Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I am so pleased to say that joining me now
Speaker 2: is Bruce Flatt, the chief executive officer of Brookfield. Bruce,
Speaker 2: thank you so much for having us and for sitting
Speaker 2: down with me.
Speaker 1: Thanks for being here.
Speaker 2: So your investor dat today comes off the heels. I
Speaker 2: think a really exciting announcement for this industry of how
Speaker 2: you're positioning Brookfield that is growing your insurer and really
Speaker 2: letting that lead your investments. If this is, in your words,
Speaker 2: an evolution, If this is Brookfield two point zero, what
Speaker 2: does Brookfield two point oh look like?
Speaker 1: I think it's Brookfield five point zero.
Speaker 3: But look, I would just say that the world is
Speaker 3: always evolving, and we're always just trying to figure out
Speaker 3: how do we fit, how do we take enough risk
Speaker 3: to expand the business to grow it over time and
Speaker 3: not take any undo risk for shareholders. So we continually
Speaker 3: try to do that in the business. And the thing
Speaker 3: that has what we been doing is taking our own
Speaker 3: capital outside of our investment management business, taking our own
Speaker 3: capital and putting it into back insurance annuities and continuing
Speaker 3: to push that business out there and really just doing
Speaker 3: the same thing that we do in our have always
Speaker 3: done in our investment business. Just do it in the
Speaker 3: insurance company because the things that we invest into are
Speaker 3: ideally suited to back long tailed liabilities in an insurance business.
Speaker 1: And so it's just traditional insurance.
Speaker 3: You make money out of insurance and you try to
Speaker 3: not lose money in investing.
Speaker 1: And if you flip that on its head.
Speaker 3: We're trying to not lose money insurance and make our
Speaker 3: money in investing. And it's just a different way of
Speaker 3: looking at insurance. And there's been some obviously that have
Speaker 3: successfully deployed that methodology for years.
Speaker 2: Oh not because you have Apollo your Berkshire Halfaway. To
Speaker 2: what degree do you look like your rivals or not look.
Speaker 1: Like your rivals? I'd say we're probably somewhere in the
Speaker 1: middle of those two.
Speaker 3: Apollo is a credit led insurance business and Berkshire Hathaway
Speaker 3: is an investment led insurance business, and we're probably somewhere
Speaker 3: between the two, but probably closer to Berkshire Hathaway than Apollo.
Speaker 2: So it is this moment where more capital is coming
Speaker 2: into this industry, be it from insurance or retail money.
Speaker 2: I know that this is something that a lot of
Speaker 2: people want to get their hands on, and Bank of
Speaker 2: America recently put out a note saying Brookfield is maybe
Speaker 2: behind some of its peers. Do you feel like this
Speaker 2: is a moment of catch up for Brookfield? No.
Speaker 3: I would say, Look, we're in the we're in the
Speaker 3: first inning. We're not even in the first inning of
Speaker 3: retail wealth like this. There's a there's a twenty trillion
Speaker 3: dollar market out there. We spent twenty five years on
Speaker 3: the first twenty trillion, which is in institutional management, and
Speaker 3: now allocations to alternatives are twenty thirty forty fifty percent
Speaker 3: in institutions, they are zero in retail. And we have
Speaker 3: a twenty year runway. What's going to going to lead
Speaker 3: to six is those that have experience and products that
Speaker 3: can fit into retail accounts. And we have a twenty
Speaker 3: five year track record in the exact products that should
Speaker 3: be in retail wealth.
Speaker 2: So if we're not even in the first innings yet,
Speaker 2: what does this industry look like in five ten years
Speaker 2: from now when you have unlocked this retail capital, when
Speaker 2: retail becomes one of the bigger investor bases. What happens
Speaker 2: to you in your peers? What does that look like?
Speaker 3: I think private markets for the last twenty years have
Speaker 3: just been increasing increasing because you just own businesses and
Speaker 3: you don't have the distractions of the public markets. Public
Speaker 3: markets are going to if you need liquidity, be in
Speaker 3: the public markets and generally be in ETFs, and that
Speaker 3: allows us as private market investors to use the capital
Speaker 3: markets actually to buy things because the people that get
Speaker 3: left aside from the ETF market, you can take them private.
Speaker 3: But increasingly, just more and more money is going into
Speaker 3: privates and that's exciting for all of us, and it'll
Speaker 3: it's going to grow continue to grow, both in institutional
Speaker 3: management as these sovereign institutional pension funds in the world
Speaker 3: just get bigger and bigger as they keep compounding returns.
Speaker 3: But in retail, you're starting at zero and if we
Speaker 3: end up at twenty thirty percent in retirement accounts, that's
Speaker 3: an enormous amount of money to deliver to an industry
Speaker 3: of alternatives, and there's just not that many people that
Speaker 3: can do what we do.
Speaker 2: I know another area that you've identified as a really
Speaker 2: big opportunity, and I speaking with Connor about this earlier
Speaker 2: is AI infrastructure, and Brookfield is so uniquely placed because
Speaker 2: not only are you in the infrastructure side, but you're
Speaker 2: on the energy side as well. It's an industry AI
Speaker 2: infrastructure that takes a lot of resources, be it human resources,
Speaker 2: be it capital, be it that energy. Is there a
Speaker 2: risk that it's crowding out that so many resources are
Speaker 2: being plowed into AI infrastructure, sure that other private investment,
Speaker 2: other public investment as well doesn't get the attention it needs.
Speaker 3: So I would say we're at the early early again,
Speaker 3: we're at the early early stages of this, and the
Speaker 3: buildout of artificial intelligence globally is going to be very,
Speaker 3: very It is very large, but it is getting bigger
Speaker 3: every single year. And you've seen some of the big
Speaker 3: technology companies what they've been doing of late.
Speaker 1: But this is going to be It starts in the
Speaker 1: United States, but.
Speaker 3: It's going global, and it's really just the next backbone
Speaker 3: of the global economy. And we've been building out the
Speaker 3: backbone of the global economy.
Speaker 1: For decades and decades.
Speaker 3: The artificial intelligence is going to be just really the
Speaker 3: table stakes that you must build in a country to
Speaker 3: deploy your businesses and for your businesses to get better,
Speaker 3: because what this is going to lead to is productivity
Speaker 3: advances in businesses and those that don't have it will lose,
Speaker 3: and those that have it were going to win. So
Speaker 3: it's going to be built out around the world, and
Speaker 3: the amount of capital that's getting put into into data centers,
Speaker 3: into power for this, and really the compute capacity buildout
Speaker 3: is very, very large.
Speaker 1: Fact. I've never we've.
Speaker 3: Actually never seen anything like this, and that probably says
Speaker 3: a lot from one of the largest backbone investors out there.
Speaker 2: For sure, Well, you're talking about that there are going
Speaker 2: to be a lot of winners from this, but Bruce,
Speaker 2: it also sounds like there's going to be some real losers,
Speaker 2: some real people who are left out in this transition.
Speaker 3: You know, I actually think that these transformations. Of course,
Speaker 3: there's always on the edges, there's always things that happen
Speaker 3: that aren't what you would want, but generally transformation think
Speaker 3: of the computer when it came out, everyone thought that
Speaker 3: people were going to lose, and your iPhone, people thought
Speaker 3: people were going to lose. What happens is we are
Speaker 3: we're a shrinking population generally in the world, and robotics
Speaker 3: and advanced productivity is just helping us do things better
Speaker 3: and we're all going to be more productive. It means
Speaker 3: there's going to be greater wealth to spread around, and
Speaker 3: if we do it right, I think it's going to
Speaker 3: be great for the world.
Speaker 2: But what about the Sam Altman comment a couple of
Speaker 2: weeks ago, basically saying we're in the phase right now
Speaker 2: where investors are over excited about AI. Do you think
Speaker 2: there is some overexcitement, especially when it comes to pricing
Speaker 2: and things.
Speaker 3: So remember, what we do is build the backbone of
Speaker 3: the global economy.
Speaker 1: So we are.
Speaker 3: Building power, data centers, compute capacity for the best of
Speaker 3: the world and for sovereign countries, and all of those
Speaker 3: have long term contracts in place, and we're behind the
Speaker 3: scenes providing them enormous amounts of money like this is
Speaker 3: we're talking per center twenty five to fifty one hundred
Speaker 3: billion dollars.
Speaker 1: This is enormous capital.
Speaker 3: Of course, when people, when excitement happens and everyone wants
Speaker 3: to get in on something, there are mistakes made by people.
Speaker 3: I'm I'm not saying there will not be mistakes, but
Speaker 3: I'd say for us, we're.
Speaker 1: Behind the scenes.
Speaker 3: We've been around this doing it a long time, and
Speaker 3: I think for it's a great investment area for a
Speaker 3: long period of time.
Speaker 2: You've again been part of this for a while. Remember
Speaker 2: in twenty twenty two you had that partnership with Intel
Speaker 2: building out some infrastructure there. One of the things that's
Speaker 2: changed in this is you have, just taking Intel as
Speaker 2: an example, more involvement from the government, a ten percent
Speaker 2: stake the US government looking at taking Does it change
Speaker 2: the calculus for investing in these types of things if
Speaker 2: you have governments more involved.
Speaker 3: No, I look, I think they did that for specific reasons,
Speaker 3: which I don't need to comment on. I just think
Speaker 3: the business world evolves. There's a lot of money out there,
Speaker 3: and businesses continue to grow and build out, and we're
Speaker 3: going to see we are going to see governments are
Speaker 3: going to have to facilitate the AI build out because
Speaker 3: they need a lot of sovereign capacity themselves, like they
Speaker 3: need government government's to your passport, driver's license, and everything else.
Speaker 3: When you come into the when you come into the
Speaker 3: United States, you go to the border now and it
Speaker 3: reads your picture on the screen and let you in
Speaker 3: the country. And that's data center capacity. And when you
Speaker 3: get down to it, like to take it really simple,
Speaker 3: that's what it is. And every day those kind of
Speaker 3: things are going to artificial intelligence. You just thought that
Speaker 3: they saw your picture and let you in the country.
Speaker 3: But it's checked as you come to the border, it's
Speaker 3: checked your face, it's checked everything going on with you,
Speaker 3: and it lets you in. And what happens is it
Speaker 3: just seeps into your life and people don't recognize it's happening.
Speaker 3: But what's behind that is trillions and trillions and trillionstead
Speaker 3: of dollars.
Speaker 2: Of in I don't know whether to be excited or
Speaker 2: terrified about what you just said to me, Bruce, But
Speaker 2: if we are in this and governments need to be
Speaker 2: more involved, I mean the US measures. Again, some have
Speaker 2: kind of criticized it, being like, oh, this is central
Speaker 2: planning taking stakes and companies and at the same time
Speaker 2: trying to get revenue share from the likes of Nvidia
Speaker 2: and AMD. Do those kinds of moves concern you or again,
Speaker 2: do you just see them as necessary in this new
Speaker 2: world we're in.
Speaker 3: Look, I just think the United States government has a strategy,
Speaker 3: they're deploying it. They've done an excellent job and many
Speaker 3: of the things they're doing, and they're supporting American business
Speaker 3: and they're going to build out American enterprise the way
Speaker 3: they best see fit and they're doing a great job.
Speaker 2: Just to that point, Bruce, because you were just so
Speaker 2: uniquely positioned not only to see all the investment going
Speaker 2: into AI infrastructure, but just on the large swath of
Speaker 2: this economy that Brookfield touches between AI build out and
Speaker 2: at the same time a labor market slowing, maybe corporations
Speaker 2: that are a little less certain. How do you feel
Speaker 2: about this American economy? Is it a moment of weakness,
Speaker 2: is it a moment of slowing, or is this still
Speaker 2: a very strong economy.
Speaker 3: I'm a long term thinker, and I would say what
Speaker 3: happens in the short term is not really relevant.
Speaker 1: We don't pay too much attention to it.
Speaker 3: Remember, we're building AI instructure for the next forty or
Speaker 3: fifty years. That's what we're thinking about. The United States
Speaker 3: today has energy dominance, technology dominance, one of the largest
Speaker 3: economies in the world, one of the richest economy of
Speaker 3: the world, and a very entrepreneurial working class. It is
Speaker 3: going to win, and we continue to put a.
Speaker 1: Lot of money behind that.
Speaker 3: I think we've probably invested thirty forty fifty billion dollars
Speaker 3: in the US this year. The United State is going
Speaker 3: to be a great place to invest for a long
Speaker 3: period of time.
Speaker 2: Bruce. I think that's the perfect note to end it on.
Speaker 2: Thank you so much for joining really really fastining to get.
Speaker 1: Thanks you for being the warm up act of our
Speaker 1: investor day.
Speaker 2: I was going to say best of luck for everything else.
Speaker 2: Hopefully you're feeling warm and ready to address the crowd, Bruce.
Speaker 2: Thanks again, Bruce Flatt of Brookfield,