Crunch struck, responding by pumping billions of pounds into the economy. Joining me on leaders with lacqua, former bank of england governor, economist and author mervyn king. Lord king, thank you so much for speaking to bloomberg tv. It is always a great pleasure. What lessons have we learned from the financial crisis . Lord king i hope we learned the lesson that this was a lot bigger than just a financial crisis. It represented a serious problem in the world economy. Not sure that everyone sees it that way, but i think that is the most important lesson. I think secondly we learned we need to worry not just about the amount of Equity Capital banks issue, we need to limit the leverage, but we also need to tackle the problem that banks are inherently unstable. And if people lose confidence in them, they take their money out, or they do not roll over their lending, and we need a mechanism for dealing with that. Francine did we see early signs of it, or were we late to the game . Lord king i think we saw signs signs of it in the world economy, and we should have given more weight to the rise of leverage in the borrowing of the Banking System. Of course at that point, the banks themselves were deeply reluctant to admit what was going on was not sustainable. Francine at what point in the financial crisis or the leadup to the financial crisis did you think there was something seriously wrong here . Lord king i gave a speech before the crisis erupted in 2007 at the Mansion House in london. Ignore the unsolicited emails that rain down on us offering unwanted credit. I received one last week that began, we have the solution, mervyn, for your bankruptcy. [laughter] lord king excessive leverage is the common theme of many earlier financial crises. Are we really so much cleverer than the financiers of the past . And that was not a welcome statement. People thought we are wiser than people in the past. Well, it turned out we werent. Now, i dont think it is ever easy to say that a particular level of leverage was going to generate a crisis. And no one there is an element of randomness in the small events that triggered the crisis, but it was pretty clear, i think, that the system as a whole was in some serious trouble. Francine with hindsight, would you have done something will differently to placate this nonconfidence . Lord king i think the things we had to do were wellknown in the u. K. And had been identified before. One was we did not have a resolution framework to deal with the failing of a bank in the u. K. Every other g7 country had one. We did not have 100 deposit insurance. And that was bound to mean once a bank run were to start, it would be rational for other depositors to join it. And these things were well understood and well known. I dont think that made the judgment of whether we were about to go into a banking crisis any easier. What we knew was the system was not as resilient as it should have been. Rishaad hello, i am Rishaad Salamat bringing you a special report on Northern Iraq, the subprime fallout that is spreading across the atlantic to the united kingdom. Panic in the straits, and who knows whether your money is going to be safe . I do want to transfer my money. Francine the cues that formed outside Northern Rock represented the first bank run in britain in 150 years. Depositors were demanding their money back after it was revealed the lender had tapped the bank of england for emergency funding. The run did not stop until the government gave a taxpayer backed guarantee that all existing deposits were safe. Would you have done things differently for Northern Iraq . Lord king we did support the bank. We were the lender of last resort right up and to the point where they ran out of money and could not give us any collateral to lend against. So the thing that is odd about that is people seem to think we did not lend to Northern Rock. We lended a vast amount to Northern Rock. And the first conversation i had with the chairman of Northern Rock in august 2007 was if it comes to it, we would be there as a lender of last resort. The problem was, Northern Rock, which was not doing anything other banks themselves were not themselves doing, had a Business Model that ended when the market in mortgagebacked securities closed, and they had a very high leverage at that point, even though they met all the International Capital standards. So it was not as if Northern Rock was somehow taking big risks with the definition of capital that the International Basel standards said they should hold. It was just that the structure of the bank, which was basically borrowing short and Lending Mortgage lending, meant they were not required to hold very much Equity Capital. And that is what made them very vulnerable. You could draw a timeline, and you knew when the bank would run out of money. And it did at exactly that point. I remember when the government appointed Goldman Sachs to help them find a way of selling Northern Rock. So actually when i met Goldman Sachs for the first time, we both agreed within a few minutes that the only end result was nationalization. But it could, if we had had a resolution framework, Northern Rock would have been dealt with over one weekend, and it never would have been the news story it became. After the fall of lehman brothers, it was pretty obvious that there needed to be a coordinated signal that we would do whatever was necessary to keep the Financial System going. I think the move in october 2008 originated in a telephone conversation between ben bernanke and myself. And i said to him i thought it would be a good idea, since we were probably all considering a cuts in Interest Rates, we agreed that he would speak to jeanclaude trichet, and i would speak to some others, and it became a g10 movement. It took about a week or so to put together. We changed the time of our normal meeting so we could announce at the exact same time, this coordinated Interest Rate movement. I remember we informed our politicians just before we did it. I think the house will want to know that the governor for the bank of england has Just Announced an immediate 0. 5 cut in Interest Rates. He has done so in a coordinated action around the world in which the u. S. Fed has cut Interest Rates by 0. 5 , the ecb by half a percent, the swiss and other members of the g10 have all cut Interest Rates, showing global problems are best dealt with by global action. Francine so who knew about this, the 10 central bankers . Lord king yes, and among other people inside the central banking world. We did not brief the political world because that, im afraid in modern circumstance, means inevitably a leak. That was one thing that would have undermined the operation. Francine is that what makes the big difference between the Central Banks and the politicians . Lord king yes. I will not go into detail, but if i had to say the big difference between the Central Banks and politicians in the crisis, i could talk to another central banker confident that it would be a conversation in confidence, and it would be treated with discretion. I think that whatever discussions took place with politicians, they seemed to end up in the, in the media. Francine how did you cope with the financial crisis . What are the attributes that a central banker needs for working under pressure, extreme pressure . Francine long before mervyn king set foot on threadneedle street, he was an academic teaching in prestigious institutions like the university of cambridge, harvard, and m. I. T. , where his office happened to enjoin to then assistant professor ben bernanke. In 1991, he brought his quick thinking to the bank of england as its chief economist, moving up the ranks to Deputy Governor then to the top job. It was a long way from his Humble Beginnings in the english midlands. What did you want to be as a child . Lord king i wanted to play cricket for my county, worcestershire. I would play for them the whole season apart from the last week of june and the first week of july when i would take two weeks off to defend my singles title at wimbledon. Francine that did not work out. Lord king it did not work out. Francine are there parallels between sportsmanship and policymaking . Lord king very much so. One reason i started a charity to encourage Young Children to play cricket and competitive sports is that it is a very good way to learn in a harmless environment that it is important to compete, but to have the ability once the game ends to be friends with people afterwards. In Business Life it is very important for people to realize they are competing. It is not just a happy game. You are competing against each other, but you can still have good personal relationships outside. You learn how to win and how to lose, something which some politicians have, but not all. And these are lessons for life, which are very, very important. Francine how did you get this love of sports . Did it come through your father . Lord king yes. I was just growing up, my father was a schoolteacher. We moved around a lot. I remember we lived in yorkshire for a while. We were living in a Council House where it was next to the cricket ground. And i went to sleep as a small boy listening to the sound of the ball on the bat outside my window. Francine does your family, did it have a big influence on you growing up . Lord king yes, and i think my father particularly. He could have gone to university had his parents been able to afford to send him, and he couldnt. I come from the lucky generation, people born in 1948. Because we did not have to fight in the war. My parents did. I went to an education that i had free of charge. I was sent to the United States on a scholarship. I paid nothing for that. Everything was worked in my favor, and young people today are facing a more challenging environment. They have to pay for their college education. Now, there are good reasons for that, because many more people go to college, and it is not obvious why the people who dont go to college, who by and large earn less, should pay for people who do go to college who thereby earn more later in life. But nevertheless, it is tougher for the younger generation. I think it is beholden on the older generation to recognize we will have to make some sacrifices to help the younger generation. Francine what has made you the central bank that you became . Is it, was it academics, was it studying . Lord king i think it is a mixture of things. I think there is no doubt my academic background was fundamentally important in being concerned all the time about what is the fundamental reason why this is happening . And have we seen this in the past . I was much less concerned with the moment to Moment Movement in Financial Markets because it was not clear that actually meant a great deal. It was a symptom of some deeper problem that i was trying to get to the bottom of. That was fundamentally important. I think the other thing was a number of people i have known well in academic life like ben bernanke, janet yellen, stan fischer, larry summers, they were all in policy positions. And so there was a natural ease of having a conversation about these questions. You know, tim geithner, who did not have an academic background, but he had been in the treasury a long time. That was very important in tim being able to interact with people around the world because he knew them all. I think if he had arrived in office only six months previously, it would have been very, very difficult. And he had experience in the Federal Reserve bank of new york and then in the u. S. Treasury, so i think the continuity there, knowing people, having had a long time in your career where you have had a chance to think through what you really believe about why Banking Systems are fragile, what causes disruptions, what is the right way to respond to it, these things were very important. I think one of the problems that the political side had was that deep down they did not really understand these issues. And they thought my god, it is a crisis. We have got to find a way of dealing with it, but they were not able to easily conceptualize the nature of the problems and therefore to come up with the right solutions. Francine how do you cope with the financial crisis . What are the attributes that a central banker needs for working under pressure, extreme pressure . Lord king well, one is you generally need to know what is the right thing to do. I think that both ben bernanke and i benefited from a study of financial history, which meant that the problems that were coming up were not unheard of. We knew that these problems had occurred in the past, and we knew what we had to do about it. I dont think in that sense that we were reacting by saying, my goodness me, what is going on . Francine there are critics who say Central Banks played a key part in inequality by putting money out there. Lord king i think that is a misleading way of putting it. There is no doubt that in terms of wealth, by allowing Interest Rates go to zero and buying assets, undoubtedly the apparent inequality of Wealth Distribution has increased. But that is only a temporary phenomenon that will last as long as Interest Rates stay low. Now, it has an intergenerational effect. It has undoubtedly made life much more difficult for young people than for old people, because people who are buying houses for the first time now are likely to find themselves buying at the top of the market, and later in life, when it comes to sell them, they will be selling at maybe much lower house price levels relative to their income. There is an intergenerational aspect, but i think that broad apparent increase in wealth inequality will reverse itself as Interest Rates get back to a more normal level, if we can find a way of getting back there. I think when it comes to labor incomes, i dont think Central Banks have any responsibility for what has been going on. Because this is partly a function of technology, partly a function of trade and globalization, and we should not shy away from admitting that fact, and it is the failure of politicians to confront it and to say, yes, we think there are benefits for the country as a whole from having these cheap imports from china, but we must as a society do something for those who are losing out in this competition. And that is what we have been reluctant to do. Francine how do you explain brexit . Lord king so it looked as if there was a Propaganda Campaign going on. The governor of the bank of england, sir mervyn king. Francine in 2013, mervyn king stepped down as governor of the bank of england. After a decade at the helm, he helped steer the economy out of a financial storm, but he did not stop sounding warnings that the world faced a new crisis unless there was reform in the financial sector. Where do you think the next crisis lies . Lord king i would guess, if i had to, it would be in the area of higher amounts of debt, because the amount of debt in the world today is higher than it was years ago. I think the risk is that there will be some defaults around the world, which will not look coordinated or related, but actually they will have knockon effects and lead other people to default. I think once that happens, you may find that the Banking System once again looks maybe overleveraged or undercapitalized because the losses that they will take as a result of these defaults will eat up some of the Equity Capital that they have on their Balance Sheet at present. And i think that is where we may see we can see examples in china. There have been some defaults. Within the Monetary Union in europe, greece has effectively defaulted from part of its debt. In terms of the present value of its liabilities. And indeed, the Banking System does not look very resilient in the Monetary Union. Francine what will the u. K. Look like in 10 years . Lord king i do not know again, because i think there are big challenges facing the u. K. I dont think, myself, that brexit is the biggest economic challenge. I think the biggest economic challenge is that, as a nation, we are saving less as a fraction of our National Income than any other country in the g20. We are not saving enough to finance our pensions. We are not saving enough to finance care for the elderly. We dont seem to know how to finance the National Health service. We still have a large budget deficit. And we have a large external current account deficit. The biggest risk to the u. K. On the political side is of muddled thinking. Francine on brexit . Or on everything . Lord king on all these issues. Both in terms of thinking that there is an easy way to improve peoples living standards, when there is not, and in terms of thinking now that, well, we can all have a softer, cuddlier brexit. And i think this just completely fails to cope with the realities of it. I think there are two positions you could take on brexit, both of which are logically coherent, but neither of which seems to me to represent what most politicians are now saying. One is to say that we really do want to stay in the Single Market and the customs union, in which case we that is effectively being in the european union, and we should confront that fact and maybe have a politically, the only way to deal with that is have a second referendum and argue that we should reverse course. Francine do you think we will have a second referendum . Lord king that is a political judgment. I have no means to think it. I think it is unlikely, but it is at least a coherent position to say that if we want to stay in the Single Market and customs union, then we should stay in the european union. The other coherent position is to say no, we have said we will leave. That means, as everyone made clear in the referendum campaign, that we would leave the Single Market and customs union, that we are ready to do that. But having made that position clear, the u. K. Would then be, first of all, be able to announce its new u. K. Immigration policy and say to our partners in europe that we would like to negotiate a Free Trade Agreement at least in manufactured goods. That is a coherent position. What is not coherent is suddenly to turn around and say we are leaving, which was what was the position of the manifesto in both major parties, who afterward increased their votes, and yet to say at the same time but we really want to stay in the Single Market and customs union. That is not a coherent position. Francine how do you explain brexit . Why did people vote for brexit . Lord king i think there were, there were two main reasons. One is that it was Crystal Clear that the only way the u. K. Could control immigration was to leave the european union. The government had promised that it would control it. It had not done so. It did not seem to show much remorse for that fact. And most voters did want some control on immigration, and being in the e. U. Meant that was impossible. And it was interesting that the government simply avoided the issue of immigration. It did not argue for migration, and immigration, it simply ignored it. And i think that was a powerful motive. I think the second was that both sides talked down to the voters, and, in a sense, the only thing that the two sides in the campaign had in common was the belief that anyone who voted for the other side must be ignorant or stupid or uneducated or even racist. And this actually did more damage to the government side than it did to the probrexit side. And all the exaggerated statements about being 4300 pounds worse off for each family did not have any traction, because people knew that no one could be that certain. So it looked as if there was a Propaganda Campaign going on. And i think if the government had said, you know, this is a difficult issue, there are arguments on both sides, which is why i understand why some of our colleagues want to leave the e. U. , and i am in favor of it, but the unwillingness to admit that it was a complex issue with arguments on both sides i think played particularly badly for the government side, because it played to the issue of trust. How can you trust these people when they are saying things that no one could conceivably know . Francine lord king, thank you so much for your time. Lord king thank you. Francine a decade after the last financial crisis, and some are predicting the next one is looming. In 2008, the biggest concern was that banks were too big to fail. Governments felt they had no choice but to prop them up or risk major meltdown. Jump to 2010, enter Philip Hildebrand, former economist, hedge fund manager, economist, and central banker, ready to take on the lenders strongly advocating stricter capital requirements. Today on leaders with lacqua, we speak with one of the most finance, themes in vicechairman of blackrock, the worlds biggest money manager, which handles more than 5 trillion in assets. After the financial crisis, what have we learned . Philipp we had too much leverage in the system without any doubt. When you have too much leverage, bad things happen. Not only do they happen, but when they happen, things tend to be amplified. Thats the key takeaway. We have also learned that this notion of letting the market be totally free, that governments should get out of the way, that wasnt a good idea. What stands out is banks needed much, 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 wee had focused more on the capital issue and less on all of the other things that have made it into the Regulatory Reform realm. Francine is there a concern now we are over regulating the financial crisis, and we may miss the next one . Philipp there is always a bit of that. We shouldnt have 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. Certainly when you look at what is happening in the u. S. , that is 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 dynamically interact that is complicated to predict. So i think that a sense of pause, a deliberate pause is not a bad thing, but i wouldnt say that the system is overregulated. Francine you love history. How did that taint your view of the world . For one thing, the unexpected will always happen, sooner or later. I think history tells you that. And we are not very good at predicting it. So what we have to think about is how do 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 do you see the biggest disruption in the next five to ten years . Is it industries or china or technology . Philipp i think it is technology on the whole. Even 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, i think that technology is all pervasive in many ways. Francine is it impacting inflation . Is that why inflation is so tricky to find . Philipp first of all, central banking has something to do with this. There is a framework around central banking that basically emerged firmly in the mid1990s, lets say. Price stability can be. Aintained, can be guaranteed that has impacted expectations of economic agents. So that is certainly part of it. That kind of innovation around central banking is important. Secondly, globalization has dampened, kind of, wage pressure. Theres no question about that, that you constantly have new pools of labor entering the global labor market, the Global Supply chains. So that has certainly made it difficult to have a wage spiral going on. And then technology certainly 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 behaved in the 1960s or 1970s. Francine so should we still look at the phillips curve . Broken, or is it dead . Philipp i think maybe thats the wrong question to ask when you ask it bluntly like that. 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. I think we do have the good news here is we have an environment where we probably dont face imminent inflation ary pressures or risks for that matter. Having said that, it still remains true that Monetary Policy has to be there as a guarantor. So i would very much hope that even if we dont get inflation for the next years, or decades, that Central Banks could continue, in terms of maintaining that stability. Because it is a very precious thing to have price stability. Francine should we worry more about deflation, or is it a lack of inflation . Philipp my sense is that we have managed to sort of kill the deflationary psychology in a sense, for the time being. Thats one of the reasons why, as we speak today, the Global Outlook looks pretty positive. Because, in a sense, we have managed to reverse that fear about deflation, and that is largely frankly due to very aggressive, 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 the side effects of this ultraloose Monetary Policy . Philipp it is essentially low Interest Rates, potentially for a long time to come. The question is, how will that impact savers . Retirement is a big, big issue. When i look at blackrock, two thirds of our assets are basically tied to retirement. 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. And frankly, in most countries, government policy hasnt really responded, hasnt even in many cases openly acknowledged this challenge that we have a major retirement problem facing us. And low Interest Rates dont help in the sense that if you start to think im not going to be able to live on my Retirement Savings because Interest Rates are low, that might just lead you to save even more. This is what is called the precautionary savings effect, and it is something that is potentially very destabilizing. The longer we have very low Interest Rates, coupled with this demographic challenge, the more i will be worried about that. I certainly sense, as we talk to our clients worldwide, that retirement is one of the biggest issues we face. And we have to make sure we dont get into a situation where this becomes a crisis. Francine what is it like working with larry fink . Philipp theres a good question. [laughter] francine as a hedge fund manager, Philip Hildebrand made his mark amongst the swiss elite, but his ambitions ran higher. He joined the banks central club, at age 26, the youngest president of the snb. His term ended two years later when a trading scandal involving his then wife led to his resignation. The governor of the bank of england said, he is a man of total integrity, extra ability, and most part of all, courage. Such people are rare. His country will miss him. Hildebrand believes having courage to act in the face of adversity. Philipp in my time we had two. One was the rescue of ubs, it was a very difficult moment. 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. Of course, it has turned out that way at a global level. And that it would take a long time for banking to redeem itself. So we knew the consequences were significant, and yet we had deep conviction that we had no choice but to proceed. The other one, obviously, was the introduction of the minimum rate. Was it a verybs, difficult day . Do you remember the conversations . Something had to be done. Philipp we had done conversations about what it would look like. We had engaged with the bank to study some swap operations. We never told them we were prepared to buy the assets or take them over, so we were well prepared, but the actual moment i remember very well was breakfast at my apartment at the time in zurich, when the ceo and chairman came by, and basically told, Thomas Jordan was there at the time, myself, and the head tor, and they told us that they needed help. That was a clear, decisive moment. From then on, the plan went into action. And that was a tough moment, because knew we had to do it. But we also knew it would be the thing to do in many ways. Francine talk to me about the capping of the franc to the euro. Were there other possible scenarios . Philipp this had been building up for weeks if not months, so we had time to look at different scenarios. We also had a history. The snb and the country have faced similar circumstances in the past. We had a great team. We had not just a board, but i brought in quite a few experts, economists, to work out every possible angle to every possible scenario. By the time we triggered it, i felt that we had done all the possible preparation we could have done as an institution. Francine that at the time was a big risk. Are you a risk taker by nature . Philipp i dont think it comes from there. One of my mentors told me early on, sometimes not acting is the greatest risk. With the markets being what they are, we had to come in very suddenly and very aggressively, which we did, but the reality is that behind this there was nothing aggressive. There was due consideration and extensive studying and scenario analysis. Francine it was bold. Philipp it was reasonably bold. It was also very important that it had the credibility of the community of Central Banks and even governments to some extent. That in many ways was my biggest worry, that we would be seen by some of our Principal Partners worldwide as doing something that wasnt quite right. And one of the things that i spent an enormous amount of time on is really to, to make sure that the analytics behind it were robust, to make sure it wasnt something we would have to explain. So all of these dimensions were incredibly 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 it is certainly one of my greatest privileges that ive experienced professionally to have experienced this is the collegiality and trust that 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 really of being part of that club. Francine what was it like the day that the franc capping was announced, not being beholden to the euro anymore . What did it feel like . Philipp this was never premised to be forever. It was not a permanent change of Monetary Policy regime. So the fact that it would be at some point, that it would come to an end, was always obvious, and as it was obvious that it had to be premised on europe somehow not falling apart. Francine will europe Stay Together . Philipp yes. Francine you are 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 so when you decided to resign, how difficult a decision 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. But ultimately, Public Service is not about yourself. It is about the institution you serve, the people you serve, or the country you serve. And in that context, it was the right decision because it needed, the circumstances were such that credibility was of the utmost importance, and the best way to preserve the full range of action for the central bank, remember in a difficult environment, this was more or less the tail end of the crisis, things were uncertain. The euro crisis was still in full bloom. It was very, very 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 a painful thing to do for me. Francine talk to me in real terms, what is a robot advisor . Am 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 for larry fink. His repetition precedes him. His job at blackrock has High Expectations and is largerthanlife. His company manages more than 5 trillion in assets, making him one of the most influential figures in the financial world. Philipp, what is 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 he is demanding, yes, but no more than he is on himself. He has coined this phrase that we all have to be students of the market. There no excuse for anybody at blackrock not to be a daily student of the market. I think that shapes the culture very much at blackrock. This relentless, never be satisfied, always remember that the world moves on, you have to learn every single day. So we have a lot of initiatives around internal programs and academy where we really force everybody and encourage everybody to live that motto. If people cant do that or dont want to do that, then they are in the wrong place at blackrock. So the culture that he carries very much runs throughout the firm. Francine whats the question you get asked most internally, and by your clients . Philipp well, you often get asked, whats it like to work with larry . [laughter] philipp i think on substance for a long time since the crisis it was about the future of europe. I would say the other question is how do we operate in slow this low Interest Rate environment, particularly if you extend it for a long time . What we believe is we are in a sustained recovery at the moment, but we also think we will see a kind of cap on Interest Rates and probably growth rates, that we are structurally in a lower real rate environment, a lower growth environment Going Forward for quite some time. Francine how does blackrock deal with it . Philipp first of all, we have to be relentless students of the market. We invest a lot of resources and time building our investment institute, providing insights to clients. We have done a lot of work around the implications of lower Interest Rates for longer. We have found new ways to share our analysis with our clients on a permanent basis. Of course we have to be , innovative around using new products,ound product innovation. Francine are you a Fintech Company or an asset manager . Philipp it is a good question. Certainly, i think we are more than an asset manager. I believe we are a platform. We have said publicly that our ambition would be five years from now, we would have a third of our 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 lots of interface, or if you are not a client we dont go directly to clients at the moment but throughout through our distributors, they will have Technology Tools that will make it easier for them to deal with their clients, work with their clients, and bring value to their clients, and we want to be that platform for our distributors. You will also see that in your products, a combination of technologydriven investments and humandriven investments, will increasingly be visible. This whole distinction of saying we have technology and people, i suspect thats not going to be the world we live in 10, 15 years from now. The reality is 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, but our people will be empowered by technology in many ways, hopefully to the benefit of our clients. Francine you definitely have an advantage because of size and scope. Do you believe there will be more consolidation amongst your competitors . Philipp look, i think there will be a lot of companies that disappear. That doesnt necessarily mean theres going to be a lot of m a. Some of these Companies Might simply not be worth buying. The clients 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 i do think we are going to see a lot of change in the Asset Management industry. Those companies that cannot respond to the need to change will simply disappear. Its easy for a client to change his or her asset manager. Francine outside of work, a passion for sport. In his youth, hildebrand was a swimmer who nearly qualified for the 1984 olympics. These days hes a skier and rock climber. It offers escape from the day job. He draws parallels between sports and business can also help you develop skills as a leader. Philipp what it teaches you, hopefully, is discipline, stamina, and staying on top of things. Every day, it is not just about a great effort today and then i slack off. It never ends. It is sort of this ability, this mindset of saying you never really win, you just kind of go to the next challenge. I think that is so heavily embodied in our culture at blackrock. At the top, larry himself talked about it. In that sense, there is an analogy. Francine do you swim . You swim and you rock climb . Philipp i climb, ski, spend time in the mountains. I like to bike. Francine is that when you think about the world . Philipp mmm, it is more that i dont do anything else other than climbing. The beauty about climbing is you dont have a lot of time, it is almost 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 normally and everyday, another email, another message, another call. Francine what part of history fascinates you the most . Are there parallels, i dont know if it is with tudor england, or anything you see with parallels that move through today . Philipp 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 our kids to auschwitz as a way to make sure that this historical sense of how things can go wrong 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 when people dont have a framework on how they think. I find it important for people to develop an ability to think about a problem, no matter what the problem is, in a reasonably disciplined way. I think erratic thinking tends to lead to erratic outcomes. Francine final question, where do you see yourself in five years . Philipp i used to be with a couple others, mark carney. We always used to be the youngest in the room. I noticed recently that in the last year or so when im standing in the elevator on the way up here in london, or in new york, our offices, i am realizing i am amongst the oldest. So i am 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, and then react accordingly. But i can certainly imagine still being at blackrock talking to you about how things have changed five years from now in Asset Management. Francine hopefully more than five years. Thank you so much. Tom this is a special edition of bloomberg surveillance. A very special conversation to look forward to and 2018 to help you frame where we are now and what some of the economic and investor realities are. We can do no better than an than ed hyman. He has been the definitive voice. Maybe anothegr