Mahindra, Moynihan, Schwarzman on Navigating Global Instability

well gentlemen thank you so much we know it's been a busy day just moving around New York City Steve I believe this is the one week of the year you take the subway right yes I'm very happy on the subway and I'm also in better physical condition just a few days in the end of the week right I'm walking yeah just from walking around our fair city well you know Carol started to sort of tee this up not only from your perspective but if I think about what's been going on we have the House of Representatives talking impeachment we have Boris Johnson flying back early to London to deal with his Parliament there we have an ongoing dispute that doesn't seem to be coming toward a resolution between the US and China and it's Wednesday so Steve I'm gonna point to you what are you most worried about in the world right now jeez there's a lot to worry about you know because you know first of all just stepping back from it you know the social media and the internet are making it very difficult for almost any government to function if you come out with a plan you have instant mobilization of opposition to anything you're doing it even makes it difficult for companies sometime with sort of this roving band of opposition and and you know financially you know sort of the you have a few weaknesses and in the system I think the European banking system isn't as strong certainly as the US which is in great shape you you have private investments in the technology area which the we work sort of non public offering has exposed as being you know really pretty inflated when you have an industry that more or less marks up its positions you know in a closed circle among itself and then it pops out into the real world in the real world says what are you thinking that's usually you know sort of a wake-up call but it's you know that that part of the world isn't big that's that's a relatively small set and I guess any of us on this stage and then I'll finish because I don't want to dominate a new thing when you have 13 trillion dollars of negative interest rates I don't even know what a negative interest rate is in other words why would I take my money and give it to somebody and for the privilege of them holding it I have to pay them like it's a storage unit and I'm supposed to get interest when I give people money and as as interest rates go down most of those places that have those negative interest rates it's not stimulative because banks have trouble earning money you know in that kind of environment and if banks don't do well then they don't grow their capital they can't then extend credit and countries don't grow unless there's credit extension and and so this whole movement particularly in Europe to negative interest rates I think is some kind of warning sign some type of wake-up call how did we get in that position why are we in that position not us as Americans but us as financial people looking at the world so Brian may know more than I do but it just seems that's this negative rate environment that we increasingly see around the globe tell you that there's some underlying weakness that maybe we're missing we see we know the obvious problems that are out there but is there something more substantial I think Steve's point is right it there's the monetary policy decision to take rates as low as possible to increase to to accommodate the economy accommodate growth and they're lower in this country than they've been historically but they're still positive in other places are negative in there's a significant amount of it I think there's a debate whether it actually transmits the economy because if you look in some of the countries where the rate structure has been negative for five years the banks still have to pay consumer depositors interest because to Steve's point they're not gonna give us $100 and get 95 back and think it's a great thing and so I think there's a great debate the economists will hack out but the reality is is showing a weakness and economies there means probably more fiscal work done a more reformed work done to stimulate those economies and well good luck with that good luck with that the good news is in the US you already have an economy which is pretty flexible and work that talent people lots of capital deep capital markets the banking system that restructured a set of rules that you can understand one law that covers an economy it's the largest in the world as opposed to you know multiple laws and so you're seeing the u.s. continue to grow unemployment slow and consumers continue to spend so the question really from the macro sense is all that parade of interesting things to ponder and worried about it is only Wednesday is offset by 70% the US economy is been speeding up its activity all this year and that is the biggest Chinese economy and so when was that tension just gonna be really wrestled to the ground and that's the question well and so an on I put that to you because you look across a hundred countries you're operating in a hundred countries I believe is that are we at a breaking point where we may see something snap here or can we continue on especially from a consumer perspective in a nice upward gentle trajectory let me start in a lighter note first because when you asked Steve this question but what's on your mind I do have a very weighty global problem on my mind right now and that is I have a two-year-old grandson who lives in New York his father's Mexican American and speaks to him only in Spanish so right now my major preoccupation is how to improve my Spanish so I can communicate with my grandma but if you look at it that's a lighter note but frankly that to me is the real thing that worries me about the world you look at it from a human centered point when you try to operate in a hundred countries language communication keeping the core of your business and the governance and the values of people is a major problem so I'm looking at more as a I'm not really worried about growth I think we have enough notices of growth to come up you heard the Prime Minister of India this morning and I don't think what he was talking about was hype Steve you've been out there very often I think he knows what the potential is if you look at the population and he talked about four DS this morning the democracy the D the demography as well and he talked about demand and decisiveness if India does get moving again and I think he's taken some steps recently like the tax cut which should do exactly what the tax cuts did here you're gonna get another engine of growth for the world for sure and I Brian as I see him more in India than I do here so I think both these gentlemen understand what the potential of India is I'm really not worried about consumer demand coming in from different parts of the world we just have to look around the world all the focus has been on America rightfully but I think you're going to see an uptick and a lot of other parts of the world but why does it feel and I know we talked so much about recession and I know you spoke with David westerner over the summer a quote that we used a lot on Bloomberg we have nothing to fear about a recession right now except for the fear of recession t-shirts bumper stickers I mean but I just feel like it feels like if you talk to businesses and CEOs they're hesitant to spend but then you talk about the strength of the consumer how do you reconcile those two and and are you still ruling that recession nobody if you look at all the consensus you know the 38 economists when I talked to David I said look there's nobody has a negative sign in front of any of their estimates and so in the bottom five probably average and it's you know five point five for GDP u.s. next year and stuff so even though people saying the probability is going up because that's the uncertainty the question is nobody's predicting it's going to happen the fear you have is it go to your point it's only Wednesday and what's going on will you get the consumer confidence to it to deteriorate it right now it's it's come up it's come down a little bit and we get it period if that starts to happen that's the worry you do not see that in our activity every day the the combination of housing prices still being constructive which that part of the wealth is destructed the stock market still being up that part of their wealth is constructive their wage is growing faster now than they have really since any any point in the last eight nine years the employment levels being high so that's always the good news the question is what breaks that and that's what I worry about the psychology of business deteriorating somewhat again high still very high but tipped over a little bit when did it when does a business owner convey to their teammates that it might not be as good for you this next year I higher wages a bigger bonus you have more incentive plans whatever or you get to keep your job we don't see that you know our middle market loans are growing at a faster clip now and they were the last few years so it's all okay and that's the question that we said and I think the fear could cause us to back up before the data will show you there so some of that fear and caution Steve comes from this dispute between the US and China there are a few people who have done as much dare I say shuttle diplomacy then you have between the leaders leaders of those two countries you write about it in your book Steve's book by the way son sale now I don't know if anybody's heard about what it takes but we'll have that commercial in a moment but you do write extensively about China in the book your experience there the Schwartzman scholars your relationship with President Xi how does this get resolved at least to the satisfaction that the CEOs that that Brian is talking about specifically feel good enough to start spending money again yeah I'll talk about that in one second but but just in terms of risk I've always felt that you know this cycle when it comes to an end won't from from normal you know business cycle issues because because that seems to be managed pretty well it'll be some type of geopolitical type of incident circumstance which which hits the confidence of consumers it won't be over production of goods and things like that I could be wrong but I've been thinking about this for a few years and we got enough of these major things that that could change people's attitudes you know weird full employment you know so so people have a good situation but their behavior may change if they're scared of something as to china-us that's a it's an interesting situation because basically driven but by the fact that you know in the last presidential election we discovered that that forty percent of americans couldn't write a four hundred dollar check in an emergency so if you think about that these are people who fundamentally don't have savings and they don't earn much money and their education american education has really slipped dramatically over the last thirty to forty years and those those people are very unhappy and and they they in effect are demanding some type of change and part of that change happens when they don't and they don't get satisfied with domestic solutions historically with populism you get angry at some foreign entity and china's the target and it was pretty obvious that it was going me and I I talked to the Chinese about that right after the election and they were not sensitive to that and I told them don't don't worry about it we didn't understand it either you know which is why you know we had a president elected that nobody thought would be elected except him and and so we all learned something I said don't feel bad you know you didn't have bad staff work but now you know and they they said okay well you know if that's the case we're gonna have to adjust now China for four years has been growing faster than any major country in history and so this is like whatever practices they have which in history when you're you know sort of a we used to call them you know developing countries or underdeveloped countries now we call them emerging markets you know they and the United States did this in the 19th century we hide behind tariff walls you protect your industries you you don't let foreigners and to certain things that you know where they can compete and and that world lives until you become a more mature country and then you integrate well I think I think in China part of part of the interesting issue is they still think they're poor and we sort of think they're rich they're their GDP per capita is $10,000 ours is roughly 60 but when they started this sprint forty years ago I think it was like $400 a person so so this has been enormous progress but they're they're still you know sort of like one-sixth of us and now we're demanding our bottom 40% in effect and also European countries don't like they have similar problems that that we're asking China to like become a more mature country and and join the rest of the world their attitude is we're still poor so so okay if we have to make adjustments it's it's not our favor to do what what do we do and so what you've been seeing over the last two and a half years is is is the u.s. warming them you know it's sort of the leader of the developed world to come pretty far and on the Chinese side they're trying to figure out how far and how fast they want to get someplace so you know the two countries got quite close in May at which point the Chinese just withdrew they you know they had agreed to a variety of things we thought and then they looked at the whole and they said you know my goodness let's not do that and now this is starting again and meanwhile what's happened in this two-and-a-half years is that the two countries have started as a result of false starts and and then a variety of other tactical stuff you know are starting to decouple which is very dangerous well can we I want to dig a little bit into that because I do wonder I think increasingly we're expecting this world where it's China and its allies and the United States and its allies is not you sit in a very interesting place figuratively and literally between China and the United States how do you see it I see it as a situation of enormous opportunity I have to be mercenary I mean as fat you do of course absolutely because to be and I'm I'm just being truthful here that for a long time it wasn't kosher for anyone in American policy positions to admit that there was a kind of conflict with China and that India in fact could be one of the players in this game as a buffer against China that was just a no-no he went to the Council on Foreign Relations nobody would admit that I think it's now it's in the open and I think President Trump has even made it more in the open I mean going to Houston and listening to a prime minister I think made it very clear what kind of Alliance he had I think there's nothing but opportunity for India in this and we have to play our cards right and see that we are viewed now as a very very appropriate Ally for the US as a buffer both in defense terms frankly if you look at the number of defense exercises between the u.s. and India they're proliferating dramatically defense procurement from the it from India is already burgeoning we never used to buy we used to buy more from the Russians and frankly all that all the tenor of the relationship with India is right this is a democratic country the country that values IPR there's the country that has scale and growth so there is profit for global companies to over there so I think India has nothing but a unique opportunity right now and we have to just play those cards right and I think it will be a win-win for both the US and for India so I actually agree and having been with a bunch of CEOs with Prime Minister this morning all who are talking about their business expanding in India it's been a natural recipient and I think some of the bureaucracy and things that were difficult to operate they have been dealt what they can be improved and everybody knows I think the broader context here though is you know global trade and if you go back and say if the china-us situation will take longer the question is what can we resolve in the interim and this is where unfortunately I'm not sure what happens given the the politics in the situation this week to u.s. MCA and things like that which are critical to get done because as much as India is a beneficiary Mexico and Canada in a trade with the u.s. is a beneficiary in a sense or a way to operate let's make it simpler that wage scale in Mexico is is actually lower than parts of China there's they could use the jobs there's a lot of people could move the manufacturing there there's already integrated manufacturing supply chains Canada's a different situation so I think to keep the u.s. kind of moving forward there are three or four things to knock out everybody hopes for China us but there are a couple things to knock out first and one of them as a u.s. MCA I just don't know politically if they push it through even though I think both sides seem to want it and if they could push that through that would be good and give more time to work I think on China so Brian I want to stick with something you said in the context of the meeting that you had with Prime Minister Modi which is clearly CEOs are stepping into a brighter and maybe higher expectation type spotlight we hear it over and over again do you feel a greater responsibility now especially given what's going on in Washington and London and capitals around the world to speak out both on your own issues related to business but also social issues we in the end a day especially our company's been around for 230 plus years and so we've been around through all kinds of fun stuff if you think about it but but the reality is our job is to produce profits and it make progress on what society needs to do and so the idea of the purpose statement by the BRT the work I do that we all do with the International Business Council and the World Economic Forum leadership for years the you know Mike's leadership on the climate you picked your thing the idea is we have to have companies can do both produce a great profit and make a sustainable that make progress on the SDGs and so I think all the CEOs agree with that and I so the attribute where people say we're speaking out publicly on an issue generally comes from the need on that second but it also reverberates the first if you have teammates working for you and you want what we went through over the last five or six years on post nightclub Charleston Vegas Houston parkland and you had teammates in every one of those situations that led our team to say we ought to take a stand on something it was not because we need to go out and make some policy statement it was because if you think about to have great teammates to make that profit you have to make you have to protect on hb2 which is a North Carolina issue about the we had to come out because it was our headquarters town our people would not travel there and so what people are thinking it's is about you know me or something it's not it's about we have to represent the 200,000 teammates that five or six hundred thousand people and their families and ensure them well pay them well but also we need them to be successful and produce great profit and sustain your progress on sggs and that and is the key and so as long as we can do an the investors and stuff should stay with us and then it gives us the permission and availability but it comes from really the view that our customers our teammates our communities and our shareholders really are more aligned and it's nothing new this is we came out of the community we were formed by people saying we need financing to Steve's point in this community two hundred and thirty years ago so start to think about we've been through all the impeachment proceedings we've been through tough election that one in 1800 was a mess and maybe they made a nice play called Hamilton out of it right we have been there through this if we will be there through the next one if we basically do both make great returns for our shareholders and deliver on that society needs because any day that means communities grow that means we grow so in India we handle the same thing we don't like Children's Museum and Mumbai that you know why because they never had a Children's Museum by two how's that consistent well that's what teammates wanted us to do to help out so it's it's work on both sides Steve I want to bring you back in because I'm curious as you know on the campaign trail some of the candidates have kind of put private equity on their radar and saying we've been happy with but I am curious that's saying you know private equity is responsible for some of the inequalities that are in our world what do you say to that well I'd say there's a lot of misunderstandings and you know the private equity industry is is comprised of a lot of different firms and but basically what we do is leaving other asset classes like real estate aside you we buy companies and we try and make them grow faster because when you exit you get a higher multiple for higher growth and and to do that you have to invest in these businesses they just don't grow faster because it's in your interest this is so you put more capital in them and you come up with good strategies and you drive growth so when you grow businesses you typically need more people and so this is sort of a virtuous circle and you know from a financial risk perspective you know we went through the global financial crisis and private equity firms didn't didn't you know have financial difficulties more than other kind of companies so so so on the downside the the industry hasn't really created much difficulties on the upside you you are in typically for your investors who were pension funds their regular people their the firemen the government employees the corporate employees you make double the stock market indexes so so basically this is a really good model in the 1980s it wasn't so much like that in the 1980s there were only a few firms and and prices were so low in the 80s that you could buy something and just cut costs lay off some people and you were successful that world is just gone with the kind of higher prices that you have to pay to buy anything today you just can't be successful doing that you you must grow your way out of you know the creation price and and so I think there's some leftover perceptions there also an occasional high profile type of situation whether it's in the retail business but but you must look at retail generally and Brian would know more than I do but retail has been with the disintermediation of the internet the number of retail companies that have gone busted are huge the same way you could get a private equity company that owns a newspaper that was in this political treatise that one of the candidates came up with what's happened to newspapers I mean the vast majority of them have gotten into trouble so you can take one example and make something out of it but but just to give you context right there were 66 they're roughly 151 million jobs in the United States 66 million people changed jobs in a given year right US economy is unbelievably dynamic the number of people who were fired in the United States was 21 million the number of total jobs in the private equity owned companies is 11 million so when you look at the massive amount of companies where do you get those 21 million people who lost their jobs it's not from private equity it's a very small part of the whole economy so so this this argument is wrong and it's sort of pyramids mistake one mistake and I think there's a there's an ideology that goes with it and also terrible marketing on the part of the private equity firms you have to give them a d' for not being able to explain this right this is pretty simple so because of where we are and all the discussions that we've had at this summit about climate and sustainability I think it's fair to say that when we look back on this week even this very newsy week the star and I'm apologies to all of you is gonna be a 16-year old Greta Sundberg her statement about what the world is doing or not doing related to to climate change I'm just going to quote what she said to the heads of state people are suffering people are dying entire ecosystems are collapsing we're at the beginning of a mass extinction and all you can talk about is money in fairytales of endless economic growth how dare you that's memorable issue right are we not doing enough as governments and those companies to really face this and our corporate leaders at least an on listening I think they were I was very pleasantly surprised to see the number of people who showed up at the climate events the CEOs who signed up wearing that large ungainly badge about the one point five degree ambition that's not a pretty badge so where that itself was not a fashion statement on a fashion statement but people are committed and you know my I've had one statement I make about sustainability and I've been repeating it with monotonous regularity I don't really intend to get into the debate of whether climate change is real who's the guilty party who's not done it has the West polluted should the West be paying and India only benefiting should we be getting money I stay out of that my statement is it's very simple this is the biggest profit opportunity for businesspeople in the next few decades why are even we wasting time arguing about who's right who's wrong whether it's a 16 year old or is the president of the US you know frankly somebody asked me the other day in a podcast they said do you have a message for governments and do you have a message for other companies I said yes I do a little tongue-in-cheek and I said to governments I would say please don't fight climate change don't invest in innovative technology let India do it let us get ahead of the game and then you come in after we've put ourselves right on the top and to my fellow company people in business I would say climate change isn't real just stay out of the game keep arguing with a 16 year old girl we are making money and everything we've done in renewables let me handle a group god they feel up the opportunities you coming later because to me the point I was making was this is futile and we are just creating almost a media created sensation of villain victim and frankly the winners are everybody because everything our group has done in sustainability has actually made money and the businesses we've started in the last five years are amongst the fastest going waste of energy solar why are we even wasting time on arguments but we agree right agreed at the time the debate the debate the arguments of what's going on scientifically and stuff or just don't help and I agree that but an on yeah the reality is we have to make progress and we have to make a lot of progress it cost about two trillion dollars a year is the estimate for the environmental part of the SDGs six trillion overall all the charity world's 800 billion a year the US government budgets only four trillion a year so there's only no governments could solve this and no charity is gonna solve it who's gonna solve it is capitalism and driving the change so in a lot since 2007 to 2019 we did a hundred twenty five billion dollars of stuff around the environment in the next seven years ten years will do no three hundred billion that is you know green bonds that is we're carbon neutral in twenty not five years from now we're carbon neutral next year it is sort of installations across the country of India solar installations across the / lodges have warehouses the United States is a wind farm financing there's a tremendous business opportunity but it's time for capitals and become to drive it because that's where the money will be and so it's how we operate a company and all of us have companies you operate and driving them to carbon neutrality and making that commitment it's how we then finance the build-out and it's the last part is to keep thing and non mention we can't be in the Western developed countries we cannot be of a sort that we will not allow other countries to have the energy that they need to have to develop we have to produce the right energy form that it was sustainable energy for all from the last UN Secretary General where they figured out a plan and how much it cost that is the critical thing is we can't be arrogant in the West or developed countries and say hey you can't have the power we have to sit there and say we will get you the power the right way and that that is where we really got to watch what's going on with coal and other things in somebody's economy we have to provide the replacement either would cost us all money but I think the business opportunity actually takes care of it that goes back to point you can produce a profit and you can make the goals and if you'd look what we're doing and this is a this has become a large business for us to what is greater right again about saying you're just focusing on money I would just say Greta let it be about money hmm don't make it about either-or you got a dish that dichotomy so the only argument has been heard it's both it's because she's making it sound like give up your ways of making money and worry about the environment I'm saying the real power is not that so she is wrong I'm saying you're businessman you're showing us the money there is money there and the pursuit of profit and capitalism is in fact one of the answers to this solution so I argue with her if I met her that don't make it so you know black and white but I think there's concerns that the goals that a lot of folks are laying out or more ambitious and ambitious than the actual initiatives and I think that's some of the concerns but from what new folks are saying I mean I'm listening to you talk and I know Steve you guys have HD investments over Blackstone so I know it's it's just the compounding effect if everybody doing more and more and more and and is it going to be enough there would be great debate every year on the 40 years about that the question is if we do more next year than this year and you get more people doing more and you get the investors not only steel but also the mainstream investors to say if you're not doing something on this we're gonna start to take your money not not the oil companies but all of us right and then you'll see the compounding effect of that and it is powerful I mean just think of it called an ambition loop which is already in we said an ambition three years ago about reducing our carbon footprint by 25 percent in three years we did it in one year so we made another roll over it just keeps multiplying yep sorry Stephen no I mean yeah I think they've answered the questions I mean the sale has been made one sustainability it's a favorite saying of mine yeah I mean really there's not much trade right that what are we doing it fast enough cuz I think one of the things that was brought up on one of the panels is we're kind of running out of time you can't reverse what's done and so do we need to be more ambitious with our goals policies I read a book recently and said you should always go big yeah excuse me I said I read a book recently that said you should always go big Steve yes well that's one of the big takeaways yes the you know the hardest thing to do is change what people think yeah and and form consensus I think on sustainability that that's happened and virtually every business I I know has concerns in that area and as an on was saying it's very profitable to to address those issues I mean we found once we started looking at that area you know what we own to a large retailer and you know we hired a team to start putting in sustainability stuff and I know this sounds almost like primitive but on the roof of every one of these retailing units is some air conditioner condenser or something and you know it's what keeps the store you know cooled and we just sent somebody up to look at every one of them and what you found is that a little rubber you know sort of thing that makes some of these circular things do something like tired it wasn't taught yeah and as a result of that the electric costs were way higher and by buying something as simple as like a 2 $3 you know sort of little part we could cut electric bills by 15 20 percent and you know who could be against this right the the practices at the beginning were the problem but what what's happened is is there's a sensitivity on these issues has driven the business community to do all kinds of things that are basically they're some of our not even so hard and they're really important it's a mindset we only have a couple minutes so we're gonna ask you to be kind of quick but we'd like to end on an optimistic note because we do feel like we're all challenged every day with some of the headlines that are coming out so give us something Brian to be hopeful about I'd be hopeful about the human capital in the world for lack of better term the ingenuity and ability to solve problems and so if you look at 1969 in America today we went through Vietnam we went through in a Pietschmann resignation of president we went through the civil rights issues who went to the DNC with rights in the street in 68 69 Bobby Kennedy Martin Luther King twice as many people work in the u.s. six million working less manufacturing 80 million more people working and the unemployment new claims today that are filed on a Thursday are the same nominally as they were back then and a populations come from 215 million people or 300 and some million people and 80 million people more work all because of the ingenuity in the u.s. that's a very optimistic our way through this and if we can figure out if there's any configure wasters Europe configure way through it's just going to take some time but you have to be optimistic that all is talent he's eight seven billion eight billion people in the world are gonna figure out solutions we just have to get them work I'm gonna keep it very simple even though I gave an argument against Greta earlier I find her one of the biggest causes for optimism I grew up in a generation of time of Woodstock and you know people from my generation missed the fact that young people didn't seem to have the kind of search for identity that we went through they weren't questioning things there weren't those coffee room conversations questioning the world existentialism Sartre Camus where's all that gone it was all Instagram now and the protests in New York gave me hope because it felt like the old days it felt like people young people were beginning to question again and you know in America more than anywhere else that that generation is what brought about real change that brought an end to the war so I'm optimistic because if me if these young people are going to become anything like what that generation was you're gonna see real change and very positive change last word to you Steve well I I was at a meeting before lunch where I guess we all were with the Prime Minister of India talking about the development of India and he's a very special kind of a head of a country but what gave me enormous optimism is they went around part of the room and in each CEO was talking about what they were doing in India and each of these individuals were really amazing what they were doing what they were innovating what were they were creating the way they presented themselves the way they were conceptualizing how to expand it just happened to be one country that I sort of looked at this group of people and I said this is a resource that's really unique the drive the commitment the creativity of every one of this speakers and I said you know we've got a winning hand long term because there are people and back of each of those people who are equally gifted and and I think that's a part of America we take for granted or we don't see it but anybody who's sat in that room watching listening had to be dazzled by the people who were in charge of substantial organizations trying to do really interesting things and those people will do that in other areas as well and that's what I think is it's it's a really really under understood area of uniqueness in America and a reminder of everything going on behind kind of the crazy headlines all right well gentlemen thank you so much thank you to our audience Steve Schwarzman and I'm Mahendra Bryan one hand and Carol Massar and JC thank you so much [Applause]

Channel: Bloomberg Television

Views: 41,657

Keywords: Bloomberg

Id: GBufbv4UqnE

Length: 41min 21sec (2481 seconds)

Published: Thu Sep 26 2019