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Influencers with Andy Serwer: Davos WEF Special

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In this special episode of Influencers, Andy travels to Davos, Switzerland for the 2022 World Economic Forum where he's joined by U.S. Commerce Secretary Gina Raimondo, U.S. Special Presidential Envoy For Climate John Kerry, and North Island Chairman Glenn Hutchins.

Video Transcript


ANDY SERWER: I'm hear with Secretary Raimondo. Nice to see you. Thanks so much for joining us.

GINA RAIMONDO: Happy to do it. Nice to see you.

ANDY SERWER: So we do want to talk to you about economics, of course. But I wanted to start off by getting your reaction about the school shooting in Texas yesterday and what you're feeling on this is given that you're a parent and you're a governor of a state as well and what message you would send to business leaders about this terrible tragedy.

GINA RAIMONDO: Yeah. It is a terrible tragedy. And I appreciate you starting with that. Enough is enough. When is enough going to be enough? I would say the most important thing is that we can't become numb to this. It's too frequent, obviously. And we can't become numb to it, children being gunned down in their schools and their communities. So whether you're business leader, a governor, a mayor, a member of Congress, you better wake up today asking yourself, what can I do to bring this scourge to an end in America?

There is a solution here. It's actually not that hard. Common sense gun bills could change this. And I did a lot of it when I was governor. So I would say everybody-- everybody-- this isn't right. It could be your kids. It could be my kids. And we have the tools to solve it. So I would say, speak out. Advocate. Or if you're in a position to change the laws, go ahead and do the right thing.

ANDY SERWER: Yeah. I want to switch to Davos, we're here, and ask you a little bit about the mood. You're talking to a lot of executives, obviously, and government leaders from other countries perhaps. What are they saying? Are people concerned about a recession, Secretary Raimondo?

GINA RAIMONDO: No, not at all. It's interesting one. Executive I was just talking to, he said, it seems like people are trying to talk themselves into a recession. But there's no evidence to suggest we should be worried about it. Consumer spending is as high as it's ever been. No slowdown. People's bank accounts in good shape. Labor market's really strong. Businesses projecting strong growth.

So I think that the economy is strong. Inflation is a different story. There's a lot of nervousness about inflation. A lot of the political leaders from around the world. This obviously is not an America issue. Prices are up everywhere. And so I think where we really need to focus, obviously, is putting a lid on inflation. But as it relates to recession, I think the fundamentals of growth, of CapEx, companies planning to expand, is really quite strong.

ANDY SERWER: Another reason you're here I believe is to talk to companies about helping to deter Russian aggression. It's a little cold out here.


ANDY SERWER: To deter Russian aggression. What are those conversations like?

GINA RAIMONDO: Yeah. By and large, I've been here to say thank you to the American business community, who have really stepped up to support the administration's efforts in Russia. And by the way, they're losing money. It's not profitable for them to pull out of Russia. But they're doing it because it's the right thing to do. And I think we ought to recognize that and thank them.

What we are talking about here is the effectiveness of our sanctions. And the part of that I'm on point for is denying Russia the technology and semiconductors that they need to conduct their military operation. We put together an unprecedentedly large and effective coalition. Europe joined immediately. And talking to the Ukrainians-- by the way, the Ukrainians are here in Davos in force. It's a very respectable and impressive showing. They tell us it's working. So keep it up.

ANDY SERWER: And you're not concerned about sanctions hurting just ordinary people in Russia?

GINA RAIMONDO: No, because we have been quite targeted. We are specifically denying semiconductors, military equipment, avionics, aerospace. We are continuing to send medical devices, medicines, food, et cetera.

ANDY SERWER: I want to ask you about your recent trip to Asia. A number of topics to get to there. You were talking I believe-- or President Biden was, excuse me-- about possibly removing tariffs to China. Is that a good idea? And what would be the impact on inflation?

GINA RAIMONDO: Yeah. So it's something we are looking at. The President, he will tell you his number economic priority is bringing inflation under control. We get it. It's hard for Americans right now. And tariffs are one tool in the toolbox to bring down costs. So he has asked us, his advisors, to do an analysis. No decisions have been made. It's an ongoing analysis. And we're trying to figure out, is it a good idea? Would it bring down inflation?

ANDY SERWER: You have a new trade agreement, an Asian trade agreement. What would that do to counteract China's influence?

GINA RAIMONDO: So it's the Indo-Pacific Economic Framework. We just rolled it out. I was with the President Monday in Tokyo. It's fantastic. We have a dozen countries representing with us. 40% of the world's GDP. And it's really designed to help our economies work more closely together with their economies. And so I think there's a supply chain aspect to it, a semiconductor aspect to it, aligning on digital standards and tech standards.

Actually, it's the biggest economic arrangement the United States has ever launched with Asia. And the point of it is China's very strong in that region. They're pouring tons of money into Malaysia, Indonesia, Vietnam. And those countries have told us they want the US to be more present. Those countries have told us they want an affirmative American economic strategy in the region. And that's what this is.

ANDY SERWER: Any fallout from the President's remark about defending Taiwan militarily when you're talking to chief executives?

GINA RAIMONDO: No. Actually, it hasn't come up. Not even once.

ANDY SERWER: OK. Let's talk about chips, one of your favorite topics.


ANDY SERWER: And I want to know how things are going with regard to the semiconductor shortage, your take on that. The CEO of Intel, Pat Gelsinger, told us that he sees it persisting through into 2024. Is that your take?

GINA RAIMONDO: Yes. At least 2023. I hope not 2024. That has come up constantly in most conversations I've had here. Medical device companies. I've met with CEOs of a few medical device companies. They are struggling to get the chips they need to make life-saving equipment. Every company here, every digital company, cloud computing company, they want to know, when is Congress going to pass the Chips Act? And my answer is not soon enough. I don't know why Congress is delaying.

ANDY SERWER: Well, let me follow up on that. I mean, chips, apple pie, baseball. Who doesn't like chips? Why are they holding this up? And what are the reasons this is being delayed?

GINA RAIMONDO: There is no good reason as far as I can tell. There's bipartisan support for it. It's a national security issue. There's 200-plus chips in Javelin launching system. We are utterly dependent on Taiwan for our chips. There is no reason Congress wouldn't pass this tomorrow. I don't have a good answer for you. But I can tell you from being here, talking to world leaders, talking to CEOs, it's on the top of everyone's mind. And you talked about China. China is plowing ahead. China is investing $150 billion into domestic production of chips. We're going to miss out if we don't move.

ANDY SERWER: Have any companies indicated to you they're going to look to do manufacturing outside the United States because they're concerned that the bill won't get passed?

GINA RAIMONDO: Absolutely. That is exactly what will happen. Friday night, I was with the President in Seoul at a Samsung facility. Biggest chip manufacturing company in the world. And you look around, it's amazing. We are at risk of losing that in America if Congress doesn't move. I've talked to maybe four CEOs of chip companies here. They've all said, we want to be in the US, but we can't wait any longer.

ANDY SERWER: Really? And so how imminent do you think that might be?

GINA RAIMONDO: Months. Months. They have to make decisions. They have to make their decision. They can't wait forever. I think if this isn't passed in the next couple of months, these companies-- and they have to. Singapore is offering incentives. Germany is offering incentives. Spain, France, Greece, Japan. So we could lose it.

ANDY SERWER: Want to switch gears just quickly as we wrap up and ask you about the solar panel review. You're overseeing an investigation into that industry that could result in some new tariffs. What's the latest there? And when might that be completed?

GINA RAIMONDO: Yeah. I don't have any news on that. We are moving as fast as we can. There's a statute that's quite rigid and a timeline we have to follow. I know it's urgent. This is urgent. We need to move forward on our solar goals. But I also have to do my job and follow the statute. So we're going to move as quickly as we can.

ANDY SERWER: And just follow up on that, are you concerned about any effects on climate efforts with regard to that in terms of the investigation's outcome.

GINA RAIMONDO: Yeah. I mean, as I said, we need to move forward quickly on solar. And I certainly have heard from the industry that certainty on this case will enhance their ability to invest and move faster. Commerce Secretary Gina Raimondo, thank you so much for your time. I'm here with US Special Presidential Envoy for Climate John Kerry. Mr. Secretary, nice to see you.

JOHN KERRY: Happy to be with you. Thank you.

ANDY SERWER: We're here in Davos. And I wanted to ask you what business you're bringing in your role and if you're going to be talking to people about some new initiatives.

JOHN KERRY: Well, we are talking to folks about new initiatives. We created a number of months ago an entity called the First Mover Coalition. And we have major-- we had 35 major corporations from around the world who have decided to be leaders in creating a demand signal by opening up markets more rapidly through making their own commitments to make purchases or to behave in a certain way.

For instance, Maersk Shipping, largest container shipper in the world, has agreed the next eight ships they build are going to be carbon free. Volvo and others have decided to step up and say 10% of the steel they buy is going to be green steel.

You have major airlines, United, Delta, Boeing, and Salesforce, and Apple have all agreed that whatever flying operations those particular companies engage in, they will buy 5% sustainable aviation fuel, 85% reduction in emissions. So a whole lot of things like that individual companies, banks, major financial institutions, and others. And we'll have some important announcements about the new things that they're going to be doing and in new sectors.

ANDY SERWER: That's a lot of stuff with a lot of big name companies, Mr. Secretary. Do you personally get involved in the discussions with them about doing these types of things?

JOHN KERRY: Absolutely. And we have a terrific team of people. We're doing this in cooperation with the World Economic Forum. We announced it last year, actually. Been working on it for some period of time.

But these chief executives, these CEOs really deserve the credit. They're stepping up. They understand the urgency. And they've decided they're going to be leaders in helping to send the demand signals necessary to change behavior. So we've got folks working on aluminum and shipping and steel and concrete. And it's major. These have been the hard to do things. But we're moving into that sector and getting things done.

ANDY SERWER: Shifting gears a little bit here, obviously, Russia's invasion of Ukraine is front and center. And I want to ask you how that's impacting climate because there's a lot of talk about Europeans turning to coal as a stopgap measure in lieu of Russian gas. What's your take on that?

JOHN KERRY: Well, coal is the dirtiest fuel there is, no matter what, if it's unabated. And most of it is not mitigated or abated. So that's a problem. But they're not-- Europe's big lesson out of this is that they want to be energy independent. And they're going to move far more rapidly to get off of Russian gas, to separate themselves, and to deploy the renewable base of their grid so that they can be free from the emissions and from petro dictators who weaponize energy. So I think at the end product could be very salutary.

But you've got to avoid building out major long-term infrastructure that doesn't mitigate, that doesn't capture emissions and deal with the problem of the climate crisis. So you can't allow Ukraine to become an excuse for people to do things they wanted to do anyway, which is continue to simply produce the way they've been producing. And that's what we've got to avoid.

ANDY SERWER: Is nuclear part of that equation for you in terms of being able to shift away from oil and gas?

JOHN KERRY: The answer is for President Biden, absolutely. He has kept nuclear on the table. It's a very important ingredient. Bill Gates is building a new design of a nuclear plant in Wyoming now and has put his own money into that effort together with some federal money. There's another nuclear plant being explored and built out, demonstration, in Idaho at the National Laboratory.

MIT is doing work on small, container-sized nuclear battery. There's a tremendous amount of research effort. And France is doubling down on nuclear. UK is looking nuclear. A lot of other countries have decided that they just can't get to net zero 2050 without the use of a zero emissions current technology capacity. And so, yes, nuclear will be part of that mix.

ANDY SERWER: As a former secretary of state and now the envoy for climate, this type of environment seems to match both of your experiences or skill sets. Is it sort of unique in that sense?

JOHN KERRY: Well, I'm not sure what you exactly mean by that.

ANDY SERWER: Well, in that geopolitics and energy seem to be mixed and conflated in a way.

JOHN KERRY: Well, they always have been. They always have been. It has been without the focus that exists today on the climate crisis, which comes from emissions. I mean, this is not complicated. It's basic mathematics and physics. Certain things are happening because human beings are choosing to provide for their power or their transportation by combustion by burning fossil fuel. And if you don't lower the emissions, those emissions create a blanket, which goes up in the atmosphere, warms the planet.

And there isn't anybody I know today who doesn't admit that the planet is warming and that life has changed as a result of this. If we want to stop spending literally hundreds of billions of dollars-- and over a long period of time, we've spent trillions of dollars just cleaning up after worse storms every year, after floods, after fires, after drought.

I mean, at some point, human nature has traditionally proven pretty adept at discerning a trend. And this trend is pretty obvious. The climate crisis is getting worse, not better. And we have to much more rapidly be reducing emissions and taking the steps not that politicians are saying we should do, but the scientists whose lives are dedicated to determining the mathematics and the physics of this particular challenge.

ANDY SERWER: And most business leaders seem to be on board as well at this point.

JOHN KERRY: It's unbelievable what's happening. The private sector is really moving. And, yes, there's a gigantic shift with the private sector taking the lead in many places. And that's all kinds of private sector institutions. And by the way, some fossil fuel companies are now working very hard to become energy companies and transition to producing electricity and doing it in a clean way, either through hydrogen or nuclear or in other ways.

So this is not something that leaves the world without options that work for our economy. In fact, this is perhaps one of the greatest economic opportunities we've ever faced, potentially much larger than the Industrial Revolution because we have to build out new energy grids. We're building out now new vehicles. Ford Motor Company and General Motors have both said they're going to have only electric vehicles by 2035. So those companies are moving because the marketplace is moving. And they know we have to do that.

ANDY SERWER: Yeah. I was going to ask you. Hadn't mentioned EVs. But is that something under your purview as well? Do you talk to Tesla and Elon Musk and do you talk to people in Detroit about that?

JOHN KERRY: Well, I talk to them about the overall impact. But by and large, that falls into the domestic hat, which Gina McCarthy and her team have been working on. And they've done a terrific job. I mean, these companies have made their own decisions though. They're led by thoughtful, visionary folks who are looking down the road. And they recognize that if we are going to meet our goals with respect to climate, we have to have an all-- everything has to be part of the solution.

Agriculture, shipping, buildings, transportation, manufacturing. We all have to look at the ways we can reduce the emissions, which by the way, our pollution-- and 15 million people die every year because of the impacts of that pollution in the atmosphere. So the common sense thing to do is what we began to do years ago. Clean up the air. Not allow pollution to be dominating the impacts on our lives.

And so we have to get back to that. And there's a lot of money to be made in producing the goods, in defining the new technologies, bringing them to market, bringing them to scale. And that's what a lot of venture capitalists and investment entities are now realizing. And they're moving there. The market is moving and will move in this direction. We will get to-- I'm absolutely convinced we will get to a low carbon, no carbon economy at some point in time. The challenge is, will we get there in time to heed the warnings of the scientists and avoid the worst consequences of the crisis?

ANDY SERWER: All right. We look forward to seeing more progress there. Secretary John Kerry, thank you so much for your time.

JOHN KERRY: My pleasure.

ANDY SERWER: I'm here with Glenn Hutchins, private equity investor, chairman of North Island, and co-founder of Silver Lake Partners. Glenn, nice to see you.

GLENN HUTCHINS: Great to be with you, Andy.

ANDY SERWER: So let's talk about--

GLENN HUTCHINS: By the way, where did you get that tie?

ANDY SERWER: Well, are you jealous perhaps?

GLENN HUTCHINS: I am. Yeah. I really wish I was wearing that.

ANDY SERWER: I bet you do. So I want to ask you a little bit about the economic cycle and the markets. You're a big-time investor. What do you think of things right now?

GLENN HUTCHINS: Interesting question. So I would say very briefly that my working assumption-- not a projection-- but my working assumption is I think we have to expect a recession in '23. Not projecting that's going to happen. But I think we have to plan for that. And I think that's because the inflation that we're experiencing now, 6% to 8%, is roughly half structural or persistent.

So I feel like we have a real economy of about 3% to 4% inflation, a point or two above the Fed's target. That means the Fed's tightening will have to go on longer and be more durable in order to get that under control. Most of the causes of inflation are not things that the Fed's tools can really address. And so it feels to me like that-- and, secondly, monetary policy is a blunt tool, not a surgical instrument. So I think we have to plan for recession. And that has enormous consequences for corporate earnings, which we can come back to if you'd like.

ANDY SERWER: So how does one position oneself then? Or what are you thinking? Or what are you doing?

GLENN HUTCHINS: Well, it depends. So first of all, if you're a company, I think you have to make plans for slowing of consumer spending and your exposure to that. Also, for a continuing increase in cost of what you do, whether it's labor or raw materials. And by the way, that's the kind of behavior that the Fed wants to induce. In other words, they want economic activity to slow down in order to bring inflation down.

If you're an investor, I think-- I talked about this at year end. But I think in anticipation of this, what I've told people is to get out of the frothiest parts of the market. But the market's done that for them. If you're an investor right now, I would expect that if we do end up in a recession that there will be a-- we've been through a PE tightening already. And when earnings adjust, when the E goes down, I expect a second leg. So I'd be very, very concerned about it, less about valuation sensitive companies now and more about earnings sensitive companies.

ANDY SERWER: Shifting gears. We're here at Davos, of course. And you're the chairman of CARE, that NGO, and you were in Poland on the Ukraine border. Quickly, what did you see there? And what was that like?

GLENN HUTCHINS: Well, in addition to observing our work there, I spent a day volunteering at the border right and greeted buses from Kharkiv and Mariupol in particular and welcomed the refugees into Poland. I met a young woman named Svetlana who as far as we could tell all she had left in her life was a backpack on her back and big dog at her side. And she said to me, why won't you stop him?

ANDY SERWER: Him being Vladimir Putin, of course.

GLENN HUTCHINS: And a principal lecture on geopolitical realities didn't seem merited. I met another man, 85 years old. He said, in 1941, I fled to Russia to get away from the Germans. Today, I'm going to Germany to get away from the Russians. Those were the bookends of his life.

ANDY SERWER: It's really shocking. Shifting gears again. A big topic here besides deglobalization is crypto.

GLENN HUTCHINS: What's that?

ANDY SERWER: Yeah. Well, you're a big crypto investor.


ANDY SERWER: I want to know what your take is on that.

GLENN HUTCHINS: So, look, I think that crypto is a long term hugely important innovation. People think about it as either as about coins or about blockchains. I think it's best understood as a new mode of commerce and a new paradigm of computing. Point number one.

Point number two, any new technology like that will go through cycles. Ups and downs. There will be good companies and bad. The bad companies will go away. The good companies will thrive, just like the internet crisis of 1999. Pets.com and Webvan went away, and Amazon powered on to a greater success. So the point here is not to diminish crypto, but trying to understand what the best companies are and invest in those.

ANDY SERWER: You are a minority owner of the Boston Celtics. They're playing Mike Claudio's Miami Heat over here. And just wondering how sanguine you are about their prospects going forward.

GLENN HUTCHINS: It's a great team. Plays enormous team defense. They've got a coach that has worked wonders with them. Got an emerging young star named Jayson Tatum. The best defensive player in the league, Defensive player of the Year Marcus Smart. But it's a team. And I am very optimistic.