Bloomberg Businessweek Weekend - September 28th, 2019

big conversations, but it's also not just talk. It's action. People really sort of presenting their bona fides about what they're doing to change the world, whether it's around social responsibility, whether it's about the climate, or whether it's about just trying to figure out what's next in the world. Among the interviews you will hear over the next couple hours from the GBF as we call it, John Gray, the

president of Blackstone, Bruce Flatt, the CEO of Brookfield. Together Carol, they've got a trillion dollars in assets under management, and we've even talked to a queen. We did it, indeed. But first up, we're gonna bring you a wide ranging panel discussion with the CEO and chairman of Blackstone Group Steve Schwartzman. Of course, he's also a co founder of that firm, CEO and chairman of Bank of America Brian moynihan, and a non Mahindra chairman of Mahindra Group. Steve Schwartzman

kicked off the conversation talking about what he's most worried about. Jeez, there's a lot to worry about, you know, because you know, first of all, just stepping back from it, uh, you know, the social media and the Internet are making it very difficult for almost any government to function. Uh if you come out with a plan, you have instant uh mobilization of opposition to anything you're doing. Even makes it difficult for companies uh sometime with sort of this roving band

of opposition. Um. And and you know, financially, um, you know, sort of the you have a few weaknesses in the system. I think that European banking system isn't is uh strong certainly as the US, which is in great shape. You have um, private investments in the technology area which that we work uh. Um, you know, sort of non public offering has exposed as as being uh you know, really

uh pretty inflated. When when you when you have an industry that more or less marks up its positions, uh, you know, in a closed circle among itself, and then it pops out into the real world. The real world says, what are you thinking that? That's usually, um, you know, sort of a wake up call, but it's you know that that part of the world isn't big. That's that's a relatively small uh set um And I guess any of us on the stage, and then I'll finish, because

I don't want to dominating anything. When you have thirteen trillion dollars of negative interest rates, I don't even know what a negative interest rate is. And in other words, why would I take my money and give it to somebody and for the privilege of them holding it, I have to pay them like it's a storage unit. Um. And I'm supposed to get interest when I give people money. And as as interest rates go down, uh, most of those places that have those negative interest rates, it's not stimulative.

Does this negative rate environment that we increasingly see around the globe tell you that there's some underlying weakness that maybe we're missing. We know the obvious problems that are out there, but is there something more substantial? Well, I think Steve's point is right. There's the monetary policy decision to take rates as low as possible to h to

accommodate the economy, accommodate growth. And they're lower in this country than I've been historically, but they're still positive and other places are negative, and there's a significant amount of it.

I think there's a debate whether it actually transmits the economy because if you look in some of the countries where the rate structure has been negative for five years, the banks still have to pay consumer depositors interest because to these point, they're not gonna give us a hundred dollars and get ninety five back and think it's a great thing. And so I think there's a great debate. The economists will hack out, but the reality is its

showing a weakness and economies and armies. Probably more fiscal work done and more reform work done to stimulate those economies, and well, good luck with that, and good luck with that. The good news is in the US you already have an economy which is pretty flexible and work talent people, uh, lots of capital, deep capital markets, the banking system that restructured a set of rules that you can understand one law that covers an economy. It's the largest in the

world as opposed to multiple laws. And so you're seeing the US continue to grow, unemployments low and consumers continue to spend well, and so and on. I put that to you, or we had a breaking point where we may see something snap here? Or can we continue on, especially from a consumer perspective, in a nice upward, gentle trajectory. Let me start in a lighter note first, because when you asked Steve this question, but what's on your mind?

I do have a very weighty global problem on my mind right now, and that is I have a two year old grandson who lives in New York, whose father's Mexican American and speaks to him only in Spanish. So right now my major preoccupation is how to improve my Spanish so I can communicate with my grandchild. But if you look at it, that's a lighter note. But frankly, that to me is the real thing, that what is me about the world. You look at it from a

human centered point. When you try to operate in a hundred countries language communication, keeping the core of your business and the governance and the values of people is a major problem. So I'm looking at more as a I'm not really wanted about growth. I think we have enough locuses of growth to come up. I'm really not worried about consumer demand coming in from different parts of the world.

We just have to look around the world. All the focus has been on America, rightfully, but I think you're going to see an uptake and a lot of other parts of the world. And that's the CEO and chairman of the Blackstone Group, Steve Schwartzman, the CEO and chairman of Bank of America, Brian moynihan, and Mahindra Group chairman

A Non Mahindra. And what's really interesting, Jason, about these three collectively, We're talking about three hundred billion dollars in market cap and they employ some nine hundred thousand people around the globe. So when you want to really know what's going on in the world, these folks together it's a huge global footprint. So let's continue our conversation with Blackstone, Steve Schwartzman, Bank of America's Brian moynihan, and Mahindra Groups

A Non Mahindro. One of the things we wanted to know are we headed for a recession. Brian Mornihan waiting, First, if you look at all the consensus, you know, the thirty economists, and I talked to David. I said, look, there's nobody has a negative sign in front of any of their estimates. And so in the bottom five probably average, and the it's you know five point five for GDP

US next year and stuff. So even though people saying the probability is going up, because that's the uncertain the question is no ways predicting it is going to happen. The fear you have is going to your point, it's only ones day and what's going on? Will you get the consumer confidence to to deteriorate right now? It's it's come up, it's come down a little bit, and we get deteriorate if that starts to happen, that's the word.

You do not see that in your activity every day. Um, the the combination of housing price is still being constructive, which that part of the wealth is constructive, the stock market still being up, that part of their wealth is constructive. Their wages growing faster now than they have really since any any point of last eight nine years, the employment levels being high, so that's always the good news. The question is what breaks that? And that's what I worry about.

The the psychology of business deteriorating somewhat again high high, still very high, but tipped over a little bit. One do the one does a business owner convey to their teammates that it might not be as good for you this next year by higher wages, a bigger bonus, you more incentive plans, whatever, or you get to keep your job. We don't not see that in our our middle market. Loans are growing on a faster clip now and they were in the last few years. So it's all okay.

And that's the question that we said. And I think the fear could cause us to back up before the data will show you're there. So some of that fear and caution, Steve, comes from this dispute between the U. S and China. There are a few people who have done as much dare I say, shuttle diplomacy than you have between the leaders leaders of those two countries. You write about it in your book. Steve's book, by the way,

is on sale now. I don't know if anybody has heard about what it takes um, but we'll have that commercial in a moment. But you do write extensively about China in the book Your experience there the Schwartzman Scholars, your relationship with President she How does this get resolved at least to the satisfaction that the CEO s that that Brian is talking about specifically feel good enough to start spending money again. Yeah, I'll talk about that in

one second. But but just in terms of risk, Uh, I've always felt that, you know, the cycle when it comes to an end, won't do it uh from from normal you know, business cycle issues, because because that seems to be managed pretty well. Uh, it'll be some type of geopolitical uh type of incident or circumstance which which uh hits the confidence of consumers. It won't be over

production of goods and things like that. I could be wrong, but I've been thinking about this for a few years, and we've got enough of these major things that that could change people's attitudes. You know, where full employment uh you know, so people have a good situation, but their

behavior may change if they're scared of something. Uh. As as to China us um uh that's as it's an interesting situation because uh, basically driven but by the fact that you know, in the last presidential election, we discovered that that of Americans couldn't write a four check in an emergency. So so if you think about that, these are people who fundamentally don't have savings uh. And they

don't earn much money. Uh. And their their education American education has really slipped dramatically over the last thirty to forty years. And those those people are very unhappy. Uh. And and they they in effect are demanding some type of change. And part of that change happens when they don't when they don't get satisfied with domestic solutions. Historically, with populism, um, you get angry at some foreign entity. And China's the target. And it was pretty obvious that

it was going to be. And I talked to the Chinese about that right after the election, and they were not sensitive to that, and I told them, don't don't worry about it. We we didn't understand it either, uh, you know, which is why you know, we had a president elected that nobody thought would be elected except him. Uh. And and so we all learned something. I said, don't

feel bad. You know, you didn't have bad staff work, but now you know, and they they said, Okay, well, you know, if that's the case, we're going to have to adjust to China for four years has been growing faster than any major country in history. Uh. And so this is like whatever practices they have which in history when you're you know, sort of a we used to call them, you know, developing countries or underdeveloped countries. Uh.

Now we call them emerging markets. Uh. You know they in the United States did this in the nineteenth century. We hide behind terror falls, you protect your industries. Uh, you don't let foreigners in into certain things that you know, where they can compete. Uh. And and that world lives until you become a more mature country and then you integrate. Well, I think I think in China part of part of the interesting issue is they still think they're poor and

we sort of think they're rich. And their their GDP per capita is ten thousand dollars ours is roughly sixty. But when they started this sprint forty years ago, I think it was like four of person. So so it's been enormous progress, but they're there's still you know, sort of like one six of us. And now we're demanding our bottom and effect. Uh. And also European countries don't like they have similar problems, uh that that we're asking China to like become a more mature country and join

the rest of the world. Their attitude is we're still poor. So so okay, if we have to make adjustments, Um, it's it's not our favorite thing to do. What what do we do? And so what you've been seeing over the last two and a half years is the US wanting them, you know, it's sort of the leader of the developed world to come pretty far. And on the Chinese side, um, they're trying to figure out how far

and how fast they want to get someplace. So so so you know, the two countries got quite close, um in a at at which point the Chinese just withdrew they you know, they had agreed to a variety of things we thought, uh, and then they looked at the whole and they said, uh, you know, my goodness, let's

not do that. And now that's just starting again. And meanwhile, what's happened in this two and a half years is that the two countries have started um as a result of false starts and in a variety of other tactical stuff. You know, are are starting to decouple. We continue with our panel with CEO and Chairman of Blackstone Group, Steve Schwartzman, the CEO and Chairman of Bank of America, Brian moynihan,

and Anon Mahindra, chairman of Mahindra Group. And Mahindra was so interesting because we wanted to talk about the US China trade war and he's got operations in a hundred countries, but he clearly thinks of the world from an Indian perspective. Here's his take on the trade war. I see it

as a situation of enormous opportunity. I have to be mercenary, of course, absolutely because to be and I'm I'm just being truthful here that for a long time, it wasn't kosher for anyone in American policy positions to admit that there was a kind of conflict with China and that India in fact, could be one of the players in this game as a buffer against China. That was just no no. If you went to the Council on Foreign Relations,

nobody would admit that. I think it's now it's in the open, and I think President Trump has even made it more in the open. I mean, going to Houston and listening to our Prime minister, I think made it very clear what kind of alliance he had. I think there's nothing but opportunity for India in this and we have to play our cards right and see that we are viewed now as a very very appropriate ally for

the US as a buffer both in defense terms. Frankly, if you look at the number of defense exercises between the US and India, they're proliferating dramatically. Defense procurement from the from India is already burgeoning. We never used to buy the used to buy more from the Russians. And frankly, all the all the tenor of the relationship with India's right.

This is a democratic country, the country that values I p R. There's a country that has scale and growth, so there is profit for global companies too over there. So I think India has nothing but a unique opportunity right now, and we have to just play those cards right. And I think it would be a win win for both the US and for India. So I actually agree.

And having been with a bunch of CEOs with the Prime Minister's morning, all who are talking about their business expanding in India, it's been a natural recipient, and I think some of the bureocracy and things that were difficult to operate, they have been doubt what they can be improved,

and everybody knows. I think the broader context here though, is is you know, global trade in and if you go back and say, if the China US situation will take longer, the questions what can resolve in the interim, And this is where, unfortunately I'm not sure what happens given the politics than the situation this week to U S, m c A and things like that, which are critical

to get done. Because as much as India is a beneficiary, Mexico and Canada in a in a trade with US is a beneficiary in a sense or a way to operate. Let's make it simpler that wage scale in Mexico is actually lower than the parts of China. There's they could use the jobs. There's a lot of people can move to manufacturing there, there's already integrated manufacturing supply chains. Canada's a different situation. So I think to keep the US kind of moving forward, there are three or four things

to knock out. Everybody hopes for China US, but there are a couple of things to knock out first and one of them as a U S M C A. I just don't know politically if they can push it through, even though I think both sides seem to want it, and if they could push that through, that would be good and give more time to work I think on China, so Bran I want to stick. It's something you said in the context of the meaning that you had with Prime Minister Modi, which is clearly CEOs are stepping into

a brighter and maybe higher expectation type spotlight. We hear it over and over again. Do you feel a greater responsibility now, especially given what's going on in Washington, in London and capitals around the world, to speak out both on your own issues related to business but also social issues in the end of day especially our company has been around for two d and thirty plus years and so we've been around through all kinds of fun stuff if you think about it. But but the rounity is

our job is to produce profits and make progress. So much society needs to do and so the idea of the purpose statement by the b r T, the work I do that we all do with the National Business Council and the world economics form leadership for years. The ideas we have to have companies can do both produce a great profit and make sustainable to make progress on the STGs. And so I think all of CEOs agree

with that. And I so the attribute where people say we're speaking out publicly on an issue generally comes from the need on that second, but it also reverberates the first. If you have teammates working for you, and you went what we went through the last five or six years on Post Nightclub Charleston, Vegas, Houston, Parkland, and you had teammates in every one of the situations that led our team to say we ought to take a stand on something. It was not because we need to go out and

make some policy statement. It was because if you think about to have great teammates to make that profit you have to make, you have to protect. On HB two, which was a North Carolina issue about we had to come out because it was our headquarters town are people would not travel there and so well, people are thinking this is about you know, me or something. It's not. It's about we have to represent the two hundred thousand teammates that five or six hundred thousand people in their

families and ensure them well and pay them well. But also we need them to be six us well and to produce great profit and sustain progress on the STGs. And that and is a key. So let's continue our conversation with Blackstone Group, Steve Schwartzman, Brian moynihan from Bank of America, and Ann Mahindra from the Mahindra Group. This time around we hear from Steve Schwartzman addressing some of

the criticisms of private equity. Private equity industry is comprised of a lot of different firms and but basically what we do is leaving other asset classes like real estate aside. Um, we buy companies and we try and make them grow faster because when you exit, you get to hire multiple for higher growth uh and and to do that, you have to invest in these businesses. They just don't grow faster because it's in your interest. So you put more capital in them. Uh and you come up with good

strategies uh and you you drive growth. So when you own businesses, you typically need more people uh and and so um, this is sort of a virtuous circle. Uh And you know, from a financial risk perspective. Um, you know, we went through the global financial crisis, and private equity firms didn't didn't you know, have financial difficulties more than other kind of companies. So so so on the downside, Um,

the industry hasn't really created much difficulties. UM. On the upside, you learned typically for your investors who were pension funds, the regular people, they're the fireman, the government employees, the corporate employees. You may double the stock market indexes. So so basically this is a really good model. Uh. In the nineteen eighties. Uh, it wasn't so much like that

in the eighties. There were only a few firms and prices were so low in the eighties that you could buy something and just cut costs, uh, layoffs some people and you were successful. That world is just gone. With the kind of higher prices that you have to pay to buy anything today, you just can't be successful doing that. You you must grow your way out of uh, you know, the creation price and and so I think there's some leftover perceptions. They are also an occasional high profile type

of situation, whether it's in the retail business. But but you must look at retail generally and Brian would know more than I do. But retail has been with the disintermediation of the Internet. The number of retail companies that have gone busted are huge. The same way, you could get a private equity company that owns a newspaper that was in this political treatise that one of the candidates came up with, what's happened to newspapers? I mean, the

vast majority of them have gotten into trouble. So you can take one example and and make something out of it. But but just to give you context, right, there were sixty six There were roughly a hundred and fifty one million jobs in the United States. Uh. Sixty six million people change jobs in a given year. Right. US economy is unbelievable dynamic. The number of people who were fired in the United States was twenty one million. The number of total jobs in the private equity owned companies is

eleven million. So when you look at the massive amount of companies, where do you get those twenty one million people who lost their jobs. It's not from private equity. It's a very small part of the whole economy. So so this this argument, it is wrong. UH, and it's sort of pyramids, mistake on mistake, and I think there's there's an ideology that goes with it, and also terrible marketing on the part of the private equity firms. You have to give them a d H for not being

able to explain this. This is pretty simple explain what you're doing. So, because of where we are and all the discussions that we've had at this summit about climate and sustainability, I think it's fair to say that when we look back on this week, even this very newsy week, the star and I apologies to all of you, is going to be a sixteen year old Gretta Fundberg her statement about what the world is doing or not doing related to climate change. I'm just going to quote what

she said to the heads of state. People are suffering, people are dying. Entire ecosystems are collapsing, where at the beginning of a mass extinction, and all you can talk about is money in fairy tales of endless economic growth. How dare you that's memorable? Is she right? Are we not doing enough as governments and as companies to really face this and our corporate leaders at least and non listening.

I think they were. I was very pleasantly surprised to see the number of people who showed up at the climate events, the CEOs who signed up wearing that large, ungainly badge about the one point five degree ambition. That's not a pretty badge. So where that itself was not a fashion state, not a fashion statement. But people are committed, and you know, my I've had one statement I make about sustainability, and I've been repeating it with monotonous regularity.

I don't really intend to get into the debate of whether climate change is real, who is the guilty party, who has not done it? Has the West polluted? Should the West be paying and India only benefit fitting? Should we be getting money? I stay out of that. My statement is it's very simple. This is the biggest profit opportunity for business people in the next few decades. Why are you even me wasting time arguing about who's right who's wrong, whether it's a sixteen year old or it

is the president of the US. You know, frankly, somebody asked me the other day in a podcast. They said, do you have a message for governments and do you have a message for other companies? I said, yes, I do a little tongue in cheek, and I said to governments, I would say, please, don't fight climate change, don't invest in innovative technology. Let India do it. Let us get ahead of the game, and then you come in after

we've put ourselves right on the top. And to my fellow company people in business, I would say, climate change isn't real. Just stay out of the game. Keep arguing with the sixteen year old girl. We are making money at everything we've done in renewables. Let Mahindra Group go out, they clean up the opportunities. You come in later. Because to me, the point I was making was this is a few tile and we are just creating almost a

media created sensation of villain victim. And frankly, the winners are everybody because everything our group has done in sustainability has actually made money and the businesses we've started in the last five years are amongst the fastest going waste of energy solar. Why are we even wasting time on arguments? We agree? I'd agree that the time, the debate, the debate and arguments of what's going on scientifically and stuff

are just don't help. And I agree that, but the non yeah, the reality is we have to make progress, and we have to make a lot of progress. It costs about two trillion dollars a year. UH is the estimate for the environmental part of the STGs six trillion. Overall. All the charity world's eight hundred billion a year. The US government budgets only four trillion a years. So there's only no government's going to solve this, and no charity is going to solve it. Who's going to solve it

is capitalism and driving the change. So in a lot since two thousand seven to two thousand nineteen, we did a hundred twenty five billion dollars of stuff around the environment. In the next seven years ten years will do another three billion. That is you know green bonds. That is we're carbon neutral in twenty not five years from now.

We're carbon neutral next year. UM. It is solar installations across the country of India, solar installations across UH, the Prologes warehouses of the United States, is a wind farm financing. There's a tremendous business opportunity, but it's time for capitalism to come to drive it because that's where the money will be. And so it's how we operate as a company, and all of us have companies you operate and driving them to carbon neutrality and making that commitment. It's how

we then finance the build out. And it's the last part is the keeping and non mentionedance. We can't be in the western developed countries. We cannot be of a sort that we will not allow other countries to have the energy that they need to have to develop. We have to produce the right energy form that it was sustainable energy for all from the last two and a Secretary General where they figured out a plan and how

much it costs. That is the critical thing is we can't be arrogant in the West or developed countries and say hey, you can't have the power. We have to sit there and say we will get you the power the right way. And that that is where we really got to watch what's going on with coal and other things in somebody these ecoutent We have to provide the replacement. EVA cost us all money, but I think the business opportunity actually takes care of it. That goes back to point.

You can produce a profit and you can make the goals. And if you look at what we've done and this is this has become a large business force. And you know you asked about is greater right again about saying you're just focusing on money, I would just say, Greta, let it be about money. Don't make it about either, or you've got to dish that dichotomy. So the only arguments both. It's because she's making it sound like give up your ways of making money and what are you

about the environment. I'm saying the real power is not that, So she is wrong. I'm saying, be a businessman, you're showing us the money. There is money there, and the pursuit of profit and capitalism is in fact one of the answers to this solution. So I would argue with her if I met her, that don't make it so you know, black and white, that CEO and Chairman of Blackstone Group, Steve Schwartzman, CEO and chairman of Bank of America, Brian moynihan, and Ann Mahindra, chairman of Hinder Group, and

really a wide ranging conversation we had with them. We had a lot of fun, more fun maybe than people thought we would. It's such a serious discussion, but these guys surprisingly optimistic about the state of the world. That was certainly my takeaway. It was a wide ranging conversation. We talked about a lot of things, had some fun with these individuals, some great perspective on some of the troubles that America has certainly got on through its history.

Some of these companies who have been around for two hundred years, like Bank of America, what it has had to deal with over its lifetime and how it's still survived, some great perspective, and can hear all of it on our Bloomberg Business Week Extra podcasts. And one of the big themes, obviously of the event is that it was

all about looking at climate change. Certainly, the UN General Assembly address that issue as well, and so the conversations Jason, of course, we're saying we can address the concerns about climate change as well as run businesses and make investments. They don't have to be one or the other. We can do them hand in hand well, and a non Mahindra making that point very clearly, essentially saying this is one of the biggest opportunities we have before us. It's

something he's investing heavily in in the renewable space. Jason. One of the things that I really took away from the event, and of course we had Indian Prime Minister Modi. They're really making a pitch saying India is open for business.

But I do wonder in this time, when there's so much tension between the United States and China over trade policy, whether or not we're starting to see a shift in terms of where we might see manufacturing collaboration between businesses and looking at maybe the Indian market as as a

place to really open up shop or do more business there. Well, we certainly put the global in global business for him, as you said, with so many heads of state and world leaders who think about the entire planet, and Brucelett is a great example of that. He's going to have about five hundred billion dollars in assets undermanaged. That that's half a trillion dollars once he combines Brookfield with oak Tree.

That's coming up in the coming week. So we talked about Brexit, we talked about how the trade war is affecting what he's doing. But we actually caught up with John Gray. He's the president and CEO of Blackstone, so he's Steve Schwartzman's successor. Here's that conversation, just jumping into what feels like the big question right now, which is cautious businesses optimistic consumers. Help me understand. Is there a disconnect,

is there a lag what's going on? Well, I think what you're seeing is you've got some uncertainty in the world. You certainly have some friction from the China trade, You've got the Brexit situation, and you just have some geo political concerns that are making everybody nervous. Businesses are responding by pulling back a bit. You see that in manufacturing, industrial data, capital investment, and you're beginning to see that in earnings from companies. So that's one side of the equation.

On the other side of the equation, the consumers actually doing pretty well around the world, particularly here in the US. So I was talking to a friend about what I think of as the three threes, which are we have three point seven percent unemployment, wages are growing north of three percent, and home prices are growing north of three percent. So if you think about the consumer, they have a job, wages are going up, and the biggest assets appreciating in value.

And that's why you see this bifurcation. So I'd say, when you add it together, I think what it leads to is not a recession, but a slowdown in growth globally, which is what we're experiencing. And so how much does it slow down? And when are we in that now? I think we're in that now. It's hard to say. The good news is central banks have decided, you know, that they're going to lower rates and continue to stimulate,

which has helped soften the blow a bit. And it's possible that some of these issues like China trade or Brexit get resolved, which would take a little bit of this uncertainty away. I think as investors, though, you don't want to get too caught up in sort of the heat of the moment. You want to try to take a longer term view. So where are you spending money? I know your investors are asking you that every time they get on the phone with you. Where you to

playing capital? You've got five plus billion dollars in assets, Well, that is the big question. I think in this point in the economy, where you have slow growth, you also have pretty high multiples. Right the low rate of interest rates, it's created expanded multiple So you have to be cautious on where you invest. What we're looking at our places where technology is creating a lot of change and where

they're really in the path of growth. Industries in the path of growth, so globally and logistics, we've talked about it before. We've been the big buyer of warehouses around the world. Probably bought seventy billion dollars on the simple premise that goods are moving from physical retail to online retail. We're doing things around content creation as a result of the cost of distribution of media coming down. You want to service that industry software as a solution. Things migrating

to the cloud. We bought a big business that does things in the human resource area online um India another area that's benefiting from I T services. So I think as the global economy transform, even though the overall growth rate isn't that high, trying to find those industries and sectors that have the wind at their back is really important. So you a net buyer are you a net seller at this point across all of your empire? You know, I would say it's a bit of both. I wouldn't say,

you know, there's one clear path. I think when we find businesses that have stabilized and sort of our buy it fixed itsel at approach we exit. On the other hand, there are plenty of things that we still have conviction in and we hold. So you're seeing us sell, but at the same time deploy a lot of capital. We put out fifty six billion dollars of capital in the last twelve months, so we're still finding interesting things. I would say it's more selective and it tends to be

in larger situations. Uh thirty seconds to go real estate. How are you feeling, especially in the United States, residential and commercial? I would say okay. The headwind is that prices are high, multiples are high for real estate, the economy slowed. The good news is that supply is pretty limited and rates remain low. I think again, you've got to focus on where do you see better growth, So West coast of the United States, more technology, more job creation.

Warehouses again another area as opposed to retail, and then rental housing. The shortage of new home construction has led to strength and rental housing and single family homes. And that's John Gray, the president and CEO of the Blackstone Group, And what I liked about him is a little bit rapid fire. We're just trying to get so much done on that day, but basically weighing in on what businesses are thinking, what consumers are thinking, and essentially what investors

are asking, which is how us and and all that money? Yeah, exactly, But he does see the economy slowing, so it's interesting to hear his perspective on that. So heads of state interacting with big global investors. One great example of that Bruce Flat He is the CEO of Brookfield. They are about to combine with oak Tree and that will make them really Blackstone in an interesting twist, they're going to have about half a trillion dollars in assets under management

of their own. Yeah. Talk about perspective right in terms of what they're overseeing. Here's that conversation. So as you're moving around, not just this event, but around New York City, they're talking to a lot of heads of state, a lot of investors. It's a world of instability. It feels like fair to say, but how does it feel to a big investor. Look, I'd say politically many countries are up in the air and uh and and pretty extreme politics in those places. But on the ground, in business,

actually it's pretty constructive. Most countries of the world are doing okay, and UH. As value investors, we look for places where you can put money for a long term, you can make decent returns in the fullness of time, and UH instability sometimes brings opportunity, so you just need to think long term in these situations. Well, let's talk about those opportunities, because, as you say, maybe some of this uncertainty drives valuations down, because valuations have been pretty high.

It feels like for the past couple of years. Are you seeing that yet? Well not in in the in the developed markets, valuations are still high. So so our focus is special situations in those places. UM. But you know Europe is being driven by interest rates that are really low today. UM. India has uh UM a situation where the financial system needs capital, so there's a lot of opportunity there. In China, we're seeing more opportunities because of just the de leveraging going on in the country,

and that's a positive and it creates opportunity. All right, So you mentioned China US China trade. Obviously, top of mind continues to be how does that play through, if at all, into your investments or into your thesis about the world. So our our business is about UM buying real things, real assets. We buy pipelines, toll roads, real estate, renewable power plants, and and their local investments in every country.

So we're in thirty five countries in the world, but we're a local investor in every single country, So it's not Trade doesn't really affect on the margins. It does if it affects the country's economy. It obviously affects investments of effect, hits currencies, it affects your investment as a global investor. But we're on the ground investors, so trade

isn't as important to us. Do you worry as someone who has to think about the whole world of the implications of a decoupling between the US and China or does that just mildly change what the landscape looks like? Look, I'd say again, as a long term value group, Um, we try to find great places in the world which have rule of law, functioning systems, respect for capital, operate with standards that we can operate with. We like to go there, and we invest for long periods of time. Yes.

Does all do all these things affect us? Yes, in the short term. In the long term, not really. So let's talk about one specific local national situation, that's Brexit. You're a big landowner and in a big landlord I should say they're in London. Canary Wharf obviously has been a big project. You got a lot invested there. How does that play through? We do um, business has been

good since Brexit happened. Every day that this gets extended and nothing happens, fewer decisions get made, and that's not helpful for business. In the fullness of time. I think just getting something resolved will be a good thing for everyone. And London is going to be a center of commerce for a long time and we just need a We just need a solution to it, that's all. Do you feel like, uh, folks are making or putting off decisions, you know, people who would be leasing from you or

putting off decisions. Look, we had one building. Brexit happened. It was least it opens this month. It's a percent least at the rents we thought. So people make decisions. It takes longer and right now, why would you make a decision in this month, so you'll wait. But people do make decisions, they have to. Business goes on, life goes on, and when you think about the infrastructure of

possibilities that are out there right now. That's clearly on the minds of a lot of people here in the guise of sustainability and where those sorts of investments are happening. You mentioned renewables. How has your strategy evolved even over the past few years in terms of the types of infrastructure deals you might be doing. Yes, so in renewables, where the I think the largest private owner of renewables in the world. We've always believed in it. We were

a large hydro owner for many decades. Uh in the last ten years we've pushed in wind and solar and will continue to do that because we think it's it's for the future and and and why it's different today is that it's actually economically feasible to do it without without subsidies. Therefore, we're putting a much much more emphasis on that. Infrastructure in the world, though, is going to

go and go into private hands. Governments are indebted, they need to provide services to their people, and more and more, and every country will be different, but more and more infrastructure will be funded by private by private entities, and we're one of them that can um put capital together

for that. You've got a lot of big investment partners around the world who commit hundreds of billions of hundreds of millions, I should say, ultimately, and in the hundreds of billions that you've collected, what's their mood right now? If you can generalize across the big institutional investors, you know, I just say that everyone in the world is thinking about and especially people with large sums of money. UM. Japan went negative ten years ago, Europe to just gone negative.

What that means is that there's only one place to get returns in sovereign credit, and that's in the United States. And that's obviously been pushing the yield curve UM down on the back end, but increasingly people are needing to put money into alternative to that, and it's just pushing money into credit. It's pushing money into alternatives, and that is going to keep happening UM going forward. If interest

rates at this level. You mentioned credit, you're about to combine officially close the deal with oak Tree that combination. What should we expect in the near term in terms of the opportunities that that presents. Well, we've announced closing. It's on Monday. UM. We're excited and thrilled to partner with Howard Marks and Bruce carshon their team. They're going to run the business. We're gonna help them in any

way we possibly can. We think it's an added benefit to our institutional clients to offer their products UM and UH. And in the world we're in where UM low rays are pushing money into alternatives I think are general private equity, real estate, infrastructure, franchise will benefit and and now we have a credit offering to add to that. That's Bruce Flat, CEO of Brookfield Asset Management. So Jason, Uh. You know, it's interesting because Brexit certainly has been in the headlines

this week, and you guys talked about that. We talked a lot about it, in part because they've got a lot at stake there in London. They're a huge landowner and landlord and obviously they're looking far beyond that as well. As interesting, Bruce participated later on in the day in a panel with former President Bill Clinton and the current president of Columbia because he's a big asset manager in that country as well. So this guy's got the world

on the string. Obviously, Jason, many leaders over at the Global Business Forum, but we also caught up with some royalty. We're talking about Queen Maxima of the Netherlands. She is the u N Secretary General's Special Advocate for Inclusive finance for development Well, and what I found so fascinating about catching up with her was this notion that we talked about developing markets all the time, but in developed markets, this notion of equality and inclusion is just as important.

Here's that conversation. I feel like this is an important issue financial inclusion, because I do feel like in a world where there are it seems like a lot of inequalities being left out kind of of the financial framework and being left behind. That's a big deal that really changes your outcome in life. Absolutely. And you know, when I started doing this job, you know, everybody thought it was only for developing markets, and it's also for developed economies.

I mean, we're talking about financial health is we're talking about sort of financial products that will really help you invest in your future, protect yourself like jokes in the case of a divorce or a death of a family member, but also you know, to be able to sort of go around the daily cashlow necessities of lives. Of course, the needs of an American city will be very different to a Nigerian citizen. Um, but it is extremely necessary.

Is something that is universal. It helps you improve your income, it helps create jobs, it helps you get better education and say for that education have access to better health and also you know in general helps the economy and improve your income. So um, yeah, very good. Well, and it's important that you're here in many ways at the global business for them, because it feels like you need obviously the buy in as it were from heads of state and governments, but you also really need the buy

in of corporate leaders as well. Tell us about the response you've gotten from the the corporate side around this issue. It's very good that you say that you differentiate, you know, sort of basically have to get the buy in other governments and the regulators because without the good regulation environment and without some help sometimes of the government, um, it will not be possible to make this true. Not at the same time, this can only be done by the

private sector. I mean, this is not cr this is a business. It's just we have to make it make sense to make this a business also to giving it to poor people. So for that is very important to actually have innovation and partnerships and thinking the business in a different way. And that sense, technology has been a very important role. You know, we're not talking about having a bank branch, you know, going into somewhere rural Ghana to do this big forever. Yeah, you would never be

financially sustainable. So today we have so many people with a mobile phone, but they don't have a bank account, so we could actually reach them with a bank account just in the phone and they can actually make transfers, they can say, they can see how much they've saved, you know, have an insurance, make the claim on the insurance. Oh, with the little power you have in your hand, and

that has really made a big difference. Now we see for example, in Kenya, I mean a huge amount of people twenty one million people have now a mobile account and that it's done, We're done by a telecom operator. So that is one private sector that actually do a huge work for financial inclusion. Banks have actually done a huge and financial inclusion. So I think that the private

sector is essential to actually make this come true. And the one thing that we do see is that we need to have dialogue between regulators and innovators in this financial sector arena so that you know, we can actually make this happen, because otherwise it's not gonna happen. I thought it was interesting to Bob Iger of the Watersney Company was here at one of the panels and making this.

You know, he was asked about, you know, doing business in different countries, and because I don't really think of countries, I think of cultures, and I do think about looking at a particular area, thinking about the people, you know, very individualized in terms of maybe how what kind of financial systems they need. And I'm assuming that you're you guys are looking at that and trying to figure out what makes sense in a different or specific region around

the world. Now, absolutely, if you look at India, for example, I mean, yeah, that's a host that's a huge market, so you can actually have a lot of competitors, so you can have a little systems running, you know, alongside of each others. To actually have a scalable, you know, sector in very small countries, probably a lot of the public goods or of payment systems have to be common because not one company will be able to afford to

make such a big investment. Because a vaseball market, if you have, want to have a competitive so one size does not fit all, but we do know certain things and the one thing that we always have to have is that the regulatory framework is prone to innovation that actually speaks to companies, so that you know, they can readjust innovation, um the regulation to innovation. And at the same time, all these new technologies have fantastic opportunities, but

they also have new risks. The data privacy breaches, they could be exclusion from algorithms that actually exclude more to include. You could actually have cybersecurity attacks. They need of actually have very interoperable systems. They need to have ideas that are digital and unique and biometrical. So all these issues need to be taught between the public and the private sector in order to make this sort of sustainable not on the financial time in the private sector, but also

from the consumer perspective. And that's Queen Maxima of the Netherlands so impressive. She's been working on this for a number of years. This is not a fly by night assignment for her. She's really gone deep and she's there every year at the Global Business Forum, engaging with not only her fellow world leaders but also heads of companies because they've ultimately got to be a big part of

the solution. Well, one of the major themes of the Global Business Forum is all about public private partnerships, and she approaches financial inclusion from that perspective, who she can work with, who she can bring together to get this done. One of the big corporate leaders at the Global Business Forum Carol was Carlos Brito Burrito is what everybody calls

him inside the company and around the world. They've got a global footprint, of course, and from the perspective of sustainability, he's very practical because what he says is no water, no beer. Here's that conversation. So Carlos, here at the Global Business Form we're obviously taking a huge amount of out sustainability. Where is the rubber really meeting the road

for you? What are the numbers that you can share with surround how that manifests through a B N Beth Well, great question because we often say it because it is the case that sustainability is not just a part of our business, and add on it is our business. Sustainability is our business. Reasons very simple. Without water, there's no beer, without healthy farming, in quality farming, there are no raw materials, and without communities that are environmentally sound, I cannot get

those materials from. So for us, stainability has always been front and center in our business. For example, the importance of water is on the main raw material nine beers water, So I mean it's very important for us to guarantee um source UM that's uh, that's of high quality, that has constant availability, so it can place assets closal sources uh. So for beer, water has been some thing that's always

in our mind. And most of the water that we consume is not really in the four walls of our brewery. It's in the egg business and bigger culture what we draw the raw materials from. That's why we have a big connection with the farmers we've always had, and more and more with technology, trying to exchange best practice given your type of soil, your microclimate, your kind of seed. One went to water, went to harvest, went to seed.

Because those things make a huge difference on the impact or not that you have on the natural sources are you're using, and has it changed sort of where and how you spend money from a CAPEX perspective in terms of going after those sustainability goals that you've set out well within the four walls of the brewer. There's a lot of technology that has allowed us, for example, in the last ten years, to reduce the consumption of water by up for leader of beer produced, So that's huge.

On the field, it's much more about things that we've that have always been part of has always been part of our business, like seed development that are more resistant to this kind of microclimate combination with soil. But it's more about best practice sharing. It's more about being closer to farmers. So it's sometimes in some of Morgian markets, more about training farmers so they go from subsistence levels sometimes to a commercial level and they get more yields

from the same acreage that they that they manage. All Right, talk to me about the global consumer right now, because it feels like businesses overall, if I had to generalize or a little bit cautious, we've got a trade war going on, etcetera. And yet the consumer globally, certainly here in the United States, feels very healthy. You are at people's table, you're in the bar, you're in the restaurants. How does the consumer feel to you? Well, if you look at our half one, this year has been a

very good year for US half one. And if you look at our main countries you asked, Brazil, Mexico, China, South Africa. I mean in Brazil constumers have been a little under pressure the last three or four years now getting better. South af Coast a little bit under pressure, but that was not different than two or three years ago. But in general, because we're a global business, we see, uh um, a good environment for our business. You know,

it's not without challenges, but that's always the case. So we don't see that what we read sometimes in papers the other things that our production is very much localized. So a lot of these things about restrictions about trade, about the flow of goods that doesn't really necessarily affect us, always affects a little bit. But n of what we

produce we sourced locally. We brew locally, we sell locally, so it's a bit different, right, So we're brewers, so we're always paying attention to what's happened to our consumer. We're not economists, so I don't have an opinion on some of the trade conversations. But if it's good for our consumers, we're happy. And what are they drinking right now? What's different? Uh new We talked about or you talk about premium is zation. Yeah, so what does that actually mean?

Does that translate into top line of bottom line? Well, that's very interesting because in the old days you would expect privialization to be happening in more mature markets, more developed markets. Today, primeuanization is a global phenomena because middle classes surging everywhere, especially the Morger markets. And when people you know, go from um this kind of income to this kind of income, they change habits and they start affording things that they couldn't afford before. And that's the

whole idea of primutization. Primetization is a latecomer to beer when you think about wine, spirits, cars, technology, so many of the things primetization has been there forever. In beer is a more recent phenomena. But because it's recent, it's too long, long way to go. So that's the good news for beer about primumization. And it's everywhere, morgor markets, more mature markets everywhere. And how much are you developing

that in the house? How much of that may come from m and A activity, Well, now mostly come from organic. We have an amazing uh full of global beers. We have Corona, we have Star dwell, we have Budweiser or Flagship Rent and those brands they travel well, they complement the child in terms of positioning, and they sell an improvement price. And that's pretty much how we built our company.

It was always this idea of let's build brands that commanded premium so we can have the kind of margins we have, so we can afford and attract kind of people we have, so we can continue to not only do that, but continue to reinvest in their business organically and also from time to time in organically. Let's talk about Asia. You pulled off an i p O there after one false start, you got it out, second biggest i PO outside of Uber, only behind Uber this year.

What does that tell you about that market and what does it tell us about the strategy going forward. Well, our business and Asia is an amazing business with the number one brewer, especially in the premium segment in Asia overall in China with the number three in volume, but the number one profitability by a wide margin. And that's because the premium brands will sell their commanded premium and

horror margins. So the idea of the I p O has always been to establish and to create a local champion that could be a vehicle for other consolidations and other things we could do in Southeast Asia mainly. Um. And that's done now, it's in the process shares or start trading next Monday. Um And yeah. So we're very happy to be where we are. And so is that a playbook that you might use in other places around the world, say in Africa, maybe the you know, the sort of model that you set out in Asia or

is this a different sort of thing. No, that's very much a mirror of what we have in Latin America. We had Latin America for many years in which we had a local champion and BATH that's listed controlled by US and m Bath was an amazing vehicle to talk and uh get the deals with local families in different countries and really expand within the region. We think that same magic could happen now in Asia. And when you think about, you know, part of the reason to to

do this deal was to pay down some debt. How far along are you in the in that process and what are some other moves you might consider to to keep on that track. The main reason for the prelay was ready to create the local champion because as we said from day one, we don't need that to get to our target of being not that to be below four times by the end of the next year, but we felt we needed a local champion there to mirror

what we have in Latin America. But of course the proceeds that were getting five to five plus bidden will be used of course to to pay down that, as with the proceeds that will come from the Australia sale around dollars. Got it. Uh, One last question for you when you think about the cannabis market. You and I've been talking about this for a couple of years. Now, tell me where you are and sort of testing uh that out. You've got a relationship I believe with til Red.

How is that going? What do we expect to see next? Well to this day, what we have is this, we have a relationship joint venture with til Ray in Canada and for Canada only because that's where it's legal. At this point, we're only doing R and D. We're not

commercializing anything. We haven't made a decision to commercialize anything, so only trying to solve some issues in terms of beverages, non acal beverages infused mainly with CBD that we're studying, but we haven't made a decision yet to go to commercialization. But again it's only for Canada where it's legal, where you can do R and d um. We're still waiting for the beverages to be legal, so we cannot do anything, not even in Canada. But it's not for the rest

of the world, not for the US. Only Canada, you're seeing any impact on the sort of blooming cannabis market on beer sales at all. It's amazing enough stweet, it's too earthy to call. Well, we're following that, trying to understand the occasions, consumer needs and all that, but it's too earthy to call. We still have we still need more data points and more time to understand all the different interact that's Carlos Brito, chairman and CEO of a

b in Bev. And what's interesting too, in this time of so many trade wars, it feels like in heightened trade tensions, I mean, they do a lot of their business locally, right, so that's a way of avoiding it, right, and they really do have to think about the ecosystem literally in figuratively, the land, the agriculture, the people on the ground who are actually producing their products. And that wraps up Bloomberg Business Week's weekend podcast. Thanks so much

for joining us. I'm Jason Kelly and I'm Carol Masster. Be sure to tune into Bloomberg Business Week Radio Live Monday through Friday, starting at two pm Wall Street Time. And I can't catch us live, get our daily podcast for the ride home. Get that at Bloomberg dot com or wherever you get your podcasts. And you can get this week's edition of a magazine. It is on newstands now. We'll be back right here next week at the same time. This is Bloomberg