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Alan Greenspan · The David Rubenstein Show

0:01
Speaker 1: Serving under four presidents from both parties. Alan Greenspan holds
0:04
Speaker 1: the title as the second longest serving Federal Reserve chairman,
0:08
Speaker 1: overseeing America's economy through booms and busts from the nineteen
0:12
Speaker 1: eighties through the two thousands. Growing up the son of
0:15
Speaker 1: a stockbroker in New York City, Greenspan studied clarinet at
0:18
Speaker 1: Juilliard's School before graduating from n y U with a
0:21
Speaker 1: degree in economics. After time at the Conference Board in
0:25
Speaker 1: his own economic consulting firm, President Ronald Reagan nominated Greenspan
0:29
Speaker 1: to succeed Paul Volker as FED Chair, and he was
0:32
Speaker 1: confirmed in August of nineteen eighties seven. Greenspan was subsequently
0:36
Speaker 1: renominated as FED chair by President Clinton with both George W.
0:40
Speaker 1: And H. W. Bush after being replaced by Ben Bernaki
0:44
Speaker 1: in two thousand six. Greenspan founded an economic consulting firm
0:48
Speaker 1: and wrote a memoir entitled The Age of Turbulence Adventures
0:52
Speaker 1: in a New World. Greenspan has a new book on
0:55
Speaker 1: now called Capitalism in America, a History, which he wrote
0:59
Speaker 1: with Financial Times reporter Adrian Wooldridge. He recently sat down
1:02
Speaker 1: with Carlisle Group co founder David Rubinstein. They spoke on
1:06
Speaker 1: David Rubinstein's Bloomberg television program Peer to Peer Conversations. John
1:10
Speaker 1: Kenneth Galbraith once famously said that conventional wisdom is almost
1:15
Speaker 1: always wrong. Now, the conventional wisdom today is that the
1:19
Speaker 1: U S economy is very strong. I think your view
1:22
Speaker 1: is that might not be accurate. Is that correct? You
1:25
Speaker 1: don't think it's that strong? Well, I think it's a
1:27
Speaker 1: different form of what we call stagflation. It had some
1:33
Speaker 1: of the characteristics of buoyancy, but underneath it is an
1:38
Speaker 1: erosion which ultimately will disable the economy unless it's corrected.
1:43
Speaker 1: Do you see any movement to solve let's say, the
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Speaker 1: deficit and debt problem. I'd say a lot of talk,
1:50
Speaker 1: but no realistic movement. And right now we're creating a
1:57
Speaker 1: deficit of a trillion dollars a year and uh that
2:02
Speaker 1: is being added net to the stock of debt, and
2:07
Speaker 1: debt as a percent of GDP is rising very rapidly,
2:12
Speaker 1: and the demographics of the age groups are such is
2:17
Speaker 1: that that's going to accelerate in the immediate future. So
2:21
Speaker 1: if you could wave a magic wand and help reduce
2:25
Speaker 1: this deficit and debt, what would you do well. The
2:28
Speaker 1: question is what's the cause of it, And the cause
2:31
Speaker 1: of it is essentially on both the expenditure and on
2:35
Speaker 1: the tax side. I actually fully approve of the tax
2:40
Speaker 1: cuts that were made, but only in the context that
2:46
Speaker 1: it is funded. Otherwords, we went to a very significant
2:49
Speaker 1: cut in the marginal corporate tax rate. But you can't
2:53
Speaker 1: have a tax cut without finding the revenues elsewhere or
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Speaker 1: you running the problems. So the tax cut bill that
3:01
Speaker 1: was passed in the first year of President Trump's administration
3:04
Speaker 1: by the Congress said, in effect, that will produce three
3:07
Speaker 1: or more growth for the foreseeable future. Do you think
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Speaker 1: three annualized growth is realistic over the next five or
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Speaker 1: ten years. No, certainly not as a consequence of the
3:16
Speaker 1: tax cut. The tax cut actually did get a buoyancy,
3:22
Speaker 1: and we're still feeling some of it, but it's nowhere
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Speaker 1: near enough to offset the actual deficit. So there's no
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Speaker 1: way around us without coming to grips with the expenditure side. Okay,
3:36
Speaker 1: So President Trump called you up and said, uh, Alan,
3:40
Speaker 1: you're a great u former Chairmber of the Federal Reserve.
3:42
Speaker 1: I need some advice. I wanted to solve the SOUCH
3:45
Speaker 1: security problem and the Medicare medicaid problem. What would you
3:47
Speaker 1: tell him to do else go elsewhere because you think
3:53
Speaker 1: it's too difficult. I think politically we're caught the terrible problem.
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Speaker 1: So let's talk about another issue that you've talked about,
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Speaker 1: which is productivity. Your point is that we don't have
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Speaker 1: the productivity that we should have, in part because we're
4:08
Speaker 1: borrowed so much money, and that's squeezing out the money
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Speaker 1: that would be otherwise available for productivity increases. Precisely, it's
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Speaker 1: the capital investment which ultimately determines what productivity will be
4:21
Speaker 1: in factor. Our equations show that you can explain it
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Speaker 1: all with the care net capital stock that's built up
4:29
Speaker 1: in business, plus uh uh, some measures of educational efficiency.
4:37
Speaker 1: But we're not doing it now. Harry Truman, when he
4:41
Speaker 1: was listening to his economic advisors, said, you know, please
4:44
Speaker 1: bring me a one handed economist, because they always said, well,
4:47
Speaker 1: on the one hand, this and the other hand this,
4:49
Speaker 1: and he got tired of that. So, um, let me
4:51
Speaker 1: ask you a direct question. Can you tell me when
4:54
Speaker 1: the next recession is going to happen? Sometimes? Sometimes, but
5:00
Speaker 1: we've had recessions every seven years on average since World
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Speaker 1: War Two. It's going to be driven by the fact
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Speaker 1: that debt is rising dramatically and there's going to be
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Speaker 1: some curtailments occurring from that, and it's going to feed
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Speaker 1: on itself. What I'm saying, we talk about stagflation. Stagflation
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Speaker 1: is something that happened in when you had a situation
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Speaker 1: where both unemployment and inflation we're high, something which the
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Speaker 1: original Keynesian model said was not possible. And we're going
5:37
Speaker 1: into that type of period now. If you look at
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Speaker 1: all the guide, if you're worried that we're going to
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Speaker 1: go into recession at some point, um you do you
5:46
Speaker 1: invest your money in a certain way to protect against that.
5:50
Speaker 1: You can't protect everything. And the point is you can't
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Speaker 1: forecast a very very accurately. Right now, we've been at
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Speaker 1: the extreme period extremely low real long term interest rates,
6:07
Speaker 1: and they're beginning now to move up, will continue to
6:11
Speaker 1: move up, and that is going to cause the basic
6:15
Speaker 1: turn in the market. Are you worried about inflation right now?
6:19
Speaker 1: I think I'm beginning to see the first signs of it.
6:22
Speaker 1: We're seeing it basically in the tightening of the labor
6:25
Speaker 1: markets first, which as you know, getting very tight. Now
6:29
Speaker 1: we'll be getting finally to see average wages rise, and
6:37
Speaker 1: clearly there's no productivity behind it. All productivity increase in
6:42
Speaker 1: the last ten years is averaged under one percent a year.
6:47
Speaker 1: It's a historic low. Uh not, I might add, it's
6:50
Speaker 1: not over your we it's Europe and everybody else as well.
6:54
Speaker 1: You're getting into a system now which has no outcome
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Speaker 1: that's and equilibrium other than inflation and low productivity growth,
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Speaker 1: and that is not something which says we're going to
7:13
Speaker 1: have a long term acceleration. So what would you recommend
7:18
Speaker 1: that we do to solve the problems that you pointed out? Well,
7:21
Speaker 1: the basic problem is fundamentally on the expenditure side, so
7:26
Speaker 1: that the issue is if I would say ninety entitlements. Now,
7:34
Speaker 1: these are as you know, basically legislated payments to certain
7:42
Speaker 1: groups irrespective of what they're paying into funds, and we've
7:47
Speaker 1: we've overdone it. Now, the question obviously is, well, if
7:51
Speaker 1: we've overdone it, why don't we just pull it back?
7:54
Speaker 1: That is the economic conclusion. It is not a credible
7:59
Speaker 1: political Now let me shift for a moment. If I
8:02
Speaker 1: could to your own personal life and career when you
8:06
Speaker 1: were a young boy, did you say I want to
8:08
Speaker 1: be chairman of the Federals aboard. That's the last thing.
8:12
Speaker 1: I could barely pronounce the words. At the time. My
8:15
Speaker 1: aspiration was to be a musician, so I went to
8:19
Speaker 1: Juilliard for a few years. Your instrument was what I played,
8:23
Speaker 1: the uh clarinet, ten of saxophone based clarinet, a little flute.
8:30
Speaker 1: But for all of those, you weren't good at any
8:31
Speaker 1: of them. To be a really professional, make your whole
8:34
Speaker 1: career at that, Let's put it this way. I could have,
8:37
Speaker 1: but I said, I'll only be clasppy because I sat
8:42
Speaker 1: next to a fifteen year old by the name of
8:45
Speaker 1: Stanley Gets when I was sixteen. We both had the
8:49
Speaker 1: same saxophone teacher, and I said, oh my god, this
8:54
Speaker 1: kid is terrific. And I said to myself, Uh, if
9:00
Speaker 1: you can't be this could Why do you want to
9:03
Speaker 1: be second best? Why didn't you tell him he should
9:05
Speaker 1: go into economics and get rid of him. I should
9:08
Speaker 1: have done that, I thought that I never thought of it.
9:11
Speaker 1: That would have been a good idea. So you ultimately
9:13
Speaker 1: left Juilliard and you went to n y U. Yes, well,
9:17
Speaker 1: I actually is very surprised. I didn't think I was
9:19
Speaker 1: going to be a good student. I knew I did
9:23
Speaker 1: well in math in high school. I did not. It
9:26
Speaker 1: wasn't absolutely sure how all I would do in college.
9:29
Speaker 1: It turns out that I don't know that I graduate
9:33
Speaker 1: summer come Louder. But I had only two bees in
9:37
Speaker 1: shop and Jim shopping, Jim so so He's and everything else,
9:45
Speaker 1: And there was no one more surprised than I. So
9:49
Speaker 1: you graduate summer come Loudy from n y U. H
9:52
Speaker 1: you've given up your music career. What did you do
9:54
Speaker 1: when you graduated? Uh? Well, first of all, I went
9:58
Speaker 1: to the National Industrial Conference Board for the first time.
10:03
Speaker 1: I went into the business world, and I wasn't really
10:07
Speaker 1: all that interested in it, and found myself fascinated. And I,
10:13
Speaker 1: at a fairly young age, was like twenty two, was
10:15
Speaker 1: writing articles for the Conference Board magazine, and I was
10:21
Speaker 1: fascinated by I was getting quoted in the New York Times. Okay,
10:25
Speaker 1: a very early age. So the New York Times is
10:29
Speaker 1: quoting you, and you're in your twenties, and then you
10:31
Speaker 1: ultimately became an fact that a well known, ultimately well
10:34
Speaker 1: known consultant on Wall Street and on the side, you
10:37
Speaker 1: become close to or get to know a very famous
10:39
Speaker 1: writer named Iron Rand. And what was the appeal of
10:43
Speaker 1: her to you? What fascinated was her heroes, And when
10:49
Speaker 1: I read her books found it. And then Atlas Rugged,
10:52
Speaker 1: I was caught up in that science thing which said
10:56
Speaker 1: basically that, uh, you didn't have anything rational about human emotions.
11:05
Speaker 1: And I had an argument about uncertainty behind Rand when
11:11
Speaker 1: ever since I met her, and I kept saying that
11:18
Speaker 1: human values are irrational, you know, there not conceptually put together.
11:26
Speaker 1: And she then proceeded to take me apart, piece by piece,
11:32
Speaker 1: showing the contradictions in my position. But did you think
11:36
Speaker 1: she was smarter than you? She demonstrated she was smarter
11:39
Speaker 1: than and we actually became very close. You obviously built
11:44
Speaker 1: a very good reputation in Wall Street because Richard Nixon,
11:48
Speaker 1: President United States, UM asked you to serve as the
11:51
Speaker 1: head of the Council of Economic Advisors, and you actually
11:55
Speaker 1: had agreed to do so. But then something happened to
11:58
Speaker 1: President Nixon. Is that right? Something I've forgotten what it was.
12:01
Speaker 1: Then Nixon resigned and Ford, as vice president, became president. Ultimately,
12:07
Speaker 1: you got to be close to President Ford. But Ford
12:11
Speaker 1: lost the election to my former boss, Jimmy Carter in
12:14
Speaker 1: nineteen seventy six and you went back to Wall Street.
12:17
Speaker 1: Is that right? You're pretty prominent now as the former
12:19
Speaker 1: head of the Council Economic Advisors and then ultimately President
12:23
Speaker 1: Reagan says to you, why don't you come in and
12:25
Speaker 1: be the chairman of the federals Ave Board. Did you
12:28
Speaker 1: meet with Reagan before you accepted the offer? Well, I
12:30
Speaker 1: actually had met with him quite often during his campaign.
12:37
Speaker 1: I was part of the Reagan for President campaign staff,
12:42
Speaker 1: so that stuff. I got to work with them fairly closely.
12:46
Speaker 1: So you take the job, and you held the job
12:48
Speaker 1: for eighteen or nineteen years, eighteen and a half years.
12:54
Speaker 1: You were called by many of the maestro and you
12:56
Speaker 1: were given a lot of credibility for the U. S
12:58
Speaker 1: economy being in such a good shap. Did you ever
13:01
Speaker 1: think that people were giving you too much credit for
13:03
Speaker 1: being such a great maestro of the economy or do
13:06
Speaker 1: you think they were pretty right? I said, wait, it
13:10
Speaker 1: won't last. Uh, you can't. Popularity in Washington is basically
13:20
Speaker 1: related to what it is you do, and if you
13:23
Speaker 1: have no if you don't have a hundred percent control
13:26
Speaker 1: of what it is that happens as a consequence that
13:28
Speaker 1: you're doing you get caught by the fluctuations up and down.
13:32
Speaker 1: My major concern, and I was cutely aware of it,
13:36
Speaker 1: as I was getting much too credit, too much of
13:39
Speaker 1: the credit for what actually was going on, And I said,
13:45
Speaker 1: don't worry about it. It'll come out on the other side.
13:48
Speaker 1: In those years, um, people often uh would say, let's
13:53
Speaker 1: photograph Alan Greenspan walking into the Federal Reserve building. If
13:57
Speaker 1: he has a big fat um set of books with
14:00
Speaker 1: him or papers, that means he's about to make a
14:02
Speaker 1: historic decision. If he has nothing very much, it means
14:04
Speaker 1: no historic decision. So was that there any truth to
14:07
Speaker 1: the validity of your carrying a lot of things into
14:09
Speaker 1: the It was my brief, briefcase, depending whether my wife
14:13
Speaker 1: made me lunch. So it really was nothing to that theory.
14:16
Speaker 1: Well everybody knew that, of course. What about the theory
14:19
Speaker 1: that you made your key decisions in the bathtub in
14:22
Speaker 1: the morning because you had a bad back. You would
14:24
Speaker 1: take a bath every morning, and that you would write
14:27
Speaker 1: notes to people and it would come back kind of
14:29
Speaker 1: with a little water marks on it because you were
14:32
Speaker 1: doing this in the bathtub. Did you make good decisions there?
14:34
Speaker 1: Do you think? Oh? Of course, And I was. I
14:37
Speaker 1: was writing speeches in the bathtub. Uh. The backwards is
14:43
Speaker 1: still bought. Obviously still a problem. Was quitely on my
14:49
Speaker 1: back full time for six weeks by an orthopedist. I
14:56
Speaker 1: ran my business looking up at the sailing. All right,
14:59
Speaker 1: so you're step down and all of a sudden everybody
15:02
Speaker 1: in the world wants to get your advice on things.
15:04
Speaker 1: Was it a shock or you actually anticipated that would happen.
15:08
Speaker 1: I was shocked. I was shocked that the price that
15:11
Speaker 1: they bit up on my first book. I was shocked
15:15
Speaker 1: by the fees I was getting U uh pretty much
15:21
Speaker 1: for number of years. So things went very well, and
15:24
Speaker 1: then the economy collapses, and so all of a sudden,
15:27
Speaker 1: are people were saying, well, it was Alan Greenspan's fault
15:30
Speaker 1: because he should have anticipated this. Did you think that
15:33
Speaker 1: was fair? And were you surprised by how much criticism
15:36
Speaker 1: you perceived at that point? One. I did not think
15:39
Speaker 1: it was fair, but I never expected it to be fair.
15:42
Speaker 1: And Uh, I anticipated that was going to happen. I
15:45
Speaker 1: just didn't know exactly when. But nobody forecast the two
15:49
Speaker 1: thousand and eight crisis. One of the things I put
15:52
Speaker 1: in a second book, I wrote, UH was how the
15:57
Speaker 1: I M F missed it, the deserve missed it. Uh,
16:02
Speaker 1: you go down the whole series of the major forecasting.
16:07
Speaker 1: Everybody got wrong, let's say every every I mean. But
16:12
Speaker 1: the purpose was I didn't find that surprise. You can't
16:17
Speaker 1: have a crisis of that nature that that is not
16:21
Speaker 1: a surprise. So you look back on your term as
16:24
Speaker 1: the Federals chair, would you have done anything different in
16:27
Speaker 1: light of events that happened after you left? Would you
16:29
Speaker 1: have done something differently enough that I'm aware of now
16:33
Speaker 1: when you testify in Congress? You were famous for not
16:35
Speaker 1: being that precise in terms of being clear clear. Let's
16:39
Speaker 1: say you were used what I would call fed speak
16:41
Speaker 1: because you were off your skating a little bit? Was
16:44
Speaker 1: that on purpose? In other words? It was a general
16:48
Speaker 1: rule uh at that time that the Federals did not
16:54
Speaker 1: make public what it was going to do. We do now,
16:59
Speaker 1: but not not back then. And so the question was
17:04
Speaker 1: what ways could I figure around answering certain questions or
17:08
Speaker 1: not answering them? And I had I worked up means
17:14
Speaker 1: to vote vocabulary, which M quite understand. How we're too
17:20
Speaker 1: ashamed to say that, don't understand? All right? So it
17:23
Speaker 1: was on purpose? Why do you think it is that
17:26
Speaker 1: we're not as creative as we were before? And for
17:28
Speaker 1: any coming up with new companies and so forth. There's
17:31
Speaker 1: more to it than just strictly the issue of a
17:35
Speaker 1: simple capitalist thing. We're getting more and more regulation. So
17:41
Speaker 1: let's talk a moment now about your book, Capitalism in America.
17:45
Speaker 1: One of the key points of your book is that
17:47
Speaker 1: we have something in the United States called what you've
17:49
Speaker 1: called creative destruction. Creative destruction essentially means that entrepreneurs starting
17:55
Speaker 1: new companies. But you're worried, according to the book, that
17:58
Speaker 1: we're not doing that as much. Now. Is that right?
18:01
Speaker 1: And why do you think it is that we're not
18:03
Speaker 1: as creative as we were before? For any coming up
18:06
Speaker 1: with new companies and so forth. There's more to it
18:08
Speaker 1: than just strictly the issue of the simple capitalist thing.
18:14
Speaker 1: We're getting more and more regulation. In fact, the one
18:21
Speaker 1: thing I'm I'm waiting to see the consequences of what
18:26
Speaker 1: the current administration's deregulation operations are doing, because, ah, what
18:35
Speaker 1: we show in the book is examples of the extraordinary
18:42
Speaker 1: broadening of controls, which ah, I mean people listening seems
18:51
Speaker 1: strange to use this example, but to be a florist
18:54
Speaker 1: or something related which has no effect on human life
18:58
Speaker 1: or health. W you need you needed, you need a permit.
19:05
Speaker 1: That never was the case. So your point is there's
19:08
Speaker 1: too much regulation. What is remarkable about the United States?
19:14
Speaker 1: We went up and down? What would have thought that
19:17
Speaker 1: after the nineteen thirties, UH, that capitalism was shot gone, No,
19:25
Speaker 1: not coming back, And ironically it got resurrected during World
19:30
Speaker 1: War Two, where it was very obvious at the private
19:34
Speaker 1: sector was what essentially won the war. And UH today
19:44
Speaker 1: the ownership of capital is not as unequivocal as it
19:47
Speaker 1: used to be. The regulation and the UH taxation and
19:53
Speaker 1: the culture is not what it used to. The main
19:56
Speaker 1: point of your book, I thought was to say, we've
19:59
Speaker 1: had a uni capitalist system, but maybe there's some dangers
20:02
Speaker 1: that what we've made us so unique aren't going to
20:04
Speaker 1: be available in the future. Is that exactly right? So
20:08
Speaker 1: you're now in your nineties and UM, did your parents
20:12
Speaker 1: lived to be this age or you have long genes
20:16
Speaker 1: or mother? So the success other than good genes is
20:24
Speaker 1: what would you attribute to? It's? Um, eating well, exercising
20:28
Speaker 1: a lot, UH, reading a lot of productivity data reports.
20:32
Speaker 1: What is it that you attribute your longevity product reading
20:37
Speaker 1: a lot of productivity data reports is probably What's it?
20:40
Speaker 1: One of your great accomplishments we haven't talked about is
20:42
Speaker 1: you've been married to Andrew Mitchell for quite some time,
20:45
Speaker 1: a NBC correspondent, among other things she's achieved. So anything
20:49
Speaker 1: you would like to say about your marriage to Andrew Mitchell,
20:52
Speaker 1: It's been wonderful, okay? And does she give you advice
20:56
Speaker 1: when economic matters? Ever you give her vital media matters?
20:58
Speaker 1: Ever advice on everything? Okay? Sometimes? I take it. You've
21:03
Speaker 1: met a lot of famous people, UH Presidents United States,
21:07
Speaker 1: heads of state from other countries, UH, finance secretaries, ministers,
21:13
Speaker 1: secretaries of treasury, secretaries of state. Who would you say
21:16
Speaker 1: among the most impressive people you or privileged to meet,
21:20
Speaker 1: let's say the too smartest, too smartest were got impeached,
21:26
Speaker 1: Bill Clinton and Richard Nixon. I mean they, I would say,
21:32
Speaker 1: on a strictly i Q basis, those two, but they
21:36
Speaker 1: had other flaws obviously. Do you ever have any regrets
21:39
Speaker 1: about anything you did in your career and do you
21:42
Speaker 1: ever regret not going into private equity? Well, I'm an
21:46
Speaker 1: economist making money, per se. It's never been my interest.
21:52
Speaker 1: It turned out that a good full out rule, but
21:57
Speaker 1: it was never my real purpose. We ever want to
21:59
Speaker 1: rein it yourself as a private equity person, let me
22:02
Speaker 1: know you could, you know, learn this business and still
22:04
Speaker 1: be very good in it. After I run out of economics,
22:09
Speaker 1: my problem basically, economy keeps fascinating me.