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So wait, what is up with the ECB? The global mond market losing some steam after notching its longest winning run this year after the European Central Bank raised its inflation forecasts after delivering a widely expected rate cut. It made us be like, yeah, wait.
What okay, it was a historic move. It saw the ECB slashing borrowing costs ahead of the FED meeting next week. Officials, led by President Christine Legard, said that while the inflation outlook has improved quote markedly, they'll keep policy rates sufficiently restrictive for as long as necessary.
All right, with what you need to know? Why you should care? Back in studio with us Bloomberg International Economics and Policy correspondent Michael McKee, Mike, so widely expected, but it seemed like, why do you cut rates when you think inflation is going up?
Well, the couple of things. One they think that the inflation path is becoming more clear, that they can make these revised forecasts with more confidence that that's actually going to happen, that over the long run, inflation will come down to target. The other thing they point out is that the real rate, as inflation comes down, goes up.
So the argument today from the ECB management was that they are basically just keeping policy as tight as it was because inflation's come down a lot, and even though they cut rates, the restraint on the economy has gone up because real rates are higher. Okay, does that make sense to you, Well, it makes sense to me. This is a debate that Paul Krugman is waiting into it in the New York Times today, saying the Fed's behind
the curve because the ECB did the right thing. You are going to have people on both sides arguing, and kind of the bottom line is twenty five basis points isn't going to make a difference one way or another. It's a bit more about the psychology of the markets and how they take it and what's going to happen
in the future. The ECB today, Christine Leguard, was very cagey about that, which is why everybody's calling it a hawkish cut because they didn't make any promises and they did, as you said, talk about keeping rates high for longer. The FED, on the other hand, is probably not going to do anything, but they will come out with a new dot plot and that will set the direction for the markets in the US.
Okay, well, speaking of that, this is ahead of the US Jobs report tomorrow, the CPI report next Wednesday in the US, the same day that the FED finishes up its meeting and gives its update on economic and rate projections, which you just referred to. Does what we saw from the ECB today mean anything to fed A officials.
Now, both of the ECB and the FED have the advantage of being the central banks for huge economies, so they really are able to focus on their own economies and do what they need to do for them. If you're in a small country, you're going to be affected by either one or both because the big trading partners, they're going to be affecting the value of your currency. But in this case, it didn't, It didn't really, it
doesn't really have an impact. The FED and the ECB will do what they have to do for their own economies.
All right, So now we want to get into a little bit more when it comes to payroll because we obviously have the monthly read tomorrow at eight thirty am Wall Street Time. Mike's going to stay with us. We want to bring into the conversation Bloomberg News Economics reporter
Rich Miller. He is in our Washington DC bureau. Rich, You've got a great story that's out on the Bloomberg and it gets into why US payroll gains may not be as robust as reported, What gives and what is the data that points this out?
With me a second. It's a little complicated, but.
We like complicated.
Good, good good. There's something called the Quarterly Census Unemployment Wages. It's basically a compilation of that the Labor Department has of unemployment insurance tax records filed by businesses. This covers like twelve more than twelve million businesses as opposed to the Monthly Payrolls Report, which is a survey of about
one hundred and nineteen hundred and twenty thousand. So this, this quarterly report, which is commonly called among the geeks as qc W, suggests that the Monthly Payrolls Report last year was overstated by about sixty thousand per month. That means, you know, the labor market may not be quite as sturdy as j Powell thinks, as Joe Biden hopes, and that kind of raises the stakes for the Fed as it tries to sort of balance cooling off the labor market but not killing.
It rich the QCW, you know, the new piece that the data are eventually used in annual revisions to the monthly data. Right, does the dispersion that we saw with the data released earlier today match dispersions that we've seen in other quarters and other years when it comes.
To the data traditionally, if this holds, and the qc QCW data is also occasionally revised, but if this difference holds, it would be one of the biggest revisions in the payrolls data that we've seen. For example, last year. Last year, there was again there was a lot of concern about a big downward revision in payrolls for the imperious year. As it turned out, the revision wasn't all that big.
It came in less than twenty thousand, so it's still only the Department will give sort of an early estimate of how what it thinks the revision will be in August, so we're still a number of months away from that, and that's when we get a sort of final tally about how much the numbers were off.
Bring I want to bring my king because no disk of the qc W, and I like wonky and I like nerding out here on economic data points. But Mike, we've had a lot of conversations with you. I feel like this doesn't come up. Why is it coming up?
Because the data just came out yesterday. A preliminary data was released in May.
So it's new data sets.
Well, basically what they do is they release a report every quarter for the previous quarter, so well actually for a quarter and a half back because the May data and the data we got today incorporated the final quarter of twenty twenty three and then the first quarter of this year, and we have not had such a huge as Rich was saying, such a possible huge change. But as you know, last year there was some of this worry going around in the economics community and it didn't
really prove out. And by August it is possible the current QCW numbers could get revised lower as well. But what we get in August is one giant number. So this is the whole amount for the year through March, and then they have to divide it up, which we won't get till the next February. Month by month, So you could see some of these months where we got three hundred thousand jobs, you get two hundred and forty thousand.
That's gonna not look too bad. But if you had something like one hundred thousand jobs and you lose.
Sixty thousand, you would say fed your pond.
Or they could say that particular month you lost every job and it was negative, and that's Bloomberg Economics is saying that's a possibility, and they're all worried about that.
So we're in a blackout period ahead of the Federal Reserve meeting next week.
I've been counting you down for the last.
Month, and we're finally there, Carol, We're finally there. Sorry, but Mike, you I mean you talk to Fed officials all the time.
This is data.
How do you think they're taking this into account ahead of the policy meeting.
Well, I'm sure they are, and I'm sure they've done the math and tried to figure out for themselves exactly what it might mean. But as we said yesterday earlier this week, the head has to deal with the numbers that it has at the time it has them to make their decisions. This could be another input, but you know, is it going to come through in which case maybe you wanted to cut rates or is it not, in which case you're maybe moving too soon. Because this is just an if at this.
Point, Rich, how do you kind of think about it against what the Fed might do? And also kind of I feel like there was I think a story on the Bloomberg turn al today from our Bloomberg Economics team. It just about kind of the continuation of like seeing softer and softer economic points, whether it's on the consumer, on the labor, Like we are starting to see some softness, not necessarily everything falling apart, But so how are you
thinking about this? This new survey the qc e W against kind of the broader backdrop of what we are seeing anecdotally are actual.
I mean, it just I mean, it just adds to the confusion, right basically, Uh, you know, we've got all these conflicting signals. I mean, the trouble is they're trying to cool things off, but they don't want to cool them off too much. So the thing is, you know, you're constantly asking you a question. Are things slowing? First, Yes, they're slowing, but are they slowing too much? Oh, we're worried.
We're worried. So I mean, and this just you know, puts one nugget or one sand on the side of we're slowing too much, but there are other sands on the side of you know, this looks like a soft landing. I think it just makes it much more difficult, and unfortunately, you know, raises the risk that you know, the FED can make them, you know, a mistake, either that it's you know, it cuts too soon or cuts too late. It just makes their job, which is already done difficult even more more difficult.
What I want to ask Mike and come on back in. It's like, why couldn't the Fed okay, oops, maybe things are slowing down faster. Do fifty basis points versus a quarter? Is it such a shock to the system, Like if they feel like they're getting behind, what's the difference of doing something like that versus like a quarter of a point gradually and really forecasting the head?
Well, if they did feel that the economy was falling off cliff, they would probably go fifty. Not inconceivable, they could go.
More and they wouldn't have to wait to a meeting.
They they went fifty and seventy five in two thousand when the tech bubble burst, But they wouldn't surprise with that because then the problem becomes for the markets, what do they know that we don't know? I mean, how bad really is it? And obviously during COVID it was really bad, which is why they were to seventy five basis points, But there were millions of people dying, and I mean, it was very opt to everyone that the FED could do that, and they sort of telegraph that
they would so they could do fifty. And that's one of the arguments they make for holding is it's easy to cut rates and stimulate the economy, and we know how to do that, so if we're behind, we can catch up. Now you can argue about that, but that's their their argument, their feeling.
Hey, Rich, I just want to wrap up with the idea of something that you flick out at the end of your piece of undocumented migrants in the way that they could be or not be accounted for in this data what did you find with the sources you spoke with when you're reporting this out?
Well, I mean, this is all too pretty confusing. But some people argue that the QCW data because it's you know, companies reporting effectively to the IRS on their unemployment insurance taxes that they might not want to if they have undocumented workers on their payroll, they might not want to say anything about that and they and they wouldn't anyway,
they wouldn't be covered by the unemployment insurance system. So therefore that the argument is that unlike in past years when we didn't have a big surgeon immigrants, uh, these QCW data are basically understating what the true level is. But that you know, that's open to debate and yet another thing that the FED is wrestling with.
Yeah, talk about wrestling, right, it's like kind of conflicting. Rich, Thank you so much, really appreciate your reporting. Rich Miller, economics reporter at Bloomberg News, joining us there in our Washington, DC bureau. You bet, Rich, Thank you, Mike Ricki, thank you so much.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm. Eastern Listen on Apple card Play and then Bright Auto with a Bloomberg Business app, or watch us live on YouTube.
New Yorkers who liked to debate a lot of things and count congestion pricing is one of those topics. It can get kind of heated when you bring up the topic. Some are definitely cheering New York Governor Kathy Hochele's last minute decision this was yesterday to definitely indefinitely halt a congestion pricing plan. Others remind us of the possible consequences of that move. I have to say, you know, when it crossed, I thought this was kind of a doune thing.
I was kind of shocked reading my phone.
I think shocked is a good way to describe, and I think way a lot of people felt, including perhaps our next guest simply put, New Yorkers maybe headed for the summer of hell. The story on this among our most read today on the Bloomberg terminal. Here with more Bloomberg News New York Politics reporter Laura Namius, along with Michelle Caski, who's reporter too here at Bloomberg. Both are
joining us on this Thursday afternoon. Okay, so Laura, I just want to start with you and remind everybody how we got to this place, and also give us your reaction to seeing this news yesterday morning.
I think it's fair to say that everyone in New York and even further beyond, was totally shocked by the governor's decision. Everyone I spoke to yesterday, people in politics, well known transit advocates, said they got no heads up about it. They were totally totally surprised. And this came
about It's been many years in the making. I mean, the idea was first proposed decades ago, but it was passed by the legislature and signed by Governor Cuomo in former Governor Cuomo in twenty nineteen, and then there've been a series of things that have delayed environmental assessments, you know, various federal approvals that needed to be passed and signed. And it was scheduled to start on June thirtieth.
Or The totally gantries right or in place. They are the streets of New York City.
The signs are in place, Yes, truly stunning. People at the MTA were stunned. Hard to find anybody who knew this was going to happen before she officially made the announcement.
Michelle CASKI, we want to bring you. You're a reporter to here at B LIBERG. You've been out on the streets and it sounds like you've been talking to folks about this. What are you hearing?
Well, definitely, the surprise is definitely real. And now the issues what does the MPa do next? And they were relying on they were counting on a billion dollars a year coming in from congestion pricing. So the issue is how do they pay for their infrastructure? Now?
Well before we get there, because it's like I said, New York's left to debate things. There's two sides to this story. Let me, lord, let me go back to you for a moment. I mean, why was she maybe right to pause? I mean we were talking with our Michael mckeeth. There are people where this cost will be a problem, an issue in an environment where things are costing a lot more.
Right, So that was the rationale that the governor offered in a short video message that she released yesterday, and recent polling had found that although a majority of New Yorkers supported the measure before it was passed in twenty nineteen. In recent weeks and months, a majority of New Yorkers don't like it. I think the numbers were something like sixty three maybe sixty eight percent disapproved of.
It, a growing number of New Yorkers. Yeah.
But the caveat there is that there's all of this social science research and people familiar with similar polling plans that have been enacted in other cities in other countries all found that the polling was really negative right before something is implemented, because you're about to pay the real cost,
but you aren't seeing the benefits yet. So there was a hope among people in the know that people would get used to it and they would start to like it more like you know, an analogy as the smoking ban in New York City was really people didn't like that before it took effect, and then eventually they grew to love it.
Move on to the summer of hell. We can't wait to talk about. But to be fair, like we Tim, you bring this up off in this poll of like, stock market doing well, economy is still doing well, tight labor market, and yet so many Americans don't feel good
about their own economic plight. Michelle, come on back in here before we get into what the MTA has to do, I mean your thoughts on right, like, for some Americans, this is another additional cost to you know, a pocketbook or wallet that's already strained.
That's definitely true. As much as you know, there's millions of people a day who use New York City's transit's just you know, charging most drivers fifteen dollars to enter into midtown Manhattan. That really does add up. For some people who have no choice but but need to take a car for whatever reason, they have to take a car and not just maybe once a week or twice
a week, but maybe five times a week. There was you know, I recently, number of weeks ago, was on the East Side, Midtown east Side, and I was at a medical facility and the people there, the nurses and the staff, we're talking about how some of them who live in deep in New Jersey, they have to drive to get to that location. And you know, some of them were wondering if might they might even need to look at other jobs because that's fifteen dollars a day, five times a week.
Does that up?
Well, Michelle, what about the other costs associated with this? Not the cost that would be the result of congestion pricing. But the cost now on the MTA and to the writers who might be stuck underground on broken subways with signal malfunctions, late to appointments and late to work, the loss of productivity from a crumbling subway here in New York City. What about that cost?
Yeah, it's definitely real. People are already, you know, they're feeling it already. The system is more than a hundred years old. And you know, back in February, even the MTA had to suspend entering into new contracting work because of the uncertainty with the congestion pricing revenue given there have been these legal challenges against congestion pricing, and so they couldn't promise work to contractors because they just really
couldn't move forward with that yet. And you know what that means is they can't already, you know, before Cochl's decision, they were stalling on really necessary work to help modernize the system, to fix it, to repair it, to get it. You know, the thing about the signal upgrades that helps the trains, that really decreases delays, helps the trains run faster. That's improved service, right, there.
I got to say, in the last few months, we've all had those moments and then we had some tapings and it's like nobody's here because we just can't get here. We're just kind of stuck. Laura back to Governor Hokeel and you know how they make up the shortfall? Now, if they're not getting money from congestion pricing, what is the governor proposing that they can do?
She is proposing, and this also astonished people, replacing the revenue from the congestion tolling program with a payroll mobility tax. Our understanding is that it's something similar to a tax that was enacted in under former Governor Patterson and then partly repealed in twenty ten because it was so unpopular. It actually ended up resulting in or was blamed for the losses of a bunch of Democrats in the state
Senate in suburban districts in twenty ten. And the legislature, although they're discussing this right now, the last day of the legislative session for this year is tomorrow. Very unlikely they get anything passed by tomorrow, or a bill drafted or even a discussing. Yeah, it's it's politically could be a really heavy lift to enact a totally new tax to cover the shortfall. So we'll see what hap.
We talked about with Michael.
Guys, I'm sorry if I could just piggyback off of Laura there. Yeah, So the businesses in New York City and seven surrounding counties have been paying this payroll mobility tax for a few years now. Just what's really really surprising is that last year the state lawmakers actually increased that tax on the largest New York City businesses, and so it's just it's surprising that the legislature is actually has an appetite to at least consider raising this tax again.
This is going back to the business community again to help offset the loss of the contest and at a.
Time when you know, story after story we see businesses moving out of the city and make you know, moving employees to other states. Michelle, real quick, the budget shortfall that the MTA will see this year that it was already relying on, where's that going to come from?
Yeah, definitely. So the if if state lawmakers, if they really do pass an increase on the payroll mobility tax, that could then offset the loss from the congestion but if they don't, they don't. And also remember the deficit that the whole now is in and he is capital plan. So this isn't their operating budget, which you know, keeps the lights on and and you know, pays their workers
and all that good stuff. This is the capital budget, which pays for you know, all the infrastructure updates, infrastructure needs.
Yeah, kind of make some fixes and stuff. Laura, definitely, Laura ten seconds. Is this really ever not going to happen in New York City or who knows? We don't know.
The governor hasn't said that it's totally over, but she definitely delayed it. It is limping along on life support right now. But the blowback that she's receiving from some people in the legislature and advocates.
I don't know.
We'll see the next couple of weeks should be critical.
All right.
We'll be watching Laura Namius, New York Politics reporter here at Bloomberg News in studio, Michelle Caski, reporter at Bloomberg News, out there on the streets with the latest on congestion pricing.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Apple Car Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
I'll give a little I'll give a little bit my love to you.
Well, Kell, you might recall the story from The Bloomberg's Channet Lauren last month about Bob and Ellen Thompson, a couple in their nineties who are donating one hundred and twenty one miss billion dollars to expand a scholarship program at Bowling Green State University in Ohio.
Right, great, sounds incredible. Absolutely. There are, however, some strings attached to make sure recipients earned degrees. According to the terms, eighty percent of the students receiving support must graduate within four years. Otherwise the public school team there has to foot the bill for each extra semester of tuition.
We've got with us Rodney Roger, the president of Bowling Green State University, joining us from Bowling Green, Ohio, as well as our own Bloomberg News higher education reporter Janet Lauren, who joins us here in the Bloomberg Interactive Brokers Studio. Jan I do want to start with you. We know the story, we've talked about it, but I do want you to remind everyone about the donation and give us sort of the nitty gritty of the strings that are attached here.
Well, what I found remarkable about this donation there were several things this ninety year old couple had met at Bowling Green in the fifties, I believe graduated. Long story short, Bob Thompson entered the business of an uncle, a road paving business at the time when Dwight Eisenhower decided they needed roads paved in the United States. Interstate Highway don't do.
But anyway, you know what they say, there's gold in the.
Streets is Interstate Highway Act. And Bob's business was quite successful, and then they sold it in nineteen ninety nine for over four hundred million dollars. And they became noteworthy because they gave about one hundred million dollars to their employees, you know, often to help them start get start retirement funds, which is also amazing. And at the same time, they heard from their alma mater, Bowling Green, that they just hadn't had a relationship within almost fifty years, and at
a football game, this relationship was rekindled. University of Michigan crushed Bowling Green, but there was a nice relationship that came out of it, and they started donating money and eventually they decided they wanted to create this scholarship program to help kids finish schools and in four years and Bobompson pressure tested this program, you know, that was a term he used in business, just to make sure the school could handle getting this huge influx of money and
to make sure the kids could finish. And then over time he had some great investments. They were actually bond investments, and they had more money, and he met with President Rogers and wanted to hear about his long term goals with the school.
Would he be.
Sticking around and they decided they wanted to give more money. It has to be spent within the next fourteen I think years, get these kids through. It won't be an endowment. It has to be spent interesting and the school has to match it. And if the kids don't graduate within four years, Bowling Green will pay the tuition for each semester for the students who are still sticking around after four years.
Well, Rodney Rodgers is with us. So Rodney, first off, just what this means for the school, the direction of your school, the future of your school.
Well, this gift is certainly transformational to Bowling Green, but more importantly, it's transformational to the over six thousand students that it's going to serve over this next decade plus years. It allows us to serve modest so students from modest income families who want to get that college degree, minimize their debt and be prepared to go out and do some amazing things in our communities. So it means a lot, especially to our students.
So why is it so hard to finish for kids to finish college? There was a statistic like only sixty two percent graduate within four years.
You know the challenge that we have today as the cost of education has increased because of decline in investment from many states across the nation, and there is an escalating cost any students, especially students coming from more modest income families. They work two three jobs, they need to borrow, They worried as we all do, about the level of debt, and so I think all of those sorts of things kind of get in the way of completing college in
a timely way. So that's one reason this program, which is really a three way partnership. So, as Janet had mentioned, the Thompson Foundation is providing some funding. The university needs to find ways to match that funding. It is not a free college, Bob and Ellen made it clear. This is a free college. We want the students to have
some skin in the game. So while the majority of tuition is covered by this scholarship program, there is about ten percent that is covered by the student and the student has to do twenty hours of community service each year to pay it forward. So everybody's got a little bit of skin in the game here. As Janna mentioned, if they don't graduate in four years, the university's on the hook to cover the tuition until they do graduate.
So we are highly motivated, the student is highly motivated, and we certainly have found this to be very effective, increasing that graduation rate during this pressure testing period to nearly ninety percent four year graduation.
I love the skin in the game. I think it's really smart.
So the students also get a coach to work with them as part of the requirements, And how does coaching help these students finish within four years, perhaps finding jobs or internships or making sure they get their right classes so they can finish in four years.
Yeah.
An initiative we've started here at the university called Life Design, and it's an initiative that's really available to all the students, but the Thompson Scholars absolutely must take advantage of it because it's part of the requirement. What it does is, using design thinking principles, we help students navigate. We empower the student to navigate this collegiate experience as they transition here.
Many of our students here at Bowling Green are still first gen students, thirty five percent of our student bodies first generation students, and those students especially sometimes need a little bit extra support on how to navigate. But what we do is give them the toolbox to navigate it
using design thinking principles. And a big part of that is prototyping, beginning to think about the kind of life you want to lead, the kind of career you want to want to lead or to be involved in, and how do you prototype those experiences, which is all about internships and co ops, and so it feeds nicely into the transition from college to life as.
Well, President Rogers, what's the typical four year graduation rate at the school right now? How long does it typically take students to r.
Yeah, our four year graduation rate is closer to fifty percent.
So that's going to be some serious work to ensure that these students. Do you graduate in four years?
Yes?
Well, what are you sorry? What are you budgeting in in terms of students not being able to do that?
Well, from a total dollar amount, we assume there's probably five percent of this group of students that we may need to have some extra skin in the game. But I'll tell you Tim what we've learned honestly the pressure testing of this and this is why we are willing to be held accountable for this type of philanthropy. And that's what I think is a key story here. This is very much about accountable philanthropy and why we are
willing to be accountable. During the pressure test, we found that we can act if we help take away the financial challenge the student has they want to graduate in four years or less because they want to begin their career.
I do have a question though, and I'm wondering in terms of is this going to change, like the admissions process of who you accept because of the importance of making sure these kids get through in four years.
Well, we are a selective admission university to begin with, so we only we're admitting students who we believe can be successful at the university. So they have hit an appropriate kind of academic admission standard where we believe they can be successful here. This program basically takes away the majority of the financial need though, and by taking that away, students can focus on their collegiate experience and.
How does it help in terms of figuring out what you want to do, What is a class path, what courses it take, so you're not wasting time in your major.
And President Rogers, we only have about thirty seconds left real quick.
The Life Design initiative, from the first time they step on campus, they meet with a design coach. They lay out what we call the Falcon flight plan, which is basically where the Falcons that's our mascot. The flight plan really takes them through that four years and they learn how to navigate that from day one to thinking about what's surprised at the end.
We're looking forward to checking back with you and Janet on this as these students progress. Rodney Rogers. He's a president of Bowling Green State University, along with Bloomberg News Higher education reporter Janet lauren Er. Thanks to both of you.
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All right, everybody, we've got on just about eighteen minutes left in today's trading session. It's kind of an interesting day. I feel like we're getting ready for the monthly jobs report tomorrow, so the economy US economy is certainly front of mind. And this, of course, we've got a FED meeting next week, so watching what they might say about the future rate environment to come. So I'm curious what our next guest has to say.
Yeah.
Martin Escobari is co president and head of Global Growth Equity at the private equity firm General Atlantic. He joins us here in our Bloomberg Interactive Brokers studio. The firm has approximately ninety billion dollars in assets under management. When people hear General Atlantic, they think private equity. So talk to us about the public equity side of this, the growth equity side of this.
Listen, We've been doing growth equity for forty three years, and what growth equity is is late stage venture capital. It's investing in high growth companies. Our companies are growing thirty forty fifty percent per year. Majority of them are already profitable, and we're helping them scale to the next level. We take them public and we hold them while they're public. But the ninety percent of what we have in the portfolio on the ninety billion that you talked about is
still private. Yeah, and in about ten percent of what we do is public because we took them public most often.
How has that activity been in a higher interest rate environment over the last couple of years.
It is the worst of times and the best of times for growth equity today. Unpack that why it's the worst of times because the IPO markets have been shut down effectively for two years. That hasn't happened since two thousand.
Some say it's not going to necessarily come back to the levels that we've seen just because companies don't need to go public.
It will never be as euphoric as twenty nineteen to twenty one, just like it didn't become a fork as a fougus nineteen to one. Since ninety eight two oh one, it was too easy to go public immature companies.
When publics are messy, it was.
Messy and not good for the industry, not good for those companies. The IPO market will come back, but the minimum is scale to be public is dramatically higher, and that is good for the industry, and that is.
Good for the company.
What does that mean? In other words, you mean like profitability metrics, Like.
That's predictability, predictability, profitability and a minimum market cup. In our view, the idea you can be a successful public and trader company with a market cup of under a
billion dollars, it's not consistent with the world today. I think in our mind you have to be three four five billion dollar market cup with a free flow north of a billion, to have equity research coverage, to have institutional support, and to have the maturity to be able to communicate with the market in a way that's understandable,
and have enough liquidity. Is that small moves in supply and the man of stock don't plummet or cause a massive high class the one we were seeing and you were just commenting with the other.
Company, Martine. In the growth equity space at General Atlantic. Are the exits in your world typically IPOs or could they be other types of exits sold to another private equity firm for example.
That's a great question, thank you, Tim. If you take the twenty year view, fifty percent of the time we're exiting to a strategic or to another private and typically in a control transaction.
That's a lot.
Fifty percent is in the public markets. That's the average, and the averages, you know, is always deceiving. In twenty nineteen to twenty one, it was eighty percent through the public markets because the markets were very welcoming and as you said, messy and disorganized but easy to find me very receptive. Over the last three years, eighty percent is to strategics. On average, it looks like fifty percent, but the day to day flooded cats a lot.
Wow, that's a lot. I am curious though, you said about the growth your portfolio companies are seeing growth of thirty to forty to fifty percent. I'm assuming that's a year over year year year year every year. Is that continuing? I'm just curious if there are any kind of markdowns that you're going to have to take because of kind of a reset when it comes to a higher rate environment.
There was a big risk reset in valuations. So the multiples we're being asked to pay today relative to what we were asked to pay in twenty twenty one sixty percent below. Okay, we've reset to a new reality. Some would say it's overcompensated. To the downside. The growth, the engines of growth which we can talk about what's driving the growth in the portfolio, are undimmed and remain extremely strong.
So when I say it was the worst of time we were talking about the difficulties in getting going public, it is the best of times because the engine of growth, which is driven primarily about technology, is alive and well and we're not seeing it, with rare exceptions, any degradation in the growth of the companies.
Martin, When you talk technology, you know, Tim and I talk about this all the time. We have a guest, I mean, technolog is a big bucket. What's the technology where you are seeing that thirty forty fifty percent growth that you guys are investing in.
If you take a step back, we believe we as a growth equity are benefiting from three revolutions, and it's indirectly answering your question. The first revolution is digital transition. More industries are doing more of their interactions with their customers and they're with the suppliers digitally. It's a trend that's twenty five years in the making, now accelerated by AI. Truly transformed. That's one driver of growth and it has to do with the transition to a digital world. The
second revolution is healthcare innovation. The healthcare system today is not functioning correctly. Are in the US, for example, and we're global US about forty five percent of what we do in the US healthcare spen has gone from twelve percent of GDP to twenty four percent of the GDP before the baby boomers get into the really expensive phase of their life. From a healthcare perspective, the system which pays for services is doing too much service and not
enough health. It is only with technology can we get better service at the right place, at the right price and improve healths spend while reducing costs. Technology has a role to do. At the same time, we believe we're in the golden age of biology there's a whole revolution
happening with biotech. Forty five percent of the disease burden of the world has a biologic solution in clinical trials somewhere in the world, and we're in the very early indians of that revolution, which is got twenty years.
Left, so it's not tapping into DNA, but you're talking about companies that already have some kind of solution that they're on the early stages, on the early stage, because we've done a whole story on twenty three and me who believe that, you know, we're hoping to kind of write monetize kind of the mapping of the genome.
But it just kind of has that's about therapeutics to address Alzheimer's and cancer and other diseases in parkinson that probably over the next twenty years we'll figure it out, and that's super exciting. That rate of innovation now again turbo charge BII is going to happen faster and for people my age is great news. Couldn't come longevity.
What's the common thread that sort of unifies your investments, Like if there's one characterization of a company that you could make it says, okay, well, every one of the companies that I've invested in and for growth Equity has this.
One thing entrepreneurial, innovative, global.
Yeah, so size doesn't matter, So.
We start really small. We'll write checks of twenty five to fifty million dollars of a company that could be growing very faster with a small base. But we try to find people who are having a part in one of these revolutions with a mousetrap. That's interesting, it's generating economic value. It's it's a mousetrap that is defensible meanings, it won't be eroded over time, and it has a team that is ready for the mission.
What's your success rate?
So we lose money three percent of the time to some extend ninety seven percent of the time, we get at least our capital back. Ten percent of the time we have a blockbuster outcome and ten percent of deals generated about half of our richard And that's been true for decades. And where to reflect what are the common characteristics of those ten percent they have? They share a couple of careths. They're going after very large markets.
Just got about fifteen seconds, go ahead.
Okay, large markets, great business model and good team.
Sorry, yeah, I got it. Yeah, you can work with us. I didn't want to have you cut off. Martin. Thank you so much. Look forward to checking in with you again. Martin Escobari he's co president, head of Global Growth Equity over the private equity from General Electric, joining us here in General Atlantic.
Wow.
Ge.
Sorry that was from the past.
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