Bloomberg Talks
00:00:02 · S0, S1, S2, Robert Kaplan
[00:00:02] S0: Bloomberg Audio Studios, podcasts, radio, news. [00:00:07] S1: Like I'm supposed to give him some lofty introduction. We'd have Gary Gensler and then Robert Kaplan in for an extensive conversation. It's what it's about, the former head of the Dallas Fed with all of his work. The only equivalent I can say to Robert Kaplan is Michael Spence with all he did in academics at Stanford and what he did across all of at economics, but I gotta, can I do an audible start? I mean, it's closing, but I have to. Alexis just mentioned Coca-Cola. You grew up in the Dr. Pepper belt. [00:00:39] S2: Were you weaned on Dr. Pepper? [00:00:41] S3: In Kansas City, it's Texas drink, but I drank it in Kansas City, yes. [00:00:46] S2: You have no idea how foreign that was when I was a kid. I liked Dr. [00:00:50] S0: Pepper. [00:00:51] S1: Once a year, and we'd get a bottle, you'd have to split it. [00:00:55] S0: It's good, it's yummy. [00:00:56] S3: It's a little medicinal tasting for me, but I just don't send me hateful ex things. [00:01:00] S1: Mrs. [00:01:00] S2: King calls it Robitussin. [00:01:03] S0: I'm with your wife. [00:01:04] S2: Robert Kaplan, with us, always. [00:01:06] S1: Of Kansas and Goldman Sachs, and of course his public service at the Dallas Fed. I look at the moment we're at, and what I want to say, Dr. Kaplan, is we want to get back to basics. What are basics for Robert Kaplan out of the election and Given the news flow that's mind-numbing, how do we get back to Robert Kaplan basics? [00:01:31] S0: Two or three points.
00:01:31 · S0, Robert Kaplan, S4, S2
[00:01:31] S0: Two or three points. [00:01:34] S3: I'd say this economy is, if it's anything AI-related or defense spending-related, super strong. [00:01:42] S0: If it's related to housing, autos. [00:01:44] S3: Serving low- and moderate-income consumers, sluggish. Government, historically highly leveraged. And we're seeing that play out in the treasury curve. And while that's going on, you've got a historic demand for capital to fund this AI infrastructure boom. [00:02:00] S0: And we're seeing that play out in rates. [00:02:03] S3: And on the inflation side, you've got to say some of this inflation and maybe the bulk of it is structural, not necessarily cyclical. I don't know that there's an overheating of this economy. So those are some of the things that we're looking at. [00:02:21] S4: How does the Fed put all that together over the next couple of days, do you think? [00:02:28] S3: I think they should be spending, I would be spending most of my time debating how much. [00:02:34] S0: Of this is supply, how much of this is demand. [00:02:39] S2: Torsten Slock's note this morning. [00:02:41] S3: Yeah, and I saw his note, and it's based on a paper from the San Francisco Fed, and I always read Torsten Slock. I don't know that they know. They say some of it's supply, some of it's demand, some of it's ambiguous. I think that would be where I'd be digging in a lot more. And I don't think the data is going to help you as much as being out there talking to companies. [00:03:00] S2: I'm going to.
00:03:00 · S2, S1, S0, Robert Kaplan, S4
[00:03:00] S2: I'm going to. [00:03:01] S1: Interrupt here because, folks, you just heard the Kaplan distinction there. You've got a lot of PhDs who are really trained not to say, I don't know. But this is your heritage at the Fed where you'd say, wait, we don't. [00:03:13] S2: Know, is it? There's a lot we don't know right now. [00:03:15] S0: And here's why it's confusing. Diesel bleeds when diesel goes up. Turns out it's embedded in 50 other items. [00:03:25] S3: And so a broadening of inflation is not a surprise when diesel is this elevated. But the issue is I could raise the Fed funds rate if diesel does not come down. The impact of raising too far too fast may be to slow already sluggish parts of the economy. [00:03:43] S0: And it may not make a dent in inflation. [00:03:45] S3: And so that's the kind of thing, that's the reason to skip today and raise rates but do it deliberately. There are pros and cons to that. If I thought this was a cyclical overheating, I'd say let's get moving faster. [00:04:01] S4: AI impact on just economic growth. A lot of folks would say if you take a look at maybe 2% real GDP growth, half of that may be related to AI. [00:04:12] S0: I guess that's good as. [00:04:14] S2: Long as it's working. [00:04:15] S4: But, boy, if it rolls over to any degree, that could. [00:04:19] S0: Be really rough for the overall economy. Do you think the Fed thinks about that? [00:04:23] S3: It should, in that this is not a broad-based– we're used to, over the last number of decades, a consumer-led economy– How strong is the consumer?
00:04:23 · Robert Kaplan, S0, S2, S1
[00:04:23] S3: It should, in that this is not a broad-based– we're used to, over the last number of decades, a consumer-led economy– How strong is the consumer? [00:04:35] S0: Is unemployment up or down? [00:04:36] S3: This AI push is more narrow. It's about building data centers, power, chips, everything related to it. Then you've got the adoption wave, but we're early in the adoption wave. I'm very optimistic about how many of these adoption use cases are going to work, but we're going to learn a lot over the next year. [00:05:00] S2: So, then go to leadership at Harvard, your three books there on leadership. [00:05:05] S1: To quote Alarion, Muhammad Alarion, with the unknown unknowns of AI, how does a given CEO away from tech certitude, how do they lead out three years, out five years, out 10 years? [00:05:20] S0: So, we talk about this a lot. [00:05:22] S3: As a CEO, the most important thing right now is to be able to ask a question. [00:05:29] S0: Be open and confident enough to seek. [00:05:32] S3: Advice, have debate and disagreement, say sometimes, I don't know, I'm not sure, I changed my mind. I think that's the sign of a good leader. [00:05:43] S2: Let me digress, Paul. Paul wanted to talk about this. [00:05:45] S1: 60,000 love notes at Microsoft? Yeah. [00:05:50] S2: Have you and I ever seen this? I don't think so. [00:05:52] S1: No. [00:05:54] S0: That, obviously, I won't comment on any one, but that's significant.
00:05:54 · S0, Robert Kaplan, S4
[00:05:54] S0: That, obviously, I won't comment on any one, but that's significant. [00:05:59] S3: I actually think more broadly, and I see this among clients I work on in our own business, and I see it among small business, I think the AI adoption phase will change the mix of businesses. The issue at Microsoft, they have lots of programmers. There are going to be fewer programmers, but I think you're going to have more and more people covering clients, building relationships, externally focused. The mix of employment will change, and the challenge for an individual worker is if you define your job very narrowly, it's going to be tough. You're going to need to be more flexible and you need to be able to read, write, communicate, have. [00:06:37] S0: A debate, build a relationship. [00:06:39] S3: And I think with all the remote communication we've got, I think those skills have atrophied a little bit and we need to rebuild them. [00:06:50] S4: We're going to have some elections a week from today here in this country. We have obviously some elections in Israel today. What do your clients want to discuss with you about A world where there might be a change in Congress. It might be that the Democrats maybe take the House, maybe even the Senate. Who knows? What does that mean for their business, for their growth and their capital allocation?
00:06:50 · S4, Robert Kaplan, S2, S1
[00:06:50] S4: We're going to have some elections a week from today here in this country. We have obviously some elections in Israel today. What do your clients want to discuss with you about A world where there might be a change in Congress. It might be that the Democrats maybe take the House, maybe even the Senate. Who knows? What does that mean for their business, for their growth and their capital allocation? [00:07:10] S3: So like a lot of things, most business people and certainly the markets have already priced in the outcome. However, the part I think that they don't know is we need more productivity growth. We don't have much labor force growth. Is there going to be a change in regulation? I don't think people think a change in Congress for the moment is going to change tariffs or immigration policy. But is it going to change regulatory policy? And that's the thing people are watching. [00:07:42] S2: Is there a dash right now into year end? I mean, literally, you know, getting ready for. [00:07:46] S3: I think most people still think we've got a couple of more year window where we're going to have not no regulation, but balanced regulation. And I think business leaders, I think, are hoping and I'm hoping, too, that that continues. In an economy that needs more growth and we're highly leveraged. [00:08:04] S1: Right. [00:08:05] S3: You need productivity growth, and balanced regulation can help with that. [00:08:08] S2: Robert Kaplan with us.