Lacqua we speak with the vicechairman of blackrock, the worlds biggest money manager. After the financial crisis, what have we learned . We have too much leverage in the system without any doubt. When you have too much leverage, bad things happen. Things tend to be amplified. Thats the key thing. Thisve also learned that notion of letting the market be totally free, that wasnt a good idea. What stands out is banks needed much more capital than they had at the time. We had capital levels that were excessively low. In some cases, these banks were leveraged nearly 100 times. That, to me, has always been the key takeaway. Ways, i wish we had focused more on the capital all of theless on other things that have made it into the regulatory reform. A concern now of regulating the financial crisis, and we may miss the next one . We might, there shouldnt be any illusions. Financial crises should not disappear from the pages of future history books. We have to be realistic. I dont think we are over regulating. I think its sensible to say lets take stock and pause. Thats happening, certainly, when you look at what is happening in the u. S. Thats part of the story, not a bad thing. To see how the system settles, as i have said, we have too many regulatory initiatives. It is the multitude of these and how they interact that is hard to predict. A deliberate pause is not a bad thing, but it wouldnt say that this is overregulated. Francine you love history. How did that taint your view of the world . Bloomberg. Com the unexpected will always happen, sooner or later. History tells you that. We are not good at predicting it. What we have to think about is how we build the system, ensure that the system is resilient when bad things happen, rather than getting into this control mindset that you can somehow eliminate all risks. Francine where you see the biggest disruption in the next 510 years . Is a industry, or china or technology . Philipp technology on the whole. If you asked me more broadly, technology, the way it will impact peoples behavior, the way it will impact democracies, frankly, the way it is impacting media right now you are in the midst of this, so you know this better than anybody. Technology is pervasive. Francine is it impacting inflation . Is that why its tricky to find . Philipp central banking has something to do with this. There is a framework around that basically emerged firmly in the mid90s, lets say. Price stability can be maintained that has impacted expectations of economic agents. That is certainly part of it. The innovation around central banking is important. Secondly, globalization has dampened wage pressure. Theres no question about that, that you cant have new pools of labor entering the global labor market, the Global Supply chains. That has made it difficult to have a wage spiral going on. Then, technology it is another piece, where the combination of Technology Competition and integration of new economies, new spaces, new pools of labor, has made it difficult indeed for inflation to behave the way it would have in the 60s or 70s. Francine should we still look atfrancine the phillips curve . Is broken are dead . Philipp i think maybe thats the wrong question to ask. I think its more about, how do we think these forces will evolve over time . I think its true that prices behave differently today than they did some decades ago. Probably, that will not change. The good news here is we have an environment where we probably pressures. Inflation having said that, it still remains true that Monetary Policy has to be there as a guarantor. I would very much hope that even if we dont get inflation for the next year or decade, that Central Banks could continue, in terms of maintaining that stability. Worry morehould we about deflation, a lack of inflation . Philipp my sense is that we have managed to kill the deflationary psychology, and a sense, for the time being. Why,s one of the reasons as we speak today, the Global Outlook looks pretty positive. There is that fear about due toon gone, largely courageous central banking, which has had some negative side effects, but on the whole, has been the right policy. Francine what do you see being a side effect of this ultraloose Monetary Policy . Philipp low Interest Rates, potentially for a long time to come. The question is, how will that impact savers . Retirement is a big issue. When a look at blackhawks, two thirds of our assets are tied o retirement. To the question of how you finance your retirement in a world of potentially protracted low Interest Rates is a big, big problem, a difficult challenge that i think most of our societies today face. Frankly, in most countries, government policy hasnt responded, and even in many cases openly acknowledged this challenge, that we have a major retirement problem facing us. Low Interest Rates dont help. If you start to think im not going to be able to live on my Retirement Savings because Interest Rates are low, that might allow you to save more. This is what is called precautionary savings effect, something that is potentially very destabilizing. The moment we have low Interest Rates, coupled with this them a graphic challenge, the more i will be worried about that. I sense, as we talk to our clients worldwide, that retirement is one of the biggest issues we face. We have to make sure we dont get into a situation where this becomes a crisis. Francine how is it working with larry fink . Philipp theres a good question. [laughter] francine as a hedge fund manager, Philip Hildebrandt made his mark amongst the elite. His ambushes his ambitions ran higher. Centrald the banks club, at age 26, the youngest member. His term ended two years later for a trading scandal involving his then wife, leading to his resignation. Bank of england said, he is a extra total integrity, ability, and most part of all, courage. His country will miss him. Believes courage is acting in the face of adversity. When you are head, were ahead, but philipp when was the rescue of ubs. It went against everything we believed in, yet we knew we needed to do it. We knew it would create tremendous anger in the population. That was clear. It turned out that way at a global level. And, it would take a long time for banking to redeem itself. We knew the consequences were significant, and yet we had the conditions convictions. Obviously, was the minimum the introduction of the minimum rate. Francine on ubs it difficult that the remember a difficult day. Do you remember the conversations . Philipp we had done conversations about what it would look like. We had engaged with the bank to study swap operations. We never told them we were prepared to buy the assets or take them over, so we were well repaired. The moment i remember well was breakfast at my apartment at the time in zurich, when the ceo and chairman came by, and basically told thomas jordan, myself, and the head regulator that they needed help. That was a clear, decisive moment. From then on, the plane went into action. That was a tough moment the plan went into action. That was a tough moment. We knew we had to do it. Francine talk to me about the capping of the frank to the euro were there other the fran to the euroc franc to the euro. Philipp this has been building up for weeks if not months, so we have time to look at different scenarios. We also had a history. The smb and the country have faced similar circumstances in the past. We had a great team. We had not just a board, but quite a few awkward quite a few experts economists working out every possible angle to every possible scenario. Every time we triggered it, i felt that we had done all the possible preparation we could. Francine that at the time was a big risk you are a risk taker by nature though that was a big risk. You are a risk taker by nature. Philipp one of my mentors told sometimes not acting is the greatest strength. With the markets being what they are, we had to come in suddenly and aggressively, which we did. The reality is behind this, there was nothing aggressive. There was due consideration and extensive studying and scenario analysis. Francine it was bold. Philipp reasonably. It was also important that it had the credibility of the community of Central Banks and governments, to some extent. In many ways, one of my biggest worries was that we would be seen by some of our Principal Partners worldwide as doing something that wasnt quite right. One of the things that i spend an enormous amount of time on is really too, to make sure that the analytics is really to, to to make sure the analytics bandits are robust, to make sure it wasnt the analytics are robust, to make sure it wasnt something we would have to explain. All of these dimensions were important. Francine did you confide in any other central bankers . Philipp thats a delicate question. What i would say is that one of the unique things about central banking, and certainly, one of my greatest privileges that ive experienced professionally is the trust thaty, develops in the central banking community. Being part of the club of governors is a, is a great privilege. You really have a community of colleagues that you can trust. Theres a way you can learn from each other. You can discuss complex issues. That is quite unique, and to me, was one of the greatest privileges of being part of that club. Francine what was a day like the day that the franc capping was announced, not being beholden to the euro anymore . Philipp it was not a permanent change of Monetary Policy regime. The fact that it would be at some point, that it would come to an end, was all was obvious always obvious, as it was obvious that it had to be premised on europe somehow not falling apart. Francine can europe Stay Together . Philipp yes. Francine a Firm European believer. Philipp in this world of globalization, the only way for europe to be influential today is to have a strong common voice. Francine when you decided to . Esign how difficult was that january 9, 2012. Philipp it was tough. I loved being a central banker. Serving the central bank, my country, is certainly the greatest privilege ive ever had professionally. Ultimately, Public Service. Is ultimately, Public Service is not about yourself. Its about the people you serve, or the country you serve. In that context, it was the right decision. It needed the circumstances it needed, the circumstances were such where credit ability was of the utmost importance. The best way to persona a full to preserve the full range of remember, this was the tail end of the crisis, things were uncertain. The euro crisis was still in full bloom. It was important that there were no questions around the leadership, so it was the right thing to do for the institution. It was the right thing to do for the country. It was the painful thing to do for me. Francine in real terms, what is a robot advisor . And i going to have a robot as a boss at any point if i work for blackrock . Francine after leaving the Swiss National bank, Philipp Hildebrand went to work. Is repetition precedes him. His job at blackrock has high expectations, and his largerthanlife. His company manages more than 5 trillion in assets making him one of the most, influential figures in the financial world. Whats it like working with larry fink . Philipp theres a good question. [laughter] philipp larry is a bit older than me. I try to keep fit, but traveling with him is a workout. Francine is he demanding . Philipp yes, but no more than he is on himself. He has a phrase that we all have to be students of the market. There no excuse for anybody at blackrock got to be a daily student of the market. Think that shapes the culture very much at blackrock. This never be satisfied, always know that the world moves on. You have to learn every single day. Initiatives around academy, where we force and encourage everybody to live that motto. Or dont cant do that want to, they are in the wrong place at like rock. The culture that he carries very much runs throughout the firm. Francine whats the question you get asked most internally . Philipp you often get asked, whats it like to work with larry . [laughter] philipp i think on substance it a long time the crisis, was about the future of europe. The other question is how do we operate in slow Interest Rate environment, particularly if you extended for a long time . Fully we are in a sustained economy at the moment, but will see a cap on Interest Rates and growth rates, and are structurally and a lower growth environment Going Forward for quite some time. Francine how does blackrock deal with it . Philipp we have to be relentless students of the market. We invest a lot of resources and. Ime for Investment Institute there implications of lower Interest Rates. To shareound new ways our analysis with our clients. We have to be innovative around using technology brandnew products, product innovation. Francine are you an asset manager . Philipp certainly, but i think we are more than an asset manager. I believe we are at platform. We have said publicly that our ambition would be five years from now, we would have a third of their earnings derived from technology empowered, or Technology Driven product services. Francine talk to me in real terms whats a robot advisor . Who is going to am i going to have a robot as a boss at any point if i work for blackrock . Philipp no. I think the answer is, you will have an interface, or if you are not a client we dont go directly to clients at the moment but throughout distributors, they will have Technology Tools that will make it easier for them to deal with their clients, work with their clients, bring value to their clients. We want to be that platform for distributors. You will also see that in your products, in a combination of technology and human driven investments, will increasingly be visible. This dissection of saying we ive technology and people, suspect thats not going to be the world we live in 1015 years from now. The reality is were still there will still be important roles to play by people, analysis, judgment, learning about the markets, experience, history all of these things will continue to be important. People will be empowered by technology in many ways, hopefully to the benefit of our clients. Francine isnt that is faster because of size and scope do you believe there will be more consolidation amongst your investors . Philipp look i think there will be a lot of companies that disappear. That doesnt necessarily mean theres going to be a lot of mna. Some of these Companies Might simply not be worth buying. The client will simply migrate away from these companies, and buy other products from a different company. It doesnt necessarily mean consolidation in the sense of the corporate idea, but he do think we are going to see a lot of change in the Asset Management industry. Those companies i cannot respond to this that need to change those companies that cannot respond to this that need to change will change. Its easy for a client to change his or her asset manager. Francine outside of work, a passion for sport. In his youth, hillebrand was a swimmer who nearly qualified for the 1984 olympics. These day hes days hes a skier and rock climber. It offers the escape from the demand of his jake day job. He draws parallels between sports and business, which can help you develop skills as a leader. Philipp what it teaches you, hopefully, is discipline, stamina, and staying on top of things. Its not just about a great effort today and then i slack off. It never ends. Its mindset of saying the mindset of saying you never win; you just go to the next challenge. Thats so heavily embodied in our culture of blackrock. Its at the top, larry himself, as we talked about. And that since, there is an analogy in that sense, there is an analogy. I climb, ski, spend time in the mountains. I like to bike. Francine is that when you think about the world . More that i dont do anything else other than climbing. The beauty about climbing is you dont have time for a form of meditation. You dont think about anything other than the next step. I find that to be a refreshing exercise, in a world where you are constantly being bombarded everyday, another email, message, call. Francine what part of history into the most . Other parallels i do know if its england, or anything you see with parallels that move through today . Francine we can learn a tremendous amount from history, from the mistakes that have been made in european history. Europe has terrible, terrible incidents, and i think repeatedly to learn about that, to teach our children. We recently took the kids to auschwitz, as a way to ensure to make sure that this historical sense of how things can go wrong with part in europe, its important to pass on. Francine is there a shortcoming in human nature that frustrates you when you do business . Philipp i struggle with people who dont have a framework on how they think. I find it important for people to develop an ability to think about the problem, no matter what the problem is, in a reasonably disciplined way. Reddick thinking tends to he reddick thinking erratic thinking leads to erratic outcomes. Francine where do you see yourself going . Philipp i used to be with a cover a couple others, mark carney. I noticed recently that in the last year or so, when you are standing in the elevator on the way up, new york, offices, i am realizing i am amongst the oldest. Im beginning to think about that. I can certainly imagine being at blackrock. I think we, we have a tremendous five years ahead of us, in terms of change, challenges, and other than that, i have learned in life you have to be prepared, for surprises than react accordingly. I can certainly imagine stopping at blackrock, talking to you about how things have changed five years from now in asset manage. Management. Francine hopefully more than five years. Thank you so much. Scarlet im scarlet fu. 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