“No one knows what’s going to happen because we’ve never been through anything like this. There’s never been a giant recession with a healthcare crisis. All that people can do is guess.”
Our inaugural SALT Talk featured the Founder & Co-Executive Chairman of The Carlyle Group, David Rubenstein, who took us through his thoughts on the economy, private equity landscape and Carlyle’s positioning in the context of the current crisis.
In many cases, people are not willing to go back to work unless there is a proven vaccine readily available. Corporations are realizing that they may not need as many employees because of how efficiently they’re working from home. They also may never need to fully return to the office.
His advice to young people today: no one ever succeeds in doing something that they do not love doing. “Take advantage of the change that COVID-19 is forcing onto the world.”
LISTEN AND SUBSCRIBE
SPEAKER
David Rubenstein
Co-Founder
The Carlyle Group
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie (00:08):
Welcome to SALT talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform that encompasses finance, technology, and public policy. SALT Talks are a series of digital interviews that we're doing in lieu of our in-person conferences, which unfortunately were canceled this year due to the coronavirus pandemic. And what we try to do in these SALT Talks, is provide our audience a window into the minds of leading thinkers, as well as give a platform to the powerful ideas that these speakers are covering.
John Darsie (00:44):
Today we're very pleased for the first edition of SALT Talks to welcome David Rubenstein. David has been a frequent speaker at our SALT conferences, both in Las Vegas, and most recently at our SALT conference in Abu Dhabi in the United Arab Emirates. He is the co founder and now the co-executive chairman of the Carlyle Group, which is one of the world's largest investment firms focused on private equity and venture capital as well, more recently.
John Darsie (01:11):
David, thanks so much for joining us. We're going to turn the interview now over to Anthony Scaramucci, the founder and managing partner of SkyBridge, as well as the chairman of SALT, to conduct the interview with David. Take it away guys.
Anthony Scaramucci (01:22):
David welcome. But I wanted to really just get right into it with you, because we've got over a thousand people listening in, and wanted to thank you for joining us. And so, I'm going to start with some basic questions, because I think people are curious to hear your thoughts on the economy. But just saw you on a CNBC. Several billionaire investors have grown very negative on the economy. Think the markets ahead of itself, obviously think that we're heading into a potentially prolonged recession to use chairman Powell, Jerome Powell's' words this morning. And so what are your thoughts?
David Rubenstein (01:59):
I thank you very much for inviting me, Anthony. I'm pleased to be here, and I've spoken at many SALT events around the world, and congratulations on what you've built with SALT. Let me quote two people at the beginning, to agree with one, and disagree with another.
David Rubenstein (02:14):
There was a man named Bob Goldman, who is the script writer for Butch Cassidy and the Sundance Kid. And he wrote a book about Hollywood, and it was called nobody here knows anything. Which is to say, nobody in Hollywood really knows when a movie is going to make it or not. Nobody really knows. Well the truth is, everybody on TV, including me, really doesn't know what's going to happen, because we've never been through anything like this. There has never been a combined gigantic recession with a health care crisis of the likes we have now. So nobody really knows. You can make guesses. And if you don't say when something is going to happen, at some point you can say your guesses turned out to be accurate. But nobody really knows. And I don't really know.
David Rubenstein (02:53):
My guess is, that right now the economy is in a recession. It may go into something between a recession and a depression, but we are not likely to get out of it anytime soon. And when we get out of it, it'll be, take quite a while. Now, the other person I would quote is Sir John Templeton, a famous investor. You're probably familiar with him of course, and one of the greatest investors of the 20th century. He famously said, the most dangerous words in the English language for investors to use is, this time is different. Which means to say, that when somebody says, oh, this has never happened before this time is different. Ignore that, because things always revert to the mean. But this time is different, and he's wrong. Because this time you've got the healthcare crisis, and you've got the financial crisis combined, is an unbelievable problem.
David Rubenstein (03:42):
And let me make one final comment about this before we get on to other things. This has really hit home to me personally. I am now 70 years old. I'm a baby boomer. I'm a fair bit older than you. And baby boomers, I call them a... Well, let's put it this way. Tom Brokaw used to say, and he always said, that the people that fought World War II, they were the greatest generation. I called my generation, that we're not getting off the main stage generation, because we never want to get off the main stage. We're running for president, we're running this. We're still not giving up our jobs and so forth. But now, we are seen not as aging baby boomers, but as senior citizens, and people are worried about our health. And I'm worried about my health, because I realized that this crisis, your life could go very quickly. Normally when you get to be 60, 70, you've got reasonably good chance of getting to be 70 or 80, or maybe 90. And your parents are... One is in their eighties? They're both in their eighties now?
Anthony Scaramucci (04:38):
Yeah. Both my parents are in their eighties. Yeah.
David Rubenstein (04:40):
When you get to be 70 or 80 in the modern world, you feel, if you're going to... Something's going to go wrong at some point, you will die from something. But you generally have a chance to have some doctors treat you well. It might take you five years or 10 years before it really got at you. And you have a chance to say goodbye to your family, your loved ones. In this crisis, you have a chance of dying within a week, and you have no chance in some cases of saying goodbye to your loved ones. So it scared the hell out of a lot of baby boomers, including me, that maybe I catch this, and all of a sudden I'm gone. So I am doing everything I can to stay reasonably healthy, and trying to get other people to stay healthy as well, because this is a virus of the likes of which we've never seen. At least not for a hundred years, anything like this.
David Rubenstein (05:23):
So, the economy is not in great shape. It'll come back in time. I don't know if it's one year or two years. But when it comes back, it's a different economy. People are going to do different things. They're going to save differently. They're going to spend differently. They're going to do things they didn't do before. And so it's a different world we're going to come back in. This has scared people like me and others, that life could go away very quickly. And therefore we have to recognize, the economy is important, but it's not the most important thing. It's our health. And it's a very sad commentary that we have a situation today that people in this country have to sit in food lines for hours, and hours, and hours, to get basic necessities. Who would've ever thought this would happen in our country. I realize there are food banks and then there are homeless people. But people in the middle class, or so, have never had experienced anything like this. And this will scar them forever.
Anthony Scaramucci (06:17):
Well, I... Listen, I not only agree with that. I think the very sad fact of the country right now, is that we are getting the reckoning of people living paycheck to paycheck. Or small businesses living cash flow month to cashflow month. And of course we all know now that our hospital system is probably not what it needs to be to handle a crisis like this. But I saw your interview with John Barry, who wrote The Great Influenza. You did an interview for the Library of Congress a few months back. And I'm just interested, because I know you read his book, and we came out of that crisis pretty well in the sense that we had the roaring twenties. Do you think we're setting ourselves up for some pent up demand, and the combination of the stimulus, plus the pent up demand, like what happened after the Spanish flu pandemic will happen? Or do you think this thing will rollover?
David Rubenstein (07:12):
Well, for those who haven't read that book, it's called The Great Influenza. It came out around, I think 2004 by John Barry. And he really went through the so-called Spanish flu, which never really originated in Spain. And it turned out that 50 to a hundred million people around the world were killed. And almost, I'd say 700,000 in the United States. One of the interesting things about that was, President Wilson never mentioned it publicly because nobody wanted to do anything that would damage the World War I efforts. So it was never mentioned publicly. Public officials weren't honest. And his main message is, be honest and upfront about the damage that is coming about.
David Rubenstein (07:48):
Now, what I should also point out, that he has said in his book, we still do not have a vaccine for that influenza, or that virus. Otherwise, here we are 100 years later and we never developed a vaccine for that. We still don't have a vaccine for HIV. We have some things. If you get HIV, you can be, have therapeutics. We don't have a vaccine. So, I think we will get a vaccine, but I don't know that it's a layup, because it's not easy to get these things.
David Rubenstein (08:16):
In terms of the economy and the roaring twenties, economies will come back. We have in our country 330 million people, they want to be economic analysts. It'll come back. But the question is, will we be damaged psychologically? Because it's going to take a while for people to really feel comfortable, traveling, socializing, and so forth. And will people be doing the same things? We don't know.
David Rubenstein (08:36):
One of the sad things is this. I have a program where I interview people, CEOs from their homes, and saying, how are you managing your company from your home? And what I'm finding when I ask them, is that they're saying it's working out okay. And in fact, a lot of their employees actually would rather stay at home, and they don't want to rush back to work. Certainly if it's not, there's no vaccine. So you're going to see a lot of people not coming back to work in the traditional ways. And the result is I think, fewer people are going to use much office space as before. People are going to train, commute less than before. It's going to change the way we live. And I think for many years it will do so.
Anthony Scaramucci (09:11):
So, that's a good transition then into private equity. You've mentioned on CNBC about an hour ago, that you have dry powder. And so when you see these accelerated changes in commutation, work from home, retail expenditures really going direct to the consumer, what do you, where do you want to go with your private equity business data?
David Rubenstein (09:33):
The lesson of the Great Recession, was that people in the private equity world made a lot of money by buying their own debt back at a discount. Putting more equity in the deals that were not doing so well. And the deal that made the most profit was the Blackstone deal for Hilton. And they had to restructure it one or two times. But they ultimately made a $14 billion profit on it. So, a lot of private equity firms are spending their time making sure that their existing companies are doing okay. That's what they know best, the companies they already have. Once they're past that, they are looking for new deals. But nobody has ever gotten into the Forbes 400 by quickly buying a company in a recession, in an area they didn't know much about. So you really have to make sure you do a lot of due diligence, and wait for the market to kind of come near the bottom.
David Rubenstein (10:17):
Nobody can ever time the bottom or the top of market as perfectly, but I don't think we're at the bottom of the market. I think the stock market has been ahead of the economy for quite some time. And I think we're increasingly seeing that more and more people are saying that. The economy is... You've got 30 million people unemployed or underemployed. And you can't just say the economy is so wonderful, and the stock market deserves to go up. I hope the stock market keeps going up, because I own some stock in lots of companies. But I just don't think it will continue to do that way. And I think it will have the middle vacillate a lot. And I think it's going to take a while for the real economy to kind of grow into where the stock market currently hasn't.
Anthony Scaramucci (10:54):
Well, you mentioned the real estate stuff. And so I'm curious your reaction to that. James Gorman was on CNBC last week, and he said that he can more or less do off of his Zoom application and VPN at home, and his telephone, and his email, almost everything that he's doing in the office. And so, when you think about commercial real estate, and suburban commercial real estate, as well as these urban centers, what's your opinion of that? Is that overblown to think it's going down or there'll be excess capacity? Or do you think that we're really in for a accelerated trend?
David Rubenstein (11:31):
As an owner of real estate office buildings and other things, I hope that everybody comes back quickly. But to be realistic about it, I think that people are not willing to go back to work until there's a vaccine in many cases. People don't want to go through public transit in many cases. So I think it's going to take a while. And I think employers, what they're not really saying to people is this, we don't need as many employees as we thought we did. And probably we are not going to bring everybody back. Most of the CEOs I talked to do not commit to say everybody that's working today, when we come back full time, I'm going to hire them all back. They're not saying that, they're more vague. They're just saying, well, we won't have furloughs forever. We'll have to deal with it. But basically nobody's making commitments. They know they probably don't need as many people, because you can work very efficiently from home.
David Rubenstein (12:16):
I'm a perfect example of this. I am a last adopter of technology. I usually, when something is about to go out of business, that's when I get involved with it. So, I'm probably the last person that got an iPhone in the United States. I was using Blackberry until they didn't service it anymore. So now I have an iPhone. I've been using an iPhone for a couple of years. Now, I am... I have a technology team that has gotten me set up at home. So I now have a portable computer. I have an iPad. I have a bigger computer. And I've got all kinds of telecommunication stuff. I have half of an army teaching me how to use these things, but I'm not probably that different than a lot of other people. And I actually, it's pretty comfortable working at home. So I don't have to go to the office every day. Or I can be in more pleasant places than where I am now. So I think it will change, yes.
Anthony Scaramucci (13:01):
Well, can we switch more to the macro side? Because I'm curious of your reaction, and your historical perspective for that matter on the deficit spending. So we're massively ramping up deficit spending. We're going to probably get deficit spending up to that World War II percentages in terms of our GDP. And what's your reaction to that? Are you worried about it, or you think it's a non event? There's a gradation from the apocalypse doom and gloom people, to the modern monetary theorists. Where are you on that spectrum? And what's your thoughts on it?
David Rubenstein (13:35):
Well, when I worked in the White House for Jimmy Carter, our last budget was sent up to Congress, and it had I think a $59 billion proposed deficit. That was seen as so big, we had to pull it back and pretend we had a balanced budget we sent up to Congress. Today, a $59 billion deficit would be wonderful. We're going to run about a three and a half trillion dollar annual deficit. I would, I'm as stunned that the markets are accepting this, but apparently the markets don't seem as worried about it as I think they should be. I don't know how much longer you can run up $26 trillion of debt, and have nobody worried about it and not have inflation.
David Rubenstein (14:10):
So I guess I'm old school in thinking that this is not a wonderful thing. I recognize we have problems now, we have to deal with it. But I do worry that when interest rates eventually go up, it'll be very expensive to pay for this. So I'm worried about it, but I think it's my children and grandchildren that are going to have to pay it off. Because I'm not going to be around to pay off these large amounts of debt in my view.
Anthony Scaramucci (14:30):
Well there's a lot of saber-rattling going on between the American government and the Chinese government related to trade, and now the virus. And so... And I know you're a student of history and you understand the Thucydides Trap, related to rising super powers causing a threat to the existing power structure. So where do you think that goes? And what's your advice to people in terms of thinking about that?
David Rubenstein (14:56):
Under the Thucydides Trap that Graham Allison wrote about, out of let's say 20 examples he studied, maybe 15 or 16 led to military confrontation. We're not going to have a military confrontation. But we'll have a different kinds of confrontation, diplomatic, geopolitical, cyber, and so forth. The relationship is going to get worse before it gets better in my view, because during the presidential election, there is no penalty for being negative on China. Nobody ever lost their congressional seats or Senate seat, or the presidency by being negative on China. So people are going to blast China. And as a general rule of thumb throughout history, people don't like to blame themselves for problems. They like to blame somebody else. So who is a good person to blame that doesn't vote a lot, China.
David Rubenstein (15:39):
So I think between now and November, China's going to get blamed for everything. If it rains, China will get blamed. If it snows China will get blamed, everything. And I just hope that people recognize after the election's over, we need to come back, because the two largest economic powers in the world can't be at each other's throats all the time. We need them to buy our treasury bills, and produce products that we want. And they need us to get products that they want as well, but also for investment technology and other kinds of things. So, I think it's not going to be good for awhile, and it's going to be a geopolitical problem between now and the time of the election, in my view.
Anthony Scaramucci (16:14):
There are people sending me texts here, wanting me to ask you certain questions. So I'm going to have an abrupt segue here. And I'd like you to talk a little bit about your upbringing. There's one question I think is very interesting. You grew up in the housing projects in Baltimore. I saw that 60 minutes interview that you did. And your father was a postal clerk. David you're the living example of the American dream. So can you take us back and tell us a little bit about your journey, where your origin was, and how you got to where you are now?
David Rubenstein (16:46):
I don't want to make it sound like I was poverty stricken. I was in a lower blue collar kind of family. My father made $10,000 a year or so working as a postman. I was an only child. We had an 800 square foot house, very modest. But, as everybody who's listening knows, that you accept as a child, the situation you find yourself in. So I wasn't bemoaning the situation. I said, this is what my situation is, and I just did the best I could to deal with it. And in the end, I got lucky in life and worked hard, but a lot of luck. And it produced some financial success. But financial success is not what I was interested in. I had no interest in making money, because I grew up not having any money. There were no hedge funds. There were no project [inaudible 00:17:31]. There were no billionaires.
David Rubenstein (17:31):
And I didn't aspire to that. I just aspired to go into government and help the country that way. And obviously I didn't, it didn't work out that well. I worked in the Carter White House. We got inflation to 19%, and we didn't get reelected. So I went back and practiced law. I wasn't that good at it. And so I went into private equity and it worked out for me. But I felt very loyal the country because I got lucky with modest circumstances I had growing up, and a last name that's very ethnic. I'm not sure in other countries, I could have done what I've done. So I've decided to give away all my money. I'm in the process of giving it away largely to things that benefit the country, but what I call patriotic philanthropy.
David Rubenstein (18:06):
So I'm doing that, and I think my upbringing may have helped a bit. I have a book that I guess I'll plug right now, it's called How to Lead. It's a TV show I have that talks about leadership, that I ask people how they became leaders. And very often people became leaders like you, by coming up... You've had modest circumstances as well. You've come up by failing, taking risks, not being willing to just take no for an answer. And basically keep pushing, and pushing, and pushing. And a lot of luck helps as well, and having good partners being willing to share the credit. So there's no secret formula, but I... Luck helps a lot.
Anthony Scaramucci (18:45):
If you were back at age 21, and you were in the financial circumstances that you were at 21 thrusted forward into the 2020 pandemic, what are some thoughts and some suggestions that you would leave for people in terms of what to think about opportunistically? And what would your mindset be like using your historical perspective?
David Rubenstein (19:11):
Well what... If I were 21 today, I would say to my... And I have a son that's graduating from law school and business school. He's in your son's class at, in law school. That, try something that is something you would like. Other words, you should, never... Nobody ever succeeds in doing anything in the world unless they love what they're doing. Nobody ever won a Noble prize hating what they do. You have to find something you love, experiment, find something.
David Rubenstein (19:37):
But today, I was not in that age interested in making money. Today, if I came out, I'd say, okay, I don't want to go into government, I want to make some money. I would probably find things that, post COVID-19 are likely to do well. A lot of things are going to do well post COVID-19. It's not that difficult to figure them out and get into that industry, or get into those companies, and start those companies. Because the world will change over the next couple of years because of COVID-19.
David Rubenstein (20:03):
And for your viewers, I also, I've mentioned a couple of books. Let me mention one other that might scare them. It's a book by David Quammen, and the book is called Spillover. And essentially he says, this book was written in 2012. He says that we've got seven and a half billion people on the face of the earth. And we are increasingly encroaching on the land that animals occupy. We're mining, we're deforesting, were killing more animals. We have all kinds of livestock kinds of things, where people work closely together with animals, and they kill them. Or you have wet markets as they have in China.
David Rubenstein (20:34):
More and more viruses that live in these animals, that don't kill the animals. They're jumping from animals to humans, and that it going to increasingly happen. And so people that can figure out how to take advantage of that, and prevent that I think will do well. But also, people are going to figure out how to take advantage of the fact that, people are going to change their lifestyles. They're going to buy things differently. They're not going to buy the things they bought before. So those are things that I would probably do if I was a young entrepreneur, trying to figure out how to take advantage of the situation in an appropriate way.
Anthony Scaramucci (21:04):
You mentioned the book Spillover. And one of the things in that book I found so interesting is the immune system that we have, which is very strong, obviously, because it got us to where we are evolutionary. From an evolutionary perspective, the immune system of a bat, or some of these other mammals is like 20 times stronger than our immune system. And so, we obviously need to do more research on that. And so I'm wondering if you, what's your thought on this, the Department of Homeland Security was created after 9/11. A cabinet level position in the executive branch. Do you think we will have something like what was recommended in the book Spillover, like a department of pandemic defense, or a cabinet level position going forward? And agency that sort of protects the American public the way Homeland Security did after 9/11?
David Rubenstein (22:00):
I think something like that would be a good idea, because clearly we weren't prepared for this. Even the department of Homeland Security really wasn't appropriately ready for this. And HHS wasn't either. So I think something like that probably will get done, whether it's a full cabinet department, or it's an agency, I don't know. But something should be done. One of the lessons we have to deal with is our supply chain. We're completely dependent on China for medical equipment. We've got to change that. And other things that could happen in the future. We're too dependent on China for their supply chain.
David Rubenstein (22:31):
But also, vaccine preparation. Vaccine manufacturing. All those kinds of things. Very, very strange in terms of the way it's gone together. And take testing, we haven't really tested that many people yet. And a lot of people are not comfortable going back to work until they have a test. So I think we've got to deal with all these kinds of things. And it's sad that it's going to take us a couple of years to even deal with it. And I hope we can get through this crisis, and then solve it with the testing and the vaccines before the next wave comes. If you now remember from the Spanish flu, the second wave killed a lot more people than the first wave.
Anthony Scaramucci (23:06):
I want to go to a question Bob [Rondano 00:23:09], one of my friends is asking, just sent me a text about global macro capital flows. And if you're sitting in an investment meeting at Carlyle, and you're thinking about, okay, what's going to happen in a post COVID-19 world, in terms of where's the capital going to flow? What nations are going to benefit versus others? What industries are going to benefit versus others? What do you think?
David Rubenstein (23:34):
Well, in the early 1980s, the phrase emerging markets was invented. And before we called those countries third world countries, or undeveloped world country. And people thought because they... Young populations, prices are cheaper, less competition, invest there, you'll do well and so forth. That may be worked, maybe didn't. It wasn't spectacular. But now people are nervous about the emerging markets, and they're going to pull money out of it, I'm afraid. So they're going to pull money back into the developed markets. You'll see more money coming into the United States. Look at all the money we're borrowing, and the dollar is strengthening. Why is that? Because people want more dollars. The foreign currencies are going to weaken against the dollar. So I'm afraid the emerging markets are going to have problems.
David Rubenstein (24:11):
I don't regard China as an emerging market anymore, or India as an emerging market. But I think, you're going to see more money flowing into the United States. You're going to see more money flowing into developed markets. In terms of specific industries, I do think technology is an industry that's going to continue to grow. Now we, right before this COVID crisis, we said maybe the big companies, the Fang so-called are too powerful. Maybe they are, maybe they're not, but they're going to continue to aggregate power and money because we need them. They've done incredible jobs during this crisis. Take a look at Amazon. Amazon has done a lot of wonderful things during this crisis. You can criticize them in some respects, but they saved a lot of people's lives by providing products that people needed.
David Rubenstein (24:51):
So I don't think that American technology companies are going to be weakened, I think are going to be strengthened. And new technology companies who take advantage of this are going to be strengthened as well. What is, I think is going to be hurt, is things that depend on travel. Things that depend on people congregating in large amounts, numbers of people. Sporting events, music events, all those things going to be hurting for a while. They'll come back in time I hope.
Anthony Scaramucci (25:14):
David, it's a little... Another abrupt segue. People want to know what's behind you. Now you're going to get a very high rating on room rater, David. I mean probably like a 10 out of 10. So what is that mural representing behind you, and who did that for you?
David Rubenstein (25:32):
Well, my late mother-in-law was a painter. And when we moved into this house, some 30 years ago, she painted murals here. And this is a mural of the White House. And my family is interposed in there, as well. But it's a mural of the White House. And so I thought it'd be appropriate. Both of us have worked in the White House, so I thought it'd be nice to talk to you with this setting.
Anthony Scaramucci (25:56):
Well, I think you lasted more mooches than me though. I don't know how long your tenure was, but I'm willing to imagine that you were there a little longer than I was David.
David Rubenstein (26:04):
I was there for the entire four years, but I didn't get as much visibility as you did.
Anthony Scaramucci (26:10):
Well, you're doing a good job of visibility now. So, I'm not too worried about your visibility. Let's talk about leadership. You've got this great new book coming out. Hold the book up again so people can see it.
David Rubenstein (26:23):
Called How to Lead. Thank you for letting me promote it. It comes out in September.
Anthony Scaramucci (26:27):
Can you tell our audience more about it? What the content is, the background, et cetera?
David Rubenstein (26:33):
Essentially, I've had a TV show on Bloomberg for about four or five years, where I interviewed CEOs, or leaders like Bill Gates, Jeff Bezos, Oprah Winfrey, David Petraeus, people like that in all walks of life. And I always ask them, what did it take to be successful? How did you become a leader? And they all have their secrets. Warren Buffett, or Lauren Michaels, or Yo-Yo Ma. They all have different secrets, but in the end it gets down to a number of things. In the end, in my view, it is being persistent, sharing the credit, being willing to take a chance, not taking no for an answer, recognizing that failure can be helpful to you. And in the end, I think there are many common traits that great leaders have. And I think it's very important that we produce more leaders, because society needs really good leaders in all areas. And that's what the book is about. It gives some insights of how great leaders have thought they became leaders.
Anthony Scaramucci (27:27):
David, before we turn this live, you were talking about Erik Larson's new book about Winston Churchill.
David Rubenstein (27:34):
Right. I have it right here, [crosstalk 00:27:37] and I'm promoting it. But here it is.
Anthony Scaramucci (27:39):
Yeah. Well it's quite an interesting book. I'm about halfway through it. But there are some similarities, as we both know between President Trump, and Prime Minister Winston Churchill. Can you tell us what you think some of those are?
David Rubenstein (27:52):
Well, President Trump became president when no one thought he would become president. Winston Churchill was somebody that no one thought would become prime minister. Remember he did not become prime minister until he was 65 years old. So people thought at that time, his day had passed by. He also, he had a lot of challenges. He had a lot of political problems. He couldn't get Roosevelt to go into the war. He made it, it was difficult for him to get control of the government. So, I'm not going to say that Winston Churchill and Donald Trump are the same, but they both faced challenges. Nobody took them seriously when they were first saying they wanted to be prime minister, or wanted to be president. And they up and became those leaders.
Anthony Scaramucci (28:34):
We've had many of our people ask us about Carlyle, the investment strategy related to Carlyle, and some of the things you're doing and thinking about strategically. And also in the context of the crisis. Could you elaborate a little bit on that for us now?
David Rubenstein (28:51):
Well, we've been through recessions before. So you have to know when you're in recessions, you can... The most important thing to do is to shore up what you own. So great fortunes have been made by people in recessions by just buying their own debt back at a discount. If it's available at a discount, or putting more equity in. And that is very often what is necessary. In our case, we have spent a lot of time making certain that our companies are fully capitalized, making certain they can take advantage of all the opportunities that are available to them, and all of our resources. But there's always going to be some things that don't work out perfectly. In Carlyle's case, because we've been through downturns and up cycles before, we have a fair amount of experience in doing this. But there's no easy answer. And again, we're not magicians. We can't do the impossible, but generally the larger private equity firms have a reservoir of talent that probably can work their through these kinds of challenges as well as anybody probably can.
Anthony Scaramucci (29:44):
So, I wanted to get your opinion on the upcoming election. As we both know over the last 100 years, incumbent presidents typically don't get reelected, if they've had a recession in the year of the election. This time it may be a little bit different, because this recession is really related to the pandemic and COVID-19. I don't think anybody is going to blame the president for the pandemic. There might be a debate about his response to it. But this time it's a little bit vexing. What are your thoughts? Where do you think things stand on the presidential election?
David Rubenstein (30:21):
A couple thoughts. Number one, presidents who run for reelection in a recession generally don't win. The last three that did it were Gerald Ford, Jimmy Carter, and George Herbert Walker Bush, they all lost. And the last president who got reelected in a recession was William McKinley in 1900. So it takes a, it's tough to do. Secondly, you don't know where the economy will be in November. It's almost certainly not going to be as good as it was six months ago. But if you have a rising perception that it's coming back, then I think the president can benefit from that. There's no doubt about it. And I just think... I have predicted the last six presidential elections, I think wrong. I thought Carter would get reelected. I thought Al Gore would get elected. I thought Hillary Clinton would get elected. So I'm wrong almost all the time.
David Rubenstein (31:09):
So whatever I think is probably not the right thing. Joe Biden has a complicated situation he has to face. He doesn't have a way to command the airwaves in quite the way the president of the United States does. And there's not going to be a big convention, almost certainly, a live convention. So he won't be able to do the kind of thing that you get, the so-called bounce out of the convention. So it's going to be challenging. I suspect, as you probably know, most presidential reelections are referendums on the current president. So it almost doesn't make a difference who he is running against. If he is popular at above 51%, he'll win. If not, it's tough.
Anthony Scaramucci (31:44):
So David, Jerome Powell worked for you at Carlyle. So take us into the inner sanctum at Carlyle, and your employment review of chairman Powell. What are you, what do you think of him as a guy?
David Rubenstein (31:57):
He was leaving the George W. Bush administration, George Herbert Walker Bush administration, where he had been secretary of international affairs, and we hired him. And he was from, native of Washington. He lived back in Washington. He was, he had been an investment banker and wanted to come back to Washington. I thought that he's a very smart guy, very cerebral. Low ego. Didn't seek a lot of attention. Hardworking. And, he was in better shape than me. And at lunchtimes, he liked to go and ride his bike. I wish I had done that. I'd be in better shape, but he was in pretty good shape. He'd come back after lunch refreshed.
David Rubenstein (32:33):
And I think he... My own view is, he's done as good a job as you can do. Imagine the situation he's inherited with the COVID-19 crisis. So, I don't know that Ben Bernanke, or Janet Yellen, or Paul Volcker would've done a better job than he's done right now. It's a difficult situation. Never been anything like this. I think he's doing okay. He's even handed, he's not an economist. That's an advantage. You can understand what he's actually saying sometimes. Whereas economist sometimes, it's hard to understand what they say. But, so I'm pretty high on J. Powell. And I think he hasn't let this position go to his head. And I admire what he's done.
Anthony Scaramucci (33:10):
How would you fix the American education system?
David Rubenstein (33:14):
Okay. So the American higher education system, I think is the best in the world. So the question really I'm sure deals with K to 12. If I really knew how to fix the K to 12 system, I would have been in Iowa many months ago, running for president. I don't really know. Bill Gates would say, that his foundation is focused on two things, K to 12 education in the United States, and healthcare in the poorest countries in the world. But I think he was just saying, that the progress they've made in education I'd say has been modest, because it's a very, very intractable problem. I don't really have a simple answer for it.
David Rubenstein (33:47):
But I do know that my own success in life, the extent that it's considered success, is due to the fact that I got a good public school education, and I was educated. And I learned early on the importance of reading. Right now in this country, we have 1.7 million people dropping out of high school every year. And many of them cannot really read. It turns out that 14% of adults in this country are functionally illiterate. If you can't read you're functionally illiterate, you have no chance of getting anywhere in this country.
David Rubenstein (34:17):
So we've got to let people know how to, make sure they learn how to read. I would try to get, discourage people from dropping out of high school, and do other kinds of things. But I recognize families have different situations, and it may not be intact, it may be hard. But right now we're never going to solve income inequality, never deal with lack of social mobility problems, unless you get people to learn how to read, and you let them get high school education. At least a high school education. So, I don't really have a solution for it. It's an intractable problem. And I wish I had an answer, but I just don't. I don't think anybody really has a simple answer for it.
Anthony Scaramucci (34:53):
David, you are a prolific fundraiser. You've raised money for Carlyle, religious groups, charity groups. You've traveled all over the world doing that. I was just wondering if you could give us some ideas about how you have been such a successful fundraiser. What tips do you have for our viewers? And could you elaborate a little bit on that?
David Rubenstein (35:18):
Well, there are different types of fundraising. There's political fundraising, there's philanthropic fundraising, and there's business fundraising. They're all different, different kinds of things that you have to talk to people about. But in all of them, I think in person presentations work better than calling people. Now in the era of Zoom, it may be the case that you can raise a lot more money than before, with just showing up in front of a video presentation. I think that might be possible, but I don't know whether it will continue that way for the future. I think is, the way to do it is you've got to be honest with somebody and explain it. You have to explain what you're, what the product is relatively in simple terms. You'll have to be, I think, an investor alongside them. I think it's very helpful to do that. You have to answer questions frankly. You have to give them bad news as soon as possible. You have to make sure that they understand what they are investing in. And you have to make sure that you are there for them when they need you.
David Rubenstein (36:15):
And sometimes, they may have financial situations themselves that might make it difficult for the fund or other kinds of problems. But I think in the end, what it gets down to is having a reasonably good product, explaining it well, showing up in person has historically been very important. Now, whether you can raise a lot of money by Zoom, I don't know. It seems like some people are raising large funds now by Zoom. Historically, if I wanted to raise money in Abu Dhabi, even though I knew the people in Abu Dhabi very well, I still have to go to Abu Dhabi to show I cared. Whether that needs to be the case in the future, I don't know. But in the end, I think business fundraising is very challenging in this environment because people have less money to invest. So they're very careful about what they're going to decide to invest with.
Anthony Scaramucci (36:59):
You're a one man show in your own rights. You certainly don't need me. So I get to ask the last question. And this is... I want you to distill all that knowledge, all that financial knowledge, private equity, leadership, knowledge, historical knowledge. It's America, 2025, what does the country look like, sir? What are your hopes for the country?
David Rubenstein (37:21):
Well, at that time, I believe we will still be the biggest economy in the world. Our per capita net income will be still far higher than China's. But we have to recognize we're not going to be the most powerful country, and the most financially wealthy country in the world forever. But I do think the country will come back from this crisis. And I do think that the future is reasonably optimistic, because the entrepreneurial spirit we have, the constitution allows a pretty good system of government. We have a reasonably good higher education system, probably the best in the world. And I think the commitment to a stable form of government, commitment to capitalism, and the commitment to letting people try to rise up to their abilities is what makes this country great. I think we'll still have it in 2025.
Anthony Scaramucci (38:03):
Do you think that the partisan divide that we're experiencing right now will be better or worse by 2025?
David Rubenstein (38:10):
It's hard for me to see how it could be worse, though it was worse during the Civil War. Hopefully it will come back, and hopefully this pandemic will enable us to come together after the presidential election. I don't think before the presidential election, we're to come together. But I do think that it's pretty bad now. I haven't seen anything as bad as this in the last 25 years. Hopefully it'll get better. I don't think it'd get much worse, unless we go into a Civil War of some type.
David Rubenstein (38:34):
So, I appreciate your having me Anthony, and I welcome everybody's paying attention to the things I had to say. I hope some of you found it interesting. And I appreciate being invited to the SALT Talks.
Anthony Scaramucci (38:47):
David hold the book back up before we let you go.
David Rubenstein (38:49):
Okay. How to Lead. Thank you very much.