Speaker 1: Hi, I'm Jason Kelly and I'm Carol Masser. Welcome to
Speaker 1: the Bloomberg Business Week Weekend podcast. This week we bring
Speaker 1: you highlights from our trip to the Milk and Institute
Speaker 1: Global Conference in Los Angeles, and it was all about
Speaker 1: driving shared prosperity and folks from all walks of life,
Speaker 1: all different types of industries, having really really smart conversations
Speaker 1: getting into complicated subjects. We also hear from some of
Speaker 1: the biggest names in business, politics and finance. Well and
Speaker 1: where else, apparently are you going to run into Steve
Speaker 1: Schwartzman from Blackstone, Bruce Flatt from Brookfield, Bob Dudley from BP,
Speaker 1: but also the Edge Laura Dern. We talked to all
Speaker 1: of them. It's like the dream cocktail party and we
Speaker 1: were there first. Up, though, Jason, we spoke with oak
Speaker 1: Tree Capital co chairman Howard Marks. You are well known
Speaker 1: in the world as someone who knows just about everything
Speaker 1: about credit and distress. Is there any distress in the
Speaker 1: world right now? There is distress mostly outside the You well,
Speaker 1: there's some in the US. Retail is in distress, some
Speaker 1: energy is in distress with low energy prices. Outside the US,
Speaker 1: it's a more widespread less shotgun. Um. You know there
Speaker 1: are some npls in in the European banks. We we
Speaker 1: buy some of those. And there's a big pile up,
Speaker 1: of course of npls in China. Um and uh, and
Speaker 1: we're we're looking at those. You are looking at them,
Speaker 1: but not buying it. We're investing, We're buying. We have
Speaker 1: close to four years of experience doing it. We we
Speaker 1: concluded four years ago that it was very important to
Speaker 1: start building the experience. You know, you can't go into
Speaker 1: a market when it becomes propitious without some background, So
Speaker 1: clearly you have to build the experience in advance. How
Speaker 1: do you see China, especially with the backdrop of I
Speaker 1: feel like the tensions between the United States and China
Speaker 1: certainly not new, We've seen them through several administrations. But
Speaker 1: how do you view that that political lens for this
Speaker 1: is the investment lens. Well, it's it's not easy, um,
Speaker 1: But you know, the way I think of it, Carol,
Speaker 1: is that Europe and Japan are economic senior citizens. The
Speaker 1: U S is a mature adult, and China's an adolescent.
Speaker 1: And if you've ever had an adolescent in your house
Speaker 1: now and I know Jason has then you know that
Speaker 1: there are it's tempestuous ups and downs, UM chaotic, but
Speaker 1: you also know that the adolescents best decades are ahead.
Speaker 1: And you know over the next twenty years, which is
Speaker 1: going to grow faster, China or the US? Simple question.
Speaker 1: In my opinion, China will have rapid growth. UM. Once
Speaker 1: in a while, there will be You'll have some bad days.
Speaker 1: You might even have some bad years once in a while.
Speaker 1: There may be issues over uh macro factors. But I
Speaker 1: think that uh, you know, one of the largest economies
Speaker 1: in the world. UH, you can't ignore it, and so
Speaker 1: do you invest differently. They're going forward in a more
Speaker 1: meaningful way, especially given now the place where you're going
Speaker 1: to have oak Tree housed within UH Brookfield. You guys
Speaker 1: are combining operations there. What is the opportunity? How big
Speaker 1: does the opportunity get in China? The numbers are very big.
Speaker 1: Everything in China is really big in terms of numbers. UH.
Speaker 1: We have been moving in cautiously. We will continue to
Speaker 1: do so, but we are amping up at this time.
Speaker 1: I feel like there is such Howard animosity. Certainly, I
Speaker 1: think there's a U S perspective of thinking. China's the enemy. Uh.
Speaker 1: And they're certainly got their long term you know, planning
Speaker 1: in terms of industries and how they want to be
Speaker 1: much more sophisticated, whether it's technology and AI and so
Speaker 1: on and so forth. And we look at that as
Speaker 1: a bad thing and we want to stop them from
Speaker 1: doing that. How do we get a better understanding of
Speaker 1: what's going on from China? You've I'm assuming, been there,
Speaker 1: You've talked to various companies and investors. What what are
Speaker 1: we missing and not understanding? Maybe? Is there such animosity? Well,
Speaker 1: I've never felt any animosity. I've been going there for
Speaker 1: about ten years or so and more. I guess is
Speaker 1: it competitive? Though? Does China look at the US as
Speaker 1: competitive and vice versa? Certainly on a geopolitical stage, uh?
Speaker 1: And within specific industries, I think, Um, that's the nature
Speaker 1: of business. Uh. You know, Uh, everybody competes. It brings
Speaker 1: out the best of us. And uh uh you know,
Speaker 1: it's really interesting to be in China and look at
Speaker 1: China and think about how they integrate a essentially controlled
Speaker 1: economy with free enterprise, which they have a lot of.
Speaker 1: And how did the two call exist? Um? But Uh,
Speaker 1: my latest memo talked about UM some reforms that took
Speaker 1: place in China UH forty years ago. UH, and it
Speaker 1: created much more emphasis on rewards and incentives. UM and UH.
Speaker 1: I think that I think that China is highly incentivized
Speaker 1: to work towards those rewards, even if not the whole
Speaker 1: economy is characterized by free enterprise. I want to ask
Speaker 1: you about this notion that's out there that maybe the
Speaker 1: markets are in what people are terming sort of a
Speaker 1: melt up. You know, that we're just sort of going
Speaker 1: and going and going along because there's nothing stopping it
Speaker 1: and valuations are getting out of control. What do you
Speaker 1: make of that argument. I've been in this business fifty years, Jason,
Speaker 1: I've heard it several times in the past. UM. You know, UH.
Speaker 1: I think that the the best way to think about
Speaker 1: it is by understanding what I call the three stages
Speaker 1: of a bull market. The first stage, when only a
Speaker 1: few far sided people understand that there could be improvement,
Speaker 1: the second stage, when most people see that there is improvement,
Speaker 1: and the third stage, when everybody and his brother thinks
Speaker 1: things will get better forever. If you buy in the
Speaker 1: first stage, you pay bargain prices and you tend to
Speaker 1: make a lot of money. If you're buying the last stage,
Speaker 1: it's much more tricky. I think that when I hear
Speaker 1: the UH stories about perpetual prosperity and trees growing to
Speaker 1: the sky, I tend to think we're in the last stage.
Speaker 1: That's Howard Marks, the co chairman of oak Tree Capital
Speaker 1: and of course one of the most followed names in finance.
Speaker 1: His memos that he sents to his investors there must reads.
Speaker 1: He's in the news of course with his combination with
Speaker 1: brook Field that is one of the biggest deals from
Speaker 1: some of the biggest dealmakers in the world. Plays into
Speaker 1: asset managers getting bigger. We're seeing consolidation. But I always
Speaker 1: love to talk to somebody like Howard who has seen
Speaker 1: lots of market cycles and really looks at things from
Speaker 1: a very smart and deep perspective. And I thought his
Speaker 1: comments about China where especially timely. I was really glad
Speaker 1: we got into that as well. So Carol next up
Speaker 1: from Milk and I had a chance to sit down
Speaker 1: with the CEO VP. That's Bob Dudley. He was coming
Speaker 1: off of earnings, who talked a little bit about that.
Speaker 1: We talked about continuing volatility in the oil mark get
Speaker 1: and of course, you can't talk about just about anything
Speaker 1: in the world, not talking about how a tweet can
Speaker 1: change your business. But rightfully so, Jason, you started by
Speaker 1: asking him about this quarter's earnings. What was the key
Speaker 1: takeaway for you from earnings this quarter? So this was
Speaker 1: our first quarter. Oil prices a little bit down. I
Speaker 1: think resilience in the earning, bang on expectations. Operations work
Speaker 1: very smoothly around the world. We have things that were
Speaker 1: down and off in long plan. So very very pleased
Speaker 1: with the earnings and no real big surprises. But one
Speaker 1: of the things that people are always interested in is
Speaker 1: your trading business. Uh. You get some details here and there.
Speaker 1: We got a little bit of details about natural gas.
Speaker 1: Tell us what was moving there? Well, there was. We
Speaker 1: did have a good quarter in the trading, both in
Speaker 1: global oil trading and natural gas. Uh l G prices
Speaker 1: were moving a bit. Of course, the oil prices very volatile.
Speaker 1: Uh you know, they've been three or four days down
Speaker 1: just on a tweet. We'll see. There is a lot
Speaker 1: of volatility in the oil markets right now. Every one's
Speaker 1: waiting to see about the either extension or no extension
Speaker 1: of Iran waivers. I think the market isn't really sure,
Speaker 1: even though they said they won't be extended. If they
Speaker 1: are extended, I think you'll see the price of oil
Speaker 1: dip a bit. If they're not. You can see a
Speaker 1: drift up here and help us understand a little bit.
Speaker 1: I know it's pretty closely guarded how the trading operation works, um.
Speaker 1: But what was driving especially the the success on the
Speaker 1: oil side. Well, I think on the oil side is
Speaker 1: a position that was taken really by by BB coming
Speaker 1: out of the New Year's season, that we thought that
Speaker 1: all presses were going to tighten. All the data look
Speaker 1: like that. If you remember, they remarkably dropped to about
Speaker 1: fifty dollars a barrel and then come back stronger throughout
Speaker 1: the quarter, And I think that was part of the strength. No,
Speaker 1: no special magic trade. It was just we believe the
Speaker 1: prices we're gonna type. And so let's talk about oil
Speaker 1: prices a little bit. As you say, they are highly
Speaker 1: susceptible to politics, they're highly susceptible to social media platforms
Speaker 1: and and sentiment. How do you manage that? Well, you can't.
Speaker 1: You can't always get right. I mean, you take it.
Speaker 1: We try to do it on the fundamentals. Long term
Speaker 1: rather than very short term reactions to things. We think
Speaker 1: fundamentally the markets are type this year. You sit and
Speaker 1: look at you know, what is unfolding, this Venezuela defying
Speaker 1: economic gravity, and reports of more violence in Libya, and
Speaker 1: these things approach the fundamentals, and you look at the
Speaker 1: production growth of the Permian, but it's still bottleneck that
Speaker 1: won't be there forever. So it feels to us a
Speaker 1: kind of tight right now. And what's your biggest worry
Speaker 1: about oil prices as we go through the rest of
Speaker 1: nineteen nineteen. Well, for for us, we planned the company
Speaker 1: on fifty five dollars a barrow or a very narrow
Speaker 1: fairway for BP. I think if I worry about it
Speaker 1: longer term, not short term. Longer term is we end
Speaker 1: up either with a spike or a drop, and that's
Speaker 1: not good for the world. It's not good for planning.
Speaker 1: But right now I think we will be in this
Speaker 1: fair way of it looks like for En, talk to
Speaker 1: me about the integration of the b HP assets. What
Speaker 1: are you learning there, especially about the the U S
Speaker 1: shail market. But so b HPS a great company, great assets,
Speaker 1: great people. We only took over the operations on the
Speaker 1: first of March after the closing, so we're really early
Speaker 1: into it. We've got, you know, synergies that that will happen.
Speaker 1: They will happen very fast. We like the assets a lot.
Speaker 1: We're part of that checkerboarding and the in the Permian
Speaker 1: you've ever seen the old historical reason why UH leases
Speaker 1: are are actually shaped like a checkerboard. And so we've
Speaker 1: got people in between us. I think down the road
Speaker 1: they'll likely be some consolidation or swapping to make that
Speaker 1: a little bit more efficient. But we like the rocks.
Speaker 1: UH We've got a great team that's been working on
Speaker 1: natural gas in the US and now they can turn
Speaker 1: themselves to crude out which would be great. And does
Speaker 1: that consolidation come sooner rather than later? Is that something
Speaker 1: we see in the near term, like this year, next year?
Speaker 1: When when might that happen? It's a good question. I
Speaker 1: think there's no need to rush it. I think it's
Speaker 1: just one of those things if you look at that
Speaker 1: big piece of geography out there, not just for us,
Speaker 1: that there will be rationaliz station right coming on. So
Speaker 1: Compere you think will be competitive is as you try
Speaker 1: and sort of figure out who's gonna get the upper hand. Well,
Speaker 1: I think I think it'll you know, you could have
Speaker 1: the industrial logic of companies just rationalized. You can do swaps.
Speaker 1: It doesn't even have to be and I can see
Speaker 1: that some people would see pairents of companies will see
Speaker 1: a lot of value in that. And for us, it's
Speaker 1: also what we did with HP with some other assets
Speaker 1: in the Eagle for in the Haynesville right next to
Speaker 1: where we were already producing gas. So it's a really
Speaker 1: nice extra piece of business for BP. And you'll see
Speaker 1: us divesting some of the gas assets that we had
Speaker 1: to make sure we we returned to shareholders. Seeing the
Speaker 1: money that we put out, well, you anticipated my next
Speaker 1: question not surprisingly those divestments, especially here in the US.
Speaker 1: How's that going? Is it the pace you want? What
Speaker 1: happens next? So again no rush where we've had data open,
Speaker 1: data rooms open now this year for a number of
Speaker 1: months now, and I can just say I'm very surprised
Speaker 1: that the number of companies and the interests are going
Speaker 1: through and kicking the tires and looking at the assets
Speaker 1: and the data. So I think it bodes well for
Speaker 1: UM whenever we decide and and what what do you
Speaker 1: owe that surprise too, and where is the interest coming from?
Speaker 1: Help us understand that it's a real wide variety of
Speaker 1: interest in the buying buying set. It's companies we know,
Speaker 1: some of the bigger companies, it's uh, some of the
Speaker 1: independence that we know. And then there's individuals essentially individuals
Speaker 1: who have a lot of backing of cash, so private equity,
Speaker 1: maybe small private equity, So it's the whole spectrum. I
Speaker 1: do wonder about the world at private equity place here
Speaker 1: because it feels like as an industry they've sort of
Speaker 1: been in and out of of the oil business, they
Speaker 1: the energy business. How do you see them both competitively
Speaker 1: and as a partner at this point, Well, we see
Speaker 1: them so not only here in the U s. We
Speaker 1: we see private equity has moved into the North Sea,
Speaker 1: the northern southern North Sea. In some cases they are
Speaker 1: buying established operators. In other cases they buy a percentage
Speaker 1: and our partners. So we've got some very good private
Speaker 1: equity partners in the North Sea here in the US.
Speaker 1: I think it's I think it sort of goes up
Speaker 1: and down a little bit with their sources of money,
Speaker 1: and when it's tight, it's less and when money is easier.
Speaker 1: You see more of it, and it feels to be
Speaker 1: easier now. So Mr Buffett plays into the broader conversation
Speaker 1: with his investment there with Anti Darca. Does that change
Speaker 1: your strategy or does it change the landscape? Well, it
Speaker 1: doesn't change our strategy. I think I was surprised because
Speaker 1: you know, a number of years ago Mr Buffett wasn't
Speaker 1: particularly interested in in energy. It shows that he is,
Speaker 1: and I think that it's going to show the the
Speaker 1: energy engine of the US has really growing and support
Speaker 1: for that. Um he stepped in to help Occidental, which
Speaker 1: is a great company. The indoor. Our antidarchical assets are
Speaker 1: really good, whether it's ro Occidental or Chevron's really good.
Speaker 1: So it really doesn't surprise me this competition, right, it's
Speaker 1: great to catch up. The biggest thing just a couple
Speaker 1: of seconds left. You learn from hanging out here at Milkin. Well,
Speaker 1: this is a very different conference than the other ones
Speaker 1: you've got. We have investors from all around the West
Speaker 1: Coast and i'd say the Pacific rim. So for us,
Speaker 1: it's a chance to not only talk to partners existing
Speaker 1: sharehold there's possibly new shareholders and it's got a very
Speaker 1: broad of agreement of subjects here, from health to uh
Speaker 1: you know, the new technologies. I've enjoined it. That's VP
Speaker 1: CEO Bob Dudley and of course one of the most
Speaker 1: followed names in terms of how the oil market is going,
Speaker 1: and it tells us so much about the global economy.
Speaker 1: Investment in politics, Well, if you're at Milkin, you're in
Speaker 1: l A. Makes sense to stop in and talk to
Speaker 1: the mayor of that city, Eric Garcetti. You know, he
Speaker 1: thought about running for president, very well known politician, not
Speaker 1: just there in l A, but around the globe. It
Speaker 1: was great to talk to Mayor Garcetti because, Jason, when
Speaker 1: I think about Los Angeles, I do think about them
Speaker 1: being at the crossroads of so many important issues, whether
Speaker 1: it's infrastructure, whether it's immigration, whether it's politics, whether it's
Speaker 1: food production, and a lot going on in this city.
Speaker 1: And we began by talking with him about a Green
Speaker 1: New Deal for Los Angeles. He talked about what he
Speaker 1: had planned. You've got a big announcement, a green new Deal.
Speaker 1: We talked about at a national level, You've got a
Speaker 1: plan for l A. Tell us about it. Well, my
Speaker 1: simple message for in Washington is, while you're figuring it
Speaker 1: out and looking across the aisle. Don't worry about looking
Speaker 1: across the aisle, look across the country. And here in
Speaker 1: l A. Actually four and a half years ago we
Speaker 1: launched a plan that was about the environment, the economy
Speaker 1: and equity. And now people have talked about a green
Speaker 1: New Deal, so we're updating it, making stretch goals huge
Speaker 1: carbon neutral cities, carbon neutral buildings, trash free cities, recycling
Speaker 1: of our water, and zero carbon electric city grid. That
Speaker 1: now is time and l A I think can be
Speaker 1: the place while creating jobs. So it's economy and environment together,
Speaker 1: all right, So how do you do it? Like, what's
Speaker 1: the first what's the first step? And how soon do
Speaker 1: people really start to see results from this? Well, we
Speaker 1: already held ourselves accountable a few years ago, so we
Speaker 1: we reduced our carbon emissions in ten by eleven percent.
Speaker 1: I'd be challenged to find a city almost anywhere in
Speaker 1: the developed world that did that, and our unemployment went
Speaker 1: down fourteen percent that year. So it's conscious strategies for jobs.
Speaker 1: So looking for those green sector energy job solar installation,
Speaker 1: water technologies, and at the same time going straight to
Speaker 1: things that I own as a mayor that we collectively
Speaker 1: own and we run the largest municipal utility in the country,
Speaker 1: and we're transferring that not just off of coal, but
Speaker 1: now off of carbon itself. And then of course our
Speaker 1: transportation system in our buildings. Those three things, electricity, transportation
Speaker 1: and buildings account for about eight percent of all of
Speaker 1: our omissions. So what pushback are you getting? Because Green
Speaker 1: New Deal on a national level has drawn some maybe
Speaker 1: eye rolling, maybe some criticism, maybe some skepticism at the
Speaker 1: very least, what are you encountering at the local level.
Speaker 1: We don't really find that, and we want to put
Speaker 1: this out not just for l A, but really is
Speaker 1: a green print for all cities in the country and
Speaker 1: around the world. I chair Climate Mayors, which is four
Speaker 1: two mayors bipartisan group around the country. And I don't
Speaker 1: think we get caught up in those conversations because while
Speaker 1: people talking about universal incomes and things like that, we
Speaker 1: know in l A we created thirty five thousand green jobs.
Speaker 1: That's more than the country lost in coal jobs. So
Speaker 1: we know that we can create sectors in any city
Speaker 1: around this um and that kind of answers that middle
Speaker 1: class question of how do we have a place in
Speaker 1: the economy for our citizens in the future. It's by
Speaker 1: embracing this stuff aggressively. Well, let's talk about that very topic,
Speaker 1: because we think about a lot in New York, certainly
Speaker 1: all over the country, affordability just of of the big
Speaker 1: City's got a lot of people who want to come
Speaker 1: to a place like l A. You see it every day.
Speaker 1: I see it, you know, flying in and driving through
Speaker 1: uh Town yesterday. How do you ensure that this is
Speaker 1: a place where people can actually make a good living
Speaker 1: and live well, You have to find what those jobs are. So,
Speaker 1: for instance, I know New York struggling struggling with keeping
Speaker 1: up the subway and expanding it. We passed a measure
Speaker 1: that will never sunset to build fifteen new rapid transit lines,
Speaker 1: and we make sure those jobs go here locally. That's
Speaker 1: seven seven thousand jobs. You can't export their middle class,
Speaker 1: and you can keep them for an entire career, your lifetime.
Speaker 1: So I think it's thinking intelligently about these things, not
Speaker 1: just buying a little bit of solar power on the
Speaker 1: marketplace or recycling a little bit more, but really building
Speaker 1: the economy around that. And that's what we're doing here
Speaker 1: in l A and how do you it it into
Speaker 1: the state schools? You've got a new governor. Um, you know,
Speaker 1: you know pretty well. Um, you know he's had a
Speaker 1: job similar to you, a little a little bit further
Speaker 1: up state, smaller town, m But you know, how do
Speaker 1: you what do you need from the state in order
Speaker 1: to get this going into insured success. Well, I think
Speaker 1: cities often inspire the state policy. So we said we
Speaker 1: were going to be renewable, and then the state passed that.
Speaker 1: So that is now the goal for all of California.
Speaker 1: When we started becoming a solar city now we're number
Speaker 1: one solar city in America, the states started to help
Speaker 1: subsidize that electric cars, uh and electrifying our transportation system.
Speaker 1: So usually cities are the laboratories. States are then the
Speaker 1: folks that can give it sort of volume. But a
Speaker 1: city as big as l A is essentially the size
Speaker 1: of a state, And so we hope to not just
Speaker 1: inspire California, but the rest of the country too. And
Speaker 1: what about traffic? Can we just talk about traffics. It's
Speaker 1: it's blowing right now, you're at that late traffic report,
Speaker 1: but it happens to be midday. You know, you know
Speaker 1: three things, One is technology. We have even peak traffic
Speaker 1: in l A. Our streets don't have a car on them. Wow.
Speaker 1: So as we have autonomous vehicles or interconnected vehicles, we
Speaker 1: can much better use that space without having to double
Speaker 1: deck freeways at billions of dollars in decades long. Second
Speaker 1: is the public transportation system that I told you we're
Speaker 1: building out. And third is going to be building better
Speaker 1: communities l A. In the past, you didn't put the
Speaker 1: housing next to the jobs. You didn't put the retail
Speaker 1: near the housing. You didn't, you know, go out and
Speaker 1: worry about hitting five neighborhoods in one afternoon. New York.
Speaker 1: You don't look at crossing three boroughs just to go
Speaker 1: see a friend every day. So it's really about better
Speaker 1: zoning and planning. And we're completely redoing the city, especially
Speaker 1: around our transit corridors, to be more dense and to
Speaker 1: put those jobs, those healthcare needs, everything all close to
Speaker 1: where you live. And that's Eric Garcetti, the mayor of
Speaker 1: Los Angeles. You know, I got to see him in
Speaker 1: action a couple of times during the conference, and man,
Speaker 1: he is smooth. He commands a room. Very impressive guy.
Speaker 1: And it's a city and it's really a state that
Speaker 1: you always want to watch because of its size and
Speaker 1: its impact on the nation overall. So one of the
Speaker 1: biggest names at milk in this year, no doubt about it,
Speaker 1: Jason was Blackstone CEO Steve Schwartzman. Well Schwartzman well known,
Speaker 1: his firm especially well known. They've eclipsed a half a
Speaker 1: trillion dollars in assets under management. It was great to
Speaker 1: sit down with him. I've just seen a couple of
Speaker 1: weeks earlier, actually on earnings day. But in this fast
Speaker 1: moving world, Steve's always got something to talk about. And Jason,
Speaker 1: you started though with Blackstones conversion to a corporation. This
Speaker 1: was big news. We talked a couple of weeks ago
Speaker 1: about earnings and the big news that day was your
Speaker 1: conversion to a corporation, which sounds a little wonky and
Speaker 1: yet has been a really big deal for the stock,
Speaker 1: not just yours, but the rest of the industry. Why well,
Speaker 1: I think, uh, in terms of ours, it makes good
Speaker 1: sense because they're probably two to three times the number
Speaker 1: of people who could buy our stock who haven't been
Speaker 1: able to because we've been using K one statements. So
Speaker 1: by getting rid of those and converting to the normal
Speaker 1: ten nine did not mind. If we can take advantage
Speaker 1: of that huge additional buying power, logic should say that
Speaker 1: more people want to buy you, your stock will go up.
Speaker 1: And so what have people said to you in the Aftermathods?
Speaker 1: As I said, it's been a couple of weeks. I mean,
Speaker 1: are you hearing from a different class of investors? Is
Speaker 1: your phone ringing from different people? Yes, it actually is,
Speaker 1: And people say, thank goodness, you've made that decision. Uh,
Speaker 1: we really want to own the stock. Can you come
Speaker 1: and see us? Are stocks up? Uh in the last
Speaker 1: week and a half since since I actually saw you.
Speaker 1: So you have a certain magic. I should come on
Speaker 1: frequently anytime. And the other firms have gone up as well,
Speaker 1: not the same amount obviously, but I think it's uh
Speaker 1: the market looking and saying if that work for Blackstone,
Speaker 1: then probably the other firms will follow, all right. So
Speaker 1: that's sort of the retail side of business to to
Speaker 1: some ex stent and some institutions. What about your limited partners,
Speaker 1: the pensions, the sovereign wealth funds, the endowments. You talk
Speaker 1: to them all the time. A lot of them are
Speaker 1: here in Los Angeles for this conference, what's their biggest
Speaker 1: concern right now? Well, I think the biggest concern are
Speaker 1: high prices uh and and that's a valid issue. But
Speaker 1: the prices that you're going to have to pay for deals,
Speaker 1: well that everyone is paying as the result of markets
Speaker 1: going up, uh and and so that that that's a concern.
Speaker 1: On the other hand, uh, the alternative class UH private equity,
Speaker 1: real estate uh and and you know credit uh has
Speaker 1: done so well for these investors over very long periods
Speaker 1: of time that they're continue to increase their allocations. And
Speaker 1: that's that's certainly good news for us. But but it's
Speaker 1: a time where you need a little more caution for
Speaker 1: investing than than when when prices are lower. And so
Speaker 1: as you look across the suite of products that you're
Speaker 1: offering to investors, whether it's real estate, credit, head funds,
Speaker 1: private equity, is there one that seems to be drawing
Speaker 1: a disproportionate or a little bit more attention from the
Speaker 1: big institutions. Right now, I'm asking you to choose among
Speaker 1: your children. I know, well that's a tough one. You know,
Speaker 1: we love all our children, uh and all the funds
Speaker 1: sell out. So the bottom line is that we've had
Speaker 1: a huge demand. Uh, partly because we've done so well
Speaker 1: for investors in every one of the classes, and the
Speaker 1: investors themselves have more money, if you will, when when
Speaker 1: markets go up, the size of their funds are bigger.
Speaker 1: So I think they're biasing things to experience managers in
Speaker 1: a higher price environment, to to basically protect capital and
Speaker 1: do the right thing. But also I had this cycle
Speaker 1: and be able to put money in at the right time.
Speaker 1: So when you think about that appetite for all these
Speaker 1: funds they're selling out. You've talked about getting to a
Speaker 1: trillion dollars in just a few years, and assets under management,
Speaker 1: you're more than halfway there at this point. How much
Speaker 1: do you worry about getting too big, that there's too
Speaker 1: much money that you have to put to work? Well,
Speaker 1: you always worry about things like that, And the nice
Speaker 1: thing is you can do something about it that this
Speaker 1: isn't mandated yet. Uh. And you don't want money that
Speaker 1: you can invest. Well, our business has gone from no
Speaker 1: assets to the largest in the world, uh in our
Speaker 1: asset class at five and twelve billion dollars. Because we're careful,
Speaker 1: because we're prudent, because we understand we're playing a long game.
Speaker 1: Uh And if we do poorly, uh, the only people
Speaker 1: who remember that is everyone who gave us money. And
Speaker 1: so we only want them to have a good ride.
Speaker 1: Uh And and so it's up to us not to
Speaker 1: have too much money in any strategy. What we tend
Speaker 1: to do, Jason, is expand not by making one fund gargantuan.
Speaker 1: We do it by inventing other strategies or going into
Speaker 1: areas we haven't where we think the investments are very good.
Speaker 1: So we're looking at growth buyouts now a growth investing
Speaker 1: uh inequity. We think that's going to be very good.
Speaker 1: So you'll raise a separate fund for that. This separate
Speaker 1: fund for that. We're also um expanding in life sciences.
Speaker 1: We think that that's a very interesting area with a
Speaker 1: very technical, technically intensive group we we purchased named Claris
Speaker 1: that does third stage trials invest in that area and
Speaker 1: actually does the trials for large pharma. So so what
Speaker 1: you do is you find something that isn't as correlated
Speaker 1: um that in the growth growth equity area. You know,
Speaker 1: it doesn't particularly use leverage where you're buying mature companies
Speaker 1: in the in the tech area compared to the early
Speaker 1: stage things and so as you look around the world,
Speaker 1: one thing that's certainly in people's mind right now is Europe, uh,
Speaker 1: specifically Germany, specifically the banking sector there. What do you
Speaker 1: think is going to have you spent a lot of
Speaker 1: time in that part of the world. Deutsche Bank, friend
Speaker 1: of mine? Where does this movie end? Well? The movie
Speaker 1: for Germany is a pretty good movie. It's been a
Speaker 1: good movie, uh since the nineteen fifties. Uh. And and
Speaker 1: they grow slowly, they're they're they're the largest country in Europe. Uh.
Speaker 1: The financial sector in Germany has always been uh uh
Speaker 1: some somewhat different than in other parts of the world. Uh.
Speaker 1: You know, they have a lot of smaller regional banks. Uh.
Speaker 1: And they've had not great luck considering how good their
Speaker 1: economy is that their banking sector hasn't hasn't performed as well.
Speaker 1: And right now, you know, Deutsche Bank has been in
Speaker 1: the spotlight for the last few years in terms of performance.
Speaker 1: And it's tough to manage a bank when everybody's looking
Speaker 1: at it and everybody's uh raising questions. Um, Germany needs
Speaker 1: a national champion. Every every European country believes that they
Speaker 1: need significant credit extender. And so do you think it's
Speaker 1: a public solution or a private sector solution that ultimately
Speaker 1: helps save Deutsche Bank. I'm not a Deutsche Bank expert.
Speaker 1: I wish I were. I say, you're not going in there.
Speaker 1: I I We're not going in. It's hard to do
Speaker 1: due diligent, so in a bank. What's your one big
Speaker 1: takeaway from China right now? You've invested there, You've done
Speaker 1: a lot of philanthropy there. What's the thing people are
Speaker 1: missing about China? Well, China has stimulated its economy like
Speaker 1: they said they would when the tariffs went in. I
Speaker 1: was there four weeks ago. The people at the Central
Speaker 1: Bank we're telling me that worked very nicely, and and
Speaker 1: now you're seeing the results of that, which is surprised
Speaker 1: some commentators that the China's economy looks pretty solid now
Speaker 1: in the sixes uh six percent grows and I think
Speaker 1: that would have surprised some other people, didn't particularly surprise me.
Speaker 1: They have the ability in China to really force money
Speaker 1: into their system uh to to to create growth, and
Speaker 1: they're they're doing it and it's been successful. And are
Speaker 1: you putting more money into China at this point as Blackstone?
Speaker 1: Are you investing more fully? And where we just bought
Speaker 1: a company there. Um, I think I think China is
Speaker 1: a harder place to invest for outsiders. Uh. And you
Speaker 1: always have to be prudent and thoughtful when you invest.
Speaker 1: We're looking in the real estate area as well. Uh.
Speaker 1: And it all depends you know what happens and what
Speaker 1: values are right. Uh. Tim Guitner over the weekend was
Speaker 1: talking about the strength of the economy and this bull
Speaker 1: market that we've been in for a long time, and
Speaker 1: he said, the only thing we have to avoid is
Speaker 1: dumb mistakes. Of course. Uh, what could be a dumb
Speaker 1: mistake that we collectively could make, either from a policy
Speaker 1: decision or from a market decision. Well, I think there
Speaker 1: are a lot of mistakes you can always make. I
Speaker 1: think if if there's a really dramatic change in the
Speaker 1: tax area, Um, if the if the Democrats win, for example,
Speaker 1: if if lot of the things that some of their
Speaker 1: candidates are talking about, I think that would be sort
Speaker 1: of a disincentive, could have a certain psychological shock value. Uh.
Speaker 1: And and logic would say that would would slow an economy. Um,
Speaker 1: that's one of the things you could do. That's Blackstone
Speaker 1: CEO Steve Schwartzman. You always want to talk to him.
Speaker 1: I mean, Jason, you have a great relationship with him.
Speaker 1: But again, when you think about Blackstone, the amount of
Speaker 1: money that they are managing, this is a big deal
Speaker 1: when it comes to the global financial industry. Well, and
Speaker 1: it's interesting too because of the nature of their businesses.
Speaker 1: They invest so heavily in real estate and credit, in
Speaker 1: hedge funds, and of course in private equity, so they
Speaker 1: have a window into the economy that if you have
Speaker 1: and I love that they say, we have said private
Speaker 1: equity is kind of the new hedge fund, right. I
Speaker 1: spoke with Walter rob He's the former Whole Foods co CEO.
Speaker 1: It was such a great conversation. You know him, well,
Speaker 1: you talk cannabis, the meal kit business, and of course
Speaker 1: his former company. I gotta talk to you about Whole Foods.
Speaker 1: A couple of years since has been sold from that.
Speaker 1: Amazon bought it app has a plate out. How you thought,
Speaker 1: has it been a good combination? Yeah? I think yes.
Speaker 1: I think on balance, yes, I think look at the
Speaker 1: large theme of digitizing whole folds, on taking the physical
Speaker 1: offer that we developed over forty years and bringing in
Speaker 1: into the digital sphere. I think the combination of the
Speaker 1: two strengths of the two companies has realized for the
Speaker 1: joining with Prime now and I think, you know, any
Speaker 1: cultural combination takes time to really settle in values, you know,
Speaker 1: those sorts of things have to join together. But on
Speaker 1: balance in the marketplace, I think the hopefuls continue to
Speaker 1: come forward through through the partnership with Amazon. You know,
Speaker 1: I think about when you and I spent some time
Speaker 1: in Detroit when hopefully It's opening in Detroit and a
Speaker 1: lot of people were like, it wasn't gonna work. This
Speaker 1: was an odd market. You folks really are Hopefully it's
Speaker 1: really embraced the citizens there at the culture there, and
Speaker 1: it's still working. Correct. It's just celebrating celebrated six anniversary
Speaker 1: in June, and so it's just I mean, it's a
Speaker 1: it was my proudest moment as a grocer June thirteen,
Speaker 1: two thousand and thirteen, and was one that store opened
Speaker 1: and uh, and you were there, So I think but
Speaker 1: it points to kind of this larger concern that as
Speaker 1: part of what's being discussed here at Milkin, which is
Speaker 1: the tremendous disparities in the air. Food access is one area,
Speaker 1: but there's over six thousand communities in America that don't
Speaker 1: have access to fresh, healthy food like we enjoy. And
Speaker 1: I think what Detroit was an attempt to do with
Speaker 1: since area, that community deserves those same set of choices.
Speaker 1: And so we're six years on and here we are.
Speaker 1: Can we bring organics to the mass market in a
Speaker 1: in a cost efficient way that is really accessible to everybody? Well,
Speaker 1: isn't that? That's the great question is whether that can
Speaker 1: actually happen. So we've come that the pricing, the availability
Speaker 1: has increased tremendously over the last number of years. I
Speaker 1: think it's going to take more years to do that,
Speaker 1: but I think more sustainable food choices in general, not
Speaker 1: just organics, have accelerated big time in you the marketplace,
Speaker 1: So I think we'll get there. I want to ask
Speaker 1: you that because your new company, you're investing in a
Speaker 1: lot of organic companies. You've also invested in a mel
Speaker 1: Kick company. However, we know it's Blue Apron. It's not
Speaker 1: an easy business. What do you think the future is
Speaker 1: of mil kick companies? I think it's part of meditated market. Well,
Speaker 1: I'm not actually an investor in Blue Apron, but I'm
Speaker 1: not I'm investor in a number of other small food
Speaker 1: companies I think represent the next generation of food. But
Speaker 1: I think for food meal kit companies, they are one
Speaker 1: choice in a litany of choices customers now have they
Speaker 1: didn't have five years ago. So we're seeing some limits
Speaker 1: on that in terms of a the number of times
Speaker 1: people repeat, the churn rate, et cetera, the concern about packaging.
Speaker 1: But where we combine the meal kit with a physical store,
Speaker 1: in the case they plated joined with Albertson's or Whole
Speaker 1: Foods is doing meal kits with Amazon, I think they're
Speaker 1: the combination is more powerful. I'm also curious about the
Speaker 1: cannabis industry, about UM and I believe you're on the
Speaker 1: board of one of the cannabis companies UM. That too,
Speaker 1: has been a bit of a volatile industry. Do you
Speaker 1: see a time Walter where there are cannabis products in
Speaker 1: all supermarkets? You know, there's a phaze of cannabis growth
Speaker 1: right now everywhere. I mean it's CBD everywhere, CBD everything,
Speaker 1: So you know, look, I think it's it's at least
Speaker 1: five years the United States before this thing kind of
Speaker 1: lines up to where the banking system can get involved
Speaker 1: and it can really go into m but I think
Speaker 1: there's some people in my natural food business that say,
Speaker 1: do they think it's bigger than natural foods. It's in
Speaker 1: the early innings, so you know, there's a lot to
Speaker 1: recommend cannabis as a medical plan and its properties yet
Speaker 1: to be discovered and I think communicated. So I think
Speaker 1: there's real, real potential here. Again, you have the same
Speaker 1: questions around quality and standards. It's kind of mixed right now.
Speaker 1: Is that necessary? I mean, I think that's where we
Speaker 1: think about government are vegean until we get that. Is
Speaker 1: it hard for to scale up? I think I think
Speaker 1: it's necessary to really hit the scale. I think there's
Speaker 1: just a lot of money. And this is global, by
Speaker 1: the way, it's not just Canada, United States. It's global,
Speaker 1: so licenses are being done in different countries. But I
Speaker 1: think some sort of stakes in the ground around standards
Speaker 1: and quality for the customer to offinately say we're going
Speaker 1: to go all the way with this. I think it's
Speaker 1: necessary we do invest in cadabiscopy. Yes I would, I would,
Speaker 1: and I thought about that a lot before I would
Speaker 1: answer that question. But you know, actually I've done the
Speaker 1: look into the science of animous went to the plan.
Speaker 1: I understand all the more rays around it, but I
Speaker 1: think that here's something really healing about parts of this.
Speaker 1: And my dad now is ninety two years old and
Speaker 1: he's taken cannabis gummies at night to help him sleep,
Speaker 1: and it's helping him. So when I see things like that,
Speaker 1: I say, all right with the real let's let's get
Speaker 1: the real part of it. But I think there's still
Speaker 1: potential here. I got to ask you what the last question,
Speaker 1: because I think we look at retail overall, but the
Speaker 1: supermarket industry like where is it going? There's so many
Speaker 1: that are seemed to be struggling, as you know, it's
Speaker 1: a low margin business. Where do you ultimately see the
Speaker 1: supermarket industry going? I have massive change. In other words,
Speaker 1: I think the edge of it right now is with
Speaker 1: Huma in China. It's a complete physical digital interaction in
Speaker 1: an integration in a fantastic way. But I think we're
Speaker 1: going to see the future store is smaller, the senate
Speaker 1: stores probably roboticized or made autonomous. The fresh product is exploding. Uh,
Speaker 1: but you're gonna see this confluence of choices that the
Speaker 1: customer today wants it in all sorts of different ways.
Speaker 1: So I think the stores are there. Seventy of the
Speaker 1: business five years from now still done in physical ours.
Speaker 1: But the customer to day, particularly the lineal generation, wants
Speaker 1: to connect digitally, wants to be met on a pickup
Speaker 1: in all these different ways. So it's gonna look very
Speaker 1: different than it looks today. That's former Whole Foods Market
Speaker 1: co CEO Walter Robin. Really it's kind of interesting, you know,
Speaker 1: he's been in the supermarket industry for so long, lots
Speaker 1: of transformations, and right now, of course he's focusing on
Speaker 1: investing in organic food companies. He thinks ultimately, Jason, it's
Speaker 1: something we can bring to the masses. What a thoughtful
Speaker 1: guy and a reminder and really a reminder that food
Speaker 1: was front and center. So many conversations about that at
Speaker 1: Milkin this year. It's really cool. So, Carol, while we
Speaker 1: were out at Milkin, I caught up with a guy
Speaker 1: who's been called the Warren Buffett of Canada. That's Brookfield's
Speaker 1: Bruce Flat. A sprawling empire. They have a cross world
Speaker 1: hundreds of billions of dollars, some very well known real
Speaker 1: estate in the big name cities. Sprawling empire, so you
Speaker 1: had to have a wide ranging conversation Jason from infrastructure
Speaker 1: to Brookfield's acquisition of oak Tree. I started by asking
Speaker 1: where we are in the economic cycle. Look, I would
Speaker 1: from most of our businesses globally and in particular here
Speaker 1: in the United States, everything feels pretty good. And uh
Speaker 1: so there's no signs in front of us, so we're
Speaker 1: gonna have a recession. But no one should forget that
Speaker 1: we're ten years into an economic recovery and at some
Speaker 1: point there will be a recession. And what do you
Speaker 1: make of this idea that you know, maybe we're in
Speaker 1: the midst of sort of a melt up. You know
Speaker 1: that people are just don't have any reasons to be negative,
Speaker 1: so they keep buying, and valuations go up, and they're
Speaker 1: you know, trees are going So we buy real businesses.
Speaker 1: We don't necessarily participate in the stock market, so I
Speaker 1: don't have a view on the melt up. What I'd
Speaker 1: say is that the real economy with real businesses is
Speaker 1: pretty constructive virtually everywhere in the world. In fact, some
Speaker 1: countries are still getting better, a few going backwards, but
Speaker 1: they're they're pretty good. So speak of real Let's talk
Speaker 1: about real estate. You guys, obviously a very big player
Speaker 1: in that globally. Uh, Starting in the US, what do
Speaker 1: you make of the especially the commercial real estate business. Look,
Speaker 1: the commercial market, similar to what we just talked about
Speaker 1: in the economy, the commercial market is strong. Office um vacancies,
Speaker 1: occupancies I think are the highest they've ever been in
Speaker 1: most cities. Many cities globally are in the one to
Speaker 1: three percent range. And that's just from a big urbanization
Speaker 1: that's occurring globally. And that's I don't think that's gonna
Speaker 1: change you. It may eben flow, but I don't think
Speaker 1: it's going to change over the next twenty five years.
Speaker 1: And so what does that sort of secular shift mean
Speaker 1: for an investor like you? Does it change where you invest,
Speaker 1: how you invest, what you build, and where look. For example,
Speaker 1: we've had we've always had a big single family business
Speaker 1: in the United States building single family homes in suburban markets,
Speaker 1: and many of the sites were now approving as we're
Speaker 1: going into cities. Yeah, part of our acquisition at GDP
Speaker 1: was we're using those sites to concentrate and build other uses,
Speaker 1: mixed use, residential and other things. Because cities are moving
Speaker 1: further in, people want to live in major groups of people,
Speaker 1: So Speaking of acquisitions, we caught up earlier in our
Speaker 1: show with Howard Marks. You made an acquisition there as well,
Speaker 1: buying oak Tree, agreeing to buy a majority of oak Tree.
Speaker 1: What's next for for that deal? How do you go
Speaker 1: about integrating? Yeah? So, Um, the good news is we
Speaker 1: did a partnership, not an acquisition, which which means that
Speaker 1: we don't have to integrate anything. In fact, Poward, Bruce
Speaker 1: and their management team are the best in the business.
Speaker 1: That's why we did a partnership with them, which means
Speaker 1: that we don't have to do anything. In fact, they
Speaker 1: have to do all the hard work. How they gotta
Speaker 1: run the place. But more said more positively, I just say, um,
Speaker 1: we're excited about having them as part of the franchise.
Speaker 1: There's many things they can do for us and we
Speaker 1: can do for them. But but the businesses are not
Speaker 1: going to be integrated. They're gonna own thirty eight percent
Speaker 1: of it afterwards will be sixty two and we'll we'll
Speaker 1: they'll run the business for us. And why credit at
Speaker 1: this point, you know, like why have why bring that platform?
Speaker 1: And because it's something you haven't done before. Look, look
Speaker 1: we've done it sparingly, but we don't have a big
Speaker 1: business stamp a hunter billion dollar business. They're very good
Speaker 1: at what they do. Our clients increasingly want credit alongside
Speaker 1: the other products, and this was an efficient way to
Speaker 1: get it done with the best in class franchise. UM
Speaker 1: On top of that, at some point in time, the
Speaker 1: markets will turn and we will put our money and
Speaker 1: other things behind their franchise, and I think we can
Speaker 1: become really best in class. Let's talk a little bit
Speaker 1: about a business you're deeply in, and that's infrastructure. There's
Speaker 1: a big meeting tomorrow in Washington. The President is convening
Speaker 1: some folks. He's gonna talk to Nancy Pelosi, Speaker Pelosi,
Speaker 1: and Chuck Schumer Senator Schumer about infrastructure. It has been
Speaker 1: long awaited in the United States. I think anyone who's
Speaker 1: driven anywhere in the United States, are going to any airport,
Speaker 1: knows that there needs to be some investment. There hasn't
Speaker 1: been a lot as of yet. What do you think
Speaker 1: needs to happen and will happen when it comes to
Speaker 1: infrastructure in the United States. First off, look, inevitably all
Speaker 1: infrastructure is going to transfer into private hands. But UM
Speaker 1: until the point that governments are either stretched or are right,
Speaker 1: governments and the individuals a run them are pushed um.
Speaker 1: There it's easier not to do it because people yell
Speaker 1: at you when they have to pay for the tool
Speaker 1: on the road that they didn't have to pay for. Um.
Speaker 1: So it's going to be slow in the OAC countries,
Speaker 1: but it's coming in eventually. And do you see a
Speaker 1: lot of opportunity outside the United States for infrastructure and
Speaker 1: and is there's still an appetite for that invest Yeah, Look,
Speaker 1: there's a lot of When I say this is the largest,
Speaker 1: the largest business in the world is real estate. The
Speaker 1: second largest is infrastructure that it's all built on. So
Speaker 1: these are enormous businesses. And when I say it's slow,
Speaker 1: there's still incredible amounts of infrastructure that are being privatized
Speaker 1: around the world. In fact, much much more outside of
Speaker 1: the United States because it wasn't natural to get a
Speaker 1: paid for and governments don't have the money and therefore
Speaker 1: they're going i'll call it skipping the step of government
Speaker 1: owning it. They're going right to private infrastructure and uh.
Speaker 1: And that's occurring today and and increasingly around the world.
Speaker 1: So when you look across your businesses, whether it's infrastructure
Speaker 1: or real estate or private equity now credit via the
Speaker 1: Oak Tree Partnership. Uh, what worries you the most into
Speaker 1: in twenty nineteen? Where are you seeing any warning signs? Look,
Speaker 1: there's no, Um, we don't see big issues in the
Speaker 1: economy out there. Clearly valuations are higher than they were
Speaker 1: ten years ago, seven years ago, five years ago, three
Speaker 1: years ago, a year ago. In the stock markets and
Speaker 1: interest rates, um, look like they're going up, but they
Speaker 1: don't look like they're going up at the current time. UM.
Speaker 1: But those are the things out there that could disrupt
Speaker 1: the markets when that happens, How it happens. UM. That
Speaker 1: in political issues, but I'd say we when we're investing
Speaker 1: into long businesses, you generally don't As long as you
Speaker 1: pick good countries, you don't get too concerned about short
Speaker 1: term governments. Last question for you. One of the political
Speaker 1: issues out there that I know is in one of
Speaker 1: your backyards or front yards. As Brexit going on there
Speaker 1: in the UK. Maybe it'll happen, maybe it won't. You've
Speaker 1: been pretty clear that the effect on your business has
Speaker 1: been diminimous so far. Still true. Yeah, Look, I would
Speaker 1: say most of our businesses in UH in the UK
Speaker 1: today are doing well. I think longer term the UK
Speaker 1: will still be a great place to invest. In the
Speaker 1: short term, there's no doubt this is disruptive and not
Speaker 1: helpful for business, but like all countries, they will see
Speaker 1: it through. That's Bruce flat the sea of Brookfield Asset Management.
Speaker 1: Such a thoughtful guy, obviously right in the middle of
Speaker 1: big deals. You know, we talked about Ee Schwartzman earlier.
Speaker 1: One of the only real rivals that Blackstone has right
Speaker 1: now is Brookfield, So Jason. Earlier in the broadcast we
Speaker 1: heard from Bruce Flatt, who spoke to you at Milkin
Speaker 1: about why he thinks all infrastructure will eventually become privatized
Speaker 1: and so keeping up with that infrastructure theme, Carroll, who
Speaker 1: better to talk to the U S Transportation Secretary Lane
Speaker 1: Chow and we spoke about that very issue, paying for
Speaker 1: public infrastructure with private funds. You started with the need
Speaker 1: to get more women into government. Here's that conversation you
Speaker 1: participated in a panel here at Milkin, and it's all
Speaker 1: about more participation by women in government. Tell me about
Speaker 1: what still needs to be done. We've made great inroads
Speaker 1: in the last midterm elections, but still so much to
Speaker 1: be done. Well. There are a lot of women in
Speaker 1: the executive branch, and there are also lots of women, um,
Speaker 1: you know, and the federal, state and local government. So
Speaker 1: I think it's good to have more diverse points of
Speaker 1: view because our reality is becoming more complex and more
Speaker 1: eyes and ears around the table that don't think the
Speaker 1: saying actually helps us all to be better at what
Speaker 1: we do well. But and we have made great progress,
Speaker 1: what still needs to be done because women are still
Speaker 1: in the minority, especially in the in the senior positions.
Speaker 1: You are, I think one of the rare individuals who's
Speaker 1: had two cabinet positions, um, But we don't see that
Speaker 1: as a commonality. What do we need to do to
Speaker 1: see that more often and it becomes the norm. Well,
Speaker 1: I believe in public service, and I think that there's
Speaker 1: a proper role for government, and you know, I think
Speaker 1: we need to get out to young girls at an
Speaker 1: earlier age and tell them about the many opportunities that
Speaker 1: are available, not just in one sect or another, but
Speaker 1: it's a constant kind of education process and um to
Speaker 1: learn all about the ability to make impact, the obligation
Speaker 1: to serve your government. I think all of that are
Speaker 1: all very important. Well, what about your own experience? Have
Speaker 1: you ever felt I mean, you're an immigrant who came
Speaker 1: from another country, really set up yourself, established yourself. Have
Speaker 1: you ever felt pushed back as a woman in Washington worse?
Speaker 1: I think I think all women have, you know, or
Speaker 1: if you're just different, you're from the outside, it will
Speaker 1: be difficult to go in any place. That's just life.
Speaker 1: And so I tell a lot of young people, men
Speaker 1: and women, uh, you know, just to develop their interest
Speaker 1: and to be brave and to be curious and to explore.
Speaker 1: I want to ask you about infrastructure because I feel
Speaker 1: like this is something but Republicans and Democrats agree we
Speaker 1: need to spend I know at south By Southwest you
Speaker 1: talked about an initiative to really be the adoption of
Speaker 1: new technologies. Where are we going? Where is the President
Speaker 1: on this? Do you really have his ear to say
Speaker 1: we gotta do this? Well, the President doesn't need me
Speaker 1: to remind him. The President feels very strongly about the
Speaker 1: need to address our infrastructure uh state in our country,
Speaker 1: and the biggest problem is how to pay for it.
Speaker 1: And the President has already said that everything's on the
Speaker 1: table and infrastructure is an area where there should be
Speaker 1: bipartisan support. Uh. You know, any long term policy needs
Speaker 1: to be done on a bipartisan basis. And so we
Speaker 1: have said always, the President has said always that infrastructure
Speaker 1: is a real priority and we need to uh talk
Speaker 1: about it. We submitted a bill last year, the very
Speaker 1: twelve there, so we didn't get enough votes. There's so
Speaker 1: much private money out there, where's emity money that is
Speaker 1: ready to do private public partnerships. They've got to be
Speaker 1: coming to Washington saying let's do something. Well, there are
Speaker 1: public or there are private pension funds as well as
Speaker 1: endowment funds that would love the opportunity to invest in
Speaker 1: public infrastructure because they're looking for long term investments and
Speaker 1: with collateral that won't walk away, and that's certainly a
Speaker 1: government project. So I hope that there will be greater
Speaker 1: interest and allowance by the private sector to come in
Speaker 1: because currently there are a number of safe but this
Speaker 1: allow the private sector from investing in public infrastructure. And
Speaker 1: so we have to remove those hurdles and allow the
Speaker 1: private sector to come in because they are a tremendous
Speaker 1: source of capital. One last question I've got to ask
Speaker 1: you because certainly the purview of the Boeing seven thirty
Speaker 1: seven fell under you, the f A we're still waiting
Speaker 1: for ahead to be approved. Um the administration criticized for
Speaker 1: taking so long in grounding it when other count I
Speaker 1: don't think that's fair at all, because the s a
Speaker 1: A who ultimately made the decision to ground the planes
Speaker 1: the seven thirties seven maps is they are a very
Speaker 1: fact based organization and they needed to have facts before
Speaker 1: they can ground the planes, because if you don't have
Speaker 1: affect based reason for grounding the planes, how would you
Speaker 1: explain ungrounding the planes. So we now have a number
Speaker 1: of audits and investigations going on to see what happened
Speaker 1: to the certification of these two planes which occurred uh
Speaker 1: in two thousand and twelve and two thou some thirteen right.
Speaker 1: And then we also I have also set up a
Speaker 1: special moverable Committee to look at the certification process going forward.
Speaker 1: And then the FAA is waiting for the software fixed
Speaker 1: from the company before it can obviously se do anything.
Speaker 1: And I want to assure the flying public that safety
Speaker 1: is number one at the Department of Transportation and that
Speaker 1: the f a A A will not sign off on anything
Speaker 1: that they're not totally. Statis fun. That's a lane show.
Speaker 1: So many things that she's dealing with, Infrastructure front and center.
Speaker 1: There was a lot of news about it this week.
Speaker 1: Possibly the potential of both sides of the aisle coming
Speaker 1: together on a big infrastructure plan. We'll see where that goes.
Speaker 1: We will see indeed, And obviously Boeing remains a friend
Speaker 1: of mine for a lot of investors and consumers. We
Speaker 1: all fly on planes all the time. Well, the Department
Speaker 1: of Justice had a big presence at the Milk and
Speaker 1: Institute Global Conference this year. Here we had a pair
Speaker 1: of interviews focusing on tech and security. Yeah, definitely big themes.
Speaker 1: First up, I got the chance to sit down with
Speaker 1: the d o j's Assistant Attorney General Antitrust Division, Making Delwraheim.
Speaker 1: We started by talking about calls to break up big tech. So, Magan,
Speaker 1: let's talk about big tech. And what's funny is you
Speaker 1: and I were talking before. This is a second year
Speaker 1: where there's been a panel saying what's going to happen
Speaker 1: in big tech? Elizabeth Warren is called for a breakup
Speaker 1: of big technology. Where do you stand on this? Well,
Speaker 1: we have, you know, a certain number of standards of
Speaker 1: the antitrust laws and we will look at, you know,
Speaker 1: every industry and apply the laws based on the facts
Speaker 1: of the evidence. I don't know if breaking up any
Speaker 1: particular industry, you know, without having an actual investigation and
Speaker 1: showing there they're doing competitive harm is the right approach
Speaker 1: for antitrust enforcement. But that's an area that you know,
Speaker 1: antitrust enforcers should be looking at, and we certainly are.
Speaker 1: And there's a big technology and then I feel like
Speaker 1: there's Amazon. There isn't any panel I do or any
Speaker 1: conversation I do that Amazon doesn't somehow come up in
Speaker 1: that conference station because there's such a bigger and bigger player,
Speaker 1: not only in retail, but so many other industries. Because Amazon,
Speaker 1: do you look at them at the different category? Well,
Speaker 1: Amazon has been a disruptor and a lot of different sectors,
Speaker 1: and they have a good from your perspective, Well, I
Speaker 1: think when you're a when you're an initial disruptor and
Speaker 1: create more efficient products of services and lower the prices
Speaker 1: to consumers, that's always a positive thing. The problem becomes
Speaker 1: when you have market power and you take certain actions
Speaker 1: that might actually harm competition, which ultimately will harm consumers.
Speaker 1: And that's the type of conduct that we look at.
Speaker 1: As I've said before, you know, big itself is not bad.
Speaker 1: It's big behaving badly, right that becomes a problem for
Speaker 1: antitrust laws. And that's certainly an area that LEA would
Speaker 1: be uh, you know, interested in it. You gotta ask.
Speaker 1: Attorney General William Barr has talked about them dating or
Speaker 1: getting more information on big technology. Um, have you guys
Speaker 1: had discussions about big tech and maybe what needs to
Speaker 1: be done. Well, I want comment about the any private
Speaker 1: conversations have had internally. But the Attorney General, uh, you know,
Speaker 1: we're fortunate to have somebody with his background and his
Speaker 1: knowledge and he, as he said at his confirmation, hearing
Speaker 1: you know, uh, the role of anti trust and how
Speaker 1: some of the largest companies in our economy are are
Speaker 1: interacting is something he wants to explore and I think
Speaker 1: it's an important area. But he's somebody who from his
Speaker 1: background the last twenty five years and the corporate world,
Speaker 1: is uniquely I think, not only qualified, but really appreciates
Speaker 1: the role of anti trust law. He's been a planet
Speaker 1: a defendant uh in the industry, and he's actually argued
Speaker 1: in the European Union before the Commission himself. Does that
Speaker 1: make him more sensitive to business aside or I think
Speaker 1: somebody like him who who you know, appreciates the free
Speaker 1: markets like me, And I think like most people in
Speaker 1: the anti trust world, is that it's our role is
Speaker 1: really to protect competition itself. It's not so much picking
Speaker 1: you know, a business or one embedded or over another
Speaker 1: one technology. And I think it makes them sensitive and
Speaker 1: knowledgeable about the role of the free markets and ultimately
Speaker 1: the benefits of having a free market economy right making.
Speaker 1: I want to ask you about some different corporate situations
Speaker 1: you met recently with T Mobiles. Don Ledger tell me
Speaker 1: about T Mobile and Sprint was what was his message
Speaker 1: to you? What was your reaction? Well, without commenting on
Speaker 1: apending mergers, of course we've made and I think there's
Speaker 1: been some reports that we have had a meetings with
Speaker 1: the parties, which is very normal in a process, and
Speaker 1: of course you know CEOs emerging companies will defend their
Speaker 1: merger and and do that, and you know, beyond that,
Speaker 1: it's it's a transaction that's under our review and it's
Speaker 1: ongoing investigation that we're doing in the transaction. One thing
Speaker 1: that's come to mind, I've heard this in discussions. Are
Speaker 1: you considering sprints struggling financial position in your decision making
Speaker 1: on this deal? Well, Sprint, and then you know the
Speaker 1: argument that you know, a failing firm, you know, maybe
Speaker 1: doesn't impact competition versus a stronger firm financial Ultimately, our
Speaker 1: goal is to make sure there's competition for the benefit
Speaker 1: of consumers and innovation. And Sprint has been a great company.
Speaker 1: They have been an innovator and a disruptor on the price.
Speaker 1: Uh they have. You know, I think there's been reported
Speaker 1: they've raised the issue what's called the flailing h company
Speaker 1: and whether they're not under the antitrust laws. The laws
Speaker 1: recognize what's called a failing firm defense and their strict
Speaker 1: guidelines about that, and we certainly will apply the law
Speaker 1: and the fact that they present to us to that.
Speaker 1: Whether or not those standards are met, we'll have to
Speaker 1: wait and see for the conclusion of the investigation. It
Speaker 1: is something we consider absolutely. When parties raised that as
Speaker 1: an issue, that doesn't mean it always wins something we consider. Okay,
Speaker 1: I want to also ask you about Foxes rsns UM.
Speaker 1: Big three has complained that Starter Communications and Liberty Media
Speaker 1: are really trying to kind of Thwart, it's been Ice Queues,
Speaker 1: Big Three Basketball League, You've got Serena Williams, Snoop Dogg,
Speaker 1: they're all investors in the Is that a factor. Well,
Speaker 1: I've seen the reports of of the allegations of the issue,
Speaker 1: and there's been letters that have been sent into the division. Um,
Speaker 1: it's a you know, certainly, when there's allegations of corruption
Speaker 1: of a bidding process at an auction, it's something that
Speaker 1: raises issues for us to look into to see if
Speaker 1: there's actual credible evidence. And I don't know if there
Speaker 1: is one here yet, but it's something that we always
Speaker 1: looked at when the you know, the free market process
Speaker 1: of fitting is corrupted. We we just had a recent
Speaker 1: criminal investigation where a group of Korean companies had corrupted
Speaker 1: and fixed prices in sales of fuel to the US
Speaker 1: government in the Pentagon, and we had we had asked
Speaker 1: about five settlements and uh, not only criminally but civilly
Speaker 1: recovered and that so it's an area that we we
Speaker 1: are concerned about. There's a lot of areas that I
Speaker 1: know that you're looking at. The Other thing I want
Speaker 1: to ask you about is generic drug companies. I know
Speaker 1: the Department of Justice has been investigating at um price
Speaker 1: fixing by a group of generic drug companies. Where are
Speaker 1: we on this? Because there were some reports at your
Speaker 1: office that's kind of declined to approve some new indictments
Speaker 1: in that case. Is that is that accurate? That is
Speaker 1: not accurate? I have flatly denied those reports. Uh. You know,
Speaker 1: there's you know, requests for opening grand juries and you know,
Speaker 1: indictments that I review and sometimes I send them back
Speaker 1: for additional information or investigation. But as far as declining
Speaker 1: and the indictments, that is just not accurate. I can
Speaker 1: I can confirm it's been a matter of public uh
Speaker 1: record that we have a criminal investigation into the generic
Speaker 1: pharmaceutical industry. We've had two plea agreements of two high
Speaker 1: level executives of one of the pharmaceutic companies. But it's
Speaker 1: a it's a broad investigation looking at multiple products in
Speaker 1: an area where we have some of the most vulnerable clients,
Speaker 1: right the elderly who buy these generic drugs. Do you
Speaker 1: anticipate more charges to come in this investigation? I would
Speaker 1: anticipate that soon. I don't know that the process works itself.
Speaker 1: We don't have a particular timeline, but we're you know,
Speaker 1: in the process of developing that. We've had some public
Speaker 1: filings in the private cases in Pennsylvania, so there's some
Speaker 1: information out there in the public record that's making Del
Speaker 1: raheem he's the Assistant Attorney General for the d o
Speaker 1: j's Antitrust Division. Great conversation. Obviously very timely. He is
Speaker 1: in the midst of some decisions that really will alter
Speaker 1: potentially the course of how we consume telecommunications, media and whatnot.
Speaker 1: He wasn't the only member of the Department Justice that
Speaker 1: we spoke without at Milk and Carroll. John Demmer's the
Speaker 1: DJ's Assistant Attorney General of National Security. He was also
Speaker 1: on hand. So John, great to have you here with us.
Speaker 1: You are participating and milking in a couple of panels
Speaker 1: on national security threat What are the biggest threats to
Speaker 1: the United States right now? So I'm here to talk
Speaker 1: specifically about Chinese economic espionage and talk to the business leaders,
Speaker 1: talk to the investment leaders about the threat to their business,
Speaker 1: to their investments by the theft of intellectual property sponsored
Speaker 1: by the Chinese government. And so what does that threat
Speaker 1: you look like to the average person, the average business person,
Speaker 1: what should they be worried about. So it looks like
Speaker 1: a combination. Sometimes it's a cyber threat, very often it's
Speaker 1: an insider threat, and sometimes it's a combination of vote.
Speaker 1: So the Chinese are using their intelligence services to go
Speaker 1: after and try to co opt insiders and companies the
Speaker 1: way they might use their intelligence services to you know,
Speaker 1: traditional spycraft. Right, So what it looks like from the
Speaker 1: inside could be someone who's works at your company, who's
Speaker 1: downloading data on a thumb drive, who's taking pictures of
Speaker 1: a screen that has data on it, somehow taking that
Speaker 1: technology and then sending it over to China, all as
Speaker 1: part of this rob replicate and replace approach to economic development.
Speaker 1: You robbed the intellectual property of an American company, you
Speaker 1: replicate that product in China, and you then you replace
Speaker 1: the American company on the global market. Eventually, if all
Speaker 1: goes well so for the American worker, then you'll lose
Speaker 1: your job at step three. How often is this happening?
Speaker 1: And I'm always curious about what kind of companies john
Speaker 1: are being targeted. So it's happening increasingly. It's a very
Speaker 1: top down approach. We've had a number of cases recently
Speaker 1: on everything from commercial jet engine technology to b p
Speaker 1: A free linings and soda containers and hands uh and
Speaker 1: they're all priorities set by the Chinese government as part
Speaker 1: of their Made in China plan. And so as you
Speaker 1: talk to executives in the C suite and on down,
Speaker 1: are they worried enough about this? I do think increasingly
Speaker 1: so worried about it, recognizing it and realizing they really
Speaker 1: have to confront this, and realizing it is really a
Speaker 1: combination of cyber defenses, but also being aware of who
Speaker 1: you have working at the company and what they might
Speaker 1: be doing on the computer. Are they accessing data that
Speaker 1: they don't really need to have, Are they downloading data
Speaker 1: that they don't need to download? Are they in the
Speaker 1: office at strange hours when no one else is around?
Speaker 1: All of that, and how much do you run into
Speaker 1: resistance from the perspective of a business saying, look, China
Speaker 1: is a really important customer, or China is a really
Speaker 1: important market, or I've got a partnership with a company there.
Speaker 1: I don't want to jeopardize these things by going overboard.
Speaker 1: So I think you you can't go overboard. We're not
Speaker 1: saying don't do business in China. You have to do
Speaker 1: business in China. That's your company. But the key is
Speaker 1: doing business smartly in China, recognizing the risks and then
Speaker 1: mitigating them. So what data do you put in China?
Speaker 1: What data is accessible from China. That's part of how
Speaker 1: you can mitigate that risk. So it's not you know, yes,
Speaker 1: do business in China, just do it smart. That's John
Speaker 1: Demmer's Assistant Attorney General of National Security, and I think
Speaker 1: it's such a timely conversation, especially with US China trade
Speaker 1: talks continuing. The US is looking very closely at Chinese
Speaker 1: state actors and their penetration of US companies and i
Speaker 1: P what kind of U S I P is at risk?
Speaker 1: A lot of eyes on that for sure. It's not
Speaker 1: an easy issue to untangled. And that wraps up Bloomberg
Speaker 1: Busines this week's weekend podcast. Thanks for joining us. I'm
Speaker 1: Jason Kelly and I'm Carol Master. Be sure to tune
Speaker 1: into Bloomberg Business Week Radio Live Monday through Friday, starting
Speaker 1: at two pm Wall Street Time. And if you can't
Speaker 1: catch us live, get our daily podcast download, subscribe at iTunes, SoundCloud,
Speaker 1: and Bloomberg dot Com. You can get this week's edition
Speaker 1: of the magazine it is on newstands now. We'll be
Speaker 1: back right here next week at the same time. This
Speaker 1: is Bloomberg