 00:40:15,239
Speaker 4: true today as well. And I would sort of draw

659
00:40:15,280 --> 00:40:18,919
Speaker 4: attention to, you know, really two episodes that we've seen

660
00:40:19,080 --> 00:40:22,040
Speaker 4: already in twenty twenty six that highlight this point. One

661
00:40:22,080 --> 00:40:24,600
Speaker 4: and most obviously, you know, is what we've seen in

662
00:40:24,680 --> 00:40:28,840
Speaker 4: markets since the beginning of the military intervention in Iran

663
00:40:29,280 --> 00:40:32,280
Speaker 4: and the world pricing to a greater or lesser extent,

664
00:40:32,760 --> 00:40:37,200
Speaker 4: you know, a pretty traditional negative energy supply shock, higher

665
00:40:37,200 --> 00:40:41,680
Speaker 4: inflation expectations, lower growth expectations, a pullback and risk really

666
00:40:41,719 --> 00:40:45,839
Speaker 4: across different types of asset classes. But if you roll

667
00:40:45,880 --> 00:40:48,440
Speaker 4: the clock back just a couple of weeks before the

668
00:40:48,440 --> 00:40:53,240
Speaker 4: beginning of hostilities in Iran, you know, you saw market

669
00:40:53,239 --> 00:40:56,520
Speaker 4: priced for a different type of supply shock, a positive

670
00:40:56,520 --> 00:41:01,479
Speaker 4: technology supply shock from AI. We saw that disinflationary even

671
00:41:01,520 --> 00:41:05,640
Speaker 4: deflationary trend in the way government bonds were getting priced.

672
00:41:06,080 --> 00:41:09,120
Speaker 4: We saw big cross sectional moves and the equity market

673
00:41:09,160 --> 00:41:13,480
Speaker 4: reflecting the potential disruption from AI around a range of

674
00:41:13,480 --> 00:41:16,200
Speaker 4: business models, and so really twenty twenty six I think

675
00:41:16,320 --> 00:41:20,560
Speaker 4: highlights both on the positive side and on the negative side,

676
00:41:20,560 --> 00:41:23,080
Speaker 4: from the in terms of supply shocks, what it means

677
00:41:23,080 --> 00:41:25,040
Speaker 4: to be living in a world shape I supply.

678
00:41:25,640 --> 00:41:28,960
Speaker 2: So abundance on the one hand, scarcity on the other,

679
00:41:29,120 --> 00:41:33,640
Speaker 2: and logistical interruptions determining which way we.

680
00:41:33,600 --> 00:41:37,399
Speaker 4: Go, yeah, and the thing I need to put on

681
00:41:37,560 --> 00:41:44,440
Speaker 4: my sort of policy observer had at a minimum. These, however,

682
00:41:44,560 --> 00:41:48,479
Speaker 4: hard financial problems are to solve, and they are hard

683
00:41:48,560 --> 00:41:51,520
Speaker 4: to solve, as the GFC is the year Zone crisis

684
00:41:52,000 --> 00:41:57,520
Speaker 4: made clear. They are fundamentally not engineering problems. They are

685
00:41:57,560 --> 00:42:02,520
Speaker 4: problems of political and policy. Well, supply chain problems, those

686
00:42:02,560 --> 00:42:06,759
Speaker 4: are a different beast. Entirely, this is about rewiring the

687
00:42:06,800 --> 00:42:12,839
Speaker 4: way physical things atoms get produced, get transported, get consumed,

688
00:42:13,360 --> 00:42:16,319
Speaker 4: and that is a much harder, much slower, much more

689
00:42:16,360 --> 00:42:20,920
Speaker 4: difficult economic and market problem, much different and harder policy problem.

690
00:42:21,040 --> 00:42:23,400
Speaker 4: I think again, I would highlight this is one of

691
00:42:23,400 --> 00:42:25,360
Speaker 4: the ways in which I think the US has proven

692
00:42:25,440 --> 00:42:30,200
Speaker 4: itself more resilience. Again, the kind of quality, the innovative capacity,

693
00:42:30,239 --> 00:42:34,160
Speaker 4: the flexibility of the US corporate sector to solve through

694
00:42:34,600 --> 00:42:36,880
Speaker 4: the supply chain problems that we've seen since the advent

695
00:42:36,920 --> 00:42:41,719
Speaker 4: of COVID. That's a genuine source of resilience for economy.

696
00:42:42,040 --> 00:42:45,200
Speaker 4: But also I think highlights that these are hard problems

697
00:42:45,239 --> 00:42:48,120
Speaker 4: and a different set of problems in kind than what

698
00:42:48,160 --> 00:42:49,320
Speaker 4: we saw post the GFC.

699
00:42:49,600 --> 00:42:52,080
Speaker 2: So let me have you put on your policy wonk

700
00:42:52,680 --> 00:42:56,680
Speaker 2: cap and look out three years, five years.

701
00:42:57,560 --> 00:42:59,280
Speaker 3: What is the result of this war.

702
00:42:59,239 --> 00:43:03,120
Speaker 2: Going to mean? Or things like alternative energy supplies. It

703
00:43:03,200 --> 00:43:07,440
Speaker 2: turns out China is fairly insulated for different reasons than

704
00:43:07,480 --> 00:43:11,000
Speaker 2: the United States. We have fracking in that gas. They

705
00:43:11,040 --> 00:43:15,800
Speaker 2: seem to have a ton of solar and wind and geothermal,

706
00:43:16,120 --> 00:43:20,360
Speaker 2: which we've sort of neglected the past couple of years.

707
00:43:21,360 --> 00:43:24,560
Speaker 2: What's the end result of this war gonna be?

708
00:43:25,080 --> 00:43:26,200
Speaker 3: I don't mean in terms of.

709
00:43:26,200 --> 00:43:30,160
Speaker 2: Military or political alignment. I mean in terms of global econology,

710
00:43:31,239 --> 00:43:34,719
Speaker 2: in terms of global economy, energy consumption, things like that.

711
00:43:36,040 --> 00:43:40,000
Speaker 4: You know, well, i'd say, you know, you talk about

712
00:43:40,040 --> 00:43:45,160
Speaker 4: three or five years out, you know, to to quote

713
00:43:45,160 --> 00:43:49,120
Speaker 4: the potentially apocryphal story about Joe and Lae, I think

714
00:43:49,120 --> 00:43:52,200
Speaker 4: it's too soon to tell. We're gonna find out again

715
00:43:52,239 --> 00:43:55,160
Speaker 4: together in the in the years maybe even the hours

716
00:43:55,200 --> 00:43:57,520
Speaker 4: and days ahead. But I will say I think we're

717
00:43:57,560 --> 00:44:00,680
Speaker 4: spending a fair amount of time trying to think about

718
00:44:00,760 --> 00:44:04,760
Speaker 4: some of these questions in Blackrock. What are the more

719
00:44:05,000 --> 00:44:08,919
Speaker 4: durable economic themes going to be coming out of the shock?

720
00:44:08,960 --> 00:44:12,120
Speaker 4: I mean, I guess I might you know, highlight three,

721
00:44:13,360 --> 00:44:16,719
Speaker 4: you know one. You know, I think energy security, which

722
00:44:16,760 --> 00:44:21,600
Speaker 4: I think post COVID, post Russia's invasion was already front

723
00:44:21,600 --> 00:44:25,640
Speaker 4: of mind for countries, companies, economies around the world is

724
00:44:25,719 --> 00:44:27,480
Speaker 4: only going to become more so.

725
00:44:28,040 --> 00:44:28,320
Speaker 1: Uh.

726
00:44:28,400 --> 00:44:33,239
Speaker 4: This is I think one of the important trends of

727
00:44:33,280 --> 00:44:36,719
Speaker 4: our moment. Secondly, you know, I think what we're going

728
00:44:36,800 --> 00:44:41,480
Speaker 4: to see both from countries and from companies is increased

729
00:44:41,480 --> 00:44:46,839
Speaker 4: focus on strategic stockpiling. You know, obviously we're seeing economies

730
00:44:46,920 --> 00:44:52,400
Speaker 4: make use of things like strategic petroleum reserves. I suspect

731
00:44:52,440 --> 00:44:56,760
Speaker 4: that in spaces like energy, but much more broadly, across

732
00:44:56,760 --> 00:44:59,560
Speaker 4: a much wider set of critical inputs of raw materials,

733
00:45:00,000 --> 00:45:03,600
Speaker 4: You're going to see companies and countries really turned to

734
00:45:03,920 --> 00:45:07,680
Speaker 4: using resources to build stock biles of those of those

735
00:45:07,719 --> 00:45:11,360
Speaker 4: critical inputs. And that is again we've talked for a

736
00:45:11,360 --> 00:45:13,759
Speaker 4: long time about the ways in which there's been a

737
00:45:13,800 --> 00:45:16,880
Speaker 4: turn in the world from just in time supply chains

738
00:45:16,920 --> 00:45:21,480
Speaker 4: to resilient supply chains. That type of stockpiling behavior is

739
00:45:21,920 --> 00:45:25,279
Speaker 4: what it means in important ways to be spending more

740
00:45:25,320 --> 00:45:28,040
Speaker 4: resources than you otherwise would to day for an efficient

741
00:45:28,080 --> 00:45:32,440
Speaker 4: outcome today in service of greater resilience over the long term.

742
00:45:32,800 --> 00:45:35,080
Speaker 4: And then I think the third is, you know, I

743
00:45:35,120 --> 00:45:38,520
Speaker 4: do think that countries and companies around the world are

744
00:45:38,560 --> 00:45:41,919
Speaker 4: going to be looking at their energy mix, and I think,

745
00:45:42,000 --> 00:45:44,040
Speaker 4: you know, to one of the points we've made about investing,

746
00:45:44,400 --> 00:45:50,440
Speaker 4: diversification is a really important precept in investing. It is

747
00:45:50,520 --> 00:45:52,840
Speaker 4: perhaps the only free lunch that's out there, and I

748
00:45:52,880 --> 00:45:56,400
Speaker 4: would expect a lot of different players to be thinking

749
00:45:56,480 --> 00:45:58,640
Speaker 4: as they think about their energy securities, they think about

750
00:45:58,680 --> 00:46:02,480
Speaker 4: how to build strategic stockpililes, what's the right diversification to

751
00:46:02,680 --> 00:46:07,759
Speaker 4: ensure that I'm not subject to show points to supply shortages,

752
00:46:07,840 --> 00:46:09,520
Speaker 4: to disruptions looking ahead.

753
00:46:09,960 --> 00:46:13,239
Speaker 2: I like the concept of the framework of this shift

754
00:46:13,520 --> 00:46:16,640
Speaker 2: that's taking place in the twenty twenties in a lot

755
00:46:16,640 --> 00:46:19,600
Speaker 2: of ways, where the regime today is so much different

756
00:46:20,000 --> 00:46:25,040
Speaker 2: than the twenty tens, more fiscal stimulus, higher rates that

757
00:46:25,120 --> 00:46:28,960
Speaker 2: seem to be structural and built in higher inflation rates,

758
00:46:29,760 --> 00:46:37,600
Speaker 2: more geopolitical actions, more volatility. Does this decade require us

759
00:46:37,640 --> 00:46:42,520
Speaker 2: to fundamentally, fundamentally rethink how we build portfolios, how we

760
00:46:42,560 --> 00:46:47,120
Speaker 2: manage risk? How different are the twenty twenties from the

761
00:46:47,160 --> 00:46:48,120
Speaker 2: twenty tens.

762
00:46:48,520 --> 00:46:50,000
Speaker 4: Yeah, I mean, I think this gets to some of

763
00:46:50,040 --> 00:46:56,320
Speaker 4: the themes we were talking about earlier. That you diversification

764
00:46:56,680 --> 00:47:01,520
Speaker 4: is an extraordinarily important tool as an investor, and diversification

765
00:47:01,920 --> 00:47:05,440
Speaker 4: is harder to come by today than it was in

766
00:47:05,480 --> 00:47:08,319
Speaker 4: the twenty tens and than has been historically. You know,

767
00:47:08,320 --> 00:47:11,640
Speaker 4: again that's true around the role that government bonds can

768
00:47:11,680 --> 00:47:15,760
Speaker 4: be relied upon to play in portfolios, like in months

769
00:47:16,880 --> 00:47:20,040
Speaker 4: such as March twenty twenty six, like in twenty twenty two.

770
00:47:20,719 --> 00:47:22,439
Speaker 4: It's also true as we were talking about in terms

771
00:47:22,480 --> 00:47:26,640
Speaker 4: of equity markets and how concentrated equity markets, especially in

772
00:47:26,640 --> 00:47:30,560
Speaker 4: the United States, have become. And so, you know, building

773
00:47:30,600 --> 00:47:36,600
Speaker 4: portfolios means building portfolios that achieve diversification in a world

774
00:47:36,600 --> 00:47:40,920
Speaker 4: where diversification is less available than it has been in

775
00:47:40,960 --> 00:47:44,480
Speaker 4: the past through straightforward means like balance sixty forty fourtfolios.

776
00:47:44,520 --> 00:47:46,919
Speaker 4: What does that mean? You know, my boss Thery Fink

777
00:47:46,960 --> 00:47:49,800
Speaker 4: has talked about the role that private assets can play

778
00:47:50,080 --> 00:47:54,239
Speaker 4: in building more resilient, more diversified portfolios. And I think

779
00:47:54,239 --> 00:47:57,600
Speaker 4: as part of that, talking about the role that hedge

780
00:47:57,640 --> 00:48:00,360
Speaker 4: funds and look at alternative strategies can play in public markets,

781
00:48:00,360 --> 00:48:05,240
Speaker 4: as we've done here, that role that uncorrelated alpha alpha

782
00:48:05,320 --> 00:48:10,680
Speaker 4: that's not exposed to broad market directionality can play in portfolios.

783
00:48:10,960 --> 00:48:14,200
Speaker 4: These are the types of solutions that I think investors

784
00:48:14,200 --> 00:48:16,239
Speaker 4: of all types are going to need to reach for

785
00:48:16,480 --> 00:48:20,239
Speaker 4: to build those portfolios that are designed for a world

786
00:48:20,320 --> 00:48:23,320
Speaker 4: shape I supply designed for a world of geopolitical shocks,

787
00:48:23,360 --> 00:48:27,239
Speaker 4: designed for a world where diversification is harder to come by.

788
00:48:27,640 --> 00:48:32,000
Speaker 4: And the answer isn't as straightforward as the traditional sixty forty.

789
00:48:32,800 --> 00:48:34,520
Speaker 4: The world is going to have to be thought of

790
00:48:34,560 --> 00:48:36,320
Speaker 4: in terms of that broader set of tools.

791
00:48:36,760 --> 00:48:38,600
Speaker 2: So we've spent a lot of time talking about the

792
00:48:38,640 --> 00:48:41,400
Speaker 2: Middle East. Let's look around the rest of the world,

793
00:48:42,239 --> 00:48:47,080
Speaker 2: starting with this attempt to sort of decouple from China.

794
00:48:47,520 --> 00:48:52,279
Speaker 2: Is that achievable or are these just political aspirations that

795
00:48:52,960 --> 00:48:56,160
Speaker 2: don't reflect economic reality.

796
00:48:57,080 --> 00:49:00,560
Speaker 4: So I think that's a very good question. I will say,

797
00:49:01,320 --> 00:49:07,000
Speaker 4: you know, it is clear that President Trump and the

798
00:49:07,040 --> 00:49:14,600
Speaker 4: administration have been working to achieve a stable economic footing

799
00:49:15,239 --> 00:49:19,520
Speaker 4: between the US and China. I think that that if

800
00:49:19,520 --> 00:49:22,040
Speaker 4: it were to be achieved, would be positive. Again from

801
00:49:22,080 --> 00:49:24,560
Speaker 4: the perspective of the type of stability, the type of

802
00:49:24,600 --> 00:49:31,880
Speaker 4: predictability that allows businesses, households, individuals to plan and make choices.

803
00:49:32,760 --> 00:49:36,640
Speaker 4: I think that plays into you know, you know, one

804
00:49:36,680 --> 00:49:38,239
Speaker 4: of the things that we've been talking about, what I've

805
00:49:38,239 --> 00:49:41,799
Speaker 4: been talking about last week, even with some of your colleagues, is,

806
00:49:42,200 --> 00:49:45,960
Speaker 4: you know, the summit between President Trump, President Trump and

807
00:49:46,000 --> 00:49:48,760
Speaker 4: President she is scheduled for May fourteenth and May fifteenth.

808
00:49:49,160 --> 00:49:51,160
Speaker 4: You know, I think that as we look about events

809
00:49:51,160 --> 00:49:53,799
Speaker 4: in the Middle East, that's a date that I have

810
00:49:54,000 --> 00:49:59,560
Speaker 4: in my own I as I think about when hostilities

811
00:49:59,560 --> 00:50:02,640
Speaker 4: in the Middle least would likely need to be winding down.

812
00:50:03,040 --> 00:50:05,800
Speaker 4: I think hard press to see how a summit happens.

813
00:50:05,800 --> 00:50:07,920
Speaker 4: They've already rescheduled once. How does hard Press see how

814
00:50:07,960 --> 00:50:10,960
Speaker 4: some it happens in the event of ongoing active hostilities

815
00:50:11,239 --> 00:50:14,400
Speaker 4: in the Middle East. And I do wonder hard whether

816
00:50:14,880 --> 00:50:17,520
Speaker 4: that's a backstop around the Middle East, because I do

817
00:50:17,560 --> 00:50:20,880
Speaker 4: think that there's a strong priority from this president, I

818
00:50:20,880 --> 00:50:22,719
Speaker 4: think from the Chinese side as well, to find that

819
00:50:22,800 --> 00:50:25,680
Speaker 4: stability between the US and China, And I think the

820
00:50:25,719 --> 00:50:28,719
Speaker 4: summit is meant to be the culmination of a lot

821
00:50:28,719 --> 00:50:29,240
Speaker 4: of that work.

822
00:50:29,719 --> 00:50:32,520
Speaker 2: So I have to talk about AI a little bit.

823
00:50:33,400 --> 00:50:37,160
Speaker 2: What's the potential there for a possible supply shock and

824
00:50:37,239 --> 00:50:42,200
Speaker 2: impact on the labor markets, the ability to accelerate productivity

825
00:50:42,680 --> 00:50:48,319
Speaker 2: and corporate earnings growth? How does Blackrock think about what

826
00:50:48,440 --> 00:50:51,200
Speaker 2: AI is really doing across everything?

827
00:50:52,160 --> 00:50:58,680
Speaker 4: Sure? I mean, I would say the uncertainty bands here

828
00:50:58,960 --> 00:51:03,640
Speaker 4: are extraordinarily high, and so I think in some ways

829
00:51:03,719 --> 00:51:07,600
Speaker 4: it's hard to venture a forecast around what this means

830
00:51:07,800 --> 00:51:12,319
Speaker 4: for productivity, what this means for the labor market, what

831
00:51:12,360 --> 00:51:17,160
Speaker 4: this means for geopolitics one year from now, much less five, eight,

832
00:51:17,320 --> 00:51:19,880
Speaker 4: ten years from now. You know, I think what I

833
00:51:19,920 --> 00:51:23,600
Speaker 4: might healthily do is zero in a little bit within

834
00:51:23,640 --> 00:51:26,800
Speaker 4: a within a domain that I know better, namely namely

835
00:51:26,840 --> 00:51:29,040
Speaker 4: black Rock, And I think about kind of what are

836
00:51:29,040 --> 00:51:32,040
Speaker 4: we doing? And I make maybe a couple of observations. One,

837
00:51:32,080 --> 00:51:36,960
Speaker 4: we've already talked about the work ongoing in the systematic platform,

838
00:51:37,000 --> 00:51:39,640
Speaker 4: and really, you know, they continue day in and day

839
00:51:39,640 --> 00:51:42,960
Speaker 4: out to define that frontier of what technology, what AI

840
00:51:43,120 --> 00:51:47,000
Speaker 4: means in terms of how to manage portfolios and generate

841
00:51:47,040 --> 00:51:50,480
Speaker 4: investment insight. You know, I look across our active investment platform.

842
00:51:50,520 --> 00:51:55,719
Speaker 4: More broadly, we are very busily deploying tools that empower

843
00:51:55,840 --> 00:52:00,880
Speaker 4: individual researchers to access more of the collective intelligent of Blackrock,

844
00:52:01,239 --> 00:52:06,400
Speaker 4: to go deeper, to go broader, more rapidly around researching

845
00:52:06,520 --> 00:52:12,600
Speaker 4: individual securities, researching individual companies, researching macroeconomic trends, and come

846
00:52:12,680 --> 00:52:16,680
Speaker 4: to more judgments, better judgments, more rapidly in ways that

847
00:52:16,719 --> 00:52:19,319
Speaker 4: we think can help them drive in best performance. Third,

848
00:52:19,360 --> 00:52:22,839
Speaker 4: I think one of the ways in which Blackrock continues

849
00:52:22,920 --> 00:52:27,200
Speaker 4: to seek to provide solutions that make sense for our

850
00:52:27,239 --> 00:52:30,760
Speaker 4: clients is to do what we call customization at scale,

851
00:52:31,160 --> 00:52:35,040
Speaker 4: to be able to look at an individual investor, listen

852
00:52:35,080 --> 00:52:37,799
Speaker 4: to their concerns, listen to their needs, and design a

853
00:52:37,840 --> 00:52:42,520
Speaker 4: solution that's customized for their particular circumstances. Again, whether that's

854
00:52:42,520 --> 00:52:48,000
Speaker 4: an institution or an individual, technology AI is opening up

855
00:52:48,000 --> 00:52:50,960
Speaker 4: the prospect of being able to do that with more granularity,

856
00:52:51,000 --> 00:52:54,000
Speaker 4: at greater speed, and allow us to get in front

857
00:52:54,040 --> 00:52:57,400
Speaker 4: of our clients with solutions that are really oriented to

858
00:52:57,440 --> 00:53:00,560
Speaker 4: their goals, their dreams, their ambitions, their concerns in a

859
00:53:00,640 --> 00:53:04,200
Speaker 4: way that's different than before Last one to make is

860
00:53:04,440 --> 00:53:06,600
Speaker 4: one of the cool things about being a black Rock is,

861
00:53:07,320 --> 00:53:09,799
Speaker 4: you know, it's a big place filled with a lot

862
00:53:09,800 --> 00:53:12,560
Speaker 4: of smart people, and a lot of the excitement is

863
00:53:12,680 --> 00:53:18,120
Speaker 4: just giving tools to our researchers, to our professionals and

864
00:53:18,160 --> 00:53:21,480
Speaker 4: seeing organically, you know, what they come up with. And

865
00:53:21,520 --> 00:53:23,320
Speaker 4: I think a lot of the excitement of the moment

866
00:53:23,400 --> 00:53:27,720
Speaker 4: is seeing so much innovation, seeing so much experimentation, seeing

867
00:53:28,040 --> 00:53:31,760
Speaker 4: so many cool applications of this technology and our data

868
00:53:31,880 --> 00:53:34,920
Speaker 4: to solve problems for clients. You know, now we're at

869
00:53:34,920 --> 00:53:37,400
Speaker 4: the stage where we're kind of saying, as a farm, okay,

870
00:53:37,760 --> 00:53:40,759
Speaker 4: what are the handful of things that have bubbled up

871
00:53:40,840 --> 00:53:43,759
Speaker 4: organically that we think can really move the needle for

872
00:53:43,880 --> 00:53:46,279
Speaker 4: our clients, really move the needle for the farm, and

873
00:53:46,320 --> 00:53:48,640
Speaker 4: think about what it means to put our shoulder behind

874
00:53:48,640 --> 00:53:49,640
Speaker 4: those as an organization.

875
00:53:50,560 --> 00:53:53,799
Speaker 2: So last question before I get to my favorites, I asked, well,

876
00:53:53,800 --> 00:53:58,799
Speaker 2: our guests, given all this geopolitical turmoil and market volatility

877
00:53:58,880 --> 00:54:03,280
Speaker 2: and uncertainty, what do you think investors are not thinking

878
00:54:03,320 --> 00:54:09,880
Speaker 2: about or talking about but perhaps should be. What topics, assets, geography, policy,

879
00:54:09,960 --> 00:54:12,719
Speaker 2: data point, what's getting overlooked but shouldn't.

880
00:54:13,920 --> 00:54:16,239
Speaker 4: So there I mean, I'll offer an answer that kind

881
00:54:16,280 --> 00:54:19,640
Speaker 4: of puts on, you know, both of my hats and say,

882
00:54:19,680 --> 00:54:22,080
Speaker 4: we've obviously been talking about AI or just talking about

883
00:54:22,120 --> 00:54:25,080
Speaker 4: it as applied to Blackrock. You know, I think that

884
00:54:25,320 --> 00:54:29,200
Speaker 4: the investment implications of AI, as I said, have huge

885
00:54:29,719 --> 00:54:34,080
Speaker 4: kind of uncertainty bands around them. Where value is going

886
00:54:34,120 --> 00:54:38,880
Speaker 4: to accrue at what pace, What transformations to the macroeconomy,

887
00:54:38,920 --> 00:54:42,200
Speaker 4: to the labor market, of geopolitics. These are all extraordinarily

888
00:54:42,200 --> 00:54:45,040
Speaker 4: first order questions for investors, you know. I'd say one

889
00:54:45,080 --> 00:54:49,280
Speaker 4: piece that I think is being underappreciated is the degree

890
00:54:49,320 --> 00:54:51,360
Speaker 4: to which, you know, I think AI is going to

891
00:54:51,400 --> 00:54:55,440
Speaker 4: become a first order political and policy issue in the

892
00:54:55,800 --> 00:55:00,439
Speaker 4: quarters couple of years ahead. We're seeing the beginnings of that.

893
00:55:00,480 --> 00:55:04,480
Speaker 4: You know, talk about you know, data center moratoriums, talk

894
00:55:04,520 --> 00:55:10,360
Speaker 4: about you know, things like you know, chip access for China,

895
00:55:10,440 --> 00:55:13,279
Speaker 4: something I worked on. But I think if you talk

896
00:55:13,400 --> 00:55:17,280
Speaker 4: to you know, polsters, they would say AI is rocketing

897
00:55:17,360 --> 00:55:20,279
Speaker 4: up the list of issues that voters are focused on

898
00:55:20,360 --> 00:55:22,480
Speaker 4: in the United States and more broadly, And I think

899
00:55:22,480 --> 00:55:25,040
Speaker 4: an important dimension of what it's going to mean to

900
00:55:25,120 --> 00:55:28,040
Speaker 4: invest in AI is understanding that this is going to

901
00:55:28,080 --> 00:55:32,560
Speaker 4: become a risingly important political and policy issue and an

902
00:55:32,640 --> 00:55:35,960
Speaker 4: additional dimension of uncertainty that investors are going to have

903
00:55:36,000 --> 00:55:39,759
Speaker 4: to confront as we make choices around where impact is

904
00:55:39,800 --> 00:55:41,600
Speaker 4: going to be felt and value is going to accrue.

905
00:55:42,120 --> 00:55:44,799
Speaker 2: Really really interesting answer. All right, let's jump to my

906
00:55:44,800 --> 00:55:48,120
Speaker 2: favorite questions I ask all of my guests, starting with

907
00:55:48,160 --> 00:55:51,160
Speaker 2: and I really have to split this question into two.

908
00:55:51,840 --> 00:55:54,919
Speaker 2: Who are the mentors who helped shape your career, both

909
00:55:54,960 --> 00:55:57,880
Speaker 2: from an investing standpoint as well as a government and

910
00:55:57,960 --> 00:55:59,120
Speaker 2: policy perspective.

911
00:56:00,280 --> 00:56:05,839
Speaker 4: Yeah, so had off a couple of thoughts here, you know, Uh,

912
00:56:06,560 --> 00:56:11,520
Speaker 4: parapeters in my life again, I'm Peter Fisher, who who's

913
00:56:11,560 --> 00:56:15,040
Speaker 4: responsible for bringing me into Blackrock? Uh? As an investor,

914
00:56:15,360 --> 00:56:18,760
Speaker 4: you know, to me he had been a senior official

915
00:56:18,920 --> 00:56:22,760
Speaker 4: in George W. Bush's Treasure departmental legendary Federal Reserve official,

916
00:56:22,840 --> 00:56:26,120
Speaker 4: had led the fixed income platform at Blackrock. Had really

917
00:56:26,160 --> 00:56:28,840
Speaker 4: that type of career bringing together public and private.

918
00:56:29,239 --> 00:56:29,399
Speaker 2: Uh.

919
00:56:29,440 --> 00:56:32,200
Speaker 4: And as the person kind of most responsible for bringing

920
00:56:32,200 --> 00:56:34,640
Speaker 4: me into Blackrock. And somebody who's been an important counselor

921
00:56:34,640 --> 00:56:36,560
Speaker 4: to me through the years, you know, spent some time

922
00:56:36,640 --> 00:56:41,320
Speaker 4: yesterday with my very first economic policy Boston, Washington. Peter Orzag.

923
00:56:41,719 --> 00:56:44,800
Speaker 4: I was part of President Obama's cabinet as the director

924
00:56:44,840 --> 00:56:48,279
Speaker 4: of the White House Budget Office, now the CEO of Bizard. Similarly,

925
00:56:48,360 --> 00:56:52,640
Speaker 4: somebody to me who's brought together public service with UH

926
00:56:52,719 --> 00:56:58,759
Speaker 4: financial and UH commercial UH service UH as well, and

927
00:56:58,840 --> 00:57:01,680
Speaker 4: somebody who's again been an important source of council advice.

928
00:57:01,840 --> 00:57:04,480
Speaker 4: But I would say beyond that, I mean, you know,

929
00:57:05,160 --> 00:57:08,320
Speaker 4: my mentors both in governments and Black Rock, you know,

930
00:57:08,360 --> 00:57:11,600
Speaker 4: I'd really look into those organizations at large. You know,

931
00:57:11,640 --> 00:57:14,759
Speaker 4: when I was in government, the career civil servants at

932
00:57:14,800 --> 00:57:17,600
Speaker 4: the Office Management Budget, the career civil servants at the

933
00:57:17,640 --> 00:57:20,480
Speaker 4: Treasure Department, they knew more about their corner of the

934
00:57:20,480 --> 00:57:23,480
Speaker 4: federal governments, their corner of the world than anybody else

935
00:57:23,520 --> 00:57:25,920
Speaker 4: in the world, and if you just sat down and listen,

936
00:57:26,120 --> 00:57:29,200
Speaker 4: they had so much to share and offer. Similarly, a Blackrock,

937
00:57:29,240 --> 00:57:31,360
Speaker 4: my attitude when I walked in it's a kind of

938
00:57:31,760 --> 00:57:33,800
Speaker 4: new investor in my mid thirties, having never been in

939
00:57:33,800 --> 00:57:36,720
Speaker 4: financial markets before, was I've got as much to learn

940
00:57:36,760 --> 00:57:40,520
Speaker 4: from the analysts associates as I do from those peters,

941
00:57:40,520 --> 00:57:43,000
Speaker 4: as I do from the senior leadership of the farm

942
00:57:43,040 --> 00:57:46,800
Speaker 4: and being open to this idea that there is knowledge

943
00:57:46,840 --> 00:57:50,840
Speaker 4: to be gleaned all in all places, in these organizations,

944
00:57:50,920 --> 00:57:53,160
Speaker 4: as I think how I think about how I've been

945
00:57:53,440 --> 00:57:56,000
Speaker 4: mentored by these places as much as individual people.

946
00:57:56,520 --> 00:57:59,000
Speaker 2: Let's talk about books. What are some of your favorites?

947
00:57:59,080 --> 00:58:00,160
Speaker 2: What are you reading currently?

948
00:58:00,720 --> 00:58:06,919
Speaker 4: So I've been revisiting a favorite of mine called Wise

949
00:58:07,000 --> 00:58:10,360
Speaker 4: Men by Walter Isaacson. I was listening to a podcast

950
00:58:10,400 --> 00:58:13,080
Speaker 4: that Tyler Cowen did a couple of weeks ago where

951
00:58:13,320 --> 00:58:18,880
Speaker 4: he talked about, you know, AI, the geopolitical changes that

952
00:58:18,920 --> 00:58:21,840
Speaker 4: we're seeing means that you know, the world is going

953
00:58:21,920 --> 00:58:25,280
Speaker 4: to have to be reinvented a new, not unlike perhaps

954
00:58:25,400 --> 00:58:27,280
Speaker 4: was the case after the Second World War. That's a

955
00:58:27,280 --> 00:58:30,439
Speaker 4: book about, you know, the group of Americans that really

956
00:58:30,480 --> 00:58:35,520
Speaker 4: constructed the post war world, constructed the security architecture, constructed

957
00:58:36,000 --> 00:58:40,160
Speaker 4: a world built on American leadership and integrated global markets,

958
00:58:40,400 --> 00:58:42,720
Speaker 4: and helped to build that, you know, eighty years of

959
00:58:43,400 --> 00:58:47,240
Speaker 4: a peace of prosperity that we as Americans and have

960
00:58:47,280 --> 00:58:51,720
Speaker 4: have enjoyed. And I think that revisiting that is a

961
00:58:51,760 --> 00:58:54,960
Speaker 4: reminder of what it takes to rebuild a world, what

962
00:58:55,040 --> 00:58:56,760
Speaker 4: it takes to invent a world, a new And I

963
00:58:56,760 --> 00:58:59,280
Speaker 4: do think that Tyler's right, that this is a moment that,

964
00:58:59,360 --> 00:59:02,920
Speaker 4: because of tech logical transformation, because of changes in the

965
00:59:02,920 --> 00:59:05,200
Speaker 4: world at large, is going to require that type of

966
00:59:05,200 --> 00:59:09,040
Speaker 4: thinking again. And so revisiting that book and revisiting some

967
00:59:09,120 --> 00:59:11,320
Speaker 4: of its lessons is something that's been important to me

968
00:59:11,400 --> 00:59:12,480
Speaker 4: in the past couple of weeks.

969
00:59:13,160 --> 00:59:17,920
Speaker 2: You mentioned Tyler Cowens podcast. What else is youre streaming

970
00:59:17,960 --> 00:59:22,560
Speaker 2: these days? Other podcasts or Netflix or Amazon type stuff?

971
00:59:22,680 --> 00:59:26,200
Speaker 4: Yeah, so I would put in a pitch for my

972
00:59:26,320 --> 00:59:30,200
Speaker 4: friends Jake Sullivan and John Fine are their new podcast

973
00:59:30,280 --> 00:59:35,600
Speaker 4: called The Long Game about US national security and foreign policy.

974
00:59:35,640 --> 00:59:39,400
Speaker 4: I'd say I'd like it for three reasons. I mean, one,

975
00:59:40,560 --> 00:59:42,320
Speaker 4: you know, I think they really try to offer a

976
00:59:42,360 --> 00:59:47,200
Speaker 4: pretty just the facts perspective on the choices confronting policymakers

977
00:59:48,120 --> 00:59:51,040
Speaker 4: here in the United States and more broadly too, It's

978
00:59:51,040 --> 00:59:54,200
Speaker 4: a real window into the craft of foreign policy. I mean,

979
00:59:54,240 --> 00:59:56,600
Speaker 4: I think there's a lot to be learned from the

980
00:59:56,680 --> 01:00:00,360
Speaker 4: craft of how professionals, whether they're policymakers or investor or

981
01:00:00,440 --> 01:00:03,040
Speaker 4: business leaders, kind of think about doing what they do,

982
01:00:03,080 --> 01:00:04,640
Speaker 4: and this is a window in that. And third is

983
01:00:04,640 --> 01:00:06,240
Speaker 4: a personal one. You know, I spent two years of

984
01:00:06,240 --> 01:00:09,320
Speaker 4: my life, spent many years on top of that, being

985
01:00:09,360 --> 01:00:11,760
Speaker 4: in dialogue with both of those guys, and for me

986
01:00:11,920 --> 01:00:13,640
Speaker 4: once a week to kind of tune in for an

987
01:00:13,640 --> 01:00:16,240
Speaker 4: hour and hear two familiar voices talking about stuff that

988
01:00:16,280 --> 01:00:18,440
Speaker 4: I care about is a pretty comforting thing to get

989
01:00:18,440 --> 01:00:19,000
Speaker 4: to do as well.

990
01:00:19,400 --> 01:00:22,400
Speaker 2: So our final two questions, what sort of advice would

991
01:00:22,440 --> 01:00:26,200
Speaker 2: you give to a recent college graduate interested in a

992
01:00:26,280 --> 01:00:31,440
Speaker 2: career in either investing or government policy.

993
01:00:32,200 --> 01:00:36,960
Speaker 4: Yeah, so I'd say, you know, a mix of the

994
01:00:37,000 --> 01:00:39,800
Speaker 4: timeless and the timely. You know, I think on the

995
01:00:39,840 --> 01:00:43,720
Speaker 4: timely side, you know, it is clearly the case that

996
01:00:44,960 --> 01:00:49,000
Speaker 4: working to be at the frontier of how the tools

997
01:00:49,000 --> 01:00:52,840
Speaker 4: of technology, the tools of AI are getting used to

998
01:00:52,920 --> 01:00:57,320
Speaker 4: expand and augment the productivity of workers in finance and

999
01:00:57,400 --> 01:01:01,760
Speaker 4: government is kind of table stakes. But I'd also emphasize

1000
01:01:01,840 --> 01:01:06,439
Speaker 4: the time less. You know, in investing, it is still

1001
01:01:06,440 --> 01:01:08,520
Speaker 4: going to be the case that the net amount of

1002
01:01:08,760 --> 01:01:13,520
Speaker 4: alpha in the market, NETA fees is you know, zero,

1003
01:01:14,040 --> 01:01:16,600
Speaker 4: or gross e fees is zero. It is still going

1004
01:01:16,640 --> 01:01:18,920
Speaker 4: to be the case that the fundamental law of active management,

1005
01:01:18,960 --> 01:01:23,040
Speaker 4: that that mix of forecasting skill, breadth and the abasiability

1006
01:01:23,080 --> 01:01:25,000
Speaker 4: to translate in the portfolio is what's going to define

1007
01:01:25,040 --> 01:01:29,120
Speaker 4: active management, you know, being steeped in those timeless truths

1008
01:01:29,160 --> 01:01:32,160
Speaker 4: I think is valuable. Last point to make is, you know,

1009
01:01:32,560 --> 01:01:36,240
Speaker 4: you can never emphasize enough what is always going to

1010
01:01:36,280 --> 01:01:39,520
Speaker 4: be human. You know. Trust is hard to build. It

1011
01:01:39,600 --> 01:01:43,640
Speaker 4: is built on the back of relationships and relationships across time,

1012
01:01:44,040 --> 01:01:48,680
Speaker 4: you know, spending time building your relationships, building trust, being

1013
01:01:48,720 --> 01:01:51,800
Speaker 4: seen as somebody who acts with trust and integrity. You know,

1014
01:01:51,800 --> 01:01:53,800
Speaker 4: it's not just a way to live a good life.

1015
01:01:54,160 --> 01:01:57,080
Speaker 4: It is also a pretty good piece of I think

1016
01:01:57,080 --> 01:01:57,960
Speaker 4: career advice as well.

1017
01:01:58,400 --> 01:02:01,320
Speaker 2: I like that advice and our final question, what do

1018
01:02:01,360 --> 01:02:03,960
Speaker 2: you know about the world of investing today?

1019
01:02:04,360 --> 01:02:06,960
Speaker 3: Might have been useful to know thirty years or so ago.

1020
01:02:08,320 --> 01:02:11,920
Speaker 4: Yeah, I mean, you know, I would say, you know,

1021
01:02:12,640 --> 01:02:17,040
Speaker 4: we've talked a lot about diversification and portfolio construction across

1022
01:02:17,040 --> 01:02:19,439
Speaker 4: this conversation, and that, to me, I think is the

1023
01:02:19,560 --> 01:02:25,800
Speaker 4: piece that I've most climbed up a curve around that

1024
01:02:25,840 --> 01:02:28,960
Speaker 4: I've been kind of most struck by learning about during

1025
01:02:28,960 --> 01:02:30,920
Speaker 4: my time at Black Rock. Across the stints in the

1026
01:02:30,920 --> 01:02:32,480
Speaker 4: part one, what I expected to learn when I left

1027
01:02:32,520 --> 01:02:34,840
Speaker 4: government the first time was Okay, how do I do

1028
01:02:35,800 --> 01:02:39,320
Speaker 4: deep macroeconomic research? What I expected when I left government

1029
01:02:39,320 --> 01:02:41,320
Speaker 4: the first time around, is how do I take deep

1030
01:02:41,360 --> 01:02:45,040
Speaker 4: macroeconomic research and turn that into an insight that I

1031
01:02:45,080 --> 01:02:49,120
Speaker 4: can put on as an individual position or individual trade.

1032
01:02:49,280 --> 01:02:53,800
Speaker 4: What I hadn't appreciated and came to really love learning

1033
01:02:53,840 --> 01:02:57,000
Speaker 4: about was, Okay, how do you actually take five or

1034
01:02:57,040 --> 01:03:01,040
Speaker 4: six or seven of those insights, put them into portfolio,

1035
01:03:01,480 --> 01:03:05,680
Speaker 4: Understand how much return each conngenerate, Understand how they're correlated,

1036
01:03:05,720 --> 01:03:08,400
Speaker 4: how they move with one another, and then you know,

1037
01:03:08,480 --> 01:03:11,440
Speaker 4: build a portfolio of those insights that is going to

1038
01:03:11,440 --> 01:03:14,640
Speaker 4: deliver the right risk, the right return for clients. And

1039
01:03:14,760 --> 01:03:17,600
Speaker 4: that's the art and science of portfolio construction, which to

1040
01:03:17,640 --> 01:03:19,400
Speaker 4: me is at the end of the day, the art

1041
01:03:19,400 --> 01:03:21,640
Speaker 4: and science of what it means to be a good

1042
01:03:21,640 --> 01:03:22,880
Speaker 4: investor into server clients.

1043
01:03:22,920 --> 01:03:25,960
Speaker 2: Well, well, this has been absolutely fascinating. Thank you, Mike

1044
01:03:26,040 --> 01:03:29,040
Speaker 2: for being so generous with your time. We have been

1045
01:03:29,080 --> 01:03:33,240
Speaker 2: speaking with Mike Pile, deputy head of black Rocks Portfolio

1046
01:03:33,360 --> 01:03:38,240
Speaker 2: Management Group, helping to oversee about five trillion dollars in

1047
01:03:38,360 --> 01:03:43,000
Speaker 2: client assets. If you enjoy this conversation, well be sure

1048
01:03:43,000 --> 01:03:44,840
Speaker 2: and check out any of the six hundred we've done

1049
01:03:44,880 --> 01:03:49,320
Speaker 2: over the past twelve years. You can find those at iTunes, Spotify,

1050
01:03:49,640 --> 01:03:54,439
Speaker 2: Bloomberg YouTube, wherever you get your favorite podcasts. I would

1051
01:03:54,440 --> 01:03:56,360
Speaker 2: be remiss if I didn't thank the crack team that

1052
01:03:56,400 --> 01:04:01,080
Speaker 2: helps put these conversations together each week. Alexis Noriega is

1053
01:04:01,160 --> 01:04:06,000
Speaker 2: my video producer. Sean Russo is my researcher. Anna Luke

1054
01:04:06,120 --> 01:04:10,000
Speaker 2: is my producer. I'm Barry Rutolts. You've been listening to

1055
01:04:10,160 --> 01:04:13,280
Speaker 2: Masters in Business on Bloomberg Radio