226. Os to the left, the ayes have it. Prime minister must now comply with law. He can no longer use the exit. Of a no deal. Delay. Ll not negotiate a neither does the law compel me to do so. Fromme of the highlights saturdays house of commons vote. Lets check in on the panel. Trading lower than we thought at fridays close. For ajohnson gears up critical week that never made it to the floor. On saturday, he had to ask for an extension from the eu. It will likely allow that extension. 31could see it from october through january 31. I would also like to take a look at what you need to know tomorrow morning when you wake up and head over to your trading floor. Many are talking about elevated volatility across assets including sterling. 1. 22 to 1. 29 from in six days. Are seeing a lot of money pour into the midcap. Will that be something we can see phase out as we deal with it next week . In terms of politics, i want to quickly tell you whats going on. Monday and tuesday, watch out. We will bring you more updates in around 30 minutes. This is bloomberg. Lisa im lisa abramowicz. Welcome to bloomberg money undercover. A show that provides valuable insights into alternative investments. We take you inside the world of private debt, equity, and real estate. Lets get straight to the burning issues in private markets, survival of the fittest. Investor firms racing to adapt in the face of lower yields. Looking at the fallout of storied unicorns that end up being donkeys. And catching up with the new masters of the universe. How shadow bankers are taking business from wall street. Lets get into these burning issues. With me now is sonali basak, mark milian, and kelsey butler. Lets start with wework. We are looking at two firms right now. They are trying to offer and compete to offer rescue packages to this very troubled company. What does that say about the state of affairs . Sonali well, some would say it is a little too big to fail for the companies involved. Softbank has had more than 10 billion put into this company, they already are the biggest shareholder. To put in more equity, what does that do for them . Jpmorgan has parts of the bank that are exposed to the firm but even to get them Debt Financing would mean going back to clients that are demanding a very high yield, should they buy into the debt. Lisa i feel like i ask you this question every week, but do we have a sense about whether wework is a specific story, or whether there are other too big to fail startups . Sonali this is pretty companyspecific, which does not mean that companies with inflated values are not seeing problems right now. These are volatile investments. People knew that when they were getting into them. The question is how much any one firm takes on. Lisa softbank and jpmorgan, both banks. Talk about how the struggling unicorns is impacting the broader tech world. Which tech companies, not nonfinancial companies, have the biggest investments in unicorns, nonpublic companies that are less visible . Mark as sonali mentioned, softbank has a lot on the line with both uber and wework. Another major investor is googles parent company, alphabet. In the case of dede, the uber of china, it is chinas two most valuable tech companies, alibaba, tencent, and apple. Lisa we talk about big tech having so much cash. Aside from these high profile names, how much cross investment is there within the tech world, big tech giants going after smaller startups . Mark in those examples, you can see there is quite a bit. Sonali mentioned softbank has more than 10 billion on the line with wework. They have almost 10 billion in exposure to uber. Apple put a billion into didi, a billion into softbanks tech fund. We are also talking about companies with mass fortunes. If a couple of these companies go down, it will not take apple down with it. But we are still talking billions and billions of dollars. Lisa that brings us to survival of the fittest, Asset Managers taking some big steps to boost profits at a time of low yield. Kelsey, fidelity expanding into alternative credit. Why . Kelsey fidelity is stepping into alternative credit as it sees pressure on fees from other parts of its business. This is part of a bigger narrative of alternative credit booming. According to one estimate, private debt could hit 1 trillion in 2020, and that is nearly the size of the leveraged loan and junkbond market. We are seeing investors be much more interested in private debt due to declining yields elsewhere. Because of the complexity of it, firms Like Fidelity are able to retire fees. Lisa in a related note, blackstone was reportedly looking to buy a stake in citadel. Not necessarily alternative credit specifically, but how much are we seeing alternative Asset Managers taking stakes in one another to boost returns . Kelsey this is a deal that didnt get across the finish line, but there have been other ones that have come to fruition. We have seen firms like blackstone take stakes in other alternative Asset Managers, including blackstone, golub bought a stake in d. C. Partners. Definitely a part of a broader trend. Lisa thank you to all of our reporters. Nice that you mentioned golub. In Bank Earnings this week, we got a tremendous amount of news. A big question looms over wall street. How much competition are banks facing from the world of alternative Asset Managers, which are raising billions of dollars to lend to Corporate America . Joining me now is lawrence golub, chief executive officer of Golub Capital. Thank you so much for being how much are you competing and find yourself coming up against some of the big banks out there . Lawrence banks are really good at real estate lending, asset based lending, but they are not very good and not staffed up to do enterprise value lending to established companies. At this point, the evolution has gone on for about 1215 years. At this point, we hardly ever see banks as lenders competing with us in our market. Lisa how much competition is there away from banks, among the other alternative Asset Managers . Lawrence plenty. There is abundant liquidity all over the world. We have to be an operating business. We have to be in the business of solving problems for our borrowers, not just providing money. If one is a desk buyer of assets that are created by somebody else, it is very hard to earn a steady return with acceptable risk. Lisa if you are digging deep into some of these companies, given how much money is out there chasing after the chance to lend to them, are you seeing credit quality deteriorate in a meaningful way . Lawrence the quality of borrowers is really very good. In our segment, most of the companies are controlled by private equity firms. Thats great, because private equity firms are smart owners. They know how to advance growth, they know how to recognize mistakes, they know how to change management. Having said that, when more money is chasing the same asset class, private equity firms are also very smart about extracting better terms. I think terms today have been pretty steady with where they were over the past 18 months, but terms today are looser than were they were five years ago. That is a consequence of money coming into the market. Lisa whats the potential consequence of that . Lawrence there are at least two potential consequences. Lenders have no financial maintenance covenant protections at all, which means the borrower does not need to seek an amendment if it is underperforming. It can continue to operate until it runs out of cash. Has not been a problem for a good economy, default rates have not gone up. The second element of it is, it allows private equity firms to add in different layers, play around with collateral basis, and for a less sophisticated investor or lender, can get them into trouble. Lisa we were showing the middle market earnings growth, and how its been outperforming the larger cap stocks. This is the thirdquarter report that you put up. Walk us through what youve been seeing in terms of earnings strength there. Lawrence absolutely. We at Golub Capital lend to about half of the u. S. Economy, businesses that have recurring revenues, generally focused on u. S. Customers. We have been publishing for years the middlemarket report, which provides actual results for the first two months of each calendar quarter of companies in our portfolio. Normally, the Profit Growth rates have been highly correlated with the s p 500. This quarter, massive difference. Our index is showing thirdquarter growth in profit of 13 . Consensus for s p 500 companies is down 4 . 4. 5 . That is really screaming there is meaning here. Thats really screaming there is meaning here. Lisa so what is the meaning . Lawrence if you separate out three factors, one, u. S. Middlemarket companies have very little exposure to the weakness in european economies, and asian economies. Number two, the companies we lend to tend not to be export driven and tend not to have exposure to internationallypriced commodities. The Energy Sector in the u. S. Is not as strong as the rest of the economy, the farm sector is not as strong as the rest of the economy. But at the core, middlemarket companies, which account for more than half the job growth in the United States, are performing very well. Third factor is, it may indicate earnings estimates are a little too conservative right now. Lisa lawrence golub, thank you for being with me. Coming up this week, scott lawlor, the chief executive officer of Waypoint Real Estate investments gives us a barometer of the u. S. Real estate market. Were buying as well as selling. Its a fine time to sell and im a big believer in chips off the table. But im also a believer in the big picture profile. Lisa im lisa abramowicz. This is bloomberg money undercover. Now for a look at our power player. Time for a look at some of the most notable names in private markets. Lets drill into the market for apartment buildings. Its been a hot market since the crisis, but its starting to see cooling values in major markets. I recently sat down with scott lawlor, the founder of Waypoint Real Estate and investments, which has billions of dollars in investments in 24 states, and asked where the firm is buying. Weve done a lot of buying in the south from florida to texas. Were a fan of the demographic profile. We have been trying to take advantage of that. Lisa one thing you said in recent data is that homeownership may not be the smart investment we once thought it was. Can you explain . Scott for about 70 years, before the financial crisis, the u. S. Housing market only experienced one outcome every year, and that is house values went up. That all turned and created the financial crisis. Generations of americans thought the best thing you could do from a personal investment perspective was buy a house. And then all of a sudden, that turned upside down violently and suddenly. Its not to say its a bad investment today, but the assumption that it is automatically a good investment has been, i think, put to bed. Lisa do you think, going forward, it is not a good investment for some individuals . Scott i wouldnt tell somebody it is a bad idea to buy a house. The Housing Market very recently is experiencing a bit of a shift in sentiment may be, but its been on a wonderful run for about 10 years since the bottom of the crash. But there are a lot of considerations about buying a house beyond the Financial Investment perspective. I think it is casebycase. Big picture, i am a fan of the Housing Market because there are some things that the forsale Housing Market tracks like we do in the rental Housing Market such as population growth, household formation. I dont think there is a crash in the Housing Market coming by any means. Lisa one thing with rental multifamily properties, there been a lot of interest in that space for years from the blackstone and some of the other behemoth investors. Do you think values at this point have kind of peaked and it is time to sell some of these in your portfolio . We are definitely selling, it is a fine time to sell. There is no other way to say it. There is quite a bit of capital in this space. Whether values have peaked, that is difficult to say. I dont know how to forecast the cycle. I think the most important thing to do is to take a longterm view and say im going to buy this property in 2019 because im happy owning it until 2029. What happens along the way, well see. Lisa do you think in boston, in new york, some of these markets, that there is more pain to be had in the Property Values . Scott yes, boston, new york, maybe san francisco, the markets that are the highest profile that attract the highest price point product is where we are seeing the most softening. The markets that attracted the most institutional capital, that led to the most new supply, that have led it a bit of a Market Correction is too strong of a word but softening. If you have half a dozen towers coming out of the ground at the same time within a few blocks of each other, that is where you may have some shortterm trouble. But that is very concentrated not only from a geographic perspective but also a price point perspective. That is not at all indicative of the market broadly. Lisa how much more do you see the declines deepening from here . Scott not a tremendous amount more. We are not meaningfully overbuilt. The apartment market is 94 occupied. Even where we see some softening, we have some strong occupancies. We dont have a tremendous amount of new pipeline coming. I think thatll normalize, even if there is a recession. That may extend some of the pain but nothing severe. Lisa you say you are selling. Are you using the cash to fill a mattress or are you actually buying things . Scott we are buying. When we sell a property, we offer our investors the ability to roll into the next property and further capital gains. It is called a 1031 exchange. Its very popular. We are buying as well as selling. Im a big believer in chips off the table. Im also a believer in the longterm big picture profile of the apartment market. So im happy to take his visions, understanding i dont know what the value will be in 2021. Im making a bet that there are longterm drivers at my back thatll take me to 2029. Lisa so where are you buying . Scott our geography has expanded, so we are investing still in our historic territory of florida to texas quite a bit, but weve also expanded selectively into the midwest, and other property types. We have been buying Student Housing properties, Senior Housing properties. Lisa what kind of income do your Portfolio Properties produce . Scott we distribute between about 6. 25 and 6. 5 current return right now. We do a lot of work to improve the property and improve the rents and increase the distribution. Lisa that was my conversation with scott lawlor. Sticking with housing, lets turn to college cash. Total educational debt could buy every u. S. House on the market almost twice over. This according to realtor. Com. This makes it tough for younger families to begin to think about buying a home since on average Student Loans are about 8,500 greater than the typical down payment. But this may end up being a boon for places like the south and the midwest, where down payments are a lot more affordable. We will study how hawaii and california top the chart as the least favorable states by that measure. Coming up, Charles Schwab slamming the wealth tax as a destroyer of creativity. We take a look at these types of tax plans that are being put forward by u. S. President ial candidates. This is bloomberg money undercover. Ver. Lisa im lisa abramowicz. This is bloomberg money undercover. Time for our billionaire beat. Were focusing on a potential 97. 5 tax rate for americas wealthiest. Two university of california professors crunched the numbers and found Bernie Sanders presidency would mean billionaires would be slapped with skyhigh taxes. We welcome Laura Davison in washington. How can Bernie Sanders manage to get the tax rate up to 97. 5 for billionaires . Laura this is really the top 400 wealthiest americans, so the richest of the rich billionaires. He is taxing more than just income but wealth. For wealth above 10 billion, annually, hes going to take 8 of that. That is how you get that high number. Hes really looking with this plan to lessen inequality, and this is what Elizabeth Warren has proposed, but even bigger. Lisa wait, wait, laura. That means Elizabeth Warren, who is currently the front runner of the democratic party, is proposing something similar to what Bernie Sanders is doing . Laura what bernie is doing but a little bit more moderate. Joe biden would not say this is a moderate plan, but she would be the first to come out in the deal with a wealth tax, kicks in 2 above assets above one billion. Bernies kicks in at a lower rate and has a higher rate. He basically took her plan, modified it, and made it bigger. Lisa can you give us a sense of how the wealthiest individuals in america have fared under President Trump . Laura yes, so back to the 2017 tax law, they saw their rates go down pretty significantly. Right now, for that richest group, those billionaires, they paid about 23 effective rate. That was a several percentage point decrease from previous years. Thats from lower rates, as well as being able to take advantage of different tax breaks that were made available through the tax overhaul. Lisa so the tax plans being proposed by Elizabeth Warren and Bernie Sanders, would that bring us back to where we were or go significantly beyond . Laura it would be significantly beyond. Joe biden would bring us back to about where we were, would raise a couple more things for those richest americans, about a 30 tax rate on those people. Warren jumps to 62 . Sanders at 97. 5 . So theres a big spread over the candidates. Lisa Charles Schwab said in an interview with bloomberg that if you like socialism, we all drive the same car, have the same house, we are all the same fundamentally. He was talking about the wealth tax and says it kills creativity. Are you hearing that from other people . Laura you know, theres a lot of disagreement between economists and critics who say this is good, this just makes sure that the wealthy pay their fair share. We are hearing that from abigail disney, warren buffett, but there are people like Charles Schwab who are opposed to this. This is very far away from becoming a reality. There are huge political questions about whether it could even pass, and constitutional questions as well. It could get killed in the courts. Lisa bloombergs Laura Davison, thank you so much. Speaking of wealth, more and more tech entrepreneurs are demanding prenups to guard against the chaos of divorce. Joining us on that story is ben steverman. The interesting thing about this is that they were looking for prenups even before they had their start up off the ground. Please explain. So we talked to a lot of divorce attorneys, especially in the bay area, and millennials are going into these offices saying, i barely have anything but i have a few ideas, and i want to protect them, in case this marriage does not go well. Lisa so the prenup basically says if the couple is divorced, whoever came up with the idea can keep any income tied to that idea. Is that correct . Yeah, yeah. If this is your baby, you want to put your energy into it, it doesnt matter what happens as the marriage goes on. You get to keep that. Its important in California Law and other states because any assets created in marriage become community property, which can be split 5050. Lisa how does divorce complicate some of these startups . It seems to be a reflection of a complication people are seeing happen. Yeah. I mean, we have seen several major tech figures go through divorces and come through pretty much unscathed, but it can create a lot of havoc, especially if its a private company that youre fighting over. In silicon valley, these founders are very important and it is very complicated when the founder may have to hand over some shares to somebody else involved in the company. Lisa we are showing jeff and mckenzie bezos, the highest profile. How effective are prenups from staving this type of chaos you are talking about . Judges can and do throw them out all the time. Usually they are challenged if there are billions at stake. The key is, you have to get them written well. They cant be rush jobs. You have to do it months before the wedding. If youre springing a prenup on your fiance the night before the wedding, it probably will not be held up. Lisa and there may be some other problems in general. Is there more acceptance of the idea of a prenup now . People are coming into marriage with more assets, they are older than they used to be, so it becomes more important. And people know that marriages dont last. As these more mature people get married, theyre trying to protect themselves and their businesses. Lisa perhaps not the most romantic but it is very practical for many. Thank you, ben steverman. Speaking of big money, its time for this weeks big number. Lets look at private Equity Fund Raising for the Third Quarter. The number is 199. 3 billion, that according to bloomberg data, compared to about 2. 3 billion for the Third Quarter of 2018, so steadily raising cash to plow into companies. That does it for us. A reminder, you can watch us each tuesday at 1 00 new york time, 6 00 in london, 1 00 a. M. In hong kong. From new york, this is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Call, click, or visit a store today. We are doing special coverage up to the political situation in the u. K. This weekend. The brexit deal did not make it to the floor for a vote. Lets look at what is going on with the fx market. I want to show you the sterling this morning. It is opening weaker against the u. S. Dollar. It could start the week off much softer. Most strategists are really sterling on bullish on sterling. A lot of this has to do with the trust that the European Union will agree to an extension. I want to show you what you need to know starting trading monday morning here in europe. Many strategists are talking about that there will be elevated volatility across asset. Sterling will be one to watch. Just last week we saw it moved 1. 29. 22 to also what is happening in the rates market. They will be opening at 8 00 a. M. U. K. Time tomorrow. These u. K. Focus domestic stocks are the ones to watch. I will bring you another update in the next halfhour. This is bloomberg. David so why do you think some people do not believe there is such a thing as Climate Change . Bill they must not have taken enough science courses or something, i dont know. David if you met with President Trump, you could convince him on paris, to maybe get back in, or is it beyond your capabilities to do that . Bill someone else should do that. David are you worried about the power of a. I. To disrupt our civilization, put people out of work . Those kinds of things . Bill the increased productivity that will come from a. I. Will create dilemmas. Would you fix your tie, please . David people would not recognize me if my tie was fixed, but ok. Just leave it this way. All right. I dont consider myself a journalist. And nobody else would consider myself a journalist. I began to take on the life of being an interviewer, even though i have a day job of running a private equity firm. How do you define leadership . What is it that makes somebody tick . For about 20 years, you have been the wealthiest man in the world. But because you have given away so much money recently, jeff bezos became wealthier. Do you think if you had stayed in college and gotten your College Degree [laughter] david i mean, you dont feel inadequate now because you are only the second wealthiest man in the world . Bill no, it is a sign i have not given the money away fast enough to drop out of the top 10. And, you know, the market has been strong. [applause] david actually, the market has been strong. Microsoft is up 35 this year. So to what do you attribute that . Bill the company is doing super well. Satya nadella is a great ceo. The whole dream of the importance of software has really come true. The five most valuable companies in the world are these Technology Companies. Microsoft has a good share of that. I get to spend about a sixth of my time now over at microsoft. David recently, you said the biggest mistake you made professionally was that microsoft should have had the Android Technology . Why was that the biggest mistake . Bill we were in the field of doing operating systems for personal computers. We knew the mobile phone would be very popular. So we were doing what was called windows mobile. We missed being the dominant mobile operating system by a very tiny amount. We were distracted during our antitrust trial, we did not assign the best people to do the work, so the biggest mistake i made in terms of something that was clearly within our skill set, we were clearly the company that could have achieved that. David your two main areas of focus are k12 education in the United States and health care in the least wealthy parts of the world. You recently decided to make another effort not necessarily for your foundation, but for Breakthrough Energy to do something about Climate Change. Why are you so worried about Climate Change . Bill well, Climate Change is a problem that gets worse every year and yet, what you have to do on a global basis is very dramatic in reshaping the entire physical economy that we have. And so it is a very complex problem and it is a problem that fits where i see my value added, looking at something through the lens of innovation. Not just the r d part, but the creation of products and the deployment of products. And so helping educate people about ok, what are the sources of Greenhouse Gases and how do you get on a path of innovation so that you can get Global Adoption and actually bring emissions down dramatically . David is that part of your foundation or are you doing this outside your foundation . Bill the part where you mitigate and you help the poor countries with better seeds and policies partly through development aid, that is through the foundation. That mitigation part. The part where you invent new ways of making fuels, electricity, cement, steel, meat, that is done directly by me with a lot of investments, including with a lot of funds as well as the Breakthrough Energy venture that i assembled, a group of 22 people to put money into companies that are trying to commercialize the breakthroughs. David that is a fund of 1 billion. Bill right. David you put in 250 million. So can 1 billion make that much of a difference . Bill 1 billion, it has actually been very catalytic. So far, they have 20 investments. Late next year, we will probably raise another 1 billion to 1. 5 billion. You know, this is all about innovation. So right now, the premium if you said ok, you have to make steel with no emissions, that will cost you four times what steel does today. Your electric bill would double if we take the technology we have today. So yes, supporting those companies and drawing other investors in. One thing Breakthrough Energy has done is got a lot of investors. Green investing did not go well in the first round. So it looked like the field that might evaporate to some degree. Because b. E. Has been able to bring a depth of understanding, they have been able to invest. The first 1 billion will be fully committed in the first year, but we have other investors. That has gone quite well. The technology they only invest in companies that have a chance of reducing Greenhouse Gas emissions by a half percent. Each company. And they found 20 and i am sure they will find another 20. David i am the smallest investor in that fund, i think, so will i make my money back and make a return . [laughter] david what do you say . Bill i would say of the things you invest in, it is probably one of the higher risk things. It is being done on a commercial basis and we are likely to have a few significant successes. So it is not philanthropic in the sense that you can deduct it. [laughter] but, the timeframe of the return and the riskiness of the returns are fairly high. But we do expect to make a profit out of that fund. David so why do you think some people do not believe there is such a thing as Climate Change . What is propelling them to say there is no Climate Change . Is it Scientific Evidence or some other political reason . I wont mention anybody, but there are some people who do not think there is Climate Change. Bill well, you know, they must not have taken enough science courses or something, i do not know. [applause] bill the climate is a complex issue. And just understanding how you do the abatement requires a lot of indepth study. In the United States, it has become somewhat of a partisan issue, which is unfortunate. It might make it harder to achieve the type of agreements we need here in the United States, but we have two problems. We have the people who deny climate, and then people who think it is easy to solve. We need to educate both of those groups. David but in the history of human civilization, is there any evidence that people do things that affect their greatgreatgrandchildren but that they will not see the benefit from . Bill well, the United States, actually, of all governments, has been willing to take on very difficult problems like cancer and make gigantic investments, knowing that the real payoff would be many decades down the road. When that was first being pushed, people are saying this is important. Climate change is like that. Where you got to take a longterm perspective and government at its best is when it is taking that longterm perspective and funding the basic policies that lead to scale deployments. David you worry there is too much power and too much data in the hands of these Technology Companies. Bill technology has become so central that government has to think, ok, what does that mean about elections . What does it mean about bullying . David now, a large part of the carbon we have in the atmosphere now is caused by the electricity grid, which is about 25 or so. Bill exactly. David so 24 comes from agriculture and forestry. Why is that causing a big increase in carbon . Bill well, the category is a variety of things. When you clear land, you are taking in the carbon that is stored in the trees and the plants and you are releasing all of that. Burning the land, say in indonesia, for palm oil plantations. Another thing is that cows and other grasseating species have a digestion system that emits methane. And methane is a very powerful Greenhouse Gas. So cows alone account for about 6 of global emissions. And we need to change david cows . Bill cows. Just cows alone. David how are we going to do that . Bill actually, of all the categories, the one that has gone better than i wouldve expected five years ago is this work to make what is called artificial meat. So you have people like impossible or beyond meat which i invested in. David do you eat it as well . Do you like it . Bill absolutely. You can go to burger king and buy the impossible burger. David is it healthier for you . Or healthier for the atmosphere . Bill it is slightly healthier for you in terms of less cholesterol. It is, of course, a dramatic reduction in methane emissions, animal cruelty, manure management and the pressure that Meat Consumption puts on landuse. David what about electric cars . Do you think thats a solution . Bill absolutely. If you look at the transport sector david another 15 bill passenger cars with another factor of two to three in battery improvement which is possible, the mainstream for passenger cars can become electric. Though you have to make that transition. Youve got to scale it up and make sure electricity is zero emission. But for trucks and planes, there is almost no chance the batteries will be good enough. And so there, you will still need to create liquid fuels, either with electricity or biofuels. Some way. Fuels are amazing. The Energy Density of gasoline is 30 times the Energy Density of the best battery we can make. And so if you look at a container ship that crosses the ocean, having your fuel be 30 times less efficient means 90 of the weight you are carrying would be batteries instead of cargo. And so trucks and planes and boats, electrification is unlikely to work in those cases. So we need ways of making fuels that are zero carbon. David when you talk to heads of state about this, do they roll their eyes and say can i have a selfie with you . But do they really do anything and what are you trying to get heads of state to do . Bill well, in the paris climate conference, one of the things that was missing was the focus on r d. And actually france said yes, we want that to be for the first time a real issue that gets discussed. And so what was called mission innovation, which Prime Minister modi got to pick that name, the idea, the commitment of over 30 governments to double their energy r d was a significant milestone that came out of the conference. In order to get that commitment, i had to make a commitment that there would be Breakthrough Energy that would take things out of those labs and get them into the marketplace. So there has been some progress. Climate is complicated enough that you want a broad set of people in the government to understand the complexities. In terms of r d that needs to be done, unless the u. S. Is deeply engaged, it is unlikely to happen because so much of the worlds capacity to do that innovation is here in the United States. David so the United States pulled out more or less of the paris accord, though not technically so for another year or so. Is that of concern to you, and do you think this will hurt the effort to change Climate Change around the world . Bill yeah, it is a huge step backwards. Even if you meet all the current commitments in that climate accord, you are still way over two degrees of warming, and most countries are behind the commitments they made. Those commitments were a set of reductions where you would compare your 2030 emissions to your 2005 emissions. And there is a little bit of that that is easy. The shift from coal to natural gas, which is a one time thing, is a lot of that, and yet the world is falling short. And so to have people like United States say ok, even that is not important just shows how daunting this is going to be. There is no way we will get there without the u. S. Coming back in in a strong way. David do you think if you met with President Trump, you could convince him on paris, to maybe get back in . Or is it beyond your capabilities to do that . Bill someone else should do that. [laughter] david all right. Now, the Largest Companies in the world and United States today are Technology Companies apple, facebook, google, microsoft and so forth. Do you worry there is too much power and too much data in the hands of these Technology Companies, and are you surprised the government has not done something more than they have today about this . Bill well, technology has become so central that government has to think about ok, what does that mean about elections . What does it mean about bullying . What does it mean about wiretapping authorities that let you find out what is going on financially, or drug Money Laundering and things like that. So yes, the government needs to get involved. I, for the early years of microsoft, bragged to people that i did not have an office in washington, d. C. And i eventually came to regret that statement because it was kind of almost like taunting washington, d. C. And so now the Technology Companies partly because of microsoft they could have seen that lesson through at t or ibm or kodak, a lot of innovators as well. They are very engaged. There will be more regulation of the tech sector. Things like privacy. Im sure and there should be at some point federal regulation that relates to that. The fact that now, this is the way people consume media has really brought it into a realm that we need to shape it so that the benefits outweigh the negatives. David you have three children, seem to be welladjusted, and you have kept them out of the newspapers and so forth. How do you avoid spoiling kids like that . Bill i think that is a huge problem. David so if you were 20 years old today and you wanted to start a new company, drop out of heard, what company or what area harvard, what company or what area would you start it in . Bill this is a great time for innovation because the tools are so much better. There are lots of things in biology that are very interesting. There are lots of things in energy that are interesting. Given my background, i would start an a. I. Company whose goal would be to teach computers how to read, so they can absorb and understand all the written knowledge of the world. That is an area where a. I. Has yet to make progress, and it will be quite profound when we achieve that goal. David so are you worried about the power of a. I. To disrupt our civilization and put people out of work . Those kinds of things . Bill the increased productivity that will come from a. I. Will create dilemmas about what should people do with that extra time. Youve got to consider that a good thing, even though it will be an interesting set of adjustments that have to take place. David you assessed the two most urgent issues were k12 in the United States and health care in the less developed areas. How did you pick those two . Any regrets on those two, and have you made progress on either of those . Bill Global Health is our biggest area, and there, the progress has been unbelievable. Not just because of our work, but our partners that include the u. S. Government spending, the european donors who have really stepped up on these health issues. One of the metrics of importance is the number of children in the world who die before the age of five. When we got started in 2000, that was over 10 million a year. Now it is about 5 million a year. And so it is just mind blowing, and people are not as aware of it as you would like them to be. Those deaths, because of getting out vaccines and understanding more about nutrition, those deaths have been cut in half. Now the goal is to cut them in half again by 2030. Our u. S. Education work, not just k12 but includes higher ed as well, they are that key metrics. Dropout rates, math and verbal achievements those metrics have moved essentially not at all. Even as the u. S. Is spending more resources on education we spend by far more than any country in the world and yet our results are quite a bit worse than almost all the other rich countries and even some middle income countries. Even vietnam now is passing us in terms of their math results. So there, the field of our work has not had the impact we had hoped for. David today, people come to you all the time today for money, i assume. Wherever you go, people say i have this thing you should really invest in. They say i have something you should invest in or give money to. How do you resist . Do you have a person that says no for you . How do you do that . Bill once you pick what you care about, if somebody has something that can make a difference in Global Health, we are super interested. We have a staff of 1500 people, and if it is to do with Global Health, some of those people come out and talk through with you whatever your innovation is and how we can partner with you on that. So that is clearly in our area. If it is something that can substantially improve k12 education, we will be interested in it. If people are asking outside of those things, fortunately you can say no. Because focus is key to philanthropy. David people have recognized over the years that raising children is difficult. Jackie kennedy famously said if you mess up raising your children, nothing else matters. You have three children, seem to be welladjusted, and you have kept them out of the newspapers and so forth. How do you avoid spoiling kids like that . Bill i think that is a huge problem. Obviously, our kids have benefited from having a great education and opportunity to travel. And so they are very lucky in that sense. Making sure that the visibility or way people treat them is not unnatural, there are some challenges that have come without. So far they have handled it well. Melinda is the one who deserves any, certainly almost all the credit for the kids so far doing very well. Our kids, we have said to them that the money is going to the foundation, so they do not think of themselves as aristocratic. David what do they say when you tell them that . Can you give me a little bit . [laughter] they dont ask for some . Bill they will get a little bit. David how much money has your Foundation Given away . Bill about 40 billion. David 40 billion . Bill yeah, we are now up to giving away 6 billion a year. David if people are watching now and say i want to do something about Climate Change but i am just one person, i dont have the resources bill gates does, what can any average person do that will have some impact on Climate Change in your view . Tsr how they buy electricity, and they can help drive up the scale of the green solutions. The most important thing at this stage is their political voice. There is going to be a need to put substantial resources into this effort. And we will need a bipartisan solution, and to send the right signal to the market you actually dont, if you just win one year and then it gets repealed, that does not help at all. The key is what people see the policies will be over the next 30 years on a consistent basis. And that means it is a much higher bar than just a onetime victory. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. 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