Abby Joseph Cohen, Professor of Business, Columbia University Graduate School of Business
Gary Cohn, Vice Chairman, IBM; Former Director, U.S. National Economic Council
Lynn Martin, President, NYSE Group
In conversation with: Diane Brady, Executive Editorial Director, Fortune Live Media and Co-Chair Fortune Global Forum
Gary Cohn, Vice Chairman, IBM; Former Director, U.S. National Economic Council
Lynn Martin, President, NYSE Group
In conversation with: Diane Brady, Executive Editorial Director, Fortune Live Media and Co-Chair Fortune Global Forum
Category
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TechTranscript
00:00Good morning everybody. I'm looking forward to a great debate. We're going to
00:05be taking questions from the audience too, so keep that in mind if you've got
00:09questions for our three fantastic panelists here. I want to start actually
00:14with a bit of a lightning round. Since we just heard about the politics, I want to
00:19ask about the economic landscape and let's at least maybe you're, are you
00:23optimistic, pessimistic, or neutral about the next say 12 to 18 months? Let's talk
00:29about the U.S. economy first. Abby, I'll start with you. Relative to what I had
00:34expected before, I am more pessimistic than I was. More pessimistic. Gary? Well I
00:40might as well balance this out. I'm optimistic. Optimistic. Extremely
00:44optimistic. Extremely optimistic. Okay so let's. I'll go the extreme category. Okay
00:51so then let's just do another, before we drill down a bit, let's talk about what
00:54are, what are you most concerned about? Abby, I'll start with you since you're
00:58mildly pessimistic. What I'm concerned about are changes in policy that are not
01:04beneficial. You know the starting point for the U.S. economy right now and for
01:08the new administration is actually quite good. The U.S. economy is growing, not as
01:14rapidly as it was in the immediate post-pandemic period, but it's growing
01:18quickly enough for job creation and also for excellent profit growth. So that is
01:24an excellent starting point. So when I take a look at what could go wrong, I
01:30think about a few things and I don't want to be a Pollyanna about this. I
01:35recognize there are problems in the economy. There are categories of workers.
01:40There are geographies in our country that have not benefited as much as
01:45others over the last few years and those problems need to be addressed. What I
01:50worry about is some of the proposals that have been made during the campaign.
01:55Now, as Gary would be very quick to point out, there's a huge difference between
02:00campaign proposals and governing, but here are the things on my checklist of
02:06things to be concerned about. Number one, tariffs. There are sometimes appropriate
02:11places to use tariffs. We'll talk about tariffs, don't worry about that. Okay.
02:17Okay, here's the landscape. I'm concerned about inappropriate
02:21application of tariff. I'm concerned about excessive fiscal stimulus,
02:25particularly stimulus that stimulates demand but not supply. I am also concerned
02:32about changes in the regulatory environment and that perhaps is a little
02:38bit surprising, I think, to some people here because we all know that regulation
02:43can always be improved, but there are some concerns that I have about the
02:47manner in which regulation might be changing. And we're gonna do some deeper
02:51dives on that and I think the word regulation might actually be one of the
02:55sources of optimism for our other panelists here. Gary, let's ask about what
02:59are you most excited about or concerned, but since you're extremely
03:03optimistic, let's go with the good stuff. So let me start where Abby was headed
03:08for a second here. So the economic data on the surface right now is
03:12pretty good. I think beneath the surface there's probably more trouble than
03:16people want to admit. The current administration has financed our deficit
03:22in very short duration, so we've got this duration wall issue. We have this issue
03:28where the immigrants into this country have cost cities enormous amount of
03:33money. Amazingly, those cities, mostly Democratic cities, have managed to keep
03:39themselves very quiet up till today on the cost of that. We're gonna have to pay
03:43for this. I think you're gonna see cities running to Washington looking for
03:47enormous amount of handout, and I think there's gonna need to be some money
03:50spent, and we've got a housing cost issue going on. So we start with that premise,
03:54but then we roll forward into where I think Lynn and I get pretty optimistic,
03:58and we start looking... I like how you're all speaking for each other. Well, she gave me the option to be very optimistic, so I'm gonna exercise my
04:07option. We roll forward into an environment where the business
04:13environment and business investment is in a position where it is going to
04:18stimulate economic growth. I think the the CEO community, which is
04:22represented well here, has been sitting on their hands for the better part of
04:26two years not knowing what to do, not understanding what the future environment
04:31would look like. I think the amount of CapEx that's going to come into this
04:34country and the amount of investments that's going to be made, and look, some of
04:39it is going to be pressure to invest in manufacturing in this country. What
04:44the Trump administration is doing, and I hear this from CEOs every day right now,
04:47is, okay, I want to get in front of this. I want to move manufacturing back to the
04:51United States. Now look, I know the federal government wants to help me. I
04:54need help at the state and local government to get permitting to be able
04:57to build manufacturing back in the United States, and I'm going to need
05:01help with hiring employees because we do have an employment problem in this
05:05country. But I do think we're going to ultimately figure these things out, and
05:09we're going to see more investment. We're going to see more economic growth, and we're
05:13going to see a smart regulatory environment. I don't think we're going to
05:16see a hands-off regulatory environment. As the last panel said, go back and look
05:20at the four years of the Trump administration. I don't think anyone
05:23would call that a cavalier regulatory environment. I think you would call it a
05:26relatively smart business-friendly regulatory environment.
05:33Before I move on to Lynn, just one quick question since nobody has tweeted that
05:37you're not going to be part of the next administration. If you were chosen,
05:42would you want to serve? I know, I mean, you can talk about the likelihood, but
05:45would you? You know, I have the best new job in America. I just became a
05:48grandfather. I'm really enjoying that one. But look, public service is public
05:53service. When you're asked to serve, you have to consider it. Okay, Lynn, you're
05:57extremely optimistic. Why? I think the U.S. economy has weathered a pretty large
06:03storm underneath the surface over the last two and a half years, and the U.S.
06:08economy has shown the strength, not just in one sector, but in all sectors. You see
06:15the returns from companies in all sectors, energy, utilities, industrials,
06:22consumers even come back. In addition to technology, that is really driving the
06:30market at the moment. So I just don't see a stress point that would cause me to
06:38be pessimistic about the economy. Additionally, there's been a lot of
06:42uncertainty both on private companies when they're going to come to market.
06:46They were waiting for Fed to cut interest rates, the election to happen,
06:52especially if it was a decisive election. Either way, because underneath, if it was
06:57not decided, it would have caused volatility in the market. So we've got
07:02quite a large backlog of companies that are waiting to go out and become public
07:08companies, and the ones who have gone this year have actually done pretty well.
07:13The stocks overall have done very well obviously. Absolutely. If I look at just some data,
07:17you know, in a normal election year, the S&P returns 12.5%
07:22growth. This year we're at 22-23% already, prior to even what
07:30happened last Wednesday. So I think the last few years we've gotten a handle on
07:39inflation. I think we've gotten a handle on a variety of other systemic issues.
07:44And if I look at how the U.S. has recovered relative to other countries in
07:48particular from COVID, it has shown the strength and resilience of our economy
07:54in a way that no other country has been able to demonstrate.
07:58Well before we drill down on sort of what's happening in this country, I'd be remiss not to ask
08:03about the rest of the world. Let's do that again with the optimism, pessimism.
08:08How do you think? Obviously China, Europe, very different parts of the world, but in
08:12general, how do you think we're going to see the global economic landscape?
08:17Sure. First let me clarify. Your question was not, are you optimistic or pessimistic, but
08:22relative to where you were, what's the incremental change?
08:26So I want everybody to get that sense. Yes, Professor, mea culpa. And so I'm
08:33going to go back to a point I made before, which is the U.S. economy is
08:37actually doing quite well. We are at a growth rate that is generating jobs and
08:43generating corporate profits. And when we compare ourselves to the rest of the
08:47world, there really are very few other.
08:51Voters did not think so. I will point that out.
08:53Voters did not think so. There's all kinds of discrepancies in what voters
08:58think and what we see in various surveys. So for example, the surveys that get done
09:04that ask individuals, how is your household doing economically?
09:09Almost everybody says, pretty good. And why not? Unemployment rate is about 4%.
09:16There have been significant gains in disposable personal income. Wages have
09:21been rising in excess of inflation. People feel good about their own situation.
09:25But the next question in these surveys is, well, what about the rest of the country?
09:30Oh, that's terrible.
09:32That's fair. Let me go pivot to the rest of the world. What would you want to say
09:36about kind of, we're talking about tariffs right now. We're talking about
09:40obviously what's happening with the U.S. economy. How optimistic relative to where
09:45we are now would you be for the next 12 to 18 years?
09:47So think about the United States as being in a good position. Not perfect, but good
09:52and resilient. If you take a look at some of the other major economies, the picture
09:57is actually kind of cloudy. China, for example, has not been doing well.
10:02Post-pandemic, they have been suffering from their really bad policies,
10:07public health policies. During the pandemic, they've not applied the right
10:12sort of public stimulus. The package they announced just last week is now viewed
10:18as a disaster, is one way to put it.
10:21But we also...
10:22We have people in the audience, I hope, that will also speak to that.
10:25And then, of course, there's Europe. If you take a look at where global GDP is
10:30generated from, the United States and China, but Europe is pretty large with
10:35regard to real GDP. They would be among the top two in the world. And there are
10:41many European countries that are on the cusp of recession. Just last week, it
10:48wasn't just the Fed that lowered interest rates. It was the Bank of
10:52England. You have problems in Scandinavia. You have problems in Germany as well.
10:57So you're not pessimistic, you think?
10:59Well, I'm concerned about that, particularly if there is an imposition
11:03across the board of tariffs. Because if you look at who do we trade with, we
11:08trade a great deal with Europe. If, in fact, you put on that 10% blanket tariff,
11:14and I'm not saying that's what's going to happen. We'll all wait and see. But if
11:17you put that 10% blanket tariff on Europe, we're talking about dinging GDP
11:23in Europe by between 0.3 and 0.5% GDP. And if an economy is only
11:29growing at one or one and a half, that's problematic. The other thing to keep in
11:35mind is that if there's a blanket tariff of 10%, who are the most important trade
11:41partners for the United States? This is a rhetoric question class. It's North
11:46America, right? It's Mexico. No, let me finish, Diane. It's Mexico and
11:51Canada. And there's all this weird double counting because a car that is produced,
11:56say, in the United States, the parts can go back and forth over those different
12:01borders up to 15 to 20 times. So when we put a tariff on Mexico and Canada, we're
12:08putting the tariff on ourselves as well. And as so many people have said, these
12:14other countries are not paying the tariff. Ultimately, it's the U.S. consumer
12:17that is. And so these tariffs are bad for inflation and they're probably bad for
12:23GDP growth as well. I don't think there are many pro-tariff people in this panel. Maybe. Gary, what do you think?
12:27There's a point. Wait, wait, wait. One more point, if I may. And then I'm going to go to Gary. There are some
12:32appropriate tariffs if another country is dumping stuff. Of course. I think we'd agree
12:38that. If it's made in the U.S. and they're doing it at the cost of, you
12:42know, unfair labor, etc. And China has been dumping stuff. They've been
12:47producing certain products more than total global demand. This is lots of
12:53fodder for debate. Gary, let me go. No, no need to stop. I want to go to Gary. Tell
12:58me, we're talking about the global economy now, and of course, you're somebody
13:01who's been known as a pro-free trade advocate. Good luck with that. And what do
13:06you think? No, I don't think it's good luck with that. Let's wait and see.
13:10Okay. So first of all, I mean, if you listen to what the Trump administration
13:16says, they want open, free trade. So their view is if you put tariffs on us, we will
13:23put tariffs on you. If you are willing to drop your tariffs on us, we will drop our
13:27tariffs on you. So I do think there is going to be a bunch of renegotiation on
13:34tariffs and trade barriers and the way that we realign. But I also think it's
13:40interesting because I've heard from a bunch of CEOs recently that are willing
13:44and going to move manufacturing to the United States. So there is a lot of good
13:50that is going to come out of this. You know, we always want to talk about the
13:52bad side of every part of these equations. We have to look at the other
13:56side of the good parts of these equations. And so when I look at the
14:02world as a whole, I'm not as pessimistic as Abby, that's for sure. I think
14:06there's some good spots of the world. There are some bad spots. I think
14:09China is a tough spot and I think China and the United States, I don't know if we
14:13can come to a real relationship or not. It will be interesting to watch, but I do
14:18think they're in a tough starting spot. So when you start in a
14:22tough spot, you have a tough place to go. But when I look at what's going on in the
14:26Middle East, I'm pretty optimistic about our relationship with the Middle East
14:29and what's going on in the Middle East. Europe, I think we could potentially end
14:33up in a better spot, but it's not completely obvious to me. But I think we
14:38all know if the U.S. economy thrives, being the biggest economy in the world
14:41by a factor of multiples of any of the individual European economies, it helps the
14:47rest of the world. Can I, before I move on to Lynn, since you're one of the
14:50architects of tax policy in the last Trump administration and now it looks
14:55like we will have a continuation of the consumer tax cuts into 2025 and beyond, I
15:00don't know what that does to the debt, but certainly there's been discussion
15:03about devaluing the U.S. dollar. I mean, give me some sense relative to the rest
15:07of the world what that does to the U.S. economy, just the tax picture. Well, the
15:15tax picture, people like predictability, they like stability. I think if you look
15:19back on the last period of the new tax scenario that we've lived in, and I'll
15:27take it aside here and remind everyone that only the personal side of the tax
15:31code expires the end of 2025. The corporate piece is not expiring. That
15:37said, we all know that when Congress starts dealing with the tax code and they
15:42open the book, they'll look at every page. So I'm not here telling you
15:45they're only going to look at the personal side. I think what we've learned
15:49is that when we have a accommodative tax code, our economy tends to thrive. So if
15:56you go back and look at the CBO scoring back when we did tax policy, the scoring
16:03was completely wrong because they use a very static scoring. They basically say,
16:07even though you cut taxes and even though you do the following things, we
16:11don't think the economy is going to change trajectory. We don't think
16:14employment's going to look like it is. We don't think all those repatriated
16:18dollars that you're forcing repatriated from from U.S. companies back in the
16:22United States is going to stimulate economic growth. Well, guess what? It was
16:25wrong. In fact, I think one of the biggest mistakes that economists made
16:29over the last five years was they were all predicting that we would go into
16:35recession in the United States. I think one of the reasons we didn't go into
16:37recession is the massive amount of cash that was repatriated from foreign
16:42earnings that was deemed taxed in the United States in the new tax code. It was
16:46brought back by U.S. companies and it was invested in the United States, keeping
16:50job growth, keeping manufacturing going. So I think we will, I know we will
16:55see some tax code changes this year, but I think it's going to be very similar to
16:59what we have now with some tweaks. Look, there's, there's, I will be the first to
17:03admit, when we got the tax code done in 2017, it wasn't perfect. There's no law
17:07that's ever been signed that was perfect because at the end of the day, the
17:11legislative process in the United States is a set of compromises. Yes, and I want
17:15to go, Lynn, I want to ask you a little bit about what's happening. You mentioned
17:19it earlier and then we'll go to questions from the audience, but we've
17:22seen a lot of companies that have gone to the private markets, private credit,
17:26private equity. Do you anticipate that, you mentioned more companies going
17:31public, so talk a little bit of the regulatory environment and what you
17:34anticipate there that would make a difference, both, you know, with the U.S.,
17:38but also global listings too. Yeah, I mean, I do think there's going to be quite a
17:43few companies that are going to look to get out pretty early on in 25. We
17:48actually have some companies that are still flirting with 24, to be honest, now
17:53that, now that the volatility has come off in the last week, so we'll see. We'll
17:57see where that lands. I don't know where we're gonna land on the regulatory side.
18:02I do think a lot of the... Plus there's the AI regulation. Yeah, I think a lot of the
18:08regulations that were passed under the current administration will be
18:12re-examined, particularly some of the ones that have been less popular with
18:16corporate CEOs and CFOs around things that look at share buybacks and how to
18:22use your balance sheet, and then some of the ESG disclosures, so some of those
18:25things probably will get looked at, and as you start to layer on some of these
18:31regulations that aren't just about what's your profit, what's your loss, and
18:35disclosing that in a transparent fashion, that then starts to bring down the cost
18:40of going public. Let me turn to the audience here. We have questions over
18:46here. I see a question. I'll wait for the mic runner.
18:51Hi, Alex Zhabonkov in Silicon Medicine. It's almost 11 a.m. and I've heard the
18:58word AI only once. From me. Okay. And it looks like generative AI has played a
19:05huge role boosting the economy over the past few years. I mean, our company
19:10managed to get the cost of drug discovery to one-tenth and one-third of
19:14the time, but it looks like for the rest of the industry, it looks like we are in
19:20the dot-com bubble again. Do you see this trend and generative AI with economic
19:26productivity and economic growth being boosted continue, or are we gonna see a
19:34bubble burst? I believe that would be a question for the vice chairman of IBM.
19:40It's also a question for the New York Stock Exchange. And weigh in everybody. I know our time is, we
19:45want to get in a few questions. Okay, so I'll be relatively quick then. So look, I
19:49do not think we're in an AI bubble. I think we're in the very early beginning
19:53of AI. This is a long-term evolution. So if you poll CEOs, if you
19:59poll a community like this, everyone in this room is talking about AI. If you
20:04search how many times you talk about it in your earnings report and your data,
20:07you're all mentioning AI. If I ask each one of you what you're specifically
20:12using it for, it gets a little bit more clouded to what you're actually using it
20:16for. But everyone in this room knows it's going to play a role in the future of
20:21your company. We're seeing the evolution. We're seeing companies take it up. We're
20:25seeing companies use it for new and different applications. It's one of the
20:30most creative productivity tools we've ever seen. And as companies, as an
20:36economy, we are trying to create productivity. Productivity is the key to
20:41success for an economy, for your company. People are starting to understand the
20:45tools. Whether it's a HR chatbot, where you can now be running a much more
20:49effective human resources department with less people. Whether it's a code
20:53assist product, where you're trying to port one set of computer language to
20:57another. We're now starting to see the real applications being implemented, but
21:01we're just at the beginning of this evolution. And companies are going to
21:05find more and more uses as these models get more and more robust, and they get
21:09more used to dealing with each of these companies. So I do not think it's a
21:13bubble, but I think it's a long-term evolution. Yeah, and their regulatory
21:17environments. I'm going to go for it. We have one more question right here, and
21:20then. Thank you. I'm Michael Garron. I actually, in 1972, started the Fortune
21:28Conferences. Oh, well thank you very much. 72 to 75. We talk about the global
21:36economy, and the economy in general, but we haven't had any conversation yet about
21:41the distribution of those rewards. And it seems to me that income
21:46inequality was a big driver, not only in the election here, but a lot of the
21:51discontent all over the world. Do you want to say something about income
21:56inequality, and whether that is going to be addressed? Yeah, Abby. Yeah, I'm happy
22:01to address what I think is a extraordinarily difficult, but perhaps
22:06the most important issue. And you, you're correct. This is a political problem, a
22:11political obstacle in many, many countries. And we began to see income
22:17inequality really begin to become more and more problematic with the financial
22:21crisis, and then the pandemic just put it on steroids. So how do we address this? I
22:28think that there were some elements of the Biden economic policies which were
22:33appropriate in trying to address this, because how do we bolster long-term
22:38productivity growth? As Gary said, that's what gives you economic growth, that's
22:43what gives you economic happiness for the population. AI is certainly a
22:48component, but when we take a look at the broader categories, it's investment in
22:53capital, it's also investment in labor. And we have many workers in the United
22:59States and elsewhere who are looking at AI, or looking at other developments, and
23:04say, I'm not part of that. How can I be part of it? So the Biden team did a few
23:09things. And I want to ask you this to be quick, because we're going to have to sum up soon. Okay, with
23:14bipartisan support, spending on infrastructure was critically important,
23:18because it also brought broadband to rural areas. We see under the Chips and
23:24Science Act some important spending, not just on bringing semiconductor fabs back
23:29to the United States, but actually enhancing scientific research, which
23:33ultimately gives us the products and technology to bolster productivity. So
23:38Abby, I want to be able to stop you there so I can ask. I actually want to ask
23:41very quickly, since I've not asked you yet, just a quick round-robin before I go
23:46to final thoughts. On a scale of one to ten, how important is addressing debt?
23:50Just quickly, Lynn. One being least important, ten being most
23:58important. Say nine or ten. Nine or ten. Gary? I'm there. Nine or ten. Nine or ten. In the
24:04next year or two, I would put it down at sort of six or seven. What about
24:08regulation? In what context? In context of important of addressing the current
24:14regulations that are, in your mind, choking business. I would say it's
24:20probably like a six or seven. Picture seven. Eight or eight. Eight or nine. What
24:26about addressing climate change, which has not been on the agenda for the
24:29parties? How important is it as a priority for the administration? I think
24:34it's now just part of the way businesses think. I think it's now just
24:39the way businesses operate. I could get into demographic time bombs. Particularly when you
24:43consider the AI revolution, which I agree with Gary, we're still in the early
24:47innings on. I feel like I should ask very quickly, Jerome Powell, you know, should
24:52he step down? In my view? Yeah. No, he should not. I started my career at the
24:58Federal Reserve. I worked with a chairman who did bow to political pressure and it
25:03was an economic disaster. Not very good. So let me give you each a chance to give some final
25:07thoughts for this audience. And again, I know this is teaser content, so thank you
25:11very much. And please follow up with our panelists here. Lynn, I'm going to start
25:15with you. Some final thoughts for how you're thinking about the trend shaping
25:20the global and U.S. landscape? So aside from the fact that I think the economy is
25:24doing pretty well, I do think AI we're at the early stages of. And I think the
25:29reason you're not seeing specific use cases mentioned by CEOs is
25:34because they're thinking about the data governance piece. Great. Gary. Look,
25:39there's so many things I could talk about. I think AI is very important. AI
25:43regulation. We haven't talked about AI regulation. There's an interesting sort
25:48of discussion going on. Do you regulate the models? Which I do not
25:52believe you should regulate the models. You do regulate the use cases. I'm a big
25:56supporter of regulating the use cases. We want everyone to contribute to models. We
26:00want the models to get as big and robust as they can. But do you need
26:04to regulate something that's picking songs? Probably not. Do you need to
26:07regulate something that's diagnosing medical things? Probably shouldn't
26:10regulate that. So I think this is going to be a big evolving area in the next
26:14four years. And final thoughts to you. Policy is the people who implement it.
26:20And one of my very big concerns is something called Schedule F. Every
26:26administration deserves to have a cadre of political appointees. In the U.S.
26:32federal government there are about 10,000 of those people spread across the
26:35country in various agencies. What Schedule F would do, and this was
26:39actually a rule put in place under Trump 1.0, but rescinded by Mr. Biden, under
26:46Schedule F those 10,000 would remain political appointees, but the 40,000
26:53experts under them, those positions would also be switched over to political
26:59appointments. So instead of having scientists and lawyers and others who
27:05are familiar with specific areas actually implementing the laws put in
27:11place by the Congress, we would have another 40,000 political appointees and
27:16that worries me. Okay. Please join me in thanking our panelists again. They will
27:20be out around today and I appreciate their thoughts.