Speaker 1: Hi everyone, I'm Emily Chang and this is Bloomberg Studio
Speaker 1: one point out. As one of Wall Street's biggest players
Speaker 1: for the better part of the last three decades, Gary
Speaker 1: Khan spent years as president and CEO of Goldman Sachs,
Speaker 1: nearly getting the top job. Then he made a big
Speaker 1: career change, joining the Trump administration as Director of the
Speaker 1: National Economic Council. He spearheaded the effort on tax reform
Speaker 1: and stuck with the president before resigning after fourteen months
Speaker 1: following a battle over tariffs with other factions of the
Speaker 1: Trump team. What's his time with the White House worth it?
Speaker 1: Where is he spending his time and money now? The
Speaker 1: answer is in part technology. Joining me on this edition
Speaker 1: of Bloomberg Studio one point, oh, former head of the
Speaker 1: National Economic Council, Gary con I'd like to start with
Speaker 1: your big picture mid pandemic view. We're in a very
Speaker 1: different place than when you left the White House a
Speaker 1: couple of years ago. How would you characterize the state
Speaker 1: of the U. S economy right now? So one thing
Speaker 1: is we have to remember how resilient the United States
Speaker 1: economy is. If we all think of what we've been
Speaker 1: through since March of this year and where we are
Speaker 1: now in December. I think it's nothing short of extraordinary
Speaker 1: to how resilient we've been, how well the consumer has
Speaker 1: held up, and how well the economy has held up,
Speaker 1: in spite of the fact that we've gone through almost
Speaker 1: every negative iteration we could go through, from completely shutting
Speaker 1: down the economy at one point, which we now understand
Speaker 1: all of the ills both for the economy as well
Speaker 1: as the emotional and psychological well being of the country,
Speaker 1: having all these little micro events in different parts of
Speaker 1: the country go on one by one. In spite of
Speaker 1: all that, the U. S economy continues to recover, It
Speaker 1: continues to find ways to find a path forward. Since
Speaker 1: you left government, you have explored new territory, You have
Speaker 1: a spack of course, you are on some tech startup boards.
Speaker 1: Tech has cushioned the blow of the pandemic and also
Speaker 1: accelerated huge changes in human behavior. What COVID borne technologies
Speaker 1: do you think are here to stay? So Emily, we've
Speaker 1: learned a lot in the last eight months, and we'll
Speaker 1: continue to learn, And I think the covi IS has
Speaker 1: accelerated a lot of the technologies that were coming naturally.
Speaker 1: If it's payment or fintech today. We didn't invent fintech
Speaker 1: eight months ago, but we're using more and more of
Speaker 1: the payment apps and we all want to be uh
Speaker 1: touchless or hands free. We don't want to be touching
Speaker 1: pens or writing or signing pieces of paper, so we're
Speaker 1: using touchless what touch us payment systems? I think the
Speaker 1: biggest question coming out COVID for me is going to
Speaker 1: be this data and freedom of data issue because we've
Speaker 1: seen a lot of the problems. Think about the whole issue.
Speaker 1: When we went through the Cares Act. One of the
Speaker 1: big cornerstones of the Cares Act is that we sent
Speaker 1: money out to individuals, well deserving individuals in the United States.
Speaker 1: It took the federal government, using all of their powers,
Speaker 1: months to find people and and to actually be able
Speaker 1: to disseminate cash to them, cash that they wanted and
Speaker 1: cash for the government was trying to get to help.
Speaker 1: We have technology solutions that would solve that. I'm just
Speaker 1: not sure people are willing to give up the freedom
Speaker 1: to have technology solve that problem. We just went through
Speaker 1: an election. Think of the the the the maybe controversy
Speaker 1: or maybe not controversy around the election, um and all
Speaker 1: the discussion around standing in line to vote, UM, and
Speaker 1: all the discomfort that that created. We have the technology
Speaker 1: to create your real biometrically enhanced voting where you literally
Speaker 1: could vote anywhere biometrically, whether it's voting from your iPhone
Speaker 1: or go into a polling place and using your biometrics
Speaker 1: to vote. We would have a accuracy on knowing who voted,
Speaker 1: when they voted, where they voted from, not who they
Speaker 1: voted from. But there are a lot of technology solutions
Speaker 1: that we could be using, and maybe we should be using.
Speaker 1: But we're going to run into this natural antibody of
Speaker 1: what information people are comfortable having out in the system
Speaker 1: and what information people are are free having are comfortable
Speaker 1: with the government having. And I know you're investing across
Speaker 1: biometrics and cybersecurity. What about the security concerns and the
Speaker 1: risks associated with incorporating more biometrics, more of us giving
Speaker 1: our own data into these solutions. Well you you you've said,
Speaker 1: I am a huge fan of biometrics. UM. I think
Speaker 1: that biometrics are going to play a bigger and bigger
Speaker 1: role in our lives. Um. We we only have one
Speaker 1: set of the biometrics. You only have one handprint. You
Speaker 1: only have one retina scan and you were born with it,
Speaker 1: and you die with it, and you carry it with
Speaker 1: you for life. Now, when I went to vote, and
Speaker 1: I'm not criticizing my voting system, you know, I literally
Speaker 1: went in there and said, hey, I'm Gary Cone. They
Speaker 1: looked me up and I signed, and as long as
Speaker 1: my signature looked like the signature before I got to
Speaker 1: go vote, if I said hey, I'm Gary Cone, I
Speaker 1: put my hand on a biometric hand reader, there would
Speaker 1: be no way I wasn't Gary Cone. They would know
Speaker 1: exactly who I was. I wouldn't even have to tell
Speaker 1: my name. I could just put my hand down on
Speaker 1: the scanner and it would come up life. How bullish
Speaker 1: are you on bitcoin and cryptocurrency and how much do
Speaker 1: you believe they will fundamentally transform our economy? So when
Speaker 1: we talk about blockchain, and we can come back and
Speaker 1: talking about the infrastructure, that's the highways and the pipes
Speaker 1: that are necessary for bitcoin, but they're necessary for many
Speaker 1: other applications, and I think they're very useful and I'm
Speaker 1: very bullish on that. When you talk about bitcoin in itself,
Speaker 1: I don't have a strong opinion on bitcoin I'm in
Speaker 1: asens I'm not a strong believer in bitcoin. Why not it?
Speaker 1: Is it developing assets potentially, and for all the reasons
Speaker 1: it's a strong developing asset class, it may fail. Remember,
Speaker 1: part of the integrity of an asset class, or part
Speaker 1: of the integrity of a system, is knowing who owns
Speaker 1: it and knowing who has it, and knowing why it's
Speaker 1: being transferred and is it being used for legitimate causes?
Speaker 1: Is it being used for good or is it being
Speaker 1: used for illegitimate causes? Is it being used in corrupt
Speaker 1: practices and corrupt way is the big coin system today
Speaker 1: has no transparency to it. So there are a lot
Speaker 1: of people that question, why would you need a system
Speaker 1: that does not have an audit trail, does not have integrity.
Speaker 1: You don't know who owns it, You don't know exactly
Speaker 1: how much exists today, how much has been mine, how
Speaker 1: much has been lost, how much has been thrown away
Speaker 1: on hard drives because they don't exist anymore. So it
Speaker 1: lacks some of the basic integrityes of a real market.
Speaker 1: And then you have to get into the idea or
Speaker 1: the concept that it's a theoretical value. It's a theoretical value,
Speaker 1: and there's a lot of other things that happens. It's
Speaker 1: a theoretical value because someone is willing to buy it
Speaker 1: or someone is willing to sell it at that price today,
Speaker 1: but there's nothing tangible behind it. At least, when you
Speaker 1: buy announce of gold, you can deliver announce of gold
Speaker 1: isign Someone may think it's worth two thousand dollars today.
Speaker 1: In six months from now, it maybe where but at
Speaker 1: least you know you're getting announced a goal which is
Speaker 1: no different than a house, or no different than a
Speaker 1: piece of art, or no difference than something else. It's tangible.
Speaker 1: At no point in time are you ever going to
Speaker 1: be able to take tangible delivery of a bitcoint? How
Speaker 1: should the FED in a new administration be approaching alternative assets?
Speaker 1: So I think as bitcoin continues to evolve, it will
Speaker 1: get more and more regulatory scrutiny, because at the end
Speaker 1: of the day, the regulatory community always is looking out
Speaker 1: to make sure that no one gets hurt, and they
Speaker 1: want to make sure that there's no unsuspecting investor that
Speaker 1: ends up owning something that they didn't know what they
Speaker 1: own and they lost a lot of money because they
Speaker 1: didn't understand it. So how does the payments landscape look
Speaker 1: different than and let's say a decade. Does cash disappear
Speaker 1: in this unprecedented economy and new economic activity that we're seeing, Well,
Speaker 1: I think can easily disappear. I mean, the idea of
Speaker 1: paper currency in the legitimate world is becoming more and
Speaker 1: more obsolete and and I believe it can become totally obsolete.
Speaker 1: But the fintech payment systems are also not going to
Speaker 1: replace the banks. There's a big difference between a fintech
Speaker 1: payment system and a fintech ability to move cash and
Speaker 1: the banking systems. And remember, the banking systems are big,
Speaker 1: they're highly regulated, and they're regulated again to protect investors.
Speaker 1: They're they're they're regulated and protect depositories. So when someone
Speaker 1: puts money into a bank that is highly regulated, they
Speaker 1: are a hundred percent confident that they can get their
Speaker 1: money out at and moments notice. And there's an enormous
Speaker 1: amount of very expensive and very costly regulation that goes
Speaker 1: around owned that concept that if I put a dollar in,
Speaker 1: or I put fifty cents in, or I put a
Speaker 1: hundred dollars in, whenever I want to withdraw it, it
Speaker 1: will be there for me and therefore to take deposits
Speaker 1: and pay interest on them. When you agree to be
Speaker 1: in that business, you agree to have an enormous amount
Speaker 1: of regulatory birth. If you're just in the money movement business,
Speaker 1: you have a lot less regulatory for burden on you.
Speaker 1: But the question is how does the money get into
Speaker 1: the money movement system. So today, if you want to
Speaker 1: put your money into a money movement system, you can
Speaker 1: either charge your credit card and put it into the system,
Speaker 1: which is going back into the traditional banking system. You
Speaker 1: can do a money movement from a traditional bank into
Speaker 1: one of these bind tech platforms, but you're still relying
Speaker 1: upon the regulated part of the system to initiate the
Speaker 1: cash flow into the unregulated part of the system. This
Speaker 1: is my conversation with the former director of the National
Speaker 1: Economic Council, Gary com Up Next. Much like big banks
Speaker 1: have faced regulation, what are his thoughts on big tech
Speaker 1: regulation now and his outlook on the public markets. I'm
Speaker 1: Emily Chang, this is Bloomberg Studio. At one point, oh now,
Speaker 1: you said that Janet Yellen will make an excellent Treasury Secretary.
Speaker 1: Biden's economic team is now shaping up. What is your
Speaker 1: advice for them? My advice overall is the growth and
Speaker 1: stability and statements in the economy has to be their
Speaker 1: number one objective. So when you look at where we
Speaker 1: are in COVID, you look at where the economy is
Speaker 1: right now, and you look at the danger we have
Speaker 1: of still fairly massive unemployment, especially unemployment in the unskilled
Speaker 1: part of the labor sector. The fact that we've lost
Speaker 1: over fifty small businesses in America. And we all know
Speaker 1: that small businesses are the drivers of jobs and and
Speaker 1: of job growth. And I always remind people every large
Speaker 1: business in America started as a small business. So if
Speaker 1: we want to get new larger businesses, we have to
Speaker 1: stimulate small businesses. I would say, look, the first thing
Speaker 1: you have to do is figure out how to get
Speaker 1: more stimulus into this system. As we evolve into the
Speaker 1: Biden administration, the key job for a lot of these
Speaker 1: people is to make sure that we build sound fundamental
Speaker 1: economic growth into the United States. We have to become
Speaker 1: a doctor. We have to stay, not become We have
Speaker 1: to stay a dominant economic power. I remind people where
Speaker 1: we were in the in the early part of this year,
Speaker 1: which is not that long ago, in January and February
Speaker 1: we basically had an economy growing in three percent. We
Speaker 1: had three percent wage growth, and we had three percent
Speaker 1: GDP growth. Those were good numbers. Those are numbers that
Speaker 1: we were striving for. I think the new administration would
Speaker 1: be ecstatic to get back to those numbers over the
Speaker 1: next four years. Biden's nomination of Yellen is now official.
Speaker 1: She has said she will work towards rebuilding. What are
Speaker 1: your thoughts on her in particular? I know that you've
Speaker 1: worked with her and the leadership you expect her to bring.
Speaker 1: We worked extremely well together when I was in the
Speaker 1: White House. We had a very good working relationship. I
Speaker 1: find her to be very practical, very pragmatic, have a
Speaker 1: very deep and broad understanding of the U. S economy,
Speaker 1: And I'm very confident that she's going to step in
Speaker 1: and do a very good job. She needs the help though,
Speaker 1: she needs help of Congress to get stimulus going. She
Speaker 1: can't do this by herself. You know, every in Washington
Speaker 1: is a team effort. She can be a leader and
Speaker 1: she can show real leadership, but other people are going
Speaker 1: to have to show followship. Now. I want to talk
Speaker 1: a little bit about the public markets, because they have
Speaker 1: been on a tear. Can this keep up? We've got
Speaker 1: to complete disconnect in some respects between the largest companies
Speaker 1: in America, which are the companies we talk about every
Speaker 1: day when we're talking about the stock market and what's
Speaker 1: going on in the real economy, and when we look
Speaker 1: back at what happened during covid in, one of the
Speaker 1: big takeaways should be and I pray that this is
Speaker 1: one of the big takeaways, is that when we made
Speaker 1: a decision and I'm not criticizing this, this decision at
Speaker 1: the time to shut down the US economy and deem
Speaker 1: certain businesses as essential and other businesses non essential. We
Speaker 1: unfortunately deem the largest companies in America as essential. So
Speaker 1: we allowed the big companies to stay in business, but
Speaker 1: unfortunately the local neighborhood business that sold the identical products
Speaker 1: we deem to be not essential and we shut them down.
Speaker 1: And so what ended up happening is the largest companies
Speaker 1: in America got a market share, and they got that
Speaker 1: market share for zero costs. We would force as consumers
Speaker 1: in the United States to go to the largest companies
Speaker 1: because they were the only ones open. So we needed food,
Speaker 1: or we needed prescriptions, we were forced to go to
Speaker 1: the big box retailers. But when we were in those
Speaker 1: big box retailers, we were able to buy clothes, We
Speaker 1: were able to buy shoes, we were able to buy appliances,
Speaker 1: things that the smaller companies on main street all over
Speaker 1: America's soul. So the stock market right now is representing
Speaker 1: the fact that the largest companies in America got substantially
Speaker 1: bigger during this crisis because they were the ones that
Speaker 1: were open well. And some of those are tech companies Apple, Google, Facebook, Amazon?
Speaker 1: Has big tech gotten too big? Do tech companies need
Speaker 1: regulation like uh Dodd Frank legislation, which some in Silicon
Speaker 1: Valley has been have been advocating. So look, I think
Speaker 1: you can't generalize on big needing regulation. Sometimes you can
Speaker 1: be very big and not need regulations. Sometimes you cannot
Speaker 1: be huge and need regulation. You know, it really depends
Speaker 1: on what are the barriers to entry? Can people come
Speaker 1: in and compete with you? Are you horizontally and vertically integrated?
Speaker 1: So therefore, do you have a huge competitive advantage because
Speaker 1: not only are you providing you know, one product, but
Speaker 1: the one product you provide leads you to another product,
Speaker 1: and another product and another product. So therefore a new
Speaker 1: startup couldn't get there and could compete with you initially.
Speaker 1: And also are you competing against other businesses that are
Speaker 1: regulated now? So are you therefore on a unfair or
Speaker 1: not a level playing field? And if you started seeing
Speaker 1: those questions, yes, then you're going to or you should
Speaker 1: be regulated to look like you're on a on a
Speaker 1: fairly level playing field with the existing companies that are
Speaker 1: regulated today. You're listening to my conversation with Gary Khane,
Speaker 1: former director of the National Economic Council. Up next, the
Speaker 1: former CEO of Goldman Sachs shares his thoughts on the
Speaker 1: spac crates and was his time with Trump worth it.
Speaker 1: I'm Emily Chang and this is Bloomberg Studio. At one point, Oh,
Speaker 1: stay with us. Let's talk about your spack. What is
Speaker 1: the latest on your SPACK efforts. In the kind of
Speaker 1: companies you're looking for. We're looking for goods, sound companies
Speaker 1: that are going going to be around for the next
Speaker 1: hundred years. So I want to buy a company that
Speaker 1: I'm happy to own for the next twenty or thirty years.
Speaker 1: And do you think this BAC process will change the
Speaker 1: traditional I P O process fundamentally? Like, is this the
Speaker 1: beginning of a sea change and how companies get to
Speaker 1: the public markets. So I've been in the financial services
Speaker 1: long enough to know that I've seen new products coming.
Speaker 1: I've seen new products go, I've seen new opportunities. I
Speaker 1: do think we are at a watershed moment in the
Speaker 1: SPAC world, and the spacts are now here to stay.
Speaker 1: The general acceptance of spects, both on the cell side
Speaker 1: and the buy side for companies, companies being willing to
Speaker 1: sell themselves the spects and spects being more better buyers
Speaker 1: of assets. That has changed dramatically. The management teams and
Speaker 1: the spacts have gotten better and better. It's not gonna
Speaker 1: look in the future like it looks today. The SPAC
Speaker 1: world will will it more mature, it will define itself.
Speaker 1: That will redefine itself. But I think the product, the
Speaker 1: back product, is here to stay as a mechanism for
Speaker 1: existing companies to merge into pre existing publicly listed blank
Speaker 1: check companies. The challenges of the time are unprecedented, but
Speaker 1: returns have also been phenomenal. If you were running a
Speaker 1: big bank today, would you be giving big bonuses this year?
Speaker 1: Bonuses in line with the enormity of the returns. So
Speaker 1: I think that. Remember, banks are very competitive beasts and beings,
Speaker 1: and banks not only compete with other banks, they compete
Speaker 1: with asset managers, they compete with private equity firms, they
Speaker 1: compete with hedge funds. And remember the bank's asset base
Speaker 1: is its human capital. So bank is only as good
Speaker 1: as the people that they can attract and they can retain.
Speaker 1: So banks therefore need to pay competitively in line with
Speaker 1: what their competitors are paying paying. And their competitive universe
Speaker 1: is fairly wide. It includes all of the other different
Speaker 1: financial intermediaries as well. As you point out technology companies.
Speaker 1: A lot of these financial institutions today, a big majority
Speaker 1: of what they're doing is tech and tech related. So
Speaker 1: when they're going out to hire the best people today,
Speaker 1: they're competing with the technology firms, so they have to
Speaker 1: be competitive. So banks are gonna look at what makes
Speaker 1: them competitive to attract and retain the best people in
Speaker 1: the world, and they'll pay commensurate with that. What would
Speaker 1: you do? I would make sure I'm competitive. I would
Speaker 1: make sure that I'm competitive with all of my natural
Speaker 1: competitors and my new found competitors, which is the technology world.
Speaker 1: And I would make sure that I'm attracting the best people,
Speaker 1: and I'm retaining the best people because the cost of
Speaker 1: losing great people is really high. Not only do lose
Speaker 1: great people in their production, but then you lose the
Speaker 1: momentum of the organization. You have to spend money to
Speaker 1: go out and hire a new person, and then you
Speaker 1: have downtime while you train the new person. So it's
Speaker 1: very important for financial institutions and other institutions, not a
Speaker 1: financial services entery. It's important for technology companies to stay
Speaker 1: competitive and make sure that they can they can retain
Speaker 1: their best peak. Now you've worked a long time in banking,
Speaker 1: you spent some time in the administration, You've spent some
Speaker 1: time exploring since then, would you be open to public
Speaker 1: service again. I thought my time in the government was
Speaker 1: literally the most amazing couple of years of my life,
Speaker 1: and the ability for me to give back to the
Speaker 1: country was extraordinary. I was very happy doing it. If
Speaker 1: a if a great opportunity comes along again, of course
Speaker 1: I'll consider it. I'm curious how you reflect on where
Speaker 1: the Trump administration is leaving this country right now and
Speaker 1: how you separate your time from that. You know, it
Speaker 1: sounds like it was worth it to you. But do
Speaker 1: you feel that President Trump is leaving the United States
Speaker 1: in a good place? Look, I think it's worth it
Speaker 1: from any individual who gets the opportunity to serve their
Speaker 1: country and give back to the country. I feel like
Speaker 1: we all owe it to the country if we're in
Speaker 1: a position where we can leave our normal life, get
Speaker 1: out of our our our normal job, and get back
Speaker 1: to the country. And I think that's important, and I
Speaker 1: think more and more people need to do that, and
Speaker 1: it's important for the country. I think the president, you know,
Speaker 1: is leaving the country in an interesting place. You know,
Speaker 1: if it weren't for COVID, and and that's a big
Speaker 1: if it weren't for and I understand it, but weren't
Speaker 1: for COVID, you know. I always remind myself where we
Speaker 1: were in February and March of this year, where we
Speaker 1: were from an economic standpoint, where we were going economically,
Speaker 1: where we were going wage growth, where we were going
Speaker 1: with minority and underprivileged wage growth, wage growth, how many
Speaker 1: people we were bringing back into the into the workforce,
Speaker 1: What the GDP was doing, what the economy was doing. Uh,
Speaker 1: how we how we got through smart deregulation. I'm not
Speaker 1: an antiregulation person. I'm a smart regulation How we deregulated
Speaker 1: some of the medium and smaller banks in the United
Speaker 1: States to make them more competitive so they could lend
Speaker 1: more money into the economy and stop spending that money
Speaker 1: on regulation that didn't make them safer and didn't make
Speaker 1: them sounder. When I think of the things that were achieved,
Speaker 1: it is a pretty good track record. Um, Look, COVID
Speaker 1: has been devastating. COVID has been devastating to every individual
Speaker 1: in this country. I don't care who you are, COVID
Speaker 1: has had a dramatic effect on you, and it will
Speaker 1: have a dramatic effect on the legacy of any president
Speaker 1: who would have been in office during this time. So
Speaker 1: where are we going to see you? Digging? Like? What? What?
Speaker 1: What are we going to see Gary Kny next? I
Speaker 1: still think there's enormous opportunities in the technology world. I'm
Speaker 1: one of those that does agree that we're still in
Speaker 1: very very early innings of what's going on in technology
Speaker 1: and what's going on in the world and how technology
Speaker 1: and the cloud is going to affect our lives. So
Speaker 1: as I keep looking at opportunities, and I keep looking
Speaker 1: at companies, and I look at places where I'm spending
Speaker 1: more and more of my time. They all revolve around technology,
Speaker 1: cloud and how our lives are going to change because
Speaker 1: of further, I would say revolution or evolution of technology.
Speaker 1: All Right, Garry Come, former Director of the National Economic Council,
Speaker 1: Thank you so much for joining us today on Studio
Speaker 1: one Point. Oh, it has been great to have you.
Speaker 1: Bloom Book Studio one Point was produced and edited by
Speaker 1: Kevin Hines. Our executive producer is Alison Weiss. Our managing
Speaker 1: editor is Daniel Culbertson, with production assistance from Mallory Abelhausen
Speaker 1: and editing assistance from Daniel Wallenstein. I'm Emily changing your
Speaker 1: host and executive producer. This is Bloomberg