Davos Special: Rubenstein Says Nationalism Affects Big Banks

of course on the Bloomberg. Tom Keen in Davos, Switzerland for the World Economic Forum's annual meeting. He just sat down with Jacob Frankel, chairman of JP Morgan Chase International, former Governor of the Bank of Israel, and let's take a listen to some of their conversation. How are we doing? Are we out of financial crisis? Yet? We are clearly very close to it, But I would never declare victory prematurely.

The important point is that at the beginning of the crisis, the mindset of policy makers was how to extinguish a file. This is a mindset that has a short term perspective. In front of you, you say, I have a file. I have to put a lot of water on the file, and if the carpets get spoiled, so beat. I need to deal with the file. But over time, as the file is being put away, we need to worry about

the resumption of growth. We need to have a medium term approach, a long term approach, the only approach that matters for investment and growth. And that's why the challenges now how to move towards an economy and policy making that is looking into the long run, that is having a flexibility of the economy, that has structural policies, that understands that in order to grow, you need to be part of the global system, that understands that trade is

a privilege that everyone should be gaining from, etcetera. But we have this year theme, my theme populism. Trump's dovo certainly not original, many other people have picked up on this. How do policy makers, through the prism of their economists and advisors deal with populism? It's just simply a search for economic growth, isn't it? Where it is sells for

economic growth. But I would add two adjectives search for sustainable economic growth, namely medium term perspective and search for and inclusive economic growth, namely that the benefits from growth are shelled. If we miss on any of these two inclusiveness and medium term approach sustainability, then we will really

miss the boat. And it is the responsibility of policy makers, of the media, of educators alike to shift the narrative and debate away from the protectionism and populism towards more concrete issue. Let me give you an example. When you talk to people who are saying I want to have protection, is against trade, I don't want the globalization, etcetera, ask them, are you really against the benefits from trade? They will tell you owners, I want the benefits. So what are

you against? I am against some of the negative consequences that trade unchecked may entail. Maybe not everyone will benefit. Okay, then shift the debate to this, how do we make sure that society shows and how do we do that? How do we affect a policy that meets the president elects demands and the people that supported him, and it gives us a policy for those left bend. Absolutely, it has to be at least two dimensions. Number One, you

need to ease the transition period. This means trade adjustment assistance. This means job retraining, This means making people more capable to accommodate the changes. Not good enough. The very fact that now, years after an after, there are those who say that NAFTA was a bad thing is a testimony to the debate. So instead of saying afterwards a good thing of a bad thing, which goes to the political debate, we really need to say, how do we ensure inclusiveness?

Tom King, they're talking with Jacob Frankl, the chairman of Japing Morgan Chase International, chairman of the Ward trustee in the Group of thirty as well and former governor of the Bank of Israel in Davos, Switzerland at Annual Meaning of the World Economic Form. Let's do this, David, Let's uh move forward to the quiet strength of Davos, which is year after year after year, persistent research. No one

has done that better than Richard Edelman. Of course, this company is dealing in public relations, usually for corporations who blown up their relations, and they assistance in moving forward. Richard Edelman very good at that. But for me, the Edelman Trust Barometer is an important document. And no there's no year which is like this year for the distrust that's out there, Richard Edlman, wonderful to have you here

your annual visit. Where As she said me, you know, two weeks ago and said, Tom, it's an extraordinary lack of trust out there. What is the telling thing in the sixty six pages of your analysis. Well, trust is imploded this year, Tom, in the institutions, but particularly in media. And it's actually seen that the media has become part

of the elite um. There's a world of self reference, that the media is an is an echo chamber in fact, for whether you're right or left, and that you don't really want to read or hear anything that you don't agree with. Is the distrust out there contained within the United States, Or when we talk about global populism, is there a contagion effect? Or is each nation discreet in

their barometer? So you know, this year is stunning in the number of countries that have moved beyond just loss of trust in their institutions to a loss of faith in the system. More than half the countries have have lack of confidence in fairness, in the extent to which they can make a better life for their families in the future, and in their leaders. They want change If you were to show the Edelman Trust Barometer to the President elect, what would you point out to Donald Trump?

I would say that in a way, he reflects the mood, which is um deep socio and economic fears that people are looking behind themselves about to being replaced by robots, about jobs being outsourced, and that they want to have a direct and honest conversation with their employer about their economic future. Are they going to be better off in the future? You know? I look, Richard Edelman, the granularity of your report and the charm of it is. It's year after year. I remember a couple of years ago.

I think even CEOs worsen politicians, which is hard to fathom within the expertology that's your review. How does CEO's lineup this year? The Trust and CEOs fell apart time We're back to two thousand nine, and I think it's a matter of compensation and also just disappointment in this narrow focus on shareholder value as opposed to fix the problems of society and tell me the truth about my job. Let me bring in my colleague in New York, David Gura,

with Richard Edelman. Please, yeah, try you don't mince words. So you say there's a complete loss of faith in the system and and and that's a bold, sweeping statement. How did we get here? And how reversible is this do you think? I think it's a long, slow rebuild. I think trust is lost easily UM and its confidence is hard to bring back. And it's going to be each company, one at a time showing that in fact it does give good jobs, that it does reinvest, and

that it does actually make communities better. And I also think that UM trust is going to be done by employees. That you've got to tell the employees because the new crazy is that it's a person like you, much much more credible than the CEO or of the government official twice as credible. Help us with with how this is setting the backdrop for conversations at Davos. Of course they're

ahead of the event. There are always articles about what's going to be discussed, how relevant the World Economic Forum meeting is going to be, how much are people They're talking about credibility and ways to sort of bridge this gap. They understand that business is the last retaining wall in a tsunami, that the first was the Great Recession. Then

you had globalization. Now you have automation, so business in a way for that uncommitted group, half the people have lost faith in the system, about a third or sort of uncommitted. In fifteen half confidence. That uncommitted group thinks that business is actually the most credible force. So now is the time for ceo s to stand up. Don't do what you usually do, which is duck and wait. UM, you've got to actually lead now and show that businesses

is good. Well, you're you're. What you're so good at is the triage of the moment for our large companies. When you say to CEOs you've got to re establish a communication with a public, what does that actually entel? It means tom actually going to the employees first, UM then also having a channel that allows customers and UM

and consumers to speak directly to the company. So for instance, United Airlines has a thing called Airtime where people can complain about service or UM employees can complain about working conditions, and all of this has made public. The level of transparency and the response over time is something that's learned from the sharing economy, from Uber Airbnb. That's a huge positive and it's been really critical to United's recovery of trust Richard Elemen, do people hunger for good dialogue? Do

they recognize there's a deficit here? Do they want something better? Or have they gotten beyond that? Have they just given up? No? I think that the business leaders here definitely have processed UM that this populist movement is really scary for business, that anti globalization and anti innovation, that people are nervous in fact about new services, new products because it might mean that they don't have good jobs or jobs at all. So they want leadership and and the business leaders are

now talking about it. I look, and again, folks, I go, I really urge you to go to the website of Edelman and look at the Edelman Trust Barometer. Over to our politicians, I can't fathom your account with the Trump administration how Edelman helps the Trump administration forward. Do you have a recommendation to our presidential tweeter? Do you what would be the Edelman Council to our newly minted president this Friday. I think that President Trump has to establish

a game plan and then show progress for it. UM that he can't as a candidate UM just tweet his way to UM satisfaction that people are gonna be holding him to account, and it's not going to be just getting forward to relocate its jobs back to Ohio. It has to be a real plan of infrastructure and um education and economic development and decent means by which to renegotiate an AFTA or with the child. Set you up

because I knew what the answer would be. Now let me let me get to what matters here, Richards, and will come back. The core idea then is you have to affect the policy. Can you do that with a distrust that's seen within the barometer the Edeleman Trust Barometer. Look, government is the least trusted institution in our study, and it has to actually be done between business and government, and it has to be seen as something that has

been um done by listening to the people. We have to move from telling the people what's good for them to doing things with the people and let them judge a result. Richard Edelman with us with the accept I've never I say this every year, but now I really mean the idea of the Edelman Trust Barometer. I'll put that out on social and as I have uh the

last few days, uh, and we'll go from there. David just An extraordinary document and a pleasure to read every year when it has launched the first day of Davos, brought you by Bank of America Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections.

Mary Lynch, Pierce Federin Smith Incorporated Member s I p C. A most wonderful panel this morning talking about the future of finance and giving terrific perspective on the potential transactions and combinations, and also on uh the Nation of America. David Rubinstein the Carlisle Group, purely one of our great philanthropists. I think the most wonderful thing you do is the

Redond Ford's Theater across the street from Ford's Theater. You guys left extent the tragic room where the sixteenth President died, but you placed a museum right next to it without destroying the feel of it. Yes, Um, I was a contributor, but I was not the principal person behind it. I was on the board of it for a while. And interestingly, the person who was the chairman of the capital campaign that raised the money was a man named Rex Tillerson.

I don't know what's happened to him. I don't, but I think he'll He'll do okay. How will he do okay? A secretary of state? He has a different president than the previous president. Well, Rex is a very smart person and he's got a wealth of experience in dealing with leaders around the world. So I think he will be assuming he's confirmed, as I believe he will be. I

think he'll be a very strong secretary of State. Remember he was recommended by one of my former partners, Jim Baker, and Jim Baker has pretty good judgment about these things. If I look at the so called Trump reflation and the idea of a boost and optimism, does that mean a boost and internal rates a return for those that invest privately, whether it's private equ venture capital, or good

old all American mergers and acquisitions. I hope always springs eternal, of course, but there's no doubt that if you have inflation, inflation which we haven't had much of, that will probably produce higher rates of return. Whether they're higher in real terms or not, obviously uh to be determined. But I think when you have higher growth rates generally produce greater economic activity and that generally produces higher rates of return. So hopefully if this all can come about, it's not

easy to do. Remember, we have a twenty trillion dollar economy and there's no history of twenty trillion dollar economies growing at five percent a year. So if we can get it slightly better than where it is, it's it's good. But a twenty trillion dollar economy is harder to move than a ten trillion dollar economy. Dave Rubinstein, there were

two big speeches this morning. I don't need to tell you that, but the UK Prime Minister to reason they spoke, as well as the Chinese president jumping there in Davos. When you when you think about the global economy, which of those two was was most important? What were you listening for today? They're both important figures, of course, Uh president of China. A president of China had never come to Davas before, and President She therefore got a great

deal of attention for coming. And what he was really saying is something that would not have been UH expected of a Chinese leader to say ten or twenty years ago, which is that globalization is very important and that China thinks that the world order should be respected in some respects UM. I think that Theresa May was saying that Brexit is going to occur at some point and that she's prepared to implement that. UM. Time will tell whether

how how easy it will be to do that. It's a complicated negotiation, as we know, and and the courts have ruled in England that the Parliament has to vote on it before it can actually occur, and so I don't know you know when that will occur. Tom mentions your your philanthropic giving. I think of your reverence for history and American institutions, and I wonder what you're looking at his in terms of US history. At this point. This is such a pivotal moment. There's no no need

to underestimate that. What are you reading, what are you thinking about at this point? Well, let me just mention one thing that I'd like all the Americans and anybody listening with to pay attention to. UM. The African American History and Culture Museum was opened a few months ago in washing d C. It is the museum that was conceived by John Lewis, or at least that he was the person who introduced legislation was signed by George W. Bush. Five hundred and forty million dollars was the price tag.

Two d seventy million came from taxpayers, two hundred seventy from philanthropic gifts them throughout the United States, and many many of Americans contributed to that, and many Americans gave artifacts and other things. We now have people going to that museum, and it was expected that the average person going to that museum would spend an hour and a

half touring the museum. The average person is now spending six and a half hours, six and a half hours because it's such a life changing experience to see the history of African Americans in this country, from four hundred years of history, through slavery, through Jim Crow Laws, through the great accomplishments of African Americans. And I recommend to all Americans, white, black, or any color to spend some

time touring that museum. I regarded as the best museum right now uh of its type in in the United States. I want to talk about populism, and we only have a minute left. People just assume you grew up with a silver spoon in your mouth. I don't know why that happened, but they just assumed David Rubinstein couldn't be that successful with with with without if you didn't you grew up a real basic life. Well, my parents were not college or high school graduates. My father worked in

the post office. Uh. I got very lucky in life and um now giving back like the anger that you see right now, David, within Americas, well, when I was growing up, I did believe in the American dream that you could work hard and rise to the top. Now many people don't believe in that. They believe that they are captain there for the Therefore, the social mobility that I benefited from is not present. And clearly I had

some advantages. But uh I, uh, you know, I don't know that everybody feels that they can rise to the top as they as they as I did. Thank you for visiting us with today and again thank you for my David Rumstein is where the Carlisle crew from New York from Davos, this is Bloomberg back to Davos to Tom Keane where we can hear the steam coming out of your mouth. A Tom, it's cold there. It is cold here. It's ten degrees colder last year, and a little bit of snow not record snow that we've seen

in my thirteen years here. But it is a winter wonderland. And I would say, David, the key early theme is what we knew uncertainty. But I can't begin to tell you the level of uncertainty to confront it last night on the trip through Zurich was just remarkable. We have a special guest. There are very few sons that pull this off. Paul Jacobs did it. His father, to full disclosure, was one of my o There's heroes and engineering out

of New Bedford, Massachusetts and Cornell to San Diego. And then there was this company two decades ago that started It has something to do with technology, and the Sun actually said hey, I'll do this too. He's a double E out of Berkeley. Paul Jacobs joined us down. What was that like? Was there a point where your father sat you down in your seventeen and said you don't

want to do this now? He was actually always interested in me being in engineering, and so you know, he just did things to make sure I got interested in and I worked there every summer. Uh. You know, when I was in grade school, high school and I learned how to program early on. Did you use a slide rule or were you after that in early days? Yeah? Old enough, Yeah, I had to use the slide rule in the old things. Tell me about the people here,

toss around the phrases. You and your father have lived technology innovation, and I find engineers the hair curls when they see the usage of today. What does technology mean for Paul Jacobs? Oh, technology is the way that we take an idea out of our head, something that we think about, and we turn it into reality and affect people's lives. And the coolest thing about Qualcom is that, you know, we thought we were going to affect everybody in the world's lives with this new technology, and we're

actually able to execute and make that happen. Let me bring in my colleague in New York, David Gurrow, happened to go to Cornell, Thanks, sir, Iwin Jacobs. David Gurra, Yeah, very proudly. Here, Paul Jacobs, let me ask you about so where chip making is headed. I know that you unveiled your plans for five G recently at c e S. Talk about adoption. Uh, A lot of the world still has not yet adopted four G technology. You're talking about five G. How quickly can you move along with something

like that? Well, so five G is going to be driven by the end markets. So you got the Koreans who want a version of five G in time for the Winter Olympics, and then you kind of got the standards process. It's going for the Tokyo Olympics in twenty twenty.

I'm not sure why Olympics are the catalysts how happened to be, but anyways, so really cool stuff though, because now you're gonna be able to do, you know, things like virtual reality and fly drones around and get you know, uh, telemetry off of people's bodies to you know, see how they're We tried that last night, I want to ask.

But anyways, so but the interesting thing about five G though, is that it's going to go not just into the phones and the tablets that we carry around, but into all other kinds of devices, whether it's sensors in the world around us, whether it's cars or as I said, drones and robots and uh, you know, all sorts of things.

And so we just did a study that said but by the time comes around, you know, it'll have been integrated wireless connectivity will be integrated to all these different devices, and it's gonna create an excess of twelve point three trillion dollars of incremental benefit to all these other industries that that will make use of it. Paul, And we know about Moore's Law, and I wonder what the biggest challenge right now is to to chip making, to getting

more advanced chips. I mean, look, Moore's Law, we still have it progressing, but it's slowing down a little bit from an economic standpoint, and we are getting close to the physical limits of More's law. And I was just on a panel for the White House the previous administration, uh talking about you know, what are the implications of that and and how do we do moonshots to sort of uh incentivize the industry to come up with the next new thing. How do we go from where we

are and how do we keep it going? And there's an analogy with what happened in wireless. We got to a point where we sort of made every radio link as good as it could and we had to then change the network. We had to make the network denser to get more data down to your device. So we'll have to do something different for chips. Whenever the lads to Apple Toy comes out. I'm always amazed how the media doesn't about the Qualcom world of technology around it.

In all, one of the things we do talk about what you've got in your cool new not time folks for Qualcom shameless play the snap Dragon eight, three, five and next gen processor made for power users. But there's still batteries. Tell me about what you're doing about what every parent knows, which is we can take a room in the house and make it a battery dumping ground for our kids and everything. What are you doing about

lithium batteries and that? Yeah, I mean there hasn't been as much progress, for sure in the battery technology as we would like. We hadn't done some investments in battery companies to try and improve that situation, but it's slow. And Uh. The other thing is we try the other side, which is to continue to make the chips more and more power efficient. We moved to the latest generation of integrated circuit technology to to do that, but of course

people also want more processing. When you want to do virtual reality or more graphics, ben you're gonna use up more battery life. So there's always this balance between what we can do in terms of lowering power consumption and what the consumer demands in terms of increased performance. Uh. One other thing we've been trying is why I was charging. I want to get this in if I could in the time that we've got a very quickly here. Stem is all the rage? Did you have to take liberal

arts as you wandered through Berkeley? I actually wanted to. One thing that was kind of funny at Berkeley was I actually was a good writer. When I went in and I tried to get into an English class. They didn't want an engineer in the English class. But I took some arts classes and I'm doing I'll have to leave it there, Paul Jacobs, thank you so much. With qualcom from Davos. He has been, without question, the most interesting person on Wall Street, UH, for any number of months.

It is one thing to find a candidate in politics, as another one to get way out front of everybody else, and Anthony Skermuchi did that with one Donald Trump long ago and far away. It is simplistic to say that he has taken the position that Valerie Jarrett held in the Obama administration. Nobody believes for a minute that Anthony Skermucchi will only be director the Office of Publicly aison he can't even pronounce it publicly is on an inter

governmental affairs as well. Anthony skermuch he joins us this morning. Good morning, we picked the French name for an American job. Well, I think so. But what will you do? What will you do January? Well, I'd like to start January twenty, So I'm hoping right after the inaugural of many of us will be in the West wing. Uh, starting to put the apparatus of government together. But I think the number one objective for me, Tom and I said this last week, is to try to help people see the

president elect the way we see him. Uh, members of his staff, members of his family. Uh. He's a very caring, generous guy, very thoughtful. UM. He's got a great vision and great direction of where he wants to take things. We had a fantastic meeting yesterday. Unfortunately I wasn't there because I was in route to Davos, but we had a great meeting with Martin Luther King the third. Uh. Jim Brown said recently that he sees him as the

quarterback of the inner city redevelopment. I think it's a lot of fun things that Caden still plays against that just in the last X number of hours a thirty five pc terrifying BMW. The things that Donald Trump says help our our listeners worldwide with the process. After he says something to do, the advisors get together and say, excuse me, sir, go in this direction, how is that process working out? I don't. I don't think so specifically

the BMW. You just so that Americans understand what happens is they're under a V A T tax system and so they're they're effectively getting a rebate back on the V A T to ship a car over to the United States. In our system, because we have an income tax and corporate income tax structure, we fix it day one. I don't know if he can necessarily be fixed day one, but there are border adjustment taxes that can be put in place to level the playing field. We have an

eight hundred billion dollar trade deficit. Uh, there's no reason why the United States needs to have an eight under billion dollar trade deficit if we just equalize and create symmetry in our trading relationship. So the President is saying one thing, I think it's very specific let's make the trade deals fair. Let me bringing my colleague in New York,

David Girl, with the Trump administration. David, it's great to speak with you, and uh, you know, I I take what you're saying that you want the American people to see President Trump the way that that you see him, help us understand where the humility is. I look at the Wall Street Journal this morning, and I see the outgoing director of the CIA really taking the President elect to task here for imputing the integrity of of folks

in the intelligence community. I look at what the president elect tweeted about John Lewis, virtual punches on Twitter towards him, a guy who's taken real punches in the South during the civil rights movement. Where's the humility? Would you like to see more humility? There? We are we miss reading what he's doing. Should should he be demonstrating more of it on Twitter and and just publicly generally. So let's let's let it's interesting the way you're characterizing all that,

So let me recharacterize it for the listener. For whatever reason, Congressman Lewis decided that he wanted to say that the election of President Donald J. Trump was illegitimate. So I guess it's you're you're saying that he should not have responded to that and the way they responded to it. But what do we know about the president elect is that he doesn't really like taking that sort of stuff.

You know, when when Meryl Streep is saying the nonsense that she said ten or twelve days ago, he responding to it. That's something that he's doesn't change. Janus, Let's see if it does. You know, before I say if it is or it is, it's his. It's up to him to make the decision whether it's going to But but when you talk about humility, I think humility is often expressed in your children. I think humility is often expressed in your family and in your grandchildren. This guy

is a very emotional guy. I knew he was moved to tears on election night. I watched it. I was there firsthand. Uh, this guy has an intense love for the country. Whether people saw this or didn't see this. And you were very nice in your opening remarks tom to say that I saw it, but I didn't get there as early as you suggested. But I got there

because he was identifying something in the population through his empathy. Uh. There he is as a billionaire living in a very large tower and probably the best location in midtown Manhattan. But he understood the struggle. I don't but the good news I get to hang out with him in the best location free. But but my my point is is that, like you say, humility, I see a lot of humility there,

but I also see em lency. He really understood what was going on in working class communities and working class families and and whether people want to hear this or not, the democratic establishment that was their typical base. Uh, they left them there for him to go in there. Well, there's a lot of there's a lot of good evidence of that, David continued, Please before I fry, Mr Scarmo repries,

because my feet are so. It was a long weekend, of three day weekend, a lot of conversation about about Russia. I'm sure that the president elect would like to move on from this. You have Congress taking a renewed interest here in what maybe a relationship between the campaign and Russia, calls for committee hearings related to this. What's the president's president elect approach going to be here? Why not just go ahead with the hearings. Why not to deliver more

formal explanation. Well, I think there's a lot on the agenda. I don't want to I don't want to speak necessarily specifically about that. But if you look at the one hundred day plan that the administration is putting together that they want to project and execute over say the next three months, um, I think they're just trying to measure what is important, what's important to the American people, uh,

and doing a cost benefit analysis of that. I think, you know, talking specifically about that, since I don't really know the answer, I'd rather focus on the one day agenda. Let me ask you about the news that's out on social media now, which is your comments here at the World Economic Form meetings about selling your business. Unlike Mr Trump, who wants to somehow keep it going in different primitations, you want to be free and clear of your Skybridge capital. Yeah,

well that's been public. It's been public on Bloomberg, Bloomberg Radio, Bloomberg TV. H. I have Greg Fleming working on that auction process for us. I think it's calm manating very soon. The good news possibly possibly yeah, and so we have I'm actually not being flipped about it. We're we're in uh the last strokes of a few pens of a deal, uh And I'll be very happy to announce it to you Tom once it once it actually comes together. But I don't want to do is because I'm a superstitious

person tell you something that has actually formulate. But we're getting close. But the good news is for the company and for the clients, once the release is out of peoples seat directionly we're going. It's a very safe pair of hands. You're bringing up an issue that which I think people need to really understand. There's one person in the American government that is un encumbered by those restrictions and by those conflicts, and that is the American President.

And so I don't know why that is. I don't know how that came into be, but he technically could run his business and and and work in the old Anthony Sam, thank you. Thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide I'm Bloomberg Radio,

brought you by Bank of America. Mary Lynch. Dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce Feerin Smith Incorporated, Member s I p C