Billionaires Dalio, Gundlach, and Schwarzman talk millennials, social media and business

well I do want to talk about my generation the Millennials we were really coming of age during the crisis so how would you advise us to prepare and and what would you tell our generation we feel scarred from the crisis yeah first of all I think one of the problems is that the experience that you had is the last experience is the one that's going to stick in your mind and probably will not be the one that's going to get you so that the next experience will be very very different I know my my parents went through the Great Depression and then they missed out on the boo because that they were always thinking about that and so I think I think that what they need to do is see all of those crisis's that's why you can see inflationary ones and see all of those and once you get that perspective I would say three things to your generation okay three recommendations the first recommendation is to is to think about your savings and how much money do you have for savings and the best way to think about that is to think how much money do I spend each month and how much money do I have saved so that I can how many months am I going to be okay without that and to value savings right and in calculate it because savings in that is freedom and security and think about what that is so that's that's the first what how much do I have for that the second thing is how do I save well what should I put my saving in and when thinking about what you should put your saving in realize that the least risk investment that you think from volatility is the least risk investment it which is cash is the worst investment over a period of time and you could judge that by judging the rate of inflation in relationship to the after-tax income you're going to earn so if you have an inflation rate that's 2 or 3 percent and you're earning 1% and you have to pay taxes on that 1% or the 1 or 2 percent that you're going to get you're going to get taxed essentially at 2% a year and that's going to be a problem so you have to move into assets that are other assets that are going to do better over a period of time and when you do that the most important thing I can convey to you is to diversify well because I can guarantee you that one of those assets and you won't be able to pick the right one will be disastrous in your lifetime that you will lose half of that savings if you're in the wrong one and you won't know what the right one is and so pick different countries pick different asset classes and I could probably take too long explaining how you might do that but but so that would be the the second thing to learn first thing is think about how to save be cautious about debt when you're thinking about debt think about is that debt going to help my savings or is it going to produce an income sometimes debt like buying a house or buying an apartment or buying an asset it produces forced savings forced savings is a good thing or if you're taking on debt and you're thinking am I going to have that debt in an asset that asset better produce more income than the asset then the cost of your debt if you're using debt for consumption that's not a good thing to do okay you're giving up that that safety so I want so number one is think about how much you save and think about whether that should be and what how you borrow number two make sure that you think about the diversification of that not in cash and number three do the opposite of what your instincts are if you're going to play the game it has to be the opposite of what your instincts in the crowd says because the market reflects the crowd so you want to buy when no one wants to buy and you want to sell when no one wants to sell right so and that's emotionally difficult and probably you're not going to play that game well because it takes a lot of resources to play the rig and we spend hundreds of millions of dollars each year to try to play that game well and it's a tough game to play well so I would caution you about the market timing game but I would say that if you're going to do it do it in the ways that are uncomfortable because their opposite your instincts that's really good advice right um one more thing that really resonated with me in the book was if in the next downturn some of the implications could be the impact on pension obligations health care is my generation are going to be on the hook for that yeah so we pay a lot of attention to debt and we should but pension obligations and health care obligations are just like debt there are obligations that require cash to fund those things and when you think about that we don't have enough money to fund those things and so there'll be a squeeze and I think that's also part of this political conflict because when you say to somebody that you're not going to be able to fully fund their pension or how are you going to fund it what are you going to take it away from in order to fund it or if you think about the health care issues and so on with the demographics and those require taking things away from people that have been promised to people and or do you print the money these are issues that will be important for your generation and you know not only are you an incredible money manager but you're also a really big philanthropist and when you're talking about the next downturn you're also bringing up some big social issues the wealth gap how do you think about that how do we address this issue because it sounds like it's going to be a very big problem yeah I think capitalism has got to work for all the people and democracies got to work for everybody and and we're in a situation right now because of a lot of things that it's not working for a large portion of the bottom 60% I separated the averages to the bottom 60% of the top 40% I could have done it the 80% or even 95% yeah and it's not working for a large percentage of the population we don't have adequate education we don't create bottoms in many cases my wife works in Connecticut to try to help what are called discing disengaged and disconnected youth give you a picture can etiquette which is the richest state in the country or or equal to the richest state in the country has 22 percent of its high school students are disengaged or disconnected disengaged means they attend high school but they don't really study they just sort of get through and disconnected means they don't even know where they are 22 percent those students those people are going to be on the street that's a problem there are school districts in which they have to share books or in some cases even after share pencils they literally will break a pencil in half and shut on sharpen it from both ends or pass it around and so on and those that issue about opportunity in terms of education or even income opportunity there's a population that in that bottom 60% we're opiate use is rising and and suicides are rising that I think there has to be considered a national emergency in which we create metrics what are those conditions and that there should be a dealing with that I think that these things can be done dealt with much much better but it has to be treated in a way that that's dealt with and that has by making them productive I don't mean by giving money or by giving welfare but by doing certain things probably in private public partnerships in which the private sector that could be business sector together with the government sector can funk can do the checks and balances to make those things productive I see many of these cases i fund for example microfinance Grameen America is one but a number of those and the capacity to lend somebody a thousand dollars and get paid back not 99% 98% payback rates and that thousand dollars can create a the purchase of a rug cleaning piece of equipment and that person's in business to be able to be productive those kinds of things need to be thought about because if we don't have capitalism working for the majority of people it's not it's going to be and the same thing is democracy the democracy is based on the notion of compromise to be able to bring people together and so on I think if we have too much fragmentation I think that these are the biggest risks I think debt crisis is can be managed but when you get into a bad situations as a basic principle if you have rich and poor living together and they have to decide how they're going to spend a budget how they divide a pie and you have an economic downturn you're probably gonna have a conflict and I think that has to be dealt with really railing against how much money we spend on old people in the United States government the system as opposed to how much we spend on young people and in that article the ratio was seven to one how much we of the budget goes to paying for things for people over 65 compared to paying for things for people under 21 I came her first 21 or 25 whatever but young people and if you're investing in dying people and not investing in the future you don't have a very bright future and so it's middle ends they're starting to understand that the baby boomers have all the wealth and Millennials don't really I mean they can't afford a house you know they've got student loan debt all right I'm starting that they're starting to believe I think finally that they kind of got screwed by the system when you see a number like 22 trillion for the nation's debt are we passed the point of no return what is the day of reckoning look like I think we are really at that tipping point so since record do anything about it in the next couple of years almost certainly I think once we get to 2020 2021 I think you will be past the point of no return and so you're just going to have to deal with it and one of the problems we have twenty two trillion in debt and it's growing very rapidly but we also have 123 trillion dollars in unfunded liabilities the state and local pension systems the United States on average are 50% underfunded so if you take a look at Dillon Oi there's no chance that Illinois can honor its pension obligations to its public unions and cannot do it so what's the solution the solution is you have to cut benefits when you have 123 trillion dollars of unfunded liabilities you have to deep you have to decommitted them to fund them it would be amazing I mean we would be we have to go to if we funded 123 million dollars of future liabilities that's six times GDP if we did that over a 60-year period we would have to take 10% of our GDP every year and put them aside into funding these liabilities so we'd go from an economy which is 6% in deficit to we'd have to go to one that's 10% in surplus so it would be 16% swing from where we are today so we cannot fund these liabilities so it has to happen is we have to raise the age of entitlement eligibility and we're going to have to cut people out even though we told them that they were paying into the system as sort of an insurance program for Social Security and that will happen and it will happen remarkably easily do you think the politicians will do that no they've made all these promises okay because the awareness of the trajectory will become too obvious right and so people will say you know what I know I supposed to get Social Security when I was 65 you know what I guess it's okay if I get it when I'm 72 and certainly the Millennials are gonna have eligibility eligibility that's probably 75 and some people like me you won't get anything because actually when I talk about you and DoubleLine this is your 10th anniversary I believe 10 years running double line um you've been in the business for over 35 years you are the bond King now you are that's what people say I never I never invited that but that'd be got it drama that the media like well you're a prominent bond investors most double lines strategies are in fixed income but I've noticed that you have been diversifying a lot lately so I'm curious where are you finding opportunities and what's exciting to you well we've been diversifying first of all because we could we were approached by Barclays bank to run smart betta equity fund using some what they were working with doctor Schiller the Nobel Prize winner on the rail of Cape ratio and it turned out that that strategy had tremendous successes I think it's the best performing large-cap strategy in the country since we launched it and it's that was good because it was successful that's over ten billion dollars and we started a liquid real estate fund which i think is really interesting with Colony Capital which we just started launching that actually invests in all manner of REITs that are brick-and-mortar rates but also includes digital assets it's it's not just malls feelings like malls and nursing homes that's part of it it's much bigger than that almost like newer economy yeah there's love its new economy like satellite towers and stuff and that uses a smart bait approach to it's just got started we'll see if it works launched it at a great time I mean was like end up our last year which is a great time to launch anything because markets have exploded to the upside but right now in the fixed income market strange thing is I think the most exciting thing is the two year Treasury not that it's great but its yields about the same as the ten year it's you know it's a two and a half which is okay I just think that interest rates have a bias to rise on the long end and I'm I I think it's late enough in the cycle with enough leverage in the corporate economy that if we continue to roll on with attractive gains and risk assets I'm pretty sure it's at the end of the game and you're going to be better off waiting and forgoing those gains because your opportunity set will be vastly better when the next recession comes and as we said earlier can't really see a recession in say by mid middle of this year we always get surprised but our indicators don't show it but once they roll but they are starting to show signs of cracking not convincingly that you have to act today but when the next recession comes there's going to be an outrageous opportunity in corporate credit and I think you want to none right now none and instead you just say I might lose a few percent versus playing in that game but when it goes down well we saw what happened from October 3rd into Christmas Eve I mean there was a pretty big drop and I think that that's just kind of a taste of things to come you called the housing meltdown and you were one of the first to put capital work is that kind of what you're seeing when it comes to corporate 3 yeah I called it but I wasn't buying the first book capital work I I actually raised a distressed fund starting in February of 2007 and it was an interesting period because the institutions that I was suggesting this idea to they were debating whether I was right more than anything they were saying like well what no one else says this you say the housing prices gonna drop 35% which I said in Barron's in December of 2006 when they were down by 1/2 of 1% so far it's a long story I won't get into it for time but I knew what was gonna happen in the housing market it took a little longer than I thought maybe by about 6 or 8 months but then what I became known for as I spoke at a very prominent conference in June of 2007 and I went on stage not fully sure of what I was gonna say I'd have any notes or anything I had some slides and all of a sudden it came to symbol here was the right moment and I made the declaration I'm gonna get to the credit markets later on in this talk but I'll just give you a hint subprime is a total unmitigated disaster and it's going to get worse that phrase was captured in the media on five continents and at that time the subprime sector the triple A's the double A's they were still trading at a hundred cents on the dollar heavy they hadn't dropped at all zero and they really started dropping in earnest in the first part of 2008 later part of 2007 I don't really start putting money to work until March of a way after the Bear Stearns collapse because by then the prices were low enough where you were pretty sure to get more than your money but you but you invested your your cost you're likely get that back but I knew was going to go lower I actually did a I announced to my investor in March at that moment March of ovate I said I just want you to know I value transparency I'm going to start buying credit I warned this was gonna happen I said the prices were gonna collapse I think they're low enough time to start buying them but I want to buy so much of this stuff that's probably gonna take us like a year to get and we didn't really get fully invested until March of o.9 which as good luck would have it turn out to be the bottom so yeah I think something along those lines is gonna happen but it's not going to be in the securitized markets it's going to be in the the market that's miss raided today when you're looking for distressed opportunities and fixed income the best ones come from things that are mis rated going into the problem because the people that buy investment grade corporate bonds are looking for safety they think they have safety when you buy a triple-a rated subprime floater you're a triple-a person you didn't sign up for a lot of risk you signed up for a little bit of reward hoping that the risk was de minimis but then it ends up being a big risk and so it's not surprising that the people that sign up for safety sell when the market goes down because they their eyes have been opened and they now realize that they were fooled they thought it was safe but they were wrong or this one they were lied to and so they decided I'd never signed up for this I'm getting out before it gets worse and that creates another layer of selling so for example there was a lot of buying of stocks and in a later part of December and by all appearances it seems to have carried it 20:19 I think the people that bought at the best levels of late December I think that they will sell at a lower level than what they paid what they bought in it for that same type of a thing they they bought in they thought it was a buy the dip they felt they feel emboldened by it they've gotten an economic and psychic reward so far but once that buy goes underwater it will accelerate the selling because those people will turn into sellers I think and that'll happen in the corporate bond market too there's another leg down coming do you think this is a bear market that we're in yeah oh yeah it's a bear market I mean this this is a bear market there's nothing to do with this 20 percent arbitrary thing it has to do with something crazy happening first and then the crazy thing gives it up and yet more traditional things continue to march on but one by one they give it up so what was the crazy thing Bitcoin Bitcoin was the crazy thing Bitcoin going from zero to twenty thousand in a straight line it was crazy and you knew it was crazy because other things started to happen that were truly insane there was a thing called crypto kitties yeah it wasn't a cryptocurrency it was a collectible but had the name word crypto in it and they were each unique but there were cartoon drawings of cats and there was actually a moment where one sold for over a hundred thousand dollars of course there were zero today but that is a sign that's like pet pets calm back in in the late 90s that's like pick up a negative amortization 120 LTV loans in 2006 Bitcoin was insane and it crashed starting in December of 2018 then the global stock market peaked a month later then the transports peaked the utilities peaked then then the Dow Jones Industrials peak then the S&P Pete then finally the Nasdaq peak and then it was down to five stocks so that was down to four stocks that was down to two Amazon and Apple and then on October 3rd it was over and so that's how a bear market develops and I think that it's been saved by the feds pivot it's been saved by the bond rally taking some pressure off the stock market but if the long end of rate starts to rise as I expect and if we break through 350 on the thirty-year I think I think it's over because the competition from the bond market particularly against a climate of limiting one of the engines of stock price appreciation which is buybacks is thought to be potentially in jeopardy I mean it is interesting that a Republican is proposing legislation to curb buybacks that shows you that Marco Rubio wants to get in front of this issue before somebody on the other party claims it as their own so the support for limiting buybacks seems pretty high so you mentioned Bitcoin which was the mania do you think there's another mania I'm thinking maybe in crypto current crypto cannabis that's kind of the one that people are talking about now if you haven't yeah I I've got young guys working for me that are big believers and the cannabis thing and they claim that it's all about getting shelf space and branding and getting bought out by another big company that's like the game I mean it sounds plausible to me but I don't know I'm pretty simplistic I don't know why there isn't a corn mania right how could this in a corn mania grow corn - right I don't understand why just because it used to be illegal and you know that somehow it's got this special magic to it but you know it's interesting the cannabis thing does seem kind of like a mania I mean people probably make a lot of money in some parts of it but that's just not for me I have no interest in in mania stuff I just kind of watch but musically from the sidelines what I do find it's a little bit scary is I saw a statistic this week that the increase in smoking among high school students year-over-year 38 percent because of vaping wow that the there is an explosion in smoking which I suppose is probably like a gateway for the cannabis industry so maybe there's something there but I I find that to be an incredibly horrifying statistic in one year 38 percent increase and now over 50% of high school kids are either smoking are there mostly vaping I think which is probably far worse far worse than traditional cigarettes I don't know I've never been to a cigarette smoker but I wouldn't get anywhere near any this chemical concentration stuff you know one thing that's always been interesting to me Jeffery is you're out here on the west coast and people do look to you for your various calls and views and I'm just wondering like how do you kind of sift through the noise how do you get your information what do you look at I look at news wires more than anything else and I try very hard to pay no attention to other people think sometimes people do things they say like name somebody that you admire or something and I was think about it and what person I really admire is someone that nobody's most people don't know the person's name his name's Donald Judd and Donald Judd was one of the great I call him a sculptor if you want to of the 20th century he broke rules and made people angry because he actually didn't make the sculptures himself he designed them and then sent them off to machine shops and this was back in the 60s when he started and that was considered to be that can't be art because doesn't have the artists hand in it but Donald Judd was an art critic in New York City and then he tried his hand at painting and he was as an art critic was very involved with the art scene which was very vibrant in the late 50s and early 60s New York was the artistic capital of the world having moved it from Paris and Donald Judd became very involved as a critic and then a painter and then he decided that being in the New York art scene was detrimental to his own artistic vision because he was too influenced by Willem de Kooning in any Warhol and Eva HESA and all these other luminaries of the time and that it made him distracted that other people's ideas were confusing him and taking his vision of his own art and making it more diluted so he did some very radical he got up and thanks to the generosity of the DIA Foundation who bought an old Korean army base that he had served at in Marfa Texas and which is the definition of the middle of nowhere he set up his art studio there in the old barracks and the old artillery sheds and he got he wanted to get away from all of the noise and he far his best work is in Marfa Texas it's the greatest art installation I've ever seen it's hard to get to it's like 300 miles away from any commercial airport you could fly in either and drive or you've got flying out to the jet strip there and I've that really spoke a lot to me because I realized that doing things like there's some events I get invited to all the time like groupthink events they call them like Titans dinners and stuff like this and all these hotshots are there all these names of people that we all know in this business and they they all whole of all will be there and you can sit there and he will share ideas and I did a couple of those years ago and I would sit there and here's mr. great a you know number one and he's massively bullish on Apple and then they turned to mr. great number two and he's massively bearish on Apple and both of their arguments sound really good to me so I'm so like I don't know what I think now about Apple I'm am I've walked in the room thinking something positive or negative but now I'm just confused and so I think what's important is to look at the news flow and watch for those times when the news doesn't change but the interpretation does or the news does change and the interpretation doesn't those are moments where there's this gap of opportunity and I think my primary skill has always been living in that gap in a way that's quicker maybe just because the way I operate I don't know than other people and so that's the real key is to look for harbingers and instances of the cusp of change we actually get a moment you can act on it I mean it's strange things happen I remember the one Ben Bernanke when things were looking pretty grim back there in 2011 or so he said we're going to keep short-term interest rates at zero for at least three years he pre announced three years of zero interest rates and shockingly many instruments in the bond market that were sure to profit tremendously from zero interest rates for three more years they didn't go up in price for like half a day and I bought them all and it's like why are people buying I don't know but they should be like 20 points higher and they were 20 points higher about two weeks later but they were actually there to be had because people want to see the idea that they have get ratified or corroborated by a crawler on some financial program and they oh I see it's safe to do this because everybody else saying that this is the conclusion you're supposed to draw but by then it's priced in so the opportunities by the time it's safe and you have a confirmation that your idea might be broadly embraced by that's too late so that's really the key also just trying to find relationships well I have a whole team that what we do is we just look for correlations that might be common sense but then you've you verified them some things that just correlate well like for example things like the feds underlying inflation gauge which doesn't get nearly enough attention it correlates incredibly well to CPI core CPI on about an 18 monthly basis it's got about an 80 percent correlation nobody knows about this well we do unfortunately I speak to people like you and I give my ideas away but it's okay because relationships don't hold up forever you've got if the world changes the variables change the coefficients change that drive things and so it's really important that you sort of just stay on top of it that's that's why I do what I do I mean I could have retired a long time ago I I find it very interesting as a way of processing human behavior society and just understanding what makes the world go around follow up on a couple things here you mentioned that your team here and I've met a few folks from Dublin in the past couple of years how do you think about talent what do you look for when you're hiring someone I generally like to hire people who either I know or who know nothing I don't like bringing people from other firms who have like eight years experience because they've learned some other way and it does not that the other way is wrong but it's not the way we do things and it's not that we do everything perfectly it there's only our way but I like people who are right out of school because that way they don't have to be but you know untrained from what they thought they learn somewhere else and I like people that I'd know the way they think so we like people are very oolitic we like people who are believed in shared success I tell people and I start working here at many firms you succeed by killing the person next to you if you even if you even go in that direction you're gone I want people to want the person next to them to do well because the person next you're doing well means the firm does well and so we have a shared success philosophy and it kind of comes from the top because I never yell at anybody my philosophy is everything that goes right the team the team did it and everything goes wrong it's my fault and I think that people appreciate that you mentioned that you could have retired I'm sure people ask you well you know you're successful you can retire anytime what is it that keeps you going what is it that drives you it's not really working is the thing I would I I just processed the world through human interaction which in this particular instance reveals itself through financial markets movements and so I just sort of like it also I'm committed to a couple of terrible enterprises that basically need a lot of money so that's a it's a good reason to to work so that it can be funneled not just to the Internal Revenue Service and the United States Treasury which I am a very significant contributor to but also something I think matters rather than just some some rathole of administrative waste and so I I don't really resent the fact that pay so many taxes I've it's sort of privilege in a certain sense but I also want to be able to see results for for the money that I'm giving away impact you know and it's a very big impact which doesn't go through a bureaucratic machine how about when folks are saying you know they should have a 70% marginal tax rate on on the wealthiest my marginal tax rate is presently combined California and US 52.6% I I'm deeply offended when people tell me no it's not I actually have pet people say that to me no it's not rich people like you only pay 15% I'm telling you it's 52 six all right so that's because California is 13.3 and then there's federal and there's other things so if they raise it to 70% that'd be a 33% increase I would go to eighty five point six percent I really think I would stop work yeah who would even work with them I think I really think I would stop working at eighty five point six so the tax policy is pre strange because a lot of people that are in my financial position really do pay low taxes I remember Mitt Romney I think he had a 14% tax rate on some tax return that he revealed as part of his run for president I mean 14 it's just amazingly low I I agree that's ridiculous but instead of raising me from fifty two point six to eighty five point six I think the 14 errs should come up to fifty two point six that's what should be happening but I guess I'm just kind of in a very very small minority and so the others protect the fourteen potential so tax policy is really weird it's really weird to me that people making exactly same amount of money pay very very different tax rates well you know I know one of the areas that you're really focused on when it comes to filling in three is art and that you are passionate art collector how do you think art influences your career your investment career I don't really think it does I I think it's just very different I mean art is you know it's it's very subjective so I think it's a balance more than a tie-in to what I do what I do running money other people's money is amazingly at the end of the day non objective as to whether you've done a good job or not it's actually painfully objective because it's a number to two decimal points or more as your number versus that market number versus some other investors number and there's kind of no getting away from that it's that it's incredibly easy to judge whereas art is incredibly subjective and you can't put any kind of definitive number on it and so I kind of think it's a yin yin and yang thing one thing I do like is when you get off the elevator you see double line you see the meaning that you actually I did tell us a story what is what does the name DoubleLine mean well it's under staying I for some unknown reason in about 2005 woke up in the middle of the night which I almost never do I'm not one of these can't sleep at night people I often get asked what keeps you up at night and I say nothing I mean nothing yeah so I woke up to know that I have some other reason I was obsessed with this idea which I never thought about before if I start a money management firm what would I call it and I was like it was just kind of a fun thought experiment and so many names are meaningless they're named after an intersection in a city or a Greek god or some sort of gibberish you know like like first financial or not if there is one I'm not trying to insult them but you know names don't really mean anything or rivers or something like this Lakes Geographic places I was like I'd want a name that kind of meant something and so what would be a good name and I just bought my first Mondrian and it's his last great classical painting were two devices are used one was an early device called a progression which is basically rectangles that progress another was a device he came up with a 1931 which is called the double line and the double line is a further ambiguity between line and plane because if there are two lines that are close enough together that they look like two lines but they could also be interpreters kind of defining the negative space of a rectangle by bordering them so I had this picture it's got this the double line just I was thinking you know it's double line yeah that'd be a really good logo and then I realized that it had a meaning that the meaning was in everyone's life that they experience more frequently than a double line there's a double line in the middle of a highway and it's by law you're not supposed to cross it but it's really there for your protection at least you like to think it's there for a reason and the reason of course is it's not safe and so I realize hey that's pretty neat because I'm really risk-averse I think more about what you shouldn't do and what you should do and what you shouldn't is take fatal risks that's what kills particularly fixed income investors if you buy a lot of junky bonds and they default your money's gone forever if you buy a bunch of mortgages and they refinance at the wrong time you kind of lost money forever but so it's what you do what you don't do and I thought that's perfect because it defines things that we won't take certain fatal risks I was giving a speech years ago now is way back and our second year of business or something it's giving speech to speeches in one day one was in Bakersfield and moments in San Luis Obispo and in Bakersfield is really interesting it's a very wealthy community you wouldn't think so but it is a lot of farmers and there's a lot of oil there and I went to gave the speech and a lot of guys showed up in overalls there were farmers there's guy it was like the number two potash guy in the world or something he's billionaires and there show up in overalls and I said hey you know there's I look at my map I've got to go to San Luis Obispo there's two roads and I can't really tell which is the more efficient route and the guy says whatever you do don't take this one why not he said it's called blood alley I said really he goes yup there's more fatal head-ons on that road than any other one in the state and the reason is that it's tractor country and it's very windy and it's one lane each way and tractors go slow and people are impatient and they just decide they're gonna go for it and their trucks coming the other way and they get wiped out and that's why it's called blood alley and I said that I said that's fantastic that's exactly and I start talking about the name of the firm and everything it was printer saying it's and so we took the other Road obviously it was pretty pretty cool we went over the San Andreas Fault where the road has a massive sort of whoop-dee-doo in it it's really surprising and I was like what was cuz I was like what was that and that was ass andreas fault that's right halfway between those two so anyway that's kind of the double line had it really came to life with that guy in the overalls well before I let you go we've seen you on Twitter in the last no when did you join it was it was said I was sewing that's right so what's your take on social media now that you have somewhat of a present I have no presence I follow nobody you get a lot of retweets well I don't tweet that much but I do sometimes I'm just trying to give people an insight into what I'm really thinking I get a lot of there's a lot of misreporting that goes on in financial media there's a lot of people that report on but somebody reported on somebody reported on and like that old telephone game that you do in first grade or you go through the class he ends up starting to be you know the sun is shining and the last person says the cow was in the hotel and you can't figure out how the message got so altered but that happens with re reporting and I like to tell people what I really think so I like interviews that are live or ones that I've do a written statement because I find when I do webcast for example the stuff that gets reported more than half it's wrong I mean oh I didn't say that no like don't like leave out the word not and and invert the meaning so i like to have the twitter account where if something like that goes off i can say you know this is actually what i'm this is truly where i'm coming from we'll never see jeffrey gun lock on facebook never never never on facebook I don't know what Instagram is I've never downloaded an app in my life you still have an opinion on Facebook I do remember you spoke about it was a pair trade so yeah and and you know it's it fell a lot it's rebounded back up i I just think that Facebook their big problem is obviously their business model and I talked about things that are safe than are being unsafe I think that's Facebook I mean they sold themselves as comfortable and safe but there's really just a diabolical data collection monster and they don't they're unrepentant and I just saw yesterday they're talking about more regulation in Europe in the UK and when the regular show up usually the stock prices go down like healthcare head of meteoric rise until the regulators showed up a few years ago and then a big decline so I I'm not I don't really trust Facebook so the fact that I don't trust them makes me not like them and the fact I don't like them makes me want their stock to go down well Jeffery Gundlach CEO of DoubleLine Capital has been a pleasure thank you so much for your time thanks again for coming I Ray Dalio the founder Co CIO and co-chairman of Bridgewater associates thanks so much for joining us today that's a kick to be with you yeah so we're here at TechCrunch Disrupt and you are now the face of an app right principles and it's been getting a lot of heat and traction over the last couple of months what is the success story behind principles and why do you feel like it's been performing well to know how to fail well you know I realize it's the path to success to know that knowing how to deal with ones not knowing is more important than anything one knows to know how to have an idea meritocracy and to know how to have fun and go after your dreams and make that happen that's so it's a kick to pass that along so it's really interesting the app itself they you're giving people the opportunity to craft their own principles right and into following yours it's almost like ok this can be your vision board as well what would you say is the most creative sorts of principles that you've seen others contribute to the platform well we're just starting to collect the principles so I but you know there's the themes that you see over and over again and they're true yep so I wouldn't make the generalization I can't dimension the ones that I would say the most creative but they're mostly how to get past that challenges the pains and all of that so I would say maybe those as you look at your principles personally what is the most challenging one for you to really hold true to or you feel as though you face the most obstacles in trying to make sure you're consistently meeting that principle why don't it's the most like the most valuable one is to meditate I would say it's not the most challenging but I want to do it the most because that gives me the equanimity creativity that really helps so much so I would say that would be one of the most important certainly you've rolled out some new tools as well to really help entrepreneurs and leaders can you explain the new push here well I want to pass along all the tools that have been helpful because tools create they create a framework that allows all these principles to be carried through I want really an idea meritocracy that's the most important thing and so the tools allow that so I'm passing along first the dot collector so everybody's going to be available for you're able to use the dot collector I think that'll be terrific it's our most loved and most impactful tool and what would you say is the success story what is your vision for principles as you look ahead to a year or two from now how would you define success well at every phase in anyone's life there's a difference in what is defines what one defines success for me at this stage my definition for success is to help people be successful without me in other words to pass along and to well to watch Beauty happen I feel I'm 70 years old I don't want any more success myself I just want to help pass that along and if I could do that that'll be success for me and then I'll go quiet I'm going to go quiet in about a year year and a half I think you know some core tenants of the concept of principles and a bridgewater are really radical transparency radical open-mindedness when you looked at Silicon Valley where we are right now what would you say are the pros or some some of the startups and companies out here that are doing that well can you name a few leaders that come to us I'm not gonna it's all personal and I keep it private so I'm not going to name leaders but I will say that some of the most successful innovative companies and then some of the startups that are just getting going are open-minded and thinking about new and better ways of doing things so Silicon Valley I love it because they really resonate the idea meritocracy to know one's strengths and one's weaknesses to work in a community where there's meaningful work and meaningful relationships it resonates here so that receptivity is really big here and you know you personally have really taken to social media platforms like Twitter like LinkedIn to really be an author right in addition to your book and you're finding avenues to express yourself and engage with customers and people who are interested in your words would you say LinkedIn is the best portal I want to clarify what I'm doing I can fine I was sort of like hesitant I'm going to go on social media and I don't know no and I'm not doing it for most of those reasons I'm doing it because I'm having quality exchanges with people you know every day we're exchanging thoughts on principles and we're having the back and forth and the people are really nice and they're very appreciative and I love communicating with them so you know I like that we're communicating in very honest ways but most importantly its quality like what are you facing and to realize that whatever you're facing there's a principle for it yeah to not view each of these individual things as individual things but part of that principle that back and forth exchange has been really well I'm loving the communication I want to briefly touch upon your latest LinkedIn post where you specifically are addressing the administration potentially curving some of the investments into China and the capital flows there would you say that is the optimal scenario is that the way that the US government should be going about relations with China no I wouldn't say that I'm you know I'm so I'm there are four types of Wars right there's a trade war there's that a capital and currency war there's a technology war and then there's a geopolitical war and I'm seriously concerned about the nature of those wars so it you know it has to be done this exchange of how will you accomplish things really should we shouldn't even using the term war we're using it too easily we should be using the term negotiation I think so you know the question is how much will this be a fight in which there's mutually hurting each other is this a win win or a lose lose however we can get to a win-win that's what I would like to see the most of it's the art of thoughtful disagreement and how do you create win wins that I would like to see the most of them so on I would say more concern about conflict than the way that we're having it and when you think about that win-win scenario what does that look like you know for it for the US and China won't see that sort of compromise happening I don't think it's just a us-china I think it's an American American thing in other words I think when we're dealing with conflict we're now saying can we go above it so that we don't make it a lose-lose so that we know how to get what we each want through exchanges like you tell me what you want and let me see if I can help you get it and let's do the same so that we build on win wins I think we're having the same challenges domestically there's a wealth gap and there's an opportunity gap and then there's a conflict between increasingly extremes and on a fight that can become a really dangerous fight and produce a lose-lose so I think the issue is to go above if we can go above it and we say how do we get the best collective benefit and work on that that's that there are lots of ways we can do that but that is I think the most important thing because if you look about what we can have there is enough okay there is enough of everything and there's an innovativeness and there's a capability but so often there's been these lose losses that can then be very damaging so I'm concerned about that so like the wealth gap like the opportunity gap the idea of coming together and working it together and understanding the art of thoughtful disagreement principles would go back to principles what are the principles that bind us together are we clear on those what are the principles that separate us so I think we have to think about how we do this in it together way before we really damage ourselves because it can get so extreme that it can be damaging and on that point when you think about unity within America of course there seems to be a lot of divide within the US political when you think about the impeachment inquiry that Nancy Pelosi did start on President Trump do you feel like that will be a headwind for the markets as you think about the next couple of months I read history and I find the same things happen over and over again and what I see is that there is a political system that normally has an ability to debate things and get past that and I'm worrying that this is a war that in which and the damaging and the hurt of that war can be so great that it undermines the effectiveness of the system history has shown that if you look at the late 30s for example the polarity between the haves and the have-nots the wealth gap was analogous the opportunity gap was analogous and the ability to get past that so I'm more concerned about that I think there are three big forces that are at work that's the domestic economic gap and political gap which is becoming extreme and I worry about a downturn in which number to monetary policy won't be as effective in the next out dirt if we're at each other's throats now and then you have a downturn and it's going to be worse and if we and then we have the conflict in terms of the rising China's arising country with the United States as an established country and so to work oneself through that in the right ways with wisdom to understand the art of thoughtful disagreement and get at the right aggregate rather than in everyone lose situation that's what yeah so that's what worries me hopefully we can reduce it soon Blackstone founder chairman and CEO Steve Schwarzman sat down with Yahoo Finance's Julia LaRoche for our series Yahoo Finance presents and Julia joins us now to discuss Julia how'd it go What did he say that stood out to you well you talked about so many different things to Dan and one of them was whether or not Steve Schwarzman would get a job if Blackstone if he were applied to apply today and guys the answer is no so take a listen to why I'm trying to feel how smart they are how how stable they are how curious they are and usually you can do that by just looking into their eyes and sometimes I'll walk in a room and talk about what I was just doing if it's exciting and if they recoil with fear because it's a different situation they probably won't be able to handle things that come at them in an unpredictable way what you want them to do is hold the table it it to be pretty much of an equal because they are just because you're senior well all that means is that you've had more experience doesn't mean that you're better than anybody that you meet I know it's really difficult to get a job at Blackstone I was reading some of the stats in the book so I can ask you this do you think if you're applying to a job at Blackstone that they would hire you well this is what I worry about because I don't think they would why not because my grades well it wasn't a summa laude or magnet I wasn't even a laude and and you know so so there they're different modes of learning and you know I'm not so bad some of this stuff but but it's not because I test to to a degree that a lot of the people we hire so so I think it's important that we look at different factors here at the firm the conservative way is always hire the brightest person I think it's important to be involved in student government of some time for a club or something where you demonstrate leadership I tend to like people who are athletes only because you can take pain you know if you're a good athlete and you push yourself to a point where it's not not pleasant [Music] please welcome Julia LaRoche and Stephen Schwarzman [Music] Steve Schwarzman CEO of the Blackstone Group and the best-selling author of what it takes it's so great to be back with you again good to see you again all right well Steve the last time we talked you gave me an answer to a question that I asked you about that you didn't think that you would be hired at Blackstone if you were to apply today so my follow-up to that is do you worry the Blackstone and maybe other firms might be missing out on the next Steve Schwarzman well I think it's always hard to know exactly who to pick when you have a qualified pool I I'm quite sure unfortunately I wouldn't be picked because I wasn't Magne or suma and we talked at our management committee about this issue and and I asked how many of you were only like eight people nine people how many of you were magneri suma one hand went up how many of you were laude no other hands went up so the rest of us were like generic people and we're pretty flexible and you know as organizations grow you end up you know sometimes hiring really very bright people but I think that people who have a balance you know it's good to be smart obviously but but having leadership skills is really important and playing sports is good too and the reason for that is you learn to take pain and it's it's not easy to be successful you know it requires a lot of effort there's a lot of setbacks it's a little bit like sports you get thrown on the ground you you got to get up so we hire less than 1% of the people who apply it's it's surreal and we we have amazing people but we always make sure that we have a few of them like myself with more generalized skills and it's something we're always refining well you've been in this business for decades I do want to go back and revisit some of your early years in your book you wrote that at DLJ I was never trained properly I would cower in my office hoping no one noticed me scared that I would be found out as ignorant or incompetent I must have been the biggest buyer of antiperspirant on the east side of Manhattan and then when you were at Lehman Brothers you told this story about working months on this fairness opinion you submit it you're so proud of it and then you get this phone call from your boss that there's a typo on page 56 so I have to ask you how formative were those experiences and how does it shape the way you built the culture at Blackstone yeah well everybody knows that sometimes when you start out it's rough ride and it was it was definitely rough for me I had no training and I was I was like the person in in a class at school who whenever they asked somebody to open the class you try and position yourself behind somebody else's head so you wouldn't get called on and that was because I wasn't trained and and so what happens is when you have these bad experiences you don't forget and when you you sort of make a you know sort of a vow to yourself that way that if you ever got into a position of authority you wouldn't do that to anybody else you one thing you want people to be as prepared as they can be you want as low as low as stress environment for them you want them to understand that they can ask questions I mean I'm in the financial business and almost everything's been invented before you did it you know with certainly for your first few years so let's let's not have you struggle it's it's absolutely okay to ask questions too as a shortcut you're not allowed to ask the same question over and over again which means you've learned thing but the idea that you have to struggle let's let's eliminate that and so each of these unhappy experiences we have a great training program now because I want everybody to be trained I want everybody to be comfortable well I do want to also talk about the fact that you excelled from an early age on Wall Street I think you were one of the youngest mansion directors at Lehman Brothers by age 31 but fast forward to today and then even looking out in the future how do you think the financial services industry has changed and is it still a viable place for young people to go yeah it's a financial businesses is still really good it's just changed and as long as you're printing in the United States and extra trillion dollars a year of money over and above what you would normally do with these deficits there's always plenty of money and plenty of new things that you can do places that are larger our place has 2,500 people so it's not that big you design people's careers so so if you're really terrific you move faster the idea that the world has to be rigid to make life easy discourages having you know people of great talent and I love people who have talent I was I was always sort of a bit frustrated by being held back and why why should we do that so you don't have to be a big thinker you just look at things that don't make sense and say I'm not going to do that I also think it's also interesting you have these rules for life you talk about finding problems and solving them you say that there's nothing more interesting to people than their own problems think about what others are dealing with and try to come up with ideas to help them I mean it makes me think of when you were in high school you brought on a cool rock band you changed the rules at Yale so women could spend the night on dorms you also made sure that the folks you're in the army with got fed they weren't feeding them breakfast when they were doing their morning tours we also saw problems whether it's Business School wallstreet so what was the inflection point for you that you were looking to solve problems in your life and realize hey this is actually good for being successful well whenever you're in any kind of situation the reason you're there is something's going on and and what you really want to know is what is the problem that you're solving and the only way you learn that is is you think you have an idea but it's really the other person you have to understand and what's what's on their mind and how do you address their issues if you're like a long young person make pretend you're you're in an advisory capacity all you want to know from your client is what are you worried about what are you thinking about and once you understand that it's it's pretty easy to create solutions if you're just guessing about what what's on their mind you'll waste a lot of time and maybe not get the right thing I do want to talk about problems that this generation will be facing right now we're in the middle of trade negotiations and I know you wrote about this you are involved in that process it's been ongoing you write that it's some of the most difficult negotiations you've ever experienced so Steve are we going to see a deal anytime soon and what has to happen for us to see a deal well that's that's almost an unfair question because the Chinese are sitting in a room either right now or they just broke with the Americans so it'll be announced and what I think might happen today doesn't really matter because today's almost over and we'll all know where things are but fundamentally what we're asking the Chinese to change their system in their system was brilliantly designed as an emerging market developing market economy so that much like the Americans in the 19th century people forget we have very tariffs we were a small country we had you know the ability to protect you know our nascent industries and the China just started doing this 40 years ago and and they've had an astonishing result you know they forty years ago they had GDP per capita of a few hundred dollars and and now it's ten thousand dollars and it's going up at a thousand dollars a year so so China has done some remarkable things but they've done it in ways that are inconsistent with the developed world and they've got very high tariffs and taxes three times as high to bring a product into China as it is for China to sell one in the United States you would assume if that were the case the the person who gets in at a very cheap price would do better and and they do it's the same way with markets opening its selectively open but not like the US has been and and so I I think it's it's a time for adjustment the question is how fast will an adjustment come over what time frame and how dramatically at each point because no one would give up their entire system because someone else asks them to do it so we're doing the asking and they have their own internal politics they've got their hardliners which is basically things have been really good for us plus we don't like being pushed around which they were you know but by the developed world for the last hundred to two hundred years and they don't like it on the other hand you have their reformers who say look we realized that we we should be more open what we'll learn best practices from the West it'll be good for us so in a way these negotiations are somewhat hostage to to what China wants to do and there are two elements in China just like we have internal politics in the United States our view that they're a monolith and they don't have internal points of view is wrong so so we'll see what's happening it's an exciting time now are you optimistic it depends on what criteria if you're looking for a full solution to the differences between the US and China that's not going to happen if you're looking for something less than that we'll have to see what China is prepared to put on the table well Steve you're no stranger to the White House I know you've engaged with several administrations and you wrote about this in the book that quote from the moment Donald Trump was elected president I had been getting calls from people who did not know what to make of him they had listened to him during the campaign and were nervous about what he might do so what I tell folks what do people get wrong about president Trump well that would take a long time to answer that question but if you could of course see you know narrowed down to one thing that people get wrong well I had a lot of people from foreign countries as well as well as domestic people sort of approached me you know Donald Trump lived in New York you know for his whole life and we're in New York now and New York isn't as big a town as it seems in the outside and so a lot of people knew you knew Donald Trump and nobody knew what he would be like in a presidential position and and so they were basically without any knowledge and and had a lot of concerns about it and so you know I would meet with them and see what was on their mind and see if I could solve some of the issues but you know what one of the things is that all of these sweets are are not worth listening to and for some reason everybody is focused on them all and I never have been you know some of them are just indicative of sort of a general area of concerned and aren't meant to be taken literally and you know with today's news media it doesn't matter whether it's left or right people just hang on every word I've always thought that would drive them sort of nuts and that's that's where they've ended up as a society and you know I think you have to wait to see something of real importance that's more considered but that that's not what the media is doing and and so you get all this confusion and focus where there probably shouldn't be focused but it's just my point of view all right well we are coming up on the 20/20 election and you are the son of a dry-goods seller you are the American dream you are now the 100th richest person in the world according to the Forbes list but as we approach the election you're seeing more and more candidates come out proposing a wealth tax you have one who says billionaires shouldn't exist you're also seeing polls that are more favorable towards socialism so what is your response to that well there are a bunch of different responses as to this thing about billionaires you know it shouldn't exist that if you look at who these people are they didn't become prosperous sitting and just watching television these are people who started businesses and every place where everybody worked was started by somebody and and that's the way the world works and the people who take that risk and start those businesses and end up you know either you're hiring ten people a hundred people thousand people 10,000 people a hundred thousand people yeah that's where people work and those people make more money and what happens is they become affluent most of them fail by the way nine out of ten businesses that are started result in failure so if you're one of the people who make it through that you're providing employment and prosperity and in effect tax revenue and and you have a bunch compared to other people and then you get older and you pass away and and and the laws you know it sort of tacks away most of what you have owned it's already it's already been taxed once already typically and then that's dispersed and then that wealth disappears and and and so that's that's what that's how these people get created and you know in terms of a wealth tax I I don't remember whether they're 210 or 220 countries in the world and only four of them have a wealth tax if it was such a good idea and it was so easy to raise money you'd have loads of them you've had more than four and they give it up so why did they give it up so so yahoo addresses a lot of younger people people who want to start businesses and here's how this would work if you were trying to start a business and you got venture capital money may pretend that you were successful and your company make it really a good success was worth a billion dollars on a valuation basis and you started it so you had three hundred million dollars of the billion but you probably had a salary of somewhere around three hundred thousand dollars so so what would happen is you'd end up with a hundred and fifty thousand dollars after tax and if you had a 1% tax you know another three hundred three million dollars so how are you gonna pay three million dollars of taxes when you only have a hundred and fifty thousand dollars so this would be a terrible situation to have created something be successful and be hemorrhaging financially so that's how a wealth tax works and what would happen with that person is they would not want to stay in the United States I believe they would leave but what's more important is people who would come here to start businesses wouldn't come because the success would be taxed away and a wealth tax ends and so what is logical is those people would find another place to go and there would be another ecosystem developed in it you would have I think countries offering them tax free zones to do their business and you would basically create a huge dislocation for the United States so so I think there are reasons why wealth taxes don't exist and I just gave you one of several well before we let you go you're problem solver you look for big problems and you want to find solutions we're starting to see some of your peers and thinking Ray Dalio Bridgewater associates sales forces Marc Benioff come out and say the current capital system is broken so using that problem solver mentality Steve how would you advise that we fix it well I think it's it's pretty clear that as a result of a Fed study done two years ago that 40% of Americans the Fed said couldn't write a $400 check in an emergency so what that means is this 40% of the population basically doesn't have savings and they are having a really really tough time which is why our politics has become poisonous because because we've got a large percentage of our population that's not doing well and I think you have to address that first you have to provide more money for these people and I think there are a lot of different policy approaches I think a good place to start is to increase the minimum wage up to $15 that this is actually a tax on the business community right you know because you're taking profits away from them to give them to workers that takes care of significantly increasing money for 15% of the population but what happens is the people who used to be getting more than the minimum wage they have to be boosted up when you're close to doubling so so this ends up affecting somewhere around 35 percent of the population and and it's got lots of knock-on effects that's the first thing but capitalism isn't broken per se what what's been broken is our educational system so so when I was younger which apparently was a long time ago but I didn't get to the word on it that that the US was one of the top two or three education systems in the world we've now fallen somewhere between number 25 and 30 and in math we're solidly in the 30s if you're producing a workforce that is dramatically inferior to editor's on the global scale we're gonna have a lot of trouble I was just in China a few weeks ago and I was meeting with one of the top few people in in their government and he was telling me he said you know what we're gonna do and in education we spent an hour on education and he said we're gonna require that every student in China take computer science and I'm sitting there going oh em gee in the United States we probably have five percent of our primary and secondary students taking computer science it is not capitalism that's broke imagine we're competing with a country where everybody is computer literate and we've got hardly anybody this is not a recipe for long-term success and and it's it's not about capitalism we have to put the best possible individuals and and and and training on the playing field that's how you win the game and we're just not doing what we need to do in that area and if you deliver those people to a workforce you're really disadvantaged so I have a slightly different take you know these these are government issues by the way they're not business issues but there are a lot of things that business can do to help train people we have to do that you know we have to make sure that students who aren't necessarily college track do stuff like they do in Germany where the business community you know trains those people for real jobs takes them on board and gives them good careers so we have a lot of levers that we can play with to have better outcomes for the people in the country and and we have to do that this is not optional well you know what I think these sound like generational opportunities Stephen Schwarzman CEO of the Blackstone Group thank you so much for joining us at the Yahoo Finance all market summit hey investors Zach Guzman here are you interested in learning more about the markets and getting the latest financial news well then click right here to subscribe to our you finance youtube channel get the latest up-to-the-minute market analysis big interviews in the world of finance and information on how to manage your money everyday wherever you are

Channel: Yahoo Finance

Views: 140,931

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Market Movers, Midday Movers, The Final Round, Ray Dalio, Jeffrey Gundlach, Steve Schwarzman, Blackstone CEO, millennials, DoubleLine Capital, Bridgewater Associates, investing, china, social media, Facebook

Id: xsINwuf6knQ

Length: 79min 10sec (4750 seconds)

Published: Fri Nov 01 2019