2018 is Ripe for a Big Unexpected Crisis, Eurasia's Ian Bremmer Says

His top risk for two thousand and eighteen, and we're honored to have with us in this hour the seventies six uh Secretary of the Treasury of the United States, someone you will know his service with President Obama. Yes, a Massachusetts Democrat, Jacob Blue joins us the morning. Jack Blue as well Ian Bremer. I want you to give the first question to Jack lu There's too much to talk about now. What is How would you frame the

nation's challenges our risks this year? As you speak to Jack Luke, Well, we were talking a little bit before the show started about the chaos, about how much it is the It takes a very long time to make things work, it takes a much shorter time to break them. You know, Jack's very worried about, you know, as someone who was Secuary Treasury and and spent so much time working so hard right to and and finding that Washington is sclerotic and you can't make policies happen. You can't

move the needle for people. Right. But if you now have a geopolitical order where the principal actors are trying to break it. The Russians want to break the geopolitical order, the Chinese wanted new geopolitical order that goes towards them. The United States is not interested in providing support for the old giopolitical or how much does that chaos worry Jack? I mean, I want to go back to something calm John Farroll like Brexit is sort of a calmer discussion.

But Mr Secretary, I want to get that. Please go ahead, excuse me. If you look at the risks facing the world, and I read you know, the Eurasia Report, I think it identifies many of the of the key risks. The thing that underlies so much of it is chaos. Um It's the unpredictability of key leaders. It's the lack of a north star with the United States stepping back in so many ways, and it's this kind of destructive policy without anything constructive to take its place. And that's true

on issue after issue here in the United States. I think that you know, you look at markets over the last year, the calmness of markets, the enthusiasm of Marcus almost suggests that there's been a decision to look beyond all of this chaos and uncertainty, because what can we do about it? But then when the moment comes, when something happens that is a surprise, it shouldn't be a surprise.

I worry about binary kind of changes. I want to cut to the January Chase greg values report this morning was shocking of how compressed this month is in Washington. I want to go back to the beginning of your career with Joe Mowkley of Massachusetts, who is the most basic of politicians from another time. What does your Democratic Party need to do to provide leadership within this chaos? What do you wish from Mr Schumer from Miss Pelosi

and others? Look, fundamentally, Democrats are not in charge right now, so I don't think it's fair or or realistic to look to Democrats to lead the way out of this. You have an administration that chose to make policy in a very, very one party way, did not include Democrats

in any of the conversation. Now they can't probably rally their own troops to do the basic business of running the government, making sure we don't default on the debt, making sure children don't get thrown off of health insurance, all kinds of things. They're gonna be looking to Democrats to help. I think the challenge is going to be to truly work together. And truly working together doesn't mean coming with a fatal company and saying we need your vote.

Truly working together means going back and doing things that you wouldn't have otherwise done to reach a consensus around some kind of a reason. Will compromise. Reasonable compromise is the basis for working together. We're not seeing any of that coming out of the White House. Sexually. You've called this legislation dangerous, this tax bill. What is this dangerous? Look?

I think what if you look at the tax bill um, what it does is almost the exact opposite of what anxious and angry voters were calling for in an election just a year ago. You have people who are worried about where did they fit in an economy where technology and trade and globalization seem to be changing all the rules that they grew up with. And what we need is we need training, We need education, we need infrastructure.

We need to invest in the kind of workforce of the future that gives people the confidence that they have a place in it. What we've seen is a tax cut that spends money we don't have to have very concentrated benefits for global corporations and the top one percent, and it's leaving us broke so that we cannot deal with these fundamental problems. So we're farther behind in actually making progress. And I fear that the next shooter drop is going to be an attack on the most of

all horrible in our society. How are we going to pay for the deficit caused by the tax cut. You're going to see proposals to cut health insurance from poor people, to take basic food support away from poor people, to attack medicare and social security. One could not have made up a more cynical strategy. And the people are going to reject things that otherwise are good when they don't work for them. So, you know, free trade good thing for the world, for global growth, but people rejected if

they think it doesn't work for them. Technology obviously a good thing, but they rejected when they see the governor's work for them. And what Jack is saying now is that on the back of this extraordinary tax bill, if you're going to see cuts for the average people, their response is going to be vastly greater rejectionism of the establishment and political polarization, and the Democrats and Republicans are

both gonna happening issues. These issues sextually did not arrive o a night with the election of President Donald Trump. They've existed for a long long time. The United States has been spending money it hasn't had for a long long time. I guess my question is why is they sendy different and what we've seen before. First of all, you know, I've been in office in several different periods, and I've spent three years running the Office of Management Budget.

In the Clinton administration, we run a surplus. We fixed a problem. When I came into the Office of Management Budget. In the Obama administration, we went from a deficit of almost ten percent of GDP to three percent of GDP. We've now consciously, intentionally as a government, made a decision to add substantial amounts of debt at a time when the economy doesn't need fiscal stimulus. What it needs is targeted investment and the things that people need for a

better future. You know, the the risk of this tax bill is both a further disenchantment with institutions and if you look at what the report gets to this, the kind of rejection of institutions. How are people going to respect institutions more when they realize what this tax payer with And if you're just joining us now on Bloomberg Radio and Bloomberg Television, Jeck lou and Ian Bremer, let me set it up in terms of Boston, where it's going to be thirteen below zero in Brockton, I think

on Saturday. Ian Bremer, you grew up tough in Chelsea, and when you're living fat large in Weston or Wellesley Hills, you know where Chelsea is. How would your mother do it today in this environment in Chelsea? Could you have gotten to tulane in this mill you today? I didn't. Let's be clear, I didn't grow up top. I grew up getting my askt h and Chelsea is slightly different. If you look at me, you understand why. But I'm

good for radio. I I think that today my mother would have voted for Trump, or she would have maybe voted for Bernie Sanders. There's absolutely no way she would have voted for a mainstream Democrat Republic and my brother voted for Trump. Um, there there ain't nobody else from my neighborhood that got out of the Chelsea projects that you know is now talking on Bloomberger Global And I think that it's precisely that environment environments like it all

over the country that are saying this isn't working. Then what does your party need to do to gain dominance in the Chelsea's a Wisconsin or Minnesota where you lost the election. Look that that is a good question. Um, what you're talking about used to be the base of the Democratic Party, and we need to find a way to communicate with people talking about the things that I'm talking about. I think he is right. You can't win by saying trade is the whole problem when that's not

the whole problem. You have to talk to people respectfully and explain to them what it is you're gonna do so that they can have a piece of the economic pie going forward. You know, Look, we have a lot of problems that if we didn't have dysfunctional government we could have made more progress on over the last couple of decades. I mean, it's not as if any of the things that I'm saying we need to do are

either rocket science or particularly part of the ideas. We've had a government that's been incapable of working together, and that dysfunction is really a problem. It attacks the core of our democracy. We look at the top Risks of two thousand eighteen with Dr Bremer, and we're honored to have with us the Secretary of Treasury, Department of the United States, of course, Jack lou with us. Uh Jack, I want to talk about eighties six. You were with Speaker uh Tip O'Neill at the time as we crafted

bipartisan legislation. We're nowhere near that now. Paul Krugman, in my Chart of the Year in the New York Times talks about how different it is now because we're a more open economy, subject to the whims of all that money coming in from abroad. Can this tax reform or tax cuts, whatever you want to call it, can it work in a modern international fiscal system and financial system. Well, there's almost no way to compare to what happened at the end of UM. They're just they're just so different.

First of all, the economy is different. UM. You know, we're we're right now at a period where we're nine years into a recovery and we don't need fiscal stimulus, and instead of paying for the tax bill, we're creating huge deficits. So that means that whatever macroeconomic benefit we get out of a little bit of stimulus, it will probably speed the pace of monetary policy change and take

away to benefit over time. I think if you look at the content of the bill, in the basic rule was do no harm, don't make the system any less progressive, and if there's going to be a change, make it more progressive. This bill went the other way. It makes the system more regressive. I think if you look even at the things that are within this bill, the cynicism is so in contrast to the way it's being described. You know, the corporate rate cuts do very little, if anything,

to encourage investment. The rapid depreciation the expensing of investment expires after four or five years. So the provision that they put in for business that actually could lead to some more investment is temporary, which means if it's extended, the bill is even more expensive. The tax cuts for individual fade away over time. This is it's a taking time bomb in terms of the debt because it costs one and a half two two trillion dollars on its face.

But if the provisions that could potentially do some things to help middle class people or stimulate investment or ended, the cost goes way up. You cannot run a fiscal policy by spending trillions of dollars you don't have at a time when the economy is doing well. That's when

you need to do some fiscal repair, not harm. And when you speak to its companies on a diving BSIS and like you do here in the United States, and they worried about the tax bill or they celebrate in it, because I sense they're probably quite pleased with what they say. They like the markets, they like the global economy, they like the tax bill. They may not like Trump personally, but I would say that unbalanced. They're reasonably happy with

most of what the Trump administration is doing domestically. They're not happy with what Trump's doing internationally. They're not happy about the potential protectionism and trade issues. They're not happy with the likelihood that the United States is going to get in bigger fights uh internationally, and they also want a consistent message, right, so the idea that they can they kind of know what they can count. They love access, So I mean, you know, there was a lot of

complaints in the early days of the Obama administration. The CEOs felt like they gave a lot of money and they weren't getting a lot of the FaceTime, the paper play that is traditional American system. They certainly feel like they're getting a bunch of that with this White House. But I do think that the CEOs are starting to get unnerved about a global order that is not as likely to benefit Western multinational corporations. And that's not something

they necessarily blame Trump for. In fact, to the extent that in we see that Trump is out there pushing much harder on China, I don't think it will work well because if you do that, you want to be doing it with your allies, not by yourself. But the average American corporate has been kind of itching for a tougher line policy against the Chinese for a while because they all feel like it's becoming harder and harder for them to compete in the Chinese marketplace against Chinese state

supported corporations. The heart of your pace today is this vacuum that's being left by the United States reluctant had him on and the way that China would like to fill it for you, Secretary Lou, the message that Ian just spills out the Corporate America, Actually, this is what they've wanted for a long time. They've wanted a hot line, a tougher line on the Chinese and the barriers to entry that they say in Chinese markets. Is this a

good approach? If this is what Corporate America ultimately wants on the international stage. In Shanna more specifically, First, Corporate America has had a kind of division within itself about how to deal with this issue. We used to beg companies to confront the Chinese government directly, so that we weren't just making the case on their behalf, but they'd

be there validating it. They wouldn't do it because they were afraid if they went to the Chinese government and said we're being blocked by the things you're doing, that there would be actions taken against them will be punitive. So it makes it harder for the government to make your case if you won't make it for yourself. That

was a constant challenge. Um. I think this vacuum is something that corporate America ought to be worried about, and frankly, all of us who care deeply about liberal democracy and free market capitalism ought to care about. The two go together. If you start to see free you know, the pillars of liberal democracy start to erode. The world does not have better place for free market economics. And that's a risk. It's a risk right now because if we create a vacuum,

others are stepping in. I actually don't blame China for seeing an opportunity. I think that China's aggressive use of the opportunity will probably limit its success because it scares some of its neighbors, like in Australia, which right now is torn between an economic poll to China and a political poll to stay with a hundred plus year old alliance. The tragedy is that friends have to go through that calculation.

That shouldn't even be. It shouldn't be that a country like Australia has to think about is the United States my stable friend. That's the scary part. Just like a big national security of you precisely on the decision the Juckulu. Thank you so much for joining us today. Greatly appreciate it. Look forward to speaking to you through the year. He's a former Secretary Treasury of the United States. We're looking,

of course at talking to Dominic Barton. He is the global managing partner of mckenzy and he leads the firm's focus not just on the Montreal maple leafs. I'm winding you up, Come on, guys. He leads the firm's focus on the future of capitalism. We joined, of course by darm As. We sit here at the URAGA headquarters on Fifth Avenue and dom I want to pick out one of the themes from URAGA groups report and it's protection is um to point zero. What does protectionism two point

zero mean to you, DM? Well, I think that that risk that they've pointed out as a very key one for us to be thinking about this year. And I think about NAFTA. What's going to happen with NAFTA and March, Whether you know we get a revised NAFTA, I'm not sure We've got Brexit that's sort of trundling along um. These the problem with trade deals is when they go the wrong way, it's a race to the bottom. Everyone then sort of looks inward. And that's the thing that

worries me the most. Um So, it's NAFTA is the big factor on the horizon in the in the next three months. But the other things that worry mere the non tariff trade barriers, which which Ian Bremner and the others point out in the report. This is the localization requirements, the labeling that's put in place, these these non tariff barriers which make it more difficult to be able to

have global supply chains and have trade DOHM. Last year, the investor community was consumed by these kind of conversations at the beginning of this year, at the beginning of the year, they did not get paid to worry about them. In fact, they got paid not to worry about them. With the performance of emerging markets, etcetera. Do you worry that as we come into people are conditioned to ignore these risks because focusing too much on them last year was not a rewarding exercise. That So as we come

into is that a risk? Yeah, I think it is. I mean I do think that as as Jack Lewis saying earlier on a program that you know, the markets or businesses have to sort of just keep forging ahead despite sort of chaos. If you will, you have to keep forging ahead. The problem is if if one of the underlying assumptions doesn't work, then you can have a big problem. It's it's the binary notion. It's one or zero. It's not a smooth probability curve. And that's the part.

I don't know what else you can do. I think you have to keep just forging ahead. You have to keep driving it. But you you better also have a resiliency plan in place to say if uh this, if trade is actually going to be stopped in some particular way or brought backwards, A am I prepared to deal with that? Yeah, And we can tell with the accents that you're decidedly Canadian. I believe of a British Columbian persuasion.

But but I look at where we are, and we're mentioning earlier leadership like an ice hockey and that and we can take the Trudeau's there was Trudeau senior, and you and I remember the emotion in the day to day tobacco of that maybe the calmness that Trudeau the younger has brought to Canada. And it comes down to people, what does business want from President Trump? I think, you know what, what I think business leadership looks for as stability, a set of policies that are going to actually help

deal with issues. It's a something Tom You've you've talked about before adult conversations which I really liked. The fright Just here's what's happening, Here's how we're going to try and deal with this, and let's be honest about the real challenges that are there, because there's a lot of them. Um, And that's what businesses. You know what, what what frightens I think business, if I might say that is, is chaos, uncertainty, things that we were not expected. I think telling the

truth about what's going on. What are the things we need to be prepared for. What are the downsides we need more of that? Do you believe And I'm saying this from your academics as a Rhodes scholar, and I'm also saying this from all the research and business dealings of transactions, the daily communication of McKinsey group. Do you believe in trickle down economics? That's a deep that's a

very deep, deep question. I mean that when the temperature goes that's what they have to get some more coffee here on that. But but I you know, I am I have to I think there's some elements have trickled down, but there is nowhere near enough trickle down to deal with an issue. And I one thing I just want

to put on the table. Over the last thirty years, the top point one percent of US households have increased their wealth by fifty point one percent increase by that means the top point one percent of households have more wealth in the bottom that in a time of that time of change. When you get that amount of inequality that's going on, trickle down isn't happening. It is trickled down. Part of the debate, the discourse in the United Kingdom, absolutely, I mean it's part of a shot of the political

debate worldwide. I think at this point the economic disparity between the haves and the haves not you focus on the future of capitalism. What's the future of capitalism When the focus increasingly is own wealth inequality zone, Well, the capitalism is going to have to morph because we know in from history when the system revolts against it as

a pretty ugly demise, right, and pitchforks. And I'm not suggesting that that's going to happen in but the trends of increased inequality are are there, and technology, which I'm a huge fan of, is actually a driver of that. You've got increasing returns to scale, right, a very few number of people can create massive amounts of wealth. You get this, as I said, the the what technology does is you know you've got you can have a consumer base of over two point seven billion people in your

in your consumer base. What we have to start thinking about is our traditional institutions that we have to help people have the chance to enter that system because capital and has never been equal. I don't apologize for inequality. What I apologize for is inequality of opportunity. Is the conveyor belt there for people to have the chance to be able to participate should they desire to build the

skills to do it. And that's what's happening. With the world moving faster and faster with with increasing returns to technology, you're going to see increasing tension on that which is going to lead to more populism and uh, and to what I would call more chaotic type government. As you look at the political debate right now, though, do you see a debate around the equality of opportunity or the equality of outcomes? Because right now I sense it is

a debate almost exclusively around the equality of outcomes. People not happy about the outcome the place, they are not so much about opportunity. Yeah, I agree with you. I do think more of the focus is on I have this,

they have that. What's going on? The challenge I think is we you know it's going to get worse, and I think what we have to start looking at is what are the ways that we can ensure that everyone has the chance to do what one book I read over the Christmas Break Janesville, it's I had to take sort of antidepressant stuff for every chapter. It's just a very second story. Okay, you you are the elite of the elites at Mackensey Group. I love going to your

sure and Davos. It is every stereotype. What can people like mackenzie and Company and the good people, the smart people that have worked their butt off for Don Barton to shake their hand and say welcome to McKenzie. What are you going to do about Janesville? What are you gonna do about opioids? What are you gonna do about

the headaches Cenator deportment of ohio has. That's a really good push, Tom, because I think one of the worries I have is people like me sipping champagne talking talking about Jamesville and the world's problems or what don't I write an op ed and that's my contribution. That's just not good enough. And I think what it means is

that in your organization. So in McKinsey, for example, we have a very significant effort called Generation, which is trying to help unemployed youth get jobs and get it quickly, in between three to seven weeks. And this isn't an advertisement. I'm just saying it's something we do. We don't talk about a lot. We have to do this, and part of it is because we are also at the thin edge of the wedge or the tip of the spear on productivity. When companies are restructuring, we're often there, so

where are those workers going to go? So we have a very significant effort on reskilling. How do we help companies and organizations to reskill workers who are who are who are losing their jobs to be able to get new jobs. What are we individually doing to make a difference in the communities that we live in don Barton with us? Who's with McKenzie and it is a mackenzie that does consulting to companies linking strategic and tactical theory.

But also they have carved out through good work over the last decade, the mckensey Global Institute, which is just first rate research. I can't convey enough the printed the value of the printed edition of their different forty and sixty page essays, which is the one you're most proud

about coming out this year. What are we gonna look for from m g I I think to one is the is reskilling the whole issue about how we're going to prepare the workforce the in around the world but also in the U S and other other developed economies to prepare for the technology disruption that we're in the midst off. That's going to be well, let's go right there right now. We've got an America of elites, we know who they are, and we thank you for listening

to Bloomberg surveillance. We've got another group striving their part of the economy. They're doing the economy. And then, as Jeff Sacks and Columbia says, there's this large body of people that have just been left aside and they're really not part of the American discourse anymore. Is that a government system that jump starts m Is it a business responsibility? I think it's all of our responsibility. It's I think government,

but increasingly has to be business. And a person I've talked about before is Randall Stevenson at A T and T, who has, you know, is a arch capitalist, if I might call it, that believes very much and shareholder value and so forth, but has undertaken one of the most significant reskilling programs I've ever seen, hundreds of thousands of people being given the opportunity to retrain to be able to deal with the digital world. And I think that's

something that business has to do much more of. If we don't take care or think about the societal impact of the work that we're doing, we won't have the license to operate, and government can't. It's just not capable of being able to deal with some of these issues. I'm not saying that we should go into education or you know, well, but there's things we can do here. Here's and I I mean, I know Don Bart that wouldn't I'd never see you the Jenny cremail or Amulsa

Golden nail at a bar. But if you're at a kind of bar that serves Jenny Creemel or Mulsa Golden nail, Michael was here helping us with television or a Utica club, fine beverages. Those people go, that's all great talk, but what's the program to jump start that. America can't seem to figure that out, where, for example, Germany seems to

have the right calculus. Yeah, Germany is. It's a great example, you said, even not only in terms of the apprenticeship programs and vocational schools, but even what they're doing with their employment centers. Their unemployment centers are not just for when you don't have a job. You go there to say, what are some of the skills I'm likely going to have to train for while I do have a job

to continue to have a job. That's being proactive, And I think that's because there's a very good there's more cohesion, and you've got business, you've got the unions who are also supportive and we don't have those. I mean, we've atomized, is there? I believe the right phrase the unions, haven't we Yeah, we have, we don't. We just don't have it. There's no there's no voice for that group um and

except through populism. In the last ten years, corporations have had the labor power and we haven't seen wage growth. We all know the story. When does that act change? Do you do? I mean, we had a major ceo a company, folks in the news who told us two, three or four years ago, one day he realized the bottom of his pagride couldn't pay the rent. They literally couldn't get to the next month. Is that going to shift? Do you do? You people see legitimate wage growth across

the middle deciles of America. I think it will come, but it's very slow incoming. And I think what's happened is actually the again, we've got this increasing polarity, so you've got, you know, a lot more low paying jobs and then a few very high paying jobs. As we're working through the system, you know, the middle class in the sense is being gutted. It's it's it's it's shifting between those poles mainly to the lower side of it,

you know, not to get into philosophy. We do that again, folks under ten degrees fahrenheit, You're Canada's out of fahrenheit system, right, Fomer. I can't keep make a note of this. I can't keep track of which countries are set are cintigrated in Fairrenheart. I just don't Francy and I don't agree temperature. But but the the idea here that we're gonna fix this and we keep waiting and waiting. Is it just about g d P. If we actually develop economic growth, we

make it labor power. I think I I think what we have to look at is the you know what the example you gave, And I think Mark Bertolini was one who would say that when he used it at now, who said he was very concerned about the This is why we have Don Barton and he's so damn good. He can pick the CEO of the five under Dyck talked to and know that it was burned leading of

ETNA that told me the story. Yeah, and but I think it's a it's a great example of again taking responsibility and because and he does it for selfish reason. Why aren't there more Mark Bertolini's we're in the fancy suits and ties of Mackenzie. I don't well. I think what we need is uh again, this again about the modernization of capitalism. You have to we have to start thinking about the whole system, not just what we're doing individually.

And because there's no system out there right now, institutions that are helping deal with these issues, there's a dearth of them. Ian Bremer talks about a hobbsy in two thousand and eighteen, and not to wax philosophical, but let's go there. Hobbes Nature's in power. A man doesn't control

the system. Leviathan, I'm guessing chapter eighteen. And then John Locke shows up, and John Locke gives us a Jeffersonian sense of individual and then we go down the road and I think of Torsten Veblen, I'm gonna say en, which ordered on a more you know socialism if you will. Where are we in our business philosophy other than a Trumps m which supporters and critics are very aware, has a roughness to it, a ruth ruthlessness to I think in some ways where we may be going back to

the owner capitalism. If you think about leads before even before that, you know that where you've got where you you saw, you know, schools and hospitals and and so forth within the site where workers were to take care of and it maybe that's too paternalistic. But there's a modern day version of that which says we better think about, you know, is there should there be a lifetime learning account that we have to think about pension pensions, people

having pensions. There should be a lifetime learning account that we all have. We contribute, employers contribute, and the government makes it an incentive, advises us to do it. Those are new institutions that we need to deal with this world because we're not keeping track. There's that you know that uh e O Wilson, right, I love you know the study right and things like that, And he had

this quote. I just want it says, you know, we have a society with godlike technology, medieval institutions, and stone age emotions. I just don't think it's quite a proposed for what we're dealing with. I got one minute left. I want to talk about foreign languages and the resumes of the super kids. You guys, look at mackenzie. It used to be as in off Canada. They spoke English, they spoke French. Does anybody speak only three languages anymore?

Is every resume four languages? People? I mean we have. The one thing I would just say about that is I think we've become two box ticking and looking at the universities and the backgrounds. This year we're going to hire five people that do not have university degrees. That's not a very big deal, but it's a big statement to say that. My mother called it Harvard on the brain.

You're getting away from Harvard on the brain. We have we're gonna do is look for talent, raw talent, and look for ways that we can train them and drive them, because talent is not just defined by the marks that they get. The NBA program overrated. I think certain aspects of it are. I think all elements some elements in education. I wouldn't want to write off the NBA at all, I think, but I think we want to look for a more diverse, raw set of capabilities that we can

then help train. It's about grit. It's it's the drive um, the desire to want to learn that you in a the world where people don't have chances, you've got to go for that. I'm gonna go with STEM as we do, and thank you to New Jersey Institute of Technology for their support. But STEM with the very liberal arts Stombard and thank you so much. He is with Mackenzie and Company right now. Some we spoke to earlier this morning

and deserves a redo. Is a name you may know, You certainly know if you're an engineering and technology His name is Vince Surf, but you may really not know who he is in the kind of work he did over many decades. Vinn Surf is with a small company named Google or Alphabet where he is given a very Silicon valley name of evangelist. But really out of that is is incredibly original and hard work on tc P, i P and really the founding set of individuals who

gave us this internet. Vince Surf, We're honored to speak to you from our studios today in Washington. Is the Internet of today what you thought it would be from the time of and Dogpile or even the decades before. Well, I have to say that we had high hopes that this technology would unleash a lot of collaborative creativity, and

I think we've certainly seen on the other hand. Uh, we'll also seen what happens when you lower the barrier to access to information and provision of informations nearly zero for virtually anyone on the planet who has access to the Internet. That's about half of the world's population. You actually allow a bunch of things to happen, some of which are not necessarily all positive. H The injection of fake news and bad data and so on, to say nothing of malware and cyber attacks and so forth, all

get enabled. At the same time, all the positive benefits are are made possible. And so now we have a challenge ahead of us, which is to try to make this a safer environment for everyone. I I look at where we are in the day to day big data phrases a couple of years ago. Nanotechnology, artificial intelligence I've seen used and abused for easily thirty or forty years. I had an UH family member who was a Sun Mike Systems years ago in the beginning of AI. Is

AI anywhere closer to reality now? Or do you cringe when you hear all these phrases? Well, thank you for asking it that way. Uh. Certainly, artificial general intelligence is not really much closer today than it was forty or years ago. On the other hand, our ability to use machine learning is actually quite impressive, and the methods that we use for absorbing large amounts of data and deriving useful output have become far more sophisticated in the last

several years, especially with multi layer neural networks. But at Google, we're very careful to try to use the term machine learning rather than AI, even though our CEO has said, you know, there's the sort of AI um because we're really not creating intelligence in the sense of being able to build models of the world old and reason about them. That's not what the software it tends to do, and that's what most people think of when they think of

artificial intelligence. But I do want to emphasize how powerful this technology can be as a tool. People use it sometimes without even thinking about it. When when we do translation, for example, I get email in various languages and it's automatically translated into English, and for many languages the translation is pretty good. We're using multi layer, multi layer neural

networks to assist us in producing that result. So so there's a huge benefit here, especially the pattern recognition, for example, the analysis of medical information. So I'm a positive, you know, very pro machine learning, but I do worry about misunderstandings, and frankly, more generally, I worry about this the reliance that we are putting on autonomous software. And I'm using

that word deliberately. It's not it's not. You know, self driving cars are certainly an example of autonomous software, but so is software that runs in your thermostat. And as we rely on the software to just do stuff without our intervention, I worry about the bugs that are in the software that either simply make mistakes or maybe make those devices vulnerable to various forms of attack. Don't We're I'm sorry, I keep going on, and it's fine, it's fine.

It's just in the in the precious time that we've got with you, Vince surf I have to ask a question that so many of our listeners are dealing with their kids. This is not nineteen fifty seven, and Mr Fagin's I g y. We are growing up at a time of anti science and anti mathematics. How do we

get the love of science and math back into our kids. Well, I can tell you that the National Science Board, of which I am a member, which overseas the National Science Foundation has been really deeply concerned about this as well. It's hard to fully understand what's happened here. UH. Science has rewarded us repeatedly for decades or well centuries and even millennia UM with new capabilities that have the potential

to make our lives better. UH, somehow or other, we have managed to contort our society around to misunderstand all of this. So I think the answer here is getting kids earlier, early enough interested in uh satisfying their curiosity bumps, and to encourage that as opposed to driving it out with educational practices that that makes science boring or mathematics born. In fact, it's probably the most exciting subjects in the world.

I mean, learning how the universe works has to be just about the most exciting thing I could possibly imagine trying to do that. We've got to leave it there. I hope to extend this conversation with Vince Serf of Google. M H. Let's talk to someone who knows Microsoft ExLF so well. Brad Smith is, of course the president of Microsoft and truly one of the great and I rarely use his phrase, Brad, I do test it, but you

have earned it so much truly a thought leader on technology. Brad, you've been writing about the Geneva Convention eighteen sixty four. The basis to find rules of international law for the protection of the victims of armed conflict. We feel like victims of technology. Why do we need a technology Geneva Convention? Well, Ian spelled it out very well, and it's top ten risks this morning. For I think number two is the

risk of accidents, and cyber attacks is one of them. Unfortunately, not always accidents, I think when we'd be hard pressed to look at some of the biggest attacks of last year, I want to cry, which was in May and it affected a hundred and fifty countries, but not pet you

attack on Ukraine in June. We live in a world where cyber tools, unfortunately are not just being used to write documents with Microsoft Word, but they're being weaponized by major nation states, and they are increasingly intentionally or otherwise being unleashed. And we're going to have to do a number of new things to address this. But among these things are to get some rules in the road in place for countries, just as we had to do for nuclear arms, just as frankly we've had to do for

every new arms technology since the middle of the nineteenth century. Well, Mr Smith, and and maybe Ian and you come in after this, what is one thing that you would like to see initiated. Well, if there is one thing above all else, it would be to get governments to agree that they will not use cyber web to attack civilians, especially in times of peace. Consider this, Since World War Two, the governments of the world have agreed that they will

protect civilians even in times of war. That's what they put in the Fourth Geneva Convention in nineteen forty nine. And yet here we see governments attacking civilians, whether it's hospitals, whether it's our electoral processes, whether it's the electrical grid. And this is happening in peace time. And this is going to continue, we believe, unless we raise our voice and really pushed governments to address this in a stronger manner.

I'man I agree with that completely. You know that you look at the U. S. Government right now, we we recognize even though Trump said NATO is obsolete, he becomes presidents of no, NATO is really important. He's focusing on industry, supporting industry, wants it to be more jobs. And yet

none of this works for new technologies. UH. The United States is not acting multi laterally try to coordinate with our allies around the world to come up with a way to address, assess, and and and deal with react to UH cyber attacks. We're not working to treat our most important industries in technology as strategically essential to the United States. And the Chinese government gets this really well, but the United States doesn't. And I think it's gonna hurt.

I look at all this and just in the time that we've got left, I want to apply the top risks of your Rasier group and any and Bremer of course, has been so good on this over the years, folks and Brad Smith to what you're doing at Microsoft, which is basically in America left behind. You've got a nodding acquaintance with the climbs of Wisconsin. Microsoft has an innovation project with the Green Bay Packers to jump start innovation where it really, really really is difficult to jump start.

Do we need obviously we need a lot more of that. Is this the year where America finally gets its act together? Like Title Town in Green Bay, Wisconsin? Well, I think there is something to that. I mean, I think fundamentally, if you look at the election results in steen in the United States, or you look at election results in a country like Poland, or you look at what's happening in Turkey or many other places that Ian captures, you see a real divide between urban areas and rural areas.

And we have to do a better job of bringing technology and innovation back to rural areas. We have to do that by bringing broadband connectivity to rural areas. There's still twenty three million Americans that have no access to broadband because they're in rural counties. And to me, this is like electricity in the nineteen thirties. The problem is not that people had electricity and urban areas, it's that

they didn't have it in rural areas. If we can't bring the country back together in this way, I don't see how we bring the country back together in any other way. A gentleman, can I can I just post come back to you though about this idea of government hacking and these new laws that you're talking about. Uh, hasn't the United States government been doing this almost forever? And I'm talking about not just adversaries but allies. So I mean, what makes anybody think this is really going

to change. I do think that there is a complexity here to which you allude. What what complexity? The United States has already hacked into the phone messages of Chancellor Angela Merkel, an ally and NATO member. But what the United States has never done, in my view, is it has an unleashed cyber weapons on hospitals or on schools. It hasn't sought to steal intellectual property from private businesses.

The US has recognized you some rules of the road, but if the end points out, it's not leading multilateral charge. Prest thank you so much, greatly appreciated. He's president of Microsoft and a good contributor to what e racial groups doing. You're thinking about technology. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

or whichever podcast platform you prefer. I'm on Twitter at Tom Keane Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio