Transcripts For BLOOMBERG Bloomberg Best 20170923

Reality, 50 of Household Wealth is managed by women. Shery debate, reflection, resolve. We need to cooperate. How are we going to get consensus on that is tricky. It is all ahead on bloomberg best. Hello, im shery ahn. Welcome to a special edition of bloomberg past featuring highlights from the 2017 Bloomberg Global Business Forum. They will address the most pressing Economic Issues facing the world today and begin the urgent work of solving challenges and charting a path forward. It was an unprecedented and memorable gathering. Our review starts on stage with the ceo of the most valuable company, apple. Tim cook joined them for a conversation about business and civic leadership. All companies should have values. And so, as a ceo one of your primary responsibilities is to decide what the values of your company his, and lead accordingly. The other thing i think it is, is that president kennedy used to say, originally from the bible, to whom much is given much is expected. Apple has had great success. We feel a responsibility to give back, to help in some of societys greatest problems. And so for us, we tried to look deeply at what issues is government working on, are key in society. We think about the skills we have. There are some issues we have no skills on. We are not going to be able to help realistically that there are some we can amplify government efforts or we can do ourselves. And apple has always been at the core of changing the world. Arguably, you cant change the world if you are ignoring the world. That is the way we look at it. As a ceo, not only today but in the past as well, i think silence is the ultimate consent. If you see something going on thats not right, the most powerful form of consent is to say nothing. I think thats not acceptable to your company, to the team that worked so hard for your company. For your customers or for your country. Or for each country that you happen to be operating in. And so, that is the way i see it. I have to say, i am more optimistic today than i have ever been. I mean that sincerely despite sometimes not feeling like that. But overall, i think we have incredible opportunity. Because never before have i seen the ability, all across the world, to Work Together on these common issues. I agree with tim, companies are a collection of people. Have a responsibility to do something for the world. Our employees care what the Company Values are when i support a cause or dont. I hear it from my employees, i hear from our customers. I hear it from my family. We dont live in a vacuum. What ive alwasy respected about tim is that he has his values, and he doesnt sit around and say profit is the only thing. I think it is good for business, if you do the right thing it will help the bottom line. The first thing is to do the right thing because you have to look in the mirror, the last thing you see before you go to bed is yourself. You have got to be proud of that. Shery the Global Business forum brought together heads of state. Remarks from bill clinton opened the event. President clinton the most important thing is whether you believe social stregth, economic performance, and political power, flow from division or multiplication. From subtraction or edition. You are all here because you know this. Shery guests and viewers heard from political leaders around the world beginning with emmanuel macron. I am a strong believer in europe. During my election campaign, a lot of people told me, you are crazy. You are proeuropean and you think you can win in france . I did believe it was feasible. People do understand we need europe in this current environment. Because we have european values. Now the challenge is how year how europe can be with the United States and china. That is not the case today. It is a lack of ambition. We had a pessimistic approach in the last decade trying to fix crises at the last minute without any prospects. Europe is the relevant scale to deal with energy. And i do promote a european Single Energy market. We have french leaders and european leaders, and europe has to be stronger. Investment in economy. What does it mean . We have to have 10 year objectives for europe. We have to reach the subjective. We need this because for my generation there is just one alternative. Do we want the dismantling of europe . Which is an ongoing process. Now we have a lot of tensions regarding overflow in europe. But in a few months or years you will have older countries suddenly raising and saying im not comfortable, there is just a lot of constraints. We need more vision, 10 year objectives. And a national process. I will refer to that next week. I want to launch a new initiative. We need new missions. That is the best way to address the brexit issue. Shery also, editorinchief with president erdogan of turkey will have that interview later in the program. Plus, lively panels with financial leaders including lloyd blankfein, and bill gates. Up next, conversations with illustrious investors on the markets and more. Maybe what the president does is not as important to the markets as many once thought. Shery this is bloomberg. Shery this is bloomberg best. Im shery ahn recapping the Bloomberg Global Business Forum, many of wall streets most respected investors took part in shared insights with my busy colleague erik schatzker. Erik what are you seeing in the economy now . The economy is in reasonably good shape. A recession is due at some point. At some point, i will be right and we will have a recession. I dont know when its going to occur. Right now the economy is doing pretty well, growing at 2. 5 gdp. I would say i dont see any signs of a slowdown. Erik some people are talking about synchronize global growth. There is more synchronization than before. I dont see any recession anywhere in the world. Erik does that surprise you . It does. Right now, things are in good shape. The deepest recession has been in brazil. But its coming back slowly. Erik you have described a private equity paradox. High prices, declining returns, accelerating inflows. Its an axiom, isnt it, that paradoxes cant continue indefinitely, or can they . Sometimes they can for longer than people think. Private equity is attracting in amounts of money. Why is that . Private equity has outperformed every other asset class and that is likely to continue. People think we cant continue to get these attractive rates of return. Erik have you ever seen this level of interest . Ive been doing this for 30 years and i have not ever seen it at this level of interest. Everything will probably slow down at some point. If something cant keep going on forever it eventually wont. Right now the interest is high. People get elected promising to preserve your Social Security benefits, but nothing happens. People have been talking about this problem for many years. And nothing happens. Not only do decisions not get made, you dont even hear any discussion. Erik one step american states might consider is following with the canadians and australians have said. Create professional investors. Do you think that would fix the problem . Well, not fix, but i think it would contribute. Obviously, quality decisions would be one of the important ingredients in a solution. I believe it is fair to say that and one thing you left out, when they hire staff for these investment organizations they pay them salaries that are competitive in the business world. In our political system that cannot be done today. For some reason people want to not be people who work for the government, making a lot of money. But then you have to say how can those jobs attract people smart enough to solve problems we have . I wrote a memo called economic reality and i think there is an example. If you pay people more you would get some better decisions which would contribute to the solution. Listen, i do believe candidate trump and i, President Trump interacts with his constituents and the population in a way using twitter that should add volatility to the marketplace. It hasnt. The only conclusion i can come up with is maybe, what the president does is not as critically important to the markets as many of us once thought. Maybe much of the noise around certain aspects of the presidency arent as relevant to the marketplace as many of us in the marketplace once thought. Erik does that realization or recognition surprise you . It does. As a great prognosticator i think i wouldnt get high marks. I thought volatility would be higher. I thought Interest Rates would be higher. We have been wrong on both. The good news about being wrong is that it forces you and us at our firm to buy higherquality assets and Better Companies that can withstand higher levels of volatility and higher Interest Rates. In a strange way we have been wrong and it has helped our investment focus. Erik would you not say it is hard to find anything under price today . Absolutely. Look at our stockmarket. That is all people are talking about. Thats fairly priced. Most people tell you it is overpriced. Yet it still keeps going up. Everybody believes youre going to have huge billion coming in from offshore. Thats going to bring more jobs. And you will get tax reform done. If none of that happens youre going to see this market take a big hit. Erik we have to wait how long to find that out . Six months. This has got to get done in the next three to six months, otherwise the market is going to start saying we dont think any of this is going to get done. Erik between now and then, brazil is a place you have gone shopping. I presume you have a short position on south korean cds. We dont view we think that right now is not fairly priced. Thats correct. Erik what else is not fairly priced . Valuations have gone up in developed markets. Youve been prospecting in nonperforming loans. We talked about that. Where else does it pay to do the work . You could still be in europe. You could make 1015 . Whats interesting is that in asia today because of the slowdown in china and what is happening out there you can do direct lending deals in asia for high teens to 20 . Erik given the state of the world and where you think it might be headed, where do you see best opportunities . Our business is raising large sums of money. Having operating people in many countries in the world. Where capital is not available and we have put a lot of money in south america, specifically brazil. Were putting money into india today. We just move our capital and we never know where it is going to be. It is going to be one of the countries where we can make opportunities into reality. We will move it where it is most important. Erik you say youre being cautious, does that mean you are deploying capital at a slower pace than you might otherwise . Everywhere, all the time somewhere there is an opportunity to put money to work. We are cautious in the United States, and have been for a wild. We put 20 billion to work in other parts of the world. It is a big market. There is lots of addon opportunities but we bought general growth in 2009. Erik where else do you feel it is time to sell were might be soon time . Id say developed markets where theres lots of money, and where leverage lending markets are strong. Outside the u. S. , thats where . The u. S. In particular. Canada is good. Even though commodities have been tough. The u. K. And europe, there is opportunity to sell things. Shery you are watching bloomberg best, im shery ahn. Lets continue our look act at the 2017 Bloomberg Global Business Forum. Lloyd blankfein and the head of the Saudi Investment Fund talk about the transition and the future of energy in the middle east. When you are considering saudi arabia as a focus, what are the metrics you want to see . Id say realistically today, still for financial institutions, it is still a net exporter of capital. It is becoming clear to was. If i were influential in that country and had those concerns i want to make sure the people doing this for us were doing things for us that would increase job creation and bring new industry and diversified the economy. Id say the facts that are two major themes causing changes, structuring of the energy market. That is pricing. Its affecting the demand side and the supply side. Apart from that, a compulsion of the demographic situation. A lot of it has been invested, and i think the region needs the commitment and the help in getting investment done and creating jobs in the region. What are your priorities . In five years time, if we say this guy made it happen, how different does saudi arabia look . It is really different than before. The vision 2030, it is a good start. Now we have targets. We have targets for the middle, mediumterm and the longterm. Mediumterm, we have the National Transportation plan. This is 2020. And we have the vision 2030. And in the vision, we have 543 different initiatives with 376 Key Performance indicators. So, its not only about the vision which is very complicated, but also the execution of these initiatives. And to monitor these initiatives, so we have everybody in the government from different ministries, looking at their own initiatives. We have the council for economic development, shared by the crown prince. They meet on a weekly basis looking at these initiatives and the Key Performance indicators. Now, going back to the pif, Public Investment fund, which is managed by me and the crown prince, we have another seven ministers. We have a lot of these initiatives. They will be part of the pif program. Thats one of the programs in the vision, 2030. Shery much more still ahead from the bloomberg Business Forum. Ceo share thoughts on the future of business. Bill gates and others have plenty more to say about technology and the discussion on trade turns into an interesting debate. The Business Community, they are looking for a level playing field. They are looking for an advantage but they will take a level playing field. Shery this is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. Shery welcome back to bloomberg best, im shery ahn. We are looking back at the 2017 Bloomberg Global Business Forum held on september 20 and new york. A conference dedicated to solving economic challenges and charting new paths forward. Let us hear from some of the top is as leaders who spoke at the event, starting with the alibaba founder and executive chairman, jack ma. I think the world is shifting from Big Companies to Small Companies. And Small Companies make extra partnerships and i am passionate about entrepreneurships. I am passionate about Small Business, i think it is the solution for this country, creating jobs, innovation. If you are not creative in a Small Business and innovative, you do not have a chance. That is my passion and i believe that it is also the future of this country. You heard President Trump speak at the u. N. What is your relationship like . He is a very unique president. We had a very good discussion the first time that should the last time, talking about chinau. S. Trade. I think the chinau. S. Relationship is critical in this country, especially on the business side. So i think they are making progress on that. Really, because the president called china an unprecedented threat and blocked the takeover of a u. S. Chip company by a private equity firm from china, what do you make of that . It happens. Here and there, now and then, this is a way i think that if you see optimistically or positively, they are countries that should understand each other better. I think the next two years, whether it will be a disaster or relying on the wisdom of leaders. How about when it comes to your business in china, the president has been taking more steps to put restrictions on the internet. This is your business. What do you make of that . Really . You feel that . Yes, he has been shutting down vpns, that is one example of late. Okay, yeah, we probably see a different view of that. This is the way that i see business. In the past 18 years, this is our 18th anniversary, in the past 18 years i got questions about internet censorship all the time. But i am the first internet guy in china since 1995. Americans have been enjoying democracy for 250 years, and china just started in the past 30 years. I would say in the past 30 years, china is learning a lot of things, making progress. For these things, if there is control here and there, what we should do is focus on the 95 of the positive things. And i think that when the government the governing or regulation of the internet is a new thing to any government. People like me, i have been talking to thousands or hundreds of government officials every year, because i think it is my responsibility to tell them, do not worry about it, this is the way to do it. So i never complain, and i try my best to educate them. Emily do you think they will ultimately be on the right side of history, the Chinese Government . Yes, i am absolutely sure. Nobody can stop this revolution. The ceo needs to be aware of issues out there and integrate them into corporate strategy. That is what i call earning a seat at the table. It may mean moving to green energy, making sure your materials are well supplied and treating your people fairly. Then you work on your value chain, these are easy things to do because these are your suppliers. Extend your influence on the value chain, you cannot outsource it. You cannot outsource the value chain and outsource your responsibilities as well, consumers do not accept that anymore. The third thing is you have to work with Industry Associations on more transformative initiatives. Renewable energy, there has been something on that, now there is a Transportation Initiative to go to limited combustion engines, initiatives on human rights and the value chain, there are many industry initiatives that are happening right now which you have to attach yourself to. And then the final point is to be proud of advocacy and helping in the political process. It is difficult to blame the politicians if youre actually not part of the solution. You are one of the spear headers of this. Has it gone more quickly than he thought it would . Or slower . Six or seven years ago, it was the nas revolutionary, and we were a little bit scared. We had goals and ambitions, increasing or social impact, doing that across the total value chain. Unfortunately, and importantly, it turns out that what we were trying to do was not even ambitious enough, with the way that the world is going. We were definitely on trend but it is an everchanging thing. One of the experiments we are very, very interested in an optimistic about is in the city in india where we are supplying the cars, the drivers have signed onto a Ridesharing Company there and that government has provided a charging station initially. It is working well, and if it continues we will replicate it. That is an example of a government stepping in actively and participating. More than that needing a Publicprivate Partnership to work, it can happen. The second thing, and i really do not believe in government subsidies at all, isnt you need the leader of the country to give direction. Let me give you an example again, when Prime Minister Narendra Modi laid out his vision for solar power and wanted to make india a leader in solar power, he set a clear goal of 175 gigawatts of Renewable Energy by 2022, 100 gigawatts of each were solar. We invested. So, businesses which look for stability, they look for direction and you do not need that much more if you are just moaning opportunity. In three years, we built the company which is now the second largest builder of solar power plants. We were not looking for subsidies, we were just saying, tell us which direction to follow, and if you do that, there is money to be made. How would you consider the growth of africa, especially nigeria, at the moment . I think the growth has been a little slow. Everything is in a cycle. When we have reached the bottom, we have bounced back. The majority of countries today, were making more money than last year when we had a recession. We have actually bounced back, because we have good fundamentals. We believe in what we are doing, when we rolled out two years ago about the chemicals in fertilizer, we continued with the devaluation. We still continue with everything. Are you looking at acquisitions at the moment . We are looking at acquisitions and im sure youve heard that we will be taking to the Pretoria Cement Company in south africa. I hope we will be able to agree with them, because of africa really needs consolidation. I think it is the right thing for us to go in there and consolidate. It is not really a rumor. Host there are other bidders, right . There are other bidders, but we will be very sensible as to what were going to be doing. Being that there are other bidders, it does not mean that we are just going to bid high, we are not going to bid in a crazy manner, we will do it sensibly where it makes sense for both the shareholders of pcc and also our companys shareholders. We also will not do something that affects our own valuation, so we have to be very careful. Shery im shery ahn and this is a special edition of bloomberg best, focusing on the 2017 Bloomberg Global Business Forum. The Main Objective of the conference was to Foster Partnership between leaders in politics and business. A panel on expanding trade moderated by the imfs christine lagarde, was a perfect example of that mission to find common ground. It featured a prayer of Prime Ministers and the heads of two of the Worlds Largest investment firms. The Business Community is basically looking for a label a level playing field. That is what we want. We do not want to be disadvantaged in certain countries for historical reasons and some countries have barriers where you have a superior product and you cannot sell it there. So that is the kind of thing that recently has to be debottlenecked. The best player is supposed to win, but one team is not supposed to bat for nine innings and another one for three. Its hard to win when you can only do it one third of the time. Full disclosure, Prime Ministers, when you receive visits from the likes of steve and larry who do not charge anything for their advice and access to information, do you take that with a pinch of salt . Or do you take it for granted that they are right . [laughter] government is about partnerships. You listen to citizens, interest groups, Business Community, you hear a range of perspectives and there is no question that when steve says, we are just looking for a level playing field, they are looking for an advantage but they will take a level playing field. [laughter] so, you listen to what theyre doing, but you also i have had great meetings with steve, for example, who came up to talk to the canadian cabinet two days after the inauguration of this new administration, to give us a sense of where their priorities are going to be. Weve been working with larry for about two years about drawing in Global Investment into canada and what kind of framework we could give to encourage people to notice canada as a great place to invest. They have been great and thoughtful, but you always know that there is interest there in growing the economy for them,. We are interested in growing the economy for everyone there is larger overlaps. You dont have to be cynical about it but you have to be conscious of the pockets youre talking to. Yes, i agree that we should not be naive about this. We are not government organizations. They are companies, they want to make a profit, but at the same time, they have a wealth of knowledge about what is happening all over the world. I would take the position that the big issues that the planet is facing in terms of climate change, in terms of fighting instability, we need to cooperate between ngos, governments and the big corporations. Companies like shell, companies here in the United States also, all companies should play a positive role in trying to get these companies and ngos to change the course of the events happening. We cannot do it on our own. What i like about the u. N. Now is that the u. N. Is realizing more and more, which i like, that the United Nations as a Organization Needs to cooperate more with businesses and is doing that. This is a change which i find extremely positive. Lagarde you have investors, and they are looking to you to help them navigate all of these forces, trade, economic integration, financial flows, technological changes. How do you think that large Financial Firms like yours driving, shaping trade, shaping economic integration, how do you participate in the process to the benefit of the company, but also to them . Let me say how were navigating this whole rise to protectionism. It means, obviously, one, more than ever before we have to mirror our client. One of the main reasons that we need to have at least gender equality, but the realities in the world, 50 of Household Wealth is managed by women. If i am going to be a mirror of my clients, we will need more women at our firm, which is what we are doing. But more importantly, if i am going to be that financial manager in the netherlands or canada, we have to be dutch and we have to be canadian. We cannot be an American Firm trying to put American Values into those different places. That is probably our biggest transformation, that is how in my mind that Companies Navigate above the problems of protectionism. One thing that governments can do, is change the game that larry was talking about. Because often, it is governments that insist on certain mixes of assets, which end up not being in the best interest of the people. The people who are supposed to been a beneficiaries, and the governments that ultimately get left with the bill. Make no mistake, it is going to end up underwriting the underperformance, it is the government. They cannot default on their people. So, this is a big problem. But typically, the governments allow what we would think from experience, odd outcomes, and governments have to encourage certain types of Asset Allocation mixes. Or they will be stuck with the same under performances. It is a danger for the solvency of the government, longterm. Shery turkeys president sat down with our bloomberg editor in chief. For 54 years, they have made turkey wait at the gate of the European Union. I wonder, can he say whether there are those who came later, what is being done to turkey is actually a political embargo. Its disrespect to turkeys character and personality. It is an approach that is contrary to the eu theme. No country has been shown this approach. They are lying to us. They do not speak the truth with us, they tell us a line. Here, as i worked talking about a little earlier on the subject of refugees, in 2016, they said they would give us 3 billion euros, they did not. There are going to give it through organizations that they decide on themselves. And they said at the end of the year, we will give another 3 billion euros, and of the figure that has, as of now, is 820 million eurosp where is the honesty . There is none. And look, it is really interesting. Sarkozy became in charge of france, merkel became in charge of germany, and before they took the reins, i used to join the leaders summit. And at the time it was chirac in france. In germany, it was schroeder, and the three of us had many meetings, which were basically preparing us. But then sarkozy came, and merkel came and they banned leaders from countries in negotiation from these meetings. They stopped them. Chapters were being opened and closed at that time. Ok, so what happened with all this . They stopped opening and closing. There are just opening, no closing. So how many chapters . There were 15, then they made it already five. Made it 35. So who was this against . These were measures only taken against turkey. Yet best let juncker explain that to me. I know juncker well. Why not give up . It strikes me, there are many Business People in this audience. When somebody else talks about pulling up the drawbridge and you are in the castle, that does not normally imply a great deal of partnership. Why doesnt turkey seek a future outside the European Union . Why persist, given all of this perfidy which you have described . This is a very good question. I say that those who are in the position to make these conditions are them. Let them close the door to us. We will make our decision easily. We are not that interested, let me say that. What they want is for turkey to run away from them. No. We will never run away from it. Let it be them to run away from the mat. Let them make that decision. Shery i am shery ahn, let us conclude this special edition of bloomberg best, devoted to the inaugural Bloomberg Business global forum. These ceos such as bill gates, and the ceo of softbank, as well as nigerias commodities titan, aliko dangote, discussed many of the possibilities created by new technologies. Rubenstein he was killed by a type of mosquito which is one of 1000 mosquitoes, a special one. The main thing is that it is precedent setting. If you think humans can go and get this species, what is your criteria for anything that might be a nuisance and may be key to an ecosystem . If you got rid of all mosquitos, there actually are some bats that feed on them. There are such a small percentage of mosquitoes, and there are no other species that is dependent on them. This new genetic approach called gene drive is still not proven, but it has a good chance of being able to knock down populations by about 99 , over a fiveyear period. That, probably for the toughest parts of the world such as nigeria in the center, where malaria is really a huge problem, we probably need that tool. And so, how are we going to get consensus on that is tricky, some people worry, i suppose people are worried about mosquitoes most people worry about the president of how such decisions are made. Rubenstein when you hear about technology innovators, they often are men. Is that because of a sexist thing . Men do not tend to let women get the opportunity, or is it some other reason, and you think it will change anytime soon . I am not an expert on women in technology. But i will Say Something interesting, i was at an m. I. T. Event on saturday, and the president of m. I. T. Was telling me that 50 of the engineering graduates from m. I. T. Are women. But if you go to most companies, 50 of the engineering staff are not women. And if you read some of the stories in the press about what happened in the Silicon Valley for example, 50 of the people are getting the funding and they are not women. Obviously, something is causing the leakage between m. I. T. , which is a premier institution and the practice. So i think, if we want to utilize all of these resources we are spending money on, we need to do something different. Rubenstein final question, is Artificial Intelligence a good thing for humans, are robots going to take over humanity . I think that misuse of ai could be horrible. But there are thousands of good reasons to utilize Artificial Intelligence for good, for humanity. It solves the unsolvable diseases, it solves the unsolvable disasters, and many other things. So, i think it is really good. Shery you can find even more interviews, presentations and Panel Discussions from the inaugural Bloomberg Global Business Forum at bloomberg. Com and is always all of the latest news and analysis 24 hours a day. That will be all for bloomberg best this week, thank you for watching. I am shery ahn. This is bloomberg. Jonathan from new york city, with 30 minutes dedicated to fixed income, this is bloomberg real yield. Jonathan coming up, janet yellen brushes aside plans to unwind the Balance Sheet and entities up another rate hike before years end. Geo politics fuels the bid as north korea threatens to deliver a hardline response to President Trump. And beyond toys r us filing for bankruptcy, heavy debt loads continue to haunt retailers. We start with a big issue. Why unwinding a 4. 5 trillion Balance Sheet is apparently