How COVID-19 Reshaped the Advice Industry | #SALTNY

How COVID-19 Reshaped the Advice Industry with David Bahnsen, Founder, Managing Partner & Chief Investment Officer, The Bahnsen Group. Karen Firestone, Chairman, Chief Executive Officer & Co-Founder, Aureus Asset Management. Josh Brown, Chief Executive Officer, Ritholtz Wealth Management.

Moderated by Sean Allocca, Deputy Managing Editor, InvestmentNews.

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SPEAKERS

David L. Bahnsen

Founder, Managing Partner & Chief Investment Officer

The Bahnsen Group

FULL BIO

Karen Firestone

Co-Founder, Chairman & Chief Executive Officer

Aureus Asset Management

FULL BIO

Josh Brown

Chief Executive Officer

Ritholtz Wealth Management

FULL BIO

MODERATOR

Sean Allocca

Deputy Managing Editor

InvestmentNews

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

David Bahnsen: (00:07)
New York was slightly different story, we reopened last summer, but we have a smaller presence in New York. We've doubled in size out here since, but it was easier to get away with kind of what was going on in New York than it was California, particularly Newport Beach where there was much less of a hysteria about things versus LA County. But I agree with Josh completely that all the technology apparatus pre-COVID was a very natural segue into what ended up taking place. We were big Salesforce users, we're big WhatsApp users, so there was the ability to use cloud and use digital communications internally where we didn't skip a beat.

David Bahnsen: (00:48)
The difference for us is... And I think there's a huge advantage for us right now versus all the wirehouses that aren't reopened and don't appear to have any intention of reopening their branches anytime soon... the client-facing aspect of the business. We have clients in 40 something states. We always have. There's a lot of remote communications, just like what Josh was talking about, when you have a national footprint, but to the extent that we have local presence, we really want the face-to-face. And we think it was a huge advantage for us last year that we were able to get in front of prospects and clients both through the second half of last year and all of this year, and we've reaped a lot of dividends from that.

David Bahnsen: (01:31)
This is something I remember when I was in training, coming out of dotcom, I was at a firm called PaineWebber, they got bought by UBS, and the then CEO, Jo Grano was giving us a speech about why we didn't need to be afraid of the e-trades and Schwabs and all this. And he said, there will never be a time in your life ever, where the really truly high net worth are... that you're going to be dis-intermediated. There's always going to be an industry for advice. And people were worried about that at the time, what they thought was cheap trading. I think it was like 20 bucks a trade or something. I remember throughout COVID thinking the same thing, the idea that we'll get to a point where this very well-established desire from high net worth people to have communion with their advisor, to have a face-to-face communication, to have events.

David Bahnsen: (02:22)
Events are a big part of our business too, like Josh was saying. We've started out doing them again. We had 250 people at a client dinner a few months ago in California, so we're back up and running our first event here in New York, it will be in another month. Larry Kudlow is an advisor on my team and he and I are going to speak together and that'll be packed out. And so those are the things that make you feel like you're getting back to normal. But the key issue for us is the face-to-face with the client where it's possible. I do not believe that can go away, I think people desire that personal relationship.

Sean Allocca: (02:57)
And so what have been... I mean, we'll give this one to you, Kari... some of the pain points that you've seen in the last 18 months in terms of the pandemic and how we overcome them at your firm? Have you seen similar things to Josh and David, or was your experience a little different?

Karen Firestone: (03:11)
Yeah. It's interesting to refer to it as pain points because I definitely feel that on March 17th in Boston, happened to be my birthday, when they closed the city because it was St Patrick's day and they said, "Everybody now, no restaurants, no bars, go home." It was painful to suddenly realize that we weren't going to be able to see each other. My office had not been virtual in the sense that Josh's, we worked together in the financial district in Boston, and that comradery was a big element to the company. And what we felt was sort of our cohesiveness and our clients often would come in... We have clients all around the country. We have clients in other countries, but we saw them frequently and we would talk to them sometimes. But coming into the office was something that they seemed to enjoy, or going to visit them. And suddenly having none of that and people working virtually was something to adapt to. We had the technology for it. We were all ready to do it. We had been using Zoom a little bit. We began obviously to use it all the time.

Karen Firestone: (04:22)
I found that... I have two very active dogs who were scratching on my office door at home. I said it's very hard for me to work here. And I began to ride my bike into downtown Boston every day, and there was nobody on the streets. There were no cars and there were no people when I got downtown. So I was in the office, I said, I'll open the mail. I can do wires. I mean, hadn't done anything like that for years. But I was there... Everybody was at home and we just progressed and we had to learn how to connect in a different way. That I think has been hard. Some people prefer to be in an office, prefer to talk to each other face-to-face, the clients or my colleagues.

Karen Firestone: (05:05)
I don't know if there are people who really work better in a sort of close knit relationship type environment, work better when they're not in the office. Yeah, there are some people who might, but it's hard to have that type of camaraderie, spontaneous discussion about investing as much when you can't sort of grab people, "Come on over into my office or into this conference room and let's chat about an idea." So that has been a part of what we've missed and part of the pain, but we've done well. We persevered. We started to come back. July six when everyone was vaccinated, that's when everybody was welcome to come back. And there are many days that everyone is back and some of the people or partners with small children have been home more, and some clients have asked if they would be able to come into the office. I think it's more a social thing, they're not seeing anybody so we're somebody to see, which we like. We hope it's fun for them.

Karen Firestone: (06:12)
But it's been a big adjustment. We can do it virtually. I don't think it's as much fun and this will change, of course, the way in which we do business forever, I think.

Sean Allocca: (06:27)
Sure. Interesting. So I think that's a good segue into another question that David kind of pointed to as well, which is when do we bring back employees into the office? Wall Street has postponed their plans, although they're pretty adamant that they want to get butts back in seats. Some of the other firms have been a little more lax about it and have a little more ability to work from home. What are your thoughts? What are the pros and cons? Do you want to start off, David? I knew you had a interesting take.

David Bahnsen: (06:53)
Yeah. But look, I have really strong opinions on it. I wrote an article in the New York Post last summer, and I sent a letter to the CEO of 25 firms in New York. A couple of them responded to me. I feel-

Josh Brown: (07:06)
I've been meaning to. I will.

David Bahnsen: (07:06)
Yeah. Josh and I had a great interchange on it, and there was some cussing and... No, look, the fact of the matter is, I think every firm has their own problems to solve. It's a lot easier... My firm now has 35 employees. When you're talking about JP and Goldman, so forth and they have hundreds of offices, let alone tens of thousands of employees. I think JP's case, it might be a million employees. I'm kind of more old school in the way that apparently Mr. Diamond and David Solomon are about this. But to the extent there's some that feel differently. I get it. It's just, I do believe I've built the firm around a certain culture and so that brand matters. And I think Karen's alluding to some of this, the inner action in the office is important for us.

David Bahnsen: (07:53)
I've also spent a long time in my career in branches. I was a managing director of Morgan Stanley for many years, and I never talked to anyone in the branch. First of all, they were all gone by two o'clock every day, I never saw them. And I got to know the people at our Chairman's Club trips more than I got to know the people in my own office. So the branches not reopening, might be a different story in the wirehouse world, but for us, it's an important thing. So my strong opinions are specific around what I believe about my company, but then also what I believe about supporting the cities. I couldn't stand seeing Manhattan last year with the coffee shops, and the dry cleaners, the laundromats, the bars, that type of thing, what it was doing economically to the city, I thought it was awful. And I wanted to see the big employers bring people back to support the infrastructure of the city. And I hope that, that will be expedited now here, post-vaccine. That's my take on it.

David Bahnsen: (08:45)
If I keep talking, I'll say something I'll regret.

Sean Allocca: (08:50)
How about you, Josh? I mean, you guys have been across the country already, right? So you have to take on mandatorily bringing back people to office, or...

Josh Brown: (08:56)
No, we're not mandatory. We kept the office open last summer like David did, but for a different reason. I was not there, but I have many millennial employees living in Manhattan and Long Island City in Brooklyn, and they don't want to be confined to a 1200-square foot a room all day. And so we had a clean, air conditioned, 5,000 square foot space on Bryant Park. They could get in, they could get out. They could be there with three other people and just hear someone else breathing, right? Like that stuff is meaningful, I think, just to have somewhere to go. A lot of these people... It's a 100 degrees outside in Manhattan in the summer, so you can only spend so much time out the element. You need a second space that's not your house, and all the Starbucks are closed.

Josh Brown: (09:48)
So I said, let's just reopen. I'm not worried about the liability. I don't think we're going to have a super spreader event with three kids sitting at laptops. So that's why we reopened and I've kept it that way. And what I've noticed.... Every week I go in on Thursday, we do a podcast, YouTube video there, we have guests, we made it vaccine mandatory to visit the office, whether you work here or not. But every week I see more people that work for us, and I even see people that work for us in other states, visiting New York just to spend a few days at the headquarters and just see each other. So I agree with what everyone said about, there is something important culturally about getting together in person. I just think we have to be realistic, the genie's out of the bottle and nobody is thinking, "I'm going back to exactly the way things were", especially people taking the Long Island railroad like myself every day.

Josh Brown: (10:51)
So here's one of the lesson I want to say, and this-

Karen Firestone: (10:54)
No, impossible.

Josh Brown: (10:55)
Yeah. Probably not.

Josh Brown: (10:56)
... this applies to client meetings too. It's not that no one's ever going to want to be together or meet, it's just that when we do do it, it's going to be really meaningful. People are really going to appreciate it. When you go see a client, now it's not obligatory. Now it's an event let's do lunch and we'll spend the first 30 minutes, "What vaccine did you get? I got Pfizer. Oh, I got..." We'll all do that, but so what? It's going to be like a powerful moment that you actually put on pants and left the house for me.

Karen Firestone: (11:27)
[crosstalk 00:11:27].

Josh Brown: (11:27)
So I think, on the whole, it's going to be a positive thing because now we're going to appreciate each other and each other's time more than we used to when it was just taken for granted and obligatory.

Josh Brown: (11:40)
Little applause for that. What's up? I appreciate you guys.

Sean Allocca: (11:42)
I felt it. I was feeling that.

Josh Brown: (11:42)
Happy you do feel.

Sean Allocca: (11:46)
You said Long Island railroad... New Jersey transit's probably way worse, but similar situation, so.

Josh Brown: (11:50)
It all sucks. Right.

Sean Allocca: (11:52)
Yeah, in both states, subsidized.

Sean Allocca: (11:55)
How about we switch gears a little bit and talk about maybe portfolio management and see if there's any trends or things that we saw there. It's been a-

Josh Brown: (12:06)
Did anyone mention crypto with this conference yet?

David Bahnsen: (12:07)
I haven't.

Josh Brown: (12:08)
Has that come up?

Sean Allocca: (12:08)
We're trying to stay away from it.

David Bahnsen: (12:10)
They have a breakout on it tomorrow.

Josh Brown: (12:11)
Okay.

Karen Firestone: (12:12)
Yeah. But I'm wearing something, so.

Josh Brown: (12:13)
I won't spoil it then.

Sean Allocca: (12:16)
So what have we seen there? We've seen some unprecedented market conditions and certain low interest rates never seen before. Were there any different trends you saw over the 18 months? Of course, we're going to get into crypto. But before we do that, how about, Karen, do you want to start us off?

Karen Firestone: (12:34)
So if we're talking about trends, well, what we've seen the last 18 months... This isn't just the last 18 months, but because interest rates have essentially been zero, we've all had to invest in a way assumes that fixed income, or cash, or the equivalent is really only for what you need to have available if you're spending money or you need to buy a house, and its other assets are going to fill the entire pot pretty much. I mean, that's the way I look at it. You're not going to get any return, how can we charge people a fee when they're making so little money. The fee is more than what you're earning on treasuries or whatever the high quality is that you're putting them into [inaudible 00:13:27] market. So we have done more investing over the last couple of years in assets that are alternative, whether it's more venture capital...

Karen Firestone: (13:39)
We've done venture capital since 2010, that was the first investment we did in venture. And private companies, we've seen more private companies. There are more opportunities that have come to us. We've done some private equity. We've done some real estate, real estate developments that groups have shown us.

Karen Firestone: (13:59)
And we used to have... And all of us who've been in the business for a while have understood that fixed income would be a reasonable proportion of people's portfolios... Elderly people who were retired, definitely, but much less now. And as the safety portion of the portfolio, no. So now we have other assets. There's more of that... We have had to spend more time devoted to learning about that they have more people in the company who look at non-equity asset classes. And I think that will continue as a trend. I mean, that's what all this is about. But it has never been as important, I think, as it is now, for nothing more than the fact that you can't have all the money in just equities as one might, unless you really just want to say that's the only asset class that we think is going to work and that's not been the case.

Sean Allocca: (14:57)
So I guess we have to jump into it then, digital assets. We can just go in a line here and just give our opinions. Obviously advisors need to know about it, even if they don't want to touch it. What say you, David.

David Bahnsen: (15:09)
Well, let me answer the other question because I don't have anything to say on the digital asset stuff at all.

Sean Allocca: (15:16)
It's okay.

David Bahnsen: (15:18)
It's really interesting to hear Karen's answer because I agree completely. We've done a lot more with private investing, we've done a lot more with venture, but I'm not sure that any of that is related to the events in the world of the last 18 months. In our case, I think that we just have had a migration of larger and larger clients that have needed those types of asset classes more. And there is a great deal flow out there. We've done a lot of direct deals, real estate, things of that nature. But I wouldn't associate that with the COVID moment. One of the things that's difficult for us, we have a high conviction, equity investing. We're never owning more than 25 to 30 stocks, all actively managed in-house at our firm, but we're dividend growth investors and dividend growth was very out of favor last year. And there's have been periods post-crisis where it's been in favor.

David Bahnsen: (16:12)
And it doesn't matter if I think it's about coming back in favor or not. You could make a yield spread argument, some other things, but it's never going to be tactical for us. It's always going to be evergreen. So whether or not, I think it's particularly appetizing this time or another is not really the pitch I'd want to make around it. We believe in it because of the recurrence of cash flows and the higher quality underlying investments.

David Bahnsen: (16:37)
In all seriousness on digital asset side, it isn't that I have any issue with those who are very interested in it. It's that, for us, we have a heavy focus on cashflow generative investments. We manage 3.2 billion at our firm, and we have roughly 85% of those in cashflow generative investments, either on the dividend equity side, or in credit, or even in alternatives and real estate, has a heavy cashflow bias.

David Bahnsen: (17:07)
We definitely have younger clients that ask about it. We have folks ask about it. I'm well aware that there are other firms that are building an incredible niche around it, but for us, it doesn't fit into the principles we built the business around. And so it's not something that has a big focus for us, although we do own some SkyBridge and so I guess we kind of got stuck with some of it. It's fabulous.

Karen Firestone: (17:28)
Yeah. Series G.

David Bahnsen: (17:28)
Yeah. But no, I'm kidding. They obviously have a bit of exposure in there. That's our take on it. I think my colleagues up here have a different approach than I do.

Karen Firestone: (17:38)
Well, it's interesting. I did a panel for Anthony once about cryptocurrency and Bitcoin and he asked me which side I wanted to take? And I said I didn't have a particularly strong point of view. Which side would you like me to take? He said, "Well, you can be against it." And I said-

Josh Brown: (17:59)
And then he pummeled you [crosstalk 00:18:00].

Karen Firestone: (18:01)
And I said, well, I'm going to have to read a lot about Bitcoin to come up with something, articulate to say. And my conclusion was that it's a risk asset. I think it's very little connected to inflation. I don't think it's particularly connected to gold. I think in terms of the safety and storage of value, I'm not sure that Jeff Bezos has decided that his money at JP Morgan, if it's there, isn't safe. I'm not sure that you need it as a [inaudible 00:18:33], but it's safe. And I understand it, it's a risk assets that people can play as they do other asset classes that have a high level of beta risk attached to them. Do we invest directly in Bitcoin? No. We have an allocation to some external managers that own Bitcoin, including SkyBridge's multi-strat fund.

Karen Firestone: (18:56)
We have a portfolio like David, 35 names. That's our sort of love and the background that we're from. I spent many years at Fidelity. I managed an equity fund. It was a growth fund. We're growth investors primarily and that's where my heart and soul is. But we, as I said, invest in a lot of places. If there's a place for digital assets cryptocurrency, I can see that for young people in particular who feel that's very important to them as long as they understand we cannot analyze it in the way we analyze any other assets. It is not a confidence of ours. It may be for other people. I don't feel that I'm particularly competent, but I can see the appeal and haven't denied including it in diversified portfolios.

Josh Brown: (19:51)
I think that when you look at the wealth management industry, the average age of a financial advisor is 59. We have a very old industry relative to almost every other industry there is other than let's say Walmart creator. There's very few industries this old. My average certified financial planner working at my farm is in their late 30s. We're also bringing in a majority of our clients from things like YouTube and social media. And so we're attracting young millionaires and young almost millionaires, and in some cases, young quinta-millionaires, deca-millionaire. Without a doubt, if your answer to these people is, there's no cashflow so I can't even have a conversation about it, you're not a candidate for their wealth, not their current wealth, definitely not their future wealth. And so it's very important, I think, for an advisor to not roll their eyes... Which I don't think anyone's doing anymore, but as recently, as two years ago when the price had plunged from 18,000 to 3,000, it was derision at advisor conferences. That part's over.

Josh Brown: (21:05)
So now the question is, our question, we call ourselves evidence-based investors. Very hard to be an evidence-based investor in a realm like this. So then the second question is, okay, if there's no evidentiary way to do this, what's the least bullshitty way to do this for clients? That's a scientific term.

Karen Firestone: (21:24)
Thank you.

Josh Brown: (21:25)
So then you're getting into questions like, well, are we really analyzing coins and tokens? Obviously, you're not doing that with a straight face. The people who created these things don't even know what they've created. So that's out. So the notion of us actively managing a portfolio of crypto is ludicrous. Right? Okay. So let's move that off the agenda. So then what's the next question? Well, do we think that people should have exposure? And the answer to that is actually more behavioral than anything else. If they feel they need to have that exposure, then the second part of that is, well, who should provide it? Should it be us, or should we tell them, go do it yourself at Coinbase?

Josh Brown: (22:07)
And there may not be a definitive right or wrong there so you might actually want to have two different approaches, give them permission to do it themselves without hanging their financial plan out to dry, right? Or, okay, we will do this in-house for you, but here are the parameters around which we'll do this, and here are the software providers we're comfortable using, and here's what we're doing on the cybersecurity side so that we don't wake up in the morning and somebody from Japan stole... You've got to go through this process and speak to the vendors. And in many cases, the vendors you encounter are in their infancy, right? You're not working with BNY Mellon, at least not yet. We'll get there.

Josh Brown: (22:47)
So there are all these considerations that have to take place as you go through this process to find the least bullshitty way to do crypto for a wealth management client. And then of course, fees, cost, trading cost, hidden costs. So you go through these iterations and then you say, well, do I want to be market cap weighted? Here's the problem with that? The back test looks fucking great, right? But you know intuitively Bitcoin's not going to go from $500 to $50,000 ever again. If it gets back to 500, you've got real problems, right? So you know the Bitcoin back test, throw it out.

Josh Brown: (23:26)
So what do you have? You don't have any cash flows. So then you say, well, there's a 100 other tokens and coins and various... So maybe I want an equal weight these things, because the next 500 to 50,000 might be among coins five through 10 by market cap. If I market cap weight, I end up with 70% Bitcoin, 25% Ethereum, and 5% all these other science projects, and maybe that's not the way to get true future upside in the asset class. So you've got to really, as a fiduciary, go through this in order, starting from how can I, with a straight face, say to clients, "Okay, I'm a certified financial planner. Now I'm ready to manage your cryptocurrency." It's very, very hard time right now for wealth managers trying to keep up with what's going on in the culture and in the markets, but also not end up making a huge mistake for the people that trust them with their assets.

Josh Brown: (24:30)
So I don't envy any CIO at any RIA in this country. And mine happens to be my partner and I always say to him, when I overhear them talking about this stuff, "Thank God, that's your problem." I'm paying the electric bill, you deal with that. So that's my take on what's going on right now, and I think it's a fascinating time and a challenging time because of those factors.

Sean Allocca: (24:56)
Interesting. Yeah. Once it matures a little more and some of the bigger custodians get more involved, we might see some more acceptance or something. But yeah, it's certainly challenging for sure. Thanks for that. I know it was painful for you to answer the crypto, David, but I appreciate it.

Sean Allocca: (25:08)
How about this one, and Josh alluded to it, digital marketing, digital prospecting, all of these things came online. And just speak to the importance of maybe social media, blogging, content creation for advisors. It's obviously hugely successful for Josh. He just mentioned a lot of his clients are coming onboard through YouTube and other social media platforms. What's your take on how can advisors really [crosstalk 00:25:34] about this?

David Bahnsen: (25:34)
Yeah. So this is I'm real passionate about, Josh is a master at this. He's been incredible, but I disagree with every everyone who tells me how well Josh has done because of the medium. I disagree. I think it's the content. The shit Josh puts out is super good. It always has been.

Josh Brown: (25:48)
Thank you so much.

David Bahnsen: (25:49)
And if he was putting it out typed on a piece of paper and mailing it to people, it would still be compelling to read.

Josh Brown: (25:54)
Thank you.

David Bahnsen: (25:55)
Those 1970s newsletters were kind of big, you may recall.

Karen Firestone: (25:58)
He doesn't recall.

David Bahnsen: (25:58)
And so it's the content. It's not the medium. Now, of course, he's kept up with the times and has found the right delivery of it. I built my practice, previously the wirehouse, now as independent RIA through content creation as well. It's different, but we have a point of view, there's things I'm passionate about, I want to speak them to the world and then I have absolutely no care in the world who likes it and who doesn't. I just let the chips fall where they may, and I'm very comfortable with that. And so, yeah, social media, YouTube television, books I've written, there's a lot of different mediums out there, but this is all pre-COVID, just like it obviously was for Josh.

Josh Brown: (26:36)
David, do you agree that this is no longer a choice? It's essential because if we position ourselves as being partly.... or the psychological component being really important to whether or not our clients can stick to the investments we recommend. If we don't start off with people who are aligned with us philosophically in some way, and you're just randomly meeting people and putting them into portfolios, it's going to be way too hard to get them through periods of time, like 2020, for example. I feel like you have that as part of your secret sauce and some of the best RIAs today, they have that baseline of people came to me because of my ideas, not because I threw a steak dinner and they want it to look the plate, like [crosstalk 00:27:26].

David Bahnsen: (27:25)
There was a point at which I realized that people were not coming to me for my good looks.

Josh Brown: (27:29)
Right.

David Bahnsen: (27:30)
And that shared alignment of values, of beliefs, of whatever it may be, it's incredibly important because we all are in a business that requires trust and the stickiness of the client is that they trust you through hard times, not through good times. The secret of the business and the great multi-trillion dollar, I think, problem out there is that a ton of clients do not move from their advisor only because the markets have mostly been good. There's a ton of vulnerability and relationships out there. The ones that aren't vulnerable, it's because there's a connection and that connection comes out of trust. For us, we build a lot of our trust out of what Josh was talking about, people believe in what we believe in. And I think that's very important.

David Bahnsen: (28:11)
There are people that maybe are... Like not everyone should go on television, not everyone's real good at doing that. Not everyone should necessarily write. But maybe someone in their firm, someone who has a passion and authenticity... I remember at Morgan Stanley when they first said we're going to allow our advisors to do social media, but you had to tweet someone else's links out. So they'd have like a David Doris who... He's a buddy of mine, writes good stuff... But you were like a mouthpiece for the firm's content or something. And I thought, okay, I don't think that's what Twitter is really all about. That didn't seem to do a lot for me. When people could start putting out their own stuff, and you can just have a point of view, you can make people upset. You can make people not like you. But you then have that chance to build that connection, that trust, I think is very important to what we do. Content as a service is not going away.

Sean Allocca: (28:59)
Awesome. Thank you for that. We have about two minutes left, so we need to do a quick lightning round, just some final thoughts. Maybe we'll start with you, Karen, what's the big takeaway for advisors moving forward?

Karen Firestone: (29:09)
Well, I'll tell you something that I think is increasingly important, which is that when people come to look for you or a firm, they, more than you think, look at who's at the firm. And I mean, I'm obviously a co-founder, I'm a woman, Co-Founder, I'm the CEO and Chairman of a company. We're five billion in assets. It matters to me, it's important to me that Aureus is a firm with a woman CEO. It also matters to some of our clients. It matters who are the people there? I know this sounds like I'm spewing ESG. That's not what I'm saying. I just think that it is now a factor, people will say, oh, it's really great that you've got a woman who's a founder. I think having a mix of ideas and people in a company is important, but I think that the clients also increasingly think it's important... Individuals, families, and institutions. So I'd keep that in mind.

Karen Firestone: (30:17)
I would also say in terms of content, because it's something we've talked. Digital, Josh is a master. David writes, I write. I've written a book. I write for Harvard Business Review, for cnbc.com. I'm on CNBC. I think all of that helps. I don't have time to do any more of that than I do now. And if I had more time, that might be more helpful. It has to be mostly performance. We have really good performance, that's what brings the clients to us.

Josh Brown: (30:45)
There goes your lightning round, by the way.

Sean Allocca: (30:45)
Yeah. [crosstalk 00:30:48].

David Bahnsen: (30:48)
A takeaway for a financial industry is advice is not going away, the need for relationships is not going away, comes from establishing competence and likability. I try to at least do one of those.

Sean Allocca: (30:59)
Awesome. Thanks.

Sean Allocca: (31:00)
Josh, we'll end with you.

Josh Brown: (31:02)
I would just like to say, it's been a pleasure of seeing David and Kari again and meeting you, Sean.

David Bahnsen: (31:08)
Five.

Karen Firestone: (31:08)
Right on.

Sean Allocca: (31:08)
[crosstalk 00:31:08].

Josh Brown: (31:08)
And thank you guys all for coming to our session. Thank you.

Karen Firestone: (31:11)
Thank you.

Sean Allocca: (31:12)
Give it up for these guys.

Sean Allocca: (31:12)
Thank you so much.

Amerivet: Producing Meaningful Opportunities for Veterans | #SALTNY

Amerivet: Producing Meaningful Opportunities for Veterans with Mercedes Elias, Co-Chief Executive Officer, AmeriVet Securities.

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SPEAKER

Mercedes Elias

Co-Chief Executive Officer

AmeriVet Securities

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Mercedes Elias: (00:07)
Good morning. As I was preparing to come and speak today, I was talking to my team and I was thinking about the last time that I spoke to an audience about this size. I was actually about to brief a battalion of Marines, we were getting ready to go to combat in Afghanistan. I actually helped them set up their will in powers of attorney. And I was basically making sure that Marines didn't sign over the power of attorney to the stripper they met last weekend. But like Rachel said, my name is Mercedes Elias. I'm the co-CEO of AmeriVet Securities. We are a broker dealer that underwrites for transactions in the debt capital markets, equity capital markets, and public finance.

Mercedes Elias: (00:49)
Now, when we set up our firm as a service disabled veteran owned broker dealer, we had this thesis that if we were going to ask our constituents to be diversity inclusive and kind of support those initiatives, then we need to support our constituents as well. If you look at the makeup of our firm, we stand at about 55% military veterans, 35% minorities, and we actually have 15% women veterans. We actually take military veterans as they get off of active duty, we train them through our internship program, which we run throughout the year. So we have the traditional summer program like most of the big banks have, but we also have a spring program and a fall program.

Mercedes Elias: (01:30)
In that program, the majority of the time, we are giving these veterans their first chance, not only in corporate America but in finance. So we're taking them from the military, teaching them about that transition because of half of us that have served actually know what that's like and what that entails, and then we have the guys from Wall Street that have 20, 30 plus years experience mentoring these veterans and teaching them about different career paths and different kind of financial services roles.

Mercedes Elias: (01:57)
Now, we're a smaller firm and unlike the bigger banks we can't hire all the veterans that we train. But what we do do is help launch them and get them into the big banks. 50% of the interns that have come through our program have actually succeeded in getting full-time employment at places like Citibank, Goldman Sachs, Bank of America and others. The other 50% just happens to still be in school, either finishing their undergrad or pursuing their MBA at top colleges like Harvard and NYU.

Mercedes Elias: (02:24)
Outside of training veterans that want to get into finance. We actually do a considerable amount of work in the veteran community, working hand in hand with nonprofits that are supporting veterans, and we wanted to do a little bit more than write a check for $10,000, take a picture and shake hands. We wanted to see what are the nonprofits doing to help support veterans? How can we let the veterans know about the resources that are out there for them? So we work with these nonprofits to help them achieve their mission and at the same time help the veteran community.

Mercedes Elias: (02:54)
So, to kind of put it in perspective for you. We work with an organization called the Gary Sinise Foundation. If you know Gary Sinise he played Lieutenant Dan in Forest Gump. He does a considerable amount of work to take care of surviving spouses and children whose husband, mother, son, daughter, has been killed an active duty. We've hosted family members for the Macy's Thanksgiving Day Parade. Recently this summer we actually hosted an event for about 24 surviving spouses with a resiliency retreat to help them work through their grief and their loss.

Mercedes Elias: (03:23)
We've worked with another organization called Achilles International that helps adaptive sports athletes. So these are veterans who lost dilemma, they're learning how to work with their prosthetic. And they're finding purpose in kind of working to basically rebuild their lives and meeting other people that are doing so as well.

Mercedes Elias: (03:42)
So, over the course of the past few days, you've been hearing things like ESG initiatives, social impact, and you might be wondering how you can help and how you can contribute. By utilizing a firm like AmeriVet you can see very tangible results about how utilizing us creates this ripple to continue to support the veteran community. If you'd like to read more about us or just kind of about our capabilities, you can visit us at AmeriVetsecurities.com. Thank you very much.

Investing in Cannabis: Analyzing the Industry’s Future | #SALTNY

Investing in Cannabis: Analyzing the Industry’s Future with Jennifer Drake, Chief Operating Officer, AYR Wellness. David Feuerstein, Co-Founder & Partner, Feuerstein Kulick. Rob Sechrist, President, Pelorus. Emily Paxhia, Co-Founder & Managing Partner, Poseidon.

Moderated by Matt Karnes, Founder, GreenWave Advisors.

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SPEAKERS

Jennifer Drake

Chief Operating Officer

AYR Wellness

FULL BIO

Emily Paxhia

Co-Founder & Managing Partner

Poseidon

FULL BIO

David Feuerstein

Co-Founder & Partner

Feuerstein Kulick

FULL BIO

Rob Sechrist

President

Pelorus Equity Group

FULL BIO

MODERATOR

Matt Karnes

Founder

GreenWave Advisors

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Matt Karnes: (00:07)
Well, hello, everybody. Thanks for joining us this afternoon. These are panelists, I'm Matt Karnes, Jen Drake, David Feuerstein, Rob Sechrist, and Emily Paxhia. I thought for those of you who are not familiar with the cannabis industry, just to give you a quick backdrop, for all intent and purposes, the industry pretty much was established in 2014 when Colorado introduced its first recreational use market. Back then, that was about eight years ago, sales were about three point eight billion dollars, fast forward to today, now we have 18 rec states, adult use, and 36 medical.

Matt Karnes: (00:49)
The industry has progressed quite a bit over the past eight years. There's been ebbs and flows. Last year, 2020., We estimate the retail sales were about 19 billion, this year, 23 billion, 28 billion by 2022., And really the thing that I focus on is where we're going to be at the end, at maturity. And I think we're looking at an 80 to a $100 billion market. If you compare that to tobacco, which is 120 billion, beer, 110, spirits and wine, about 150 billion combined.

Matt Karnes: (01:25)
So there's a tremendous opportunity, but the industry remains illegal under federal law, which is a problem, and a good thing, in a way. So what I thought I'd do is kick it off to you, David, our lawyer, our expert legal person here, and why don't you walk us through where we are at a federal level, the policy changes that have been introduced?

David Feuerstein: (01:49)
Sure. Well, thanks, Matt. As I think, if I'm sitting in your seat and I put myself in your seat, the first thing I'd want to know, when investing is, whether I'm investing in something that's actually legal. As Matt referenced, cannabis is still illegal at the federal level, but for those who are following cannabis in any respects, I'm sure you're aware that Senator Schumer and Booker recently released legislation with respect to how you would federally legalize cannabis. Meaning that you would not only take it off the scheduling list, you would allow for banking, listing, you would allow for interstate commerce.

David Feuerstein: (02:29)
There's also many social reforms in that social equity, decriminalization and sort of criminal reform, so that is now on the table in Washington, DC. Many industry participants have commented on it and provided insight as to what they think about that legislation. And what I would expect, in the future, is some sort of incremental change. I think it's hard to envision a widespread federal legalization with a snap of a fingers, but I do think that within time, you'll see sort of small steps towards federally legalized industry.

Matt Karnes: (03:11)
Great. And Jen, in light of the challenges, the legal challenges, how is AYR able to establish such a compelling national brand in light of the federal illegality?

Jennifer Drake: (03:24)
Sure. Well, for people in the audience, maybe, who aren't as familiar with cannabis, AYR is a publicly traded equity. So we started our life as a SPAC, raised about a $100 million in 2017, and are now a two and a half billion dollar publicly traded company. So we give the industry viewpoint on this panel. And just a little bit by way of background. I used to be in your shoes, I think went to my first SALT in maybe 2009, in the private credit world. And it's such a compelling opportunity in cannabis that I actually, several years ago voted with my feet and moved into doing the first cannabis SPAC.

Jennifer Drake: (04:07)
But if I'm in your shoes, if I think about to back to when I was looking at an alternative investment, what's super compelling about cannabis is that it is incredibly fragmented market. And so for the few businesses, like ours, that are at the top of the food chain, in terms of multi-state operators who are able to have a footprint across many of those legal states that David mentioned. You can both have a very compelling cashflow opportunity today in your operating business, because you are vertically integrated, you grow it, you manufacture it, you produce it, you sell it at wholesale, you sell it through retail stores, which in many cases are in a limited license environment. So for instance, in Nevada, our most productive stores do $35 million per year in revenue, which is over $10,000 per square foot. So it's a really compelling industry structure, for today.

Jennifer Drake: (05:06)
And for tomorrow, as Matt mentioned, the future is branding. The future is when cannabis becomes a proper consumer product at a $100 billion plus or minus, in terms of annualized revenue, putting it up there with all of the other major consumer products, kind of in the sector. And the key to being that great consumer products company when the industry matures, is first and foremost, having a great product.

Jennifer Drake: (05:39)
And what does that mean for cannabis? Well, I think people don't realize how hard it is to grow great cannabis. And I certainly didn't know this three years ago, you certainly wouldn't want me growing your weed. What you want is incredibly experienced cultivators, who've been in the industry for a long time growing a great product. Because half of what gets sold is flower, is the flower that either goes in your pre-roll or gets ground up and goes in your joint. I never thought I would be talking about this. But half of our product is flower, and so it is all about the plant. It is all about growing a great product, and that is why, for us, the way to build a great brand is to do all the normal things a consumer product company would do, excellent customer experience, excellent approach to branding.

Jennifer Drake: (06:35)
But first and foremost, it all starts with the quality of what goes in the box. It all starts with the quality of the plant, and any operator, I'm the operator kind of on the panel today, but any operator will tell you the same thing, that is the key. And that is why for us, the key is to be the largest scale producer of high quality flower in the US.

David Feuerstein: (06:59)
One other thing, just to Jen's point, was when we started five or six years ago in the business, you used to have people say, "We had the greatest cultivator," and it's been doing it for 20 years, which sort of made you scratch your head for a minute, because 20 years ago, there was no legal industry at all. But now as you see the industry evolving, you have true horticulturists, PhDs, real scientists who are growing cannabis in real controlled environments with greatest technology. So just in our experience, just being in the space, it's completely evolved.

Matt Karnes: (07:32)
It's definitely not like growing tomatoes, that is for sure.

David Feuerstein: (07:35)
No.

Jennifer Drake: (07:36)
No.

Rob Sechrist: (07:36)
Not quite [inaudible 00:07:38].

Matt Karnes: (07:38)
So Rob, from your perspective, you run a fund, it's a REIT fund, Pelorus, from your perspective, what do you think needs to happen before federal legalization actually occurs? What is the industry missing, aside from it actually being legal?

Rob Sechrist: (07:57)
And just to give you a little color on us, we're the largest privately held, private mortgage REIT, that's lending specifically to the owners of cannabis properties, with cannabis use tenants, I should say. And we've put out nearly a quarter of a billion dollars in this sector. For us, the most consequential legislation that's has already happened in 2014, which is the Rohrabacher-Blumenauer amendment at the time, which defunded the Department of Justice from many prosecution, but cannabis-related business. So that was the clear path for us to lend to the owners of commercial real estate and allow for cannabis use tenants.

Rob Sechrist: (08:28)
It's very important that that's there, and that's the bedrock that I think that most of the people are here. In regards to what I think needs to happen, legislatively, or where things are going to go, I am less optimistic as my peers, that legislation reform is going to de-conflict state policy from federal policy in the near term. I just don't see the progressive states, California and New York, and liberal states giving an advantage to the Republican states that are coming in late to the game to completely legalize it. And on top of that, there's a patchwork of different laws and tax structures that are already in place, so I just never see the interstate commerce clause coming into play. I could be wrong. I think the bill is too broad. I think that if they just focus on removing 280E from the IRS code, it's a simple one-shot kill.

Rob Sechrist: (09:18)
And if allow credit cards to be run on the federal system, we've killed two major issues out there with very targeted measures. But that's not how Congress works, we know many of these representative Dana Rohrabacher is our friend, and our local Congressman, and we were implementing funding him at the time. I just don't see a broad bill passing with the 60 votes that are necessary to get past the filibuster. And unless they include it in the infrastructure bill, I just think the opportunity has passed. And I think the Democrats will lose the house in this midterm.

Jennifer Drake: (09:48)
That said, I don't think you have to have federal legalization in order for the investing opportunity to be compelling. And I know Emily does a lot of investing in the space. So, I mean, why don't you talk a little bit about that?

Emily Paxhia: (10:00)
Well, I mean, hi everyone, I'm the founder of Poseidon. Poseidon has three funds dedicated to investing in the cannabis industry. We opened our first fund, right when Colorado opened our doors to their legal adult use market in January of 2014, and we've invested across the entire capital spectrum, and really in the United States, Canada, Latin America, and Western Europe. So we've really explored and engaged in across the entire supply chain and have understood the levers you can pull to really drive returns in this really early emerging markets. But Jen's point is spot on, and I totally agree.

Emily Paxhia: (10:35)
For us, actually, the ability to deploy capital before federal legalization, this is the time to be putting money into this industry, because by the time the lawmakers move to get something legalized on the federal level, I think the alpha will be out of this space. And you'll just be kind of investing where it's very easily accessible. Our whole thing is to kind of exploit the delta between perceived and actual risk, when it comes to investing in this market. And the way we do that is by being boots on the ground, we spend all our time on the road in these facilities, understanding the people involved, understanding the regulations involved, because the regulations are also kind of a gas pedal and a brake pedal.

Emily Paxhia: (11:14)
So we have things where we want to change, 280E, which is our egregious federal tax code around cannabis, where you cannot write off ordinary business expenses. So you have these tremendous effective tax rates, and Jen can speak to that in her business. What we also have, in the US, is a lack of access to the capital markets. We are currently listed on the OTC. We trade in Canada, but what that does is it creates a lot of challenges around what actually happens around these public names. And for us, we've seen a couple of cycles. I don't know if anyone here is familiar with the Gartner hype cycle around tech, but we've been observing a very similar pattern in cannabis. The one big difference is that institutional capital has largely been sidestepping this industry.

Emily Paxhia: (11:59)
So it's time for smaller firms like ours to be able to get into the mix, invest along the way, and then when we see that institutional capital opening up, when we see the capital markets opening up, and people can participate at a broader base into this industry, that's when we're really going to see some serious liftoff. And you can see how that's been mirrored in Canada, where they do have a federal legal program, and they've been able to access the capital markets.

Emily Paxhia: (12:27)
An interesting conundrum is that we have tremendous operators in the United States. The fundamentals of these businesses are very strong. You can't see a consumer sector that's growing at the rate it's growing at over 30% year over year with EBITDA margins like we're seeing in cannabis, it's really unparalleled, almost. And so it's just a very exciting time to be in it. But then you see the Canadian operators who don't have those same strong fundamentals, but they have access to our NASDAQ and to our New York Stock Exchange, and so they have a totally different experience in terms of how their public companies perform.

Emily Paxhia: (13:02)
So I don't know, one of the things we said when we launched Poseidon is, we would have to get very comfortable, often being uncomfortable, and so that's been part of our whole thing. And we just lean in on our work to really understand how to engage in this sector.

Matt Karnes: (13:18)
What I think is really compelling about the story in the US is, the ability and the proven track record of many of the MSOs, the ability to generate free cashflow and cashflow from operations in light of federal prohibition, because there are added costs of prohibition. There's the 60 to 70% effective tax rate. There's a higher cost of capital. There's added compliance costs. I mean, the list goes on. And so in my view, when federal legalization occurs, or when there's any meaningful change to state law, the cashflow profile will accelerate dramatically. And that's when you'd want to be in now, I would say.

Matt Karnes: (14:00)
But, Jen, just getting back to like the capital markets like, for AYR, you guys have made a series of acquisitions. I mean, that's sort of the play now in the sector, there's a lot of acquisitions and consolidation and so forth. And AYR has done some of their transactions, cash, stock, a combination thereof, valuations have come down as we talked about. And so how do you think about deploying the capital that you have? You're also doing a share buyback.

Jennifer Drake: (14:28)
Well, one of the things that's amazing about this business is even at... we've talked a little bit about the barriers and the extra costs about running this business and the extra taxes, et cetera, but even with all of those headwinds, you're still able to have an incredibly robust margin structure, an incredibly robust cashflow generation. Which means, you have really great kind of credit metrics, and the ability to, when you deploy capital, you can do it extremely, extremely profitably. For instance, and this is going to sound crazy to the people in this room, when we engage in capital projects, which can have multiple returns, in terms of return on invested capital, we get our capital back within like 18 months. So people are always very worried, is it worthwhile putting $30 million into this cultivation facility in Massachusetts? What is going to happen with federal legalization?

Jennifer Drake: (15:23)
Well, every dollar I get after a year and a half is gravy, because I paid back my $30 million investment. There's no other industry where your return on capital is that fast. And it's because of the margin structure of this business is so robust, and because the leverage you can get from capital projects is so material. So when we invest in capital projects or an M & A, I mean, our business currently trades at about, and this sounds like a crazy number, like five, six times 2022 expected EBITDA. For a business growing a 100%, year over year, in terms of revenue, with a 30% EBITDA structure, that's crazy, but it's because of these structural hurdles to investment. And when we buy other people, we're buying at a creative EBITDA multiple, so M & A is sub six times, capital, we invest in capital projects, returns within one and a half years.

Jennifer Drake: (16:22)
It's an incredible, incredible proposition to grow your company right now, which is why we're so acquisitive and why we want to expand our business as much as possible. Exactly, as Emily said, before it's federally legal, because when it is federally legal, there will be a rush of capital in, both from the people who are on the sidelines now, whether it's the Canadian, they're called licensed producers, LPs, the Tilray and Cronos and Aurora and Canopys of the world, or even the big tobacco and alcohol companies who have been desperate to get into the cannabis business for donkey's years, but still won't do it, until there's more clarity on federal legalization. When those people come into the business cost of capital is going to go down, return on capital is going to go down, so we want to get as much as possible at these cheap levels before federal legalization

Matt Karnes: (17:23)
And David, speaking of, on the topic of M & A, one of the things that I really scratched my head on during the Trump administration was attorney general Barr. There was a lot of M & A activity going on, and the Department of Justice was conducting antitrust reviews, so to me that didn't make a lot of sense to have a federal investigation or deploy those resources into an activity that's fairly illegal. A lot of money was spent. A lot of time was spent, unfortunately for you guys were on the sidelines when they did it, and had to deal with all that.

David Feuerstein: (17:57)
A lot of delay.

Jennifer Drake: (17:57)
Oh, no deals broke, and we bought them. That's we're happy.

Matt Karnes: (17:59)
Yeah, exactly. Well, that's part of being a good operator is knowing, when to deal.

David Feuerstein: (18:03)
There's a lot of, I guess, asymmetries, so a federal government that's using federal funds to conduct investigations into antitrust issues in state run businesses doesn't seem to make a whole lot of sense. And major transactions were sort of kept on the sideline for many, many months waiting for the antitrust review to sort of pass by. It is sort of inexplicable, but I think that's one of the smaller inexplicably things of the past administration. So in any event, I don't disagree that federal legalization is some time off, but as I said, there's nothing in this country that I'm aware of right now that has more sort of consensus-

Jennifer Drake: (18:54)
No.

David Feuerstein: (18:55)
... than legalization of cannabis, believe it or not. I believe at the last election was over 60% of eligible voters agreed that cannabis should be legalized for adult use. I assure you that any of our politicians would fall over themselves for that kind of approval. So there are things that don't make sense and are inexplicably in our government, but certainly you would expect that given the population sentiment, there will be movement, eventually, towards federal legalism.

Matt Karnes: (19:26)
And I think there's going to be a smoother ride to the finish. I mean, there was a lot of bumps. It was like being in a bumpy, old jalopy or something, under the old administration. And now it's sort of just smooth. So we don't know when the timing is, but in the meantime, there are restrictions around access to capital, that's a challenge. And there's been a variety of different solutions to that, one of which are the REITs, which has been very important in the sector over the last few years. So Rob, can you talk about what the advantages are to the operator and sort of what the advantages are to the investor?

Rob Sechrist: (20:07)
Sure. So we're a mortgage REIT, which is different than a traditional REIT, we don't own properties. We just get the tax advantage of being a REIT, which we've passed along to our investors, which is a 20% tax savings on the ordinary income that we generate. In addition to that, the other super significant advantages is that the state tax is only paid in the state that you're domiciled. So our largest portion of our investor base is in no tax states, such as Texas and Florida and other various states like that.

Rob Sechrist: (20:36)
But in regards to the capital markets and things out there, I will share kind of off the record that the institutional investors are ready and willing, and we'll be making an announcement next week that the largest investment banks and community banks, insurance companies, pension funds are active and ready to come in. So there is a path through, we have a different structure, since we're non plant touching, as opposed to some of my peers here. So we're specifically only lend to the owners of the property and allow for cannabis use, so we have a little bit of delineation there.

Rob Sechrist: (21:05)
But in that quest for investors, since 2016, almost five and a half years, we've been dedicated to this space. We've had to go through every single approach that there is. And there was no short path, easy path. There was no broker dealer. It was myself and my team raising every single one of those dollars ourselves. We started with retail investors, and now we're finally to the institutional investors.

Matt Karnes: (21:27)
Great. So interstate commerce, we talked briefly about that. That's a very important issue now, a lot of people are talking about it. Because, for those that aren't aware, each state has to operate in a closed economy within cannabis, because it's a state by state, it's illegal federally. So the question becomes, are you able to... it's obviously a lot more efficient if you're cultivating in just one state or however many states, rather than in every single state, but the ability to cross state lines, that's weighing a lot on people's minds. What is your take on that, Jen, on how important it is in the near term or medium term as you think about investing?

Jennifer Drake: (22:10)
So I think it's one of the many uncertainties in the space is when we finally get mainstreaming, when we finally get legalization, what is that going to look like? Is it going to look like full federal legalization? You can cross state lines, and PS, if you cross state lines, you can pretty much cross international lines. So that's another thing that is a wrinkle that, even if people decide, oh, I have no problem having all the cannabis in the US grown in California and then shipped around the country, does that mean they want cannabis coming up from Mexico and from Columbia and in from Canada? That's probably not exactly what lawmakers want. So there's a lot of uncertainty around that.

Jennifer Drake: (22:56)
And that's why I think a lot of people have a view that, at least in the interim, something called the STATES Act is the most likely more mainstreaming approach to cannabis. And that basically says, federal government's going to take their hands off, like the Rohrabacher amendment, but like forever, and the states can do whatever they want. But in that environment, it is unlikely that THC will be able to cross state lines. So we'll be in the similar situation that we are today. But who knows, it's a lot of uncertainty. There is a lot of talk about, well, maybe states can make interstate, pacts, and Indiana and Ohio can make a decision to trade amongst themselves. It's a little bit of an uncharted territory, if we were to do something like that, but it is less of a kind of big bang than just to allow interstate commerce.

Rob Sechrist: (23:50)
And if I could just add to that, Cory Gardner is a friend of ours. He was a co-sponsor with Elizabeth Warren of the STATES Act. And at the time that he was a Senator, he had the 60 votes necessary to get it through, so those votes are there. Mitch McConnell wouldn't bring it to the floor. They were afraid because Elizabeth Warren was a presidential candidate that the other presidential candidates would try to move the bill a little bit farther and farther saying, "STATES Act is not enough. We need to decriminalize." The next one would say, "Well, there needs to be reparations." And so they were afraid they'd lose the vote. So what that tells us is that there are enough Republicans. I believe there are 17 had been identified that are willing to do it, but neither side is willing to get the other side the win.

Rob Sechrist: (24:29)
And the political machinations that are happening behind the scenes have nothing to do with what the laws are. And so it's just such a broken system. And unless they get it through budget reconciliation, I just don't see it happening in the very near term. And I think the political capital right now is in decriminalization, not legalization. And so that's where I think that they'll focus and that could be national.

Emily Paxhia: (24:51)
I also think that implementation of regulation changes around cannabis takes years. So even if we got federal legalization-

Rob Sechrist: (24:58)
True.

Emily Paxhia: (24:58)
... even if they were to open up interstate commerce, the implementation of a framework around that, I mean, if it takes two years for California to turn on, I mean, we're in New York, we're watching what is going on here and the timelines there, on a federal level, I can't even imagine. And just even thinking through all of the ways that this starts and stops, like if you look at after alcohol prohibition, we still have blue laws in states, we still have states that are not as open to importing from California, for example, or you have to pay a fee or a tariff to do so. So there are different challenges around this that I think we...

Emily Paxhia: (25:33)
So even if it did happen, where they said, "Yes, we have federal legalization and there can be interstate commerce." I think there are many barriers to the full implementation of that. So I think we have years until we see this laying out. I mean, even the states that are very opposed to having legal cannabis, I could see them saying you cannot pass through our state with legal cannabis to get from the West to the East Coast.

Emily Paxhia: (25:56)
And I think Jen's point, too, about once you think about the global infrastructure of what a global cannabis market looks like, then you start to see Columbia has massive cultivation going on in greenhouses down there, and by the way, with EU GMP certification. And so if you can produce cannabis in Columbia at that level, at that certification, and be importing that into Europe for a medical distribution chain, I mean, things start to get very interesting, when you think about the commoditization of the raw material, which is really a plant. That's many years away, but it's just, once you start to go down that path, you really have to go the whole way down that path.

Matt Karnes: (26:38)
One thing, some companies now are establishing an exchange, developing, or conceptually anyway, futures contracts around cannabis. But if you have a futures contract, if you trade on that in the same mechanism than any other futures, you have to be able to take delivery of the product. So with interstate commerce not being permissible, I don't know how that's going to work out, but that's another discussion. But anyway, David, what's your take on what's going on with interstate commerce?

David Feuerstein: (27:08)
Well, I mean, I think we've talked about it, but for this room, I think the takeaway should be that the opportunity exists now. Because of regulatory hurdles, because of the fragmentation, because of limitation of state's licenses, there's opportunities abound in terms of investing.

David Feuerstein: (27:28)
I think Jen touched on Massachusetts. Massachusetts is super attractive state, in particular, because there are limitations on canopy. No matter how wealthy you are, no matter how big you are, you can only grow so much cannabis in the state of Massachusetts, which means that there's an absolute supply and demand, in favor of demand right now. So prices are very high, which is why Jen's company's able to get return on her investment in 18 months.

Jennifer Drake: (27:53)
Yeah. I mean, and it's the same across, basically, everywhere east of the Mississippi, you had the same limitation on canopy, so it's New York, well, it will be New York, we know, it's New Jersey, it's Massachusetts, it's Pennsylvania, Illinois has a higher cap, but all of the Eastern US is implementing a similar license structure, where there are these caps. And that's why, when we were talking earlier about that incredibly robust margin structure, there are these regulatory limitations that allow for that robust margin structure, and keep it really, really pervasive for a long period of time.

Jennifer Drake: (28:37)
I mean, people have been asking me for over three years when Massachusetts going to be less good on a wholesale basis. I'm like a long time from now, and it's five years ahead of Pennsylvania and New Jersey. So it's a persistent opportunity that's structural, and if you can get in it, it's the hardest business I've ever seen. It's an incredibly challenging business to really operate in, but if you can operate well, you have an incredible structural advantage. And I personally would like federal legalization to be as far as away as possible, because I want the biggest portfolio possible, the biggest wholesale business, the best brands, and the biggest retail footprint ahead of that.

David Feuerstein: (29:19)
And I just think one of the countervailing points that you haven't heard yet about federal legalization is that you have state constituents who are going to be super opposed to interstate commerce, save for maybe the state of California and the state of Arizona. Every state on the East Coast, every governor, every delegate, every senator is going to say, "We don't want interstate, because we have tons of tax revenue that's coming in from our state operators. We want to keep cultivation facilities and dispensaries-

Jennifer Drake: (29:50)
Jobs.

David Feuerstein: (29:51)
... and jobs and tax money coming in. What are we going to do?" The state of Colorado, it was a startling statistic about the amount of tax revenue they've generated and how that goes to schools. So imagine if all of a sudden that revenue base is taken away, because jobs are lost or tax dollars are not there anymore. So I think once they even get, sort of again, to Emily's point, once they get to the point of actually legalizing it, from a legislative point, the regulation process and enacting regulations are going to abound and it's going to be very difficult to get consensus quickly. So I think you're going to find every governor coming to Washington DC to lobby against interstate commerce.

Jennifer Drake: (30:28)
But again, good for the incumbents.

Matt Karnes: (30:30)
Yeah. Well, it's clear the smokes out of the bomb at this point, in terms of federal legalization, it's going to happen. But there are still a lot of challenges around trading and capital markets and stuff, so, Emily, your Poseidon, you have some publics in your portfolio, what are the challenges that you are faced with in terms of, if you want to exit or trade?

Emily Paxhia: (30:58)
Well, yeah, because the markets are... there's low liquidity in these names and they're very thinly traded. And so when you're affirmed, that's really kind of one of the institutions trading in it, you can definitely impact the market. And, for example, we saw, was it Credit Suisse that said, "No more trading." Yeah. And so we know there were a number of actual big funds that were in the space, they weren't big for their funds, but for the space, it was hundreds of millions of dollars. And so there was some force selling through April. And you could just see across the entire sector, what that did to the sector in terms of the volume and also just the pricing, so that was really difficult.

Emily Paxhia: (31:41)
There's also just the challenges around, where you can hold the stock, who you have as your brokerage firms that are actually working in this space, and then you have the Canadian and US piece to it. So even if you go public and you have public stock, the perception of liquidity that you're now free and you're trading is just not there. There's a lot of steps you have to take to navigate through it. And we're generally long the names that we're in. We do some shorting in our first fund, but it's very specific and very short shorting, but we're generally long the sector. We're long the names that we select for the portfolio. So we're okay with the buy and hold, and we're generally really just trying to be mindful of our entry points and timing the market right.

Emily Paxhia: (32:25)
But for us, it's not been as much about getting in and getting out. It's just continuing to build positions, especially as we've watched this market draw down, since I think it was like February 20th was when we talked ticked at the last time. But it's just not the same as being on the listed exchanges, and until we have some... From what we understand, it's not necessary to get the banking reform in place, it's just that the exchanges would like to see that before they potentially endeavor into the space for the plant touching companies.

Rob Sechrist: (32:57)
And if I could add to that, it's not just the custodian of the shares, it's the custodian of the securities we help.

Emily Paxhia: (33:03)
That's right.

Rob Sechrist: (33:04)
So we've had those challenges as well with some of the things we're working on. But something that most people don't know is that there's 684 banks that are currently listed on FinCEN's website that are actively accepting cannabis depositors, tier one banking. And so there's an enormous amount of banking already out there, state banks and credit unions. We're in an FDIC insured bank, and we're tracking all those banks and private lenders. And of those banks, there's dozens and dozens of them that are already lending direct. So it's much more robust than people realize and think. The challenges that we're talking about are challenges that are kind of ancillary challenges, but they have to be thought all the way through.

Rob Sechrist: (33:42)
And it's one of the challenges of this industry, you're like, "Okay, I've got my capital source, I've got my deal source, I've got my due diligence source," and you go to close, you realize the custody escrow company can't hold anything to do with cannabis related whatsoever, and the title company won't deal with it, and the [inaudible 00:33:58] insurance won't deal with it, and all the way down the line, the property insurance. And you've got to disclose that, you've got to get it disclosed in writing, because if you ever go to make a claim, they're going to deny that claim.

Matt Karnes: (34:09)
Sure.

Rob Sechrist: (34:09)
And so getting an insurance company, a major insurance company, or somebody to put that in writing is a major challenge. So you have to know how to work those things and have those relationships. And so even once you get past the biggest challenges that you thought were in place, these little challenges, you don't have any leverage with these third parties. And so these really become the bigger obstacles that we're all having to face here at different value points in the product space.

David Feuerstein: (34:34)
There's also-

Matt Karnes: (34:34)
So... oh, go ahead.

David Feuerstein: (34:36)
... issues from the federal illegality is, how do you secure against your debt, if you're issuing debt? And what do you do? There's no bankruptcy protection. A number of companies have once tried to file for bankruptcy, they've been kicked out of bankruptcy court. So what are you doing if you're going to lend money, how are you going to be able to seize your collateral? How are you going to be able to ensure that there's no leakage of collateral? Those are things-

Jennifer Drake: (34:57)
Yeah. I would say, though, that you're well compensated for that. I mean-

David Feuerstein: (35:01)
No, of course.

Jennifer Drake: (35:02)
... cannabis spreads are 500 basis points over similar comparable credit companies-

David Feuerstein: (35:06)
I agree. I'm just saying from a legal [crosstalk 00:35:08]-

Jennifer Drake: (35:08)
... and like billions of dollars have been raised in the cannabis credit markets. So, I mean, definitely, yes, what you're saying is true, although UCC, but I will say that people find the potential returns sufficiently attractive that billions of dollars of cannabis credit has been raised.

Emily Paxhia: (35:24)
I agree.

Matt Karnes: (35:25)
So we're almost out of time, but one thing I want to touch on, because of the name of the panel is the future of cannabis.

Jennifer Drake: (35:30)
Sorry.

Matt Karnes: (35:32)
So when I rolled up my sleeves nearly eight years ago, and I thought about the industry, I thought there were going to be three lanes. There's the rec market, there's health and wellness, and then there's pharmaceutical. And the rec market, or the rec lane is widening now, as we have more states. Well, same with the health and wellness, as we have more CBD products and so forth. I think medical will be redefined and recalibrated, as big pharma comes in and there's more research that's done. And that's a whole nother panel and discussion about true medical marijuana. But what are your each of your thoughts on how the industry is going to look in say 10 years, 10 and 15 years? I'll start with you Jen.

Jennifer Drake: (36:18)
I think that you'll find that a lot of people who use cannabis for "recreational" purposes are actually using it for wellness purposes. There's a whole plant wellness movement across the country right now, and what you'll see is as "recreational" adult use sales become legal in more states, you will see people, essentially, almost using cannabis, more like a nutraceutical. There are some people who will use it for it's... we call it the intersection of wellness and wonder, you'll see some people who are using it for its wonder properties, but a huge portion of the people who are using it, like my mom uses it for arthritis relief, because she has really bad arthritis, so she uses topicals. She has a bad back, and instead of taking opioids, she will use cannabis instead.

Jennifer Drake: (37:13)
So she substitutes it for some of the more OTC type wellness products that she would otherwise use. I think you'll see that expand materially. I think you'll see people substituting alcohol for cannabis. I talked to someone last week, we just bought a cannabis sparkling seltzer, that is basically like a LaCroix, but cannabis infused, and literally, I don't know this person from Adam, I met her for the first time over the phone. She told me she drives across the border to get our product, LEVIA, a 100 cans at a time, and then drives-

Emily Paxhia: (37:49)
Wow.

Jennifer Drake: (37:49)
... back across to New York, a 100 cans at a time. Literally, I had no idea, she was just like, "Oh yeah, great buy. I have two Levia's as a night now, instead of two glasses of wine, and my husband does too." So you'll see substitution, you'll see an expansion of OTC and nutraceutical wellness. And then I think you will see true pharmaceutical grade cannabis, like GW pharma's [dialects 00:38:18]. You'll see more and more of that come, because you'll have more research. But want [crosstalk 00:38:24]-

David Feuerstein: (38:23)
I would just add that, I think I agree with all of Jen's points, most of them, at least. I think the one point that I would add is that you're going to find that there's going to be significant research in what they call them, the minor cannabinoids. And they're going to find uses for those minor cannabinoids in all sorts of things. The human system has a cannabinoid system already long before cannabis has been talked about as a legal drug. And I think that people are going to figure out ways to treat multiple diseases and symptoms with cannabis. And so I look for the medical space to really explode in 10 or 20 years.

Rob Sechrist: (39:04)
Well, I would agree with all the things that they're saying, but from a debt perspective, we've already analyzed this space as being a $50 billion market size for the real estate sector, and only two and a half billion has been put out. So we see that the rates and the terms will be more mature and stabilized and similar to other types of debt markets out there. And we've got to work through and make sure that we are dealing with that and addressing that. But we believe that this specialty use lending market is similar to cold storage data centers and labs, and it will always help perform other types of debt/credit funds for real estate out there.

Rob Sechrist: (39:40)
So we're excited about it. We think it's here to stay in. And like you said earlier, I think 48 billion projected by 2025, so it's a massive... But that's from the consumer side, we're talking about the asset side. So we're a little bit different lane, but we have a different approach, but we're all in the same general business as well.

Matt Karnes: (39:58)
Emily final word.

Emily Paxhia: (39:59)
Yeah. I think that I'm really interested in watching how gen Z is really the first cannabis native generation, where they're entering the workforce. Their share of wallet is being dedicated to cannabis as opposed to alcohol. And there was just something released about, for the first time ever, alcohol use is down in college students, cannabis use is up. So I think where we're going next is that this is being integrated into people's lives differently. It doesn't have to be siloed or kind of off to the side. It can be a part of everyday life. And I think what is coming from that is the shifting from the form factors from just smoking it in a bowl or a bong to being able to drink it or being able to eat it, and having these other more socially acceptable and socially normalized ways of consuming cannabis.

Emily Paxhia: (40:41)
So I think that that's just really interesting, because right now, it's the Pareto principle, where the 20% of the population, they're spending 80% into our market, and it's all the flower, high potency products. But I think once we get to the outskirts of that, where we're hitting into those other form factors, and we're hitting more with women, we're hitting more with seniors, we're hitting more with the gen Z, that's really driving this, I think we're going to see a real spreading out of this market and actual depth to the growth of it. Not just from turning on new markets, but we'll see real depth in our consumer bases. So I'm really excited about where we're going next.

Matt Karnes: (41:13)
Awesome. Well, thank you everybody. There's certainly a lot to talk about in this space. We really didn't hit on every topic, but thank you all for participating here.

David Feuerstein: (41:22)
Thanks.

Workshops for Warriors: Helping Veterans Get Jobs at Home | #SALTNY

Workshops for Warriors: Helping Veterans Get Jobs at Home with Hernan Luis Y Prado, Chief Executive Officer & Founder, Workshops for Warriors.

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SPEAKER

Hernán Luis y Prado

Chief Executive Officer & Founder

Workshops for Warriors

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Hernán Luis y Prado: (00:00)
Good morning. Thank you for inviting me here today to share a little bit about Workshops for Warriors and how together we can rebuild America's manufacturing. If you served in the military, please stand and be recognized. All right. Thank you for your service. I'm sure the beard was the first thing you did when you got out. Right? So my name is Hernán Luis y Prado. I'm a 15 year Navy veteran with combat tours in Iraq and Afghanistan. And I love the Navy, but I left. Why? When I came back from Iraq, the people I served with, competent, capable, honorable men and women, struggled to find purpose in the civilian world. But it dropped me to my knees when one of my Marines lost both of his legs on a roadside bomb. I turned to my wife and said, "We have to do something." We sold our house, cashed out our savings, retirement plans, sold everything that we had, and started Workshops for Warriors. And it's thanks to her selflessness and unparalleled ability to analyze data that we are what we are today. Rachel, where are you? Please stand. Thank you, sweetheart. Thank you.

Hernán Luis y Prado: (01:24)
Since 2008, Workshops for Warriors is the only nonprofit school in America that provides accelerated advanced manufacturing training, nationally recognized credentials and places veterans into advanced manufacturing jobs in machining, welding, robotics, 3D printing. And this is critical because there are almost one million unfilled manufacturing jobs in America that are unfilled due to lack of skilled labor. This number will triple by 2030. So who will build our bridges, our ships, our future?

Hernán Luis y Prado: (02:02)
How did we get here? America has been relying on this manufacturing training pipeline that was turned off after World War II almost 80 years ago. This staggering lack of vision is leading to this colossal skills gap, which jeopardizes $1 trillion of economic output and leaves America economically, socially, and militarily at risk. We can't have that happen. President Biden's infrastructure bill is well-intentioned, and it's desperately needed to reinvigorate America's manufacturing force. But it's based upon an incorrect assumption, which is that we have to train people to fill these jobs. The missing cornerstone of this plan is a nationally scalable training program like Workshops for Warriors.

Hernán Luis y Prado: (02:55)
But let me share with you how it impacts people on a personal level. After eight years and two combat tours in the Marine Corps, James suddenly found himself unemployed, single and living in his car with his three-year-old son, Sammy. This combat veteran had never felt fear before until that day because he was worried. How was he going to feed his son? Low on gas with $2 in his bank account, he had lost all hope until he found Workshops for Warriors. After 16 weeks of accelerated manufacturing training and machining at our school with housing, tuition, childcare, and all meals covered, I am thrilled to tell you that James now has a $60,000 a year job in advanced manufacturing. But most importantly, thank you, he found hope. And for Sammy, that means that he and his father can sleep in their own beds in their own home for the first time.

Hernán Luis y Prado: (04:10)
What's the problem? For every James we can help, there are thousands we cannot. There are over one million service members that are leaving the service over the next five years. These are competent, mission-oriented, team-focused people that are ready if given the proper training, to start a new mission to rebuild America's manufacturing force, which every industry in America says is their number one priority right now. The challenge? Money. This is enlightened self-interest. By training veterans, you help our nation, and you help your company's bottom line. It's that simple. So here's my ask. $15 million allows us to train three times as many veterans as we can every single year and allows our school to become self-sufficient. $148 million increases the number of graduates we train 20 times and is tax-deductible. But you say, "Wait, those are numbers. Give me more numbers." Well, my wife, the statistician, says, "It's all about data." Right? So here's the data.

Hernán Luis y Prado: (05:20)
Since 2008, we have over 1,000 graduates who work in every state of the nation. 94% of our graduates are placed and retained in full-time jobs at companies like Boeing, SpaceX, Tesla, Google with $60,000 a year average starting salaries after just 16 weeks of accelerated training at our school, and we can replicate this nationally. Since 2008, we have grown 350 times our original footprint. We have a proven track record and we are ready to scale nationally. Because Workshops for Warriors manufacturers productivity and purpose by giving veterans the skills they need to strengthen our nation and your bottom line. That's what we need. We would never be happy with second place. Right? Guess what? In manufacturing, that's where we are, second place, and I need your help to fix that. You can put America back on top again, but it requires all of us to help. Join us at wfw.org, speak with me here at the conference, and join Workshops for Warriors in rebuilding American manufacturing, one veteran at a time. Thank you for your time. Have a good day.

Out Leadership: Driving Return on Equality | #SALTNY

Out Leadership: Driving Return on Equality with Rufus Gifford, Chief of Protocol of the United States (Nominee).

Moderated by Todd Sears, Chief Executive Officer, Out Leadership.

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MODERATOR

SPEAKER

Rufus Gifford

62nd United States Ambassador to Denmark (2013-2017)

FULL BIO

Todd Sears

Founder & Principal

Out Leadership

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Rufus Gifford: (00:00)
Good day Todd.

Todd Sears: (00:08)
How are you?

Rufus Gifford: (00:09)
I'm good. I'm good.

Todd Sears: (00:09)
You hear the one about the former gay banker and the former gay ambassador I just spoke in the SALT Conference?

Rufus Gifford: (00:14)
How did that one turn out?

Todd Sears: (00:15)
I guess we'll see. Well, I want to thank Joe and Anthony and the whole team at SALT for having us today. Really, really excited to be here. This is the third time I've gotten to speak at SALT Conference and I dragged my buddy Rufus here.

Rufus Gifford: (00:27)
My first.

Todd Sears: (00:29)
Hopefully not your last.

Rufus Gifford: (00:30)
Hopefully not my last. And certainly the first time I've been in a room full of so many people in 20 months now. So it feels pretty damn good to be honest with you. So thanks for having us.

Todd Sears: (00:40)
Little social distancing, though.

Rufus Gifford: (00:41)
Indeed, indeed, indeed.

Todd Sears: (00:43)
So we figured we'd just start with a little bit of a level set in terms of the world of LGBT equality in business.

Todd Sears: (00:49)
Even 90% of them were financial. So I thought, "Well, why is the financial services institution, wouldn't we service this really opportunity market." And so I put together a plan and we brought in almost $2 billion in the first four years. And that was exciting because I got to keep my job, but I also got Merril to support the gay community because I proved it was a business opportunity.

Todd Sears: (01:07)
And so fast forward, when I started Out Leadership 10 and a half years ago, you did not see CEOs using their economic platform to advocate for equality. You did not see companies signing on to any of these bills or these collective actions. And so I wanted to start that platform. I looked at Davos World Economic Forum, saw Milken and I thought, "Could I create that for LGBTQ equality?" And so we did. So we're now the first and only global LGBT business organization. We have about 700 CEOs, some of whom are here today, Dan Loeb and others, who have spoken at our summits and supported our work in New York, London, Hong Kong, Paris, Sydney. We have 91 companies that are members, and using that collective action we've been able to convene investor statements in places like North Carolina or Indonesia on LGBT equality as a business imperative.

Todd Sears: (01:51)
And so from a Rufus perspective, we had the pleasure of meeting many years ago when he was ambassador in Europe, and so I want to flip it to you. I think we jokingly say that we're accidental activists in the sense of we've taken a business platform or a political platform and use it to advocate for equality. As one of the first openly gay ambassadors, give us your take on that slash growing up.

Rufus Gifford: (02:10)
Yeah, I think the personal journey is so connected, you used the term accidental activist, which is what I think both of us are. And I still don't consider myself an activist, I just consider myself to be honestly grounded. I never lie about who I am. And I think one of the things we forget about if you are an LGBT person in the workplace, and you know all this data, and we'll get into that in a second, but so many of us were closeted. And, despite the fact that I was closeted in my twenties in the workplace, in the latter stages of my career I've always been very open, and I've had very public facing jobs. And what I think you realize is that it really makes a difference.

Rufus Gifford: (02:54)
So I'm going to talk about this in two different ways, I think. So my dad when I was a kid, I came out at 18, and my dad at the time was a CEO of a bank in Boston, it was a Bank Boston at the time and fleet after that, and I grew up in a fairly conservative and somewhat homophobic household, not religious, but just didn't really understand what this meant when their son came out of the closet. This led my parents to go on this really intense journey personally, but also as a business leader, and I think that that was really interesting, both as a family, as his son. My dad back in the nineties was going to his board of directors as CEO of Bank Boston and asking for support for the board for domestic partnerships, and if you all know a domestic partnership, this would feel like a draconian idea now, this was just about providing health insurance to same-sex partners of your employees, and actually got voted down initially, meaning the board of directors was like, "There's no way in hell that we're doing that."

Rufus Gifford: (03:56)
And this is not that long ago. This is 25 years ago, something like that. But I think if you asked my father, did this make a difference in his life and for his bank, for the corporate culture that existed afterwards after that advocacy for equality, which only had to do with the fact that his son, not only, I mean this is obviously part of the value set that was somewhere inside, but it was because of the honesty, it was because of that sharing of stories that allowed for this larger conversation to take place culturally. And I like to tell that story because I do think it really matters.

Rufus Gifford: (04:35)
And then separately from that, I think as I grew, and I was nominated by president Obama to serve as the US ambassador to Denmark in 2013, the same sort of thing happened. I think when you all think Denmark, you think progressive, you think their internal journey or domestic journey as it relates to LGBT equality is sort of over. But the truth of the matter is the fact that an American representative would be public facing about his marriage to his husband actually mattered there, mattered culturally. It was something that they were very curious about.

Rufus Gifford: (05:14)
And I think that when you are in a position of leadership, like so many people in this room are, you're leaders in whatever industry that you're here representing, for you to take an active leadership role really does matter, and people listen, and I think that's what is always underestimated. And we could tell a million stories about how that came to be, but it's been very, very meaningful and I never thought that I would be considered to be an LGBT activist in any way. I've just tried to do my job like you have, and then you realize just there's so much work to be done.

Todd Sears: (05:54)
I want to key on a couple of things you said. First of all, it's being out and visible, the fact that people are out as leaders, as ambassadors, as bankers, as lawyers, as people in humanity, matters significantly. And yet I think if we took a poll in the audience, you would probably think that most people would assume that with marriage equality passing that all the issues are gone, that there are no issues for LGBTQ people in the United States or around the world, and that's patently false, and we can talk a little bit about that. But the second thing was just your father, and I've had the pleasure of meeting your parents several times. And something that Rufus didn't mention was his parents actually wrote an op-ed in one of the Boston newspapers around marriage equality supporting it and marched in the Gay Pride Parade.

Todd Sears: (06:32)
And I had the opportunity to interview them at an event in Boston many years ago. And there were so many employees who were from Bank Boston and Bank of America, and literally came to that event specifically to thank Chad for being a leader and an ally, and said exactly what Rufus said in a different way, that his dad's allyship mattered for their career, for their life, for their ability to feel like they could be out at work.

Todd Sears: (06:54)
And if you think about being out, or covering, we like to talk about the idea that you hide aspects of who you are in an environment, I know there was a panel on diversity and talent a little bit ago, people don't bring their whole selves, whatever that is. It's not just LGBTQ people. And if you can't bring your whole self, then you're losing, and your company's losing.

Rufus Gifford: (07:10)
And I was just going to follow up on that to Todd. So you have such incredible data. I mentioned that my father's board of directors voted down domestic partnerships 25 years ago. And I think a lot of us think that the actual equality, this conversation was called The Return On Equality, don't LGBT people have full equality right now? And I think lots of people think that that is in fact true after we have marriage. But talk about some of the data that actually exists, especially inside the workplace, that your organization Out Leadership has really been driving so much of this research and data.

Todd Sears: (07:51)
Well, just take a very simple one, what percentage of employees are still in the closet in the workplace in the United States today? 52%. How many companies have a 100% on the HRC Human Rights Campaign, Corporate Equality Index? Over 680. So there's this Delta there's difference between policy and culture. So it's not just about having the policies inside your company, but at a state level, there are 181 anti LGBTQ bills in 31 state legislatures currently. Some state legislatures have more than one bill under consideration. The Texas one for a good example would actually make parents guilty of child neglect if they support gender affirming surgery for their trans or gender non-conforming kid, and their kid could be taken away from them.

Todd Sears: (08:32)
There are massive challenges that still exist all across the United States. In 67 countries around the world, it is still illegal to be LGBTQ in one way, shape or form. And in about a quarter of those countries, you can be imprisoned or killed. And from my framework, in all of those countries we do business. So if you can leverage the economic power that you have by walking into a room in Singapore, where by the way it is still illegal to be gay, 377A is still on the books, if you can leverage your economic power to say to the minister of family, or the monetary authority of Singapore, or any other business organization, that gay people should actually be allowed to enter the country with their legally married partner because that matters to your business, that's how you can drive change.

Todd Sears: (09:09)
In a US perspective, you mentioned the boards, just one quick win that we've had recently. Hopefully everyone here saw the NASDAQ win for the SEC and the requirement of board diversity. Out Leadership worked with NASDAQ over the last year using our quorum data, which is an LGBTQ board program we have, to actually make sure that the NASDAQ's proposal to the SEC included LGBTQ people in the definition of board diversity. There are only 17 companies in the entire fortune 500 that include LGBTQ people in that definition of diversity. And by our very, very scientific count because it's not disclosed, so we basically just have to sort of hunt and peck and figure it out, there are 29 out board members out of 5,670, which is about 0.02%. Now it's not about a percentage, but I would make the case that if between 10 and 30% of the US population identifies as LGBT, we should have more out board members at that point.

Todd Sears: (10:00)
So there's a lot that's happening. And from a government perspective, I think I would argue that business often leads government.

Rufus Gifford: (10:08)
I think without a doubt on issue after issue, I obviously won't make this conversation political, none of us have any interest in that, but obviously regardless of the political trends that exist, and obviously we're in a rocky political time domestically, the private sector really has been driving progress here. And my work has been on the political side, on the government side, but when you see the evolution of where the business community has gone here, it is truly remarkable. And I will say though, that is connected to, I think that allowing people to tell their stories and be publicly out, does very much help drive that progress. And obviously allowing us to have this conversation with corporate leaders here and asking you to be allies alongside us really does matter too.

Rufus Gifford: (11:08)
When I was ambassador, I think one of the things that's very interesting is that although I served with a number of other openly gay ambassadors, the vast majority of the other openly gay ambassadors would leave their same-sex spouses at home at official events. There were a number of different reasons why, very often it was because their countries didn't recognize their relationship as legal, or some other reason, it could just be because they didn't feel comfortable.

Rufus Gifford: (11:37)
Frankly, I could never have left my husband at home to go meet the queen, I would have gotten divorced, like probably many of your spouses would feel the same way. So I always brought him with me, and that action, which is like the most normal thing in the world, became something that allowed young gay kids in the rural countryside of Denmark, where there is actually still homophobia, write me messages on Twitter or Instagram or Facebook, or write the letters being like, "Thank you." Or parents writing me letters saying, "Thank you for telling your story. Thank you for just being a simple role model and making us understand that this world can be safe and happy and positive and successful for young LGBT people."

Rufus Gifford: (12:20)
And I think both from an LGBT perspective, from openly gay people, but also from an allies' standpoint, all that stuff really, really does matter.

Todd Sears: (12:30)
So let's talk about allies for a second, because I think a lot of companies now have ally programs that are tied to their LGBTQ or diversity inclusion initiatives. And in my work with a lot of CEOs around the world, I kind of get the, "Okay, just give me the five things I need to know. I've got 10 minutes to talk about the gay thing, then I'm going to go back to work."

Rufus Gifford: (12:46)
Give me the shorthand.

Todd Sears: (12:47)
And so Out Leadership have actually published some ally research this last year called Ally Up. And we surveyed 5,000 respondents from 11 countries, really distilled down what LGBTQ people need from their allies and what allies think they're supposed to be doing. And there's this disconnect there. And the number one thing that I say to allies is that they have to come out as well. So people always ask, "When did you come out? So Rufus when did you come out? First time.

Rufus Gifford: (13:12)
1993, I was 18 years old, and I'm 47 now. Been out for almost 30 years.

Todd Sears: (13:18)
We both came out at 18. I'm significantly younger than Rufus is.

Rufus Gifford: (13:21)
Not really.

Todd Sears: (13:24)
But coming out is a constant process, every time I travel, I have to decide, do I come out? Every time I go into a conference room in accompany, I have to decide, do I come out? And your LGBTQ colleagues and friends and neighbors, et cetera, have to do the exact same thing. Coming out is a constant process for gay people. There is never one time. And you have to make that decision. And that actually makes us incredibly great empathetic leaders because we read a room, we walk into a room and have to read it for psychological safety, are these people going to be okay if they find out I'm gay? And so from an ally perspective, when I say allies have to come out, you have to tell us that you were an ally, otherwise, unfortunately, there's this psychological term called the Assumption of Negative Intent, which means that gay people will think that you are not an ally unless you tell us otherwise.

Todd Sears: (14:06)
And there are great reasons for that, including the laws that I just mentioned earlier. There is a lot of discrimination that still exists against LGBTQ people, primarily religious based issues. And so you do have to come out as an ally and you have to come out constantly.

Rufus Gifford: (14:20)
Without a doubt. And I think about this everyday, you mentioned this, I'm very comfortable in my own skin, here we are sitting at SALT Conference talking about the fact that we're gay, but I still have that internal dialogue when I walk into a new room. And that's the anxiety of the 16 year old, who was very, very ashamed of who he was, continues to come out. And so I go through that in every new situation that I'm in. And frankly, you mentioned sort of countries around the world where the same sex relationships are still criminalized, and hopefully in my next chapter will have a global job, and I will be protected by the US government in every way, but this will still be in the back of my mind every single time I am engaging with world leaders who come from a country where LGBT equality is not where it is in this country or in Western Europe.

Rufus Gifford: (15:18)
Because we have to understand that, that is, and you all should know that, that is what your employees, your LGBT employees, are thinking about when they go into these various scenarios where, whether it's true or not, feel unsafe, might be unsafe. And that that's why we actually have to work together, which is to your point on allyship to achieve equality.

Todd Sears: (15:41)
And leveraging the assets that you have as a company. One of my favorite stories when I had my first Out Leadership Asia Summit in Hong Kong, almost nine years ago, which was the first gay summit ever in Asia, the then CEO of HSBC, Stuart Gulliver hosted the summit, I actually was a co-host, with the CEO of Barclays at the time Anthony Jenkins, and Stuart Gulliver, were co-hosting the first gay summit in Asia, as two straight white CEOs, which was pretty awesome. And at the end of the dinner, there were two screens kind of like these, I guess, and they showed the HSBC Building in Hong Kong. And if you've been to Hong Kong, you know the HSBC Building, it's on the currency, it's like the Empire State Building here in New York.

Todd Sears: (16:15)
And in 37 years, they had never changed the colors of that building from red and white, and the CEO said, "We've got a surprise for you. We think this is important. We want to send a message," and they start playing Rihanna's song, All Of The Lights. And I'm like, "Oh, gay summit. We're going to play Rihanna. Cool." And they showed the screens, and the lights of the building go off, and three seconds later it comes back up in a giant rainbow. And they rewired the entire HSBC Building in the middle of Hong Kong into a giant rainbow and left it up for four nights.

Todd Sears: (16:42)
We later found out it was the single largest precedent HSBC had anywhere in the world that entire year. Well, fast forward, every year they light it for the Out Leadership Summit, and now all their competition do as well. So Hong Kong is a wash with rainbows once a year. And if anybody has Apple TV and the flyover screensaver, if you ever see the Hong Kong at night, it's taken during the Out Leadership Conference, because it's all the rainbows. And if you think about that, that's a simple message. That's a simple symbol, but going back to my Singapore example, the next day, Stuart Gulliver flew to Singapore because he was chair of the monetary authority of Singapore. He had just hosted a gay summit, and now he's in Singapore in closed door meetings with the monetary authority in a country where gay people still are criminalized.

Todd Sears: (17:20)
So the opportunity for you to leverage that soft power that you have is something I would encourage all of you to do. We have a ton of resources from an Out Leadership perspective, our CEO briefs, et cetera, that I would encourage you to take a look at.

Rufus Gifford: (17:30)
And just reiterating what Todd said that the impact that you can have for maybe an employee that is in the closet, that hasn't had the confidence to actually come out, may be out in his private or her private life, but not out in his professional life, that allied leaders, CEOs, not even just CEOs, but any sort of manager, the impacts real.

Todd Sears: (17:54)
I want to do something a little bit different Ruf, we've got just a few minutes left, I want to do a quick little audience participation moment here. I feel like people are maybe on their phones, or maybe not even a fully there. So we've been talking about LGBT rights and equality and, oh, there we go, thanks, Joe. And so I want to do a little bit of a survey. How many of you would say if I came to work at your company, it would totally be okay to be gay or it's totally okay to be gay right here on the room? Just show of hands. How many would you say? Okay, that's pretty good. How many of you say, you know what give it a little bit of time, maybe it's not so cool because we've got folks in Kansas or Tennessee, or all these other places, maybe give it a year? How much do you give like middle of the road? No hands. Okay. So then I'm guessing, but let's still ask, how many of you would say totally don't do it, not cool, can't come out here? Nobody. All right.

Todd Sears: (18:49)
Well, so I want to stress test that a little bit, I want to actually talk to a couple of gay people in the audience and see if that's true for them. So I'm not going to ask for volunteers, Rufus can back me up on this, gay people have this thing we call gaydar. Have you guys heard of gaydar? So it's the ability for gay people to find him point out other gay people. It's just this ability to find gay people through the eyesight. So I'm just going to point out a couple of gay people here in the audience, and I'm just going to ask them. I've got a little... And I'm not going to do that. But I want you to think about if you had any fear in the pit of your stomach, "If he pointed at me, would I be embarrassed? Would I be shamed? Would it be different for me the next day I went back to work.?"

Todd Sears: (19:39)
That's the feeling gay people have every single day when they're in the closet. So as you're going out today, and you're thinking about going back to your office, or going back to your workplace, or going back to your ambassadorship, or going back to the federal government-

Rufus Gifford: (19:50)
And I ended tonight too, because I actually love, first of all, I love that everyone raises their hands when they think that their businesses are a welcoming place for LGBT workers. But. what's the data? Because we didn't actually talk about that.

Todd Sears: (20:05)
Well, technically they're really not. The number one thing that LGBTQ people need allies to do is to actually stand up and say something in a room, in a situation, in a company, et cetera. The number one thing allies think they're supposed to do in a company is go to the gay cocktail. You've got an employee resource group show up and have a drink versus using the platform. That's why this conference matters so much, that's why I'm so grateful that Joe and Anthony invite us to this conference, because I don't know how many times you hear about LGBTQ issues in business conferences, but I bet it's pretty slim. I get to come to a number of which is wonderful, but this isn't a diversity conference, this is a leadership conference, and leadership matters. So I would say making sure that you are coming out as allies, that you are actually making sure that if work for a hedge fund, you have a diversity investment mandate. Do the companies you invest in have diversity on their boards? Bet they do, but I bet they don't have LGBTQ in that definition.

Todd Sears: (20:58)
You've got tons of assets to deploy in the marketplace, use that economic power that you have to make sure that LGBTQ people are represented, that you're not investing in states, for example, where LGBTQ people are marginalized. We have a climate index that Out Leadership has built that we update every single year, and we rank US states on how LGBTQ friendly they are. And there are some really terrible states. And we actually know data-wise that LGBTQ people will leave an LGBTQ unfriendly state to move to more friendly state, and they're willing to give up a third of their compensation to do so. So from an economic argument perspective, you have a massive opportunity to create change.

Todd Sears: (21:35)
BlackRock, for example, just joined Out Leadership. We've had a number of hedge funds, a number of private equity firms. Lloyd Blankfein was our first board member for God's sake. We have a lot of leaders who have used their platforms to help us advocate for this. And I think that would be the ask for both Rufus and I, following this conference, I'd really love for a number of companies that have never been involved to be involved, join Out Leadership, join the coalition of companies that we are creating around the world to advocate for this change and this equality, because it is a business issue.

Rufus Gifford: (22:02)
And I would say in closing, I would say this, for all the progress we have made, and we've made remarkable progress because the board conversation that I referenced in the nineties it's would be unsinkable in the United States these days, maybe not unthinkable, but very unlikely in the United States, certainly at a high level, but the fact is that we are sliding backwards in a number of different ways, not only in certain states in the United States, but also globally. And so there is work to be done. This Fight For Equality, as this panel is called, it can never be over, because the moment you stop fighting for equality is the moment you start losing, as far as I'm concerned.

Todd Sears: (22:42)
So with that, we want to thank you for inviting us. Thank you for listening. Thank you for the participation. Hopefully that was actually stressful a little bit. And Joe and Anthony, thank you for having us.

Rufus Gifford: (22:52)
Thank you.

Todd Sears: (22:52)
Thanks.

Peace & Prosperity in the Middle East | #SALTNY

Peace & Prosperity in the Middle East with H.E. Abdulla Bin Touq Al Marri, Minister of Economy of the United Arab Emirates (UAE). H.E. Dr. Thani Ahmed Al Zeyoudi, Minister of State for Foreign Trade of the United Arab Emirates (UAE).

Moderated by Danny Sebright, President, U.S.-U.A.E. Business Council.

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SPEAKERS

His Excellency Abdulla Bin Touq Al Marri

Minister of Economy

United Arab Emirates

FULL BIO

His Excellency Dr. Thani Bin Ahmed Al Zeyoudi

Minister of State for Foreign Trade

United Arab Emirates

FULL BIO

MODERATOR

Danny Sebright

President

U.S.-U.A.E. Business Council

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Danny Sebright: (00:07)
Good morning, ladies and gentlemen. Thank you so much for attending this panel today with his Excellency Abdulla bin Touq Al Marri, the UAE Minister of Economy. And his Excellency Dr. Thani bin Ahmed Al Zeyoudi, the UAE Minister of State for Foreign Trade.

Danny Sebright: (00:23)
Today's program is aptly named peace and prosperity in the middle east because it marks the one year anniversary of the successful signing of the Abraham Accords in Washington, DC. This normalized relations for the first time between the UAE, Israel, and Bahrain.

Danny Sebright: (00:40)
And as we celebrate, or as we come to the end of the Jewish new year, Rosh Hashanah to all, and we ask that our names of our Jewish friends and all be inscribed in the book ahead for the next year on the holy eve of Yom Kippor. We're so pleased to be able to celebrate this trilateral Abraham Accords with all of you here at SALT.

Danny Sebright: (01:06)
SALT's been a leading global thought leadership conference. There was amazing conference in Abu Dhabi in 2019. Thani and his team led and they're planning and hoping to be an Abu Dhabi again in March of 2022. And we are very pleased to be participating in that.

Danny Sebright: (01:23)
I'm Danny Sebright, President of the US UAE Business Council. And I think as was said, we're the leading bilateral chamber of commerce and trade between the US and the UAE.

Danny Sebright: (01:33)
Without further ado gentlemen, let's jump right in because we have a limited amount of time. I'd like to cover a number of topics if we could. Coming out of COVID-19. And I just came back from two weeks in the UAE, and I'm telling you, it's a very different sense and feeling. 95% of your population is vaccinated. Everyone wears a mask. I must've had six or seven PCR tests while I was there in a two week period. You've implemented a lot of new economic reforms coming out of COVID to get the country and the region back on track in a very exciting way. Mr. Minister, could you outline some of the steps you've taken?

H.E. Abdulla Bin Touq Al Marri: (02:14)
Thank you, Danny. Thank you, SALT and the organizers for having us here today, sitting on the panel. We'd be speaking about the UAE story. I think the major story that we're going to speak about is next month, starting the 1st of October, the Expo 2020 happening for six months in the UAE, in the Emirate of Dubai. We're here as well to really explain as well about the story that happened the last 18 months. And let me tell you what I started my post back in July in 2020, which is the hardest post you could ever take as a minister of economy in the middle of a pandemic. But I think as soon as we started that we managed to really reform and really took a step back and read and look at the economy as sectors and understand what was the UAE's economy pre-COVID. And the question was, what's the UAE economy post-COVID?

H.E. Abdulla Bin Touq Al Marri: (03:02)
And COVID-19 really made a dent in the economy, not just in the UAE, but I think globally. And I think the economy is not going to come back to pre-COVID times and in a setup where we understood that we need to really put some regulations, some policies in place to really move the economy towards a new economy, towards new sectors, and areas of what we doing. So we started, we formed a team in the ministry of economy, we reorganized. And the first thing we came out with is a 100% ownership to companies in the UAE. In the past one ownership to companies in the UAE used to be 49 to the foreign owners and 51 to a local owner. And today you now own at a 100% in the United Arab Emirates. With that gave the opportunity as well, to look at other regulations such as the residency's program, which his excellency Dr. Thani, can speak more about.

H.E. Abdulla Bin Touq Al Marri: (03:59)
I think we looked at how can we look at the talent? And the talent is the fuel of an economy. We already understood as well that there are some ex-industries in the UAE that might be not be there in the future. And then we understand that as well, how do we look at sustainability moving towards new economy? We found out that there's a lot of e-commerce digital economy coming to place, FinTech, Agri-tech, there's a lot of sectors that we started up back in COVID times. At that as well, we looked at we the FDI investments in the UAE has increased by 44% in 2020. We understood as whether there is a lot of people want to move to the UAE because how safe and secure the nation is. We had a message from our leaders back as was saying that everyone in the UAE is going to be taken care of. And that message really gave a pleasant understanding that anyone who sits on the ground of UAE is going to be taken care off. So don't worry about the COVID-19. We have everything under control.

H.E. Abdulla Bin Touq Al Marri: (05:05)
So we started with a plan of a hundred billion dollars into SMEs and companies supporting them. We had the 33 initiative plan phased out on three phases. We are at the moment at phase three, looking at the future of the economy, really pushing towards that. And I think that's something which is very vital and important for us. Last week, Danny, we managed to launch the 50 by 50 projects for the next 50 years. You know that the UAE's celebrating its 50 years anniversary this year by the 2nd of December. And the 2nd of December, we are as well giving the UAE and the world our 50 years vision as well. So this is something which is very important.

H.E. Abdulla Bin Touq Al Marri: (05:46)
So last week we launched about 13 projects out of the 50, more to come today as well, more to come next week, there's more projects coming out. So we have 50 projects lined. And let me tell you, Danny, this projects are not announcement of we're going to start. These projects have already started. These projects already been in plan and in the kitchen for the last couple of months and they are ready to go out at the moment.

H.E. Abdulla Bin Touq Al Marri: (06:11)
So let me tell you a couple of things. We are looking at one, which is the investor opiate conference we are looking at. So the investor of accounts from the utopia and investing in the future city as well. So this is something which we would like to bring people attention here, that UAE is putting down a conference in March. In the Expo 2020, trying to bring people in to invest in the future, not in the current economy.

H.E. Abdulla Bin Touq Al Marri: (06:37)
So we were looking at the future economy and trying to bring governments, funds, investors, SMEs, and entrepreneurs to come together and say, what's the next big thing in the next 10 years. What's going to make us disruptive and how can we invest in it today? And maybe announce some investments at that time as well. So this is what we are focused on. There are other projects that we focused on, the 10 by 10, which is a 10 sectors in 10 countries working on with 10 governments, started to put some economy trade agreements. Economic agreements to bring together the-

Danny Sebright: (07:16)
Thank you, sir. Dr. Thani, I came back from the UAE last week and I had 70 some meetings with the major American companies while I was there. They all spoke as his excellency said about security and how glad they were to be operating and doing business in the UAE during the time of COVID. The UAE, as we all know, is a regional hub, has been a regional hub, but the UAE what most Americans and foreign audiences don't know has become a global hub. Truly has entered the stage on the global scale as a hub for the world. You are in charge, you're responsible for some of these foreign direct investment incentives and working to make change some of the laws that make it more attractive for American and other companies to come set up business. Talk about that. Why should everyone in this audience be thinking about doing business in the UAE today in this new global hub?

H.E. Dr. Thani Ahmed Al Zeyoudi: (08:10)
Sure. Thank you, Danny. And thank you for the organizers for inviting us here. I want to just compliment what his Excellency Abdulla, was saying. And we assumed our roles within the Ministry of Economy at the middle of the pandemic. But one of the main decision that we thought while joining the Ministry that we will not disturb anything within the country and we'll not go backward. And this is one of the main messages that we always send to our business communities. We released a statement and released reforms within the laws our regulations which is going to boost the economy and not going backward.

H.E. Dr. Thani Ahmed Al Zeyoudi: (08:45)
One of the things which we always work to sell, why the UAE? The UAE is very stable as a nation, has a very visionary leaders, leadership is there, the infrastructure is one of the most state of art infrastructure within the region and globally, and the safest stuff we provide for everyone. So what we have achieved throughout the last one year and three months. We sent the Hope Mission to Mars. Fulfilling our commitments, nothing will stop us. No pandemic, no crisis will stop our ground. Second one was the connection of the first peaceful nuclear planet to the grid and the whole region. Sending strong messages that sustainability and power and the continuities is the backbone of our economy. And then we started the whole reform of our regulations and the way that we manage the residences. What we have done in the field of trade and investments, we're talking about mainly four main pillars.

H.E. Dr. Thani Ahmed Al Zeyoudi: (09:53)
The first one is the how are we going to attract more investments. For sure, the promotions and the marketing campaigns, which were starting the engagements that we have. And thinking about the whole holistic approach, how the investors, and entrepreneurs, that anyone who's visiting the UAE is going to feel that the UAE is home for them. And by encouraging and improving the ecosystem and improving the regulatory systems by improving... The company knows what his excellency was talking about. At the same time, how are we going to give a clear picture on the UAE's business environments to the communities.

H.E. Dr. Thani Ahmed Al Zeyoudi: (10:27)
One of the initiatives which was launched last week, as well as part of 50 by 50 economic conditions of the celebration for our 50 years anniversary is then based of UAE platform where we're combining all governments for the local, private sector in one platform where they can have a clear picture and with clear visibility on the various sectors. And then they can't start opening their license and opening their accounts under 15 minutes.

H.E. Dr. Thani Ahmed Al Zeyoudi: (10:54)
The fourth aspects when it comes to FDI is direct engagements between us on the private sector and ensure that we're widening the markets for them. And we want to ensure that... We're not talking about the UAE market, we're not talking about the JCC, we're a global hub. And we're global investment fund to a hub.

H.E. Dr. Thani Ahmed Al Zeyoudi: (11:13)
The second part of the whole investments trans-trade is the how we're going to go abroad? What are the sectors which are going to be very strategic? We'd like to ensure that our companies are investing in jobs abroad. Now, how can we take our SMEs and the exporters, some of the small and medium companies with us outside to encourage them to expand and scale up outside the UAE. And at the same times, we are one of the highest contributor to the humanitarian worker globally. And how can we ensure that the investment goes hand in hand with this development work we're doing globally?

H.E. Dr. Thani Ahmed Al Zeyoudi: (11:46)
The theater element is the three. We noticed that the three it has been declining lately, especially in the last 10 years. But at the same time, the service of theater is beginning. So we have to focus on service and we work on very dedicated and very comprehensive service strategies. And we're started targeting countries. We launched an initiative last week. We call it 10 by 10, where we're going to talk some 10 sectors, 10 countries for certain period to ensure that we are having at least 10% growth in our exports to those countries. And at the same time, we announced to eight country that we're going to start with them comprehensive economic partnership agreements. To ensure that those investors and the business people within the UAE they will have a wider range of markets that they can cover. And we're talking about almost 4 billion populations from far East Austria to far West of Africa. And this is the population which has almost 50 to 60% young generation, which is going to have and embrace the new technologies and digitalizations of work.

H.E. Dr. Thani Ahmed Al Zeyoudi: (12:49)
Last element is the tenants. On the tenants of human being is the backbone, is the DNA of the whole movement more focal. We're talking about knowledge-based economy. Knowledge-based economy is about human being, and it's about person. So we're not talking about the locals, we're talking about anyone who's living in the UAE. So that's why we went and revamped the whole citizenship system where we added to the Golden Visa on the National Program, which was announced earlier this year.

Danny Sebright: (13:18)
The Golden Visa means I can stay for 10 years, yeah,-

H.E. Dr. Thani Ahmed Al Zeyoudi: (13:20)
Absolutely.

Danny Sebright: (13:20)
... as a business person.

H.E. Dr. Thani Ahmed Al Zeyoudi: (13:22)
Absolutely. So we would like to ensure that if you stay there, if you mean that UAE is home, we start even taking all the barriers that bind direct engagement with those investors. Having their children and sponsoring their children who are up to 25 years old. Anyone who lose his job he's not obliged to leave the country within 30 days, now they can stay up to 60 days so they can look for another jobs. Families who lost their the main sponsor, they can stay up to one year. So we took even the humanitarian aspects of the system. We launched the freelancer visa for the first time in the region. So freelance services is going to be introduced. And the green visa has been introduced as well. So we can compliment the whole system. So those are the four main pillars when it comes to trade and investments which we're focusing on.

Danny Sebright: (14:11)
It's amazing. It's different, and it's revolutionary from anything else that's going on in the region today. And it does set you up to be a global hub, for sure. You mentioned the 10 other countries that you're focused on in the year ahead. Just quickly, one of those is Israel. And we are in the anniversary of the Abraham Accords, just a word or two about the opportunity for trilateral business investment, and cooperation by friends in the audience here in that context.

H.E. Abdulla Bin Touq Al Marri: (14:39)
Can I just start with that maybe so that, Thani, can add to it. I think when we had the conversation with you last year, and the Israeli as well, companies. We were talking about one major thing. There was a question that I see that says, "Well, we know how are you going to benefit from Israel, but how Israel is going to benefit from you?" And I said, "Well, Israel is a startup nation, and the UAE is a scale-up nation." And one year later, or less than a year later, two months ago, his Honor Sheik Mohammed bin Rashid Al Maktoum, the Prime Minister and the Vice-President of UAE, tweeted about the Israeli drone company scaled up in the UAE, taking a surveillance project in Expo 2020 surveilling the security of Expo 2020. That's a real time, Danny, of a scale-up project of what we were talking about. How can you actually look at the UAE not just as a hub, but the scale up for the region.

H.E. Abdulla Bin Touq Al Marri: (15:40)
The UAE is today is welcoming 200 nationalities, people from every part of the world to come to the UAE. I look at the UAE as a gateway to scale up in to MENA, in to Asia, in to Africa, you name it. This is something which we are putting out there; our logistics, our infrastructure, our space is ready for the world. We already, we're young, we're fit to fight.

Danny Sebright: (16:03)
Excellent.

Danny Sebright: (16:04)
You have some brand name companies in the room today from the UAE that are titans in the industry; Mubadala, [inaudible 00:16:12], Abu Dhabi Global Markets. We have representatives on... You brought a delegation gentlemen with you, your excellencies, of some 20 some people. We have his Excellency Mohammad Ali Al Shorafa, from the department of economic development in Abu Dhabi. We have, Fahad Al Gergawi, from Dubai FDI. We have Sharjah' FDI. You're here on a week, traveling around the United States to tell your story. You were in Washington all day yesterday and had meetings at the White House, the Department of Commerce, USDA. What's your message in these government meetings with this great delegation that you've brought, and with businesses that you're meeting with? What are you trying to convey?

H.E. Abdulla Bin Touq Al Marri: (16:53)
Well, let me tell you one thing, Danny, in all these meetings we had yesterday, and the day before we were hearing the word, "Wow, are you doing this? Wow, you're doing that? Wow!" So the story we're saying is amazing. And I think what we're trying to convey to the audience and everyone is there is a story in the last 18 months. We took the job back in July, we were working day and night to really put things into the future. Thinking about the economy, we're here to make changes. We here to look at to really diversify sustainable FDI investments. UAE has always been the US partner consecutively for the last 14 years. The number one partner of trade in the region. We want to continue that. We want to increase that. We want to put that in the map. We want to really help businesses to take forward from the UAE, anywhere into MENA, into Africa, into Asia. That's what the UAE is. That's the UAE always been for the last 50 years. And we want to keep in doing that.

H.E. Abdulla Bin Touq Al Marri: (17:49)
We here to really talk and tell our story. And it's more of a fact-finding mission, as well. We want to understand what changed in the US, what's happening, what's really the new gig? What's the technology?

Danny Sebright: (17:58)
You need a few months for that.

H.E. Abdulla Bin Touq Al Marri: (18:01)
Trying to put it with a very condensed structure of visits while the last three or four days, we learned a lot as well. And I think that's something which is very... I just learned a lot about anesthesia yesterday. So this is something which is really interesting.

Danny Sebright: (18:16)
Any thoughts from an FDI perspective-

H.E. Dr. Thani Ahmed Al Zeyoudi: (18:18)
Yeah.

Danny Sebright: (18:18)
... the story you're trying to tell here?

H.E. Dr. Thani Ahmed Al Zeyoudi: (18:19)
Well, to add to what his excellency was saying we're going from what we have done, and we're going to open doors, we're here with the business delegation as well, not only the representatives of governments. So we can explain the growth on those sectors which we are targeting. What's happening in those sectors, which for sure, we're going to add value to the states, as well as, to the UAE, and to the whole globe.

H.E. Dr. Thani Ahmed Al Zeyoudi: (18:41)
And if you allow me, Danny, I would like to just think of some details on some of the sectors which we're targeting. We're not targeting the conventional sectors because we know that they're going to be transformed drastically and they'd been pushed very hard by the pandemic and the crisis so they can move forward and make sure that they're going to continue living after the pandemic. But the sector in which we are targeting for sure, the e-commerce, and the retail. We saw a huge growth, we saw transformations, and this is going to be the game changer. Taking the SMEs, taking the exporters with them and they're in the market. Agri-business is something which very crucial. We saw the food security matters during the pandemic. And we saw how crucial and how important that the movements of the productions to be close to home.

H.E. Dr. Thani Ahmed Al Zeyoudi: (19:25)
The theater sector, which we're very pioneering is the health-wellness sector. We're talking about almost... The UAE is attracting around 70% of the whole region health-wellness businesses and our part of the world. And at the same time, the health sector in general and pharmaceutical is very huge, would be in a supplier to the whole region, through the storages, through the big warehouses that we have and big factories that we have in the UAE. And we will make sure that through our infrastructure, through our connection, through our investments abroad we're going to have this accessibility to everyone during any futuristic crisis.

H.E. Dr. Thani Ahmed Al Zeyoudi: (20:04)
Biotech, advance science are very key. Its very linked to our manufacturing and the industrial strategies. There's a huge push. We're targeting to invest around 300 billion dirhams for the upcoming 10 years in the industry and the manufacturing sector.

H.E. Dr. Thani Ahmed Al Zeyoudi: (20:22)
ICT is a game changer because we saw that transformation and applications and health sector and the e-commerce. So ICT is going to be embedded in most of the work which we're doing.

H.E. Dr. Thani Ahmed Al Zeyoudi: (20:30)
Supply chain. Supply chain is going to be a key and critical challenge to everyone. Through the containers, through the course of the shipments. So supply chain has to be looked at carefully and something which we've been managing very well during the pandemic. We're going to ensure that we do have very strong investments in this too, to make sure that we're bringing the crisis and not cause inflations within the country.

Danny Sebright: (20:53)
Before we leave the focus on the US, you have an amazing team here in the United States with your embassy in Washington, DC. Obviously, ambassador Al Otaiba, leads a wonderful team. Saud Al Nowais, your commercial counselor. You have a new consul general here in New York. You have consulates around the country. All of these folks are focused on helping Americans understand better, what is the UAE and what are the opportunities? So it's really important to shout them out and say a word about them.

Danny Sebright: (21:21)
When we look at other countries in the region, obviously, and again, in my meetings over the last two weeks when I was there, every American company is thinking about how they triangulate between statements that are coming out of Riyadh and Saudi Arabia in dealing with competition. American companies are worried about China and competition. Healthy competition is good for everyone. There's no question about that. See a few words about how Americans should think about their business place in the region vis-a-vis other countries there.

Danny Sebright: (21:58)
And then in the great power competition that's going on with China, there was obviously a lot said at this morning session. I think the national security session this morning, we talked about Afghanistan for five minutes, and then the rest of the session was spent talking about China and the US. How the US has to think about China for the future. So I'm just curious if you can add anything on those two issues.

H.E. Abdulla Bin Touq Al Marri: (22:19)
Let me speak about what really I'm very expert about is trade supply chains. I think the trade supply chains, I always think about it as a miles and millions of miles of supply chain where they are as thick as one inch. So any stoppage to any supply chain, you have a problem globally. Post-COVID-19 today, every country and nations we're looking inwards and try to build manufacturing and establishing inwards kind of investments as well. But what we need to look at adjust global issue is the globalization's issue. How do we really look at the re-engineering supply chain overall the increase in prices of container-shipments today reached up to $15,000. How can we look at that and address that as a major issue. I really push this kind of thinking as well with my colleagues in the UAE and pushing it as well with my counterparty in the US as well, speaking about let's adjust this kind of issues.

H.E. Abdulla Bin Touq Al Marri: (23:26)
These are problems of inflation. We're going to see them in the next months and next year. This is a challenge that will really face the world. And I think it's important to really understand how can we push the multilateral organization to re-think, can we engineer the supply chain and trade globally? This is something of our interest and UAE can really play a big role into it. We have a very strong infrastructure in logistics, in aviation. We can really play a role as well to reduce the prices, to really move and the mobility of containers and shipments across the globe. The UAE has always been a place where people meet and do business, whatever nationality you are, wherever country you come from. The UAE has a lot of tolerance and a lot of ability to really talk different languages, as well.

H.E. Dr. Thani Ahmed Al Zeyoudi: (24:20)
Let me add to what his excellency as well has said. When it comes to geo-politics, competition is always healthy and encouraging to move forward. And the competition within our region means that the volume of businesses and the economy growth is going to be higher, which means that our share in the spike is going to be much bigger than it used to be. So competition is always healthy, and we always encourage the competition.

H.E. Dr. Thani Ahmed Al Zeyoudi: (24:44)
So speaking about the geo-politics and especially the relation between US and China. We've been looking carefully on this, and there is always a winner and loser from such geopolitical tensions. I would say that some of the countries managed to win from this attentions like Mexico, which harvest many manufacturing, which moved from China, goes up to the states. So we have to look at those from even positive angle. How can we bring an added value to the work and to the economy production that we're doing.

H.E. Dr. Thani Ahmed Al Zeyoudi: (25:26)
Last point, which I want to raise as well. The economy has to be always at the front seat not the politics. The minute that the politics is at the front seat is going to slow down the economy. The minute that you have the economy, that's going to push the political agenda forward to the right way.

H.E. Abdulla Bin Touq Al Marri: (25:47)
We're creating jobs in the industry-

Danny Sebright: (25:49)
Yes.

H.E. Abdulla Bin Touq Al Marri: (25:50)
... in every way. So they're creating jobs, is the bottom line.

Danny Sebright: (25:52)
So this morning, again, on the national security panel, every one of the experts talked about maybe the future of the US-China competition, one aspect is to start moving some of the American companies moving some of their supply chain production and content from China to other places in the region. In conversations with the US government at a high level, this might be an opportunity for the UAE going forward. If US companies really do start doing that as a result of what's going on in our big power competition, as we call it for the future. You might be a winner in this have handled the right way, is what I'm trying to say.

H.E. Abdulla Bin Touq Al Marri: (26:28)
Welcome to the UAE, already. I think what's important by this was I had a meeting with all the businesses people back in the UAE. One question is, I always sit down... When I sit with them is asking, "How can I improve your profitability by 10%?" It's not about what challenges you, it's not about what's the problem is. Its profit they want to make. And business people really speak about profitability, whatever it is, the questions to the audience, as well as to everyone. How can the UAE improve your profitability by 10% in the region? And that's something which really can push a lot of discussions and the challenges away.

Danny Sebright: (27:05)
With a billion and a half people coming into the middle-class in China, of course, the flip side is; China's a huge market that you, the United States, no country can ignore and has to take very seriously. And it's very important.

Danny Sebright: (27:18)
We have a couple of minutes left. I want to talk about that... You talked about everyone from the world coming to the UAE. I want to talk about the greatest show on earth that's going to open here on 1 October. Say a few words about Expo 2020, please. And what people are going to find there. I was out at the site last week when I was in the UAE and I can't wait. This is going to be amazing.

H.E. Abdulla Bin Touq Al Marri: (27:40)
Expo is going to be really amazing. The Expo was ready last year. We are more ready than last year today and I think it's important. We already to receive the world. We're ready to see people face-to-face. I'm tired of the virtual calls and being behind screens. And I think its time for really showing up and being there, physically discussing, discussing a lot, conversing on so many ideas. There's so many things to see in the Expo 2020. And I think the world is ready, the UAE is ready to really host and Dubai is a place to be in October, till March. It's a great weather as well. So you're going to enjoy the beaches as well.

Danny Sebright: (28:20)
You want to add to that?

H.E. Dr. Thani Ahmed Al Zeyoudi: (28:21)
We invite everyone to see the future, on the futuristic technologies. As his excellency said, we were ready since last year as the technology were on place in site. But we really invite up the ones who come and see on how come we take the UAE's technologies, ideas, and innovative ways of finding things. Pull and scale them up from the UAE to the whole globe.

Danny Sebright: (28:46)
Well, Saud and I, have been working on Expo for 10 years and with her Excellency Reema Al Hashmi. And I have to tell you, I just can't wait. It's going to be an amazing welcoming of the world to your country. So thank you for the hospitality that's about to come.

Danny Sebright: (29:03)
I asked you a question yesterday in Washington, and just very short, we have just a few seconds left. It's time to be positive about the future of the world coming out of this global pandemic. Tell me something positive you each say to your children about the future and when you talk to them at night at the dinner table.

H.E. Abdulla Bin Touq Al Marri: (29:21)
Well, my discussions, I think yesterday I was you telling, Danny, about when I seat with my nine year old daughter, and we all speak about the future. It's a challenge that we always try to convince a nine year old, at least what type of job they're going to hold 10 years from now. And I think that's something which is very important. The skill set is not the skill set today that is going to be there next 10 years. So trying to inspire them, trying to push that there is a lot of part for the youth to focus on. She wants to be a jewel maker. So she does a lot of jewelry and stuff, so she should be a designer and stuff. So she wants to be that. So, yeah, I'm pushing for that.

H.E. Dr. Thani Ahmed Al Zeyoudi: (30:02)
Two things. First one, they have to ensure that they are very well equipped to the quick changes that are happening on a daily basis. And the other thing is that they have to be a global citizen, as you rephrased yesterday very well. They should not stick to their technology. They have to go and meet people in person, and they have to do the balance. And we as politicians, we have to ensure that the infrastructure is there to do this balance.

Danny Sebright: (30:29)
Outstanding. And someone asked me to ask the question, you do tell them about Anthony Scaramucci and SALT, right?

H.E. Abdulla Bin Touq Al Marri: (30:36)
Yeah, of course.

Danny Sebright: (30:36)
You talk to them about, Anthony, all the time. Ladies and gentlemen, thank you for joining today. Thanks to our guests for joining.

Dr. Scott Gottlieb on The Future of COVID-19 & How We Can Defeat the Next Pandemic | #SALTNY

Dr. Scott Gottlieb on The Future of COVID-19 & How We Can Defeat the Next Pandemic with Scott Wapner of CNBC. Dr. Gottlieb's new book, "Uncontrolled Spread" identifies the reasons why the US was caught unprepared for the pandemic and how the country can improve its strategic planning to prepare for future viral threats.

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SPEAKER

Dr. Scott Gottlieb

23rd Commissioner of the U.S. Food & Drug Administration

FULL BIO

Scott Wapner

Host, Fast Money Halftime Report

CNBC

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Scott Wapner: (00:07)
You're the man of the hour. I think everybody owes some debt of gratitude to you for your guidance through this whole thing. I know I do, a lot of journalists who relied on you for information are thankful for that. I wasn't sure, frankly, if we'd be even sitting here. The fact that you're here, we're both sitting here, we don't have masks on, that's like the Good Housekeeping seal of approval of this conference in and of itself, that you're willing to be here in a room with all these people. Are you comfortable?

Dr. Scott Gottlieb: (00:37)
Yeah, I am. Look, the prevalence right now in New York City's low, and this venue's done a good job of creating a safe environment with vaccinations, they've kept people distanced. I think that we're still here in the Northeast due for some surge of infection from the Delta variant. I don't think that we're through it. There's a perception that the sort of bounce that we had in the summer was our Delta wave. I don't think it's quite come yet, but I don't think it's going to be anywhere near as dense as what we saw in the South.

Scott Wapner: (01:04)
So you said something to that effect a couple of weeks ago that I certainly took note of, when you said quote, "I don't think that was the true Delta wave. That was the Delta warning. Our true Delta wave is going to build after Labor Day here in the Northeast. I do think labor day and the return to school are going to be incubators for spread." That's a little worrisome. How bad do you think it's going to get here in the Northeast, now that we're here post-Labor Day and school's started?

Dr. Scott Gottlieb: (01:31)
Well, look, you're seeing it right now. I don't know what people are seeing anecdotally, but you're seeing more infections, more outbreaks in school settings, and so, that's going to continue to build. Right now, we were at, when we sort of peaked out here in New York City, so let's take New York City, we peaked out at about 20 cases per 100,000 people per day when we had that mini Delta surge. Louisiana and Florida peaked out at about 110 to 120 cases per 100,000 per day, considerably more. I wouldn't be surprised if we got to 50 cases per 100,000 per day at some point at our peak, when Delta sweeps through, somewhere between 30 and 50. That's about what North Carolina's at right now. I don't think we're going to get above that. There's so much prior infection, so much immunity acquired through vaccination or previous infection here, I don't think that there's enough people who are susceptible to create the kind of condition we saw in Florida and Texas, but I don't believe we're through this.

Dr. Scott Gottlieb: (02:23)
And the final point, what you saw in the last spring was you saw very dense epidemics in Michigan, we all remember that, and also in Massachusetts, as B.1.1.7 swept through. What happened there was B.1.1.7 got into those areas earlier, and they reopened their schools and then the schools became sources of community spread. So the schools will become sources of spread here in the Northeast as well.

Scott Wapner: (02:50)
You look at the fact we have more Americans hospitalized today than we did a year ago, and it seems insane to me that we're still doing 170,000 cases a day. Should we be alarmed by that? It feels like we've become numb to this whole situation.

Dr. Scott Gottlieb: (03:08)
Well, I think we have defined what success and failure looks like differently over time, and we are somewhat complacent with a very excessive amount of death and disease. I would expect to see cases decline quite quickly at this point. Most of this is being driven by the epidemics in the South, where they let the virus spread largely unfettered, where you had a lot of susceptible populations still, you didn't have high vaccination rates. There's a perception that Florida had very high vaccination rates, but if you look, a lot of it was vaccine tourism. Their vaccination rates probably weren't that much better than other Southern states. So there was still a lot of susceptible communities, and Delta, because it's so contagious, has been very effective at finding pockets of geographic and social compartments that have pockets of vulnerability, getting into those pockets and infecting people, and that's really what you saw happening in the South.

Scott Wapner: (03:57)
You've said that COVID is going to be endemic, right? You wrote in The Atlantic that how endemic COVID becomes a manageable risk. You just wrote this the other day. How do we manage it? What is life, what is the new normal going to look like with COVID as a part of our lives?

Dr. Scott Gottlieb: (04:14)
Well, look, we've been far too complacent about the spread of respiratory diseases in the winter time. We allow influenza to infect and kill far too many people every season, and there's things we could be doing in our daily lives, in workplace settings and school settings that could cut down the risk of flu substantially, and we've seen some of the mitigation we've adopted for COVID has substantially reduced the incidence of flu. I don't think we're going to have the luxury of being complacent about the risk of the spread of respiratory pathogens in the wintertime anymore.

Dr. Scott Gottlieb: (04:40)
We're going to have to put in place a heightened level of vigilance. That doesn't mean shutdowns, it doesn't mean dramatic intrusions into people's daily lives, but it means trying to improve air quality and filtration in buildings. We made buildings green, we sealed them tight. We now have to put hospital grade air filtration in to prevent outbreaks in that setting. It means masks are probably going to become more commonplace, at least on a voluntary basis. I think culturally, we're going to change around masks. It means a lot of workplace settings are going to mandate vaccination for flu and COVID to better protect those environments.

Dr. Scott Gottlieb: (05:09)
It means a lot of businesses are going to make decisions to hold conferences in the fall or in the spring, because they know that winter's going to be peak COVID and flu season. It means business is probably going to look for ways to de-densify offices in the wintertime. Maybe not crowding 30 people into a conference room, but having people sort of Zoom in meetings. Even within the office, the structure and the work function in the office is going to be different, and the idea of going to a holiday party on December 20th and getting 40 people in the back of a restaurant in a room that's equipped to fit 10, I don't think we're going to be doing that.

Dr. Scott Gottlieb: (05:38)
I think we're just going to do things differently, and it doesn't mean our lives change in such a dramatic fashion that we lose a lot of things that we enjoyed and were very important to us, I think we just need to defang this virus and flu as well, because the final point is that if you look at the impact of flu every season, not just in terms of death and disease, but the productivity impact, it's substantial. I mean, the studies that have looked at this are billions of dollars, and sometimes tens of billions of dollars. If you have the twin thread of COVID and flu circulating alongside each other, I think it's going to be too much of an impact on business to sustain the cost of both of those pathogens.

Scott Wapner: (06:15)
It's something that we're going to have to look forward to. There was very big news just this week, and I wanted to get your take on it, because I think everybody who's been vaccinated is thinking about the idea of a booster shot. I don't know if you've had a booster yet, I haven't. I don't know if anybody even in the room has had their booster, but in a study published in The Lancet, which as you know, and most of you may or not know, is sort of the bible of medical journals, or certainly one of them, two prominent FDA experts from the agency that you used to run say, "Most people will not need a booster shot, because the vaccines that we've gotten so far work so well." Do you agree with that? Because there is a debate, I think in the ether of whether you need one, whether you should get one, whether nobody needs one yet, what do you think?

Dr. Scott Gottlieb: (06:59)
Well, look, and there is an open advisory committee today at FDA that's going to be adjudicating this very question-

Scott Wapner: (07:05)
Today?

Dr. Scott Gottlieb: (07:06)
Today, right now. Actually, this week. The data came out today, so it's Friday is the meeting. The data came out today.

Scott Wapner: (07:13)
Okay.

Dr. Scott Gottlieb: (07:13)
But there's going to be data presented by the Israelis and other groups looking at the decline in efficacy that's been observed, particularly in an older population that was vaccinated a long time ago. I think that we're going to arrive at a point where boosters are going to be recommended for some portion of the population. Ultimately, FDA and CDC are the arbiters of this, but in my view, looking at the data, I'm on the board of Pfizer, I've looked at some of the data that they're looking at coming out of Israel, you see a decline in efficacy over time, particularly in an older population for people who were vaccinated back in January and December, so a long interval ago.

Dr. Scott Gottlieb: (07:47)
I think the controversy for public health officials, the sort of main controversy, is the original premise of the vaccines were that they were going to prevent you from getting really sick, being hospitalized, and dying. That premise is still very much intact, even for people who were vaccinated a long time ago, even for older individuals, we're still not seeing a real dramatic increase in hospitalizations and severe disease for people who are vaccinated. What we are seeing is a rise of people who are developing symptomatic disease and infection. That was the second premise of the vaccine, that the vaccines can prevent you from getting any infection at all, and prevent you from spreading the infection.

Dr. Scott Gottlieb: (08:22)
That wasn't our original expectation of the vaccine. When the vaccines were first authorized, the premise was they're going to prevent you from getting really sick. Then we learned, "Wow, these vaccines work even better than we thought. They prevent you from getting any infection and from spreading it." So a lot of public health officials look at that and they say, "Why should we give boosters to the population, when the reason why we made these vaccines available in the first place is still fully intact? Why should we give boosters just to achieve something that was never part of the original premise?"

Dr. Scott Gottlieb: (08:50)
And in the other argument that enters into this, which is entered into that Lancet article is, well, if we boost the American population, we're taking vaccines away from other countries where there's no vaccine at all. I think that second part of the premise is flawed, insofar as this is not a zero sum game. We have already purchased these vaccines, the Biden administration has. There is no way that the Biden administration's going to let go of those vaccines, because they're going to want to hold onto them as a matter of national security, enough vaccine to reinoculate the entire population as a hedge against what we don't know.

Dr. Scott Gottlieb: (09:20)
The reality is, from the global situation, we have a lot of supply, and the challenge that we're going to see emerge very quickly is a problem of distribution. 5.8 billion people have received a vaccine globally, 380 million Americans. So we've given a lot of vaccine already. Now, there's billions of people who still need to be vaccinated, but the challenge of reaching those people isn't going to be a supply challenge. There's going to be literally, maybe tens of billions of doses available over the next 12 months. The challenge is going to be distribution, and frankly, convincing people to take the vaccine. There'll be hesitancy abroad as well.

Scott Wapner: (09:51)
Let's talk about just getting our own citizens as vaccinated as we possibly can, specifically children. One of the greatest days of my life was when I could take my 12 and 15 year old and get them vaccinated, and the relief that that brought. There are people in this room who have kids who are younger than 12, who don't have a vaccine yet. When can they get it?

Dr. Scott Gottlieb: (10:11)
So, just to sort of table set this, to your point, I think a lot of the residual anxiety that people who are vaccinated feel is around children in their households, and the concern that you're going to go out and get COVID, become asymptomatic or mildly symptomatic-

Scott Wapner: (10:26)
Bring it home.

Dr. Scott Gottlieb: (10:26)
... and bring it back into the home. I think a lot of people talk about well, that vaccinated people are overestimating their risk, and I think most people are cognizant that the risk is substantially reduced. What they're worried about is introducing the vaccine into a home setting. Pfizer has said that they'll have data on the vaccine for ages five to 11 at the end of September, and they'll be able to file with FDA for authorization of that vaccine within days, and FDA has said publicly that they expect the review to be a matter of weeks, not months. I interpret that to be FDA signaling that could be a four to six week review.

Dr. Scott Gottlieb: (11:00)
Now, ultimately, FDA has to be an arbiter of the data that the company submits, but if everything goes well, if the data package is good, I have confidence in the company to forward a good data package, and the review goes smoothly, best case scenario, you could see a vaccine available for five to 11 by the end of October. Perhaps it slips into early November, but you could see a vaccine certainly within this year, maybe by Halloween.

Scott Wapner: (11:24)
Also, I often wonder sort of we are where we are, would things be different if we had reacted differently from the beginning? And you do spend a good period of time in your new book, I urge everybody to read it, it's Uncontrolled Spread is the new book by Dr. Scott Gottlieb, Why COVID-19 Crushed Us and How We Can Defeat the Next Pandemic. You write the following: "The federal government started off in a weak position with plans that were ill-suited to countering a coronavirus. This mismatch between the scenarios we drilled for and the reality that we faced, left us unprepared. Poor execution turned it into a public health tragedy." What was the biggest mistake? The most costly thing we did from the beginning?

Dr. Scott Gottlieb: (12:04)
Well, we had a plan on the shelf that we thought was applicable, and that plan was geared towards a pandemic involving influenza, and I don't think we fully appreciated how different this coronavirus was from flu, in terms of how it spread, the kinds of preparations we would need, and we stuck with that flu-based plan for far too long. But I think the other costly mistake was that we had an expectation that CDC was going to be able to operationalize a national response to this, that they had the capacity not just to surface information and guidance in sort of a near real-time fashion that would objectively inform us on how to reduce risk in our daily activities, but that they would actually be able to operationalize the manufacturing deployment of diagnostic testing, help scale up vaccine manufacturing, help deploy mass vaccination in the population. They had no logistical capability.

Dr. Scott Gottlieb: (12:54)
They're a very retrospective organization, they have a retrospective mindset, they're a high science organization. They would much rather gather data and do a deep analysis and tell you in four months how COVID's spreading. Meanwhile, we have to spend the next four months figuring out how to reduce that risk in our lives. What we needed was the equivalent of sort of a JSOC, a Joint Special Operations Command public health response that surfaces information in a real-time fashion, surfaces guidance in a way that it's interpretable and actionable to consumers. We didn't have that organization, and the problem was we thought we did. Everyone said, "The CDC has this," and CDC didn't raise their hand and say, "Hey guys, we really don't have this. We need to create some new entity."

Dr. Scott Gottlieb: (13:38)
The other thing is we just lacked the resiliency. We thought we'd be able to scale the manufacturing, and biologics, and vaccines, and diagnostic tests. We thought we had an ample supply chain for something as simple as a nasal swab used to collect samples. We lacked that capacity to scale the kind of manufacturing we needed to respond to this.

Scott Wapner: (13:55)
You go after the CDC pretty hard. I mean, you have a chapter that's entitled, The CDC Fails, and some of it you... I mean, you do, you wrote that it. Some of it, you almost make the case was deliberate in things that they did to undermine the overall efforts around testing from the get-go, that hurt the country's response. Isn't that true?

Dr. Scott Gottlieb: (14:16)
Well, it wasn't deliberate in a way that it was sort of malfeasance. I think it was deliberate in terms of how the agency operates. So, just to sort of build on that point, they wouldn't share viral samples with any manufacturers. So in order to make a test, if you're Roche, and you want to make a test for COVID, you need an access to a sample of the virus. CDC said, "We're not going to share the viral samples," and then they said to the manufacturers, "If you want to make your own test, you've got to license our intellectual property, because we developed our own tests." So on the one hand, the manufacturers couldn't make their own tests, on the other hand, they had to enter into a protracted negotiation in the setting of a crisis, to license IP from the CDC, in order to make a test. And what did manufacturers do? They sat on the sidelines.

Dr. Scott Gottlieb: (14:57)
So the big manufacturers, the commercial manufacturers that had to get in this game early, all sat on the sidelines, waiting for the CDC to roll out its test. CDC botched the rollout of their test, because they insisted on doing all of the components within the same facility, so they contaminated their tests. They were literally making tests in the same facility they were running samples that they were getting, so lo and behold, the virus jumped from the samples that they were getting, the patient samples, into their manufacturing process, and contaminated all their tests, and that's why we had no testing.

Dr. Scott Gottlieb: (15:27)
The testing void finally got filled when FDA, on its own, turned to a contract manufacturer and said, "We need you to start making what we call primary probe kits," basically the ingredients to a diagnostic test. But early on, someone needed to say, "We need to turn to the commercial manufacturers." This had to happen in January, "Or we're not going to have enough capacity if this becomes epidemic in March." And what happened was we didn't have testing in place, and a lot of our problems, I could trace a lot of the problems that we suffered, both political and public health, back to the fact that we didn't have a diagnostic test early enough to turn over infections.

Scott Wapner: (16:04)
Did people unnecessarily die in this country because of the CDC's lack of action, their, in some cases, ineptitude? Can we say that?

Dr. Scott Gottlieb: (16:15)
Look, people unquestionably died in this country because we didn't have a diagnostic test. There will be people who argue that there were multiple components that were at fault in terms of not being able to operationalize that test. What CDC would say, and I've talked to people at CDC, is they would say, "We couldn't do this. We needed the Secretary of Health and Human Services, someone above us in the political chain to go to private industry and say, 'We need you to get in this game.'" And there's some truth to that, but there was no leadership above CDC, that the political leadership assumed that CDC would be able to do this.

Dr. Scott Gottlieb: (16:48)
But CDC continued to say, "We will be able to do this," and what happened when CDC was having these conference calls, and I talk about in the book, where they would get on a call every week with the whole industry, and with FDA, and the public health community, say, "Another week, we just need another week," and this went on for four weeks, where they just said, "Another week," and everyone was just frozen waiting for CDC to act. So they froze the market in place, and it was at a time when we were becoming heavily seeded, we didn't know it, because we were relying again on the influenza-like illness surveillance systems. So we were relying on data of how many people were showing up with flu-like symptoms and testing negative for flu, and what CDC and others, NIH and others were saying was, "Well, look, we don't really see a spike in people presenting with flu-like symptoms who are testing negative for flu, so it doesn't suggest anything's circulating."

Dr. Scott Gottlieb: (17:34)
But what was happening was flu incidence was collapsing, because people were starting to Purell more and be more careful, so all of a sudden, flu incidence was going down. And if you look at the actual data, it wasn't green. It wasn't red, but it was orange. The number of people who were presenting with flu-like symptoms all through the month of February into hospitals and testing negative for flu, was at the high end of the normal range over a 10 year period. That should not have been reassuring in the setting of what was going on around the world.

Scott Wapner: (18:05)
I read your book, I feel worse than better about what's going to happen next time, because in part of what you say about the CDC, our lack of preparedness, and now we have an environment where you have such discourse within the public. What's it going to be like the next time?

Dr. Scott Gottlieb: (18:24)
Well, look, I think that there's an awareness of these shortcomings. I don't think that these issues around the CDC are controversial anymore. I think the public health crowd doesn't like to have this discussion in public, because they see the CDC as sort of an institution, a public health institution that needs to be kind of protected. But I think the biggest challenge we're going to face is the debate about the role of public health and public health officials in a moment of crisis, because I think there's a lot of people in this country who've lost confidence in the advice that public health officials gave, because it seemed to be shifting, it seemed not to be science-based, at times, it seemed to be arbitrary, and it's not just right, left, this isn't just a political discussion.

Dr. Scott Gottlieb: (19:00)
I think that a lot of Americans say, "Why did the guidance on masks shift so much?" And the best example of this was the six feet, the requirement they have to stay six feet apart. The single costliest piece of guidance issued in this whole pandemic was that you had to remain six feet apart. Most schools remain shut because of that guidance, because they didn't have the physical infrastructure to keep students six feet apart. Where did that come from? CDC actually initially proposed 10 feet, but a political appointee in the White House, in the Office of Management and Budget, at the outset said, "There's no way we can tell the public they have to stay 10 feet apart. People can't even measure it." So CDC compromised with the White House around six feet, and the six feet-

Scott Wapner: (19:37)
Did they pick six feet out of a hat?

Dr. Scott Gottlieb: (19:39)
Well, it was derived from old studies looking at flu and how far droplets spread in the setting of flu, but we also knew at this point that COVID was probably spreading through aerosols, and wasn't spreading through droplets. Now, imagine if that anecdote had come out back in March of, this was 2019... Actually, 2020.

Scott Wapner: (19:57)
2020.

Dr. Scott Gottlieb: (19:58)
People would've said, "That's political interference in the CDC's process. How dare the White House tell them that they can't have six feet, if they're asking for 10 feet," yet, we now know six feet was arbitrary. CDC subsequently changed to three feet when the Biden administration rightly wanted to open schools in the spring, and they knew that the single impediment to opening schools was the requirement to keep kids six feet apart. And so, CDC said, "We have this study from the fall, we did a study and we showed that if two people with masks on are three feet apart, you reduce transmission by 70%. So on the basis of that study, we can now readjudicate the six foot requirement." They ultimately went to set three feet, if people had masks, which begs the question, if they had that study for six months, why'd they wait until the spring to change their guidance, on the basis of evidence they had in the fall?

Dr. Scott Gottlieb: (20:51)
So when you hear things like that, it makes you feel like the process is arbitrary, and it's not as objective and science-based as it should be, and also, the CDC doesn't actually put out an explanation of how they reached their conclusion. So if you all want to go online and see how did the CDC come up with six feet, it's not explained anywhere. So that saps confidence, and I think the first challenge we're going to face is getting over the public's skepticism of public health officials, and trying to restore the role of public health officials in adjudicating these things in the setting of a crisis, because I think they have to have a role. I think there's a lot of skepticism right now in the public.

Scott Wapner: (21:32)
Well, I mean, you're right. If the public refuses to follow guidance in a public health crisis, if there's widespread opposition or protest, it becomes difficult or even impossible to advance additional measures to take strong actions. That's exactly what we witnessed during COVID. I do want to discuss with you the miracle of the vaccines, because it is nothing short of that, both from Pfizer and BioNTech, and of course, you sit on the Pfizer board. You write something in the book that just blew me away about the power of science and what these companies were able to do. You say, "Moderna never had the actual coronavirus on its premises. It never needed a sample, just the computational sequence of the virus's RNA. Once Moderna got the sequence, the entire process to construct a candidate vaccine took just two days, and in six weeks, Moderna went from having the sequence in their computers to beginning the manufacture of a vaccine to start human testing." That is remarkable.

Dr. Scott Gottlieb: (22:30)
Right. Look, we crossed a technological inflection point with these vaccines, and with COVID generally, in that we were able to drive therapeutics fully synthetically. Not just the vaccines, not just the J & J vaccine, and the Pfizer vaccine, and Moderna vaccine, but also the antibody drugs also would drive through synthetic tools. What I mean by that is using just information and genomic information to derive the initial constructs for these drugs. If this had been three years ago, we would've made vaccines by finding a cell culture that this virus can grow in efficiently, growing up a lot of the virus, inactivating it, cleaving off its surface proteins, and putting those proteins in a syringe. That's exactly how the Chinese made their vaccines, which aren't that effective, and that's how we make flu vaccine.

Dr. Scott Gottlieb: (23:14)
If this had been five years from now, the methods we use right now to come up with these vaccine constructs probably would've been mainstream, but we were right at that inflection point, and that allowed us to pivot towards the construction of highly effective vaccine constructs and drug constructs very quickly, because we were at this technological inflection point. Now, that technology has now been pretty well validated in the setting of COVID. So I think you're going to see a whole plethora of vaccines and therapeutics start to be developed based on these platforms, but we were straddling two scientific states of fitness, and in a way, this happened at a time that we had the capability to do this because a couple of years before, we would never have been able to do this.

Scott Wapner: (23:55)
It's truly remarkable. Let's conclude with a passage that you conclude your book with, and I'd like you to reflect on it. "Learning from what went wrong," you write, "We have a chance to build a safer future. COVID was the worst pandemic in modern times, it won't be the last. Weak leadership exacerbated the pandemic's toll, but even with a stronger and more coordinated federal response, we were poorly prepared for this threat. COVID crushed us as a result, and left our society permanently altered. What we learn from it and how we change will determine if we are better prepared for the next pandemic, or whether we just remain just as vulnerable." What's it going to be?

Dr. Scott Gottlieb: (24:34)
Well, look, I think we're going to need to look at public health preparedness through a lens of national security, and when you're looking at it through that orientation, you start to plan differently, not just what we do domestically, but what we do overseas. Overseas, we were excessively dependent upon multilateral commitments from different nations, people coming together in the world, health organizations holding hands and making promises that they were going to share information. We've seen time and time again, that failed.

Dr. Scott Gottlieb: (24:57)
So we're going to have to get our clandestine services far more engaged in trying to guard against these threats. We're going to have to look at how we build resiliency into our domestic capacity to do things like scale up manufacturing of drugs, of diagnostics differently, and not just have some of these industries built for maximal efficiency, but also maximal resiliency. And the federal government's going to have to offset some of that, the cost of doing that. I'll give you one quick anecdote.

Dr. Scott Gottlieb: (25:22)
After Hurricane Maria devastated Puerto Rico, I was FDA commissioner at the time, I called around all the CEOs who had manufacturing facilities on the island. Fully 10% of all the drugs used in the United States were manufactured in Puerto Rico. They were all offline, every company, with the exception one. I got to Bob Bradway, the CEO of Amgen, and I asked Bob, I said, "How's your facility?" And he basically proceeded to describe the most hardened facility I'd ever heard of. He had generators to back up his generators, enough fuel on hand to keep them going for months. I concluded that if there was ever a nuclear war, the only thing that would be left would be cockroaches and Neupogen, because he was making Neupogen in that facility. And I asked him why he had built such a hardened facility and he said, "We made an implicit guarantee to the federal government that there would never be an interruption in the supply of Neupogen."

Dr. Scott Gottlieb: (26:06)
Neupogen is a drug used for a lot of different things, including chemotherapy, but it would also be a drug that would be essential in the setting of a radiological attack to help rescue people whose bone marrow was poisoned by radiation. So the federal government made a strategic decision that they were going to build hardened sites around a nation to make sure there was never any interruption. They were going to pay Amgen implicitly for that guarantee. We need to decide what are the strategic capabilities that we need, and we're going to need to subsidize it, and we can't just keep it warm, we have to keep it hot.

Scott Wapner: (26:36)
He is Dr. Gottlieb. His book is Uncontrolled Spread. I urge you to read it. Thank you again for your service.

Dr. Scott Gottlieb: (26:42)
Thanks a lot.

Advancing Principled Veteran Leadership to Reduce Polarization | #SALTNY

Advancing Principled Veteran Leadership to Reduce Polarization with David Mccormick, Chief Executive Officer, Bridgewater Associates. Rye Barcott, Co-Founder & Chief Executive Officer, With Honor. Congresswoman Mikie Sherrill of New Jersey’s 11th Congressional District. Dan Streetman, Chief Executive Officer, TIBCO.

Moderated by Anthony Scaramucci, Founder & Managing Partner, SkyBridge.

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SPEAKERS

David Mccormick

Chief Executive Officer

Bridgewater Associates

FULL BIO

Rye Barcott

Co-Founder & Chief Executive Officer

With Honor

FULL BIO

Congresswoman Mikie Sherrill

NJ-11

FULL BIO

Dan Streetman

Chief Executive Officer

TIBCO Software

FULL BIO

MODERATOR

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Anthony Scaramucci: (00:07)
Well, let's start with you for a second, your organization, With Honor, what are the qualities and characteristics of veterans that make great elected leaders beyond the obvious? What's the X factor? I want you to channel Simon Cowell and tell us what it is.

Rye Barcott: (00:28)
Well, I'm going to do my best on that. I obviously dressed a little bit differently than Simon Cowell, but I think about this question, I think about when I first signed up for the Marine Corps. You sign an oath and a pledge that is to every marine will be a rifleman. So what does that really mean? What it means is that you are going into the military. And if your country calls on it, you may give up to and including your life for your country. There are very few professions, of course, that have that calling for it. And what that is, at its essence, is true service.

Rye Barcott: (01:05)
What our organization does, With Honor, is we help support veterans who take a pledge to serve with integrity, civility, and courage, and to work across party lines in the Congress to try and help fix that very dysfunctional and polarized institution that actually matters a great deal for the country. So to your question, the bedrock has to be in service. It's a very unforgiving environment, politics. If you have the attitude that I'm going in to serve, this is going to be a hardship post. This is not for myself aggrandizement.

Rye Barcott: (01:41)
I may lose an election, but I will stand for principles that I believe in. That's hard to find. But it's what our organization works and strives to not only help identify, but help get them across the goal line because, of course, the cost in our elections are outrageous these days. And then once, in Congress, support that group, which ends up meeting every two weeks and put the country before yourself.

Anthony Scaramucci: (02:08)
So, let me go to you for a second, Congresswoman Sherrill. For the people out here that don't know you and your bio, tell us a little bit about your bio, who you are, where you grew up, what you did before you entered the Congress, why. Give us your philosophy about public service

Congresswoman Mikie Sherrill: (02:30)
So I am Congresswoman Mikie Sherrill. I currently represent the 11th District of New Jersey. I usually get a little Jersey love, and I thank you.

Anthony Scaramucci: (02:39)
There you go.

Congresswoman Mikie Sherrill: (02:44)
Thank you. Alright, alright, a little better. I appreciate that, especially with that kind of hometown crowd. So I'm in Montclair. The district stretches west from there Morristown out to Lake Hopatcong. And I grew up up and down the East Coast, and ended up going to high school in Northern Virginia, and then went to the Naval Academy, served for almost 10 years as a helicopter pilot. Got out, went back to law school, ended up at the US Attorney's Office in service once again, and then decided to run for Congress.

Congresswoman Mikie Sherrill: (03:15)
And I think what's interesting about that is I think about people who've served and what they bring to Congress. There are a couple things. So if I had gotten into the Naval Academy, I was going to go to UVA. And I envisioned my life a little bit like this. I would have gone to high school in Northern Virginia. I would have gone to UVA with a bunch of people from Northern Virginia. I probably would have gotten some job in the DC metropolitan area with a bunch of people, college educated people from Northern Virginia. And that would have been my world.

Congresswoman Mikie Sherrill: (03:48)
Instead, I went to the Naval Academy with people from all over the country, some of whom had been living overseas with their parents. I then served with people, not just from all over the country, but also with people from all different economic backgrounds. We recruit people, not just from some of the nicer areas of the country, but also from struggling areas of the country. So people have very different backgrounds than myself. And at a very young age, I was leading them.

Congresswoman Mikie Sherrill: (04:14)
I was helping them navigate bad divorces and bad purchasing decisions like motorcycles that they crashed immediately and financial burdens. And I was doing that very young and really helping them. And then I served overseas, in countries that were very unlike our own so I could see firsthand why our ideals and our democracy is important. And I think that's a perspective that veterans bring. And then Dan and I were talking before about how optimistic veterans are.

Congresswoman Mikie Sherrill: (04:47)
And many of you might not realize that because some of you have met some veterans and think that's not really my impression. But we're very optimistic in a sense that we are given a mission and we have to accomplish it. And you hear failure is not an option. Well, when you're in the military, failure really isn't an option because that could result in your death or the death of other members of your team. So failure really isn't an option. So you look at a mission no matter how hard it is and you've got to figure out a path for it. And I think with what's going on right now in our country, that's a very important viewpoint.

Anthony Scaramucci: (05:19)
I want to ask the same question with you, Dan. Tell us about your background, people that don't know you.

Dan Streetman: (05:25)
Sure.

Anthony Scaramucci: (05:26)
And we've got a nice crowd here. We also have about 15,000 people streaming.

Dan Streetman: (05:30)
Great.

Anthony Scaramucci: (05:31)
And there's a lot of young people, so provide perspective.

Dan Streetman: (05:34)
Well, I don't want to really start with this as the way you would think of me, but like Congressman Sherrill said, I was one of those young people that wrecked the motorcycle right after I graduated from West Point. We weren't allowed to have them at West Point. I bought one. Four weeks later, it totaled.

Congresswoman Mikie Sherrill: (05:47)
I did too, so do my husband. We all have motorcycles.

Dan Streetman: (05:50)
But fortunately, I'm married because of that. I actually used the extra six weeks to heal a broken collarbone. The insurance money from a totaled bicycle to buy a ring and ask my lovely bride who's out here to marry me. But it was also a third factor, which was to desperately throw my mom off the trail that I owned a motorcycle the first time. She was super happy, and it all worked out. I grew up in a little town in Florida, went to the States Military Academy.

Dan Streetman: (06:16)
And I want to echo what Congresswoman Sherrill said around your early opportunity to be exposed to a lot of people from a lot of diverse backgrounds. There is a person at West Point from every single congressional district. There's someone at West Point when I was there from 41 different countries. And we have a very active recruiting team, which makes sure that we bring in cadets from diverse backgrounds and underserved backgrounds. And that route gives you this understanding that everybody brings something to the team and everybody is different in their perspective.

Dan Streetman: (06:51)
And bringing that together was one of those key things you learn. You combine that with that this idea that you could call it a feature. Sometimes you might call it a bug. We're relentlessly optimistic. Every day in your military career, you spend your time thinking about how you are going to put yourself in harm's way as well as others that you care about. And if you can't be relentlessly optimistic about that, you need to find a different career path. And I love that aspect. I enjoyed military very much.

Dan Streetman: (07:21)
I spent eight years as an army paratrooper, ranger school, all aspects of it. But I did determine that I wanted to see other aspects and apply that in other places. So I went to business school. And I've been in California ever since. And I run a company called TIBCO. And we provide essentially data integration, data management, and predictive analytics capabilities to both our armed services, federal agencies, as well as some of the world's largest companies, Federal Express, for example. Depending on TIBCO to both deliver vaccines as part of Operation Warp Speed. At the same time, they were delivering more Christmas presents than ever, holiday presents than ever before ...

Anthony Scaramucci: (08:02)
Sure.

Dan Streetman: (08:03)
... because of the pandemic and everyone shopping. Timmy got his bicycle, and Timmy's grandmother got her vaccine. And we're really proud of the role that TIBCO plays in some of those organizations around the world, giving everybody one thing we gained in our service, a shared consciousness and understanding of what's important, rooted in data and coming back to the common goals we shared together.

Rye Barcott: (08:23)
Can I just add something?

Anthony Scaramucci: (08:25)
Yeah, please.

Rye Barcott: (08:25)
On optimism. So, my favorite quote of all time, leadership quote is Colin Powell, who said, "Perpetual optimism is a force multiplier."

Dan Streetman: (08:34)
Absolutely.

Rye Barcott: (08:35)
And I just love that, it embodies so much of, hey, you're seeing adversity, but run into the adversity. Keep a positive attitude. Nobody wants to follow somebody that's down.

Dan Streetman: (08:45)
And I think it's something for organizations and our government to keep in mind, is that we are trained that way. And so, there’ve been people who said, well, generals or admirals lied about our status in the world. No, they didn't. I mean, they honestly did have the optimism to do the right thing. I think that biggest thing we learned is you have to have, like Congresswoman Sherrill said, integrity in everything you do. And if you don't bring that from day one, you put yourself at risk and you put everybody else at risk. And that's one of those other things. You can get that in a lot of different perspectives. I don't want to say that service is the only way you can build those characteristics, but it is certainly a great way.

Anthony Scaramucci: (09:24)
So I want to test something on all three of you. And it left a big impression on me. It was from Speaker Boehner, John Boehner. And so, Boehner came here a few years ago and talk. But prior to that, I met him in his office, which is one of the most beautiful offices in Washington, because looking down Pennsylvania Avenue. And I told Bob Dole I met him in that office, it's known the most beautiful office is the Oval Office looking out into the Rose Barn. And I thought that was funny.

Anthony Scaramucci: (09:51)
But Speaker Boehner said to me that the Congress worked better when there was more civic virtue in the country, civic Unity, and it primarily came from the military. He said that the Congress worked better in the '40s and '50s because the men and women that were serving in the Congress had served the country in some part of the world. And so if they were from New York, they didn't necessarily have a rivalry from the person from North Dakota because they had met those people in their various battalions and squadrons and so forth. And so it made it easier to get things done. Have we lost that? Number one, is that true? I believe it is, and I'm interested in each of your reactions. And then secondarily, if we've lost that, how do we get it back?

Rye Barcott: (10:35)
Yep. Well, I really believe that to our core, and that's what we embody it With Honor, is trying to get more veterans who pledge to work across party lines, work with integrity and civility into the Congress. That doesn't mean that all veterans are part of the solution. But when you look at the numbers, what's happened over the last 50 years, it's happened in my lifetime, is that Congress used to have better representation above 70%, roughly. That's now down to 20%.

Rye Barcott: (11:04)
Obviously, it's no secret that in that time period, the polarization of Congress measured by how people vote across party lines has gone out the window. There's a really interesting chart, it's on our website at withhonor.org, that actually shows that a data, a histogram of how folks have voted over that time. And we believe that that's correlated, that's a part of the reason, is that you have increasing this tribalism almost. The military breaks down that tribalism. It does not matter what your political party is. It doesn't matter what your ethnicity is.

Rye Barcott: (11:40)
It doesn't matter what your religion is. It doesn't matter who your mommy and daddy are. You are in the foxhole together and you are doing the mission together. And that's the attitude that we look for With Honor that's embodied by many of the 25 vets that we support who are members of Congress, and so thrilled also to have Congresswoman Sherrill in that group as well. But you're living it so. And I know it's not easy, for sure.

Rye Barcott: (12:08)
Yeah. So, I had one Zoom meeting and one of the members of Congress said, "I'm going to just give y'all some real talk. Congress is a dysfunctional workplace." And I was like, ah, taken aback. And then I was like, huh, yeah, yeah, that might describe it. It is a unique ... If we're kind, a unique workplace. And what we've seen is the consolidation of power on both sides of the aisle for various reasons. And it's almost become this sense in Congress that voting against the party is wrong, you're not a good Republican, you're not a good Democrat, you're somehow doing the wrong thing.

Rye Barcott: (12:48)
And the people that I think are most often likely to put their district, to put the country first are our veterans. And you think that doesn't sound like that big a deal. I mean, I remember saying, people are saying, oh, you're going to vote against this? Wow, that's pretty brave or pretty courageous. And I'm like, I've done a lot braver things and vote against a piece of legislation that's bad for New Jersey. But it does ... There is this reinforcing problem because you start to do this and then you're trying to get other stuff done.

Rye Barcott: (13:17)
And people think you've committed this sacrilege against your party, et cetera. So, I think it's so important to have veterans though, that can take a view and say, look, I'm just putting the country first. I just think this is critically important, and to model that for other people. I just had a piece of legislation that I cared about very deeply, and that was critically important, not just for working moms, but for our economy as a whole, around childcare. And the legislation that came forward in my committee was not going to cut it. It just wasn't.

Rye Barcott: (13:47)
And I think the first instinct was, well, let's try to do this and the chair was holding firm. We weren't getting any momentum. And finally, I just gathered the people on the committee, a lot of them working moms and said, "You guys know this is not going to cut it." And we got together and finally got a unanimous vote for my amendment, making sure that we had the childcare forces we need. That's not traditionally what ... Traditionally, you just say, okay, well, I'll just wait until maybe there's another opportunity. That seems to be what's going on in Congress too many times. And it's leading, unfortunately, to a lack of compromise, a lack of bipartisanship, and occasionally a lack of good legislation.

Dan Streetman: (14:32)
Look, the first thing you learn is that the best contributions you make are always going to be in service to a greater good. There are no units of one, even though it was a good motto for a little while for the army ...

Congresswoman Mikie Sherrill: (14:44)
There's never a good motto.

Dan Streetman: (14:45)
... out there. There's a motto, a motto. There aren't always one. You're always part of a unit. You're always part of a team. And what you come back to is, what do you share in common? And too often right now, you're rewarded by yelling or making noise about what you don't share in common. And don't get me wrong, if something is dangerous or something is against our principles and our values, you better speak up in the military because bad things will happen for ... But if it's a disagreement or you have different perspectives, you get together, you work it out, and you think about what your mission is.

Dan Streetman: (15:19)
And it starts with those values. At West Point, it was duty, honor, country. You come back to that principle and then you come back to what is it we are trying to accomplish. And so, I like to bring that back into the workplace. I like to think TIBCO software is a very functional workplace. And we do that because we bring exactly that idea. What do we have in common? What is the data that lead us to? Let's have a tough discussion, but let's then figure out where the common ground is and make it happen.

Dan Streetman: (15:45)
It was like seeing Congressman Khanna and Governor Bush here yesterday on the stage. They disagree about exactly how a private-public partnership should work, but they agree we need private-public partnerships to get things done. And if we come back to what we agree on ...

Anthony Scaramucci: (15:59)
That was a great discussion.

Dan Streetman: (16:00)
... then we can make so much more happen.

Anthony Scaramucci: (16:03)
So, last night, I purchased a $50,000 dress. And on the back of the dress, it said tax the rich. But when I put it on this morning, I couldn't fit in there properly. I was like, I wasn't going to ...

Dan Streetman: (16:13)
Yeah, that wasn't a good ...

Anthony Scaramucci: (16:15)
... wear this morning. Then I realize that these delegates will eventually get mad at me. Is that distracting, if I'm wearing a $50,000 dress and paying a $38,000 ticket to go to a mall like that?

Dan Streetman: (16:27)
I want to bring it back to the model Congresswoman Sherrill demonstrates. Go to Twitter. I challenge you to find something negative that she has posted, shared that attack somebody or belittle somebody. Instead she shares information on how to get FEMA funds for her district. She shares information on how she celebrated our [crosstalk 00:16:48].

Anthony Scaramucci: (16:48)
Alright. I get it to you, Dan, and do that, Congresswoman. I'm going to get your Twitter following up, okay?

Congresswoman Mikie Sherrill: (16:51)
Okay, you're going to get me more following.

Anthony Scaramucci: (16:54)
[crosstalk 00:16:54]

Congresswoman Mikie Sherrill: (16:54)
And then get me kick out.

Dan Streetman: (16:54)
But her Twitter following is pathetic compared to that person. And so, I think Twitter is ... It's like a ...

Congresswoman Mikie Sherrill: (16:59)
My [inaudible 00:16:59] here. That's something ...

Dan Streetman: (17:00)
It's like a car accident. It's like, yes, you can't look away from it, but you should. And so, I think that there's this come back to the character she demonstrates. It's not about, hey, look at me, it's about what we get done. And that action was about look at me.

Anthony Scaramucci: (17:14)
Okay. And I want to get the Congresswoman to react is, I think is interesting point because ...

Congresswoman Mikie Sherrill: (17:19)
Then my Twitter feed is pathetic?

Anthony Scaramucci: (17:20)
Well, no, [crosstalk 00:17:21].

Dan Streetman: (17:22)
No. I love it.

Anthony Scaramucci: (17:23)
We're going to work it out. I'll give you some really bombastic ridiculous things to say. We'll get it up like 50,000 by this evening.

Dan Streetman: (17:28)
That's your role.

Anthony Scaramucci: (17:30)
Yeah. I've done that well. Trust me. We're in a different age now. And so, what I'm wondering is, can we blend civic virtue and patriotism with the right connectivity and communication to get the messaging out there in a way that people are going to pay attention to it. I admire Congresswoman Ocasio-Cortez. I do. She's got a great work ethic. I may not agree with her intellectually. I want to debate her in the free marketplace of ideas. But I do admire her because of her moxie for hard work, and she's getting messaging out there. So I'm wondering, can we get the civic virtue, patriotic, unifying message out there and not have it be boring and have it be attractive to people?

Congresswoman Mikie Sherrill: (18:15)
I mean, that's our challenge. And you can like social media or not like social media. It's not going anywhere. We were operating in a new environment. I can tell you, it's constantly evolving. We talk all the time about how do we use this platform, how can we get our message out. What's the most effective way? Because it's critically important, especially as you're trying to communicate to people through a really difficult communications arena, and there are some people, you're not going to believe this, who are very bombastic and really clutter the airwaves with that makes it hard to break too.

Anthony Scaramucci: (18:55)
[inaudible 00:18:55]

Dan Streetman: (18:55)
You might be surprised.

Congresswoman Mikie Sherrill: (18:55)
You might be surprised. But it is a medium that you do have to, to gather a certain thing, come up with a way to connect with people. And we know that emotional connections work best. And so, how do you work in that thing when you don't want people enraged? And there are a lot of people in rage a bit. You don't want people in rage. You want people passionate about your childcare bill. How do you do that? It's very difficult, and we're constantly evolving. I agree with you.

Congresswoman Mikie Sherrill: (19:24)
I know there is room for doing something that gets so much attention that makes people think. And you can be for or against representative Ocasio-Cortez does, but you were talking about it and you were thinking about it and you were lining up in your head how you feel about some of her positions. And I think that's part of the public discourse. The trouble for a person in my district doing the things I'm doing is, how do you bring excitement to boring legislation? And why do you do that?

Congresswoman Mikie Sherrill: (20:08)
Because the other thing is you can get really wrapped up in just trying to get a million followers and suddenly, you're realizing, hey, I'm not sure I'm actually creating the progress I want to create in Congress. And so sometimes you find the tail wagging the dog a little bit. It's really a brave new world, I think, in how we became.

Dan Streetman: (20:24)
And that's the military piece, is you always have in mind, this is what I love. It's not that you know what your mission is, you know what you're trying to accomplish, you know what you're trying to advance and you don't get distracted by the other aspect of it. And Rye does a great job celebrating that with With Honor. And of course, he's lived it himself of how do I certainly raise the issues that need to be raised, but do it in a way that's constructive and do it in a way where we can continue to advance what we all agree on? And that's the biggest challenge.

Rye Barcott: (20:52)
Yeah. And I mean, some of the old school still matters, and it's definitely going to continue to matter. You cannot attack somebody on Twitter before you've met them eyeball to eyeball and expect that you're going to have a really real relationship with them. And that happens. Obviously, that happens in our orbit. That also happens in Congress. So one of the things that we ...

Anthony Scaramucci: (21:13)
Okay. But I'm going to pushback [inaudible 00:21:13] and I'll tell you why. Because a lot of people tag me on Twitter, I could care less. When I meet them, they're like running. Particularly, if they're verified, they're running away from me. I don't care. I mean, you just had a guy in stage that fired me after 11 days in the White House, no problem.

Rye Barcott: (21:29)
Well, you are a unique individual.

Anthony Scaramucci: (21:30)
No, but I'm just saying to you like, we got to get over this stuff. You know what I mean? And for some reason, it's like indelible ink, if it's on Twitter and then people flip out [inaudible 00:21:40] ...

Congresswoman Mikie Sherrill: (21:40)
You're a little bit ahead of your time.

Dan Streetman: (21:41)
I think a bigger ...

Congresswoman Mikie Sherrill: (21:42)
Because you're like my kids.

Anthony Scaramucci: (21:43)
What's that?

Congresswoman Mikie Sherrill: (21:44)
You're a little bit ahead of your time on this because you're like what I think is coming, where people ingest social media differently. I'm constantly ...

Anthony Scaramucci: (21:51)
How old are your kids?

Congresswoman Mikie Sherrill: (21:51)
My oldest is 15, my youngest is 9. And I constantly tell them, don't post anything, don't get on there. You don't want to be on there. And I'm constantly getting stuff from my sisters who are following them like, oh, that was so cute. I'm like, really? Great. I hate school. Great, great. I'm trying to just ... I have this kind of old school, non-digital native, just keep your private business private type thing. And my kids are part of this whole new world where they want to share what they had for breakfast with their 10 followers. And I think ...

Dan Streetman: (22:25)
And [inaudible 00:22:25] team say, they can use that against you in court when ...

Congresswoman Mikie Sherrill: (22:32)
Yeah. It's like, this is ... That you could [inaudible 00:22:33] this. I think we're headed there. It's just trying to find where we're at now. To some of us, it's an interesting balance to try to connect with people, try to get the word out, but try to do serious things. I think that's where I have a lot of struggle, is how do you do serious things on social media?

Anthony Scaramucci: (22:50)
Okay. So I think that ... And I don't know how to answer that. I think we're all searching for that answer. But what I want to ask you is you see these amazingly talented people, they're patriots. How did you go from being a patriot, which is an amazing thing, serving the country, putting your life at risk, but now you got to crossover into the political realm. I didn't do well in the political realm because I didn't see the shots coming. I mean, at least in your realm, you're working on a team, the team is patriotic, you have a culture where you're going to help each other.

Anthony Scaramucci: (23:27)
But you get to Washington. There's not that many people that have a culture of, oh, you know what, we're here actually to serve the country. A lot of these people are like, hey, I'm here to serve my own personal power and to aggrandize myself usually.

Rye Barcott: (23:40)
Yeah. Or they come into it and then it's a slow creep. The pressures are there. I think the attribute ...

Anthony Scaramucci: (23:47)
Slow creep can become like that.

Rye Barcott: (23:48)
Yeah, exactly. It just chips away. So what we look at in particular is it comes back to service. Do you view this as being something larger than yourself? Do you view it in military terms as a hardship post? It is a hardship post. It's definitely a hardship post for Congresswoman Sherrill who has three or four kids is in a competitive district. She has basically three jobs and stuff coming at her all the time.

Congresswoman Mikie Sherrill: (24:16)
My husband doesn't consider it a hardship post. He considers it an escape.

Rye Barcott: (24:23)
Escape, yeah, yeah.

Congresswoman Mikie Sherrill: (24:23)
I'm like, "I can't even go down to Washington. I wish I wasn't going." And he's like, "Really?"

Rye Barcott: (24:28)
We share that. We married well. To have that grounding that, listen, this is going to be something that's larger than myself and to be able to resist that slow creep. Because corruption is real. I mean, and it happens and it builds on itself.

Anthony Scaramucci: (24:43)
I want to extend that because I often think about this in the parable George Orwell wrote in Animal Farm. And I was thinking about it. The pigs were revolting against the farmers. They organized all the animals. They were upset with two legged animals, which were the farmers. But do you remember what happened to the pigs at the end? They were up on their hind legs and they were wearing vest and they had pocket watches. And they've taken over the farm. And so, they had started out as part of the proletariat. And they started out with this virtue and this principle.

Anthony Scaramucci: (25:14)
But by the end, because of that process that you said they get drawn into, they became the two legged animal. So when the horse knocked on the door, there were the pigs in the farmhouse standing up and they had the pocket vest. That happens a lot in Washington, does it not?

Rye Barcott: (25:29)
It sure does, except ...

Anthony Scaramucci: (25:30)
How do you keep it from happening to yourself, Congresswoman?

Congresswoman Mikie Sherrill: (25:33)
We keep it from happening with groups like the For Country Caucus. Because the difference, I think, in some of the people that I served with and why I think we've been able to create a different culture is because we came in as a group. The 2018 class in the Democratic caucus was one of the largest classes to enter into Congress. And so, you have this built-in group of people. And it was a reinforcing measure too. You would say, well, this is ridiculous, and you'd have a group of people saying, yeah, this is ridiculous, this doesn't make any sense. Why would anyone do it this way? And that felt very unique. I know I'm on the New Jersey delegation, as somebody have mentioned. You don't clap again?

Dan Streetman: (26:21)
Jersey.

Anthony Scaramucci: (26:22)
[inaudible 00:26:22]

Congresswoman Mikie Sherrill: (26:22)
Thank you. But I did go to ...

Rye Barcott: (26:25)
I feel like I need [crosstalk 00:26:26]

Anthony Scaramucci: (26:25)
Some of those New Jersey's move the floor to them. I met a few of them, okay?

Congresswoman Mikie Sherrill: (26:29)
You can clap if you're from any connection. I remember early on, it's a large delegation, which is very nice. You don't quite realize how that's going to be helpful until you get into Congress. And I went to one of them and said, "Well, are we going to vote as a block on this? What are we thinking here?" And the person said to me, "I got to be honest with you around here, it's every man for himself." And I said, "Huh." And we got that a lot. In fact, when I would want to do events, we do fundraisers.

Congresswoman Mikie Sherrill: (27:01)
And when I would want to do a fundraiser with another one of the Veterans Service members I came in with, my team would be like, oh, I don't know, we'd probably be better off by ourselves. There just wasn't this idea of coming together. And we have almost, in some ways, had to show others the way that this kind of group can actually build ...

Anthony Scaramucci: (27:26)
There's power in that collection.

Congresswoman Mikie Sherrill: (27:27)
It's more power. It's more power. You're not ...

Anthony Scaramucci: (27:29)
Of course.

Congresswoman Mikie Sherrill: (27:30)
But for so many, it feels like a zero sum game. If I'm, in any way, giving this person power and somehow losing it, we've created a base of people where we've all gotten more power and more ability to [inaudible 00:27:43].

Dan Streetman: (27:42)
And I think the military has great training for it. So you're absolutely ... You get a block rating where your boss puts it on paper and it goes into permanent record how you stack up against all your peers. Yet that you don't think about that day in day out, you think about what you're doing with your peers to go accomplish what you have to do. And so, where Congresswoman Sherrill stepped up is saying, look, we can do this differently. I don't care if you think it's every person for themselves. We can accomplish more and we can all do that together. So I really believe that.

Dan Streetman: (28:12)
And look, I'm in the commercial space, and companies have the same challenges. Organizations can very easily lose their way, and you come back to establishing one of things we learned, is what are our values. So again, I work at TIBCO software. TIBCO founded by Vivek Ranadivé. The information bus company, just what TIBCO stood for, we now focus on our values and what it stands for. We work together, the T, we are innovative, the I. We are bold, we are customer focused, and we're optimistic. Nowhere in there does it say we're going to go make a ton of money.

Dan Streetman: (28:44)
Nowhere in there does it say we're going to rise faster than others. Instead, we focus on our customers on bringing innovation and being bold, and we do it. And that helps people get aligned. And that's something you learn where you're serving.

Anthony Scaramucci: (28:56)
Is there an incentive? If you ... Where Washington's are, gave you the magic wand, we could change incentives in Washington to drive people to do what Dan is saying because he has a corporate culture. The military has a military culture where the incentives are aligned to do exactly what Dan just said. So if you had a magic wand, you could go to Washington, wave the wand, what are two or three normative things you would do to try to get the incentives alongside of what the Congresswoman and Dan is saying?

Rye Barcott: (29:24)
That is a great question. The first thing that I would do ...

Anthony Scaramucci: (29:29)
Finally, got a good question. I'm going to relax [inaudible 00:29:30].

Rye Barcott: (29:30)
It's a great question. The first thing I would do would be build up organizations like With Honor, little bit of pitch there for the organization that I co-founded with other veterans. Why? Because what we're trying to do is actually shift against this tide and build a group that is cross partisan that does meet every two weeks, that takes a pledge to serve with integrity, civility, and courage, and lives by it. And by the way, we measure their bipartisans [inaudible 00:30:00].

Anthony Scaramucci: (30:00)
So more people elected from your group, they're all in there with that pledge, but still worried about the animal farm thing. Because when they get in there, they start getting corruptive forces. So what would be some incentives from the town?

Rye Barcott: (30:16)
I think folks ...

Anthony Scaramucci: (30:16)
Is there anything you'd change about the town that would make it easier for them to stay in the curve of your group, inside the boundaries of your group?

Rye Barcott: (30:25)
Yeah. I mean, one thing that everybody in this room can do is you can support individuals that push the tide back. You can support them. You can send ... That doesn't need to be financial, it could be financial, but you can put, you can say, listen, I believe in this. I'm not going to just jump on this culture war. I'm not going to get triggered by this or that. I'm going to actually say I'm going to look for the ones that are bucking the tide and I'm going to support them and I'm going to use whatever microphone I have to do that. That's something that individuals can do.

Rye Barcott: (30:56)
That's part of the reason why our organization, With Honor, were political reform organization. There aren't many. I mean, we are a big country. We run out about $10 million a year. There are maybe five organizations that are similar in the entire United States that are working on political reform that have that sort of magnitude. We need more Americans that care. We need more Americans that are going to lean in, that are going to actually stroke checks, they're going to put their time and effort and work into this, because it really matters. This really matters for our country's competitiveness. We cannot have our congress continue to be this dysfunctional and polarized and really broken.

Anthony Scaramucci: (31:38)
I mean, I think it's brilliant. And that's why we invited you and we're going to do everything we can at the SkyBridge SALT level out. I want to switch to something that I'm concerned about. I had dinner last night with General McMaster, General Kelly, and a few people. And they talked a little bit about it this morning, but they are very worried about China. And they're very worried about the inner inward turn at China, the investments that have made by the United States, the competitive dynamic, what China is doing around the world. Is the Congress and the Senate, as well versus General HR McMaster on the danger of what's going on between the United States and China?

Congresswoman Mikie Sherrill: (32:23)
Certain committees. So, different committees have jurisdiction, as you know. So I'd say the House Armed Services Committee is very aware. That's one of the committees I sit on. I'd say Foreign Affair is very aware. Your Intelligence Committee, very aware. Other committee members, probably not as largely focused. But the committees of jurisdiction that are dealing with this are moving to address all these things. But the problem isn't necessarily if Congress is aware, that is one problem. The problem is, is the nation aware?

Congresswoman Mikie Sherrill: (32:58)
And I don't think the nation is where ... I think the nation regards China as this great place to get cheap Halloween costumes. I don't think the nation is aware that China is moving into African and Latin American countries, putting them into a great deal of debt to build roads and bridges, teaching the leaders in power how to shut up parts of the internet, promoting Chinese ideals and television. It's very costly to get American television or the BBC. I mean, I don't think America is aware, in general, that we are ceding so much ground as far as our values and our ideals to China.

Congresswoman Mikie Sherrill: (33:39)
And that matters, economically, a great deal. I will say that the new national defense strategy does envision great power competition. So for those of us who grew up during the Cold War, to me, this idea of great power competition doesn't just involve how are we going to be competitive, how are we going to make sure our national security needs are met, vis-à-vis China or Russia. But really, it's also war of ideals, promoting our ideals, convincing our allies and friends that our view of the world is better for individuals, it's better for government, it's better economically, and we should band together and ensure the world order agrees with us.

Congresswoman Mikie Sherrill: (34:24)
And so, when we're making decisions on cyber, when we're making decision international norms around those issues, the values of places like China and Russia are very different from what the US values are. So we need to still be at the table creating those norms. And we can't do that if our country as a whole is not convinced that that's where we need to be and pushing that agenda.

Rye Barcott: (34:49)
And that's part of the reason why a forum like the For Country Caucus of 25 members of Congress, both parties that meet every two weeks. It's so important that we are actually talking about these issues. One of the big topics that the Caucus has worked on is artificial intelligence has been a huge topic at SALT this week. Eric Schmidt, former SALT speaker, with Bob Work, commissioned a study over two years by Congress called the National Security Artificial Intelligence Commission. They have over 50 recommendations in Congress.

Rye Barcott: (35:24)
The beginning of their report starts with the slide, with one simple statement, and that is that China believes that our polarization is to its critical advantage. That's an 800-page study on artificial intelligence. And that's the slide that it starts with. We have to have Congress working. We have to be able to talk across party lines on these issues, because they are massive and they're going to be defining our lifetimes.

Dan Streetman: (35:52)
I remain ...

Anthony Scaramucci: (35:53)
That's totally true, by the way, what you said.

Dan Streetman: (35:54)
Yeah. But I remain relentlessly optimistic about our country. I think democratic ideals and a free market economy will ... We both learned Russian at our respective military academies. We are prepared for [inaudible 00:36:09].

Anthony Scaramucci: (36:09)
Could you see Russia from your house though?

Dan Streetman: (36:13)
They got [inaudible 00:36:14] houses. But this whole idea of understanding the different systems and what they're doing is key, and we also studied the history. You absolutely is, as Secretary Flournoy was talking, have to be prepared. You have to be ready. You have to understand that that polarization is absolutely a potential flaw, but it's also one of our greatest aspects of it. And that we allow people to do that. And we bring different opinions. I'm still convinced, because I work in the commercial sector. We use artificial intelligence in all of TIBCO's products.

Dan Streetman: (36:43)
And I would put what we do in what our free, willing, and able to move across the economy team members are able to do against anything China does. We do have to have public-private partnerships. We have to be thinking about what is the DARPA aspect ...

Anthony Scaramucci: (36:59)
National question.

Dan Streetman: (37:00)
... do that helps you see the internet, but then all these companies made the most of the internet. And so, finding those combos are going to be important. But some of these, our polarization is, again, a feature. But we have to just make sure it doesn't become like a bug.

Anthony Scaramucci: (37:15)
We got a couple minutes. How many more congressmen and women are going to be in the Congress as a result of your work in the upcoming midterm elections?

Rye Barcott: (37:28)
Well, we the group that we support currently in Congress, and we're 50/50 across party lines, has 25 members. We'd like to get that up to 40. That's going to take some work. This is a critical election coming up because of [inaudible 00:37:40].

Anthony Scaramucci: (37:40)
That would be almost 10% of the Congress, so 8%, 9% of them.

Rye Barcott: (37:43)
Again, if you have cohesion, that can move things and make stuff happen. So that's our goal. That's what we're aiming for.

Anthony Scaramucci: (37:51)
And you're in software, how are you going to get the Congresswoman's Twitter following up? Do you have some ...

Dan Streetman: (37:56)
Well ...

Anthony Scaramucci: (37:56)
Any advice there?

Dan Streetman: (37:57)
Might be I'm going to up following that.

Anthony Scaramucci: (37:59)
She's not going to take [inaudible 00:37:59].

Dan Streetman: (37:59)
[inaudible 00:37:59] following them.

Congresswoman Mikie Sherrill: (37:59)
Thank you.

Dan Streetman: (37:59)
But my point is it's a bad measure.

Anthony Scaramucci: (37:59)
Which is supposed to be. She's not going to take my advice. She's not going to my direction.

Dan Streetman: (38:04)
I mean, my whole point is a bad measure and idea exactly what With Honor is doing. Let's raise, let's help people. Not all of us have the time every day to make sure we're seeing how people vote, but what you do to share that perspective and help us understand what makes us a better place is important. The work you're doing is really valuable. And it's just a real pleasure to be part, I think, of a system that can deliver. As long as we bring integrity and teamwork to everything we do, [inaudible 00:38:29].

Anthony Scaramucci: (38:28)
Congresswoman, I want to make a pitch for tourism in your district. Have you been to the Yogi Berra Museum at Montclair's [inaudible 00:38:35]?

Congresswoman Mikie Sherrill: (38:34)
I live in Montclair. I've been to Yogi Berra several times.

Anthony Scaramucci: (38:37)
Make the pitch for Yogi here. How much fun is that museum? You've been in a museum?

Congresswoman Mikie Sherrill: (38:42)
That it is wonderful. I don't know, those of you who've heard him say, to get to his house, he'd say if you come to a fork in the road, take it. You really could go either way to get to his house. That was true. That's wonderful. The winter headquarters of George Washington, in the hardest winter during the Revolutionary War was in Morristown. And if you want to take a moment to commemorate 9/11, the most beautiful 9/11 memorial that we have is at the top of Eagle Rock.

Congresswoman Mikie Sherrill: (39:12)
That's where George Washington looked down over Manhattan to spy on the British troops. We have the Great Swamp, which is a gorgeous outdoor conservation area. And the last time I was there, a bald eagle flew right over my head. Nobody believes me. I was by myself. So, we just have some wonderful tourism. And as you start to make your plans for the 250th anniversary of our country, I would suggest you come out to my district.

Dan Streetman: (39:42)
So there's one place that's not in her district that's in New Jersey, Meadowlands, where army is going to beat Navy this December, is also a great place to be.

Anthony Scaramucci: (39:54)
Okay, uh-oh.

Congresswoman Mikie Sherrill: (39:55)
I can't leave it on that. I can't leave it on that. As the New Jersey [inaudible 00:39:55].

Anthony Scaramucci: (39:55)
That's how you got to finish for the kneecapping, you kneecap it.

Congresswoman Mikie Sherrill: (39:57)
As the New Jersey congresswoman, I'm going to have to say go neatly.

Anthony Scaramucci: (39:57)
See the polarization in sports I'm telling you, it's going to be a hard one. Ladies and gentlemen, thank you very much. Guys, that was terrific.

How Baseball Explains New York with Joe Torre, Bobby Valentine & Tom Verducci | #SALTNY

Joe Torre was inducted into the Baseball Hall of Fame in Cooperstown, NY on July 27, 2014 and the New York Yankees retired his Number 6 at a ceremony at Yankee Stadium the following month. Joe is currently a consultant to Major League Baseball Commissioner Robert Manfred. Prior to his current role, he served as the Chief Baseball Officer for Major League Baseball. In this capacity, he was responsible for overseeing several areas that included Major League Operations, On-Field Operations, On-Field Discipline and Umpiring. He served as the Office of the Commissioner’s primary liaison to the general managers and field managers of the 30 Major League Clubs regarding all baseball and on-field matters.

Bobby Valentine was born and raised in Stamford, the son of Joseph and Grace. Bobby attended Ryle Elementary, Cloonan Middle School, and Rippowam High School, where he was elected student body president and became the only three-time All-State football player in Connecticut history. Bobby received a scholarship to the University of Southern California and was drafted by the Los Angeles Dodgers in 1968. After 10 seasons as a professional baseball player, Bobby made his major league managerial debut in 1985 with the Texas Rangers. He was the American League Manager of the Year in 1986 and went onto become the winningest manager in Rangers history. Bobby began managing the New York Mets in 1996 and led the team to back-to-back postseasons, including a 2000 World Series appearance. He also won the 2005 Japan Series Championship while managing the Chiba Lotte Marines.

Moderator Tom Verducci is an analyst and reporter for FOX Sports’ Major League Baseball coverage. Joining the network in 2012, Verducci has been a reporter for the MLB Postseason since 2016.

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Joe Torre

Special Assistant to the Commissioner

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Bobby Valentine

Former Major League Baseball Manager; Candidate for Mayor of Stamford, Connecticut; Inventor of the Wrap

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Tom Verducci

MLB Analyst & Reporter

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EPISODE TRANSCRIPT

Tom Verducci: (00:08)
So anybody that's city field this past weekend?

Bobby Valentine: (00:12)
Woo.

Tom Verducci: (00:13)
Yeah. Talk about how baseball explains New York. That was the cliff notes version on Saturday night, what a moving ceremony on the 20th anniversary of 9 11. You had the Yankees and the Mets standing shoulder to shoulder, not on separate foul lines but interspersed together, unity, solidarity, very moving. The next night, they're at each other's throats because somebody whistled. That's New York, isn't it?

Joe Torre: (00:41)
Yeah, I guess. Yeah, I guess it is. I think everybody really has an open sore because of what happened with Houston a few years ago. And the whistling isn't against the rules based on the fact that they didn't use technology to get information, they were pretty much calling the pitches because what he was doing or what he wasn't doing, Andy Pettitte went through that in game six in the world series in 01 where the diamond backs just beat us up and he was tipping his pitches. So, I mean, that's not illegal to be able to communicate that.

Tom Verducci: (01:28)
Let's talk about the ceremony I mentioned Saturday night, obviously the memories, emotions had to come back to both of you, so involved with the way baseball helped in its own small way for this city, for this country to recover from the nine 11 attacks. Bobby, when you saw the ceremony on the field, what were the strongest emotions and memories that came back to you?

Bobby Valentine: (01:53)
Well, Stanley with Joe on the sideline, watching the men in uniform, hearing the bagpipes walk across the field and the sound of a funeral for all intents and purposes, just brought me back 20 years ago to the funerals that we attended, to the people who were wounded so drastically from those horrific attacks, that we were both shaken, we were touched, and we were moved by the idea that we should never forget.

Tom Verducci: (02:30)
Well, you told me a great story, I had not heard this before. I remember watching Bobby during the national anthem being played September 21, the first game in New York after the attacks, the Mets are playing the Braves. And you guys remember, we weren't sure whether we should be playing baseball at that point. And the national anthem is being played and I see Bobby Valentine with his shoulders back, his chin up, he's smiling, proud. Tell me the story about how you decided to really strike that obvious pose.

Bobby Valentine: (03:06)
Well, if you go back 20 years, we could all get that feeling of fear that we had in our hearts and our minds. We were attacked, we had never experienced before and there was confusion. And the confusion was separated from the fear when I got the message from our commander in chief, who said, "Hey, the bad guys are going to be watching. Make sure when you play this first game in New York city, that they don't see on your knees, they see you standing tall." And even though I was confused a bit and very fearful because we didn't know if it was the biggest bulls-eye that had ever been created by man. We didn't know if there was going to be another attack and we decided to put 40,000 people in a stadium to make it easy for the bad guys. And during the national anthem when I knew we would be on television, and maybe that dude in a cave somewhere across the world was looking, I wanted him to see me standing tall and not crying during our national anthem. And it was a hard thing to do, I'll guarantee you that.

Tom Verducci: (04:22)
Joe, what is it about baseball that people kind of sought inspiration from? Or even if it was comfort at that time? Why baseball?

Joe Torre: (04:33)
Well, what's interesting when it happened that morning, I was home, we had been rained out the night before, Roger Clemens was scheduled to pitch against his former team, the Red Sox, he was going for his 20th win. And I had to be at the charity lunch in the next afternoon, so I didn't even have the TV on up in the bedroom, but I was milling around getting my clothes together and I got a phone call from the car service that was going to pick me up. And they said, "I guess it's canceled." And I said, "What are you talking about?" And I turned on the TV and I saw what all of us were watching. And my mind right away went to my daughter who was five years old, and I know she was down with my wife and I wanted to make sure that she wasn't watching what I was seeing on TV. I went downstairs, my wife was handling that situation.

Joe Torre: (05:30)
It was frightening, as Bobby said. I mean, it scares you because all these attacks always happened on somebody else's turf. And here we are in New York city and it was scary, and I got to be honest and to your question, Tommy, baseball all of a sudden wasn't on my mind, it was what's happening and what do we do? And fast forward a little bit when they decided that baseball was going to resume the following Monday, on a Saturday, because we were home, Bobby's club was on the road at the time it happened. And we went with about four vans to Manhattan, we came here to the Javits Center where it was the staging area for all those first responders, firefighters that came from different parts of the country. That's where they were sleeping and eating and doing what they can, hopefully there was going to be a recovery, but obviously we didn't have any of that.

Joe Torre: (06:44)
And then from there we went to St. Francis hospital, and the sad part about it, there were no victims there, there was some firefighters who were dealing with smoke inhalation. Then we went to the armory, and I was a little hesitant about, going in there because we had a lot of players had gone home, they had got in a car and just started driving, and we went into the armory once somebody checked that it's okay for us to go in because the families were there waiting for DNA results about their loved ones. And I thought it was a very personal thing to intrude upon. But we went in and we sort of stayed around the perimeter of everybody gathered because there were low partitions that separated all the groups. And this woman, we were waved over to this one family and we walked in and Bernie Williams was with me and he goes up to the woman, he says, "I don't know what to say to you," he says, "But you look like you need a hug."

Joe Torre: (08:01)
And with that, he gave her a big hug and it sort of opened the flood gates because other families would come toward us with photos of their lost relatives, wearing Yankee garb, caps or jerseys and jackets and just talking about what big fans they were. And it was really at that point, you asked earlier in the week obviously baseball, it was a game we played. And all of a sudden at that point, I realized that we had something more important to do, and that's try to get in the way of these people's grief that they were dealing with and baseball was our vehicle.

Joe Torre: (08:57)
And the team got together in Chicago, we were going to play the White Sox, that was our first game on a Tuesday because we didn't play on Monday. And I told them, I said, "The NY on our caps guys, it represents New York. Not only the Yankees, but the city of New York." And like Bobby's team, everybody was so determined and dug in. And I think if you're Yankee fans and I was a member of the Yankees, people either love you or hate you, there was no middle ground there at all, okay? And when we went out there in Comiskey park, there were signs, we love New York, we love you and we love you, and it was so unlike going on a road trip normally with the Yankee. So you realize that it was our job as baseball people to try to distract. It's a weak word, distract, but just get in the way of their grief.

Bobby Valentine: (10:07)
And Tom, Joe talks about loving and hating the Yankees. Well, I grew up a Yankee fan, and just because God has a sense of humor I got to play for and then coach and manage the Mets. When I first got to the Mets, Joe was the manager and I really loved him, and then he released me, and then emotion changed. And then we got to do battle from 1996 through 2002. And for whatever it's worth, last night concluded a three-day game set in this subway series. Well, when we first had to understand the undertaking of the Yankees and the Mets playing during the season, and they had us do it six times, three in one stadium and three in the others. And when we played against each other, we would have police motorcade escorts with the guys in uniform, in a bus from our stadium to their stadium or their stadium to our stadium, and check it out during rush hour they closed the highways down. So it was just our buses and the motorcade going down the major deacon and crossing over the Williamsburg bridge.

Bobby Valentine: (11:42)
So it was a crazy situation that we lived through. And by the time 2000 came around and we had played these four years of inner league series games, we said to each other, I remember Joe coming over to me and said, "We got to stop doing this during the season." And I said, "Yeah, maybe we should start doing it after the season." And God was looking down and we got to play a world series against each other in 2000.

Joe Torre: (12:14)
Let me just give you a second here at Tommy. We used to play spring training and in the spring training, the Yankees would play the Mets.

Bobby Valentine: (12:24)
The mayor's trophy game.

Joe Torre: (12:26)
And I know, because I was on both sides, I managed the Mets for a while when we were playing the Yankees in a game, and you had to win, you had to beat the Yankees or you had to beat the Mets. And I remember I was with the Mets, we were playing at the Yankee stadium, Billy Martin was managing the Yankees and as the tie game, okay? All of a sudden the baseball comes over into our dugout, and it rolled toward me, I looked at it and Billy Martin had sent me a note on a baseball. And he said, "Who's going to squeeze? You or me?" Who's going to end this game basically.

Joe Torre: (13:12)
And then when I was managing the Yankees, the first year in 96, we finished spring training with three games against the Mets before we went to Cleveland to opened the season. And George Steinbrenner comes in my office and he says to me, "You got to beat these guys. You got to beat these guys." Well, it doesn't mean anything, it's spring training. And so he says, "You got to beat these guys." I said, "Let me ask you something, George." Now I'm just trying to lighten the mood here. I said, "If you had a choice of beating the Mets two out of three, or beating Cleveland two out of the three, which one would you choose?" George's answer was, "Don't ask me that question."

Joe Torre: (13:57)
So it tells you how important it was against each team. And then we did play in the world series in 2000 and we lose the first game at Shea stadium. George Steinbrenner had all our furniture from Yankee stadium clubhouse moved in to Shea stadium clubhouse to make us feel at home because he saw too many Met logos in our clubhouse. This is for real guys.

Tom Verducci: (14:26)
Well, speaking of George Steinbrenner, your former boss, he used to talk about how he wanted his teams to really represent New York. In New York, he used to say, "You have to fight to get a cab, you have to fight to get a seat on the subway, you have to fight to get space on the sidewalk to walk." So he wanted the Yankees to have that same mindset. So as a manager, did you find that there are some players who he might go, "I don't know if he can play in New York." Is there something too that it takes something a little bit different to play and succeed in New York?

Joe Torre: (15:01)
Yeah, I think there are players, first of all I think new Yorkers realize that you have to have thick skin. And some players don't handle criticism very well. I mean, none of us like it, but you have to understand that it goes with it, this is part of the deal you make. And there are players that you could see weren't the same players that when they played in New York as when they were playing with their previous clubs somewhere else. And again, you don't want to name those players, but they just weren't as comfortable, they were aware. And the biggest mistake you make is making sure, and at that time there were newspapers, that you read all the newspapers and listened to all the radio shows that are telling you how good you are, how bad you were. And if you do that, then you're hooked, you're stuck.

Bobby Valentine: (16:09)
And you're going to have the pleasure to listen to Steve Cohen soon here in this conference, who now owns the New York Mets talking about owners. I don't think he's going to talk about the Mets, he's probably going to talk about how you could be like him when you all grow up. But when I got hired by his predecessor, Fred Wilpon, the one thing that Fred wanted me to do was get the back pages away from the New York Mets. It wasn't about winning the world series. I mean, from the New York Yankees, it was about getting the back pages away from the New York Yankees. So it's all an interesting, crazy world that we live in.

Joe Torre: (16:51)
Aren't you happy you opened this can of worms?

Tom Verducci: (16:53)
It's all the media's fault anyway. When in doubt, just blame the media. But didn't you say when you were hired by the Yankees that you are not going to read the newspapers?

Joe Torre: (17:01)
I did.

Tom Verducci: (17:02)
And you really were able to do that, just shut out all that noise?

Joe Torre: (17:06)
Let's admit it. I was living in Cincinnati at the time, and the reason I was fired the third time.

Bobby Valentine: (17:13)
Oh, I know that feeling.

Joe Torre: (17:14)
Right. I was fired by the St. Louis Cardinals, and I moved to Cincinnati because my wife was pregnant with our daughter and my wife, Allie is from Cincinnati so I thought, let her be surrounded while she's pregnant and let her be surrounded by family when I was out looking for a job. And the first word I got when my name came up as the possible manager to take Buck Showalter's place was "Clueless Joe," that was the headline in the paper, you want a headline, take it. It was clueless Joe. So, the only thing that came to my mind is all well and good, it's all going to come down to how we do. I mean, of course I'd been around long enough, when you get fired three times, I mean, what's the worst thing that could happen to you.

Bobby Valentine: (18:09)
You get fired again.

Joe Torre: (18:09)
You get fired. And I had a special group, there was no question about it, players that just were so resilient and very determined.

Tom Verducci: (18:24)
How about you, Bobby? Did you pay attention to?

Bobby Valentine: (18:26)
I read every newspaper, of course I did. What are you kidding me? Yeah, every one and wanting to respond to every guy, when you came in after writing a bad article, I wanted to make sure that I responded to you.

Tom Verducci: (18:37)
So you did.

Bobby Valentine: (18:37)
Actually Jay Horowitz, our PR director who is spectacular during my tenure with the New York Mets, would give me all of the good clips when I got to the office and made sure that I read them. And then after I read all the good clips, he'd say, "Oh, and by the way, clappage killed you this morning in the post." Or "Verducci really got you in the times." And so I wouldn't read those articles to tell you the truth.

Tom Verducci: (19:07)
Joe, you've had an incredible baseball career in so many different capacities, most recently with major league baseball. The only job you haven't had is commissioner, but I'm going to make you a virtual commissioner because there's a lot of things we all want to see baseball improve upon. So if I could make you commissioner, what do you think maybe the one or two things that you would like to change to have this game be as good as it can be?

Joe Torre: (19:35)
Well, first off the talent out there on the field now is amazing. I mean, these kids, we didn't have any weight training until the middle seventies. I mean, spring training, you used to come down as a player and run until you threw up. I mean, that's how you got in shape. And all of a sudden the players started paying attention to their conditioning, obviously during and even off season. But to me, I think what's missing, and I always try to restrain myself because I'm 81 years old and...

Bobby Valentine: (20:14)
And doesn't he look great?

Joe Torre: (20:15)
Don't do that.

Bobby Valentine: (20:16)
81 years old.

Joe Torre: (20:23)
And... Now what was I saying?

Bobby Valentine: (20:25)
I'm sorry, you were saying about getting in shape. You're the commissioner for the day, you're the commissioner. You've got to change one thing.

Joe Torre: (20:31)
No. I say I'm 81 years old, and I think I've got to restrain myself because I'm looking at it from my perspective. But the game of baseball is so much more than hitting home runs, even though we all love it when it's for your team, but there's more excitement that should be had during the course of the game on the field. And to me, I don't know how you change it Tommy. You've got teams that are teaching things as far as hitting balls out of the ballpark, I think a big part of it is because there's an incentive for players to do this, because they go to arbitration and they get paid because of their statistics. I think we got to find a way to incentivize team play and doing little things in baseball which really contribute to the teams that win because they have to make sure they do little things like moving runners, being able to put the ball in play, different things, and it's boring when you talk about it.

Joe Torre: (21:55)
But trust me, if you're sitting in the dugout with a man at third base and less than two out, you want contact, you want a chance to score a run. And that's really team the team on how you proceed and try to win a ball game. To me, I think we need to make sure that the game is what we're trying to fix and have the players' association and the owners be able to keep that in mind when they negotiate contracts, what's best for the game. And I think we're seeing this, and I'm not a political person other than wearing a Bobby Famayer pin here, everybody's trying to win the day and get the best of somebody instead of trying to do what's best for all of us. And as I say, I'm an old fuddy duddy, but I like the fact that baseball, when you can enjoy defensive plays and base stealing and running first to third, and the fact that you don't have to be big and strong to be able to play our game, I think is important to really have them be a part of successes in our games.

Tom Verducci: (23:33)
Well, I think everybody in this room realizes the world just keeps moving faster and faster, right? I think Bobby cut three Bitcoin deals just while we were waiting to come on stage up here. So Bobby, my question be about baseball, does it succeed because maybe it's a respite from how hurried we are and short attention spans, or will it only succeed if it quickens up its own pace to kind of match the pace of our society?

Bobby Valentine: (23:59)
Interesting. See, I think that essence of baseball that Joe was talking about gets back to that communication between people who are watching the game, and a lot of times we talked about it being the father and the son, the mother and the daughter, the father and the daughter, who would go to a game and share the experience. Part of the experience in our country of watching baseball was the time lapse that you had in between plays for the father and the son, the mother and the daughter, the father and the daughter, to talk about what happened or what's going to happen. And most of that conversation dealt with what Joe's speaking of. The bump that might be or might not be, the squeeze that Mike could or shouldn't could, the stolen base, the way the ball was thrown from the outfield. All the nuances of the game have literally been taken out of the game by the idea that you pay for the statistical value of the individual player, if that makes any sense to you.

Bobby Valentine: (25:09)
So the only thing there we're waiting for is how far the guy's going to hit it, or how fast the guy's going to throw it, and there's no conversation about the game during that time. And that's why it seems like it's such a long game because you're just waiting around for the home run or the hundred mile an hour pitch. And I think we need to get that stuff back. One of the things they deal with today, if you watch baseball is shifts. Hey, everyone shifts and the purest say, "Oh, what are those shifts?" They're all based on the analytics of where ball might be hit. I don't think the shifts are going to go away, I think they're part of the game, but I think that they should limit the number of shifts so that the manager now comes back into play, into that discussion of what he should do for this hitter, should he use a shift or not use a shift in the first inning? He might run out of shifts and not have it in a nice inning when he needs it.

Bobby Valentine: (26:07)
And things like that maybe even require three plays to be executed on offense by the offense. Three plays during a game, a bun, a hit run, a stolen base, something like that. And then you could sit around and figure out when the manager does do those plays and when he should have done those plays and talk about it. I think we've taken the conversation out of the game and I think that's really killed the game.

Tom Verducci: (26:36)
I love baseball conversation. One word you'll hear a lot here, and it's an important word, is leadership. It's hard to define, but it's used a lot. Joe, you were just in Cooperstown, New York last week, Derek Jeter inducted into the hall of fame. I never thought of Derek as a vocal leader, but he certainly was, I thought, the leader. And leadership in the way that people look to how you carry yourself, how you respond, especially in times of adversity. You know him as well as anybody, what made Derek Jeter a leader?

Joe Torre: (27:13)
Well, to me, if you're going to be successful, the first thing you need to understand is you have to deal with failure. You got to be able, instead of saying, "I wish that didn't happen," you realize that it's not going to change it, so you got to move on. Derek was not afraid to fail. I mean, that's the one thing. He had a horrible spring that first year in 96, and there was conversation about sending him back to the minor leagues. And when you looked in his eyes every day, he was the same kid out there getting ready to play, and there was something very special about him, so special. I mean again, leaders, we all probably have a different idea on what leadership is, but leadership to me is the ability to listen, and the fact that you lead by example, you don't tell people what to do, you show people how to do it. And it doesn't mean ability wise, it's effort, preparation, and all that.

Joe Torre: (28:24)
Derek Jeter, by probably August of his rookie year, you had the veteran players looking to him to do something special, because he had earned that trust over the first four or five months of the season that these players trusted him. And he never changed, never changed. He showed up for work every day, he didn't always do well, but he showed up there every day. We had opening day in Toronto one time, and he tried to go from first to third, they had a shift on and he was trying to go from first to third, and the catcher came from behind the plate to cover and wind up putting his knee down and tag Derek, he winds up dislocating his shoulder. I went out there with our trainer obviously, and he's laying on his back, he says, " I'll be in there tomorrow, Mr. T." I said, "Yeah, you will, sure you will."

Joe Torre: (29:35)
But that's who he was, that's who he was. He was a leader on field and off the field. And again, he didn't talk a whole lot, I mean, when George named him captain, that was something that he didn't really want because he didn't want the attention, but he certainly never backed off on who he was and showed, right? Again, last week in Cooperstown, his speech was right on, touched on his teammates who he valued so dearly, because if he walked in the dugout and somebody who was supposed to, every day player wouldn't be in the lineup, and he'd say, "What happened to such and such?" And I'd say, "Well, he didn't feel good," or whatever, he'd just gave me that roll his eyes thing and walked down the other end of the dugout. It wasn't his cup of tea.

Tom Verducci: (30:34)
Bobby, you played in Los Angeles, you've managed in Texas, New York, Boston. When I mentioned that word leadership, who are maybe the one or two guys that came to your mind that you saw that quality in?

Bobby Valentine: (30:49)
Well, Derek Jeter. Joe, you said he failed, how come in seven years that we played against each other he never failed playing against the Mets? I can't figure that one out to tell you the truth. I had a leader on my team, his name was Pete O'Brien. It was really interesting thing, I thought of as a captain of a team when I was first managing, I was a young guy, I was 35 years old, 36 years old, 37 years old. And now after the third year managing at my end of the year meetings, I had the meeting with Pete O'Brien, and I said, "Do you have anything else to say about your year and everything that went on?" And he looked at me and he said, "Yeah, I have something to tell you, Bobby, if that's okay." And I said, "What's that?" He says, "You think and talk about winning too much."

Bobby Valentine: (31:37)
And I thought, this is the leader of my team, and he just told me that I think about winning too much. I better train this guy and get him out of my clubhouse. Luckily it was at the end of the season and I had a long time to think about that. And after thinking about it, I realized that I was talking and thinking about the end of the game, winning too much, and not concentrating on what happens during the game to get to the win. And so that leader who was a young guy at the time taught me how leaders are supposed to lead, and that's by being part of the process that make things happen properly so you get the results that are needed.

Tom Verducci: (32:27)
That's a great point. And I'll leave you with my own observation because I always looked up, and I'm sure you guys did as well, to Vin Scully, the best in the business who remained the best in the business even into his eighties, just an amazing career as a broadcaster with the LA Dodgers. So I asked Vin Scully one day, "How could you possibly be this good for this long?" And he actually borrowed a line from the actor Lawrence Olivier, and he said, "The humility to prepare and the confidence to pull it off." And I thought about that, it makes perfect sense. The humility to prepare means knowing what you don't know, even when you're as accomplished as Vin Scully, to do the work as if you're trying to establish yourself, even when you already are established. And then the confidence to pull it off is something that obviously comes within all of us. We get confidence from people around us, but if you don't have it internally, that external confidence is not going to resonate.

Tom Verducci: (33:24)
So, that really has stuck with me, I think it's a great lesson if you will, or certainly advice from one of the best in the business. And finally, I wanted to thank these two gentlemen here, because when you do talk about leadership and especially in this great city, they're on the short list, Joe Tory, Bobby Valentine, true leaders. Thank you guys so much, we've enjoyed this.

Joe Torre: (33:47)
Thank you, Tommy.

How to Keep the U.S. On the Forefront of High-Tech Growth | #SALTNY

How to Keep the U.S. On the Forefront of High-Tech Growth with Congressman Ro Khanna of California’s 17th Congressional District. Governor Jeb Bush, 43rd Governor of Florida. Jason Crabtree, Chief Executive Officer, QOMPLX.

Moderated by Jeff Sonnenfeld, Senior Associate Dean for Leadership Studies, School of Management, Yale University.

PRESENTED BY

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SPEAKERS

Congressman Ro Khanna

CA-17 (D)

FULL BIO

Governor Jeb Bush

43rd Governor of the State of Florida

FULL BIO

Jason Crabtree

Chief Executive Officer

QOMPLX

FULL BIO

MODERATOR

Jeff Sonnenfeld

Senior Associate Dean for Leadership Studies

Yale University School of Management

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Jeff Sonnenfeld: (00:05)
Given that the music has gone quiet, I think that's my cue that I'm supposed to start talking now. I want to start by pandering to the audience by saying, I've been telling the panel for the last 15 minutes, don't be offended. At the end of the day, we're going into a room that's one-third larger than the Radio City Music Hall, so it's going to be so cavernous. At this time of day, it'll look empty. It's not your fault. It's my fault. And sure enough, you're all here. So extra credit for everybody. I'm Jeff Sonnenfeld. I'm up at Yale.

Jeff Sonnenfeld: (00:34)
That's all you need to hear from me, because we have such a superstar panel. Our topic is keeping America innovative, how to keep the US on the forefront of high technology growth. Innovation. Einstein said that the essence of innovation is a combination of intelligence and fun. Well, the series of superstars for intelligence and they also have a lot of fun. And my goal is to try to see if we can get some fun mixed in with their intelligence to wrestle with innovation.

Jeff Sonnenfeld: (01:08)
As the description of this session is US has ceded its core role as dominant technology power in the world with China investing trillions of dollars in innovation across deep tech, education, and advanced manufacturing at a time of partisan divide. US Congress passed the US Innovation and Competition Act of 2021 on a strong bipartisan basis, which we're going to talk about where this goes. And on the panel, we have a great mix of public and private figures to wrestle with this.

Jeff Sonnenfeld: (01:37)
But just as we think of who we have on our panel, we have Congressman Ro Khanna, who has told us that we can refer to him as Ro, so please don't think that I'm being rude and disrespectful, as progressive capitalist who has led the way on technology policy, job creation, and working across the aisle to pass multiple bills into law. Ro's named as the democrat most likely to succeed in having a bill signed by former President Trump passing five and to law ... That laugh was just off the record, by the way. Joined the Trump administration, he's got a kid running for office, we can't ... In response to the growing economic crisis, Ro led the way on the largest government investment in science and technology since the 1960s, the Endless Frontiers Act.

Jeff Sonnenfeld: (02:23)
I thought it would have been Sputnik, but this is bigger, which invest 250 billion in science and technology hubs across the US. Ro has worked to spread the wealth of high paying digital jobs to areas of the country left behind in the digital revolution, partnering with Silicon Valley get companies to establish training programs in states like Iowa, South Carolina, Mississippi, to rebuild the middle class. And the most important thing that he is ... He is a Yale alum. That's where I work. And most important of all, he's a fellow of Philadelphia way back in his heritage.

Congressman Ro Khanna: (02:57)
[inaudible 00:02:57]

Jeff Sonnenfeld: (02:57)
Governor Bush said that we can refer to him as Jeb. You're wondering if they'll have to call me professor, I don't think so. As the 43rd governor of the state of Florida, starting from 1999 to 2007, he was the third Republican elected to the state's highest office and the first Republican in the state's history to be reelected. He's most recently a candidate for Republican presidential nomination in 2016. Jeb remained true to his conservative principles throughout his two years in office, cutting nearly 20 billion in taxes, vetoing more than 2.3 billion in earmarks and reducing the state government workforce by more than 13,000.

Jeff Sonnenfeld: (03:32)
He has limited government approach, helped to unleash one of the most robust and dynamic economies in the nation, creating 1.3 million new jobs, improving the state's overall credit ratings, including achieving the first ever triple A bond rating for Florida. During his two terms, he championed major reforms of government in areas ranging from healthcare, environmental protection, civil service, and tax reform. But he also has some technology and technology background ideas that we're going to get into very shortly and across a great reach on cross-sectoral change and innovation. But we should point out that he, too, is a professor, having been a professor University of Pennsylvania, I think, at one point along the way.

Governor Jeb Bush: (04:13)
Yale didn't invite me.

Jeff Sonnenfeld: (04:14)
Yeah, yeah, I know. I will forgive you anyway. But the part I'm not going to mention is the Harvard professorship, so forget that.

Governor Jeb Bush: (04:21)
Yale didn't invite me.

Jeff Sonnenfeld: (04:22)
I thought he was such an honorable nice guy too. Jason Crabtree is the chief executive and co-founder of QOMPLX, founded with Andrew Sellers. As CEO, he guides the vision long term direction of complex and oversees all aspects of company operations. Prior to complex, Jason served as a special assistant to senior leaders of the Department of Defense and cyber community and supporting operational cybersecurity missions, including research and development, strategic risk management, and digital transformation initiatives.

Jeff Sonnenfeld: (04:53)
Like the rest of the panel, you've probably seen him in the media quite a bit. He's been on all the major networks and cable channels and in the rest of the print media speaking often on cybersecurity issues. And in fact, some of you might even be his client here. So where are we on this problem? Well, the US had led in chip development and of course, in technology since World War II. And it's not looking so great more recently.

Jeff Sonnenfeld: (05:22)
Just because they're little doesn't mean they don't matter, is that these chips are the fundamental building block for all advanced technologies, whether or not we're looking at AI or looking at perhaps any building block cutting edge technology. The chips are going to be critical for understanding our self-reliance for innovation around integrated circuits and microprocessors. And yet, what do we see now is the US has maybe 10% at most of chip manufacturing. And we take a look at backend, we're down to around 1%.

Jeff Sonnenfeld: (06:07)
If we go back a few decades, say 1990, we were around 45%. So we've dropped precipitously. Well, who's grown? Well, who do you think has grown? It's about almost 80%, just below 80%, coming from Asia with half of that, People's Republic of China and the rest split between the rest of East Asia. Now, that has led to some challenges of what we do. And I'd love to turn if I could to the Congressman, is this is not a new issue for you. You've been wrestling with this.

Congressman Ro Khanna: (06:42)
Well, Jeffrey, thank you. First of all, thank you for inviting me. It's an honor to be on the panel and honor to be here with Governor Bush who, in my view, has always approached political debate with civility and patriotism even when I've disagreed. So thank you for that. And Jason, thank you for your leadership on cybersecurity. First, let me say this, I think America is and will remain the most innovative nation in the world for a simple reason. When you come to Silicon Valley, we don't have hierarchical teams.

Congressman Ro Khanna: (07:18)
You have a team at Intel or at Apple, and they basically have the direction to do what they want. They don't have to go through five levels of bureaucracy. The last technology coming out of Europe, I mean, they did Skype, but think how many tech companies they've come out of there. And yes, China has competed on TikTok, but it's probably one of the only places where they actually have an advantage on product. We still lead in the most advanced semiconductor design. The problem is we've had this complacency.

Congressman Ro Khanna: (07:47)
We thought, okay, if we're going to invent the best product that the scale doesn't matter, and we'll just let other countries like Taiwan or Korea deal with mass production. Now, do we really want at a time with the rise of China, our semiconductor supply to be dependent on what happens in Taiwan? Do we really want all the mass production jobs not being in the United States? Of course not. We need to have that mass production of semiconductor chips in the United States.

Congressman Ro Khanna: (08:16)
And the Congress in a bipartisan basis, Senator Schumer, myself, Senator Young, and Representative Gallagher from Wisconsin, in this innovation at have provided $40 billion for semiconductor manufacturing to help these companies establish manufacturing in the United States. That, to me, is smart policy. It's public private partnership. And it's going to help make sure that we are never dependent on a foreign nation for our critical supply.

Jeff Sonnenfeld: (08:45)
Well, we've never met before, but we're best of friends now because we established the link to Philadelphia and Yale. So I can ask you the hardball question that I didn't clear with your team, and that is the Bloomberg innovation list that just came out has us falling off the top 10 for the first time ever. We're number 11. And you say the US will always be ...

Congressman Ro Khanna: (09:07)
I don't buy that. People say this, my parents are immigrants from India. Where's the line to go to China of immigrants? Why is the line here still to come to the United States? When people around the world want to stop coming to the United States is when I'll start to worry. I mean, this is still the most ... We have the most capital, the most risk capital. We have the best and brightest from around the world. We have a lot of advantages. And I'm very, very bullish. There's so many people running America down and pointing everything out. And I guess maybe because I'm the son of immigrants. I'll tell you, this is still an extraordinary country. Yes, we have challenges, we have problems, but we have a lot going for us.

Jeff Sonnenfeld: (09:50)
So we should bring Michael Bloomberg in here to explain how he's distorted the list. You want to know, he has seven metrics that define this and what are they. The level of research and development investment they have to do with the fabrication, how much of the creative work is being done here on that end too that has to do with not just design, but diffusion and adaptation. And that's some of what you build into this legislation. So maybe we'll see that change.

Jeff Sonnenfeld: (10:20)
But I'm just wondering, Jeb, when he talks about the bipartisan concern here that we ... It's got some momentum, but we have all these other things. We hear that Senator Manchin has had perhaps some great success in the last two or three hours and getting 6 of me to 10 to get a different version of voting rights legislation together. And the rumors are that the next four are lining up tonight. So maybe in two weeks or so, who knows? But it's caught in the weeds right now as infrastructure is and is the number of issues what we thought we had momentum, it's hit the wall. Do you think that Ro is too optimistic? Or do you think that both parties are going to take this over the finish line?

Governor Jeb Bush: (11:06)
Our political system ... Ro, thank you for those great words. You stole everything I was going to say. Jeffrey, thank you for hosting us. It's great being with a great entrepreneur here. So I think the key to this is to realize our system is dysfunctional, but there are good people inside it that want to find common ground. And in the pandemic, I think there's just such an eye opening experience for all of us. You take the lens back a bit, we've had learning losses in the K-12 system that are epic, that are creating inequality for 10 years down the road.

Governor Jeb Bush: (11:40)
The digital divide became pretty clear because some of us could actually enhance our productivity with high speed internet in our homes, get telehealth, be able to make sure our kids were well educated. We were thriving, many of us were thriving that environment. Too many people weren't, and we're leaving people behind. And if you look at the rural areas of our country, clearly, there's an opportunity now to say, in this crisis, what did we learn? And we've learned a couple of things. One, that there's big inequality that we can address.

Governor Jeb Bush: (12:09)
We don't have to talk about in cocktail parties. There are ways to solve this problem. And the second is supply chain dependency, which Ro is bringing up. It's not just semiconductors, it's across the board. And we should have a strategy to make sure that we're secure. It's in our national security interest to do that. Here's an opportunity. I don't think democrats republicans disagree with that. And then finally, I think we have to deal with the 10 million people that aren't getting jobs because they don't have skills for the jobs that exist.

Governor Jeb Bush: (12:38)
And that is a chronic problem that existed before the pandemic that has gotten worse. So you take those three things. They're not partisan. It's not ideological. And I think the Congress ... I hope that Joe Manchin doesn't get sick or anything because he's holding the power here and he's a rational guy and he could bring people together. And I'm optimistic that that will happen.

Jeff Sonnenfeld: (13:00)
Well, if we have a shared consensus of two out of three on the diagnosis, maybe we can stir up some trouble in the minutes that remain a little bit down the stream when we take a look at the resolution, solutions that maybe you have some different approaches, solutions. But it is nice to see people across the aisle agree, isn't it, about common issues of patriotic concern. This is your calling, Jason. Weren't you a West Point guy?

Jason Crabtree: (13:28)
I was.

Jeff Sonnenfeld: (13:28)
So, national security has been in your training from the beginning. Are we overstating this though? I mean, look at them, you got a roomful of finance ears who many of them grew up going and taking economics courses and believing David Ricardo with the theory of comparative advantage, that each company, each country brings to the global marketplace what they can do at its best, and we don't need to be self-reliant. Is that if the South Koreans are going to give it to us at a cheaper price and a lot of the manufacturing that we've lost here was also very unsafe manufacturing.

Jeff Sonnenfeld: (14:00)
There a lot of problems with women working and at the backend of chip manufacturing is very labor intensive and has a lot of toxic chemicals. Intel and others were happy to get rid of them, especially AMD. Is that a bad thing? Or is that maybe we let other countries that they're willing to do it for us, why is that a problem? And how much is Apple manufacturer? Are they're outsourcing at all?

Jason Crabtree: (14:25)
Well, I think the reality for the United States is that talent, trust, and transparency are going to be a critical part of the future. When we talk about talent, there are people that are being left behind.

Jeff Sonnenfeld: (14:35)
If we can just hold briefly on the talent because I know you don't trust me that I'll manage the time well enough to get through it, since all three of you have tried to go down that path, definitely have tried to frustrate you.

Jason Crabtree: (14:44)
That's great. Sure.

Jeff Sonnenfeld: (14:46)
But tell me about what's the security issue first there as our security expert, about relying on Korea, relying on the other parts of Asia, if you don't trust China, Taiwan, elsewhere.

Jason Crabtree: (14:59)
Well, you have to have talent to have trust. Because at the end of the day, the supply chains that we're trying to operate, especially in an increasingly digital world, an increasingly outsourced world, an increasingly interconnected world require the people who are operating things like software as a service companies like my business, they're a critical part of your operations. These are outsourced entities, and they're an ambassador for your brand.

Jason Crabtree: (15:21)
And I think when we understand what it takes to operate these things, you look at the cyber and security crisis we have in this country right now. Why is that happening? Part of it is because of massive vulnerabilities and core products at places like Microsoft that are creating massive, massive issues and costs in our home. We actually have to be digging into those things and reestablish trust that the software products, the technology products do what they say they're going to do. That only works if you have the people. It only works if you have the educational system.

Jason Crabtree: (15:46)
That only works if people want to continue to line up the gates. And if they line up with the gates, they line up with the universities and they have an opportunity to stay. We have real options, real hope about actually creating an environment where this is the best place to do applied research and development. And I'll set the Bloomberg metrics aside, but operationalizing technology is hard. How many finance professionals here have tried to do things like adopt AI and machine learning, only to find out they didn't have any of the basics in place to actually do it in practice?

Jason Crabtree: (16:15)
A lot of people. That's happening across our government. It's happening in the private sector. So when we talk about all these new topics, many of them put the cart before the horse. And we really need to make sure we're building in those fundamentals and not leaving people behind as we think about the future, the talent base that's going to do it for us.

Jeff Sonnenfeld: (16:29)
So there you have it. All three of you agree that David Ricardo is wrong, that we need to be self-sufficient, especially in something as ... You don't believe that?

Governor Jeb Bush: (16:39)
No, I don't believe complete ... It would create huge poverty all around the world, including our own country. But there's a middle ground here. There are key elements of our ... I mean, look, if Apple tomorrow, if we have frictions that get higher with China, given the fact that the supply chain for the Apple phone, which is an integral part of our lives, is made there, even though the value add is outside of China, by the way, it's here and it's in Germany, it's in Japan and Korea, our allies.

Governor Jeb Bush: (17:12)
But if they stopped allowing Apple phones to be sold, and there was a disruption in the supply chain, that would have a huge economic impact and a national security impact in our country. So there are elements that we have to harden our supply chain, for sure. I would advocate, by the way, reshoring, not nearshoring and reshoring. We should look at Mexico and we should be North American economy. And there's huge opportunities there for elements of this. Not all of it. Part of it has to be done here. Part of it can be done in Asia, for sure. I mean, Ricardo is not completely wrong at all, but it's not a zero sum game. It's not either or.

Jeff Sonnenfeld: (17:51)
So you want to bring a little bit back here and you bring it back to North America, doesn't have to be the US necessarily, but just somehow in Mexico, you can reach us a little more easily.

Governor Jeb Bush: (18:02)
I want to make sure that our rare earths that we can access it because that's an integral part of technology. I want to make sure that our reliance on semiconductors ... Look, Ford Motor Company shut down their plants because they couldn't get chips across the spectrum of our economy.

Jeff Sonnenfeld: (18:18)
Because ...

Governor Jeb Bush: (18:19)
These are issues that relate to supply chain logistical bottlenecks, as well as supply chain challenges. So we can do this in partnership with other countries. We can't do it by ourselves. But there's so many lessons learned from this last two years, let's learn them, and then act on them.

Jeff Sonnenfeld: (18:37)
Do you know what the contingency plans are if we lost 40% of our chips from China? And let's just say that things were going the wrong way in Taiwan and we don't need to make headlines that make any political conjecture about Hong Kong versus Taiwan, but let's just say that the supply was less accessible there. Would our contingency plans are in the US?

Governor Jeb Bush: (18:58)
I'll let my colleagues speak to that. I think it's pretty, but ugly.

Jeff Sonnenfeld: (19:01)
I'll save them for giving the wrong answer. We have none, is that the leaders of all the chipmakers that I talked to for this panel tell me that we don't have a contingency plan. Now, we still are a major headquartered company for chip manufacturing, but we don't really don't control where those plants are. One big shoe manufacturer told me he wanted to bring the biggest one in the country, want to bring shoes back to the US, and the Chinese told us, no, you can't do that, we're going to shut you down if you try to do it. And he realized he's just the marketing arm of a Chinese operation. So it's hard to bring it back here. Should there be incentives, some kind of tax incentives to reinvest back here in manufacturing chipmaking growth?

Congressman Ro Khanna: (19:42)
Absolutely. And there should be federal support when you have massive capital expenditures to set up volume manufacturing factories. You need federal purchase agreements or federal financing agreements. We did that with the vaccine, right? I mean, we provided purchase agreements to Pfizer and to Moderna, and that incentivized the private sector. So we have had a history going back to Alexander Hamilton of having the private sector work with the federal government to produce a very strong economy. Other countries have copied us. I don't know why we can't do what's worked to build us into the superpower we are. It's not a hard problem to solve because we have the innovation, we just need to do the volume manufacturing.

Jeff Sonnenfeld: (20:19)
Does the chips legislation have tax incentives for manufacturing bill? Because some would argue, we chose to not fabricate here to outsource it. We chose to do it, and it's much cheaper and easier for US companies to build the chipmaking plant in China than it is to do it here.

Congressman Ro Khanna: (20:35)
I think the problem ... I mean, it's a complicated issue. As the governor said on the one hand, about the fact that millions of people are out of poverty around the world is probably good for stability, but we paid insufficient attention to jobs in this country. We said, okay, as long as consumers are paying less prices, who cares? And the reality is, those are good paying jobs. We should have those jobs in the United States. And some of the chip sect is one concrete bipartisan initiative that would fund a lot of that ...

Jeff Sonnenfeld: (21:02)
What's the level of tax incentives that you would put in there? Because as you know, in Korea, in the next three years, are funding about $70 billion into chip manufacturing. It's two-and-a-half times that in China with the explicit goal that Xi Jinping has, is to have self-reliance, Jeb, in three years. They were zero in ...

Congressman Ro Khanna: (21:25)
Let me be clear on China. China is terrible at semiconductors, horrible. And where has China's innovation been? They've copied a lot of the United States innovation. I mean, I don't know. Is there anyone in this room who would want to go start their company in China? I get that they're an authoritarian system, that is an inferior system to a free market system that allows for immigration. I mean, I fundamentally believe that. The challenges on our chips, $50 billion is what chips would authorize. It would allow for ... TSMC wants to expand in Arizona. It would allow Intel, other companies to expand. The solutions are there. I just think we have to have the strategic investment.

Jeff Sonnenfeld: (22:09)
The preferred provider for a lot of US government outside the security agencies is Lenovo, that's a Chinese tech company, Chinese owned, Chinese manufacturer. You just wonder. Jeb, do you think that we're picking winners and losers by some of these tax incentives? Do we know how to do this the right way? It's national industrial planning. If the Chinese want to go into their 14th five-year plan, let them try it.

Governor Jeb Bush: (22:38)
Like the Soviets. That worked out real well for them. I think we're a bottom up country. I think there's a useful role for Washington, particularly in basic research. There's the success stories are ... I mean ...

Jeff Sonnenfeld: (22:51)
So basic research, you would fund, but you don't agree with Ro ...

Governor Jeb Bush: (22:54)
Totally.

Jeff Sonnenfeld: (22:54)
... on funding building plants.

Governor Jeb Bush: (22:56)
Providing incentives for companies that are willing to put up capital to do it rather than saying, this is the one we're going to do, making it something where you're supporting private sector involvement, which I think is what Ro has proposed in this bill, that's okay. But if you have a venture capital arm inside the Department of Energy, we went through that. It didn't really work out very well. Government is not designed to be a venture capitalists, to be a risk taker, and our government particularly. I mean, maybe China knows how to do this.

Governor Jeb Bush: (23:27)
Well, it doesn't look like it to me. Comparing Korea or China to the United States misses the whole point. We're Americans, dammit. I mean, we operate in a totally different way. We operate in a garage with a dream to pursue it. So support that rather than have an industrial policy that dictates how this is all supposed to come out.

Jeff Sonnenfeld: (23:49)
Ro, do you want to respond to that? The Chinese had the first five-year plan, gave them the first bridges, the first automobiles, the first a lot of technologies. The second five-year plan was the Great Leap Forward. That was a disaster. They made a big wrong bet in agricultural pass and small backyard furnaces for steel. It was a disaster and stuff. So what do you think? Is Jeb right that maybe you want to withdraw the national industrial planning part of this by picking the winners and losers?

Congressman Ro Khanna: (24:21)
I don't think we're picking winners and losers. I mean, obviously, the governor I probably have a disagreement of how big the role of government is. But I think fundamentally, we both believe in the public-private partnership. I mean, I imagine the governor would support the fact that we invested in DARPA. They gave us literally the internet. It wasn't China that invented the internet. It wasn't Europe. It was Vint Cerf sitting there at DARPA with US tax dollars, the fact that GPS emerged from there.

Congressman Ro Khanna: (24:47)
And the investments, if you have Intel saying, look, Korea's rolling out the red carpet, China is rolling out the red carpet, other places are. We need certain tax incentives to put the factory here. We need certain capital with certain loans. I think that is perfectly fine. Now, on the investments, I will say that I think it's better to have that administered by local regions and help with the private sector in picking bets, so you don't have government bureaucrats or Congress making some of the determinations.

Congressman Ro Khanna: (25:18)
But in terms of fundamental research and helping on factories and plant building, I think that's a perfectly good use of the federal government. One other point, there's a federal financing thing that provides loans and purchase agreements to federal agencies. Actually, Senator Rubio and I are working on something where we would say, if you want to reopen a factory in Ohio, why can't that federal financing bank help GM do that for a public purpose? So I think we have to explore those type of opportunities.

Jeff Sonnenfeld: (25:49)
So I think you're right, it was actually not Al Gore who invented the internet, good for you. And in fact, the DARPA had a long history, of course, of spawning technological development just like the Interstate Highway Act, of course, took us through parts of the country. But there are a lot of people in your party, Jeb, didn't think that was the right way to go. The ...

Governor Jeb Bush: (26:13)
You mean Dwight Eisenhower [inaudible 00:26:15] Interstate Highway system?

Jeff Sonnenfeld: (26:17)
No. I mean, Jeff ... He ...

Congressman Ro Khanna: (26:18)
Or Lincoln either.

Governor Jeb Bush: (26:19)
Lincoln was ... Transcontinental railroad Lincoln.

Jeff Sonnenfeld: (26:21)
People are still arguing against the Rural Electrification Act.

Governor Jeb Bush: (26:22)
Let's go through this.

Jeff Sonnenfeld: (26:24)
My old student, Jeff Skilling, who we probably shouldn't bring up his name here, was arguing back as a student. He said the Rural Electrification Act was awful. He said, "Those farmers, want to pay for it, they should go out and pay for them." We don't have the government tried to manipulate private markets, but sounds like you guys will find some common ground on where ...

Governor Jeb Bush: (26:39)
I mean ...

Jeff Sonnenfeld: (26:40)
... mRNA came from the government financing, Moderna and Pfizer, great.

Governor Jeb Bush: (26:45)
And if we said that they found the basic research that created this incredible platform from which now we can find cures and then they provide it to the private sector and allow entrepreneurs, many of whom are coming from other countries to pursue their dreams and they do it with a vengeance. And they do it through trial and error, and they do it one step forward, 10 steps back, 20 steps forward, as is the case with Moderna. I mean, did not have $1 of revenue, and now it's a business worth billions of dollars.

Governor Jeb Bush: (27:16)
That wouldn't have happened if you contain that through a bunch of rules and through the government being heavy handed. But there is a proper role for these long term basic, infrastructure deals, as well as research to maintain our competitive posture, for sure.

Jeff Sonnenfeld: (27:31)
Some people are trying to layer into Ro's legislation, blocking the loss of intellectual property developed in US universities that can migrate back to other countries. Do you see any problems with it?

Jason Crabtree: (27:45)
The reality of this is that when you look at things like mRNA and you look at a lot of DARPA programs, when basic research programs are actually creating these fundamental technologies, entrepreneurs can combine them in novel ways to create new services that deliver operational business benefit or consumer benefit. And that's where the government, to your point, Jeff and Ro, I think, the reality is that's a much more appropriate place for private sector to play.

Jason Crabtree: (28:09)
And I think one of the things we have to be careful of, and I think we've gotten close to the line, and I don't think the new legislation does, but I think there have been some historical missteps where we've started to play venture capitalist or we've started to get into picking winners and losers. And those haven't always ended well. But the reality of this for us has to be that those fundamental building block technologies need to get mature to technology readiness levels, that they can be readily accepted by private sector capital and risk takers that are not in a position to take fundamental technology risk.

Jason Crabtree: (28:38)
They're there to take distribution risk. They're they take actual product market fit risk. They're able to think about how those combinatorics are going to manifest in commercial opportunity. And that's something that's a lot more important, but it can't turn into Silicon Valley, no offense, tourism and innovation tourism. Most of the good ideas in America aren't in Silicon Valley, they're all over the country. And that goes back to how we have to make sure not to leave the rest of the country behind [inaudible 00:29:00].

Congressman Ro Khanna: (29:00)
So, Jason, what's your view on making sure that we build capacity?

Jason Crabtree: (29:05)
Well, building capacity comes down to actually helping [inaudible 00:29:09] ...

Governor Jeb Bush: (29:09)
Let's see what your ... We've got six [inaudible 00:29:09].

Jeff Sonnenfeld: (29:09)
Yeah, I know. Before we move on to the talent management issue, which I know Jeb and Jason was starting to open that door again, and we're going to turn to it and one second, anything you want to tell us more about your expertise in cybersecurity and technology? I won't make you talk about cryptocurrency because you chase that up before. Surveys overwhelmingly blame cryptocurrency for Ransomware, but that would have three quarters of this room up in arms. I wouldn't possibly bring that up right now.

Jeff Sonnenfeld: (29:38)
However, you look at the new three Chinese cybersecurity laws, the first of them, which was three years ago, says like the old what happens in Las Vegas stays in Las Vegas. By the way, I hope Anthony Scaramucci keeps us in New York and not Las Vegas, is that data created in China has to stay in China. I think that would be a violation of general agreement on tariffs and trades going back 30 years, but nobody's challenged it.

Jason Crabtree: (30:07)
Well, internet balkanization is a real thing. And one of the challenges that we have to address as a country is it goes back to this idea of trust and supply chain transparency. It's not just the hardware level. There's more technology above the chip than in the chip. Not to say that they aren't important building blocks.

Jeff Sonnenfeld: (30:22)
Are you worried about this Chinese light has to be managed by Chinese?

Jason Crabtree: (30:25)
That's not just China.

Jeff Sonnenfeld: (30:26)
Chinese software and Chinese hardware?

Jason Crabtree: (30:26)
There's all kinds of data and nationalization and localization laws. And remember that we're seeing the same kinds of changes happening with privacy considerations, not just things like GDPR in the UK. There's California has a law, Virginia, where we're headquartered, has a new law. And by and large, that's going to be positive for us to think about data is an emerging element of property. Remember, most of the corporate balance sheet used to be physical assets, those factories, intangibles, dominate the market value of most real digitizing technology companies.

Jason Crabtree: (30:56)
So we have to deal with incentives and structure and investment that aligns with the fact that most of the value you're creating as an entrepreneur in a digital business is increasingly getting trapped in a different part of the balance sheet, and that has massive ramifications for how we actually build capacity.

Jeff Sonnenfeld: (31:11)
Well, you just nailed it and you've been such a good sport. Tell us about the skill shortage and what we do about talent issues that we take a look at universities, is close to 90% of universities in our country have the majority of their STEM students are international students.

Jason Crabtree: (31:29)
Sure.

Jeff Sonnenfeld: (31:29)
And we're down 75% this year at international student enrollment.

Jason Crabtree: (31:32)
Well, I mean, this is a huge challenge. So I think for us, we have to do a better job of making it attractive to start and build businesses here. And we have to do a good job of tying this to immigration policy reform. When you look at the amount of technology talent that is starting to go to overseas, right? I went to grad school at Oxford with my co-founder. But a lot of those folks should have come to the United States to start businesses. And a bunch of them didn't, a bunch of them went to other parts of the world.

Jason Crabtree: (31:58)
I'd love for everybody that we graduated with overseas to want to come here because this is the best place to build a business. Some of them are. But when we have talent applying to US universities and you look at the amount of university research R&D spending that is starting to globalize, we should be maximizing the amount of it that continues to build in the United States. We should be maximizing the conversion of those talented people into our society and bringing their families here. And some of that's just stability and trust that they don't have uncertainty.

Jeff Sonnenfeld: (32:24)
But instead, we've seen the US which has been such a magnet for the world's top talent, as well as people who are suffering as refugees, that we see them as somehow displacing opportunities for American workers, when the reality is their course, their job creating, and that 45% of the current Fortune 500 firms are either created by immigrants or by first generation at Google, Tesla, Intel. These are all created by immigrants and a quarter of the tech workforce is foreign born, the current workforce.

Jason Crabtree: (33:04)
International talent, Jeff, is so important. And we have to create a society that's predictable and welcoming. And if you don't have a predictable future and you're thinking about bringing your family here, that undermines our competitiveness as a country.

Jeff Sonnenfeld: (33:17)
What's happened, Ro? Is it the last four years, just between us and ... Yeah, I trust these people with your life, by the way, is that candidly that [inaudible 00:33:26] ...

Congressman Ro Khanna: (33:26)
What happened is Jeb didn't win in 2016. His vision on immigration would have been much better than Donald Trump's. I mean, I don't agree on everything. But let me say this as a son of immigrants. I was born in Philadelphia, 1976, or bicentenary. My grandfather spent four years in jail with Gandhi as part of India's independence movement. My parents came here in the 1970s. I grew up in Bucks County. It was about 95% White when I was growing up. I had little league coaches who believed in me.

Congressman Ro Khanna: (33:55)
I had high school teachers who believed in me, neighbors who believed in me. And at the age of 40, this country elected me to represent Silicon Valley, arguably, the most powerful economic place in the world. That story is not possible in almost any other country. Germany wouldn't put a first generation German in charge representing their most important industry. That, ultimately, I believe is the story of America. And no politician is going to change that fundamental story. We're a story of people who come with ambition, dreams, and it's what makes us the most exceptional nation in the world. And I don't care how many Donald Trumps or other people come around, they're not going to change the fundamental [crosstalk 00:34:39].

Jeff Sonnenfeld: (34:38)
What do we do to make this more hospitable to new Americans to come here? How do we get people a permanent residency status earlier? But there are people here that are coming for technology jobs, can't get an audit, can't get a driver's license, can't rent a house, let alone buy a house, and that their spouse can't work. The complications are ... And the kids, they age out of protection and under the visa. It's easier said than done. And there's a reason why we are falling. You can talk about us still being a magnet, but we aren't the magnet we were, that we need to brush it off a little bit.

Congressman Ro Khanna: (35:13)
We could talk about the details of policy, but I'll say and I'll give the governor the last word. There are places ... Look, I don't want to ... That Jeb Bush and I disagree. There are certain places that George W. Bush and I disagree. But President Bush, one of the moments that I thought was a highlight, was after 9/11 when he went out and he talked about Muslim Americans being Americans. And Jeb has always, in your rhetoric, been pro the value of immigrants to this country. We need more people willing to tell that story of America.

Congressman Ro Khanna: (35:44)
We need more people willing to tell that story in the Republican Party. It's not about the policies. It's about what you believe America is. And I think if we have more voices like that, we're going to be fine as a country.

Governor Jeb Bush: (35:57)
I think it's a wedge issue on both sides. And both sides think they win by having this gridlock because the gridlock existed before President Trump got in. We should control the border. You mentioned all these other countries that really got it going on great. They control the borders. They don't allow people to come in. And they actually don't allow many people to come in legally for that matter. And I think we need to move to a merit based system where we narrow the number of people coming.

Governor Jeb Bush: (36:26)
We're the only country in the world that has extended family being allowed in, adult siblings and parents. I think parents ought to be able to come in and children of immigrants ought to be coming in. But if you narrow that and then expanded by a half a million, the people that would be restricted legally to pick the kind of people you want to create jobs for all Americans, that's part of the answer. We have to control the border. There's a solution here if we depoliticize this.

Governor Jeb Bush: (36:56)
But the bigger issue to me is, why is it that we don't focus on the next generation of Americans not being able to have the skills to be successful? I mean, this shouldn't be a political issue either. But we dumbed down, we lower expectations. We actually had the state of Oregon this year pass the law that said it is unjust to have an accountability system, a testing system that has Whites and Asians being more successful than other minorities. Who thinks that's going to be a great outcome over 10 years?

Governor Jeb Bush: (37:32)
Where you're ending up saying, you have this what my brother called the bigotry, the soft bigotry of low expectations. We should have high lofty expectations for every person. We don't have the luxury of having some kids educated and some kids not. Our demographics demand that we do far better. And then the final thing I'd say is where the whole focus is on getting a four-year degree, and psychology is the number one major, and 60% of kids graduate in six years with a four-year degree and the number one degree is psychology. Come on, man.

Governor Jeb Bush: (38:06)
I mean, we should maybe move away from that and start focusing on career and college readiness in high school. And then offer nationally recognized certificates to give people, immediate jobs at a much higher wage than what they could ever imagine being a psych major after four years of that.

Jeff Sonnenfeld: (38:21)
Do you think that Senator Sanders in the social infrastructure, the budget resolution piece is on to a solution here by taking a look at free community college for everybody?

Governor Jeb Bush: (38:37)
No. When you ...

Jeff Sonnenfeld: (38:38)
Is that not intended to address, those left out ...

Governor Jeb Bush: (38:43)
No.

Jeff Sonnenfeld: (38:43)
... educationally? What do you think that's all about?

Governor Jeb Bush: (38:44)
If there's no expectations, no standards, it's just free something, I don't think that's the ...

Jeff Sonnenfeld: (38:50)
That's even worse than psychology. Jeb, what do you think? Jeb.

Governor Jeb Bush: (38:52)
Well, it's worse if you ... At least you won't have debt and fail. I mean, that's a better alternative than failing with that, but we should be having much higher expectations. We should have ... Kids are much smarter than we give them credit for.

Jeff Sonnenfeld: (39:06)
Ro, is that part of a solution that Senator Sanders has in mind? Because, personally, you helped made his campaign.

Congressman Ro Khanna: (39:10)
I do. Look, I ... There are 25 million digital jobs by 2025, 25 million, more than construction and manufacturing combined. And most of them don't require a four-year degree. They require a credential, they require skill. So I would say, in a digital age, you need more than K through 12. If we have free K through 12, we can have a free vocational or post-secondary education that we disagree on that. But at the very least, we ought to make sure that they are collaborating with the private sector on the credentials that are going to get them employed. And that I think that there are ... Look, obviously, the governor and I come from a different perspective. But the point is, there's enough of a Venn diagram of overlap to get things done and ...

Jeff Sonnenfeld: (39:51)
Jason, did you find the talent you need?

Jason Crabtree: (39:55)
The reality is areas like cybersecurity technology have lots of opportunities, but they require skills. And it requires a mix of vocational skills and it does require some people with liberal arts. But remember, areas like the law are ripe for a lot of automation with a lot of the kinds of technologies that we're thinking about. There's a lot of opportunities for automation in finance. So we have to get out of saying that there's inherent value in four years or six years and 10 years and say, what are the life skills these people have to support their families, to be contributing members of society, to be good citizens, and in addition to good employees?

Governor Jeb Bush: (40:24)
I want to make it clear, I'm not disparaging psych majors. And every time I say this, someone comes up and says, "How dare you say that?" Look, I mean, you're going to go to graduate school, you're going to spend more time in school. We have a lot of therapists. We probably need more film makers.

Jeff Sonnenfeld: (40:40)
As a psych major myself, I'm happy to hear you say that.

Congressman Ro Khanna: (40:42)
Jeb, it's better than Marco Rubio who wants what I like, we work together. And the Republican debates said, "Well, what do we need philosophy majors for?" And I didn't say, "Well, it was philosophers who helped build America's founding." I mean, Madison, Jefferson, there's a role for them.

Jeff Sonnenfeld: (40:56)
Yeah. There is a role for all and there also was a role for this panel. And this panel knocked it out of the park. I tried not to get in their way too much, but to bring out some modest variations. But basically, we have three great patriots, three great Americans that are huge contributors to American society. I admire the three of you enormously. And thank you for not letting me tempt you in the cyber cryptocurrency because they would be furious. And the five minutes that were taken away from us, that would have gotten us into it.

Jeff Sonnenfeld: (41:27)
Since we're from Philadelphia, Gene Ormandy, who was the great conductor of the Philadelphia Orchestra once was going into taking the orchestra into a rehearsal, and the orchestra erupted. Even the concert master was like shop steward, he said, "We're not ready to perform." And he said, "You have to perform, it's Friday. We're performing tonight." So they said, "Listen," Ormandy said, "It's just Mahler. As long as we begin together and end together, they'll never know the difference." We, as Philadelphians, at least we began together and ended together. I want to thank you so much for your trust and your wisdom.

Congressman Ro Khanna: (41:58)
Thank you.

Jeff Sonnenfeld: (41:59)
Thanks.

White House Chief of Staff Ron Klain Discusses President Biden's Agenda | #SALTNY

Ron Klain is the White House Chief of Staff under President Joe Biden. He served in the two previous Democratic White House administrations that included his role as President Obama's Ebola Response Director.

Robert Wolf worked in the Obama administration, serving on the Economic Recovery Advisory Board, the Council on Jobs and Competitiveness and the Export Council. He is fonder of 32 Advisors, an investment firm holding company, and was previously CEO of UBS Americas.

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Ron Klain

White House Chief of Staff under President Joe Biden

FULL BIO

Robert Wolf

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EPISODE TRANSCRIPT

Robert Wolf: (00:06)
Ron, this is truly an honor to interview you, especially during such incredibly challenging times at the White House, and throughout the globe. As you know, a few years ago, the SALT Conference had the honor of hosting then Private Citizen, and now POTUS, and your boss, President Biden. So, before I begin, on behalf of SALT and its founder, Anthony Scaramucci, we want to thank you. We're going to cover a few topics, but the thousands of attendees today watching live and streaming are mainly from financial services. So, we're going to start with the economy.

Robert Wolf: (00:44)
Ron, we've seen over the last three months, over 700,000 monthly job gains. I mean, really remarkable numbers. There continues to be a large number of unemployed, but what's amazing, and really for one of the first times, we have actually more jobs available than those unemployed, almost 10 million now. The GOP gladly says, "You're just way too generous. You're paying people to stay home," whereas the administration often talks about, "This is mainly COVID-related, childcare, elder care, healthcare," and just the change that's taken place in a post-pandemic world. So, I'd like to ask you, how do you close the gap and how do you see it?

Ron Klain: (01:32)
Well, first of all, Robert, thank you very much for having me. I appreciate being invited to speak to the attendees at the SALT Conference. It's always a great opportunity to get our message out and to answer some questions, and always great to be with you-

Robert Wolf: (01:43)
Thank you.

Ron Klain: (01:44)
... even if virtually, Robert. Look, I think we've gone through a difficult year here, as we've transitioned from a pandemic year to hopefully getting back closer to normal. The three months before Joe Biden became president, the economy created 50,000 jobs a month. The past few months, as you noted, it's been 700,000 jobs. And so, we're making a lot of progress, but I think the transition from a shutdown, shuttered economy to a fully open, reopened, moving economy is going to have some fits and starts, and is going to have some adjustments and some kind of growing pains, if you will. And so, that's what we're seeing, I think, with all these open jobs not yet filled.

Ron Klain: (02:24)
In terms of the generosity of unemployment benefits, well, however people see that, what we know is this fact: those extended unemployment benefits ended last week. So, right now, there's no one in America getting the extra $300 a week, no one in America who were in that group of what we call Pandemic Unemployment Assistance, big economy workers who weren't otherwise eligible for unemployment who got unemployment because of special benefits. No one in the group anymore who's getting the super-extended unemployment, the additional 49 weeks on top of the 26 weeks. So, those programs have now come to an end, and I think you're going to see more and more of those jobs filled, but I think what we have to do is finish the work of going back from pandemic to normal.

Ron Klain: (03:10)
That means getting people the childcare they need. I think we had a big moment the past couple of weeks as school started to reopen, sometimes for the first time. I think New York City was the first day today. The students were back in school in 18 months. So, our lives as a country, our lives as a society, were badly disrupted in 2020, and we had a bungled response to the pandemic. And so, I think this year as we've gotten people vaccinated, we're getting people back to work, the unemployment rate's down to 5.2%, created a lot of jobs, I think you're going to continue to see that transition back to more economic normalcy, as the year continues to unfold.

Robert Wolf: (03:46)
Well, that brings us, and we're going to go into childcare and elder care, but I think the next question I want to discuss is infrastructure. I am someone, and you know this, that would like it to pass tomorrow. My guess is there's a lot of people in the White House that would like to pass it tomorrow. It's a 550 billion bipartisan bill. President Biden is the president about bipartisanship. He touts it all the time, it was one of the reasons I think the nation elected him. That being said, we're at this impasse. Why aren't we passing it today when unions support it, businesses support it, polling supports it? What are we waiting for?

Ron Klain: (04:31)
Well, look, I think it's working its way through the legislative process, like everything else. We haven't made this kind of investment in infrastructure since the 1950s. So, we're talking about a lot of investments that are decades overdue, and we'd all like the legislative process to work lickety-split. I think we're on the verge of breaking, as I said, a 50-year, 60-year, 70-year deadlock, and finally getting a bipartisan infrastructure bill. I hope it passes in the next few weeks and gets to the president's desk. I think the thing we should be remarking is not that it's going so slow but really, by historical standards, it's a lot of progress very, very quickly.

Ron Klain: (05:06)
It has been bipartisan as you noted, Robert. It addresses very traditional forms of infrastructure, long overdue investments in roads, in bridges, and highways, those sorts of things, but also some new infrastructure. It really gives a chance to connect every single American to high-speed internet. It replaces all the lead pipes that still bring leaded water to too many of our schools, childcare centers, too many homes. It's a record investment in electric charging stations for electric vehicles, so we can really move into the clean energy economy. So, we're very excited about that bipartisan infrastructure plan. We're looking forward to it passing [crosstalk 00:05:42].

Robert Wolf: (05:42)
I'm always smiling, because I actually testified, I think it was 2009 or '10 on infrastructure. So in a way, I'm saying to myself, I think you made a good point. It's actually September 29th possibly, it may pass the legislative action, but I would say it's so long overdue. You guys have been at the forefront. It's something that I think I've heard President Biden talk about so often. I would say the anxiousness is every second, that people really are saying this, and we're going to talk about climate action, when you talked about kind of the changes being made.

Robert Wolf: (06:22)
I'll give you kind of the pass on, okay, infrastructure's around the corner. The one that seems a little less around the corner, and maybe in some ways, as if not more important, because it really impacts what I would say, the social agenda of Build Back Better, President Biden's main plan, which is really the reconciliation package, which is three and a half trillion. It's healthcare, it's elder care, it's childcare, it's climate action. From where I sit, it feels like it won't be north of two trillion, and I know that a lot of the Progressives want to tie it to the infrastructure bill. So one, do you think the infrastructure can pass without it? And number two, if it ends up being around two trillion, will that be big enough to get what you need to get done on the most important priorities?

Ron Klain: (07:19)
Well, first of all, we want both these bills on the president's desk, and that's how the president laid it out when he stood before Congress and the country in April and laid out, and the joint session of Congress has plans for what we called then the American Jobs Plan and the American Families Plan. The Jobs Plan has kind of morphed into the bipartisan infrastructure bill. The Families Plan is now the reconciliation bill, or what we like to call Build Back Better, because no one really likes the word "reconciliation bill." And so, we're making progress on both these things. It's a very bold, big agenda, and again, I think the amazing thing is Congress has moved as much of it as quickly as it has. We're only in the eighth month of Joe Biden's presidency, and here we are kind of in the final stages of getting both these bills to the president's desk. I think it's a great credit to everyone who's been working on it.

Ron Klain: (08:05)
And so, I think that in terms of the size of the Build Back Better Plan, I know the president's endorsed, and his plan was about a $3.5 trillion gross cost. It's always important. I always hate these numbers because the truth is, the cost of the Build Back Better Plan is zero, because we have proposed a way to pay for every single penny of spending in that plan, with a penny of revenue increases. Now, four years ago, people talked about Donald Trump's tax plan as a $1.7 trillion plan, but that was the net cost. It actually was a six or $7 trillion tax cut with five or $6 trillion of offset, so they talked about the net cost of that plan. Well, the net cost of Build Back Better is zero, because we can pay for every penny of those investments.

Robert Wolf: (08:46)
And we're going to talk, Ron, about the pay-fors. That's the next question.

Ron Klain: (08:49)
Okay.

Robert Wolf: (08:50)
And I did not show it to you, but that is the next question. But before I get to the pay-fors, I don't want to make this a Senator Sanders versus Senator Manchin debate here. I'd rather much hear what your view is. But you need 50 votes.

Ron Klain: (09:06)
Yes.

Robert Wolf: (09:06)
And so, it certainly feels like we won't see a $3.5 trillion package. So my question is a little more narrow. If it was a narrower plan, which I know is not the preference, what are the few most important priorities that you see that the president wouldn't sign without them?

Ron Klain: (09:27)
Well, look, I think the important thing is to make sure we meet the moment on the key items. Maybe they have to be cut down in size, maybe. Maybe they have to be shortened in duration, maybe. I'm not going to sit here and negotiate it out at the SALT Conference. This is what we're going to do here over the next few weeks with members of the House and Senate. But what is really critical is we have a big childcare problem in our country. We were talking a little bit before about the mismatch between jobs and workers, and we know one reason we have millions of people sitting on the sidelines in the economy, is they don't have affordable childcare, particularly at a time of great disruption and change, people moving, all these things. They don't have affordable childcare. We know we have other people sitting on the sidelines because they don't have elder care to take care of elderly parents, or maybe a disabled child or something like that. They need in-home care services.

Ron Klain: (10:12)
You go down the line. And so, we think about this as an investment, not just in people and social spending, but in economic growth, job creation, and doing the things we need to do to really build long-term growth. Now, the other thing I'll say is what are the must-haves? Another big must-have here certainly is climate change. Joe Biden ran, he said there were four crises he was going to deal with, COVID, the economy, climate change, and racism. Climate change is at the center of the agenda, and the Build Back Better Plan is a critical opportunity to make investments in combating climate change, and building jobs and creating a clean energy economy. That's absolutely central to us, it's got to be part of the mix here.

Robert Wolf: (10:48)
I want you to talk about taxes, but before I go there, that let's just talk about climate action. I mean, yes, it's great that you went into the Paris Accord, but forget what's happening globally. Let's just talk about the United States. The hurricanes, the floods. I mean, this has just been a brutal few months for this country, with respect to climate change and the impact it's having on everyone. What are the few things you think you can do that actually will be an agent of change?

Ron Klain: (11:20)
Yeah. Well, I absolutely agree. We've seen extreme weather, not just the things you mentioned. As you and I are having this conversation, the president right now is in Idaho at the National Wildfire Center. We have tremendous wildfires burning up the Western part of our country, another example of this extreme weather phenomenon that we're seeing. So what can we do about it? Well, we've got to move to a clean energy economy. We know doing that will be key to our international leadership. We know it will be key to our economic leadership. We know it's going to create a lot of jobs that can't be outsourced. We know it's going to make the planet healthier. And it means, first of all, working with industry. The president's had the CEOs of the big auto companies to the White House a couple times. He spent a lot of time on them developing new standards and new tools to convert our fleet over the coming years into an electric vehicle fleet. That's going to again, create a lot of jobs and make our economy stronger, and make our environment better. We also-

Robert Wolf: (12:12)
I think after that, GM actually made a pretty impressive announcement that they're going almost all electric vehicles over the next decade or something.

Ron Klain: (12:20)
Yeah, so we've had a lot of progress on that front, but we can't stop there. We also have to focus very much on power generation, making a lot of investments in expanding our use of solar and wind in particular, other alternative energy fuels. That's a big part of the money and the Build Back Better Plan, our tax credits to really help the further expansion of solar wind and other renewable energy. And so, we've got a bold, ambitious agenda on a number of fronts. As you said, it's both a domestic thing and an international thing. The president has a big international conference coming up at the end of this week with leaders around the world to continue to press the global approach here to fighting climate change, but we need to make the investments here at home that will create jobs that will get us on the right path.

Robert Wolf: (13:06)
So let's go back into the pay-fors. I know that President Biden, and you have said quite often, as well as Brian Deese, and all the people from the economic team, we're paying for everything. We have pay-fors, here they are. It's the global minimum tax, it's the corporate tax increasing, it's capital gains, and a lot of other tax reforms. It's taxing the wealthiest. So let's just be clear. Are we concerned about having Democrats be tagged as, "Oh, there they go again, tax and spend liberals," and if not, why?

Ron Klain: (13:45)
Well, so I'm not, because I think really what it's about is tax fairness. I mean, I know we have a lot of big economic interests in the SALT Conference, but let's be frank about it. Middle-class folks have paid taxes, they've paid their burden, and we've seen during the pandemic a lot of people at the top do extremely, extremely well. A lot of companies are doing well. We have the stock market essentially at record highs, we have corporate profits at record highs, and yet, the corporate tax rate is lower than it's ever been, frankly, lower at a level that... I remember when we did corporate tax, no one was really talking about 21%. I don't know how we wound up [crosstalk 00:14:18].

Robert Wolf: (14:17)
28 would've been a win.

Ron Klain: (14:19)
28 would've been a win. So that's what we're talking about. Were not talking about going back up to 35, our proposal's to go to 28, which I think at the time would've been seen as a very, very reasonable proposal, a very modest proposal. And so, that's the kind of thing we're talking about, I think a basic fairness. Secretary Yellen's done a great job working on this idea of a global minimum tax to try to avoid tax havens and companies escaping to different countries to deal with their tax burden. Putting that into our tax code makes a lot of sense.

Ron Klain: (14:48)
Raising the tax rate back to what it was when George Bush became president for the people, the top earners, we think makes a lot of sense. So these, I think are pretty reasonable provisions to kind of rebalance the tax code, to kind of get to a place where everyone's paying their fair share, the people at the top are still going to do extremely well. No one who makes under $400,000 a year will pay a penny in taxes more than they pay right now. That seems like a pretty fair way to do things.

Robert Wolf: (15:12)
I know my Republican friends will never admit it, but when you tout the idea of a minimum global tax and that there's 50 or 60 of the top Fortune 100 companies didn't pay any taxes, I know that they would support that on an up and down vote, they just would never admit that, but that's for a different conversation.

Ron Klain: (15:30)
Yeah, exactly. Exactly.

Robert Wolf: (15:31)
Ron, I want to move to COVID, because there's probably nothing that ties to the economy now more than the pandemic. We actually had you for one of our VIP sessions on April 2020 when you were a special guest, and we actually had you because of your experiences at that time being the Ebola Czar under the Obama administration. And to paraphrase you, you articulated that, I'm going to quote you, but "The opening will be more like a light dimmer than a light switch, and the two key variables we need to focus on are testing and vaccines." If we had that again today, where do you see us now? What are the most important variables? Just give us an idea of where you see us in this COVID environment.

Ron Klain: (16:17)
So look, I think that "the light dimmer, not the light switch," still is the right metaphor. And that's kind of some of the struggles we're seeing. On the one hand, as you said, we started off with a conversation about job creation. On the other hand, we know we have supply chain disruption that's creating production problems, all kinds of problems. A lot of that supply chain disruption traces back to the pandemic itself. These oddities in the economy, rental car companies that sold off all their rental cars-

Robert Wolf: (16:45)
Unbelievable.

Ron Klain: (16:45)
... during the pandemic, because, obviously, people weren't renting them, and now they need to go out and buy cars, and because they're buying cars or too few cars. So, this is part of this kind of dimmer switch thing. As we turn back on, we're seeing all these things that need to be worked out. A shortage of semiconductor chips, of course, that's wreaking havoc across a lot of different industries, but also just basic hitches in the supply chain. We had built an incredibly efficient economy with a lot of just-in-time inventory, just-in-time supply chains, maybe a little too efficient, but whatever it was, once it got kind of blown up with the pandemic, it's taking a while to work all that back out, get that all in place. Same thing with, of course, the labor markets, and as I said before, people who now lack childcare, people whose schools were closed until this week.

Ron Klain: (17:33)
So that's all kind of part of the readjustment, but fundamentally, what we need to do is get the rate of COVID down, right? That's the most important thing, I think-

Robert Wolf: (17:41)
Do you think-

Ron Klain: (17:42)
... in terms of economic growth and where we go from here, and that's what the plan the president announced last week to increase the vaccination rate, to help the people who are vaccinated with booster shots, to take steps to help small businesses. Again, all these things, that's part of kind of moving us forward from where we are now.

Robert Wolf: (17:59)
And we're going to talk about the requirement, but do you think that the nation understood the idea of the dimmer versus the light switch? I know that July 4th, we were all excited, and then Delta variant, and then 100 million people are not vaccinated, and all of a sudden, it speeds up and then it starts going through the bumps. Should we have expected that it wasn't just going to have this exuberant reopening?

Ron Klain: (18:22)
Look, I think human nature is to kind of hope for the best and hope that we could turn a corner quickly. That's that's just who we are, that's just, I think humanity. But the reality is you look at these epidemics throughout history, you look at particularly something this big, truly, a pandemic hitting every corner of the globe, you have manufacturers in the country, "Why is my plant shut down? My plant's shut down," because COVID's bad someplace on the other side of the planet, where a critical element of my production was assembled, where I have a supply chain. Companies probably who didn't even know where their supply chains fully reached and extended, they're now learning about COVID outbreaks in other parts of the world and things like that. So, this has been a real test. I think we are getting back to normal. I think things are coming along, certainly. We've made a lot of progress on employment, a lot of progress on economic growth, but we have more work to do about the pandemic.

Robert Wolf: (19:13)
Well, let's talk about where I think you guys have done an amazing job, and I have to admit, I'm a little confused at the other side right now, but last week, the president took incredibly bold steps on the vaccine requirement, what going to happen with the federal employees, the private sector, the healthcare sector, the education sector. I have to admit, I'm confused because you have red state governors, you know what they're calling him, but then they have their own immunization requirements for kids going to school. So we have so many different narratives coming out that people are confused, and in some ways, it feels like it's stalling our success. Two things. One, how do we square the circle and get people to know vaccines are important to take, and take it, and it makes everyone better? And then number two, what is the legal argument you have with the requirements that the president announced last week?

Ron Klain: (20:15)
Well, first of all, I hope everyone understands the vaccine is safe and effective. One reason the president held on these measures until now, is we waited until the FDA gave its final license to the Pfizer vaccine. The Pfizer vaccine is fully licensed permanently. We obviously have emergency use for other vaccines. The vaccines have been taken by billions of people around the world. Tens of millions of people, 175 million people in the United States are fully vaccinated. So the proof, this isn't some assertion, everyone can see this in their own lives around them that the vaccine is safe, effective. We also spent a lot of time, Robert, as you know, over the course of the spring, building out an unprecedented distribution network. 90% of Americans live less than five minutes from a place where they can go get a shot without an appointment-

Robert Wolf: (21:04)
It's incredible.

Ron Klain: (21:04)
... and without waiting, and it's free. So it's basically ubiquitous, it's free, it's well-proven, now we need to finish the job. Now, not withstanding all that, the problem is we only have about 64%, 65% of the adults in this country fully vaccinated. So we've got basically a third left that aren't vaccinated. 75 million or so eligible people haven't even gotten the first shot. And so, the steps the president announced last week were an effort to try to boost that number up. You look at countries where that number is up around 80%, not 65%, these countries have a much more normal way of life than we have right now. That's where we need to get to.

Ron Klain: (21:43)
And so, the steps the president announced, I think were all based on his strong legal authority to make the members of the Armed Forces get vaccinated. They live in barracks, they live in close proximity. We don't want COVID outbreaks in our Armed Forces. Who could possibly want that? The federal government pays for Medicare, Medicaid, having the medical facilities that get those benefits, have their staffs be vaccinated. You should be able to go into a hospital if you're sick, and have confidence that the people treating you are not giving you COVID. Okay? That seems like a very reasonable thing. And same thing with the announcement the president made last week about Head Start. Our youngest kids can't be vaccinated. Their caregivers should be vaccinated to lessen the risk to our youth.

Robert Wolf: (22:25)
But Ron, how about the private sector aspect, where it seems is the most pushback?

Ron Klain: (22:30)
Look, the private sector, first, let's be clear what the president announced is a requirement that for large employers, a hundred and up, their workforces either have to be vaccinated or tested. And so, first of all, I don't really understand the philosophical objection to being tested once a week. I don't really understand anyone's right to show up at work at a large workplace and say, "You can't know if I have COVID or not." That seems like a very odd right to me.

Ron Klain: (22:54)
In terms of the president's legal authority, that's going to be done through the Occupational Safety and Health Administration, OSHA, [inaudible 00:23:00] says to workplaces every day in this country, "You're going to work on a construction site, you got to wear a hard hat. You're going to work around noxious chemicals, you got to wear a mask that protects you from noxious chemicals." So saying that in a large workplace where consumers are coming in and out, where you got a lot of other people working there, those people either need to be vaccinated or tested, and COVID-free, it seems like a reasonable way to keep those workplaces safe in the middle of a pandemic.

Robert Wolf: (23:24)
So Ron, one more question, and then I just want to end with some of your priorities. This is kind of, I thought was very impressive what Justin Wolfers, the Economics Professor from University of Michigan, and I'm going to paraphrase him, said, "He's viewing Biden's vaccine mandate as the cheapest and most powerful economic stimulus ever enacted. COVID is a tax, a tax on all in-person interactions, and vaccinations is a tax cut. More jobs equal a bigger tax cut." I know we keep harping on vaccines equals economic growth, but that seems like such a clear message to me. How do we get that a message across, so the 64% goes to 85%, we go to our goal of herd immunity? But how do we get this economic vaccination message more clear that people just say, "Yes, that makes sense to me?"

Ron Klain: (24:26)
Well, Robert, I hope that this conversation and other things get that message out. I also saw that Goldman Sachs today said that the president's vaccine requirements might create, I read it briefly, but I think something like three million more jobs because of people being less fearful in the service sector. So I think there's a lot of evidence that our economic growth will be stimulated tremendously by getting more people vaccinated, by lessening the fear and anxiety that consumers have about spread of the virus, by lessening the absenteeism from workers who get sick from the virus, and by obviously, lessening the burden on our healthcare system from the unvaccinated that they're placing, and the impacts that has on our healthcare system. So it makes economic sense, it makes healthcare sense, it makes sense in every single way. That's why the president did what he did last week.

Robert Wolf: (25:11)
And who would've thought it's a tax cut?

Ron Klain: (25:14)
And who would've thought it's a tax cut? You bet.

Robert Wolf: (25:17)
So last question. I mean, we could talk about civil rights, voting rights, Afghanistan, China, trade, so many issues that literally are on your desk on a daily basis. What do you see away from COVID and the economy, which is kind of a strange thing to say, away from COVID and economy, but what do you see as the few key priorities of 2022 that we're not thinking about today?

Ron Klain: (25:47)
Well, I think voting rights is very important. I don't know about not thinking about it, I hope people are thinking about it, but it's certainly a very important priority that needs to be addressed this year. I think we need to continue the work on police reform and criminal justice reform that's been talked about and the Congress has been working on, we need to kind of get to the finish line on that. As we alluded to before, climate change remains a very, very high priority, both on the domestic front, the international front, as we build towards Glasgow near the end of the year as a critical milestone in terms of combating climate change.

Ron Klain: (26:21)
And so, those are critical things. I hope we get some action on immigration reform inside the reconciliation package. We need to do more work there to make our system a more fair system, more rational system, and fix what's broken in our immigration system. We obviously have tens of thousands of evacuees coming here from Afghanistan. We're going to get them settled appropriately, we're going to have to get them into their new lives here in the United States, and we're going to need a lot of help from state and local governments, but also from the private sector to help these people find jobs, help these people move on with their lives. Many of these people, many of these men and women fought alongside our troops or assisted our troops in other ways in Afghanistan, and they're now coming to our country, they're coming to a new country. There is a large Afghan-American community that's going to help them resettle, but we need broad social help to help these people begin their new lives.

Ron Klain: (27:12)
So I think all those things and many more. I'm sure I'm forgetting many things. Obviously trade, China, we could go down the line, a lot of priorities here, but for us fundamentally, those four key priorities, the economy, COVID, climate change, combating racism, those are the four key pillars for us this year and probably on into next year.

Robert Wolf: (27:30)
Well, listen, Ron, we truly appreciate your time. I mean, more importantly, I just want to thank you on behalf of our entire country. You have done an amazing job, what I think is really being one of the most transparent chief of staffs in White House that we've seen in years. And so, I just want to thank you for that, and thank you for thinking about us.

Ron Klain: (27:51)
Well, thank you for having me, Robert. Thanks for all you do and your public advocacy, and thanks for having me here at the SALT Conference.

Robert Wolf: (27:57)
Thank you very much.

Ron Klain: (27:59)
Take care.

America’s Place in the World: National Security & Leading From the Front | #SALTNY

America’s Place in the World: National Security & Leading From the Front with General John Kelly, Retired U.S. Marine Corps General & 28th White House Chief of Staff. General H.R. Mcmaster, Retired U.S. Army Lieutenant General & 26th United States National Security Advisor. Michele Flournoy, Co-Founder & Managing Partner, WestExec Advisors. Richard Fontaine, Chief Executive Officer, Center for a New American Security.

Moderated by Zoe Weinberg, Fellow, Schmidt Futures.

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SPEAKERS

Michèle Flournoy

Co-Founder & Managing Partner

WestExec Advisors

FULL BIO

Richard Fontaine

Chief Executive Officer

Center for a New American Security (CNAS)

FULL BIO

GeneralJohn Kelly

Retired U.S. Marine Corps General & 28th White House Chief of Staff

FULL BIO

General H.R. McMaster

Retired U.S. Army Lieutenant General & 26th United States National Security Advisor

FULL BIO

MODERATOR

Zoe Weinberg

Fellow

Schmidt Futures

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Zoe Weinberg: (00:07)
Morning. Thank you, SALT, for bringing us together in person no less. I'm Zoe Weinberg, and I'm pleased to kick off this morning with the discussion about America's role in the world and the future of national security. We have with us today General John Kelly, former White House Chief of Staff and former Secretary of Homeland Security. We have General H.R. McMaster-

Gen. John Kelly: (00:31)
Wait a minute now. And also a retired Marine.

Zoe Weinberg: (00:33)
And also a retired Marine. Most importantly, we have General H.R. McMaster, who's currently a senior fellow at the Hoover Institution, previously National Security Advisor, and also a retired US Army lieutenant general.

Zoe Weinberg: (00:52)
We have Michele Flournoy, who is the co-founder and managing partner of WestExec Advisors and formerly Undersecretary of Defense for Policy under President Obama. We have Richard Fontaine, CEO of the Center for a New American Security and former foreign policy advisor in both the Senate and the White House. Welcome.

Zoe Weinberg: (01:16)
I'd like to start where everybody's attention is focused right now: Afghanistan. Exactly one month ago, the Taliban entered Kabul and took control of the presidential palace. Of course, historians are going to be debating for many years our role in the country, but with the events still very fresh, what are the lessons learned from both our decades-long engagement in Afghanistan and from our withdrawal? General McMaster, I'd like to start with you.

Gen. H.R. McMaster: (01:45)
Well, so thanks for the question. I mean I think it is important that we learn the right lessons from, I think, what is a catastrophe in Afghanistan. I think the first step in learning the right lessons is to stop pretending. I mean what we hear from Washington today about the situation in Afghanistan and the ramifications, the costs, and consequences is exactly the opposite of reality.

Gen. H.R. McMaster: (02:09)
So we have to stop pretending that we didn't surrender to a terrorist organization. We have to stop pretending that a lost war has no consequences. We have to stop pretending that the Taliban is going to share power and be concerned about the opprobrium from the international community and modify its behavior. We have to stop pretending that the Taliban is not completely interconnected with al-Qaeda, the Haqqani network, and lots of other terrorist organizations.

Gen. H.R. McMaster: (02:41)
We have to stop pretending that the consequences of this surrender to a terrorist organization and our precipitous retreat from Afghanistan will not have profound consequences in three areas. First, the humanitarian catastrophe, which is just beginning, just beginning.

Gen. H.R. McMaster: (03:01)
With our withdrawal, we have created not only a humiliating scene that is reminiscent but worse than the withdrawal from Vietnam in 1975, where we're now on fast forward to a hostage crisis more like 1979 in Iran, that is orders of magnitude larger and is of our own creation, not only for obviously US citizens but also for Afghans who helped us and for the citizens of our allies and partners who were part of the coalition.

Gen. H.R. McMaster: (03:33)
So that catastrophe is now just beginning, but that humanitarian catastrophe is related to the security catastrophe of a massive refugee crisis that also is a source of strength for jihadist terrorists who are, by the way, the enemies of all humanity. Those refugees will become a great recruiting pool for the 20 or so US-designated terrorist organizations that are in the border area between Pakistan and Afghanistan.

Gen. H.R. McMaster: (04:00)
We know from 9/11, we know from 20 years ago that when these terrorist control territory and populations and resources, they become orders of magnitude more dangerous. What's sad in the area of lessons is we didn't learn from 9/11 and we didn't learn from an even more proximate experience, which was our complete withdrawal in December 2011, when then Vice President Biden called President Obama and said, "Thank you for allowing me to end this goddamn war."

Gen. H.R. McMaster: (04:31)
Think about the conceit that underlies that approach to war. Wars do not end when one party disengages. While we have been developing policy based on the mantra of ending endless wars, we should at least acknowledge the agency and authorship over the future that our enemies have and recognize that jihadist terrorists are fighting an endless jihad against us. When we disengage from that problem set abroad, we can only deal with the consequences at an exorbitant price once that threat reaches our shores.

Gen. H.R. McMaster: (05:03)
Then, finally, it's a political catastrophe, political catastrophe in connection with our credibility. Deterring conflict really, I mean, depends on capability times will. Our adversaries and enemies now think our will is zero. And so, this catastrophe is connected, I believe, and will be connected to more aggressive actions by the Chinese Communist Party. Just read the China Daily and what they're saying about Taiwan.

Gen. H.R. McMaster: (05:31)
It is connected to the missile launches out of North Korea and the activity at young beyond. It'll be connected, I think, to more aggressive actions on the part of the Iranians as well. And so, we're in for a rough ride ahead, and it's going to be an even rough ride because I think we have demonstrated our inability to learn lessons from even this ongoing catastrophe.

Zoe Weinberg: (05:58)
Thank you. Richard, what's your take on lessons learned and what are the implications for our longer term role in the region?

Richard Fontaine: (06:04)
Well, I think one of them is the difficulty with which the United States has in solving some of these foreign policy challenges. Afghanistan's a good example. We constantly and continue to look for the solution. We're going to defeat the Taliban utterly, we're going to surge troops in, we're going to take them back, we're going to leave. Something is going to solve it.

Richard Fontaine: (06:31)
Iraq was a similar situation in 2011. Everything was about exit strategies, about solving a problem. Some of these problems can be mitigated. The threats of jihadist terrorism can be mitigated, but they're not going to be solved in any meaningful timeframe.

Richard Fontaine: (06:48)
That's not very conducive to our way of thinking where we're going to get in, we're going to accomplish something, and then we're going to get out. If we've been there for a long time, it must mean that we've done something very, very wrong and we need to stop it.

Richard Fontaine: (07:00)
What that tends to do in the Greater Middle East in terms of military operations is a yo-yo diet where we're on the ground with a certain number of forces, we're trying to do some things. Doesn't seem to quite work out. We go really big half-satisfying. Then we say, well, nothing's going to work so we come all the way down.

Richard Fontaine: (07:18)
Really what we need is sustainability, sustainability over a long period of time. We need staying strategies as much as we need exit strategies for some of these kinds of things. I think Afghanistan is a case in point where we had too few at the very beginning. Then we surged troops and we came down. Now we say, well, it can't be won.

Richard Fontaine: (07:37)
Well, in fact, our American presence was not going to topple ... It was not going to defeat the Taliban, but it was going to prevent the government from being defeated by the Taliban. Those are two very different outcomes from an American interest and American point of view.

Richard Fontaine: (07:55)
And so, to focus on sustainability and the mitigation of threats rather than all or nothing, in or out, solving the threats once and for all and then coming home once they're done, I think, is the main takeaway. But, in fact, I think we're probably going in the opposite direction right now.

Zoe Weinberg: (08:13)
General Kelly, both General McMaster and Richard have referred to the very real risk that Afghanistan may become a haven for terrorists. There's been reports that the Biden administration has considered, or allegedly is considering, cooperating with the Taliban to combat the ISIS affiliate on the ground. I'm curious, how should we think about the terrorism threaten the country and the trade-offs of possibly cooperating with the Taliban to reduce it?

Gen. John Kelly: (08:46)
Well, the first thing I'd say is the Taliban is a terrorist organization, as both these gentlemen have referenced. They're aligned with all of the other radical terrorists, Islamic terrorists. This war is not over in their minds. Just because we withdrew doesn't mean the war is over. We're still at war.

Gen. John Kelly: (09:07)
This war will not be over for a long, long time. It's not about our friendship with Israel. It's not about opportunity in the Middle East. It's about who we are as a people. Until we either surrender to them, and I mean more than just surrender like we did in Afghanistan, or we just simply defeat them over time.

Gen. John Kelly: (09:31)
So the war's not over. So the idea that you can deal with the Taliban, who are sworn radical terrorists, that have sworn to kill Americans and, frankly, anyone they can kill on the west, to say that you can work with them, well, maybe there are smarter people in the White House than I can imagine. I can't wait to watch it. But I just don't see it working.

Zoe Weinberg: (09:54)
On that note, Michele, where do we go from here?

Michele Flournoy: (09:59)
Well, I think the thing that makes this even more consequential is that it's happening at a time when we're really in a period of a strategic inflection point. We've had 20 years focused on the post-9/11 period fighting terrorism. The problem has not gone away. It still needs to be managed.

Michele Flournoy: (10:19)
But we have a new set of challenges, and particularly the rise of China as a great power, the continued presence of revisionist Russia under Vladimir Putin, who's constantly trying to undermine democracy in Europe and here.

Michele Flournoy: (10:37)
But we're in a new era where we are going to be in a major competition with a rising China that is very committed to changing the rules of the road, changing the rules for trade, changing the rules for use of force, imposing its will on smaller countries, changing the architecture and the whole feel and operation of the Indo-Pacific region, which, oh, by the way, is the most important part of the world when it comes to the prosperity of Americans and the security of Americans here at home.

Michele Flournoy: (11:09)
So this point where we've just mismanaged withdrawal, which these two gentlemen can confirm that one of the most dangerous parts of a military operation is coming out of it. But that's clearly been mismanaged. I think US credibility has taken a hit at exactly the moment where we need that credibility and we need that leadership to start rebuilding alliances and partnerships and to try to take on and deter any kind of conflict with China, constrain China's influence, and in certain areas like climate change and preventing the next pandemic, we've got to find ways to cooperate.

Michele Flournoy: (11:52)
So the world really needs US leadership right now. Even though I think the president sought to get out of Afghanistan wisely, or unwisely, to free up bandwidth and energy and focus and resources to put to the Indo-Pacific, the truth is this has created such a mess that it's actually draining that bandwidth and refocusing it on the Greater Middle East.

Michele Flournoy: (12:17)
So I am concerned. I think the administration has made its own job much harder going forward to really focus on the major challenges we have in Asia.

Zoe Weinberg: (12:28)
I want to stick with this for a second. I think you're right. In many ways, to a certain extent, we are closing the chapter on 20 years of very counterterrorism-focused operations and shifting our focus toward great power competition, and specifically competition with China, as you mentioned. Michele, I mean this is obviously a departure from the playbook of the early 2000s. Is the United States prepared to compete with China? If not, what needs to change?

Michele Flournoy: (13:00)
Well, I think we need a vision and a leadership engagement. I think we need to have a president to talk to the American people to say this is one of those moments that Americans need to stand up and do what we're really good at. We are good at standing up out of crisis, dusting ourselves off, coming back strong, whether it was the Great Depression or World War II or Vietnam. I mean you can go through the scenarios, the financial crisis.

Michele Flournoy: (13:28)
This is one of those moments where we've got to stand up, turn the corner on COVID, get the economy again, reinvest in the drivers of our own competitiveness, re-embrace our allies and partnerships, but with a purpose, that we are going to compete. We know how to compete when we're inspired to do that, and we need to do it economically, technologically, in terms of defending democracy, and militarily.

Michele Flournoy: (13:53)
I'll just comment on the military piece. We do have the greatest military in the world, but we can't rest on our laurels. We have to adapt, we have to transform, we have to innovate to be able to effectively show up and deter a country like China, which has spent the last two decades, while we were focused in the Middle East, investing in the capabilities to try to keep us out of the Indo-Pacific.

Michele Flournoy: (14:19)
So we have a lot of work to do. We have a lot of rebuilding of our diplomatic core and the ability to show up and shape things there. So if you ask me, "Would you rather have the Chinese hand cards to play or the American hand cards to play?" I would far prefer to have our hand cards, but we have to start playing those cards better if we're going to be successful.

Zoe Weinberg: (14:42)
Yeah. So our allies obviously play a meaningful role here. Richard, you've written about the need to unite democracies, to enhance digital cooperation through an alliance of techno democracies. Will you tell us a little bit more about that concept and the role of multilateralism more generally?

Richard Fontaine: (15:01)
Sure. So when you're talking about this grand US-China competition, it's natural to think, well, power is shifting in the Chinese's direct because they're becoming, every year, more powerful, richer, more militarily capable, more assertive, et cetera.

Richard Fontaine: (15:17)
The real way to think about it is not America on one side of the scale and China on the other, but China on one side of the scale and America and all of its allies and partners, like-minded countries on the other side of the scale. When you start to add up all the capabilities, the economy, the diplomatic weight, and everything, then you see quite what we have to work with in this grand competition of United States and China, and this contest of models, of autocracy and democracy, and things like that.

Richard Fontaine: (15:46)
Those are some of our greatest assets are our system of alliances, the like-minded nature of partners that want to work with us more than they did even in the past, frankly, some of their apprehensions about China and it's illiberal directions in which it's going.

Richard Fontaine: (16:03)
That then goes into, okay, so what are the new things that you do about this? You're starting to see whether it's on the military front, on the diplomatic front with the Quad, with the US, Australia, India, and Japan, new frameworks there that the Trump administration really revived and has now been taken up by this administration.

Richard Fontaine: (16:21)
So you're seeing these different kinds of ways of countries that are like-minded working together. One that has not really come to the fore yet, but in my mind and in minds of others really needs to, is on technology. So right now there are technology aspects to gatherings here and there of the G7 and the US and the EU and others.

Richard Fontaine: (16:44)
There's no forum, there's no group where you get like-minded democracies that are the advanced technological economies together to say what is it that we really care about in terms of our democratic practices, our economic matters? What are we worried about in terms of the use of illiberal technology, surveillance technologies, Chinese innovation, et cetera, et cetera, and how do we actually work together across lines, both private sector and government sector to do this?

Richard Fontaine: (17:16)
It's the kind of thing that when you start to think about it, I think you start to say, well, it's almost amazing we don't have something like that now, given that technology is so key to everyday life, but also to this grand competition that we're in. And so, to build a structure like that, where the like-minded techno democracies can cooperate, I think, is a pretty near-term imperative.

Zoe Weinberg: (17:38)
On the subject of technology, I want to step back for a second and consider the role of technology and the evolution of conflict over time. Some have argued that, increasingly, war is becoming less about kinetic combat on the ground and instead technological control, surveillance, cyber attacks, disinformation, stolen intellectual property. That is what's going to define the next era of war. General McMaster, do you agree with this assessment? What does that mean for militaries of the future?

Gen. H.R. McMaster: (18:11)
No, that's a pipe dream because those who say that, really, really, really the next war will be fundamentally different from all those that have gone before it because of X technology. In the '90s, it was the combination of surveillance technologies, assured communications, space-based assets, precision strike capabilities, and GPS and so forth. Remember, we're supposed to have a revolution in military affairs.

Gen. H.R. McMaster: (18:38)
Future war would be fast, cheap, efficient, and waged from standoff range. But what this kind of thinking neglects is really there are two ways to fight wars, asymmetrically and stupidly. You hope your enemy picks stupidly like Saddam Hussein did in 1991. But I think a lot of countries and jihadist terrorist organizations learned vicariously from the ass-kicking of that army in 1991. That's why jihadist terrorists used box cutters and airplanes to bypass our technological military prowess and strike as asymmetrically.

Gen. H.R. McMaster: (19:14)
We also keep thinking that really force on the ground, that doesn't make a difference anymore, right? Well, do you think it made a difference to the Taliban? I think it did. When people say, "Hey, there are no military solutions to these emerging problems," we know the Taliban had one in mind. What we don't think about is the need to integrate all elements of national power and efforts of like-minded partners to achieve well-defined objectives in war.

Gen. H.R. McMaster: (19:43)
That's the essence of strategic competence. We are incompetent because we divorce these and we engage in strategic narcissism, essentially. We define the world as we would like it to be and assume that we can map out a linear course toward progress, the kind of wars we want to fight in the future, for example. We're going to invest in these fewer and fewer, more exquisite systems. Well, guess what? Hey, your adversaries have a say. They develop countermeasures.

Gen. H.R. McMaster: (20:13)
And so, I would say that the element that is most important to thinking clearly about future war is to balance, change, technological change, with continuities in the nature of war. There are really four of those.

Gen. H.R. McMaster: (20:26)
War is an extension of politics. So you fight to achieve sustainable political outcomes consistent with your interests, like a political order in Afghanistan that is fundamentally hostile to jihadist terrorism. That would've been a good outcome. Afghanistan, as Michele mentioned, didn't need to be Denmark. It just needed to be Afghanistan.

Gen. H.R. McMaster: (20:45)
Second, war is human. People fight for the same reasons Thucydides identified 25, 20 years ago, fear, honor, and interest. What we hear these days is the secretary of state and others saying, "Gosh, it's not in the Taliban's interest to do X." Well, the supreme leader of the Taliban, Hibatullah Akhundzada, his 17-year-old son was a suicide bomber. What else do you really need to know? Emotions and ideology drive and constrain the other as well.

Gen. H.R. McMaster: (21:12)
Third, war is uncertain. Again, the future course of events depends not just on what we do, but what on the other decides to do. Remember in 2009, 2010, when President Obama announced the reinforced security effort in Afghanistan. He announced the timeline for a withdrawal at the same time and then said to the Taliban, "Hey, let's negotiate." President Trump actually doubled down on that approach. I mean how does that work? That resulted in the capitulation agreement of February of 2020.

Gen. H.R. McMaster: (21:44)
Then, finally, war is a contest of wills. What we hear a lot today, we hear, well, the Americans don't support the sustained effort in Afghanistan, even though it was at a very low level and relatively low risk as the Afghans bore the brunt of that fight and our European coalition members bore a lot of that fight as well. Well, it's not a surprise that Americans didn't support it because three presidents in a row told them it wasn't worth it.

Gen. H.R. McMaster: (22:07)
So I think that we neglected our peril continuities in the nature of war. The historian Carl Becker said the memory of the past and anticipation of the future should walk hand-in-hand in a happy way. We engage in self-delusion when we think that really the next war will be fundamentally different from all those who've gone before it. Wars still resemble each other more than they resemble any other human activity.

Zoe Weinberg: (22:34)
General Kelly, I'd love to get your perspective on this. What are the ways in which defense strategy may need to evolve and what are the places where there ought to be continuity?

Gen. John Kelly: (22:45)
Well, the first thing is the United States, in its very unique role in the world, has got to be able to operate across the spectrum of warfare, from cyber and all the rest to out and out war. So that's the reality of it.

Gen. John Kelly: (22:59)
The strength of the US military, I would offer, before we even talk about technology and weapons and all that, are the people that are in it. Very unique people, very unique Americans. I would offer this in terms of continuity.

Gen. John Kelly: (23:16)
The first war I was told as a young guy that I needed to get involved in was the Vietnam War. I didn't go to Vietnam, but that's the war where we just had to get in there, had to stop communism. And so, an awful lot of people went in, 50-plus thousand killed.

Gen. John Kelly: (23:39)
Then around the late '60s, Washington lost interest in the war because, politically, it was not popular anymore. So we decided to, in my view, cut and run.

Gen. John Kelly: (23:52)
Then the next time, I was told that this was one of the most important things you could get involved in, young men, young women, was the Beirut effort. That was fine until a bomb went off and then, again, Washington lost interest in that.

Gen. John Kelly: (24:07)
Then the next one and the next one and the next one. So you go to 9/11, and this is the most important thing young men and women can do. We've got to go and we've got to fight terrorism in Iraq and Afghanistan. 20 years later, we lost interest in that.

Gen. John Kelly: (24:23)
When you start talking about conflict at the level, God forbid, with China and the potential casualties and how fast those casualties, again, I'm not so sure ... If I was a young person listening to we really have to shift to China and the Indo-Pacific and really do what we need to do out there, with the possibility of a war with someone like China, I'm not so sure ...

Gen. John Kelly: (24:49)
The consistency in terms of how we've treated wars since World War II is you've got to go in, you've got to do it, and we lose interest in it, mostly because it's politically unpopular. Then, of course, the politicians want to run for it.

Gen. John Kelly: (25:06)
So I really wonder if we ought to even consider the possibility of a conflict with China, because I just don't think we have the staying power. The troops do. They'll go and do anything that they're told to do to, to their lives. I'm not so sure, though, that that level of sacrifice can be maintained if there's a major war, clash, if you will, with China or for that matter Russia.

Zoe Weinberg: (25:46)
Any responses to that?

Michele Flournoy: (25:48)
Well, my own view is that the name of the game is deterrence, and our efforts have to be to make sure that the leaders in Beijing understand that if they launch aggression, they can't be successful, or they will face such costs from the international community that it's really not worth it, that they shouldn't take the action. They should try to work things politically and diplomatically and not through military means.

Michele Flournoy: (26:18)
But that means we've got to show up in the region, diplomatically. We have tons of embassies that are still empty, or at least ambassadorships. We've got to show up in every major forum there to reassure people that we care, we're here. We've got to find some positive agenda for engaging the region economically on trade.

Michele Flournoy: (26:41)
I think one of the biggest strategic mistakes that both Democratic and Republican administrations made was not joining the Trans-Pacific partnership, which is a trade deal that we negotiated and set the standards for, high standards. Then all of our allies joined and we didn't. I mean that's a self-inflicted wound.

Michele Flournoy: (27:03)
But we've got to show up and then we have to make the investments in the people and the technology and the concepts and demonstrate those concepts to make sure the Chinese understand that our military can inflict terrible costs if they try to move aggressively and unprovoked and against the rules of the road.

Michele Flournoy: (27:25)
So I'm not suggesting that we should charge into a war with a nuclear power, but I think it's in our interest to double down on trying to prevent that war in every way possible, but on our terms, on terms that favor the like-minded states and the democracies that Richard is talking about.

Michele Flournoy: (27:46)
This is a competition between systems. The stakes in this are are we going to have a global order that is defined by free market democracies? Are we going to have a global order that's defined by authoritarian states that are embracing a very oppressive surveillance-based model of governance? I think those stakes are pretty high.

Gen. H.R. McMaster: (28:13)
Just to pick up on Michele's point, I think it's important to recognize that China has increased its defense measure by about 800% since the mid '90s. What's important is deterrence by denial, as what Michele's talking about, really. It really is convincing a potential enemy that the enemy cannot accomplish its objectives through the use of force.

Gen. H.R. McMaster: (28:32)
I think it's important to invoke the early 20th century philosopher and theologian G.K. Chesterton, who said that war may not be the best way of settling differences, but it may be the only way to ensure they're not settled for you.

Gen. H.R. McMaster: (28:47)
And so, it's important for us, I think, to maintain military capabilities that are essential to deterrence by denial, but also capabilities that will allow us to protect our vital interests and our security against determined enemies, from jihadist terrorists to the Chinese Communist Party, if they were going to employ military force against us.

Gen. H.R. McMaster: (29:12)
I don't think the defense budget today, for example, is adequate to do that. I think Teddy Roosevelt's old adage of "speak softly and carry a big stick". On China, we're speaking super loudly right now and we're carrying a stick that's growing smaller because of real reductions in the defense budget.

Gen. H.R. McMaster: (29:32)
So I think this should be more of a topic for public discourse these days as well. How do we maintain our deterrent capability, especially given the increasingly aggressive nature of the Chinese Communist Party that we've seen just in the last couple of years, bludgeoning Indian soldiers to death on the Himalayan frontier, weaponizing islands in the South China Sea, ramming and sinking Vietnamese vessels, the constant overflights and aggression toward Taiwan, this announcement the other day that they might start to patrol Taiwanese airspace with People's Liberation Army Air Force aircraft?

Gen. H.R. McMaster: (30:07)
I mean this is a period of extreme danger, I think. The only way to, I think, prevent the worst from happening is, as Michele says, to be strong in the region and to be strong with allies and partners.

Richard Fontaine: (30:19)
We also-

Gen. John Kelly: (30:20)
The other-

Richard Fontaine: (30:20)
I was going to say I think we obviously have to be intently concerned with deterrents, by bolstering deterrents, being prepared to win a war if, God forbid, everyone came, so that we can hopefully avoid it at all costs. That's with respect to China or Russia or some of these other threats. But we also have to look at the non-military threats that these countries pose that we need to defend ourselves against, and the much higher likelihood that we're going to face those.

Richard Fontaine: (30:49)
So, for example, we've got an entire NATO alliance that thinks every day about what we would do if a Russian tank column moved into Estonia and how we would beat it back. That's entirely appropriate. But NATO doesn't look at protection of our own democracies against Russia's meddling in democratic practices through cyber means, as they did in the United States in 2016 and in 2020, as they did in France before their presidential election, as they've done in Britain, as they do in other countries. And yet the possibility that that's going to happen is 100% because it's happening right now.

Richard Fontaine: (31:24)
Same thing on China. We have to think about what it would look like if China acted in an aggressive way militarily against one of our allies in the region and what we would do in response to that, entirely appropriate.

Richard Fontaine: (31:36)
But we also have to be thinking at the much higher likelihood they'll engage in the things they already do, like theft of intellectual property through cyber means at vast scale, at surveilling people well beyond their borders and trying to impose their own value system on other countries and their technological governance matters and things like that, their economic dominance and their use of economic coercion to try to get the outcomes that they like, including with countries like Australia and things like that.

Richard Fontaine: (32:06)
And so, we can't leave behind all of the non-military stuff that's happening right now while we prepare for a war that we hope never happens.

Zoe Weinberg: (32:15)
I want to shift gears and talk a little bit about our economic agenda as it relates to national security. This is obviously relevant to China, but extends beyond our engagement there. There's been a lot of activity when it comes to a defensive economic strategy, export control, CFIUS, Committee on Foreign Investment in the United States, sanctions. But there's been little, it seems, on the other side of the ledger when it comes to advancing a positive economic agenda. Richard, what do you think we should expect when it comes to proactive economic measures?

Richard Fontaine: (32:49)
Not much in the near term because it's caught up in domestic politics, but it's a real missing piece. I mean Michele mentioned the Trans-Pacific Partnership. Take Asia, for example. There are two region-wide, big trade agreements in Asia. There's TPR, CPTPP now, and there's RCEP, which is the other one. The United States is party to neither of those. China's party to one and is closer to joining TPP that we are at this point.

Richard Fontaine: (33:21)
There's been talk about digital economy agreements. Well, we can't. Trade is too controversial now. We're in this protectionist mindset. But maybe we can get digital economy agreements that liberalize digital trade and show some leadership there, reduce the barriers, and things like that. But there's been no effort thus far out of the administration, and the Congress is not particularly pushing this very hard.

Richard Fontaine: (33:44)
So I think you're absolutely right. There's all kinds of defensive measures on how to deal with export controls and investment screening and all these other things. Virtually nothing on the positive side of what would economic leadership in various parts of world look like, not only for geopolitical reasons but for no-kidding economic reasons at home.

Richard Fontaine: (34:05)
But it's too domestically, politically difficult now. Maybe something after the midterms or in a second term, but we're now seeing more or less three administrations in a row that are not terribly gungho on the positive economic side. And TPP didn't pass, as we know.

Zoe Weinberg: (34:29)
Yeah, Michele?

Michele Flournoy: (34:30)
If I could just jump in. I think there is an opportunity to make some lemonade out of lemons. When you look at the incredible integration of our supply chains globally with China, there are areas where, fine, not a big worry, but there are areas that touch on national security, that touch on our digital economy, that touch on heightened awareness, public health, supply chains, and pharma supply chains.

Michele Flournoy: (35:02)
There are places where we really need to reconsider our vulnerabilities and develop much greater resilience. Some of that may be reshoring things to the United States, but in many, many cases, it's going to be redistributing supply chains in the region.

Michele Flournoy: (35:21)
That's an opportunity for us, in terms of absent the trade agreement we wish we had, to make at least some progress in bolstering the economies of some of our key partners by moving some of the supply chains that are currently in China to places like Vietnam, or pick your favorite ASEAN economy.

Michele Flournoy: (35:44)
So I do think there's an opportunity there. But in the meantime, to me, the most important thing we can do economically is actually invest in the drivers of our own competitiveness here at home, which science and technology spending, research and development spending, access to higher education, 21st century infrastructure.

Michele Flournoy: (36:04)
Smart immigration policy. I mean look at the founders of Silicon Valley. Half of them are either immigrants or first-generation Americans. We benefit from an immigration policy that welcomes and draws the best and brightest from around the world to this country and then convinces them to stay and make their businesses here and so forth. We've lost the bubble on that somehow in the last administration and the last few years.

Michele Flournoy: (36:30)
So this is, this is an agenda that I think resonates in a post-COVID America. I think it's very, very important. As we evaluate these big investment bills, the two infrastructure bills, the Chips Act, we've got to make sure that we're investing in replacing some big bets in the areas where we need to compete. We're not just investing in technology, but we're investing in the human capital that's really going to help us win the competition in the longer term.

Gen. H.R. McMaster: (37:04)
I would just say that economic security is national security. I think just one area I'd like to highlight is an area of energy security, how that relates to carbon emissions and climate change.

Gen. H.R. McMaster: (37:13)
I think because we don't look at the interconnected nature of energy security and national security that we make some bad decisions. I mean the Biden administration blocked the Keystone pipeline, which made a lot of sense in terms of protecting the environment and from an energy security perspective and then green-lighted a Russian pipeline that has profound implications for Russia and Russia's ability to have course of power over Europe.

Gen. H.R. McMaster: (37:39)
And so, I think we have to look at the interconnected nature of these problems and make decisions based on informed judgments, and ensure in the area of energy in particular that we don't trade our dependence on Middle Eastern oil in the 1970s for a new dependence on fragile supply chains that are dominated and controlled by China as we shift to the next-generation energy sources. In particular, I'm thinking of supply chains related to rare earths and rare earths refinement, battery manufacturing, and so forth.

Gen. H.R. McMaster: (38:10)
So we have a lot of work to do, I think, from an economic security perspective, resiliency of supply chains that became too fragile based on maybe unchecked globalization or a bias in favor of efficiency rather than resilience.

Gen. H.R. McMaster: (38:27)
We have a lot of work to do to catch up to China's weaponizing its authoritarian, mercantilist model against us. This is in areas like the Endless Frontier Act, the Chips Act, which are elements of industrial policy, which we don't do particularly well and have to be careful about, but I think are necessary to compete with China's economic aggression.

Zoe Weinberg: (38:49)
We only have a few minutes left, but I want to touch briefly on one more topic that's generating a lot of headlines these days, and that's space. Of course, historically, space has obviously been the domain of the federal government and programs in defense and science. But now we're watching the competition between Blue Origin and SpaceX and Virgin Galactic play out in real time.

Zoe Weinberg: (39:11)
Michele, you recently joined the board of Astra Space. What do you make of the commercialization of space and where is it headed?

Michele Flournoy: (39:21)
Well, I think it is a new frontier and it's a very exciting time. Because I think there's a lot that we can do in space to actually help better manage the planet, particularly when it comes to things like climate change, resource depletion, environmental degradation, and so forth.

Michele Flournoy: (39:42)
But it's also a great example where the federal government changed the model and opened the doors to commercial industry with great benefit. I mean the credit goes here to NASA, which decided to open up the door, let commercial industry compete with the traditional defense industry in providing solutions in space.

Michele Flournoy: (40:04)
It really created a market. Now we have not only the space companies you've heard of, but some of the ones you haven't heard of yet that are coming up with very interesting new models.

Michele Flournoy: (40:17)
Since you mentioned Astra, I mean Astra's model is to get to daily launch on demand out of a container truck from anywhere in the world. They're mass producing high-quality rockets that can put payloads for commercial, defense, intelligence into bespoke orbits and beat the best competitors on price.

Michele Flournoy: (40:39)
When you talk about resilience, when you talk about space becoming a contested domain and needing to be able to put assets back into space so we're not blinded, so our GPS doesn't go down, so our communications doesn't go down, et cetera, anything that contributes to that resilience has got to be part of our future.

Michele Flournoy: (41:00)
So this is one of those areas where I think it's a very exciting time, because you've got a lot of new entrants, a lot of new ideas, and some real energy behind transforming that sector.

Zoe Weinberg: (41:09)
General Kelly, I know that you departed the administration before this Space Force was created. But I was wondering if you could tell us anything about the motivation for its creation and what we can expect from the Space Force?

Gen. John Kelly: (41:23)
Well, there were a lot of people that had been encouraging this move for some time. The United States Air Force was doing, to say the least, a good job in terms of managing assets in space and that kind of thing. But there were certainly people that came on board that argued that it's about time to break it out separately.

Gen. John Kelly: (41:46)
So it wasn't necessarily ... And I don't know, H.R., if you remember. I mean there were a lot of good ideas coming into the White House, but it was not necessarily the president or someone like that who decided we've got to do Space Force. There was a lot of discussion about, okay, well, do we really need it now or do we need it at all? Because the Air Force has a separate Space Force and why aren't they doing a good job and all of that.

Gen. John Kelly: (42:09)
But I think, at the end of the day, it's a good decision. It's not going to grow into a huge organization nor does it need to. I was just up in strategic command up in Omaha last week and the week before, frankly, and a lot of great work being done on the Space Force. They're already credible and they'll get even more so.

Zoe Weinberg: (42:33)
Any final thoughts? Yeah?

Gen. H.R. McMaster: (42:34)
Yeah. I'll just say sometimes the government puts the right person in the right job. I think General Raymond and then his deputy Bill Liquori, who was our director of defense and worked with the Vice President in the space council to develop, I think, a really sound space strategy that ought to have broad, enduring, bipartisan support going into the future. There's an unclassified version and then there's a classified version. I think it's actually quite good.

Gen. H.R. McMaster: (42:57)
I was agnostic on it, but now that it's done, I think it was the right decision to split out the Space Force, because we've got the right people working on, as Michele just mentioned, is ... We're late to the game, recognized as a contested domain. There's so much potential now thanks to really the private sector coming up with so many innovative solutions to the problems we have and the opportunities that we have in space.

Zoe Weinberg: (43:24)
I have-

Richard Fontaine: (43:25)
The-

Zoe Weinberg: (43:25)
Go ahead, Richard.

Richard Fontaine: (43:26)
The one thing I would add is I think the commercialization, the creativity that's been unleashed in this country around space is a good example of the bright side of some of the darkness that we were talking about on this panel, because when you're talking national security, you talk about threats and China and Afghanistan, and it starts to get pessimistic.

Richard Fontaine: (43:47)
I think it's a good example because everything that the United States needs to compete in this new world that we're entering, whether it's China or deal with the threats around the world, we already have. We have the strongest, most powerful, richest, most creative, most innovative country in the world with an attractive democratic system, lots of friends around the world. It's about putting those pieces together and drawing on our greatest strengths as Americans that's going to win across this whole swath of stuff.

Richard Fontaine: (44:19)
On the one hand, it's daunting when you spend most of your hour talking about all of the threats and all the problems in the world, but the encouraging side is, as Americans, we're in the lucky place of if we just are better versions of ourselves, then we'll be able to deal adequately, if not excellently, across the whole spectrum of them.

Zoe Weinberg: (44:40)
Richard, thank you for helping us to end on a positive note. I have one final question this morning. This was a special request. I won't say from whom. It's for General Kelly. You can answer in just a sentence or less. General, tell us what was it like to fire Anthony Scaramucci?

Gen. John Kelly: (44:59)
Well, of all of the things I did at the White House, it was certainly the most enjoyable thing.

Zoe Weinberg: (45:02)
Great. Well, thank you.

Welcome to SALT New York! Eric Adams & Anthony Scaramucci | #SALTNY

Eric Adams, Democratic Nominee for Mayor of the City of New York welcomes SALT to New York! Joined by Anthony Scaramucci, Founder & Managing Partner, SkyBridge.

SALT New York is a global thought leadership and networking forum at the intersection of finance, technology and public policy. Over the course of three days, leading investors, creators and thinkers will take the stage in support of SALT’s mission: empowering big ideas.

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MODERATOR

SPEAKER

Eric Adams

Democratic Nominee for Mayor

City of New York

FULL BIO

Anthony Scaramucci

Founder & Managing Partner

SkyBridge

FULL BIO

TIMESTAMPS

EPISODE TRANSCRIPT

Anthony Scaramucci: (00:07)
Super, super excited to do this. I want to talk about the right person, at the right time, in the right place for New York City. He's going to come out and present himself, but he's an amazing guy. He's a warrior for the city. He has a love of country. He has a love of humanity, which is more important than anything else. That's the thing that you really need, and our public servants, and our politicians. Mike Bloomberg endorsed him this week. He doesn't need my endorsement, but I'll be voting for him. I'm a financial supporter. Ladies and gentlemen, I want you to meet the future mayor of New York City, Eric Adams.

Eric Adams: (00:55)
Good morning. Good to see you all welcome to the Big Apple and it's shiny, beautiful redness. I went through Manhattan today the image of darkness came to mind. I just want to take a few moments to share with you.

Eric Adams: (01:13)
About four years ago, I woke up and I could not see my alarm clock. I went to the doctor. Doctor stated, "Eric, you're losing your sight. You're going to be blind in a year". I had permanent nerve damage in my hands and feet, that was going to lead to amputation. I learned that ahead, I was experiencing late stages of diabetes. Those were the symptoms; high blood pressure, high cholesterol. The entire American healthcare crisis package was all in my body, went to five of the best doctors. They all told me I will be on medication the rest of my life. And this was my new norm.

Eric Adams: (01:58)
I made the determination to seek beyond what the traditional medical profession said. I found an amazing doctor in Ohio, Dr. [inaudible 00:02:07] he said, "I can give you medicine for your vision loss, your nerve damage, your high blood pressure, your high cholesterol and all the other problems. Or I can tell you the underlying reason that you experienced in these issues. And if you change that you would change your entire health outcome". I did just that. I changed my diet and learned that it was not in my DNA, but it was in my dinner that caused me to have the diabetes issues that I was experiencing. Three weeks later, my sight came back. Three months later, my nerve damage went away. Three months later, my diabetes went in remission. I dropped 35 pounds. I don't have a six-pack. [inaudible 00:02:47] my body's healthy as it's ever been before in my life.

Eric Adams: (02:50)
I say that because when you look at our cities across America, we are playing whack-a-mole. We're continuously trying to respond to issue, after issue. We are dysfunctional as a city in New York and dysfunctional as a country, and we have to stop feeding the crises that we are experiencing and start going to the underlying causes. I believe Archbishop Desmond Tutu has the right quote, "We spend a lifetime pulling people out of the river. Let's go upstream and prevent them from falling in the first place." New York would no longer be anti-business. This is going to be a place where we welcomed business and not turn into the dysfunctional city that we have been for so many years. It is imperative that we face an unprecedented crisis. Government must do his job to create an environment for growth. That includes lower crime. The prerequisite to prosperity is public safety and justice.

Eric Adams: (04:00)
We have to curb COVID. Fewer homeless as you see on our streets. Greater affordability and partnership with the business community. That is why I have proposed some clear outlines, laser-focus on gun violence, all across our country, gangs and guns. They are destroying the foundation of not only public safety, but business. No one is coming to New York if a three-year old is shot in Times Square or bullets and carbon highways of death throughout our communities. We're going to create community health centers in undeserved neighborhoods where COVID is still spreading to improve access to vaccines and provide preventive care, to assure better, long-term health. We're going to invest and attract growing industries in New York. We're going to be the center of cybersecurity, drone development, self-driving cars, all the new industries right here. A pathway of young people having the opportunity to fill those jobs. A large new investment in green jobs, through the city's capital program to raise employment and create a more sustainable city in the process. We can't continue to feed our babies food that feeds their healthcare crisis.

Eric Adams: (05:23)
We in conflict with each other. Department of Health and Mental Hygiene spends millions of dollars to fight childhood obesity, diabetes, and asthma. You know what happens every morning? We feed our babies 960,000 meals a day. Those meals cause childhood obesity, childhood diabetes, and childhood asthma. That is the height of dysfunctionality. We can have a free and subsidized childcare for every parent who needs it at every age, so that young people can develop to their full potential and parents can work and thrive. There's a huge investment that we are planning to make in New York, but we expect something in return folks. It is my goal, and I want to be blunt with this. This is a business conference after all. So we have to be talking about business. We want to offer you, and ask you to offer your jobs to New Yorker's. Right now, there are hundreds of thousands of people out of work in New York.

Eric Adams: (06:23)
There are hundreds of thousands of jobs that you have that we can fill. We have to connect you to those New Yorker's who are unemployed or underemployed. If they do not have the skills or trainings needed to do the jobs you can and need to fill, we want to connect you with them and the road for us to develop them with our workforce development center. That is why I'm proposing unprecedented partnership between city employers, and the city itself to make those connections and create one common application. One job application to fill all the jobs you have available in this city. New York wants your jobs and we want to fill them. I'm offering my hand in partnership today, but I am also making an ask. Pledge to be part of this unprecedented effort to grow this city and get New Yorker's back to growth.

Eric Adams: (07:21)
I want you to join us today. You choose New York and we want to choose you. The anatomy of our city can be a healthy place. Not only physically healthy, but healthy by insuring we leave no one behind. We want to end inequality and create an environment where we raise healthy children and families. I wore a bulletproof vest for 22 years as a police officer to protect the children and families of the city. My son, Juan grew up in the city that I grew up in. We will be safe, will be affordable, and we will be practical in our practice.

Eric Adams: (07:55)
Thank you very much.