UChicago Davos 2019: “Leading Change” — Satya Nadella, Raghuram Rajan, David Rubenstein, Zhang Xin


– Good afternoon, everyone. For those of you who don’t
know me, I’m Bob Zimmer, President of the University of Chicago. It’s a great pleasure
for me to welcome you to our annual event here in Davos. This event has two parts,
we have a panel every year, they’ve generally been, I
believe, very interesting and I hope will be again today; and then, we have a reception afterwards. There’ll be many more people here and we hope that all of you stay and enjoy yourself after the panel. Now, at the event a little bit later, I’ll say a few words about what’s happened and happening at the
University of Chicago. I’m not going to do that right now so that we can go right
into this discussion, but I’m now going to sit
down and ask Madhav Rajan, who’s Dean of the Booth school to come up and say a few words and just
quickly introduce the panel. Thank you. (crowd applauding) – Thank you. Thanks, Bob. Good evening, everyone. On behalf of Chicago Booth and University, it’s a privilege and
pleasure for me to invite you all here to this panel
discussion on leading change. It’s great to be back here
after our economic forum, great to collaborate with the
university on this program. I wanted to extend my
appreciation and gratitude to the amazing set of panelists here whom I’ll introduce kinda briefly in just a couple of minutes. I wanted to give you just some updates about the school that I
think you’d be interested in as friends of the school,
friends of the university. Chicago Booth, as a school, it’s mission has stayed
constant, unwavering through the years. It is to produce knowledge
that has enduring impact and to educate the current and
future leaders of the world. I’m happy to report that
the school continues to have incredible positive momentum on both aspects of this mission, and this is thanks to
our outstanding faculty, our staff, our students, and also largely because of our incredible set of alumni. We have 53,000 alumni now
in more than 120 countries as a business school, and
they do great things for us. In terms of brief updates,
I think that the school had a banner faculty recruiting year, probably the best ever,
so we hired 18 new faculty for the current academic
year, and five more who are gonna be beginning
in the next academic year, which is the most that we’ve ever hired. These were in the most
competitive academic areas, economics, finance, marketing, and so on, and we did phenomenally
well at the junior level, but also made some key
senior faculty hires; and the one that I mention in particular is our recruitment of Sendhil Mullainathan from Harvard University. Sendhil, winner of the
MacArthur Genius Grant for his work, has done
incredible work in a wide variety of areas, including poverty,
finance, behavioral economics, and machine learning; and
his appointment is gonna have a huge impact on the school
in the field of data science, which is a big priority for us. So, Sendhil right now is
teaching for the first time an elective on artificial
intelligence at Booth to the students and he is
putting together a new center for us that’s going to
focus on the interface between human and machine intelligence, which is a key area for us. Our faculty continued to do amazing things and get great recognition,
and you’ve all heard about the Nobel Prizes
that our faculty have won. So, the Booth School, in
its history has had nine Nobel Prize winners,
including three who are active right now on the faculty,
Eugene Fama, Lars Hansen, and Richard Taylor. I made a joke last year when
I was here that that’s three more than every other
business school combined, which I have to slightly modify that. In December, one of the
winners of the 2018 prize was Paul Romer, who has an
affiliation with N.Y.U Stern, but Paul was an undergrad in mathematics at the University of Chicago,
and a PhD in economics from Chicago, so I think we’re still okay. (crowd laughing) Another distinction I wanted
to mention, in the same vane as the Nobels, that just
a couple of weeks ago, one of our faculty members, Ralph Koijen, won the official Black Prize for 2019. This award is given every two years to the best financial
economist in the world under the age of 40, so it’s
phenomenal that Ralph won. It’s also phenomenal that
this award has only been given eight times in its history. Four of those have been won
by faculty of Chicago Booth. The very first winner was
somebody who’s sitting right here, Raghu, so the great finance
faculty continues at Booth. A couple other things, one of
my goals coming in as Dean, Bob would almost call it a KPI for me, was to connect the school
better to the university, and I think this is something where we’ve made great strides in. One of the big changes that
we introduced this year, as of September, is that
we have now introduced a new undergraduate major
in business economics. So, this is jointly taught
by the Economics Department and by the Booth School of Business, and it’s sort of the bigger
change in terms of Booth and its involvement with the
college in over 60 years, which is the last time Booth
had such a big presence there. So, the classes that we
have offered in that track have been incredibly successful to date, and it’s very likely that
in the next couple of years, this could be either the top,
or one of the top, majors at U of C for undergrads. On the student side, the
school continues to do well, quality of the students
is at an all-time high, as well as diversity. The entering MBA class had 42
percent of women coming in, which is the highest it’s
ever been in our history; and as a school, attracting,
yielding the best students is the most important priority for us. So, we’re preparing to launch
a scholarship initiative, which you’ll read more about
over the next several weeks to increase the amount of funds available, and to offer scholarships
across all of our MBA programs. The executive MBA program,
many of you may know, we had the world’s first
executive MBA program, which we started in
1943, in World War Two, to strengthen leadership
in American business, and we then were the first school to have a physical presence
on three continents. We had campuses in Europe and Asia, and today we continue to do that. We have the campus in
Chicago, the one in London, and the newest one in Hong Kong, so this is a new building which we just completed in November. We had the grand opening. It’s a spectacular building. I strongly encourage any of you
who may have the opportunity to go to Hong Kong to go take a look, and it’ll host our executive
MBA program in Asia, and also will be the center
for the study abroad programs that the college is going to run. So, another true example
of true collaboration between us and the university. So with that, let me turn to the panel. So, this follows in a long
tradition we have as a school of trying to inform public discourse through panel discussions,
through our initiative on global markets, through publications, like Chicago Booth Review. So, we have an amazing set of panelists who are going to discuss how do you manage complex organizations in changing times? How do you innovate and
execute in a landscape that keeps changing? And how do you support your
organizations enduring values? So with that, let me
introduce tonight’s panel very briefly because none of them really needs an introduction. So, I’m gonna begin with
the first panelist here. Chicago Booth alumnus, Satya Nadella, is a U of C trustee and CEO
of the most valuable company in the world, Microsoft. Then, we have Xin Zhang,
who is CEO and Co-Founder of SOHO China, the largest
property developer in China. Next, Raghuram Rajan, who is
the Katherine Dusak Miller Distinguished Service Professor
of Finance at Chicago Booth. Raghu is the former Governor
of the Reserve Bank of India and Chief Economist of the IMF. And finally, Robert Zimmer, as you know, star mathematician, and
the for the past 13 years, President of the University of Chicago. And finally, closest to me,
our moderator for the evening, David Rubenstein, U of C
trustee, alum of the Law School, Co-Founder and Co-Executive
Chairman of the Carlyle Group. My thanks to all of you for being here, and now I’ll hand it off to David. Thank you. (crowd applauding) – Before I start, how many
people here are graduates of the University of Chicago? Okay. How many people are parents of graduates of the University of Chicago? Okay, how many people are professors at the University of Chicago? How many administrators? How many people wish they had gone to the University of Chicago? (crowd laughing) Okay. How many people have children applying to the University of Chicago? Okay, those are the most
important people here. Okay.
(crowd laughing) So, there are many panels in Davos. Davos doesn’t suffer
from a lack of panels, but I can assure you that
by being here tonight, you’ll be at the panel with the highest IQ of the people participating. (crowd laughing) So, on my immediate left,
let me start with Satya. Let me ask you a question. When you became the CEO of Microsoft, when the market capped
around February of 2014? – [Satya] Right. – Was around 250 billion dollars. Today, it’s around 850 billion dollars. So, you’ve increased the market value by 600 billion dollars. Has Bill Gates ever said thank you? (crowd laughing) – David, I would say I have
a lot to be thankful for, but quite honestly, it’s
been one of the greatest privileges of my life, having
worked now for 27 years at Microsoft, to get that platform, to be able to do what I love doing; and even though maybe Bill
Gates has not said thank you, he enabled that journey,
so I’m thankful for that. – You realized that if you were
in the private equity world, 20% of that 600 billion would be yours. (crowd laughing) – You should be on my Com Committee. – Right. Okay. But to be very serious. What was it that you did
that transformed a company, which was already very good, but not now the most valuable
company in the world? What did you actually do? – I mean, as someone who
is a consummate insider growing up at Microsoft,
I felt that the two things that were very necessary for me to do, before we get to what
we mostly think about as business strategy, picking
trends, and execution, was that sense of purpose and mission. When I joined in ’92, we used
to talk about our mission as putting a PC in every
home and every desk, and literally by even the end of the ’90s, we more or less achieved that, at least in the developed world; and since then, we always
had this identity challenge, which is what’s next? What’s really our mission? And I realized that what
we used to articulate as our mission was an audacious goal, but was not the real mission. And so, I went back, in fact, to the very origin of the company. Bill and Paul created a company
that basically was tools for developers so that they
could create more technology, and I felt like that’s our
true calling, so to speak; and so, I focused on that sense
of purpose, in 2018, 2019, every company out there
is a software company. So, if the market in
1975 Bill thought was big for software developers, 2019 is big, and that’s what we’ve done, which is get back focused
on what we do well and be proud of it, not be
envious of other’s success, and then had to change the culture. I used to always joke at Microsoft that we are a great gift
in that we have Bill. We also had a challenge that
there are 100 other people roaming around Microsoft who
thought they were Bill Gates, and so we needed to move
from being these know-it-alls to learn-it-alls, and these
two things, I would say, have been a big part.
– But when you go to your annual meeting, you must get a standing ovation, right? (crowd laughing) – [Satya] No. – They don’t give you a standing ovation? – No, no, no. There’s mostly a lot of
questions that are critical of what we’ve got wrong. – Okay, right. Well Xin, you have a very
interesting background. You were born in China, you grew up there, went to Hong Kong, worked there, then you went to England for schooling, then back to China, and
you built the biggest development company in China, which also does a lot of development in the United States, as well. So tell me, is it more
cut throat to do deals in Beijing or in New York City? Which is harder? – Cut throat? They’re both cut throat. This is a cut throat business, but the difference, I
would say, is in China, because the real estate
industry is so much regulated by the government, and
the government policy changes almost every month, so the core skills that
we have is to interpret the government policy. – We have that problem in Washington, too. (crowd laughing) – You’re catching up. – I know. We’re learning from the Chinese. Right, okay.
(crowd laughing) – But in New York, what I find out– Now, I only developed in an economy that’s not a democratic country. In New York, you have another layer, which is if you wanna build something, like I have a project
now in upper west side, you need to go to community board, and community board consists of the people who’ve been living there forever, and I find out most of
them are in senior age, in their 70s, some in the 80s. So, I was like, this is
a very challenging skill that I don’t have, ’cause
I don’t know how to read the community board, what do they want, and do they really say
something that they need? And so, it’s challenging, and it’s challenging comes
from living and working in a democratic society. – Well, senior I would redefine
as in your maybe 90s now. (crowd laughing) 70’s nothing. That’s like a teenager to me now. (crowd laughing) Okay. So, let me ask you this. Is it difficult for somebody who’s Chinese to do deals in the very
inbred New York City real estate world because
there are people– – [Xin] Very Jewish. – Very Jewish. You haven’t converted, right? No, okay. So, it’s a very Jewish real estate world, except for Donald Trump,
but he didn’t really develop that much, but okay. (crowd laughing) So, how hard is it to break in? You say you’re Chinese to
people, is it harder or easier? – I actually find New York,
at least in America generally, it’s a welcoming business
environment to foreign money. I try to do business in England, try to do business in France. It’s harder, those places, ’cause cultures are very different and there’s a lot of
local interpretations. This is a true capitalist society. You think that I’m coming in,
I’m a developer from China, but I wanna develop here,
and you’ll get phone calls from every project and
they want your money. Now, whether I make the
right choice, I don’t know, but you get phone calls. – But you made an investment in a building that’s now the most
valuable building, I guess, certainly in New York City,
maybe in the United States, is that right? The General Motors building? – [Xin] Oh, yeah. – You forgot about that? (crowd laughing) Isn’t it worth– The last round of refinancing, it’s worth four billion or something. – A bit over four billion.
– Four billion dollars. How did the building go from– When my firm looked at
it, it was one point two or three billion. How did it go so– – So, you didn’t get in? – We thought it was too
expensive at one point three. (crowd laughing) – We got in at two. – I should have. What’s so great about that building? Is it the Apple thing
that makes the whole thing more valuable or what? – Well, I think it’s brand. Branding is everything,
even in real estate. People think about is location– Well, there’s many
buildings in that location. Why the others are not doing as well? I have another building
three blocks away from that, it’s not doing nearly as well because that building not
only in the prime location, but it also has the brand
name that has been recognized and people wanna be there. So, it’s able to charge
rent above the market. – I know. I’ve looked at renting there,
but it’s very expensive. (crowd laughing)
Okay. So, in the world of central– – [Xin] You’re moving
into a great building. – Well, we’re in a new building, but the General Motors building is a more expensive building. (crowd laughing) Maybe a better investment. So, in the world of central banking, since you’ve been following central banks, who is the greatest Central
Banker of your lifetime? – Well, my lifetime it
certainly is Paul Warburg, a phenomenal sense of duty, still in all the public service he does. He, on his sick bed, wrote
this book about his life in order to send a message about what he thought was important, and very much a believer in the
old William McChesney Martin sort of idea that the
role of the Central Bank is to take away the punch bowl
when the party gets going. – Now, Paul, when I
worked in the White House under Jimmy Carter, we got
inflation to that 18 or 19%, which is hard to do, and we said, we’ve gotta do something about it. We said we’re bringing Paul Volcker. I said to the president, if
you bring in Paul Volcker, he will really take the
inflation out of the system, but he won’t get re-elected
(crowd laughing) and I was right about that. But other than Paul
Volcker, who would you say– Would you say that Ben
Bernanke was the best in terms of what he did in the
times of the great recession? – I thought Ben was the right person at the right place at the right time. He did a phenomenal job. He has a very, very sharp mind, but also he was very
practical in what he did in bailing the system out. So, I think he’s truly a hero for that. I’m a little more
skeptical about his views about monetary policy in ordinary times. I think that he’s less
of a hard money person than Paul Volcker was, and to some extent, one of the big challenges
before the Fed today is it’s too closely
associated with the market and sentiment, and markets
swore the Fed will come and bail us out. That’s a history that
the Fed has to live down. I think it was created by
a bunch of Central Bankers. – So, the Federal Reserve
today in the United States is chaired by somebody who
worked in private equity. Do you think that’s an important skillset for somebody to be the Chairman
of the Federal Reserve? – You have to understand markets. I think it’s an important skillset, but shouldn’t be too
sympathetic to the market. – Okay. And the professional staffs
at the Federal Reserve and the Central Bank in
India, which one is better? – Look, I– (crowd laughing) You put me on the spot there. The young people in every country, I think they’re your hope for the future because they really want to learn. India has a lot of old
fogeys in the Central Bank who have stopped learning, but the young people
are really phenomenal. You give them a task, they
figure it out, they come back. Working with these
people was really the joy of my life there. – Bob, let me ask you a question. You were recently the recipient
of the Philip Merrill Award, which was given for your
outstanding leadership and particularly what
you’ve done for free speech at the University of Chicago. At that time, a New York
columnist wrote an article saying that you were the
best university president in the United States. Did you call your mother
right away and tell her that? (crowd laughing) And what did she say when
she found out about that? And your mother is 100 years
old now, is that right? – Yes, my mother just had her
100th birthday two days ago. – [David] Really? (crowd applauding)
Wow. – I don’t know if you would
call me a good Jewish boy, but I’m a Jewish boy and I
went to see her for lunch. (crowd laughing)
I did, on my way here. – [David] Make her a
nice Jewish delicatessen or where’d you go? (crowd laughing) – No, we got some nice
food from Chelsea Market. – [David] Okay. – No, I didn’t tell her, but of course, she lives in New York and
she has a lot of friends who all communicated to her,
so she sent me a nice note. – Okay, so when you took
over as the president of the University of
Chicago it had a ranking in U.S. News of roughly 13. It’s now three. So, that’s a pretty good leap forward. What do you attribute the progress to? Is it just better
students, better faculty? What would you say has
been the principle reason the university’s moved up so much, despite the fact that’s its endowment, compared to Harvard, Yale, and Princeton, is relatively modest? – Right. Interestingly, it was
very interesting to listen to Satya describe his
perspective on Microsoft, so I’ll describe this
in a way that I think is how I felt about the whole thing, which will have some resonance
with what Satya said. So, I’ve been at the University
of Chicago for a long time, so when I became president,
I was able to reflect with a good deal of experience, and what I believed, and
how I would articulate the situation for the
University of Chicago, is that it had an
absolutely fundamental set of enduring values and a
belief in these values, which had to do precisely
with the importance of sustained intellectual
challenge, rigorous inquiry of the free expression
that goes along with it, and that this needed to
inform absolutely everything that the university took on; and you look at every school, everybody who’s had any
experience with the university, that is a core experience they had. So, you’d have these
enduring fundamental values that had been an enormous
strength for the university, but then you need to ask the question, how are these values being manifest now? Are they actually being
manifest with enough ambition reflecting what I would say
is a non-complacent view of what a university should be doing? Were they being addressed
with a level of outward view and outward engagement? Or was there too much of
a sense of complacency? We were great last week,
we’re great this week, therefore we’ll will be great next week. So, I think the effort
was to take every piece of the university and
say we can actually build on the enduring values of the university in a way that relevant for
today and do way better; and that’s what we did. – Okay. So, do you worry about this? You became president
in 2006, is that right? – Yeah. – And the Board has asked you
to stay until at least 2022. – Yeah. – Is that right? So, at least 16 years
you’ll have done this, but do you worry that you’re
gonna be so well known for the free speech
efforts that you’ve made at the university that might
trump all the other things you’ve done because you get
so much attention for that, but people don’t pay as much
attention to the other things. Do you ever worry about that? – No, I don’t. (crowd laughing) No. Seriously, I would say that
I’m not really all that worried about legacy issues and what people think. Time will go by, at some
point I won’t be president, there’ll be other people doing it, and the real question is
what have you actually left? Not what other people are thinking about. So for me, the question
is getting things done and getting a lot done,
leaving as much as I can, and leaving the core
values of the university intact and enhanced. What people say about
it afterwards, that’s– – So, you are an expert in geometry. You’re a mathematician, expert in. You came up with something called the Zimmer Theorem, I guess. Is that theory– – Well, there’s a program,
there’s a conjecture. – Conjecture, okay. Somebody recently solved it. – Yes. – So, can you explain in two sentences what they actually discovered
(crowd laughing) that you actually came up with? – Two sentences? – Well, three or four.
(crowd laughing) – Well, the program is really
about trying to understand the relationship between
symmetries and geometry or topology, so the question
was if you look at spaces in various sorts of dimensions, what are the possible symmetry groups? And there were some very clear conjectures that I made about that, and
one that, in particular, I never went to sleep
without thinking about this for five years, and so
it was a great relief to become president of the university. (crowd laughing) I was thinking about it. But now that one piece of that– – You were sleep deprived for five years. – Yes. – Okay. Satya, let me ask you back to Microsoft. How can it be the case? Microsoft’s a big technology
company, they’re in Seattle, they’ve got all these brilliant engineers and software people,
that Amazon came along and kind of invented the Cloud and you guys were doing something else? How did that happen? (crowd laughing) I think what happens to
a successful company, when you sort of feel like
you’re at the top of your game, is when you have to really watch exactly what’s happening,
what’s disruptive. Think about it, right? I remember very distinctly
when we first heard about the Cloud and the
Cloud business model, for anybody who’s making
90 plus percent margins on software licenses on servers, that business looked pretty bad, and we thought it’s
never gonna get anywhere. So, that I think is one
of the key challenges. In fact, I sort of study
a lot now of businesses that are being very successful. How do they find their
second and third act? It turns out, it’s as hard
to find the first success. In our case, although we
missed the first turn, we caught that very quickly
and that was one of the things I worked on before becoming CEO even, and now, we are a very
competitive Cloud company. In fact, we’re giving
Amazon a run for its money, so it’s good to see. – Okay, so when you became the CEO, you succeeded Steve Ballmer, and Steve Ballmer had a major acquisition, it was the Nokia telephone ancestor, and you came in and you
wrote it down completely, just said it’s terrible. Was the difficult to do that? When you came in, your
immediate predecessor had just spent six or eight
billion dollars buying that. – Yeah, look, in tech you’ve
gotta take lots of shots. Some work, some don’t,
some big, some small. In our case, the decision
I had to make at the time I was making it was to say,
look, where should I allocate my focus, my capital,
my operating expenses so that we can win? So, I chose– Look, this notion of a
device being the center of the universe, I think
those days are done. To me, my reading of where we are going is that it’s about the person. You’re gonna have many devices. It’s already true today. You’ll have a phone, you’ll have a laptop, you’ll have TV, you’ll have many devices at work and at home, and we
wanna create an operating system more in a platform for the
person, not for the device. – So, you worked your
career at the beginning at Sun Microsystems, right?
– Yep. – And then, you decided to apply to the University of
Chicago Business School, and you got in.
– Yeah. – But then, you got a job at Microsoft. – That’s right. – So, what did you decide to do? How did you actually get your
University of Chicago degree because you went to Microsoft? How did you actually get the degree while you were working at Microsoft? – So, one of the admission
directors was kind enough to defer, so my idea was
that I would give Microsoft a shot and see if it works out, if not I’ll go to business school; and during that period,
the guy I was working for convinced me, saying, hey,
you’re gonna come back here after business school,
because my original idea was to become an investment
banker, by the way. (crowd laughing) – That’s the highest calling of mankind. The kind with equity. – Yeah. And then, I realized that,
man, I’m not cut out for it, so therefore, I decided
that I’ll stay at Microsoft, and luckily enough, I was
able to do this crazy thing of fly to Chicago and complete it, and so low and behold, I
got both the things done. – Wow. So, you’ve written a
really interesting book about your life and I wouldn’t mention it, but the fact you’ve wrote
about this in your book. While you were doing
that, you also had to deal with your son who had a
congenital birth problem. You might describe what it
is and how you handled that throughout your life,
and he’s still living with you and your wife, is that right? – Yeah, in fact, my wife is here as well. Both of us were only
children of our parents and when our son was born– Frankly, if you asked me even
one day before he was born, I was all about both of us and our parents were all very anxiously
waiting for the birth of our first child and my
biggest thing, perhaps, would have been how was
Anu gonna go back to work and raise child care, and
that night, everything changed because Zane was born with
severe damage to his brain and therefore, he has cerebral palsy; and quite frankly, I struggled with it for many, many years. It was actually looking and
seeing Anu and how she reacted. I remember her driving up and down Seattle trying to give Zane
his best opportunities, whether it was speech therapy
or occupational therapy, is when I realized that, first of all, nothing happened to me,
but something had happened to my son and I needed
to do my job as a father, and that’s perhaps what
changed me as a parent, but more importantly,
changed me as a person, as a leader, as a co-worker, and I think I attribute
at least that life event to a lot of evolution, at
least in terms of my own life skills, which
obviously are manifested even in my workplace. – So, your son has lived
with you his whole life and your wife gave up
her professional career. Okay. So, talk about China for a moment. What do you think Xi Jinping
really thinks of Donald Trump? (crowd laughing) – That’s a tough one. (crowd laughing) – You know Xi Jinping, you’ve met him. – I met him briefly.
– So, tell us about– Is he a dynamic person? He’s very smart. What motivates him? – Well, I got the same as
what you got from meeting him. He would say nothing,
he would shake hands, he would smile, he would
take photos, and that’s it; and Donald Trump is the opposite. (crowd laughing) He would talk all the time. (crowd laughing) I think that– I don’t know Xi Jinping
thinks about Donald Trump, but I know that one thing
is China generally believes that the rise of China is inevitable. Along the way, we will
meet a lot of resistance, and the biggest resistance now
is coming from Donald Trump, maybe not personally,
but he managed to rally and built around him, and
then built a consensus in America among business,
academic, you name it, government, left and right, both parties to think that China is
a challenging rival. So, in the eyes of the Chinese, and especially with the public,
this is not just Xi Jinping. Recently, all eyes are
all U.S. China trade talk and you probably follow the news that we have a very high profile company, Huawei’s CFO was arrested in Canada. People here would think that
this is a judiciary system independent of politics,
but almost nobody in China thinks that way. Most people would think in China, this is a politically
driven action, tactic, in order to hold her as hostage to get a better deal in the trade talk. So, that’s what is happening in China and how the public reads this. – They don’t think we’re virtuous and we’re just doing
the right thing, China? (crowd laughing) Okay. Actually, I did meet Xi Jinping once and the first time I met him
I was the member of a board and my job was to have
a conversation with him with the board, and I tried
to make a conversation, I said, there’s this old Chinese saying that a trip of 1000 miles
starts with one step; and he said, no, that’s an
American fortune cookie. (crowd laughing) So, I didn’t say much else. (crowd laughing) So today, would you think that– The Chinese economy is slowing down. The growth last year was
at six point six percent, I think it was, which is the
lowest since 1990, I think. So, one, how accurate do you
think the Chinese numbers are for these growth rates, and secondly, do you think that China
is slowly going lower and lower in growth rates or do you think it can ever get back to seven
or eight percent growth? – Look, no one really
understands how accurate these numbers are, but for
sure, it’s slowed down. That is for sure. The trend has slowed and you
can see that the government economic policy right
away changed, it reversed. Up until middle of last year, containing debt was the
main economic policy. Government was worried
about the debt crisis, so we, as a company, with
triple A office buildings in Beijing, Shanghai,
almost had a hard time re-financing our projects,
and you have to think about other companies don’t have asset like building to pledge,
what would happen? And by October, we got
a different message. All the banks came and
say, we’ve been told we need to lend to private sectors. In fact, some banks been
told 50% of your new lending needs to go to private sector. So, you could see that
that reversal of policy is because the number changed,
the slow down is happening. – And your view is that Xi
Jinping is more likely than not to be there for quite a while. He’s probably going to
be renewed for many terms or nobody knows?
– I think he’s a young guy. – Okay.
(crowd laughing) So, in terms of interest
rates, we’d like to know, before we leave today, is
the U.S. going to increase interest rates or decrease interest rates? (crowd laughing)
– We all want to know that. – And can you explain why
the Fed seems to be confusing some people about what their
interest rate policy is? – I think sometime last
year, middle of last year, with the Trump tax cuts out there, it is a sense that the U.S. economy is in danger of overheating. The Fed was very clear
that we’re gonna increase interest rates and you guys in the markets better believe us, and
they sent that message very, very clearly for quite some time. Now, towards the end of the
year, first you had the slowing in Europe, following on
the slowing in China, and in the U.S., the anxiety
about the U.S. China trade relationships went up, and
the Fed had been backing off from any sort of kind words to the market. It was trying to get away from the Fed Put that we talked about earlier, and they had said some
volatility is a good thing. Some Fed presidents actually went out and said volatility is not terrible and we’re not gonna be
too worried about it, but the combination of president Trump yelling at the top of his voice that the Fed would be to
blame for the next recession, the market volatility, as well
as the growing apprehension that the strength of the
economy may, perhaps, not be as much as we
thought; they backed off. I think backed off in a couple of steps. First Jay Powell sort of eased the view that he was set on this course, and then early this
year, he basically said, we’re contingent now,
which basically means if you ask me where
interest rates are gonna go, probably less high than they
were gonna go last year. – Okay. So, president Trump made a lot of news when he said the first decision he’d made was appointing Jay Powell. I don’t know if he really meant that, but he said that at one point, and he was saying the Fed
should do certain things, lower interest rates, and so forth. Did you ever have that problem in India where people said, oh, you’re raising interest rates too quickly? – Look, our problem
was inflation was high, we had to bring it down. So, it was close to 10% when
I came in, I left at five. How do we bring it down? I think it was repeating again and again, we’re gonna bring inflation
down, come what may. Now, that was also important
to say it in pubic. There’s a tremendous amount of pressure on the Central Bank, both from industry, as well as from the government. Hey guys, why do you wanna
keep interest rates high? Why not bring it down a little? Give some boost to growth. That’s always the mantra. And we didn’t have any
dependence in Central Bank in the sense of– We create– Just to end that, we created
a monetary policy framework, which eventually we’ve
moved to a committee. All that helped. That essentially has been quite important in keeping the inflation
low, so it’s a process. – So, who has bigger egos, Central Bankers or Novel Prize winners,
in your experience? (laughing) – Depends. (crowd laughing) – Okay. Okay, Bob, let me ask you,
at the University of Chicago, when I was in the Law School
and I graduated in 1973, I think the University of
Chicago undergraduate part of the university admitted
roughly 50% or maybe 60% of the people applied, and
they had relatively few applications compared
to what they have now. What did you do, with
others who have helped before you a little bit as well, to get the application process
such that you have 40,000 applications, or something like that, and you’re accepting six or seven percent? What did you actually do? – Yeah, so there were a number of things. First, going back to what I said before, as we were very clear that the quality of the academic program, the
intensity of it and so on, needed to be not only sustained, but I would say renewed
for the current situation. So, we started a number of new programs, including molecular
engineering, for example, for an institution that had
no engineering programs, expanded programs with the global view, which I think was very important, obviously resonating with this group. So, there was an expansion
of the academic programs. There was also a huge
effort to help students connect the very particular
education you’re getting at the University of
Chicago to their future life because we’ve been in a situation where we gave people an
absolutely fantastic education and then sort of said,
good luck if you get work kind of thing. So, we instituted a
large number of programs, internship programs, career programs, which were not part of
the academic program, but which were how do you
connect your education to your future life? Then, we spent a lot
of time building issues around community, and I would
say that a lot of this effort was to break down what I would
say is a false implication, the story the university told itself, which was we’re intense and
rigorous, which was true, and we wanna be, and that
implies that you’re cold and austere, which is a
ridiculous implication, but was sort of something that
the university had lived by. So, we replaced that with
we’re intense and rigorous and warm and inviting at the same time, which is not a contradiction. And then, we had to get somebody who knew how to talk about the university, and that was Jim Nondorf,
who is so much better than everybody else in his business. – So, when you go to dinner, let’s say you’re downtown
Chicago or wherever you might be, having dinner in New York or somewhere, do people come up to you and say my child or my grandchild really deserved to get in to the University of Chicago
and maybe you could help him? Here’s the resume or here’s a– Do you ever get any of those? – Almost. I get a lot of that, but
they usually don’t carry the resume around, but they’ll
say, I’ll send it to you. – Okay. – But yeah, there’s a lot of people– – So, is there any truth to the rumor that if somebody gives to
the University of Chicago Capital Campaign, they have
a chance of living longer and eventually going to Heaven? (crowd laughing) – It’s absolutely true. (crowd laughing) We apply a very rigorous
view to that question as we do to all questions and
have absolutely verified that. – At the Rockefeller Chapel,
that’s what I’ve heard they say a lot of times. So, if you contribute,
you have a better chance of living a long life. Look, David Rockefeller was a graduate of the University of
Chicago, got his PhD there, and was a donor, and he almost made 102, so there may be something to that. (laughing) So, finally we wrap up. What is the greatest pleasure
of being the president of the University of Chicago and what’s the least
pleasurable part of the job, other than panels like this? (crowd laughing) – Well, I would say, actually, the greatest pleasure to me is the– A slightly peculiar thing to
say, but is actually seeing the integration of these disparate parts into a whole that has a big
effect on people’s lives in multiple and very
different sorts of ways, and just the moment one
sees, particularly somebody from a financially
disadvantaged background, and you’re able to give them fellowships with no expectations of debt,
and talking to their parents who are astonished that
this opportunity arises is an extraordinary feeling,
as is watching the emergence of these phenomenally
accomplished faculty members, and all these things are happening at once inside this integrated hall. – Okay, final question. Are we going to a recession
in 2019 in the United States? A recession, yes or no? – Who, me? – Yes.
(laughing) – You want a yes or no? (crowd laughing) – It’s one of the other. I don’t
know what else it could be. It’s either happening, one of the two. – Look, it’s anybody’s guess. – I could have said that. (crowd laughing) – I’ll tell you the worst thing, the worst thing in the
world in being an economist is people expect you to have
an answer to that question. (laughing) – Well, okay, so you’re not gonna– – Look, we’re doing– I would put a high probability
on not having a recession, but there’s so many uncertainties. What happens if we continue this trade war for another three months,
four months, five months? Well, we could drive the
economy into a recession. – So, this is a problem. Usually, the R word is always a problem because when you say there
could be a recession, then newspapers make a big deal of it. When I was in the White House, Jimmy Carter’s Inflation Advisor said that he thought we were
going into a recession in the year that Carter was
running for re-election, 1980. Carter called him into the
Oval Office, said, look, never use the R word. It’s killing me when you say
we’re gonna have a recession in a re-election year. He said,
well, I’m and honest person. What am I supposed to say? He said, just don’t use the R word. From then on Fred Kahn said, I think we’re heading into a banana. (crowd laughing) And he used the word banana
and nobody would put that in the headlines, so
that was what he used, so you don’t see any bananas
on the horizon either, right? – Yeah, we’re heading into a banana. (crowd laughing) – So, if I wanna buy an
apartment in New York, is this a good time or
should I wait a year because the price will be coming down? – You should wait.
– Wait a year. – Wait a few more years. – A few more years?
– My project will be on the market. – Okay.
(crowd laughing) Alright, what if I
wanna buy an apartment– – It will be the best location and I’ll give you a good discount. – Okay.
(crowd laughing) – You finance it, as well? – Yes.
(crowd laughing) – Alright, well, I’ll
call you right afterwards. So today, Microsoft stock has
been spectacularly successful. I missed the run up, but if
I bought the stock today, would I be happy in a year? (crowd applauding) – You’ll always be happy, David. (crowd laughing)
– I don’t know, I’m Jewish. I’m never always happy. (crowd laughing) Okay. (crowd applauding) Thank you. (crowd applauding) Is David Booth here? There he is, David. David Booth is a person who
is going to Heaven for sure because he made the biggest gift in the history of the university. Thank you very much. It’s named Booth School
because of David Booth. David, thank you for that terrific gift and thank you for coming here and everything you’ve done
for the University of Chicago. I’ll tell you one little– (crowd applauding) I’ll tell you one little
story about David and myself. My undergrad work was at Duke University and David did his undergraduate work at the University of Kansas, and one time, the rules of basketball,
written by James Naismith, were coming up for auction at Sotheby’s, so I thought I would buy it
and give it to Duke University; and so I get there and
it was supposed to go for, I think, $250,000
or something like that. So, when it gets to 250, I’m bidding, and all of a sudden, somebody bids 350. I’m wondering, who could this
be? Is it Phil Knight at Nike? Who’s bidding? Well, it goes back and forth
til we’re at about four, five million dollars, and I
didn’t know who was bidding and I was really upset that I
wanted to give this to Duke. Well, it turned out, the
person bidding against me was David Booth. (crowd laughing) And it was being filmed
for an ESPN special, as it turns out, and he was
apparently saying to somebody, who the hell is on the other
end, me, bidding against him? Any, it’s now at the University of Kansas, and congratulations on getting it. (crowd laughing and applauding) I’ve worked with Bob for many years and I would say that I do think that he is one of the
great university presidents our country has ever had. He’s done a spectacular
job at the university, but he does need some help, and we are in the middle
of a Capital Campaign. The Capital Campaign’s designed to get about five billion dollars or so, and we’d like people
who haven’t participated to think about what you might
do to be able to live longer and to get to Heaven, and
maybe follow the example of David Booth. We do need your support
because the university really depends on philanthropy. We really can’t get government money. We really need a lot of philanthropy. Tuition doesn’t cover very
much, frankly, of the cost. Just think about this. All of you who are here for
the University of Chicago are probably proud you have a
University of Chicago degree. I know I am. If the university goes this way, people will think you’re not
as smart as you think you are because they’ll say, you went
to the University of Chicago. It’s not very good. So, as the university
gets better and better in its reputation, people
will think you’re smarter and smarter than you are, so what you need to do to make sure the reputation is increased,
is give to the university. So, I hope all of you will
seriously think about it before the campaign is
over sometime this year. We hope it will be the
most successful campaign in the university’s history. I’m sure it already will be,
but we need to do much more. The University of Chicago
competes with Harvard, Yale, Princeton, and Stanford, but its endowment is a
fraction of their size, so Bob and the other people
of the University of Chicago have done a terrific job of taking a relatively modest endowment, that was aided a great
deal by David’s gift, and taking the university
to the highest level, so I hope all of you are
proud of your degree, I hope you’ll think about
doing something to campaign. Thank you all. (crowd applauding)

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