Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple car Play or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Joining us now, wasting too much time, I'm sorry, folks. Richard Clarida of Columbia University, of PIMCO and of course the former vice chairman of the FED, Professor CLARDA. Were thrilled to have you in today. Can I go nerd for a moment? Sure? Okay. I never talk about the Nobel Prize in economics. It's like bad luck, and I'm not doing that with somebody qualified to get the call from Scandinavia. But I want to go back. This is
really important, Richard Clarida. There can be like in nineteen eighty, I've had the honor of talking to Joe Stiglitz about Gross and Stiglitz, which in nineteen eighty I'm not kidding, folks, it was like a four page paper. It was small, it was focused. And then with you and you know, I don't want to get into you know this or that there's Clarita Girtler and A Gali okay, up at
Brown University. When you make a paper like that that is treasured by this is on DSGE folks, it's treasured by all of economics, how do you get that paper done? That ends up being like, hey, should they win a Nobel Prize? What was the process of doing? You know, name the paper, but I'll go to Girtler The Science of Monetary Policies just one example.
Well, it was an interesting time because the authors Mark Gertler, Jerdi Galli and I were sort of either early or late. But we felt there was a vacuum in academic economics in that it treated monetary policy as a black box, and we thought these guys are trying to do something sensible. So we actually worked out essentially a forward looking tailor rule to describe actual monetary policy. And it turned out that it actually did a good job and it made
a lot more sense than the black box. But when we wrote that paper, I don't think we had any idea that it would have the impact.
That it did. We thought it could get ignored, okay, away from you. In modern economics, there's a nineteenth century what's called plug and chug which you have an equation, folks, and you fill in the little blanks of the algebraic equation the tailor rule. You can't do that because you don't know where the output gap is right right out? Yeah, is Jerome Powell flying blind?
Well, he's certainly flying with an obscured vision out the cockpit, for sure. And I think there's always some uncertainty about things like what is our star? What's the full natural rate of unemployment? But it's probably elevated now. And the stakes, let's be honest, I guess, let me cut to the punchline. The stakes are higher now because of the fact that for the last four years inflation has been above target, and of course in twenty twenty one and twenty twenty
two it served and was not transitory. And so I would argue that the stakes are higher now for the FED than they have been.
Really, going back to Paul Volker forty years.
Ago, does the government shutdown impact the Fed's ability to manage its mandate here in terms of managing interest rates?
The longer it goes on, the more that becomes a factor. In particular, because a lot of the data comes from the government, including you know, inflation data and the labor market data. Now, the FED, like many other organizations and in the private sector, looks at a wide range of high frequency data. You get ADP, you get a lot of different indicators of the labor market. But yes, the longer this goes on, the more challenging it is to determine exactly where the economy is.
What do you think is the bigger risk for this economy? Is it from the Fed's perspective, is it the labor market? Is this inflation? Are they evenly balanced here? What do you think the bigger risk?
Well that was what was important about the September meeting because up until September, Jay Powell and many on the committee had said, look, we have dual mandate employment and inflation, and they seem to be roughly in balance. And at the September meeting they said, we're now more concerned about the balance of risk in the labor market. And I respect that, But the reality is inflation now using the FEDS preferred measures two point nine percent, that's where it
was eighteen months ago. It's well above two and so there is a risk to both sides. There's a risk if you don't cut rates the unemployment rate goes up a lot. There is a risk that if you do cut rates a year from now, inflation stuck in the threes.
Richard Claiter, with this talk, is a former vice chairman of the FED. For an extensive conversation. When we invented this, Paul, I mean to go from Man Deep Singh with his brilliance on AI to Professor Claiter, I mean, this is the way you roll, That's how you do it. This is how you do it. We said good morning to all of you across America worldwide as well. Okay, I'm in the basement of the of our building in London with a guy named Jean Claude Trichet, the engineer from Leon.
He's brilliant. He goes Tom, I think you call me Tom. I can't remember, and he says it is about diffusion, and we're talking about productivity. I hate the phrase K shaped economy because it implies a symmetric distribution baloney. The productivity that we're all witnessing right now. Maybe Jeff Sachs would be good at this. Yeah, the productivity that we're witnessing. You can't tell me it's evenly diffused. Across some mirror. How asymmetric are we in this productivity? Boom?
Well, I think you're one hundred percent right. You know the term in economics, you know, is is it labor augmenting technical change?
And I think the answer is yes.
But more labor is augmented, another lager over time may be substituted for. And I think that is really the potential disruption from AI is not only does it lift out at per hour, but it also could result in at some point in some displacement as well. So I think it's too soon to tell, but the minimum we know it's not evenly distributed.
Dominic Constume over at Missou and now Brilliant out of Oxford, Doctor Constum would say, there's a capital deepening issue here. Explain to our audience this wall of AI money and what that does to the capital dynamics of America.
Well, the interesting point is, you remember a couple decades ago, the talk in the US was about the witless economy, that we could get all this GDP without bricks and mortar. And it turns out that at least for this part of the new economy, you need a lot of bricks, a lot of mortar, a lot of servers, and a lot of power generation. So in some ways to get to the very new economy, you need old economy capital spending.
And that's a pretty interesting period to be in. We think it's going to go on for five to ten years, but it's a different economy than we were used to thinking about in the last twenty years.
You strip out the AI spend, a lot of folks will tell you this economy not that strong. Capital spending is not that good.
How do you think about that arithmetically? That's correct.
You know, in the first half of the year GDP growth was about one point six one point seven. If you strip out tech investment then it was somewhere between zero and half of that, and you have to adjust for imports. But clearly in the first half of the year it's really been an AI driven capex economy.
So one of the issues out there that I guess it's got to push the background a little bit, maybe just because fatigue is tariffs and the impact on the economy. We have not necessarily seen meaningful inflation resulting from the tariffs. Growth seems to be kind of hanging in everything. Strong gd for in a few weeks ago. How do you think tariffs will impact the economy if at all.
The economy has been refreshingly and surprisingly resilient. I don't think there's any doubt about that. So at PIMCO, we've revised up our outlook. You know, Atlanta Fed is now saying Q three could come in north of three percent.
So I actually think it actually in part.
Is because of at the same time we've had the tariff hit to the economy, we've also had a justifiable optimism about tech and capital spending, so that that's been an important feature. I think the other important feature is that, you know, some of the tariffs have been absorbed either by the profits of US companies that had a lot of profits to absorb or foreign exporters. And then the third piece is we're probably not yet at the at
the endpoint of teriffs. They will continue to show up in the inflation data at least for a while, but I think increasingly I and the Federal of the view, and that the FEDS what's important that this is really not going to be an inflationary story. It's a price level adjustment that we're sort of in the middle innings of getting through.
Against some nerd knowledge here, folks, Good morning Global Wall Street. Richard Clara with this with PIMCO, and of course forever with his Columbia University. Okay, my path in foreign exchange is Mundel, Mundel, Fleming, Jacob Frankel. Out of Chicago, a guy named Rogoff shows up, No excuse me than Rudy Dornbush up at Amputeen this upstart Rogoff and so getting ops felt out at Berkeley. They show up and it
goes on and on and on. Let's take it back to Colombia, where you have this incredible that you helped build, this incredible synthesis of international economics. Explain to America with Xavier Salah, m Lartin or Robert Mundel the Giant would say about how screwed up, messed up Japan is. With weekend log convex interest rates moving higher, the real rage chart published out of Tokyo today by Bloomberg is grim. Explain why our listeners and viewers should care about the fragility of Japan.
Well, because Japan is obviously a major economy, but it's also an even bigger part of you know, international financial system. With the yen an important currency, especially in risk off episodes.
Somebody has to hold all the jgbs.
That the government has been issuing, and so what happens in Japan also spills over into US capital markets and the global economy. And I think what's important for the listeners to understand now is that markets and investors have had sort of a rule of thumb about Japan, which is it sort of goes off in its own it's got deflation. Eventually they'll figure out their fiscal situation. And
now Japan has broken out of deflation. They now have inflation, they have positive interest rates, and they're now very much a player in the global financial system.
Is there is there.
Any precedent for a successful reflation. I don't see it in the literature. It's original to Japan, isn't it.
Well, Japan was went through about a two decade period where they had deflation. It wasn't a spiral, but prices were negative. I think to me, Tom, one of the interesting things about Japan is although the boj was trying to reflate the economy, the politicians in the public actually didn't get a vote. They actually liked deflation. You know, if you've got you've got your savings in yen under
the mattress. You know, deflation is good for you. So I think a challenge right now in Japan is they finally, after twenty five years, achieved the positive two or three percent inflation. But it's creating substantial political tension as well.
Well, I can't emphasize that that was brilliant. We'll try to do that single best idea. We'll see if the interns get the cut today. Well, the societal change. I was at the White House correspondence dinner and you got this whole security idiocy because the President's there and Martin Feldstein's standing in front of me. I think rogue off was my guest. Martin Feldstein's standing in front of me. We'd all had six martinis. And he turns around and
he says, Tom, Japan has been lost for two decades. Yep, that was a societal struggle.
Is Japan now found?
Is it out of the wilderness at this point?
Do you think?
Well, as I mentioned, you know, narrowly, it certainly is no longer in deflation.
It has positive interests.
I will say, just an anecdote, if I'm allowed an anecdote, I visit Japan almost every year for the last thirty years.
And most recently this summer.
I was struck by not only the boom in the economy, but it is a real tourist magnet now. In fact, if anything, in Japan, the politics is such that there are too many tour right, which is a problem they did not have for twenty five years.
Professor, I got to ask you, or I should say Vice Chairman, I've got to ask you. Lisa Cook gets an extended stay at the Fed. What is the significance of Lisa Cook remaining at the Federal Reserved table.
Well, obviously the case is at the Supreme Court, and so we'll know next year where they end up. But what's important is, you know, she continues to serve as a governor and continues to vote on monetary policy.
And I think that that is right. I think that's appropriate. Did Columbia pay for Sala E. Martin's bright colored jackets? Is that part of his deal?
During my time as chair, we did not subsidize the jackets or the m and ms that he distributes to class.
But I'm not sure about the current practice. This is your dovo. Sally Martin's like three quarters of a mile away, and he's there in bright orange, just like there's the growth guy from Columbia, Richie Claire brilliant. Thank you so much, really, treasure of the comments there. Maybe we'll get him back once we figure out who Scandinavia annoints this week as well. Clarida is with Pimco. Stay with us. More from Bloomberg Surveillance coming up after this.
You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Apple, Karplay and Android Otto with the Work Business up or what Us Live on YouTube.
Joining us now. Finally, Jane Foley out of FX strategy at Robbo Bank in London. I can't say enough, folks about the difference here in the Rabobank of the Netherlands. They go back to commercial hedging utilizing foreign exchange back centuries.
It's a whole different twist here on the dynamics. Jane Fowley, I want you to explain the sowhat to our American listeners and viewers and those in London frankly as well of a week Japanese yen our two point nine standard deviations, What why do I care that dollar yen could go to one fifty five shockingly week Japan?
Well, I mean, gently excuse me. That's the talk this morning that we could see a move back to one fifty five. And it is all because the market thinks, well, you know, the end characterve is back on. You know, we're going to not get the Bank of the Bank of Japan interest rate hiking October after But I would warn but I think this is a really dangerous strategy
in it. Why is it dangerous because if you think about the position of the LDP leader now, and she is of course quite likely to be voted in as the Prime minister maybe next week, although there's some issues there with her coalition, But assuming she is the prime minister, you've got to wonder does she actually want a weaker yen? Now the market is assuming that she is going to follow the policies of her mental Aarby. But of course when Abe was the prime minister, things were very different
in Japan. They were still trying to fight deflation. Now Japan has got inflation, and she is very concerned that a lot of this inflation is because of important inflation. And of course, if you are worried about important inflation. Why would you want a weaker currency, particularly when you want to build a strong relationship with President Trump, who, according to the Japanese prayers, may start Japan in his visits to Asia and perhaps at the end of this time.
So I think this could be quite a dangerous strategy. I'm not quite so certain that beat the carriage trade will be on so long.
In Paul Toro Fujioko off for Tokyo Desk has a brilliant story today showing the in the new inflation, the inflation justed wages. The japan people are flat on If that happened in America, they'll literally be revolt. They're flat on their back with a negative real wage growth.
Absolutely, Jane, we've got I think the story maybe this week over it. Certainly this year has been gold. We've got gold north of four thousand dollars per ounce. A lot of folks are saying, hey, this is a safe haven, maybe more so than the US dollar. What are folks in your world thinking about the relationship between the US dollar and gold.
Well, certainly that seems to be you know, the fashion trade right now. But I do think that there is room for both and I do think that if we did have, say a sudden step up of geopolitician, I think we'd see the dollar and we'd see gold gold rallying, although over time the dollar, you know, if the dollar were to recover significantly, of course, I think there would be forfit taking first of.
All in gold.
Now, gold I think is a real true diversification trade this year, and I think this is where a lot of the buying has come from. You know, if we go back to the first five months of this year, that there was this rotation trade away from the US assets and maybe that's stop now bores turned around because we do see you know, the AI trade, the S and P making you such strong gains really since since June.
But I think there is diversification still amongst that. We've seen various different stock markets, including the perform quite well this year, and we've seen silver do well, We've seen bitcoin do well, and I think there is a want by many investors really to diversify their portfolios, and I think that's where the strength in gold is coming from.
Jane, We've we've seen the Bloomberg dollar index, you know, kind of stabilize here over the last month, or two here the dollars stabilized. Is this kind of a a new level you think for the dollar?
Yeah, you know, the dollar is the best performing G ten currency on the one month view, despite the fact that it's still the worst performing on the year to date. And we have seen a lot of stability really over the summer months. Really sort of July is and you know, a lot has been said over the spring about the hedging strategies or the change in hedging strategies by non US dollar based fund managers, and that probably accelerated the
downside of the donor certainly through the spring. But if we assume that for now, you know, that's done, maybe it could start again. But if we assume it's done, you know, I think what we've got now is short covering in the dollar because there's an awful lot of fed easine in the price. The market's still whether or not inflation will come through.
Tours jargon here, let's let's translate this. Jane. You're saying, everybody bet the bank, bet the farm that there would be strong dollar, and now they're turning that trade around and going the other way.
It seems that's what happened in the spring. So if we go back to the global financial crisis, we've seen you since then, a massive rally out performance of the S and P five foundred and really a massive rally in the value of the US dollars. So everyone was buying American assets and during that period non dollar based assets, so really Asian European fund managers, they were investing in a lot more money. There was a lot more money to be invested, and a lot of that was finding
its way into the US. And I think come the beginning of this year, the market, okay, the dollar's done so well in recent years, we weren't that hedged, and at the start of this year they started to hedge the dollars.
Jane, we're running out of time. First of all, we got to get you in the studio in New York to do like a double barrel, like a whole hair four with Jane Folly, a raval bank. Jane. People think I got hired at Bloomberg because I'm like bow tie. It's not true, folks. I mean meetings with like Matt Winkler, Peter Grauer retiring chairman, and they're going dance all our rods and cones. Where do you do that, You do that in Jane Foley space. Foreign exchange, Jane, I'm seeing
huge tension. If I look at something obscure like sterling swissy, I'm out strong, Swiss franc to new territory, new points of tension. If I look at euro yen back up to a one seventy seven week en, points of tension in your world, What do those tensions mean in foreign exchange, for the stock market, for the bond market.
Well, I mean the Nikai T two five has perform really quite well this year. But if you're an overseas investor investing in Japanese assets, well, you're not going to really like the en going lower. Now.
The yen again.
Seems out of place here because what we've seen is some Safeyvin Ausset's doing quite well, the dollar stabilizing, the Swiss frank doing well, goal doing well, but the yen again on the back foot, and that to me is another reason why this yen selloff is probably overdone.
Okay, Jane Foley, thank you, thank you so much. Stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance podcast. Listen live each weekday starting at seven am Eastern on Applecarplay 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.
Here's the way it rolls, folks, Economics, finance, investment, international relations. It's no different than sports entertainment. Taylor Swift, did you know she has a new album out?
I heard that.
I think we're efforting her right now, Miss Swift. If you're listening, bring Jack with you as well. Taylor. Anyways, people keep score and as a young kid that came out of York University of York in England and all of a sudden things are working. He's with Capital Economics,
which is a really wonderful firm writing clear stuff. He's global group, such a group Chief Economistic Capital Economics, but really made us a splash, like with the ft and the thinking within England of what in God's name is going on? The summary of it is a wonderful two hundred and fifty pages. The Fractured Age Martin Wolf warbles gaily on the cover. A guy named Robert Nibleta Chathamhouse shows up so does bread sets her Neil shearing with
us in celebration of the fractured age? Did you time the book release for the world falling apart?
Some things with the book that you need an idea, you need the support of your friends and family, and you need a bit of luck. I'm luck in space.
What is the distinction of this fractured age that's not in the zeitgeist? Now, all the blood, the eighteen newspapers, the media, people like us, what are we missing of this fracture?
So I think that the genesis the book was that the rhetoric of deglobalization was everywhere right. Tariff's going up, trade barriers going up, this idea that we're returning to the nineteen thirties, countries are turning inwards. And when we at capst Economics looked at the data, we saw global trade volumes going up year on year on year. So this idea, the thing that everyone's missing is the idea that the world isn't deglobalizing. But clearly something is changing.
And as I argue in the Burke, and as we've written about a cap of Economics, the thing that has shifted is the relationship between the world's two major economies, the US and China, they've become superpower rivals, and that's causing those economies to both put apart or fracture, and then other economies to have to pick aside.
Essentially, So again, we all grew up in a world of globalization. That's just that's several generations have grown up in that world. Is that still the world we're in in terms of globalization, because it again it doesn't feel that way.
Well, globalization has certainly shifted, and if you look at trade flows you can see them see the evidence that shifting globalization. So up to about four years ago, about three quarters of US cell phones came from China. Less than one in four cell phones are going to be produced in China that are consumed in the US this year,
with more coming from Vietnam and India. So we're still consuming vast amounts of cell phones and imported vast amounts of cell phones, but the location of the production is shifting, and it's shifting for these security reasons.
Can the global economy truly be global if there is this seemingly broadening divide between China and the West.
Well, there's going to be greater frictions within global trade and capital flows and technology flows, maybe people flows too. As I argue in the book, the key economic, key driver of the economic consequences of this fracturing it's going to be twofold. One is how do other countries align? Can the US block, which is enormous, kind of hold together or does Trump push everyone apart?
And then the second, as you allude.
To Poored, is the contours of the fracturing. If it's contained to things like cell phones and batteries and chips and semiconductors and pharmaceutical products, then I think the economic costs are going to be quite limited to be manageable. If we get a much wider fracturing that encompasses many more areas than the economic costs will be much larger. And if the two sides ever come to conflict, then all bets are off. We shouldn't worry about the economic costs.
We're sharing with us. The fractured age is the book two hundred and fifty pages. Mister wolf Over at Financial Time says an exceptionally sensible, clear headed, and original thinker. I'll vote for that is well. One of your Catholic economics essays Europe flat and is back. We see that with the politics of France and I looked at it's sterling swissy today and my word, it looks like Britain after World War Two. How fragile is the continental and United Kingdom economy right now?
I think about the UK to one side. The UK we have our own fiscal challenges, but actually I don't think they're quite as a cut as say France. Yeah, there's plans on the way to reduce the deficit in the UK. The question is, really you're optimistic the UK can get it det I think we can get to kind of muddle our way through. There's enough fiscal fudge going around that we can kind of muddle our way.
Through this one.
France, it seems to me, is a bit more intractable. They've had four governments now of four on the back of efforts to try to reduce the budget deficit. The parliament is fractured, there's a presidential election due in twenty twenty seven. All of this political dysfunction is fodder for nationalists populist and let's see what happens in the twenty twenty seven election. I don't think that we're going to
have a repeat of the Eurozone crisis. I don't think we're going to get big debt to faults in banking crises. The banks in France look pretty well capitalized. They don't hold much government debt, but it's a fiscal crisis that is brewing.
Albums. If the right takes over in France, I mean within the five party parliamentary system, the right in Hungry, the right in Poland, the right, I mean there's a huge fear almost of it. I'll call it a Trumpian right in.
Europe, absolutely, and we're seeing it happen. That's what we're seeing this play out in real life. That I think the question is what type of rights that might might govern Italy is an interesting example here. We've had a kind of populist right wing government for the last couple of years under Georgia Maloney. Actually they've governed in economic matters in their relatively orthodox way. So I think it depends as much upon how they govern in if they win power as to what the rhetoric do.
You think This is a seminal point for France right now to either stay the course and hope for the best, or make it some significant changes. Is this a pivot moment.
I think we are kind of we're approaching one of those pivot moments, certainly when it comes to the political structure of France. If you look at the rise of the right, and you look at the rise of the right across Europe, I mean, the center is kind of holding so far. The center health in the German elections last year. The center's held so far in France. The question is would it continue to hold through to twenty twenty seven in those elections you're sharing.
And the government shutdown of the United States.
Of America, well, I've just spent two hours.
I came. I flew into Dallas on Monday evening. I spent two and a half hours at immigration.
Yeah, did you say hello to Lisamated?
Exactly. So it's so it's having a real world consequence now in terms of the impact on the economy. When we look through the history of government shutdowns, we can't really see them in the economic data. It tends to be a bit of dislocation that gets made up in subsequent months. But again, a bit like France, this speaks to political dysfunction, and it is as acute here in the US as it is in Europe.
Congratulations, you're sharing the fractured age. Can't say enough about it. Really an abrupt read in well timed to say the least. Stay with us. More from Bloomberg Surveillance coming up after this.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
That special moment here for Bloomberg Surveillance this morning, our essay of the year I'm thrilled to announces, will do that here in a moment. Stay with us across America around the work. Can I just suggest this hour of Bloomberg Surveillance sponsored by generous.
Electric Shorts Finances Chins.
We'll do that maybe as well. Futures up, ten down, Futures up, one hundred and thirty eight. Bloomberg Surveillance this Morning brought you by IBKR. Well the US Consumer Sentiment Index it seeds sixty in October twenty twenty five at IBKR Forecast Trader. The yes was recently at thirty three percent. Start predicting today at ibkr dot com slash forecast. Last training day for this contract is October twenty five, So over a decade ago. David Brooks did an essay in
the New York Times. It was my essay of the year on the nerds in the smooth Guys on Wall Street. It was brilliant on the cultural divide on Wall Street. I still quote it in speeches all the time. Brilliant essay. This year, My essay of the year is on the generational divide that we live every single day. Paul's limited, I'm limited, Tucker. Do you have offspring?
Ah?
Yeah, okay, altering as well, joining us now with my essay of the year. This was out of the Wall Street Journal a number of days ago, and she's made a huge splash with it. Is Professor Susie Welch of NYU is gen z unemployable. It has created a firestorm of comment. And I have to go to this because the last time Susie, I think I saw you was with a guy named Jack Welch. When did you decide to go into the dark caver and of academics at NYU? What was the pat You didn't have to do this?
I did not I had been in broadcast journalism for a bunch of years, and then I was running a small tech music tech company, and the pandemic brought it to its knees. And then Jack passed away, and I went up to the woods of upstate New York with all my kids and all their spouses and all of our dogs. And then the pandemic ended and everybody went
back to life. I had been cooking up in my mind a class called Becoming You, which was going to help people figure out what to do with their lives, which was what I was trying to figure out what to do with my life.
And I brought it to n Yu Stern and to.
The dean there, who I knew from my previous life, and I said, I've got this class I wish I had taken in business school that has a methodology that helps you figure out what to do with your life. And he said, well, let's try it as an experiment.
Before we get to the essay. Yes, what reeks in this essay is academic rigidity. This is not some fancy person like Susie Welch who decided to get some cushy thing. There are some real work of often here. This is like legit, accountable academic research, isn't it.
Yes, I'm proud to say that it is.
I mean it was conducted by myself and my team, which includes all of the usual suspects of psychometricians and data analysts and so forth. So we the research, I think is I'm really proud of it.
It's rock solid.
Forty thousand people, seven thousand plus gen Z types. Yeah, when did the shock set in over your outcome? And describe there?
Well, there's a bunch of you know, Look, I teach gen Z every single day, I mean every semester. Are hundreds of students, So my shock was perhaps less than the rest of the team because I'm in the room with them. Now, NYU students are not quite as representative of gen Z as outside of NYU. These are MBAs, so they tend to have a little bit more ger going on. I think that when we saw the two percent number which we can get to, we were all like, we checked it about thirty five timesoose.
We thought that is too much in that number.
So what we did is we have a tool called the Values Bridge, which we developed in our labs, and what it does is it ranks your values from one to sixteen, your personal values from one to sixteen. And so we now seventy five thousand people have taken this test, but at the time we did the research, it was forty five thousand people. And we were able to cut it by generation and we were able to see gen
Z's values ranked from one to sixteen. And their number one value is something we call you ammonia, which encompasses self care, recreation, leisure, fun employment. You know, just so John Tucker, But I think we all know somebody who was in eutamonia is their number one value. Number two was authentic self expression voice as we call it, and number three was the desire to organize their life around helping other people, which is very admirable, I would say.
But after I saw those top three values, I thought, I wonder what hiring managers are looking for, because my students are going out into the world to get hired. I have four adult children who are fighting out there in the world every day. So we did a separate study and we replicated it twice after that to say, okay, here the definitions of all the values hiring managers in knowledge industries mainly business, It was tech, it was accounting, finance,
and so forth. The consulting what values are you looking for?
And lo and behold.
They were looking for the number one value of achievement, the desire to have success that other people can see. Number two was a desire for learning, stimulation and growth. And the third value was work centrism, the desire to work hard. And when you cross reference those two data sets, it ends up that it's just two percent of gen Z that have the values that hiring managers are looking for.
It's interesting.
I've for gen Z adjacent kind of offspring. They're all employed, but they tell me their first memories of my oldest were nine to eleven. That's their first memory. Yeah, and then they had, you know, the great financial crisis, right, their parents are impact that everybody's parents are impact. And then they had the pandemic. So they've had some stuff, you know, and I wonder have that influence is kind of how they look the view of the world.
Yeah, I think they don't want to buy into a deal that their parents bought into that didn't work out for a lot of their parents.
I mean, you can you can come up with.
A hundred reasons why they have these values and they're entitled to them. I think that the problem is values have consequences, and so some of them also have affluence as a top value, and then they are very frustrated and frustrated to the point of kind of anger that they don't get the they don't get to have affluence also as an output. If you have the value of self care number one, so they can have their value. I don't you know how they can buy their values.
I get it, there's a million reasons. I mean, their parents might be to blame. I mean, with the torrent of letters that came to the letters to the editor after the article ran, a lot of people had a lot of people they wanted to blame for this phenomenon.
What does corporate America do here? Is corporate America adjust?
You think that?
Or do the students adjust or do they.
Just find to find some common ground?
Maybe this is a million dollar questions.
So I've talked to a lot of business leaders since the piece came out, and so the companies with brand equity who can go higher the two percent are out looking for them earlier, and they one executive said to me, this is a cage match. We're willing to fight all right, they're going to go find that two percent. They're going to they know where they are, they're going to go get them earlier, and they're going to lock them down.
And then other companies are going to have to figure out what to do about the fact that they're not going to be hiring young people who share their company values. And do they accommodate them or do they try to slowly move them over to a different.
Way of thinking. It's very hard to talk people out of their values.
However, Yeah, what do you find in the NBA program, Because you said those people kind of self select, they want to achieve, presumably, but again I would suspect you see some of that in your class.
I mean, I see a preponderance of pneumonia, self care being a top value. I do have MBAs, okay and so, and in particular the nbas we're majoring in finance. Those they have a lot of the values that companies are looking for, and they're picked off pretty early.
But I don't think this.
Is true in colleges in general, and I think there's a few And this is what I mean is that companies are going to figure out where the two percent are and they're going to come get them and they're going to at them early.
So how about for these these kids, though, I mean, do they recognize that maybe they are in fact different from certainly maybe their parents and maybe their grandparents and others, and they they're defiant and they're okay with them.
No, they're defiant. I mean they're not just okay. They're they're they're defiant. They're like you, I mean what the letters from gen Z that I got, the emails were like, hey, shut up over there, lady, because you ruined the world. You boomer people ruined the world. And our response is this, and why would we want your values? Look what you did to us with climate change and terrorism and school shootings.
You created this world? Why would we buy your version of events?
Welcome all of you across America. It is my essay of the year. Susie Welch, professor at New York University. Where that's it's in the Wall Street journals. Created a firestorm of comment, including from the kids in my family as well. Susie, I had the honor of talking to a guy named Jack Welch and frankly on it fmled
as well. Is the magic of the corridor from Pittsfield, Massachusetts, through Albany out the Mohawk River Valley every single nineteenth early twentieth century industrial X exercise out to the Great Eastman Kodec Company GE nineteen twelve invented a fine benefit pension plan. Those companies Carrier in Syracuse, Coodek, and Rochester. They took care of their employees. What you're going to hear in your classroom, what I hear every day is
the loyalty has been broken because of the employers. What do employers need to do to increase that two percent to a much larger number.
I think that they can't do what they would need to do, which is promise a long term employment. I mean, people feel loyal when they feel like, Okay, I'm investing my time in a company, and I'm going to be here in two or three years and my boss is going to be here.
Disclosure Bloomberg LP every day. It's a privilege. I mean, that's where we come from, right, the three of us in this were right.
Well, you probably a sense that, look, this company is healthy and it's thriving, and we're all going to be here, and I'm willing to give myself to this organization and to work the extra hours because we're all going to be here together. And but for most people going into organizations, there's this constant sense of fragility and we may not be here.
I could be gone tomorrow.
Why would you invest in yourself in that? And so that contract is pretty much over now. There are places I think JP Morgan, Goldman Zachs you can go and think I could try to build my whole career here.
But there's not a lot of companies like that anymore.
A lot of it is technology. There's so much technology out there, there's so much. Is that a net positive? Like do the kids in your class like that's a net positive? AI is probably all over your daily issues with your dealings with your students. Is that is technology with the hindsight a net positive or net negative?
This is I don't know the answer. Sometimes I think it's a real net negative and what it's done to how much we talk to each other. But I will say that my students are terrified because of AI. Like right, AI is taking the job they would do AI. You know, a first year consultant or a first year analyst, they're like deer in headlights, like what jobs are left for us? How where are our entry points? That's why technology is scary. Now when it comes to using AI for.
Homework, that's a totally what is your experience? What do you say?
When it first came out, they were using it a lot, and then as teachers we got very savvy about how to phrase the homework, you know, from your personal experience. And then I look at my students, I say, you know, it's against the rules to use this on exams, and I'm asking you personally, for reasons of integrity, do not use AI.
And generally they.
Comb aerospace engineering At Boulder, I got through the Great Books English course off the cliff notes. Did you mean is there any difference between the cliff notes and AI?
That's a good point. I think that AI does the thinking for them. With the cliff notes, usually you would then go into a classroom and you'd be forced to discuss issues. But AI, right, you know, does the thinking and the talking.
Explain to me what I I also see, particularly what I'm giving speeches between the American gen z yeah and the hungry four is a stereotype the hungry for in a kid's recent immigrants. Second they're not buying the gen Z thing. They're focused and they're killing it in differential equations. It's stern, all right.
So this is what I want to say to that, and I want to wait to the data comes in. But we are currently running the exact same study in three different places, one with first generation immigrants as part of the gen Z and then we are attempting in a collaboration with a different school to do it for this exact study in India, and I don't know if
we'll be able to do it, but in China. And I think that has implications for American competitiveness because if it comes back, then in India eighty two percent of gen Z has hiring managers values.
Right, that's worriesome that.
Susie Welcher is my essay of the year. It's in the Wall Street Journal on gen Z. Thrilled could come in to celebrate the research of it at New York University, Paul finished it up. Please.
I wonder if gen Z, because I live with them every day, will be if their values will change as they age and they say, ooh, I got a mortgage now, Okay, So.
Values generally don't change, Okay, right, values are generally set by time we're twenty five years old, because a lot of things go into that too. What changes is how much we express them or repress them. So I think what will happen is gen Z will keep these values because unless you have a seismic event, your values generally stay the same your whole life. The seismic event may be not getting a job, and then therefore they'll repress certain values or they'll suppress them not happily.
Do you see that as again, you're the one of the top NBA programs in the world.
Here my first sponsor, first people to step up.
My point is half of Global Wall Street came out of the Stern program.
Everywhere.
Absolutely, that's ever really true. I mean, as a student body changed there? Do you think my students who I.
Don't want to make generalizations, but my students who are first generation generally are in that two percent, so they're not changing anything. They're like, they've got their parents' values and they're there to win, and they are clearly already there. I don't see the change yet right now, I just see a shock, you know, Okay, nobody doubts the research, right, they don't know what they're going to do.
Do you give out c's? Okay, I just you know, just a vignette, folks. I had a privilege of Ruth Rebecca Stroic in mathematics one hundred million years ago. It was a curved grade, right like in England where it's much tougher. Could you give Professor Walch a Tito's and tang that's good morning? Drink here, Susie, Susie, I look at the great inflation and it's a joke. I mean, I killed myself for quality C in organic chemistry.
Yes, I did too. I have I want you to know something. I have given a C.
It's not a very common thing, but what the student maybe should have gotten was different than a C. But I gave a CE. It felt like a very brave and daring thing to do. I spoke to the academic dean beforehand, setting I'm giving a CI.
No kidding me?
Yeah, because look there's a there's great devlation everywhere. You know, I'd be lying to say there wasn't. Should we be giving c's the students to say, no, no, no, we got to get jobs.
Please don't do that to us. But lawyers are not allowed to ask your.
Gpsh no one in the control room has ever gotten a C. That's what. No, Let's go around the room.
Business School back in the early nineties, you had twenty classes and if you passed all twenty, they stamped your passport and I could go back to a Wall Street at twice the pay. So though, saying was twenty p's equals sixty G.
My grades mattered.
My grades at Harvard Busines School, my grades at Harvard, they both mattered a lot. And I worked so hard, and I did ask do they work the.
Same hard today that you lived at HBS.
I don't know. I don't know because I'm not.
I've asked these kids get through Michael.
Porter at HBS right now. I got to believe it they can. I mean, I don't know because I'm not in that classroom. I ask my friends there.
Here's what my friend, this Bloomberg LP is managed by twenty and thirty somethings, So we're the outliers.
Yeah, and the.
Smartest people running these businesses are to me kids. But they're so smart, they're so driven, they're so creative. I hired a bunch of them from boom Bloombir Intelligence.
Yes, yeah, I'm not.
I'm fine. I'm comfortable with this.
The kids are all right.
The kids are all right. One final question of twenty seconds, how much hate mail have you gotten?
It's a good portion of it. I have to say. You know, people always like to kill the messenger.
And you know, it's as if I stood up and said gen Z is unemployable at me and they did.
What you've done is phenomenal. Susie Welch, thank you so much. My essay of the year is gen Z Unemployed.
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