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Live from New Delhi: What the World's Financial Leaders Fear Most · Trumponomics

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Speaker 1: Bloomberg Audio Studios.
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Speaker 2: Podcasts.
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Speaker 3: Radio.
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Speaker 4: News. I think the biggest thing, when we look back
0:11
Speaker 4: in history, when we look back 10, 20 years from now,
0:14
Speaker 4: will be the technology. Because I think that's the thing
0:18
Speaker 4: that's going to define this era. That we're moving from
0:22
Speaker 4: a place like we did in the U.S. from 1870
0:25
Speaker 4: to 1900 with the Industrial Revolution, that when you bring
0:29
Speaker 4: this superintelligence to the entire world that it's going to
0:34
Speaker 4: profoundly change how we live, how consumers live, how businesses
0:38
Speaker 4: are impacted, and how governments oversee societies.
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Speaker 1: And to me, that's the big thing.
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Speaker 5: I'm Stephanie Vlanders, head of government and economics at Bloomberg,
0:57
Speaker 5: and this is Trumponomics, the podcast that looks at everything
1:01
Speaker 5: in the economic world of Donald Trump. And this week,
1:04
Speaker 5: I'm in India, where Bloomberg is holding its annual New
1:07
Speaker 5: Economy Forum for the first time in New Delhi. There
1:11
Speaker 5: have been a slew of luminaries here from the world
1:13
Speaker 5: of business and finance, along with many government ministers from
1:17
Speaker 5: around the world. I counted at least a dozen. I'm
1:20
Speaker 5: recording this on Wednesday, which is day two, after a
1:23
Speaker 5: very grand opening session yesterday featuring a barnstorming speech from
1:28
Speaker 5: the Prime Minister, Narendra Modi. I'm not going to play
1:32
Speaker 5: that to you because, frankly, I don't think it would
1:34
Speaker 5: come across. But we did have the President and Chief
1:37
Speaker 5: Operating Officer of Blackstone, the world's biggest private equity investor,
1:41
Speaker 5: and the Chairman of Tata & Sons, India's biggest multinational,
1:45
Speaker 5: in the opening panel session, along with the former UK
1:48
Speaker 5: Prime Minister, Rishi Sunak. Now, I know panels aren't always exciting,
1:51
Speaker 5: but this one, I thought, really told you how the
1:54
Speaker 5: world looked right now to people at that level. And
1:58
Speaker 5: as you'll hear, it's not necessarily the way it looks
2:00
Speaker 5: to you and me, or indeed people in the White House.
2:03
Speaker 5: That's in a minute. But first, I also wanted to
2:06
Speaker 5: give you a taste of another section of that first morning.
2:11
Speaker 5: In fact, a few minutes after Prime Minister Modi spoke,
2:14
Speaker 5: we had a presentation from our very own Global Chief Economist,
2:17
Speaker 5: Tom Orlick, who you've heard regularly on this podcast. And
2:20
Speaker 5: he decided to go back to that summer hit, Christopher
2:24
Speaker 5: Nolan's film of The Odyssey, to enliven his presentation around
2:30
Speaker 5: the global economy. Tom, thank you very much for being here.
2:34
Speaker 1: Great to be here, Stephanie.
2:39
Speaker 5: Now, I was thinking back, Elon Musk, I seem to remember,
2:43
Speaker 5: accused Christopher Nolan of trashing Homer's grave.
2:46
Speaker 1: That film.
2:48
Speaker 3: was a woke.
2:49
Speaker 5: Cry of pain for the end of the rule-based global order,
2:52
Speaker 5: which obviously Elon Musk didn't like. Ezra Klein, the columnist
2:55
Speaker 5: for the New York Times, thought that was precisely why
2:58
Speaker 5: it was, in his words, the political movie of the decade.
3:02
Speaker 5: Everybody found something in that film. Tom, you saw lessons
3:06
Speaker 5: for economic policy in it.
3:08
Speaker 6: I'm sure classics scholars would tell me that this is off-base, Stephanie,
3:13
Speaker 6: but it seems to me that one of the themes
3:16
Speaker 6: that comes through in The Odyssey is this idea of
3:19
Speaker 6: a world where the rules of hospitality have broken down.
3:24
Speaker 6: You see it in Polyphemus the Cyclops, a host who
3:28
Speaker 6: eats his guests. You see it in Penelope's suitors, guests
3:33
Speaker 6: in Odysseus's house, eating his food, drinking his wine, trying
3:37
Speaker 6: to steal his wife. I thought this idea of the
3:41
Speaker 6: Odyssey and a world where the rules of hospitality have
3:44
Speaker 6: broken down will be a kind of neat framing for
3:47
Speaker 6: a presentation to the audience.
3:50
Speaker 5: So what are some of the consequences from an economic
3:52
Speaker 5: standpoint of this world where the rules of hospitality are
3:56
Speaker 5: broken down?
3:57
Speaker 6: So I think one of the places where we're seeing
3:59
Speaker 6: this dynamic play out is in the US bond market.
4:03
Speaker 6: If we think about the cost of borrowing for the
4:05
Speaker 6: US Treasury, back in 1980, that was around 15%. Over
4:12
Speaker 6: many decades, the cost of borrowing for the US Treasury
4:14
Speaker 6: fell and fell until by 2020, it was close to zero. Now,
4:20
Speaker 6: in the last few years, that trajectory has changed, and
4:24
Speaker 6: the cost of borrowing for the US isn't falling anymore.
4:28
Speaker 6: It's rising. The 10-year rate is now north of 5%.
4:31
Speaker 6: And I think that's a reflection of some of these
4:36
Speaker 6: big dynamics that we're seeing. A world where war is
4:41
Speaker 6: more likely, and so companies have to borrow more to
4:44
Speaker 6: pay for defense. A world where there's been rupture between
4:48
Speaker 6: the US and China, the US and Russia, the US
4:52
Speaker 6: and the petrostates. So these countries, which in the past
4:55
Speaker 6: were willing to put their savings to work in the
4:58
Speaker 6: US treasury market, are now not doing that anymore. And
5:03
Speaker 6: a world where geopolitical shocks like the Iran war are
5:07
Speaker 6: pushing inflation higher. And of course, bond investors need to
5:11
Speaker 6: be compensated for higher inflation. So in this world where
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Speaker 6: the rules of hospitality have broken down, the US Treasury
5:21
Speaker 6: has to pay more to borrow. And of course, when
5:24
Speaker 6: the US Treasury has to pay more to borrow, everybody
5:27
Speaker 6: has to pay more to borrow. A fact which is
5:30
Speaker 6: pretty consequential for our hosts here in India, hoping to
5:34
Speaker 6: attract more FDI to finance the build-out of their infrastructure
5:39
Speaker 6: and their manufacturing base.
5:41
Speaker 5: One of the other themes that came through, which obviously
5:43
Speaker 5: has been much discussed in this conference, is AI is
5:46
Speaker 5: actually something that might surprise some people, that we have
5:50
Speaker 5: seen with the build-out of AI, in many ways, a
5:55
Speaker 5: kind of reassertion of global supply chains, at least in
5:58
Speaker 5: a certain part of the economy, and reanimation of globalisation
6:05
Speaker 5: and trade. And with that... the return of very large
6:09
Speaker 5: global imbalances. So despite Donald Trump's best efforts, China exporting
6:14
Speaker 5: more than it ever has. We actually had new record
6:18
Speaker 5: trade surplus numbers coming out of China this week. And
6:22
Speaker 5: the US, despite Donald Trump's efforts, importing, we reckon, $ 500
6:29
Speaker 5: billion more a year than in 2016. That's allowing for inflation,
6:35
Speaker 5: not all from China, but it has in many ways
6:38
Speaker 5: become more dependent on the rest of the world as
6:40
Speaker 5: a result of, in part, AI and other things about
6:43
Speaker 5: the way the world has gone. But as you pointed out,
6:47
Speaker 5: the flip side of that is big trade surplus and
6:52
Speaker 5: surplus revenues for China, Korea, Taiwan are We've seen those before.
7:00
Speaker 5: They used to be invested via central banks into US
7:06
Speaker 5: treasuries often. What's different this time?
7:10
Speaker 1: It's strange.
7:11
Speaker 6: President Trump imposed these sweeping tariffs to try and reduce
7:15
Speaker 6: the US trade deficit, reduce the Chinese trade surplus. In fact,
7:20
Speaker 6: what we've seen in the last couple of years is
7:23
Speaker 6: actually those surpluses and deficits have exploded higher, right? We've
7:28
Speaker 6: now got surpluses in China, Taiwan, Korea, and deficits in
7:34
Speaker 6: the US that are bigger in dollar terms than they
7:37
Speaker 6: were back in the early 2000s before the global financial crisis.
7:42
Speaker 6: But as you note, Stephanie, there's also a different dynamic
7:45
Speaker 6: at work. In the early 2000s, let's take China as
7:49
Speaker 6: an example, the trade surplus meant a huge pileup of
7:53
Speaker 6: dollar savings in the economy. Those dollar savings were managed
7:57
Speaker 6: by the People's Bank of China Central Bank, a very
8:00
Speaker 6: conservative buy and hold investor. And the PBOC put those
8:05
Speaker 6: dollars into the US Treasury market, the most stable, safest
8:09
Speaker 6: asset in the world. This time around, the savings piling
8:15
Speaker 6: up in East Asian countries, they're not being managed by
8:18
Speaker 6: central banks. They're being managed by private investors, much more nimble,
8:23
Speaker 6: much more focused on returns, And when we look at
8:26
Speaker 6: the data, what we see is they're not going into
8:28
Speaker 6: the treasury market anymore. That's one of the reasons the
8:32
Speaker 6: treasury is having to pay more to borrow. They're going
8:35
Speaker 6: into stocks. They're going into corporate bonds. The pretty clear
8:39
Speaker 6: signal is that they're going into the AI revolution, right?
8:44
Speaker 6: So you've got this circular flow of funds where the
8:47
Speaker 6: US is importing a huge amount of chips to build
8:52
Speaker 6: out its data centers and And the countries making those
8:55
Speaker 6: chips are taking the dollars the US is paying them
8:58
Speaker 6: and turning around and investing them back in the US
9:02
Speaker 6: AI companies. Now, if you're an AI optimist, and there's
9:06
Speaker 6: lots of reasons to be an AI optimist, that's all good, right?
9:10
Speaker 6: AI is going to make us better off. This is
9:12
Speaker 6: accelerating the AI revolution, which is going to make us
9:16
Speaker 6: all better off. But if you're an AI pessimist, And
9:20
Speaker 6: you think the profits from AI might turn up a
9:22
Speaker 6: day late and a dollar short. And there's going to
9:25
Speaker 6: be a moment where there's a big adjustment in the markets,
9:28
Speaker 6: a crash. This dynamic means the pain from that crash
9:32
Speaker 6: is going to be spread out around the world.
9:35
Speaker 5: It does certainly sound like a risky combination. What was
9:37
Speaker 5: striking to me was A slightly different view from that
9:41
Speaker 5: panel I mentioned at the start, although they, at least
9:45
Speaker 5: one of them, was pretty focused on the risks lurking
9:48
Speaker 5: in government debt and government balance sheet. So let's hear
9:52
Speaker 5: from that now. And I'm actually going to let my colleague,
9:55
Speaker 5: Eric Schatzker, the editorial director of NEF, who presided over
9:58
Speaker 5: the panel, do the introduction.
10:06
Speaker 7: Distinguished guests, I'd like to say a few things about
10:10
Speaker 7: our panelists to explain why we've invited them to join
10:15
Speaker 7: me here on stage this morning. Rishi Sunak, as you know,
10:20
Speaker 7: is a sitting member of parliament in the UK and,
10:22
Speaker 7: of course, the country's former prime minister. He has become
10:25
Speaker 7: a strategic voice in Silicon Valley as an advisor and
10:30
Speaker 7: also as a visiting fellow at Stanford's Hoover Institution. He
10:33
Speaker 7: has also rejoined his old firm, Goldman Sachs, as a
10:37
Speaker 7: senior advisor offering counsel on geopolitical risk, trade dynamics, and
10:41
Speaker 7: macroeconomic shifts. John Gray, runs the world's largest manager of
10:47
Speaker 7: private capital, a total of more than $ 1. 3 trillion, with
10:51
Speaker 7: assets across real estate, infrastructure, life sciences, credit, insurance, private equity, renewables,
10:57
Speaker 7: and of course, data centers. And Chandra is the leader
11:02
Speaker 7: who transformed Tata for the 21st century, building on its
11:05
Speaker 7: strength in IT services, automotive engineering, and heavy industry to
11:09
Speaker 7: enter semiconductors, advanced electronics manufacturing, electric mobility, and digital platforms,
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Speaker 7: an extraordinary trio of minds to tackle this provocative conceit,
11:23
Speaker 7: the end of predictability. Every generation thinks its moment is
11:29
Speaker 7: uniquely uncertain, right? If you were around for the oil embargo, 1973,
11:36
Speaker 7: the Gulf War, 1991, of course, the financial crisis, 2008,
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Speaker 7: what I'd like to know, and I'd like to start
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Speaker 7: with you, Chandra, What is actually different about this moment
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Speaker 7: in history?
11:49
Speaker 8: First, I think we have had it very good for
11:52
Speaker 8: the last five decades. That's what the first realization is.
11:57
Speaker 8: But if you look at a group like ours, which
12:00
Speaker 8: is about 160 years old, we have seen two world wars,
12:06
Speaker 8: we have seen the pandemics, and we have seen high
12:10
Speaker 8: borrowing levels, many things, and we have survived. So it's
12:15
Speaker 8: not the first time that something as hard as this
12:19
Speaker 8: is happening. But the primary difference is all of it
12:24
Speaker 8: is happening at the same time. The geopolitical disruption, the
12:30
Speaker 8: AI disruption, and commodity crisis, supply chain crisis, and the
12:37
Speaker 8: world has become so advanced and so connected. We are
12:43
Speaker 8: trying to decouple it. It has never been this coupled.
12:47
Speaker 8: Tackling all of it at the same time is the
12:50
Speaker 8: unique thing now.
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Speaker 4: We obviously have two live wars in Russia, Ukraine, and
12:57
Speaker 4: in the Middle East with Iran and its proxies. We
13:01
Speaker 4: obviously have an environment that has got more volatility.
13:06
Speaker 1: We see the U.S.
13:08
Speaker 4: With a little more tension with its allies. although I
13:12
Speaker 4: think there are enough shared values that will ultimately get
13:15
Speaker 4: through this. I think the biggest thing, when we look
13:19
Speaker 4: back in history, when we look back 10, 20 years
13:22
Speaker 4: from now, will be the technology. Because I think that's
13:26
Speaker 4: the thing that's going to define this era.
13:29
Speaker 3: That we're moving from a place like we did in
13:31
Speaker 3: the U.S.
13:32
Speaker 4: From 1870 to 1900 with the Industrial Revolution, that when
13:37
Speaker 4: you bring this superintelligence to the entire world, that it's
13:41
Speaker 4: going to profoundly change how we live, how consumers live,
13:46
Speaker 4: how businesses are impacted, and how governments oversee societies. And
13:51
Speaker 4: to me, that's the big thing. That's the biggest challenge.
13:54
Speaker 7: What we are talking about is a cocktail of risks.
14:02
Speaker 7: Geopolitics is a risk. Technological disruption, obviously a risk. Bad
14:06
Speaker 7: policy is a risk. Climate events are a risk.
14:09
Speaker 1: Market dislocations are or a risk.
14:12
Speaker 7: Which of those risks, or perhaps a risk that I
14:14
Speaker 7: didn't mention, do you find hardest to manage? And which
14:20
Speaker 7: worries you the most?
14:21
Speaker 1: Rishi?
14:23
Speaker 2: AI is often compared to the Industrial Revolution, but I
14:26
Speaker 2: think that actually undersells it. I think of it as
14:28
Speaker 2: the Industrial Revolution combined with the Enlightenment, that period in
14:32
Speaker 2: Europe of invention and discovery of new ideas, combined with
14:35
Speaker 2: the printing press, which democratized information and knowledge around the world.
14:39
Speaker 2: So this trifecta is going to be extraordinary. It's going
14:41
Speaker 2: to raise the floor for humanity. We talked about that
14:44
Speaker 2: here in India in February at the AI Summit. However,
14:46
Speaker 2: all new technology brings with it new risks. And what
14:50
Speaker 2: technology does is lower the barriers to entry for bad actors.
14:53
Speaker 2: And that's what this technology does. And I think our
14:55
Speaker 2: job as policymakers is to get ahead of that, provide safeguards, governance,
15:00
Speaker 2: and a framework so that we can not only prevent
15:02
Speaker 2: bad things from happening, but also bring along the public
15:05
Speaker 2: with us who outside of places like India or China
15:08
Speaker 2: and the Gulf are deeply distrustful of this technology. And
15:11
Speaker 2: if we don't reassure them, we're not going to get
15:12
Speaker 2: all of its benefits. So put aside all the geopolitics.
15:15
Speaker 2: We'll manage that. But John's right. The technology is a
15:18
Speaker 2: thing that, for better or worse, we will be talking
15:20
Speaker 2: about for years to come.
15:22
Speaker 1: Chandra, they're not the same thing, right?
15:24
Speaker 7: The thing that you worry about the most and the
15:25
Speaker 7: thing that you find hardest to manage. In Rishi's case,
15:28
Speaker 7: it sounds like it is the same thing.
15:30
Speaker 1: What about for you?
15:31
Speaker 8: Rishi is right, definitely in near term. technology both in
15:37
Speaker 8: terms of what it will do at the hands of
15:39
Speaker 8: the bad actors and also the labor restructuring that has
15:43
Speaker 8: to happen near term is going to be a big
15:46
Speaker 8: deal in medium to long term is going to be
15:49
Speaker 8: hugely powerful it's going to make I at least think
15:52
Speaker 8: the world beautiful and highly impactful but the other thing
15:57
Speaker 8: I worry about is the war situation I think we
16:02
Speaker 8: seem to be opening wars on every front And nothing
16:05
Speaker 8: is getting closed. So I don't know. Somebody is going
16:09
Speaker 8: to press a button.
16:11
Speaker 1: We should all be worried about that.
16:13
Speaker 8: I worry about that a lot.
16:15
Speaker 4: John? I definitely agree on both of these fronts and
16:19
Speaker 4: the technology, which I highlighted. But since Rishi covered that,
16:23
Speaker 4: maybe I'll talk about another risk, which is the lack
16:27
Speaker 4: of fiscal sustainability. in Western governments. Interestingly, emerging market countries
16:33
Speaker 4: in many cases have been much more responsible. And we're
16:37
Speaker 4: now facing a bit of a reckoning. We're seeing that
16:39
Speaker 4: in terms of what's happening in the bond market, which
16:42
Speaker 4: also the wars have contributed to the demand for capital
16:46
Speaker 4: because of AI.
16:47
Speaker 1: But also there's.
16:48
Speaker 4: A perception that, hey, these countries are running deficits that
16:53
Speaker 4: are well above their inherent growth rates. And you worry,
16:57
Speaker 4: shocks come along. You saw it with, obviously, the financial crisis,
17:01
Speaker 4: with COVID, governments now with deficits that are greater than 100%
17:06
Speaker 4: of GDP and don't seem to have a path to
17:09
Speaker 4: bend that curve. And what happens, of course, is It
17:13
Speaker 4: leads to affordability challenges, particularly around housing. And it means
17:18
Speaker 4: you have to make tough choices around taxes and social services.
17:22
Speaker 4: I continue to think that technology probably is the biggest
17:25
Speaker 4: sort of existential risk. But this is one that has
17:28
Speaker 4: been slow moving, and it's going to force very tough choices.
17:31
Speaker 2: Just interesting, John's point there, you see these different forces
17:35
Speaker 2: coming together, right? Because On the one hand, you've got
17:38
Speaker 2: governments who aren't able to be fiscally conservative and the
17:41
Speaker 2: kind of populist politics we're seeing across Europe and elsewhere
17:44
Speaker 2: contributing to that. But this massive capital build-out of AI
17:48
Speaker 2: is then adding to the mix, as John knows, because
17:52
Speaker 2: the demand for capital from the technology companies is so
17:55
Speaker 2: huge that, remarkably, if you think about long-term debt, so
17:59
Speaker 2: 10-year-plus debt, next year, I think the technology companies are
18:03
Speaker 2: going to be bigger net issuers of that debt than
18:06
Speaker 2: the U.S.
18:06
Speaker 1: Government is.
18:08
Speaker 2: And it gives you a sense of the scale here.
18:10
Speaker 2: But that ultimately is putting pressure on governments in Europe,
18:12
Speaker 2: contributing to some of the challenges that John mentioned. It
18:15
Speaker 2: just speaks to the interplay between these big structural forces
18:18
Speaker 2: that we're living through.
18:20
Speaker 7: I was just going to follow up briefly with you, John,
18:22
Speaker 7: because you can see this coming to a head right
18:26
Speaker 7: now in France. The situation that the French are dealing
18:29
Speaker 7: with is very real. There just simply isn't enough money.
18:33
Speaker 7: There isn't enough money in the United States either. Now,
18:36
Speaker 7: America has exorbitant privilege. Perhaps that puts it in a
18:39
Speaker 7: different category. But at what point do you begin to
18:43
Speaker 7: worry that what's going on in France is going to
18:46
Speaker 7: become a similar problem in America?
18:48
Speaker 4: I think there's a very important difference. I think all
18:51
Speaker 4: of these countries face this challenge.
18:54
Speaker 1: But the growth rates in the U.S. are much higher.
18:59
Speaker 1: And when you look at the technology.
19:02
Speaker 4: the investment, what's happening with AI, you're seeing it lead
19:08
Speaker 4: to a lot of capital flows in. And that higher
19:11
Speaker 4: rate of growth gives you a little more room. Now, ultimately,
19:15
Speaker 4: the US is going to have to face tough choices.
19:19
Speaker 4: But I think now this is more of a France, UK,
19:23
Speaker 4: continental Europe challenge, just because there you have.
19:27
Speaker 3: Much lower rates of growth approaching, call it 1%.
19:31
Speaker 1: But also very large deficits.
19:34
Speaker 4: And what we've seen over time is these get addressed
19:37
Speaker 4: when there's crisis. We saw this in Greece. And unfortunately,
19:40
Speaker 4: that feels the way this is going. But I would
19:43
Speaker 4: say the U.S., its great strength is both the age
19:46
Speaker 4: of its population, but also its.
19:48
Speaker 1: Higher growth rate.
19:50
Speaker 4: And I think people are underestimating how much growth is
19:53
Speaker 4: going to come out of the U.S. because of this
19:55
Speaker 4: investment and then productivity boom. So that's helpful to us.
19:59
Speaker 4: But again, we, like everybody, are going to have to
20:01
Speaker 4: find a way over time, either through much higher growth
20:04
Speaker 4: or better fiscal responsibility or a combination to get to
20:08
Speaker 4: sounder footing.
20:09
Speaker 1: I'd like to stick.
20:10
Speaker 7: With you for a moment because when we talk about
20:13
Speaker 7: unpredictability and we talk about risk, of course, we should
20:17
Speaker 7: be talking about how to manage, how to hedge those risks.
20:22
Speaker 7: And the hedge for unpredictability is resilience. But resilience is expensive, right?
20:30
Speaker 1: It comes at a cost, efficiency. And since we're talking.
20:34
Speaker 7: About markets, investors really aren't very good at putting a
20:39
Speaker 7: price on resilience. For the most part, they don't actually
20:42
Speaker 7: value resilience, just the opposite. When you think about the
20:46
Speaker 7: need to build resilience into the investments that Blackstone makes,
20:51
Speaker 7: are you implicitly, or do you find yourself wondering whether
20:56
Speaker 7: the implicit consequence of that is that your investors are
21:00
Speaker 7: going to have to accept structurally lower returns in exchange
21:03
Speaker 7: for securing those cash flows?
21:06
Speaker 1: There may be some of that.
21:07
Speaker 4: I think if you went back over time, you probably
21:10
Speaker 4: just looked at where could I get the lowest cost,
21:13
Speaker 4: let's say. Where could I source a product, set up
21:16
Speaker 4: my business to manufacture in that lowest cost location?
21:20
Speaker 1: Optimizing for efficiency. Optimizing for efficiency.
21:23
Speaker 4: I think it's clear now, after you go through COVID,
21:27
Speaker 4: you go through wars, you have tariffs, you recognize if
21:31
Speaker 4: I run a manufacturing business.
21:34
Speaker 1: I need multiple sources of input.
21:36
Speaker 4: But I would say that we focused a lot on
21:38
Speaker 4: risks here. It's worth pointing out that we're seeing real
21:41
Speaker 4: revenue growth globally. So our companies in the second quarter
21:45
Speaker 4: saw 11% revenue growth. We've seen margins consecutively go up
21:50
Speaker 4: for now two and a half, three plus years.
21:53
Speaker 3: We've just seen steady improvement. We see this in the
21:56
Speaker 3: public markets.
21:57
Speaker 4: So what we're finding in our companies is even if
21:59
Speaker 4: they have some incremental costs to absorb that resilience, they're
22:04
Speaker 4: able to do it and continue to grow the businesses.
22:07
Speaker 1: And one of the reasons you strengthen.
22:08
Speaker 4: Markets, particularly the US markets, is because the revenue growth
22:13
Speaker 4: and the margin growth have been such that you're getting
22:15
Speaker 4: compensated even though there are more risks out there.
22:18
Speaker 7: Chandra, how do you decide how much resilience is worth
22:22
Speaker 7: paying for?
22:24
Speaker 8: See, I think I have a fundamentally different viewpoint. In
22:28
Speaker 8: a highly unpredictable, volatile environment, optimizing for efficiency is definitely
22:38
Speaker 8: not the right thing. And to think that resilience is
22:42
Speaker 8: opposite of efficiency is a wrong move. I believe that
22:46
Speaker 8: If you design it for resilience in an unpredictable environment,
22:52
Speaker 8: actually you're optimizing for efficiency. We had an air crash.
22:57
Speaker 8: We had a cyber attack. We had supply chain disruptions. Still,
23:01
Speaker 8: as a group, we will deliver double-digit growth. And margins
23:05
Speaker 8: are holding up. So I think we are paying more attention.
23:11
Speaker 8: I send the message across the group. We have to
23:15
Speaker 8: think what is resilience for each one of our businesses.
23:18
Speaker 8: We can't define resilience as a global thing. Every company
23:22
Speaker 8: has to think of what is resilience. I think if
23:25
Speaker 8: you design it for resilience, you will optimize for efficiency
23:29
Speaker 8: because that's the nature of the word.
23:32
Speaker 7: Rishi, I made the point that markets aren't very good,
23:34
Speaker 7: or investors at least, aren't very good at valuing resilience.
23:38
Speaker 7: But nevertheless, and we keep hearing about this, every country...
23:43
Speaker 7: wants a resilient economy. So what happens if the market
23:47
Speaker 7: doesn't reward companies for having excess inventory, right? Spare capacity,
23:55
Speaker 7: surplus capital, supply chain diversification. If the market doesn't reward
24:00
Speaker 7: you for that and the genius of having it only
24:04
Speaker 7: looks brilliant in a crisis, what do you do?
24:07
Speaker 1: Is that where government needs to step in?
24:09
Speaker 7: Does government need to subsidize or incentivize And if so, how?
24:16
Speaker 2: It does, but you have to be careful because politicians
24:21
Speaker 2: always like opportunities to protect local businesses. They like opportunities
24:26
Speaker 2: to put up barriers that you protect the producers. And
24:30
Speaker 2: this gives them an excuse to do that. I think
24:34
Speaker 2: the instructive example here is the French. When Pepsi, big,
24:38
Speaker 2: bad American company, tried to come and buy Danone, the
24:42
Speaker 2: important French company, the French declared that yogurt was a
24:45
Speaker 2: strategic national priority in order to block this transaction. And
24:49
Speaker 2: that is an example of what not to do. Having
24:51
Speaker 2: said that, it's clear, as Chandra said, the world has
24:54
Speaker 2: changed and governments need to adapt to it. And the
24:57
Speaker 2: G7 we had when I was in office, we talked
25:01
Speaker 2: about this notion of de-risking.
25:04
Speaker 1: Rather than decoupling.
25:06
Speaker 2: And the National Security Advisor, Jake Sullivan, in the US
25:09
Speaker 2: actually had this concept that we put in a speech
25:11
Speaker 2: that was very good, which is this concept of a
25:13
Speaker 2: kind of small garden or small yard and a high fence.
25:17
Speaker 2: And it's trying to figure out what are the small
25:19
Speaker 2: number of absolutely critical things that you do want to
25:23
Speaker 2: have national sovereign capability in, where you need to have
25:26
Speaker 2: a really good range of options. where you're going to
25:29
Speaker 2: prioritize to protect. But outside of that, we should be
25:33
Speaker 2: careful to make sure that we enjoy the benefits of
25:36
Speaker 2: free markets and enterprise, which all of us realize creates
25:39
Speaker 2: growth and prosperity for our citizens. Hard as it is
25:42
Speaker 2: sometimes to defend, Chandra and I spend an enormous amount
25:46
Speaker 2: of time working on different things together in government, and
25:48
Speaker 2: that's probably indicative of the environment that we're in. But
25:52
Speaker 2: the other thing I'd say with that is, going back
25:54
Speaker 2: to what John said about financial market risk, I think
25:57
Speaker 2: generally this is inflationary. It comes at a cost. In
26:02
Speaker 2: the UK, take an example, gas storage. John talked rightly
26:06
Speaker 2: about the supplies we've seen. In the UK, we had
26:09
Speaker 2: our storage capacity at a rundown over time. You have
26:12
Speaker 2: the energy shock in Europe when Russia invaded Ukraine, new
26:16
Speaker 2: energy shock now in the Middle East. And then you
26:18
Speaker 2: realize the value of having more storage. Ultimately, that storage
26:21
Speaker 2: comes at a cost for all the other years. that
26:24
Speaker 2: it's not used and that requires the government to step
26:26
Speaker 2: in and provide essentially some incentive to do that.
26:42
Speaker 7: I'd like to flip the script a little bit and
26:44
Speaker 7: talk about predictability and Chandra and I have had conversations
26:49
Speaker 7: about this. And in those conversations, Chandra, you've told me
26:53
Speaker 7: that the Tata, which to your point earlier is almost
26:56
Speaker 7: 160 years old, has learned to think in terms of generations,
27:03
Speaker 7: maybe even centuries, which is quite a thought. Any strategy,
27:10
Speaker 7: any plan built on that kind of timeframe requires at
27:15
Speaker 7: least some certainty about the future. What do you believe
27:20
Speaker 7: is predictable?
27:22
Speaker 8: See, I think if you look at our own history
27:26
Speaker 8: and go back some of the decisions that were made
27:29
Speaker 8: by Jamshed G. Stein in the early 1900s, he believed
27:34
Speaker 8: that steel was fundamentally important.
27:37
Speaker 1: Steel.
27:38
Speaker 8: Was fundamentally important. He felt power was fundamentally important. He
27:42
Speaker 8: imagined a steel plant. He imagined a hydroelectric power plant.
27:49
Speaker 8: And he imagined R & D is important, science is important.
27:52
Speaker 8: None of this he saw. He didn't live to see
27:55
Speaker 8: any one of those. But the steel plant came up
27:58
Speaker 8: in 1907, and the hydroelectric power plant came in 1911.
28:03
Speaker 8: And they had raised money in Ohio in 1911. So
28:10
Speaker 8: then the IASC came about. And subsequently, there are many
28:15
Speaker 8: decisions that have been taken by people various chairmen in
28:20
Speaker 8: the group, which have all proved to be right in
28:23
Speaker 8: long term. And sometimes things go wrong, then you course correct.
28:29
Speaker 8: But I believe that directionally, if you design it on
28:34
Speaker 8: the belief that it is needed for India, it is
28:37
Speaker 8: needed for mankind and for enterprises, you will get it right.
28:43
Speaker 8: Even from the time we went in, to electronics to
28:47
Speaker 8: start manufacturing, the India's exports has gone from 12 billion
28:53
Speaker 8: five years ago to 48 billion this year. So the
28:57
Speaker 8: manufacturing sector is growing at 9%. And advanced manufacturing is
29:03
Speaker 8: here to stay. And if you take chips, I think
29:07
Speaker 8: if you take a vote, everyone will say chips are
29:09
Speaker 8: the future. So whether we will get it right and
29:14
Speaker 8: meet the numbers two years or three years is not
29:18
Speaker 8: the point. We need partnerships because we may not have
29:21
Speaker 8: all the technologies and so we need partners. But if
29:25
Speaker 8: you design it, definitely we'll get there. We can't be
29:28
Speaker 8: reckless in saying that I'm going to be putting a
29:32
Speaker 8: two nanometer chip. It's just not going to work. So
29:35
Speaker 8: we need to also see where the demand is. But
29:38
Speaker 8: I think for me, the metric is it's important for
29:42
Speaker 8: India or it's important for businesses and people and its future. Third,
29:49
Speaker 8: it can create jobs. Fourth, it's financially viable. It's not
29:54
Speaker 8: that you're going to have a very clean spreadsheet in
29:58
Speaker 8: this uncertain world, that everything is going to be certain.
30:01
Speaker 8: But a lot of things are certain. Direction is certain.
30:04
Speaker 8: The need is certain. The ability to execute is certain.
30:08
Speaker 8: And only thing is how much you ramp up, how
30:10
Speaker 8: fast you ramp up, which technology you go to.
30:13
Speaker 1: All this is uncertain.
30:14
Speaker 7: John, if I look at Blackstone's track record, maybe I'll
30:17
Speaker 7: use the hockey reference, being the Canadian that I am,
30:20
Speaker 7: that you want to skate to where the puck is going, right?
30:23
Speaker 1: Not where it is.
30:24
Speaker 7: So where is the puck going for Blackstone next?
30:27
Speaker 1: What is.
30:28
Speaker 7: The next trend that you anticipate will become a big
30:31
Speaker 7: business for you.
30:32
Speaker 4: I think we'll continue to be very long electricity because
30:37
Speaker 4: everything we're talking about around technology, the data centers, the
30:42
Speaker 4: autonomous vehicles, the robots, all of it's going to use electricity.
30:47
Speaker 4: So this AI is going to move from the desktop
30:49
Speaker 4: to the physical world. That'll demand more electricity. Obviously the
30:54
Speaker 4: digital infrastructure, hugely important. I think, unfortunately, based on the
31:00
Speaker 4: discussions here, Rishi knows better than all of us, but
31:03
Speaker 4: defense is going to be hugely important for pretty much
31:06
Speaker 4: every country in the world is going to be investing
31:09
Speaker 4: more on its own resiliency. I think life sciences is
31:14
Speaker 4: an area that we will keep doubling down. It'll be
31:17
Speaker 4: obviously good for India. But this technology, which we all
31:21
Speaker 4: rightfully focus on the risks, the benefits to human health
31:25
Speaker 4: are going to be the number one thing that's going
31:28
Speaker 4: to come from it.
31:29
Speaker 3: So there's going to be lots of innovation. You'll still
31:32
Speaker 3: have you'll need to do a lot of trials around that.
31:35
Speaker 4: And then I would just say geographically, because we are here,
31:39
Speaker 4: this place is It's got an incredibly bright future. When
31:43
Speaker 4: you look at the size and age of the population,
31:47
Speaker 4: the education that's here, English speaking, lots of people with
31:53
Speaker 4: degrees in technology and engineering, a government that's pro-growth. and
31:58
Speaker 4: yet you're working off GDP per capita that's 1 30th
32:02
Speaker 4: of the United States.
32:04
Speaker 1: Now with new infrastructure, this is.
32:06
Speaker 4: A place when we look over the next century that
32:09
Speaker 4: I think will grow faster than any other major economy
32:13
Speaker 4: in the world.
32:13
Speaker 3: So we want to deploy more capital here.
32:16
Speaker 7: And Rishi, the last word on predictability goes to you.
32:21
Speaker 7: What trends do you believe are durable enough to outlast
32:27
Speaker 7: the today's geopolitical and technological uncertainty.
32:33
Speaker 2: It used to be said that you couldn't be a
32:35
Speaker 2: high income country without being a high energy country. And
32:38
Speaker 2: I think John touched on that well. I think the
32:40
Speaker 2: same will be true for intelligence and compute. And that
32:45
Speaker 2: to me is the critical infrastructure of the next couple
32:49
Speaker 2: of decades. And ensuring that a country has that enabling infrastructure,
32:54
Speaker 2: I think is going to be absolutely critical of the
32:56
Speaker 2: electricity powers that India's investing in it. Countries need to
33:00
Speaker 2: do that in order to get all the benefits that
33:02
Speaker 2: John talked about, whether it's in life sciences, whether it's
33:05
Speaker 2: in productivity and elsewhere. And we're living in the midst
33:08
Speaker 2: of this extraordinary explosion in demand for intelligence, right? The
33:12
Speaker 2: Jivans paradox that people are familiar with from the 1860s
33:16
Speaker 2: when a new engine came along that made it all
33:19
Speaker 2: more efficient meant that the consumption of coal went up extraordinarily.
33:23
Speaker 2: And we're seeing that today. The demand for tokens is
33:26
Speaker 2: growing exponentially. I think that will continue and enable all
33:28
Speaker 2: these things. So yes, all these swirling currents are there.
33:31
Speaker 2: But as a country or as a company, having access
33:34
Speaker 2: to that raw intelligence to power your future, I think,
33:37
Speaker 2: is the thing that you can bet on. And alongside that,
33:40
Speaker 2: I'd say human ingenuity, right? No matter what comes our way,
33:44
Speaker 2: we are always able to find solutions, right? So I
33:48
Speaker 2: would always bet on human ingenuity, whether it's in countries
33:51
Speaker 2: like India or elsewhere, the people who are innovating, the
33:54
Speaker 2: entrepreneurs who are creating new things, supporting them and allowing
33:58
Speaker 2: their ideas to flourish and grow. That's ultimately how you
34:01
Speaker 2: develop not just security, but also prosperity and health to
34:05
Speaker 2: your society.
34:06
Speaker 7: An appropriate note of optimism on which to end our conversation.
34:09
Speaker 7: Rishi Sunak, John Gray, Chandra, distinguished guests, please join me
34:13
Speaker 7: in thanking them.
34:14
Speaker 6: Thank you, Rishi.
34:23
Speaker 5: Thanks for listening to Trumponomics from Bloomberg. It was hosted
34:25
Speaker 5: by me, Stephanie Flanders, and I was joined here in
34:28
Speaker 5: Delhi by Bloomberg's chief economist, Tom Orlick. You also heard
34:31
Speaker 5: a panel hosted by NEF editorial director, Eric Schatzker, featuring
34:35
Speaker 5: the Right Honourable Rishi Sunak MP, John Gray... and N.
34:39
Speaker 5: Chandra Shekram. Trumponomics was produced by Samasani and Moses Andam,
34:44
Speaker 5: with help from Gautam Gulati and Ajunt Singh. Sound design
34:48
Speaker 5: was by Blake Maples and Kelly Gary, and Amy Keene
34:51
Speaker 5: is executive producer of Talk Podcasts, with Cheryl Brumley, the
34:55
Speaker 5: head of
34:55
Speaker 8: Podcasts at Bloomberg.