Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Ley. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: we now join on Bloomberg Radio and I'm Bloomberg Television.
Speaker 1: Our conversation with Ian Bremer. Have you raised your group?
Speaker 1: His top risk for two thousand and eighteen, and we're
Speaker 1: honored to have with us in this hour the seventies
Speaker 1: six uh Secretary of the Treasury of the United States,
Speaker 1: someone you will know his service with President Obama. Yes,
Speaker 1: a Massachusetts Democrat, Jacob Blue joins us the morning. Jack
Speaker 1: Blue as well Ian Bremer. I want you to give
Speaker 1: the first question to Jack lu There's too much to
Speaker 1: talk about now. What is How would you frame the
Speaker 1: nation's challenges our risks this year? As you speak to
Speaker 1: Jack Luke, Well, we were talking a little bit before
Speaker 1: the show started about the chaos, about how much it
Speaker 1: is the It takes a very long time to make
Speaker 1: things work, it takes a much shorter time to break them.
Speaker 1: You know, Jack's very worried about, you know, as someone
Speaker 1: who was Secuary Treasury and and spent so much time
Speaker 1: working so hard right to and and finding that Washington
Speaker 1: is sclerotic and you can't make policies happen. You can't
Speaker 1: move the needle for people. Right. But if you now
Speaker 1: have a geopolitical order where the principal actors are trying
Speaker 1: to break it. The Russians want to break the geopolitical order,
Speaker 1: the Chinese wanted new geopolitical order that goes towards them.
Speaker 1: The United States is not interested in providing support for
Speaker 1: the old giopolitical or how much does that chaos worry Jack?
Speaker 1: I mean, I want to go back to something calm
Speaker 1: John Farroll like Brexit is sort of a calmer discussion.
Speaker 1: But Mr Secretary, I want to get that. Please go ahead,
Speaker 1: excuse me. If you look at the risks facing the world,
Speaker 1: and I read you know, the Eurasia Report, I think
Speaker 1: it identifies many of the of the key risks. The
Speaker 1: thing that underlies so much of it is chaos. Um
Speaker 1: It's the unpredictability of key leaders. It's the lack of
Speaker 1: a north star with the United States stepping back in
Speaker 1: so many ways, and it's this kind of destructive policy
Speaker 1: without anything constructive to take its place. And that's true
Speaker 1: on issue after issue here in the United States. I
Speaker 1: think that you know, you look at markets over the
Speaker 1: last year, the calmness of markets, the enthusiasm of Marcus
Speaker 1: almost suggests that there's been a decision to look beyond
Speaker 1: all of this chaos and uncertainty, because what can we
Speaker 1: do about it? But then when the moment comes, when
Speaker 1: something happens that is a surprise, it shouldn't be a surprise.
Speaker 1: I worry about binary kind of changes. I want to
Speaker 1: cut to the January Chase greg values report this morning
Speaker 1: was shocking of how compressed this month is in Washington.
Speaker 1: I want to go back to the beginning of your
Speaker 1: career with Joe Mowkley of Massachusetts, who is the most
Speaker 1: basic of politicians from another time. What does your Democratic
Speaker 1: Party need to do to provide leadership within this chaos?
Speaker 1: What do you wish from Mr Schumer from Miss Pelosi
Speaker 1: and others? Look, fundamentally, Democrats are not in charge right now,
Speaker 1: so I don't think it's fair or or realistic to
Speaker 1: look to Democrats to lead the way out of this.
Speaker 1: You have an administration that chose to make policy in
Speaker 1: a very, very one party way, did not include Democrats
Speaker 1: in any of the conversation. Now they can't probably rally
Speaker 1: their own troops to do the basic business of running
Speaker 1: the government, making sure we don't default on the debt,
Speaker 1: making sure children don't get thrown off of health insurance,
Speaker 1: all kinds of things. They're gonna be looking to Democrats
Speaker 1: to help. I think the challenge is going to be
Speaker 1: to truly work together. And truly working together doesn't mean
Speaker 1: coming with a fatal company and saying we need your vote.
Speaker 1: Truly working together means going back and doing things that
Speaker 1: you wouldn't have otherwise done to reach a consensus around
Speaker 1: some kind of a reason. Will compromise. Reasonable compromise is
Speaker 1: the basis for working together. We're not seeing any of
Speaker 1: that coming out of the White House. Sexually. You've called
Speaker 1: this legislation dangerous, this tax bill. What is this dangerous? Look?
Speaker 1: I think what if you look at the tax bill um,
Speaker 1: what it does is almost the exact opposite of what
Speaker 1: anxious and angry voters were calling for in an election
Speaker 1: just a year ago. You have people who are worried
Speaker 1: about where did they fit in an economy where technology
Speaker 1: and trade and globalization seem to be changing all the
Speaker 1: rules that they grew up with. And what we need
Speaker 1: is we need training, We need education, we need infrastructure.
Speaker 1: We need to invest in the kind of workforce of
Speaker 1: the future that gives people the confidence that they have
Speaker 1: a place in it. What we've seen is a tax
Speaker 1: cut that spends money we don't have to have very
Speaker 1: concentrated benefits for global corporations and the top one percent,
Speaker 1: and it's leaving us broke so that we cannot deal
Speaker 1: with these fundamental problems. So we're farther behind in actually
Speaker 1: making progress. And I fear that the next shooter drop
Speaker 1: is going to be an attack on the most of
Speaker 1: all horrible in our society. How are we going to
Speaker 1: pay for the deficit caused by the tax cut. You're
Speaker 1: going to see proposals to cut health insurance from poor people,
Speaker 1: to take basic food support away from poor people, to
Speaker 1: attack medicare and social security. One could not have made
Speaker 1: up a more cynical strategy. And the people are going
Speaker 1: to reject things that otherwise are good when they don't
Speaker 1: work for them. So, you know, free trade good thing
Speaker 1: for the world, for global growth, but people rejected if
Speaker 1: they think it doesn't work for them. Technology obviously a
Speaker 1: good thing, but they rejected when they see the governor's
Speaker 1: work for them. And what Jack is saying now is
Speaker 1: that on the back of this extraordinary tax bill, if
Speaker 1: you're going to see cuts for the average people, their
Speaker 1: response is going to be vastly greater rejectionism of the
Speaker 1: establishment and political polarization, and the Democrats and Republicans are
Speaker 1: both gonna happening issues. These issues sextually did not arrive
Speaker 1: o a night with the election of President Donald Trump.
Speaker 1: They've existed for a long long time. The United States
Speaker 1: has been spending money it hasn't had for a long
Speaker 1: long time. I guess my question is why is they
Speaker 1: sendy different and what we've seen before. First of all,
Speaker 1: you know, I've been in office in several different periods,
Speaker 1: and I've spent three years running the Office of Management Budget.
Speaker 1: In the Clinton administration, we run a surplus. We fixed
Speaker 1: a problem. When I came into the Office of Management Budget.
Speaker 1: In the Obama administration, we went from a deficit of
Speaker 1: almost ten percent of GDP to three percent of GDP.
Speaker 1: We've now consciously, intentionally as a government, made a decision
Speaker 1: to add substantial amounts of debt at a time when
Speaker 1: the economy doesn't need fiscal stimulus. What it needs is
Speaker 1: targeted investment and the things that people need for a
Speaker 1: better future. You know, the the risk of this tax
Speaker 1: bill is both a further disenchantment with institutions and if
Speaker 1: you look at what the report gets to this, the
Speaker 1: kind of rejection of institutions. How are people going to
Speaker 1: respect institutions more when they realize what this tax payer
Speaker 1: with And if you're just joining us now on Bloomberg
Speaker 1: Radio and Bloomberg Television, Jeck lou and Ian Bremer, let
Speaker 1: me set it up in terms of Boston, where it's
Speaker 1: going to be thirteen below zero in Brockton, I think
Speaker 1: on Saturday. Ian Bremer, you grew up tough in Chelsea,
Speaker 1: and when you're living fat large in Weston or Wellesley Hills,
Speaker 1: you know where Chelsea is. How would your mother do
Speaker 1: it today in this environment in Chelsea? Could you have
Speaker 1: gotten to tulane in this mill you today? I didn't.
Speaker 1: Let's be clear, I didn't grow up top. I grew
Speaker 1: up getting my askt h and Chelsea is slightly different.
Speaker 1: If you look at me, you understand why. But I'm
Speaker 1: good for radio. I I think that today my mother
Speaker 1: would have voted for Trump, or she would have maybe
Speaker 1: voted for Bernie Sanders. There's absolutely no way she would
Speaker 1: have voted for a mainstream Democrat Republic and my brother
Speaker 1: voted for Trump. Um, there there ain't nobody else from
Speaker 1: my neighborhood that got out of the Chelsea projects that
Speaker 1: you know is now talking on Bloomberger Global And I
Speaker 1: think that it's precisely that environment environments like it all
Speaker 1: over the country that are saying this isn't working. Then
Speaker 1: what does your party need to do to gain dominance
Speaker 1: in the Chelsea's a Wisconsin or Minnesota where you lost
Speaker 1: the election. Look that that is a good question. Um,
Speaker 1: what you're talking about used to be the base of
Speaker 1: the Democratic Party, and we need to find a way
Speaker 1: to communicate with people talking about the things that I'm
Speaker 1: talking about. I think he is right. You can't win
Speaker 1: by saying trade is the whole problem when that's not
Speaker 1: the whole problem. You have to talk to people respectfully
Speaker 1: and explain to them what it is you're gonna do
Speaker 1: so that they can have a piece of the economic
Speaker 1: pie going forward. You know, Look, we have a lot
Speaker 1: of problems that if we didn't have dysfunctional government we
Speaker 1: could have made more progress on over the last couple
Speaker 1: of decades. I mean, it's not as if any of
Speaker 1: the things that I'm saying we need to do are
Speaker 1: either rocket science or particularly part of the ideas. We've
Speaker 1: had a government that's been incapable of working together, and
Speaker 1: that dysfunction is really a problem. It attacks the core
Speaker 1: of our democracy. We look at the top Risks of
Speaker 1: two thousand eighteen with Dr Bremer, and we're honored to
Speaker 1: have with us the Secretary of Treasury, Department of the
Speaker 1: United States, of course, Jack lou with us. Uh Jack,
Speaker 1: I want to talk about eighties six. You were with
Speaker 1: Speaker uh Tip O'Neill at the time as we crafted
Speaker 1: bipartisan legislation. We're nowhere near that now. Paul Krugman, in
Speaker 1: my Chart of the Year in the New York Times
Speaker 1: talks about how different it is now because we're a
Speaker 1: more open economy, subject to the whims of all that
Speaker 1: money coming in from abroad. Can this tax reform or
Speaker 1: tax cuts, whatever you want to call it, can it
Speaker 1: work in a modern international fiscal system and financial system. Well,
Speaker 1: there's almost no way to compare to what happened at
Speaker 1: the end of UM. They're just they're just so different.
Speaker 1: First of all, the economy is different. UM. You know,
Speaker 1: we're we're right now at a period where we're nine
Speaker 1: years into a recovery and we don't need fiscal stimulus,
Speaker 1: and instead of paying for the tax bill, we're creating
Speaker 1: huge deficits. So that means that whatever macroeconomic benefit we
Speaker 1: get out of a little bit of stimulus, it will
Speaker 1: probably speed the pace of monetary policy change and take
Speaker 1: away to benefit over time. I think if you look
Speaker 1: at the content of the bill, in the basic rule
Speaker 1: was do no harm, don't make the system any less progressive,
Speaker 1: and if there's going to be a change, make it
Speaker 1: more progressive. This bill went the other way. It makes
Speaker 1: the system more regressive. I think if you look even
Speaker 1: at the things that are within this bill, the cynicism
Speaker 1: is so in contrast to the way it's being described.
Speaker 1: You know, the corporate rate cuts do very little, if anything,
Speaker 1: to encourage investment. The rapid depreciation the expensing of investment
Speaker 1: expires after four or five years. So the provision that
Speaker 1: they put in for business that actually could lead to
Speaker 1: some more investment is temporary, which means if it's extended,
Speaker 1: the bill is even more expensive. The tax cuts for
Speaker 1: individual fade away over time. This is it's a taking
Speaker 1: time bomb in terms of the debt because it costs
Speaker 1: one and a half two two trillion dollars on its face.
Speaker 1: But if the provisions that could potentially do some things
Speaker 1: to help middle class people or stimulate investment or ended,
Speaker 1: the cost goes way up. You cannot run a fiscal
Speaker 1: policy by spending trillions of dollars you don't have at
Speaker 1: a time when the economy is doing well. That's when
Speaker 1: you need to do some fiscal repair, not harm. And
Speaker 1: when you speak to its companies on a diving BSIS
Speaker 1: and like you do here in the United States, and
Speaker 1: they worried about the tax bill or they celebrate in it,
Speaker 1: because I sense they're probably quite pleased with what they say.
Speaker 1: They like the markets, they like the global economy, they
Speaker 1: like the tax bill. They may not like Trump personally,
Speaker 1: but I would say that unbalanced. They're reasonably happy with
Speaker 1: most of what the Trump administration is doing domestically. They're
Speaker 1: not happy with what Trump's doing internationally. They're not happy
Speaker 1: about the potential protectionism and trade issues. They're not happy
Speaker 1: with the likelihood that the United States is going to
Speaker 1: get in bigger fights uh internationally, and they also want
Speaker 1: a consistent message, right, so the idea that they can
Speaker 1: they kind of know what they can count. They love access,
Speaker 1: So I mean, you know, there was a lot of
Speaker 1: complaints in the early days of the Obama administration. The
Speaker 1: CEOs felt like they gave a lot of money and
Speaker 1: they weren't getting a lot of the FaceTime, the paper
Speaker 1: play that is traditional American system. They certainly feel like
Speaker 1: they're getting a bunch of that with this White House.
Speaker 1: But I do think that the CEOs are starting to
Speaker 1: get unnerved about a global order that is not as
Speaker 1: likely to benefit Western multinational corporations. And that's not something
Speaker 1: they necessarily blame Trump for. In fact, to the extent
Speaker 1: that in we see that Trump is out there pushing
Speaker 1: much harder on China, I don't think it will work
Speaker 1: well because if you do that, you want to be
Speaker 1: doing it with your allies, not by yourself. But the
Speaker 1: average American corporate has been kind of itching for a
Speaker 1: tougher line policy against the Chinese for a while because
Speaker 1: they all feel like it's becoming harder and harder for
Speaker 1: them to compete in the Chinese marketplace against Chinese state
Speaker 1: supported corporations. The heart of your pace today is this
Speaker 1: vacuum that's being left by the United States reluctant had
Speaker 1: him on and the way that China would like to
Speaker 1: fill it for you, Secretary Lou, the message that Ian
Speaker 1: just spills out the Corporate America, Actually, this is what
Speaker 1: they've wanted for a long time. They've wanted a hot line,
Speaker 1: a tougher line on the Chinese and the barriers to
Speaker 1: entry that they say in Chinese markets. Is this a
Speaker 1: good approach? If this is what Corporate America ultimately wants
Speaker 1: on the international stage. In Shanna more specifically, First, Corporate
Speaker 1: America has had a kind of division within itself about
Speaker 1: how to deal with this issue. We used to beg
Speaker 1: companies to confront the Chinese government directly, so that we
Speaker 1: weren't just making the case on their behalf, but they'd
Speaker 1: be there validating it. They wouldn't do it because they
Speaker 1: were afraid if they went to the Chinese government and
Speaker 1: said we're being blocked by the things you're doing, that
Speaker 1: there would be actions taken against them will be punitive.
Speaker 1: So it makes it harder for the government to make
Speaker 1: your case if you won't make it for yourself. That
Speaker 1: was a constant challenge. Um. I think this vacuum is
Speaker 1: something that corporate America ought to be worried about, and frankly,
Speaker 1: all of us who care deeply about liberal democracy and
Speaker 1: free market capitalism ought to care about. The two go together.
Speaker 1: If you start to see free you know, the pillars
Speaker 1: of liberal democracy start to erode. The world does not
Speaker 1: have better place for free market economics. And that's a risk.
Speaker 1: It's a risk right now because if we create a vacuum,
Speaker 1: others are stepping in. I actually don't blame China for
Speaker 1: seeing an opportunity. I think that China's aggressive use of
Speaker 1: the opportunity will probably limit its success because it scares
Speaker 1: some of its neighbors, like in Australia, which right now
Speaker 1: is torn between an economic poll to China and a
Speaker 1: political poll to stay with a hundred plus year old alliance.
Speaker 1: The tragedy is that friends have to go through that calculation.
Speaker 1: That shouldn't even be. It shouldn't be that a country
Speaker 1: like Australia has to think about is the United States
Speaker 1: my stable friend. That's the scary part. Just like a
Speaker 1: big national security of you precisely on the decision the Juckulu.
Speaker 1: Thank you so much for joining us today. Greatly appreciate it.
Speaker 1: Look forward to speaking to you through the year. He's
Speaker 1: a former Secretary Treasury of the United States. We're looking,
Speaker 1: of course at talking to Dominic Barton. He is the
Speaker 1: global managing partner of mckenzy and he leads the firm's
Speaker 1: focus not just on the Montreal maple leafs. I'm winding
Speaker 1: you up, Come on, guys. He leads the firm's focus
Speaker 1: on the future of capitalism. We joined, of course by
Speaker 1: darm As. We sit here at the URAGA headquarters on
Speaker 1: Fifth Avenue and dom I want to pick out one
Speaker 1: of the themes from URAGA groups report and it's protection
Speaker 1: is um to point zero. What does protectionism two point
Speaker 1: zero mean to you, DM? Well, I think that that
Speaker 1: risk that they've pointed out as a very key one
Speaker 1: for us to be thinking about this year. And I
Speaker 1: think about NAFTA. What's going to happen with NAFTA and March,
Speaker 1: Whether you know we get a revised NAFTA, I'm not
Speaker 1: sure We've got Brexit that's sort of trundling along um.
Speaker 1: These the problem with trade deals is when they go
Speaker 1: the wrong way, it's a race to the bottom. Everyone
Speaker 1: then sort of looks inward. And that's the thing that
Speaker 1: worries me the most. Um So, it's NAFTA is the
Speaker 1: big factor on the horizon in the in the next
Speaker 1: three months. But the other things that worry mere the
Speaker 1: non tariff trade barriers, which which Ian Bremner and the
Speaker 1: others point out in the report. This is the localization requirements,
Speaker 1: the labeling that's put in place, these these non tariff
Speaker 1: barriers which make it more difficult to be able to
Speaker 1: have global supply chains and have trade DOHM. Last year,
Speaker 1: the investor community was consumed by these kind of conversations
Speaker 1: at the beginning of this year, at the beginning of
Speaker 1: the year, they did not get paid to worry about them.
Speaker 1: In fact, they got paid not to worry about them.
Speaker 1: With the performance of emerging markets, etcetera. Do you worry
Speaker 1: that as we come into people are conditioned to ignore
Speaker 1: these risks because focusing too much on them last year
Speaker 1: was not a rewarding exercise. That So as we come
Speaker 1: into is that a risk? Yeah, I think it is.
Speaker 1: I mean I do think that as as Jack Lewis
Speaker 1: saying earlier on a program that you know, the markets
Speaker 1: or businesses have to sort of just keep forging ahead
Speaker 1: despite sort of chaos. If you will, you have to
Speaker 1: keep forging ahead. The problem is if if one of
Speaker 1: the underlying assumptions doesn't work, then you can have a
Speaker 1: big problem. It's it's the binary notion. It's one or zero.
Speaker 1: It's not a smooth probability curve. And that's the part.
Speaker 1: I don't know what else you can do. I think
Speaker 1: you have to keep just forging ahead. You have to
Speaker 1: keep driving it. But you you better also have a
Speaker 1: resiliency plan in place to say if uh this, if
Speaker 1: trade is actually going to be stopped in some particular
Speaker 1: way or brought backwards, A am I prepared to deal
Speaker 1: with that? Yeah, And we can tell with the accents
Speaker 1: that you're decidedly Canadian. I believe of a British Columbian persuasion.
Speaker 1: But but I look at where we are, and we're
Speaker 1: mentioning earlier leadership like an ice hockey and that and
Speaker 1: we can take the Trudeau's there was Trudeau senior, and
Speaker 1: you and I remember the emotion in the day to
Speaker 1: day tobacco of that maybe the calmness that Trudeau the
Speaker 1: younger has brought to Canada. And it comes down to people,
Speaker 1: what does business want from President Trump? I think, you
Speaker 1: know what, what I think business leadership looks for as stability,
Speaker 1: a set of policies that are going to actually help
Speaker 1: deal with issues. It's a something Tom You've you've talked
Speaker 1: about before adult conversations which I really liked. The fright
Speaker 1: Just here's what's happening, Here's how we're going to try
Speaker 1: and deal with this, and let's be honest about the
Speaker 1: real challenges that are there, because there's a lot of them. Um,
Speaker 1: And that's what businesses. You know what, what what frightens
Speaker 1: I think business, if I might say that is, is chaos, uncertainty,
Speaker 1: things that we were not expected. I think telling the
Speaker 1: truth about what's going on. What are the things we
Speaker 1: need to be prepared for. What are the downsides we
Speaker 1: need more of that? Do you believe And I'm saying
Speaker 1: this from your academics as a Rhodes scholar, and I'm
Speaker 1: also saying this from all the research and business dealings
Speaker 1: of transactions, the daily communication of McKinsey group. Do you
Speaker 1: believe in trickle down economics? That's a deep that's a
Speaker 1: very deep, deep question. I mean that when the temperature
Speaker 1: goes that's what they have to get some more coffee
Speaker 1: here on that. But but I you know, I am
Speaker 1: I have to I think there's some elements have trickled down,
Speaker 1: but there is nowhere near enough trickle down to deal
Speaker 1: with an issue. And I one thing I just want
Speaker 1: to put on the table. Over the last thirty years,
Speaker 1: the top point one percent of US households have increased
Speaker 1: their wealth by fifty point one percent increase by that
Speaker 1: means the top point one percent of households have more
Speaker 1: wealth in the bottom that in a time of that
Speaker 1: time of change. When you get that amount of inequality
Speaker 1: that's going on, trickle down isn't happening. It is trickled down.
Speaker 1: Part of the debate, the discourse in the United Kingdom, absolutely,
Speaker 1: I mean it's part of a shot of the political
Speaker 1: debate worldwide. I think at this point the economic disparity
Speaker 1: between the haves and the haves not you focus on
Speaker 1: the future of capitalism. What's the future of capitalism When
Speaker 1: the focus increasingly is own wealth inequality zone, Well, the
Speaker 1: capitalism is going to have to morph because we know
Speaker 1: in from history when the system revolts against it as
Speaker 1: a pretty ugly demise, right, and pitchforks. And I'm not
Speaker 1: suggesting that that's going to happen in but the trends
Speaker 1: of increased inequality are are there, and technology, which I'm
Speaker 1: a huge fan of, is actually a driver of that.
Speaker 1: You've got increasing returns to scale, right, a very few
Speaker 1: number of people can create massive amounts of wealth. You
Speaker 1: get this, as I said, the the what technology does
Speaker 1: is you know you've got you can have a consumer
Speaker 1: base of over two point seven billion people in your
Speaker 1: in your consumer base. What we have to start thinking
Speaker 1: about is our traditional institutions that we have to help
Speaker 1: people have the chance to enter that system because capital
Speaker 1: and has never been equal. I don't apologize for inequality.
Speaker 1: What I apologize for is inequality of opportunity. Is the
Speaker 1: conveyor belt there for people to have the chance to
Speaker 1: be able to participate should they desire to build the
Speaker 1: skills to do it. And that's what's happening. With the
Speaker 1: world moving faster and faster with with increasing returns to technology,
Speaker 1: you're going to see increasing tension on that which is
Speaker 1: going to lead to more populism and uh, and to
Speaker 1: what I would call more chaotic type government. As you
Speaker 1: look at the political debate right now, though, do you
Speaker 1: see a debate around the equality of opportunity or the
Speaker 1: equality of outcomes? Because right now I sense it is
Speaker 1: a debate almost exclusively around the equality of outcomes. People
Speaker 1: not happy about the outcome the place, they are not
Speaker 1: so much about opportunity. Yeah, I agree with you. I
Speaker 1: do think more of the focus is on I have this,
Speaker 1: they have that. What's going on? The challenge I think
Speaker 1: is we you know it's going to get worse, and
Speaker 1: I think what we have to start looking at is
Speaker 1: what are the ways that we can ensure that everyone
Speaker 1: has the chance to do what one book I read
Speaker 1: over the Christmas Break Janesville, it's I had to take
Speaker 1: sort of antidepressant stuff for every chapter. It's just a
Speaker 1: very second story. Okay, you you are the elite of
Speaker 1: the elites at Mackensey Group. I love going to your
Speaker 1: sure and Davos. It is every stereotype. What can people
Speaker 1: like mackenzie and Company and the good people, the smart
Speaker 1: people that have worked their butt off for Don Barton
Speaker 1: to shake their hand and say welcome to McKenzie. What
Speaker 1: are you going to do about Janesville? What are you
Speaker 1: gonna do about opioids? What are you gonna do about
Speaker 1: the headaches Cenator deportment of ohio has. That's a really
Speaker 1: good push, Tom, because I think one of the worries
Speaker 1: I have is people like me sipping champagne talking talking
Speaker 1: about Jamesville and the world's problems or what don't I
Speaker 1: write an op ed and that's my contribution. That's just
Speaker 1: not good enough. And I think what it means is
Speaker 1: that in your organization. So in McKinsey, for example, we
Speaker 1: have a very significant effort called Generation, which is trying
Speaker 1: to help unemployed youth get jobs and get it quickly,
Speaker 1: in between three to seven weeks. And this isn't an advertisement.
Speaker 1: I'm just saying it's something we do. We don't talk
Speaker 1: about a lot. We have to do this, and part
Speaker 1: of it is because we are also at the thin
Speaker 1: edge of the wedge or the tip of the spear
Speaker 1: on productivity. When companies are restructuring, we're often there, so
Speaker 1: where are those workers going to go? So we have
Speaker 1: a very significant effort on reskilling. How do we help
Speaker 1: companies and organizations to reskill workers who are who are
Speaker 1: who are losing their jobs to be able to get
Speaker 1: new jobs. What are we individually doing to make a
Speaker 1: difference in the communities that we live in don Barton
Speaker 1: with us? Who's with McKenzie and it is a mackenzie
Speaker 1: that does consulting to companies linking strategic and tactical theory.
Speaker 1: But also they have carved out through good work over
Speaker 1: the last decade, the mckensey Global Institute, which is just
Speaker 1: first rate research. I can't convey enough the printed the
Speaker 1: value of the printed edition of their different forty and
Speaker 1: sixty page essays, which is the one you're most proud
Speaker 1: about coming out this year. What are we gonna look
Speaker 1: for from m g I I think to one is
Speaker 1: the is reskilling the whole issue about how we're going
Speaker 1: to prepare the workforce the in around the world but
Speaker 1: also in the U S and other other developed economies
Speaker 1: to prepare for the technology disruption that we're in the
Speaker 1: midst off. That's going to be well, let's go right
Speaker 1: there right now. We've got an America of elites, we
Speaker 1: know who they are, and we thank you for listening
Speaker 1: to Bloomberg surveillance. We've got another group striving their part
Speaker 1: of the economy. They're doing the economy. And then, as
Speaker 1: Jeff Sacks and Columbia says, there's this large body of
Speaker 1: people that have just been left aside and they're really
Speaker 1: not part of the American discourse anymore. Is that a
Speaker 1: government system that jump starts m Is it a business responsibility?
Speaker 1: I think it's all of our responsibility. It's I think government,
Speaker 1: but increasingly has to be business. And a person I've
Speaker 1: talked about before is Randall Stevenson at A T and T,
Speaker 1: who has, you know, is a arch capitalist, if I
Speaker 1: might call it, that believes very much and shareholder value
Speaker 1: and so forth, but has undertaken one of the most
Speaker 1: significant reskilling programs I've ever seen, hundreds of thousands of
Speaker 1: people being given the opportunity to retrain to be able
Speaker 1: to deal with the digital world. And I think that's
Speaker 1: something that business has to do much more of. If
Speaker 1: we don't take care or think about the societal impact
Speaker 1: of the work that we're doing, we won't have the
Speaker 1: license to operate, and government can't. It's just not capable
Speaker 1: of being able to deal with some of these issues.
Speaker 1: I'm not saying that we should go into education or
Speaker 1: you know, well, but there's things we can do here.
Speaker 1: Here's and I I mean, I know Don Bart that
Speaker 1: wouldn't I'd never see you the Jenny cremail or Amulsa
Speaker 1: Golden nail at a bar. But if you're at a
Speaker 1: kind of bar that serves Jenny Creemel or Mulsa Golden nail,
Speaker 1: Michael was here helping us with television or a Utica club,
Speaker 1: fine beverages. Those people go, that's all great talk, but
Speaker 1: what's the program to jump start that. America can't seem
Speaker 1: to figure that out, where, for example, Germany seems to
Speaker 1: have the right calculus. Yeah, Germany is. It's a great example,
Speaker 1: you said, even not only in terms of the apprenticeship
Speaker 1: programs and vocational schools, but even what they're doing with
Speaker 1: their employment centers. Their unemployment centers are not just for
Speaker 1: when you don't have a job. You go there to say,
Speaker 1: what are some of the skills I'm likely going to
Speaker 1: have to train for while I do have a job
Speaker 1: to continue to have a job. That's being proactive, And
Speaker 1: I think that's because there's a very good there's more cohesion,
Speaker 1: and you've got business, you've got the unions who are
Speaker 1: also supportive and we don't have those. I mean, we've atomized,
Speaker 1: is there? I believe the right phrase the unions, haven't
Speaker 1: we Yeah, we have, we don't. We just don't have it.
Speaker 1: There's no there's no voice for that group um and
Speaker 1: except through populism. In the last ten years, corporations have
Speaker 1: had the labor power and we haven't seen wage growth.
Speaker 1: We all know the story. When does that act change?
Speaker 1: Do you do? I mean, we had a major ceo
Speaker 1: a company, folks in the news who told us two,
Speaker 1: three or four years ago, one day he realized the
Speaker 1: bottom of his pagride couldn't pay the rent. They literally
Speaker 1: couldn't get to the next month. Is that going to shift?
Speaker 1: Do you do? You people see legitimate wage growth across
Speaker 1: the middle deciles of America. I think it will come,
Speaker 1: but it's very slow incoming. And I think what's happened
Speaker 1: is actually the again, we've got this increasing polarity, so
Speaker 1: you've got, you know, a lot more low paying jobs
Speaker 1: and then a few very high paying jobs. As we're
Speaker 1: working through the system, you know, the middle class in
Speaker 1: the sense is being gutted. It's it's it's it's shifting
Speaker 1: between those poles mainly to the lower side of it,
Speaker 1: you know, not to get into philosophy. We do that again,
Speaker 1: folks under ten degrees fahrenheit, You're Canada's out of fahrenheit system, right, Fomer.
Speaker 1: I can't keep make a note of this. I can't
Speaker 1: keep track of which countries are set are cintigrated in Fairrenheart.
Speaker 1: I just don't Francy and I don't agree temperature. But
Speaker 1: but the the idea here that we're gonna fix this
Speaker 1: and we keep waiting and waiting. Is it just about
Speaker 1: g d P. If we actually develop economic growth, we
Speaker 1: make it labor power. I think I I think what
Speaker 1: we have to look at is the you know what
Speaker 1: the example you gave, And I think Mark Bertolini was
Speaker 1: one who would say that when he used it at now,
Speaker 1: who said he was very concerned about the This is
Speaker 1: why we have Don Barton and he's so damn good.
Speaker 1: He can pick the CEO of the five under Dyck
Speaker 1: talked to and know that it was burned leading of
Speaker 1: ETNA that told me the story. Yeah, and but I
Speaker 1: think it's a it's a great example of again taking
Speaker 1: responsibility and because and he does it for selfish reason.
Speaker 1: Why aren't there more Mark Bertolini's we're in the fancy
Speaker 1: suits and ties of Mackenzie. I don't well. I think
Speaker 1: what we need is uh again, this again about the
Speaker 1: modernization of capitalism. You have to we have to start
Speaker 1: thinking about the whole system, not just what we're doing individually.
Speaker 1: And because there's no system out there right now, institutions
Speaker 1: that are helping deal with these issues, there's a dearth
Speaker 1: of them. Ian Bremer talks about a hobbsy in two
Speaker 1: thousand and eighteen, and not to wax philosophical, but let's
Speaker 1: go there. Hobbes Nature's in power. A man doesn't control
Speaker 1: the system. Leviathan, I'm guessing chapter eighteen. And then John
Speaker 1: Locke shows up, and John Locke gives us a Jeffersonian
Speaker 1: sense of individual and then we go down the road
Speaker 1: and I think of Torsten Veblen, I'm gonna say en,
Speaker 1: which ordered on a more you know socialism if you will.
Speaker 1: Where are we in our business philosophy other than a
Speaker 1: Trumps m which supporters and critics are very aware, has
Speaker 1: a roughness to it, a ruth ruthlessness to I think
Speaker 1: in some ways where we may be going back to
Speaker 1: the owner capitalism. If you think about leads before even
Speaker 1: before that, you know that where you've got where you
Speaker 1: you saw, you know, schools and hospitals and and so
Speaker 1: forth within the site where workers were to take care
Speaker 1: of and it maybe that's too paternalistic. But there's a
Speaker 1: modern day version of that which says we better think about,
Speaker 1: you know, is there should there be a lifetime learning
Speaker 1: account that we have to think about pension pensions, people
Speaker 1: having pensions. There should be a lifetime learning account that
Speaker 1: we all have. We contribute, employers contribute, and the government
Speaker 1: makes it an incentive, advises us to do it. Those
Speaker 1: are new institutions that we need to deal with this
Speaker 1: world because we're not keeping track. There's that you know
Speaker 1: that uh e O Wilson, right, I love you know
Speaker 1: the study right and things like that, And he had
Speaker 1: this quote. I just want it says, you know, we
Speaker 1: have a society with godlike technology, medieval institutions, and stone
Speaker 1: age emotions. I just don't think it's quite a proposed
Speaker 1: for what we're dealing with. I got one minute left.
Speaker 1: I want to talk about foreign languages and the resumes
Speaker 1: of the super kids. You guys, look at mackenzie. It
Speaker 1: used to be as in off Canada. They spoke English,
Speaker 1: they spoke French. Does anybody speak only three languages anymore?
Speaker 1: Is every resume four languages? People? I mean we have.
Speaker 1: The one thing I would just say about that is
Speaker 1: I think we've become two box ticking and looking at
Speaker 1: the universities and the backgrounds. This year we're going to
Speaker 1: hire five people that do not have university degrees. That's
Speaker 1: not a very big deal, but it's a big statement
Speaker 1: to say that. My mother called it Harvard on the brain.
Speaker 1: You're getting away from Harvard on the brain. We have
Speaker 1: we're gonna do is look for talent, raw talent, and
Speaker 1: look for ways that we can train them and drive them,
Speaker 1: because talent is not just defined by the marks that
Speaker 1: they get. The NBA program overrated. I think certain aspects
Speaker 1: of it are. I think all elements some elements in education.
Speaker 1: I wouldn't want to write off the NBA at all,
Speaker 1: I think, but I think we want to look for
Speaker 1: a more diverse, raw set of capabilities that we can
Speaker 1: then help train. It's about grit. It's it's the drive um,
Speaker 1: the desire to want to learn that you in a
Speaker 1: the world where people don't have chances, you've got to
Speaker 1: go for that. I'm gonna go with STEM as we do,
Speaker 1: and thank you to New Jersey Institute of Technology for
Speaker 1: their support. But STEM with the very liberal arts Stombard
Speaker 1: and thank you so much. He is with Mackenzie and
Speaker 1: Company right now. Some we spoke to earlier this morning
Speaker 1: and deserves a redo. Is a name you may know,
Speaker 1: You certainly know if you're an engineering and technology His
Speaker 1: name is Vince Surf, but you may really not know
Speaker 1: who he is in the kind of work he did
Speaker 1: over many decades. Vinn Surf is with a small company
Speaker 1: named Google or Alphabet where he is given a very
Speaker 1: Silicon valley name of evangelist. But really out of that
Speaker 1: is is incredibly original and hard work on tc P,
Speaker 1: i P and really the founding set of individuals who
Speaker 1: gave us this internet. Vince Surf, We're honored to speak
Speaker 1: to you from our studios today in Washington. Is the
Speaker 1: Internet of today what you thought it would be from
Speaker 1: the time of and Dogpile or even the decades before. Well,
Speaker 1: I have to say that we had high hopes that
Speaker 1: this technology would unleash a lot of collaborative creativity, and
Speaker 1: I think we've certainly seen on the other hand. Uh,
Speaker 1: we'll also seen what happens when you lower the barrier
Speaker 1: to access to information and provision of informations nearly zero
Speaker 1: for virtually anyone on the planet who has access to
Speaker 1: the Internet. That's about half of the world's population. You
Speaker 1: actually allow a bunch of things to happen, some of
Speaker 1: which are not necessarily all positive. H The injection of
Speaker 1: fake news and bad data and so on, to say
Speaker 1: nothing of malware and cyber attacks and so forth, all
Speaker 1: get enabled. At the same time, all the positive benefits
Speaker 1: are are made possible. And so now we have a
Speaker 1: challenge ahead of us, which is to try to make
Speaker 1: this a safer environment for everyone. I I look at
Speaker 1: where we are in the day to day big data
Speaker 1: phrases a couple of years ago. Nanotechnology, artificial intelligence I've
Speaker 1: seen used and abused for easily thirty or forty years.
Speaker 1: I had an UH family member who was a Sun
Speaker 1: Mike Systems years ago in the beginning of AI. Is
Speaker 1: AI anywhere closer to reality now? Or do you cringe
Speaker 1: when you hear all these phrases? Well, thank you for
Speaker 1: asking it that way. Uh. Certainly, artificial general intelligence is
Speaker 1: not really much closer today than it was forty or
Speaker 1: years ago. On the other hand, our ability to use
Speaker 1: machine learning is actually quite impressive, and the methods that
Speaker 1: we use for absorbing large amounts of data and deriving
Speaker 1: useful output have become far more sophisticated in the last
Speaker 1: several years, especially with multi layer neural networks. But at Google,
Speaker 1: we're very careful to try to use the term machine
Speaker 1: learning rather than AI, even though our CEO has said,
Speaker 1: you know, there's the sort of AI um because we're
Speaker 1: really not creating intelligence in the sense of being able
Speaker 1: to build models of the world old and reason about them.
Speaker 1: That's not what the software it tends to do, and
Speaker 1: that's what most people think of when they think of
Speaker 1: artificial intelligence. But I do want to emphasize how powerful
Speaker 1: this technology can be as a tool. People use it
Speaker 1: sometimes without even thinking about it. When when we do translation,
Speaker 1: for example, I get email in various languages and it's
Speaker 1: automatically translated into English, and for many languages the translation
Speaker 1: is pretty good. We're using multi layer, multi layer neural
Speaker 1: networks to assist us in producing that result. So so
Speaker 1: there's a huge benefit here, especially the pattern recognition, for example,
Speaker 1: the analysis of medical information. So I'm a positive, you know,
Speaker 1: very pro machine learning, but I do worry about misunderstandings,
Speaker 1: and frankly, more generally, I worry about this the reliance
Speaker 1: that we are putting on autonomous software. And I'm using
Speaker 1: that word deliberately. It's not it's not. You know, self
Speaker 1: driving cars are certainly an example of autonomous software, but
Speaker 1: so is software that runs in your thermostat. And as
Speaker 1: we rely on the software to just do stuff without
Speaker 1: our intervention, I worry about the bugs that are in
Speaker 1: the software that either simply make mistakes or maybe make
Speaker 1: those devices vulnerable to various forms of attack. Don't We're
Speaker 1: I'm sorry, I keep going on, and it's fine, it's fine.
Speaker 1: It's just in the in the precious time that we've
Speaker 1: got with you, Vince surf I have to ask a
Speaker 1: question that so many of our listeners are dealing with
Speaker 1: their kids. This is not nineteen fifty seven, and Mr
Speaker 1: Fagin's I g y. We are growing up at a
Speaker 1: time of anti science and anti mathematics. How do we
Speaker 1: get the love of science and math back into our kids. Well,
Speaker 1: I can tell you that the National Science Board, of
Speaker 1: which I am a member, which overseas the National Science
Speaker 1: Foundation has been really deeply concerned about this as well.
Speaker 1: It's hard to fully understand what's happened here. UH. Science
Speaker 1: has rewarded us repeatedly for decades or well centuries and
Speaker 1: even millennia UM with new capabilities that have the potential
Speaker 1: to make our lives better. UH, somehow or other, we
Speaker 1: have managed to contort our society around to misunderstand all
Speaker 1: of this. So I think the answer here is getting
Speaker 1: kids earlier, early enough interested in uh satisfying their curiosity bumps,
Speaker 1: and to encourage that as opposed to driving it out
Speaker 1: with educational practices that that makes science boring or mathematics born.
Speaker 1: In fact, it's probably the most exciting subjects in the world.
Speaker 1: I mean, learning how the universe works has to be
Speaker 1: just about the most exciting thing I could possibly imagine
Speaker 1: trying to do that. We've got to leave it there.
Speaker 1: I hope to extend this conversation with Vince Serf of Google.
Speaker 1: M H. Let's talk to someone who knows Microsoft ExLF
Speaker 1: so well. Brad Smith is, of course the president of
Speaker 1: Microsoft and truly one of the great and I rarely
Speaker 1: use his phrase, Brad, I do test it, but you
Speaker 1: have earned it so much truly a thought leader on technology. Brad,
Speaker 1: you've been writing about the Geneva Convention eighteen sixty four.
Speaker 1: The basis to find rules of international law for the
Speaker 1: protection of the victims of armed conflict. We feel like
Speaker 1: victims of technology. Why do we need a technology Geneva Convention? Well,
Speaker 1: Ian spelled it out very well, and it's top ten
Speaker 1: risks this morning. For I think number two is the
Speaker 1: risk of accidents, and cyber attacks is one of them. Unfortunately,
Speaker 1: not always accidents, I think when we'd be hard pressed
Speaker 1: to look at some of the biggest attacks of last year,
Speaker 1: I want to cry, which was in May and it
Speaker 1: affected a hundred and fifty countries, but not pet you
Speaker 1: attack on Ukraine in June. We live in a world
Speaker 1: where cyber tools, unfortunately are not just being used to
Speaker 1: write documents with Microsoft Word, but they're being weaponized by
Speaker 1: major nation states, and they are increasingly intentionally or otherwise
Speaker 1: being unleashed. And we're going to have to do a
Speaker 1: number of new things to address this. But among these
Speaker 1: things are to get some rules in the road in
Speaker 1: place for countries, just as we had to do for
Speaker 1: nuclear arms, just as frankly we've had to do for
Speaker 1: every new arms technology since the middle of the nineteenth century. Well,
Speaker 1: Mr Smith, and and maybe Ian and you come in
Speaker 1: after this, what is one thing that you would like
Speaker 1: to see initiated. Well, if there is one thing above
Speaker 1: all else, it would be to get governments to agree
Speaker 1: that they will not use cyber web to attack civilians,
Speaker 1: especially in times of peace. Consider this, Since World War Two,
Speaker 1: the governments of the world have agreed that they will
Speaker 1: protect civilians even in times of war. That's what they
Speaker 1: put in the Fourth Geneva Convention in nineteen forty nine.
Speaker 1: And yet here we see governments attacking civilians, whether it's hospitals,
Speaker 1: whether it's our electoral processes, whether it's the electrical grid.
Speaker 1: And this is happening in peace time. And this is
Speaker 1: going to continue, we believe, unless we raise our voice
Speaker 1: and really pushed governments to address this in a stronger manner.
Speaker 1: I'man I agree with that completely. You know that you
Speaker 1: look at the U. S. Government right now, we we
Speaker 1: recognize even though Trump said NATO is obsolete, he becomes
Speaker 1: presidents of no, NATO is really important. He's focusing on industry,
Speaker 1: supporting industry, wants it to be more jobs. And yet
Speaker 1: none of this works for new technologies. UH. The United
Speaker 1: States is not acting multi laterally try to coordinate with
Speaker 1: our allies around the world to come up with a
Speaker 1: way to address, assess, and and and deal with react
Speaker 1: to UH cyber attacks. We're not working to treat our
Speaker 1: most important industries in technology as strategically essential to the
Speaker 1: United States. And the Chinese government gets this really well,
Speaker 1: but the United States doesn't. And I think it's gonna hurt.
Speaker 1: I look at all this and just in the time
Speaker 1: that we've got left, I want to apply the top
Speaker 1: risks of your Rasier group and any and Bremer of course,
Speaker 1: has been so good on this over the years, folks
Speaker 1: and Brad Smith to what you're doing at Microsoft, which
Speaker 1: is basically in America left behind. You've got a nodding
Speaker 1: acquaintance with the climbs of Wisconsin. Microsoft has an innovation
Speaker 1: project with the Green Bay Packers to jump start innovation
Speaker 1: where it really, really really is difficult to jump start.
Speaker 1: Do we need obviously we need a lot more of that.
Speaker 1: Is this the year where America finally gets its act together?
Speaker 1: Like Title Town in Green Bay, Wisconsin? Well, I think
Speaker 1: there is something to that. I mean, I think fundamentally,
Speaker 1: if you look at the election results in steen in
Speaker 1: the United States, or you look at election results in
Speaker 1: a country like Poland, or you look at what's happening
Speaker 1: in Turkey or many other places that Ian captures, you
Speaker 1: see a real divide between urban areas and rural areas.
Speaker 1: And we have to do a better job of bringing
Speaker 1: technology and innovation back to rural areas. We have to
Speaker 1: do that by bringing broadband connectivity to rural areas. There's
Speaker 1: still twenty three million Americans that have no access to
Speaker 1: broadband because they're in rural counties. And to me, this
Speaker 1: is like electricity in the nineteen thirties. The problem is
Speaker 1: not that people had electricity and urban areas, it's that
Speaker 1: they didn't have it in rural areas. If we can't
Speaker 1: bring the country back together in this way, I don't
Speaker 1: see how we bring the country back together in any
Speaker 1: other way. A gentleman, can I can I just post
Speaker 1: come back to you though about this idea of government
Speaker 1: hacking and these new laws that you're talking about. Uh,
Speaker 1: hasn't the United States government been doing this almost forever?
Speaker 1: And I'm talking about not just adversaries but allies. So
Speaker 1: I mean, what makes anybody think this is really going
Speaker 1: to change. I do think that there is a complexity
Speaker 1: here to which you allude. What what complexity? The United
Speaker 1: States has already hacked into the phone messages of Chancellor
Speaker 1: Angela Merkel, an ally and NATO member. But what the
Speaker 1: United States has never done, in my view, is it
Speaker 1: has an unleashed cyber weapons on hospitals or on schools.
Speaker 1: It hasn't sought to steal intellectual property from private businesses.
Speaker 1: The US has recognized you some rules of the road,
Speaker 1: but if the end points out, it's not leading multilateral charge.
Speaker 1: Prest thank you so much, greatly appreciated. He's president of
Speaker 1: Microsoft and a good contributor to what e racial groups doing.
Speaker 1: You're thinking about technology. Thanks for listening to the Bloomberg
Speaker 1: Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,
Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at
Speaker 1: Tom Keane Before the podcast, you can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio