Bloomberg Businessweek Weekend - September 14th, 2019

prominent alumni. And among the most prominent James Gorman. He is the chairman and CEO of Morgan Stanley. We caught him for a really interesting conversation after he had spent about an hour with a lunch and learned with students. If you're a Columbia Business school, so how cool is that to be able to sit down It was cool for us to sit down with him as well. It was indeed. First up, though, we begin with a preview

with Joel Webber, the editor of Bloomberg Business Week. Well, and it appears, Joel Webber, that this is not your first time on campus. In the last couple of weeks you were here taking a class this week. Yeah. They let me attend a class last week business analytics too, with Professor Daniel Guetta, which did you take the pre record, which means I didn't have to take business and they just let you skip ahead. So that was great, except then you show up in the class and it's like,

what's going on here? Are you ready for linear regression? And that's what I got to sit through an hour and a half of linear aggression. Honestly, it was amazing because of how well taught that class was. Professor Guerta

made it all very approachable. The students were amazing. It was so there was such an ingred engaged group of intelligent people asking really insightful questions, and he would repeatedly be like, no, we're coming back back to that question in two weeks, just push pause in it right now. So you end up just having this little sneak peek

of of what an amazing school to Columbia's. One of the things that wanted to make sure we talked to you about was this notion that we're coming up on sort of the second version candidly under your watch of the business school rankings, you have to be fair, like really expanded this franchise in a big way, invested heavily in an ongoing series of stories. Why, like, what what do you see in business schools that's so relevant to

the business audience. The thesis here is that the nexus that you get between the business schools and alumni networks and the students that are coming through, that's why people come to business school. You get a crash course in the you know, the greatest business curriculum you can get, but then you also get the case study feeling that

comes from real world applications. So for us, we look at that, we look at the stories we do in many ways as as case studies and and kind of making the world of business come to life via story is what we do in the page of Business Week, which is not that dissimilar from what's happening in a classroom setting either. So for us, this just feels like the water that we swim in and the air that

we breathe in. And Columbia really embodies the spirit because of you know, we're we're witnessing it here with with Mr Gorman today, like this is a powerful place to play. Well, I think about the surveys that you guys do and you really kind of dice and slice what goes on in a business school community. But it is interesting because you figure out the nuances that kind of make each NBA program distinct. One of them about Columbia is you know here you are in New York City. Yeah, so

New York City is part of it. I think the big thing that we really leaned into with the way that we've done rankings and really why you know, thirty years into this, we've doubled down on it and really found the our DNA with it, which is data, you know, and leaning into how do we make this data set

be extraordinary? And you get that from talking to alumni, from talking to current students and and other business schools and all of that stuff together you get there's there's messages in that data, which frankly brings me back to that business analytics class too, that which is, look, you've got a data set, and maybe that data set is ever expanding because that's what you're going to be looking at if you're at a company, right, how do you make sense of it? And where are the little nuggets

inside of that? That is a business leader you can have takeaways that apply and benefit from at your company. So between sitting in on that class level, let's point that out again, but also even being here today, like what's the ethos of Columbia? I mean I would put this to Carol as well, because you worked here and you have a great sense in just like what is it about Columbia? New York City obviously is a big piece of it, but what is it about this place? Well,

I'll bring it back to their tagline. Have you seen that one yet? At the very center of business? Right? I think that really does embody it because here we are in New York. You can't imagine a better setting setting for a business school when you have the real world applications that are right outside your door. And that's what you saw in Professor Gudes class was case study,

case study, case study, case study. It just is an ending experiment, right, and and to be able to harness that with the resources that a Columbia has, whether in the classroom or with the alumni network, gairly powerful place? Do you think as this Well, I was thinking about when I worked here. I got my undergraduate at bar right across the street, but I worked at the business schools an undergrad, and I just think also the connection

with Wall Street and the role of money. And I'm not trying to you know, money makes things happen, and whether you're an entrepreneur and you start something and ultimately you need an investor, you know that helps you get that started. I just think that connection made this schools something really special. I think that's absolutely right, and that entrepreneurs entrepreneurship spirit here routinely. It's it's among the things that comes through in the surveys and the data that

we see. Uh and and you see it, you know, in the classroom, because that's a place that people can harness it and take it out and apply it to whatever your big idea is. Why even the conversation we had with Senorico Marquetti, I mean he was a banker who then came here and said, Okay, I'm gonna start a company. I'm not sure what it is, but I'm going to learn about retail. I'm gonna learn about marketing and learn about entrepreneurship, and and then he scales it.

Yeah and yeah, and you know, I don't know if somebody could scale that business idea or that business model as effectively as you might have had you had a linear regression class that it's like, you know, maybe you're not gonna do it every day, but you're gonna probably talking to somebody who can do it for you. And that's Joel Weber, the editor of Bloomberg Business Week, joining us at Columbia. He had actually gone to a class

the week before. He's a pretty confident guy. I think he was a little humbled by his experience in that class room. We want to talk about the global economy. Now, I'm at Candle wall Is, Columbia Business School, Professor of International Development and Economics joining us. Now, I'm a you cover a lot in terms of what is so relevant to the world right now you're sitting down with a group of students. What are the things you want to bring into the classroom that relates to the real world

and what's happening. Sure, So at Columbia, I teach two kinds of courses. So I teach one core course that all incoming NBA students will will take. UM. This is a core course in manageri economics. So what we do in this class, which is not so much global related, but our general principles that we UM that we try to instill UM is for students to learn the basics of how to take data on the market environment and try to figure out what prices they might be charging,

how to how to manage their revenue and product lines. UM. We consider what are the implications of their business decisions when they are reacting in an environment with competitors and and and consumers who may be responding as well. So

think about kind of your classics supply and demand market conditions. UM. One of the things that we try to do with Columbia is to not only show when the market kind of can provide the allocation of resources that we think is efficient, but also to kind of think very carefully about what are the conditions under which the market may not be living up to what we think should be going on. So that would be your your examples of um uh just issues of fairness UM or should we

have things like search pricing. It can lead to an efficient outcome, but it may not be very fair for some consumers. UM. What happens in the market when a fire and a seller arrive uh into a marketplace where

they've got differences in information um. And so this is actually very relevant for very important markets like healthcare, where the provider of the service has different information than than the buyers the service, and and we know that classic economics of the market outcomes can actually can maybe not deliver UM the best outcomes in those situations. Uh. And we also consider things UM related to strategic decision making game theory, which is a very uh common set of

tools that are taught in an NBA program. But we also discuss things like auction auction designs UM for instance, so Google and Facebook now made the vast majority of their revenues off of designing auctions. We will go through the very basics of of how you would bid in an auction like the one that Google sets up, How would you set up an auction and so so that's very much a kind of a set of things that we do in the in in in my core course. And then you also look at the international sort of

trade landscape as well. That's correct. So I also teach a an elective course on doing business and emerging markets. And there's a starting point if you think about what is different about an emerging market relative to to to a develp country like the US is really the one which the markets are not working as as well as we think. So the capital markets might be broken down, the labor markets might be broken down, this weak rule

of law. And what I try to do is to walk through, UM the core strategies that a company UM that's maybe based in the US would need to consider as they enter these environments. UM. What are the parts and products and services that might be very beneficial in

these environments where the market is broken down? UM? As well as to think about what are the UM what is the role of a business in a society where we where the corruption levels very high, UM and so forth, and what should be under I want to make sure we ask you about this this bit of research, didn't you did? That caught a huge amount of attention, including on the Bloomberg which was about the effects of the

trade war. UH. And I think some, if not unintended consequences, some surprising consequences tell us about that, right, So outside of the classroom, I I as you said, I'm an international trade economist. UM. I recently was involved in a project where we UM, we're looking at the impacts of the tariffs on on the U S economy. UM. If you think about what are the tariffs should do? So imagine a country like the US imposted the tariff UM. There's kind of a sequence of events that happened. So

one is that the tariffs are a tax on imports. UM. Consumers are gonna start to see potentially rising prices on imported goods, so they should kind of switch towards domestic goods UM. And so that means that there's going to be a transfer from US consumers wore potentially paying higher prices to US producers who are potentially benefiting from higher prices UH. And then the government collects the tariff revenue.

And so one of the goals of this exercise was to kind of calculate what is the overall effect and and what are the transfers that that are going on. One of the surprising things that we found in in in this in this research was when you look at the at the data UM and you kind of charted the time path of what happens to goods that are being targeted with terriffs as they come into the US. Is a really important number for an economist is to understand what happens to the prices of those goods UM.

And we have heard from from the President, for instance, to say who says that the that the Chinese, that the Chinese will be paying for the tariffs. And in principle that is possible. And the way that could work is that if the U S imposes a tariff, the Chinese exporter may lower her price down to such a point so that the post tariff price actually doesn't change for the U S. Consumer. And that's possible, and that would be a consider a condition under which the Chinese

is essentially eating the tariff um. And but when we look at the data, we in fact that's in fact not what's going on. UM. The split, of course, could be anywhere between zero percent and percent, and what we find is that the U S consumers or the U S economy is actually bearing the full incidents of the tariff.

So that's am it. Candlewall, of course, professor of Global Business at Columbia love getting his perspective because I think, you know, we constantly have conversations about US China different perspectives from investors, from politics, ships, but I think it's nice to go back to academia and see how they

see it. Well. And I'm glad you said that because one of the things that I was thinking throughout our time at Columbia Business School was a business degree is only as good as its applicability in a lot of ways. And I do think one of the things we heard throughout our time at Columbia. We heard it, dare I say, from Stanford. We heard it, dare I say from Harvard as well, is these deans, these faculty, they're under a lot of pressure to us. And you say, yeah, cool,

that's some interesting theory. How does this apply in the real world? So, and I think what's interesting. You'll hear this later on in some of our conversations. This point of so many different disciplines that are crucial and having a successful business. So whether it's psychology, whether it's technology, marketing, you know, all of it kind of has to be in the room when you're putting together a business plan or running a business. It's also one thing to read

a book. It's another thing to have a conversation with someone. And another thing. Later on the show, we're going to hear about from a very well known yogurt maker, Ziggy. He talks about the idea of some of the people he was exposed to. We hear from Federico Marquetti. He started you he got to spend some time back in the day with Mickey Drexeler, you know what I mean, the guy who worked at the Gap, who who helped

create Ja grew. Well, it's such an important aspect of this because one of the folks that we talked to, of course, is James Gorman. He's the chairman and CEO of Morgan Stanley, a Columbia Business School alumnus. He spent time in the class before coming to talk with us at our special broadcast. But that's what's neat about these

business schools. You have access to folks that are out in the business world, out in the financial community, folks who have learned things at the school but have had to put it to work, and so that's just a great asset. So everything we do at Homeworker Play has a digital element to it because it Mets is that assistant professor Business that the management group within Columbia Business schools focusing on manager he focuses to on all things digital.

It's so nice to have you here on Bloomberg. Tell us a little bit about um. What's the typical class for you in terms of what you're teaching. It's interesting because the class that I'm teaching is not that much related to everything digital that I study, And so I teach managerial negotiations, which is really trying to help students make the most of the interpersonal relationships that they have obviously negotiating at work, negotiating with customers, their colleagues, their boss.

They personally are using data to do that, right, they do that, and so I think it's it's part of the class. So it's trying to figure out, how can I learn about my counterpart, how can I learn what they care about and use that in my negotiation. And I think to some extent, you could actually do that looking at what is it that they do online, stalking their Facebook profile, looking at their company website, so all

these things could technically go into the decisions that you make. Well, And it's interesting that this is an offering in it in part, it's not surprising at think we talked to the dean you know earlier, who was talking about how this isn't just sort of like six MBAs who sort of all look alike getting in a room and making a decision. This is, you know, a couple of managers,

a couple of engineers. You've got to be not just you know, sort of conversive but almost fluent in the ability to to talk to lots of different types of folks from different backgrounds, etcetera. And I hope that's the experience that the NBA is actually get out of this class, is that not the same strategy isn't always successful. It's not always the same situation that you can use the same strategy, is not the same person that you would

use the same strategy. And I think the NBA actually gives them a good overview of like diverse people to to talk to. Psychology comes into this big. I think about my sister who studied psychology for years and years and years, and I think everybody was thought that was kind of like a a side form of study, right, but it is being you know, being incorporated into so much of what we do, and that includes the business world.

So I actually get that question a lot when people ask me, well, your degrees in psychology, what are you doing in a business school? And I think my answer is usually well, like, there's people working in organizations. Not sure if you've noticed, but there's it's groups. Is like there's group dynamics. It's interesting to see how do people select into organizations, what makes them happy at the job

where it makes them productive. So there's a lot of psychologists trying to understand like the dynamics that are going on within organizations. So give us a sense of an assignment or an exercise that you might give in this class. So we do a lot of cases, and I think that's what students benefit the most from is we throw them into a situation. We tell them just this is a role, take it on, assume that those are your

own preferences, and now go and negotiate. And I think the biggest learning that they get is really the feedback from the other students. So they're like, wait, like I lost so much money on the table. I actually felt pretty good about the outcome, like after the negotiation, but now that I see what the case was actually about, maybe I see I could have pushed a lot harder.

So I think it's this feedback that they get from from the students and also just seeing like how well did I actually perform in the negotiations and so is there It feels like in some of these cases, because it's not so clinical that there are some emotional aspects to it. Are you are you pushing students out of their comfort zones a little bit. So that's the that's the plan, Like you could. I mean, you have this saying that experience alone is a great teacher, and I

think to some extent it's true. So I always encouraged them to go out there and while negotiate, But the problem is that you don't get the feedback and you don't experiment. I would not recommend to any of my students to go into the next sceleery negotiation and try out something entirely different, something that is completely outside of

their comfort zone. So that's what we do in class, and it's just kind of providing the safe space for people to experiment and to say, like, well this is what I usually do, but maybe there's another strategy that's much more successful. I have to ask you about one of the studies that you did. I got a lot of media attention. Um, I think you do this with a colleague, and it basically found out that when it comes to finances, nice guys and gals fall short. What

exactly is going on? So do you What we showed is basically that people who have a certain personality trade which we call agreeableness. So that's the idea of people are nice, trusting, caring and pathetic, that those guys have fewer savings. I a debt and I'm more likely to default on loans and everything. Why is that so? I think one of the reasons is that they just care more about other people. And I think society has this image of well, you can either care about money or

you care about other people. So there seems this almost a false dichotomy saying, well, if you care about other people, you should not care about money because that makes you a lesser person. And I think agreeable people just place almost too much emphasis on the people's side, where they like neglecting their finances. Just think of someone will be agreeable, basically is the left. I think it's a different lesson

so that that would be the sad news. I think it's because like, agreeable people are the people who keep society together. And I think it's the way that we think about money as a society is just the wrong way, because technically, if you care for your loved ones and if you really want to make sure that they have a good life to some extent, you should be caring about finances because if you default and if you go into debt. It's not just you suffering, but also your

loved ones. And that's Sandra mac is a system professor of business, and we talk so much about technology and how it plays in that clearly is on her mind, but what's really on her mind is the mind and how people are interacting with each other as human beings. I love it. So while we were at Columbia Business School this week, as you said Carol early in the show, right there on College Walk in the midst of it,

it was like college game day for business schools. We had a chance to sit down with James Gorman, he is the Morgan Stanley chairman and CEO, back to the campus where he was thirty years ago. Right. I love to hear about his experience because he came from Australia, was already a lawyer. But he talked about so many different things. We of course did speak about the I P O market, very timely, interest rates and as I said,

his time at Columbia. Yeah, it's like Columbia in the mid eighties, and uh it was, you know, it was a great experience. So it was it was fun. I just did a lunch and loan Claus for about and fifty kids and they had kids there. They went BOM when I was a business school here. What do you want to know from them when you're talking with them, because I feel like the world that so many different industries, your industry also going through lots of changes. What do

you want to hear from them? Well, it's what kind of cultural what kind of company they're really looking to work out? I mean, what what what matters to this generation different from my generation? You know, I grew up at a time when Solomon Brothers and Drexel and you know, that was all the rage on Wall Street is a

very sort of hyper intense environment. I mean, these uh, young folks there are much more interested in social impact, um in the values of the organization and just trying to share in exchange how we think about our role in society as as an obviously global bank. Well let's go all the way back to your arrival here on campus. This was after that so long ago, but it was a big move. I mean there it was defining in

a lot of ways. What do you remember most about arriving and then what did you take Because you came from Australia and you were a lawyer, already, right, yeah, I can. I came here to sort of change careers. What I remember most is the interest rate on my student loan, which I think is a world record, right. And I thought I'd died and gone to heaven because America welcomed me to come here to learn to grow, and and I just it was unbelievable. I arrived on

a very hot August day. August was that classic New York's sweltering heat, and it just it was on you. It was just it was so exciting on the campus this university, which is you know, extraordinary. Um, I couldn't I couldn't have been happier, honestly to be given that chance. And that's why I think, you know, immigration, welcoming foreigners, giving them an opportunity to contribute. And I'm still here, right,

you know, thirty past years later. Because you had an experience living in International House, I believe, and so many people are exposed to many different cultures. I mean, you were living in it in a lot of ways. How did that affect sort of your world view? I used to play chess every Sunday night with a Danish guy who listened to Frank Sinatra with candles on, you know, in the dark, and it was so you know, and one of my closest friends, uh I was from leon

in France and another guy from Morocco. Uh. So you you you learned to experience the cultures and the diversity that this world has. And one of the great things about a university like this is it brings people like that together who all motivated, they're all they're obviously uh they're talented, uh and they want to move forward. So

I thought it was a tremendous experience. Well, having said that, James, I do wonder what you think about kind of the pushback that we're getting, um from the current administration when it comes to folks coming in from other countries to study here, maybe start companies here. But it's not that

happy an environment or hospitable environment for them right now. Yeah, I mean I think, um, this country has always been a country of immigrants, and uh celebrating and welcoming those immigrants and seeing how they've contributed to this society here. I mean, it's it's been one of the great elixas of what's made America different is most countries people trying

to move out of to get a better life. This is one of the few countries in the world in Australia was like that where a lot of people are trying to get into and I think welcoming those immigrants, providing opportunities for them, obviously having sensible border control, which I support. People shouldn't come here illegally, right I didn't you come through passport control. You earn your way into this country, you set the tests, you I became a citizen.

I mean, you do it the right way. But having as many people as you can bring in talent into the US I think has been one of the great hallmarks of the success of last century. When you think about talent as well, you know, it used to be a much more prescribed path. That feels like at a business school, you went to a big consulting company, you went to Wall Street. You know, you talked about hearing

from the students, going to have a social impact. What do you draw in terms of student and talent from a business school like Columbia, And what's the case you make to them for working on Wall Street right now? Well, they're they're they're great tourism Wall Street. There always have been, I mean, things out and flow. I think the largest recruiter. I don't know for sure, but I think Amazon might be the largest or one of the largest at the

business school now. So at different points, the sort of cadence and flow and focus changes as society is changing, in as business opportunities are changing. Listen, Wall Street is highly sophisticated, very intellectually interesting, very dynamic because you're in the markets. As you guys know, this is what you do. Um So for a lot of people, not everybody, for a lot of people, who remains an extremely attractive career option. So let's talk about the market you're in it. We

obviously watch a day in and day out. There's so many big macro stories that are out there, whether it's Brexit, whether it's US China trade. How do you see the market, the global market environment right now, Well, you know, it's it's a conundrum. At one level, We've got record low unemployment, we do still have global growth. The US economy, the most important economy in the world, is performing strongly. China is still performing strongly. Um Europe. Europe is obviously mixed,

but it's been mixed for two decades now. Um So, one level, the fundamentals are actually quite strong. Uh. At the other level, the sense of confidence there isn't the confidence and there's a sense of inevitability where at the end of a cycle, you know it doesn't have to be you don't. I mean, statistically there is a recession every seven years, right, each year you begin with the fifth percent chance of recession, but it doesn't have to be.

You know, in Australia they haven't had a recession for twenty eight years in a row. So why is there so much pressure though then on the Federal Reserve to continue cutting race? Does that make sense? Well, because the economy is slowing. The economy is slowing, and you know the job of the Fed is to sort of balance monetary policy with economic outlook and fiscal policy, and you know they should feather rates obviously when the economy is getting hot, their job is to raise raids, slow it

down and the reverse. So you know, I've supported the latest FED rate cut, and I suspect they'll do one or two more, but then it's time for pause and really absorb this because the problem with cutting is it's one of the few tools you've got. So if you give it away too easily, what do you have If we have a real problem. I want to go back

to something you said a minute ago. It sort of squaring some of the different elements out there, and especially businesses that certainly seem more cautious with a consumer that isn't showing much signs of caution at all. How do you square those things as you talk to your customers and what do you see out there that that could help explain that dichotomy as it were, Well, we're you know,

we're we're in a bit of an echo chamber. If you're a business leader, you go to business leadership meetings, we all talk to each other. We sort of, you know, we bounce off each other. So a little bit of it is, Gee, we must be at the end of the cycle, the Feds cutting rates, we must be about to have a recession. By the way, we've had an inverted Yolka, which has been highly predictive of a recession. So there's some hard evidence that things are more likely

to slow down than accelerat at this point. I don't think there's any doubt about that. So as executives, his job is to think about capital investment of a multi years you would be prudent and being cautious at this point. There's nothing wrong with that. Consumers aren't yet experiencing that they've got very cheap dead housing is starting to recover their consumer consumer read apart from student loan sadly is

in very strong shape. So the consumer balance sheet is still very strong and that's why it's lagging where the corporate balance sheet and corporate attitudes are. There implications though, from having rates at such a low level for such a protracted time. I mean, it's it's all about funding equilibrium between economic growth and the cost of money. So I mean there are only implications if it creates a bubble, right, that's a cheap money eventually will create a bubble. We're

a long way from that now. Don't see any of that. I'm seeing no bubbles. And how do you manage your business given all of those different inputs and and outputs that Where do you hire? Where do you maybe stay steady? Where do you invest? Across the empire of Morgan Stanley empire, never thought about it. We're just a simple business, um, you know. Firstly, very long the US our wealth management business is I think percent us UM and at least

half a securities business here. So that's a good thing, right. This is an eighteen tree in dollar economy, strongest economy in the world, most important economy in the world. I'm happy to be along in the US, where obviously, you know, we've been aggressively building our Asia business, which is now i think fourteen percent or sell of the company. With the trade talks, things have slowed clearly across parts of Asia,

so let's be played out. But our job is to try and look past one three six months hiccups or slowdowns. Our job, certainly, my job is to think out five plus years. And you know, traders are thinking every five minutes. I'm trying to think five years and can do that in this environment though, because it does feel like we've been going back and forth on let's you've got to we've been around three d five years. I mean, we're

managing two point six three in people's money. They're not all selling into the market on day and all buying on the next day. No. Things things actually move in in small increments. It's it's small things like the public markets and companies going public that you know or m and A transactions happening or not. But most about core businesses are relatively immune to what's going on right now, you wouldn't see the impact on that wealth management business

greatly at all. That's James Gorman, Columbia Business School alum, also the CEO and chairman of Morgan Stanley. And that's not all we've talked to him about. Well. More of that conversation part two coming up in the next hour, and for the full interview, download Bloomberg Business Week Extra wherever you get your podcasts. We caught up with Kastee mclara's He is the new dean of Columbia Business School.

We chatted about the cost of higher education. We started by asking about what he's learned since taking the top job. A few things to UH to say about that. I I have been embraced with a lot of enthusiasm from my colleagues, and we're actually working on some very interesting initiatives here at this pol both to sort of improve and change education UH and UH and also sort of talk to business leaders that have been sort of flocking in to meet the new deane and see how they

can be involved in help. So I think it has been exciting first three months. That seems like a very long day for McLaren's I mean he talked to us about the NBA because there's so much of a conversation right now about the cost of education, right, and I'm curious, how do you see the NBA of the future. How do you kind of justify you know, the education with

the cost. Yeah, so, uh, a few things. First of all, we're constantly looking at the cost of the education, and we're always trying to take cost out of the equation. We're also working on providing good financial aid to our students to essentially uh facilitate that investment on their part. Uh. And we're really focusing on the value of the degree.

So I think, actually, because business is undergoing quite a bit of change right now, it's it's a great opportunity for us to innovate in the value that we offer to our students. And in fact, I actually believe that, uh, the NBA degree now it's a fantastic investment, both in terms of time and return, uh, simply because you know, you need new skills to succeed in practice, uh, and that's what we're trying to do here. So I actually

think that the degree free to robust uh. And and I think, in fact, because of the change we're undergoing is actually more valuable now than it potentially was five ten years ago. So as those business leaders, especially here in New York City alum include James Gorman from more Etainly, he's going to be with us later on when he and his friends and and Phillo olam Or are visiting

with you. What are they asking you for that may be different than what they've been getting in the past in terms of what you're teaching or the types of students that you're turning out. Yeah, So I think when you talk to business leaders, you realize that they're encountering two things. First of all, technology data analytics is really changing the way their business is being transacted, so they

leave that for quite some time. They also understand that the nature of the NBA jobs, the types of jobs that our graduates are going to do, is itself changing over time. So they want to see in what way are we going to best prepare students in order to really participate in the digital future. So they ask what are we doing in the curriculum, what are we doing

in experiential learning? How do we bring NBA students together with engineering students so that they learn how to collaborate because that's what they're going to do when they go out to work. So these are the types of things we talk about. I'm also cures how much you talk about the U. S. China trades spat and what that has done to students who want to come to the clumby business goal to get a degree, but they're nervous about what does this mean. Can I stay in the country,

can I create a company? You know? So I'm just curious if you're seeing pushback or a decline in students from overseas that you know want to apply. So for now at Columbia, we haven't actually experienced that, uh, no

change at all, almost almost no change. We continue to have about international students, uh about two thirds of them, about six of them that just graduated that wanted to stay in the US actually found jobs in the US, uh And of that left, I think a lot of them actually wanted to go back in different areas of the world. Having said that, you know, our service economy here in the US depends on really high skilled human capital.

So this is a problem that we need to solve, not just for business education, but for essentially training any type of high skilled labor that we would like to retain in the country and hopefully we'll get to have the dialogue and then move to a solution. Well, I'm curious that that's where I wanted to go. Are you being a dialogue with folks in Washington about this issue? There are there is some dialogue that is going on. Yes, uh, you know, but early steps. I mean, people understand that

this is an opportunity for the US to actually do better. Ah, and people understand the value of high skilled human capital, which is how we actually helped build companies, start companies, create new ideas, new technology. So you know, they recognize the value and I think, you know, hopefully we'll keep talking about it and resolve. And that's coach Us mcglaura's Columbia Business Schools New Deane. What's interesting is he's been at the school for a long time as a professor.

He focuses on operations, research, data analytics, and he focuses on the increasingly larger and larger role of technology in our world at large and of course in the business community. So fun conversation, interesting to talk to him about, you know, teaching there for a while, but then you become the boss it's a whole different scenario. Lulu Wong, she is

definitely a pioneer when it comes to Wall Street. She graduated from the Columbia Business School back in eighty three on the executive program, but she's been doing financial money management since about nineteen seventy two, so she's seen a lot of up and down cycles. And we want to start by talking with you about coming to Columbia in three. Columbia was different, New York City was different. What drew

you here? I came to Columbia because um I had already been working in Wall Street for a number of years. Um I had developed a good um practice, but I knew that in the future was a firm of my own, and I really want to have the best credentials. I had gone to Wellesley uh College undergraduate strong credential, but I thought I needed to have the credentials of a great university like Columbia. So I came really for that reason,

but found that it was far more than that. Well, talk about that specifically, because you were working and doing the executive program right, which was like Friday's for a long time. Tell us about what you got from being here, I found, but coming to Columbia that everything I've been doing and observing as an investor on Wall Street, it all began to come together in the context of theory and practice. And I believe that when you take practice from experience and then putting it into some sort of

a structure and theory it really works. Then it all makes sense. And one of the things that you quickly identified was the ability both as an investor and a leader, a business leader, to make stronger connections between the US and China. That clearly has been a big part of what you've been doing. That has never been more relevant than it is today. Tell us what you see right now, especially headlines every day about Hong Kong. Maybe maybe we

start there. What do you make of that situation? I think it's it's a very fraught situation, and I hear from friends and colleagues on both sides and they're both equally grieved of And I think the way it works out is that, um, I don't think Beijing realized it was going to go this far. I think they certainly do not want to have a tantemous square. It's a very different world we live in social media. They cannot have that, So they have to find some face saving

way to begin to come the crowds. Um. I think fortunately, the beef that's the demonstrators have is really more with the Hong Kong government than with Beijing. So I think if you can work through Carrie Lamb where she has already withdrawn the Tradition Bill, and if she can begin to negotiate on the three other conditions that the the protesters have set up, there is a potential to work

through some understanding. Lulu, is there a role for folks outside of Hong Kong and outside of China, because there's certainly been some push among the protesters to involve the United States. What's your role on that or well, I do think there is a role um Um. In my uh not day job, I'm also on the board of Asia Society, which is really the u foremost nonpartisan group trying to bridge US and Asia, and we have been

very busy talking to both sides about the issues. Um. I think if we can find ways the Chinese are very big unface, they cannot be humiliated, and there's a way in which they can continue to stay with the one country two systems, begin to exert some some control over Hong Kong, but not with the heavy heavy handedness we've seen. I think there will be a solution. Business leaders and certainly investors are talking increasingly of a decoupling

between the United States and China. Given you've spent decades coupling in the US and in many ways, how much do you worry that that that may become a reality. I think there are many people who concerned that this is going to be uh uh, one win, one lose. I still am a believer that it can be a win win situation. UM. I think right now we have two leaders who are both under short term pressure to try to resolve some of the problems for their economy's crumble.

I think the advantage that she has is that he also is playing the long game, and I think he believes that the long term future of China is very conditioned on China retaining economic political, not necessarily military, but geo political power. UM. The question is does the economy crumble before he can achieve this. But he has many lovers that are not present in America which he's been pulling. Especially there's absolutely he has been pulling levers. He's um

moving more liquidity into the system. UM. He's getting some of his UM companies, both multinational and Chinese, to begin to try to UM do more investing in the economy. He's trying to bring more capitals UM investment back into China. Well, I'm curious that what you are hearing is that, well, there ultimately are the expectations from US folks that you're talking to folks in China that there will be some

kind of a trade deal that's done. Or is the fear that I think we keep hearing is that we're going to see China kind of go off with their plans and have its allies, and the US will go off on its plans. And when it comes to trade and developing technology, what do you expect. I think it would be very difficult for there to be two fortresses. The world is too connected, the supply chain of the markets, we are interdependent, so I don't think we can truly

exist separately. UM. I do think that some of the reforms that the US is pressuring China to make are not actually bad for China. Some of the progressive in China have been militating for them all along, but they

had been sort of outnumbered by the Hawks. But I think with this current situation where she's under pressure internally for UM having managed it UH in an indelicate way, it's going to provide some opportunity for the progressive to say, look, it makes sense that we open our markets, it makes sense that we liberalize, and so let's do some of this. We will make it appear that it is our own initiation. We're not being bullied into it. That's very important. The

West has to not play the bully hand. I think that will be very difficult for SHEET overcome. But if there can be UM sensitive diplomatic accommodations on both sides, I think it could come out better for both countries. One of the biggest concerns for investors, sort of broadening to the entire world, Lulu, is this notion of negative yields, a world where pensions and other huge institutional investors are

just not making the money they need. Do you see a short term change in that You're so involved in so many of these big institutions as customers and as an advisor, right well, I think there's a lot of liquidity around. There is money to be invested, and in a way, that's why many UM bears on the US market a puzzled and frustrated that they've been shut and the market continues to just want to work this way

up so that money wants to find a place. And in this very troubled world, um the U S and the U S Dollar seems to be a relative, relative safe haven. That's Lulu Wong, founder and CEO of two Below Capital Management. She has been on Wall Street for a long time, been an investor for a long time. But I also thought, what a great time to be sitting with her because of her experience and understanding really both the United States and China as well as we

sit in this trade war. She brought nuance to an issue that I think far too often is painted in very broad brush rokes. Yummy, I got loving my perfect song. And before we wrap up our day here at Columbia Business Going one more treat. The founder of ciggis who when he came to the United States, I think, first for an interview at the Clumbia Business School and then to actually go to school here, he kind of missed

something from home. Yeah, and that was yogurt. And so now his yogurt it's available in tens of thousands of locations around the world. The founder is Siggy Hillmerson. He is here with us at Columbia Business School, your alma mater. Welcome, Thanks to you, Thanks for having me. Alright, So what are your feeling sort of coming back here. What do you remember most clearly about your time in Columbia. Uh, it's great to be back on campus. I love the campus.

It's beautiful and it's uh, you know, I live in the festivaliy now, so it's like pretty close. It's awesome to just jump on the subway and come up here. Uh what I miss. What I remember most vividly about Columbia was to come here and all the amazing people

that would come through campus. I'm a big basketball buff and uh, as a kid used to wake up in the middle of the night to watch, you know, the Bulls play Michael Jordan's And I remember very vividly coming to campus one day and David Stern, who was the NBA Right Commissioner, was giving a talk to the students.

And I when I was a kid that the whole world felt so distant and then you come to Columbia and these people are just there giving you advice, and it was just my mind was blown, and I felt so lucky I got to be here, and I was just I remember it very vividly. I was so grateful and it was just kind of amazing, you know. Well, and what's interesting is, I mean, obviously you started your

own business when you initially went to business school. I mean you started at a consulting from did you think at some point while you were studying, man, this is what I want to do, is have my own company. No, I didn't have like a clear vision of what I wanted to do post business school. I'm sort of like a stubborn guy and I have an independent streak in me, so I knew I would probably do something by myself.

I just wasn't quite sure what it was. And after business school, I actually uh started working in management consulting. But I think I was a very poor consultant, you know. Uh, you know, I couldn't consult very well. So I was sort of thinking about what to do with my life. And I had started making the yogurt, you know, the skier, which is sort of the classic iceland at yogurt from home.

I sort of started making it as a hobby, uh, and sort of long story short, I had had a professor at business school who I was friendly with, and he sort of encouraged me to explore it and started as a business and that's sort of how it came about. And he backed you. Yeah, and so Michael, Michael Lambiema is his name. He basically became my business partner and first investor and and and was on the board, uh all the way until we sold the company last year.

So as a rich Columbia connection there, What was it that though you learned at at the at Columbia Business School in terms of now running your own company and starting because it's not always easy in the beginning. Yeah,

it's actually it's a it's a funny story. And it's another sort of one of those serendipitous events is that my background was econ and I sort of opted out of some classes when I started Columbian and I needed to film my schedule and I had never done anything in supply chain, and Columbia has a great supply chain program and and and great professors there, so I just took a bunch of those last is not having any

idea that would ever use it. But one of the most important things when you run a consumer products business CpG company is supply chain and logistics, right. A business in that industry can be broken if you don't have your supply chain correct. So one of the most important things that I learned from Columbia was actually supply chain. But that was kind of almost by luck. You know

that that happened, so um, very thankful. It feels like you did when you created this company anticipate a place where we are now when when it comes to food and ingredients and people's willingness candidly to pay up for high quality and to really care about where their food is coming from. What did you see sort of looking around the corner that that convinced you that this was the way to go. Oh, that's that's pretty easy to answer. I when I came here, I not only missed Skier,

the Iceland, the yogurt. I noticed that a lot of the yogurts here are very sweet, and the most popular yogurt in America at the time had more sugar proounds than a koind of coke. And the difference between coke and yogurt was that, you know, people drink Coca cola and they kind of know it's not healthy, but they do it. Anyway. Right with yogurt, it had the halo of health products, so people were totally indiscriminating of eating it,

even if it contained more sugar than the coke. Right, So I thought, this is like a contradiction here, like people need to know about this and I need to do something to fix it. So when we started the company, I wanted to make the yogurt but not make it so sweet that it was equivalent to candy or soda. And that was a challenge. People were sort of not super receptive at first, but then it really took off two and twelve and why do you think it Why

do you think it took off? And why do you think that sort of mega trend really set in and people just finally realized, how that's terrible for me. I shouldn't be eating so much sugar. Like what what was the catalytic moment? Well, I think I think it was

just sort of generally people came to realize this. I think people have been so focused on fat as the enemy, uh, and not focused enough on sugar and all the suddenly sort of the drumbeat of a lot of dietitians doctors who work in diabetes, you know, personal trainers, also some people who work in health. That sort of started trickling off to mainstream media and getting a lot of attention. And that really helped us as well because we've been around for a while when that started happening and had

been saying the same thing. So so we were lucky to catch that wave. I do feel like there's been an enlightenment when it comes to food right in terms of absolutely what's in it? Because I was talking with you before we get started. I mean I loved the video online. I mean there's not a lot of ingredients

in it. And I think more and more people we talk about it about our kids are turning around the containers and saying, Okay, what's in something so fast forward you've got this company, People are like, yeah, I don't need all that sugar. I need just kind of healthy ingredients in something. There's more competition, So how do you continue to get the shelf space and set yourself upon a right Well, we were we were very lucky in

that regard because when we started, nobody was focusing on that. Uh. And the weirdest thing I actually found was that, uh, we didn't get a lot of competition. We heard sort of rumors that some of the big companies looked at our space and said, yeah, people are not gonna like that. You know, Oh, this is a cool little brand, but people are not gonna like it. It's not sweet enough. Uh. And then all of the suddenly we we sort of are starting to have a meaningful share of the U. S.

Grocery market. First one percent, then two percent, then close to three percent, and then sort of the competition came in. So I think our luck in that regard was a little bit that we managed to establish ourselves before the competition first over advantage. Yes, so that makes a difference exactly.

So that kind of helped fight the fact that we don't have as much fun to some of the bigger players got and and and and they're like why you know, I just think, is somebody who runs a company just twenty seconds, um, you know, your advice to other entrepreneurs and just quickly planned for success. There's nothing worse than having the demand and having the things out there that people watch your product and not being able to supply them.

So build the infrastructure. And that's Siggy Ellmerson. He's the founder of Siggy's I Love his story about you know, studying at school and the things he was interested and he took a class on supply chain management. He's like, I don't know if I'm into it, but it turned out he needed it in running and developing his company. Super important when you're growing a big brand like that. Last hour, we caught up with James Gorman about the

FED his view on interest rates. He admitted to getting it wrong when it came to how the ten year is trading Now. We talk about how tech has been driving Wall Street and also about how folks are getting realistic with I p O valuations. But some of those that have come public this year, whether it's an uber, whether it's a lift, you know, came out with a bang, but then I pulled back. So it's the market telling you will wait a minute, you weren't worth that much

or or what is it? Does? It take some time with these companies that have been around for a while that are still not profitable. But I've been around for a long time, how do you make sense that? Uh? You know, the market can be very stupid in the short run, um in the medium term and occasionally gets things wrong, and the long term you're the one is stupid, right right? So, uh, you know when facebo yeah totally.

When Facebook went public, Um, I went on TV. I can't remember if it was with you guys or not. Let's just say what it was obviously was you know, I said, this is a great, great new company that has been formed by incredibly innovative people who have created something that didn't exist before. That should be celebrated. The fact that traded at a value in the weeks and months after went public below what people wanted on the day of the issue. Okay, that happens, but look at it.

Give it time, give it a year, and now it's it's something like six times the valuation, you know, in a relatively short prade of time. So we should all wish to have Facebook's problem. So I give this, I give this a little bit of time. I'm not I wouldn't be too too wound up about it. Are you seeing more issues that your team? Are you talking to more people who to bring more companies to public? How active is it right now? Are they? Are they not

bringing them public because of this? I think it's making people more realistic about valuations, you know, for some of these unicorns. I think there's a little reality check has gone into the system, and that's that's okay, this is what the market does. You know. In fact, to my point, the market in the long run gets it right. The short run is how you find opportunities when you think about this, uh, maybe overstate the little bit. This negative

yield world that that we're living in. How does that change your view of the market. How does it change the way you may deploy some assets and may deploy some of your teams around the world. Well, I firstly, I've been very surprised at where rates are. I'll just say that up front. I felt the tenure at this point. I'd expected by the end of this year the tenure would be around three I was dead wrong. Okay. Um, so you know, a negative yield curve has been historically

highly predictive of recession. But as Janet Yellen, former chair Yelling said, uh, it's not necessary really, so it doesn't necessarily lead to a recession. Uh So, how does it change our business? It doesn't. You know, We're we run our business based upon what we see going on in the broader economy rather than where rates are trading on any particular day. And I think in the last week, you've seen the tenure recover about ten fifteen basis points, so you know, we'll see you know, I'm curious to

about the role of technology and finance. We see it increasingly, so talked to a little bit about, you know, the incorporation of it at Morgan Stanley and where you see it kind of all going, because it's certainly a big part of what they're being you know, taught at the Columbia Business School and more and more so, whether it's algorithms, whether it's engine engineers coming in and coding, where do

you see it all playing out. It's interesting. I just came from our monthly Risk committee meeting to our meeting this morning, and we had a whole section on electronic trading and um, what we're doing in that space and how it's bleeding from equities into the fixed income space. Um. You know, the technology has been driving Wall Street dirty little secret for a very long time. You know, we set up our electronic trading businesses in the mid nineties,

and it's like everybody suddenly discovered technology because of fintech. Um, there's a lot of innovation going on in the fintech sector, for sure, and we're partnering with a lot of those companies. But we are you know, we spend upwards of four b and all its on technology. We have centers of competence in machine learning, robotics, artificial intelligence, cloud computing, big

data management. Obviously, our cyberspace is huge, so we have the resources and I think the intellectual horsepower to be at the forefront of a lot of the new technology development, but not all of it we want to do in house. So we're actively looking to partner with large and small companies, whether it's in software development, in data management in particular, and you know, embrace it. So it's it's very much

a part of everything we do. Digital currencies as well, Uh we Yeah, we're helping clients hedge and manage their exposures to digital currencies. We haven't been um, you know, we haven't set up a digital business unit focused on you know, the various forms of cryptos. Per see much more interested in the blockchain technology. I don't know what. It's just another form of stored value to me. And I'm you know, people, maybe I'm dead wrong about this.

I've been quite conservative on this for a long time. Um, I see much more value around the blockchain technology supporting the currency, in the currency itself. You mentioned sort of various partnerships, especially on the fin tech side. From a competitive standpoint, where do you see the most competition across your line of business at this point? Um, Well, in wealth management clearly, you know the online space, but but that's not new. I mean schwab and e Trade and

merrit Trade being around an awfully long time. They've been doing online you know, digital business. It was just called something different, which was direct brokerage, right, had a different name. So that's always been competitive. I think. UM. In the asset management space obviously the challenge of a lot of the package t F indexing versus the traditional long earning

active manage. But a lot of our businesses are very complex, require global capability, you know hedging, uh, you know a currency exposure in Japan, being long certain rate securities in Australia. I mean we're twenty four hours. It's a lot of it is um. It's it's not that it's not challenged competitively, but most of our challenge comes from our traditional competitors, the big banks. James, I'm always curious, you know, we spend our time so much talking about FED policy, yield curves,

us trying to trade policy. What is it that you folks and Morgan are spending so much time having conversations about. What is it that we're not talking about that really deserve a little bit more attention? Leadership culture um creating an organization where diverse employees don't feel included, but feel not just included, but feel they belong. That's something I've felt very strongly about the whole diversity inclusion discussion in place. Somebody invited you into the room, Now I want you

to belong. It's your room. So we talk about a lot of the qualities that get at. Do employees respect your institution, want to be part of your institution, want to make their careers and lives there? That the macro stuff okay, rates for two and a half percent, now they're one and a a half percent. Is Morgan sending fundamentally

changing strategy because of that? Of course not. But if we can't attract really talented, committed people who do things the right way you have the right vegas, then then we're going nowhere. So I'm very Once your strategy is in place, and I think we have a really sound strategy. It's all about reaffirming the cultural values and putting the leadership in place for the next ten and fifteen years. Who can drive those vas? Are we making in roads?

I want to ask about diversity because I feel like we've been talking about diversity, parody women, you know, issues on Wall Street for a long long time, and we're still struggling and we will be talking about it for a long long time. I share one fact with you,

uh this year and this somebody design. It was an outcome this year for the first time ever, more than fifty of our intern class, which is a thousand interns globally with women, first time ever, ahead of China as a woman, Head of Europe, Middle East, Africa as a woman, cohead of Investment banking as a woman, the head of our bank as a woman. I mean, we have senior leadership women in multiple roles, but are they representative of the role of women in society? No, they're not. Right.

So we've we've we've we've made steps, but it starts with the pipeline at the beginning, and then finding ways in which you can keep those folks through all the transitions we make in life. Have h terrific careers of Morgan Stanleys. Are those discussions and those efforts becoming easier or harder given the political climate we're in. We live in a pretty I think it's here to say, divisive time,

hyper political time in a lot of ways. How do you cut through all that to make these sorts of decisions? I think from a diversity perspective, No, I think from what is the role of the corporation society? Yes, I think we're being called as CEOs into the public debate much more we're our our employees want us to express opinions on a wide range of issues, and it's very difficult because you've got to you you know, we all have personally. I mean, I'm I'm a voter, right, I'm

a citizen. I have opinions on all these issues. And it can't be just what James Gorman thinks. I'm not the company. It's what what is for the greater good of the whole organization. And I think what a lot of companies are now struggling with is what is our role in society? And this is why the statement came out recently from the CEOs at the roundtable, which was basically two embrace the broadest stakeholders that we have. You can listen, you can be a bank and runner only

for Shareholderbayou. But if society turns against you and nationalize as your bank, that didn't work out so well. All right, So I've always believed you have to operate in the

ecosystem with respect for everybody in that ecosystem. But what's interesting isn't We had a very smart conversation with um like we're having right now, but with another individual in the financial community, but talking about no, not everybody has the same access to education, you know, and I do wonder you know what that has done in terms of creating the gaps within our society. So how do we

deal with that? Well? There, I mean, there are gaps in in in every society and not everybody starts off with the same exus. I mean it's you know, you're like I was lucky. I was born in Melbourne to the family of his born with and given the education I was given. That's why I'm here. That's James Gorman, CEO and chairman on Morgan Stanley, a Columbia Business School alumnus. Great conversation, of course, we talked the obvious about the

market environment, the business outlook. We talked about I P O S, but I really did also love the other areas we went Jason when it came to either diversity, UH and other issues inequalities that we're facing in our society right at politics too. Very thoughtful guy, obviously a big job, and he does echo back a lot to his time at Columbia. For the full interview, download Bloomberg Business Week Extra wherever you get your podcasts. And that

wraps up Bloomberg Business Week's weekend podcast. Thanks for joining us. I'm Carol Masser and I'm Jason Kelly. Be sure to tune into Bloomberg Business Week Radio Live Monday through Friday, starting at two pm Wall Street Time. Catch us live well. Check out our daily podcast for the Ride Home at iTunes, SoundCloud, and at Bloomberg dot com. And you can get this week's edition of the magazine on newsstands now. We'll be back next week at the same time. This is Bloomberg