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David M. Rubenstein On PE Investing

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WHEN: Today, Wednesday, July 18th

WHERE: CNBC’s “Power Lunch”

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with David M. Rubenstein, The Carlyle Group Co-Founder and Co-Executive Chairman, live from the CNBC Institutional Investor Delivering Alpha Conference in New York City on Wednesday, July 18th.

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David M. Rubenstein
Image source: YouTube Video Screenshot

Following are links to the video of the interview on CNBC.com:

Carlyle CEO: No evidence of an economic slowdown

David M. Rubenstein: Minority stake is not completely passive position


BECKY QUICK: Folks, you know David Rubinstein, but I want to tell you a little bit about him. He is a standard in Washington, D.C., and not just because he's a power player when it comes to private equity or when it comes to politics; also because of what he does with his particular brand of philanthropy. And you may have heard about this before, but David is a patriotic philanthropic guy. And to describe what that is, let me tell you about a few things. He has given lots of gifts, gifts that have done things to restore the Washington Monument, the Lincoln Memorial, Thomas Jefferson's Monticello, and James Madison's Montpelier, and that just names a few. He's also a collector of documents. And I'm not talking about the documents we pass around in our workplaces. I'm talking about the Emancipation Proclamation, the 13th Amendment, the Magna Carta, all of which he has bought and then turned over so that the public has access to these documents, too. He's given money to institutions as varied as Duke University, Memorial Sloan Kettering, and the Kennedy Center for Performing Arts. So if you have a kid who is going into college, if you need to get an appointment with a doctor or if you need concert tickets, he's your guy. But today, we are here to talk about his ability to deliver Alpha, and so I want to give you some of his street credentials on that. David, as you know, cofounded Carlyle Group. He did this back in 1987, and at that point, this was a new industry. They had $5 million. Fast-forward 31 years to today, Carlyle has over $201 billion in assets under management. So think about that for a second. 31 years, you go from $5 million to $201 billion, and I think that is enough said. David, by the way, is a self-made guy. His father was a guy who sorted mail for the Postal Service. His mother was a homemaker, and he came to finance in a rather circuitous manner. As Tyler mentioned, he practiced law, and then he moved into government and he served as an advisor for the Carter White House. I had read that when Carter lost, you were crushed. Is that true?

DAVID RUBENSTEIN: Yes, I was 31 years old. I had the vision that I would be the senior domestic advisor in the second term. I had worked for Ted Sorensen when I practiced law, and he had been 31 years old and a top advisor to President Kennedy. I said okay, maybe I can do the same thing. The voters obviously heard that I was going to be the senior advisor and they threw Carter out of office. So, yes. Look, it's a unique phenomena. If you are working at the White House and you're young, you're single, it's a great privilege to do that for your country. And people can tell you how great you are, how smart you are, and you begin to believe it. Then the day after the election you call them up and say, you know, "You told me how smart I was, how great I was, and if you want to hire me. I'm ready now." And they said, "I don't need you anymore because you're a Carter aide, and there's nobody that cares about Carter aides anymore." So it was a little deflating after we lost the election, but it was a great privilege to work in the White House, and I enjoyed it thoroughly.

BECKY QUICK: Is it fair to say that maybe Carter losing the election was the best thing that ever happened to you? Would you have gone out and started Carlyle otherwise?

DAVID RUBENSTEIN: Well, I didn't start it until '87, so Carter could have gone for another four years, I still could have started it. But on the other hand, I managed to help get inflation to 19%.

BECKY QUICK: Well done.

DAVID RUBENSTEIN: Which was hard to do, and nobody's done it since, so had I had a second term, we might have got it to 35% or something, so maybe it was good for the country that I didn't serve in a second term.

BECKY QUICK: Let's talk about private equity and your breed of private equity. Because private equity was a pretty fledgling industry when you started out. And you have a different access. Most of these firms were in New York City; you're in Washington, and you used the assets of Washington when you did it. Do you want to explain that?

DAVID RUBENSTEIN: Yes, let me explain. I was in Washington. If you were a private equity firm in those days -- and they were called buyout firms then. The word "buyout" became a little "odious" so they changed it to private equity. But in those days, everybody was in New York who did those things, or maybe L.A. or Chicago, and you had to have an investment banking background. I didn't have that. And there weren't a lot of people with investment banking backgrounds in Washington. So I thought if I moved to New York, people would laugh. They would say, "How can you be this private equity firm? You don't have any investment banking background." So I said we'll do it in Washington. And it reminded me of a phrase that Everett Dirksen had said. He said -- a famous Senate minority leader in the 1960s. He said: When you're getting kicked out of town, get out in front and pretend you're leading a parade. Now, what does that mean? That means take advantage of the situation you find yourself in. So I'm in Washington. So I said, Okay, we understand companies more heavily affected by the federal government than guys in New York. And it sounded logical. Now, whether we did or didn't, I don't know. But we did focus a bit on the early days on companies that were heavily affected by the federal government, like aerospace defense companies. So it worked. Also, by being in Washington, nobody paid attention to us in the early days, so we could make mistakes and we weren't going to be on the front page of the Wall Street Journal. Had we been in New York, maybe people would have made more fun of us or paid attention to our mistakes.

BECKY QUICK: What was their reaction when you first rolled out this idea? Did people take to it instantly?

DAVID RUBENSTEIN: Well, my mother said, "Don't give up your law license." Which I still have because she always reminded me that, you know, Carlyle might not make it and, you know, you need a fallback and practice law. But the reaction was: Are you kidding? You're going to do private equity in Washington D.C.? You don't know anything about it. So I remind myself that most people that start companies honestly don't know that much about the business they're about to get into. If they did, they probably wouldn't do it. Because if Jeff Bezos had known a lot about what he did -- he didn't really have a background in selling books over the internet, Bill Gates didn't have a lot of background in what he was doing, or Steve Jobs didn't have a lot of background in their companies. Our company is not as big as theirs or as great as theirs. But people who start companies don't know how little they don't know. And, therefore, you're willing to start it. If you know so much about something, you know all the problems, and you might not start something. That's one of the reasons why great entrepreneurial companies are started by people generally in their 20s or 30s, not in their 70s. You know? Generally, when you have all the experience and you know all the problems, you don't start an entrepreneurial kind of venture. That's just the way the world works.

BECKY QUICK: All right. Let's talk about private equity and where you see valuations right now, how the industry is doing. This is what you said of private equity back in 2006: This has been a golden age for our industry, but nothing continues to be golden forever. So here we are 12 years later. What's happened since then? How would you assess it?

DAVID RUBENSTEIN: During the Great Recession, which happened after 2006, around 2007, 2008, the industry went down, as most of the economy around the world went down. And a lot of buyout fields didn't work out as well as people thought. It was a complicated industry at the time, complicated for the economy about whether we could do the things we said we were going to do for our investors. As the world turned around, it turned out that actually most the deals done in the heydey of the Great Recession pretty much worked out, maybe not as well as some people thought, but some did work out pretty well. And as a result, more and more people had confidence that the private equity industry can deliver good returns in good and bad times. So the industry is strengthened so much so that now it's the greatest time we've ever had to raise money. There's more money under management than we've ever had. Deals are getting done at higher prices than they were in 2006 or '07. But because investors are willing to accept somewhat lower rates of return, it works. In other words, investors used to want to go into private equity for net internal rates for a return of 20% per annum. Today, I think in this environment, they're happy with 13, 14, 15% per annum. They'd like more, but they're happy to take that. Therefore, you can still pay higher prices, still get those returns, and the industry is doing quite well.

BECKY QUICK: What created the Golden Age to begin with? What were the conditions that set that up?

DAVID RUBENSTEIN: The principal thing that changed the private equity was really this. It happened in the Carter administration, though I can't claim responsibility for it. When the industry first started in the 1960s and '70s, the buyout business was called the bootstrap business. You were pulling yourself up by your bootstraps. You were borrowing 99% of the purchase price; you're putting in 1% equity. The people that were putting that 1% equity tend to be wealthy families, the Hillman family, the Rockefeller family, the Whitney family. In 1978, the Carter administration said, under Department of Labor, ERISA funds could invest in private equity. It's no longer a violation of the Prudent Man Standard. And as a result, public pension funds in the United States began to invest, and it just produced more and more money. And as people realized you could make 20% of the profits on somebody else's money and it was easier to raise the money, the business grew. So today -- when I started Carlyle, there were 250 private equity firms in the whole world. Today there are about 7,500. It's been a big-growth business and people have done pretty well. The people that have done the best, though, are not just the sponsors, the general partners, but the people that invest in the funds, the pension funds. They've done extremely well. They've gotten very high returns. The highest rate of returns of pension funds over the last 20 years have come from private equity funds.

BECKY QUICK: All right. Let's talk a little bit broadly about the markets at this point, too. And I think back to 2007 when Chuck Prince infamously said that as long as the music is playing, you got to get up and dance. And you were much more circumspect around that same time. I think in 2006 you said something like, Right now we're operating as if the music's not going to stop playing, and it is going to stop. So what made you think at that point -- what did you see that maybe he didn't see?

DAVID RUBENSTEIN: You know, if you're Jewish, you always think something bad's going to happen, and so it was kind of that. You know, you just know something bad's going to happen eventually. So I thought eventually something bad will happen, because it can't keep going on forever. And I have been concerned now. We've been in what is now the second-longest growth period since World War II. At some point, it will slow down. As Herb Stein, the former head of the Council of Economic Advisors, once said, If something can't keep going on forever, it won't. At some point there will be a slowdown. I don't know what will cause it; I can speculate. I don't think it's imminent now. I don't see it coming. But at some point it will slow down. At that time, I did think people were paying very high prices, the deals were fairly highly levered, and I thought there was a -- basically a view that nothing could go wrong, and that was probably a bad attitude.

BECKY QUICK: But you are opportunistic at times where you think you need to be. You just said it's the easiest time you've ever seen to raise money.


BECKY QUICK: So how do you take all your concerns about when things are going too good, and how do you match that up with right now? And are we in a situation of musical chairs right now or not?

DAVID RUBENSTEIN: There's no doubt that when you look at an investment committee memo and you see what the projected returns are and you see that there is no projection for a recession or a slowdown over the next five or six years, those returns are probably too optimistic. So when we look at deals, we do assume that there will be some slowdown. It doesn't have to be a great recession, but there will be a slowdown. I think you have to be very cautious. You have to assume you can have some slowdown in the next five or six years and at that point be prepared for it.  Now, one of the things that makes it a little bit easier is that the debt terms are much more favorable to general partners than they used to be, and the sponsors. So before the Great Recession, that's 70% of the debt was -- had covenants. 30% did not. Today, it's probably the reverse. Maybe only 30% of the debt has covenants, maybe 70% does not. So there's a lot of covenant life debt out there, so that if something goes down, the economy slows down, I think you'll have a chance to work through the debt problems.

BECKY QUICK: Why is that?

DAVID RUBENSTEIN: Well, I think lenders have felt that private equity people are pretty responsible, and they're likely to make these deals work. And I guess there's competition. But, generally, very little money has been lost, relatively speaking, on buyouts by banks, and so they're feeling fairly comfortable with the sponsors. Also, the sponsors are different than used to be. In the old days, they were investment bankers who knew a little bit, but not that much about operating companies. Over the last 20 years, the private equity firms have had an enormous amount of operational experience. And so it's not investment bankers or people like me who are former lawyers really running these companies, overseeing them; they are people that have real operational experience. So the banks have much more comfort.

BECKY QUICK: Is part of it just what the Federal Reserve has done and with interest rates being so low and with so much money now sloshing around, too?

DAVID RUBENSTEIN: Well, I wouldn't say I'm an expert on the Federal Reserve, though I hired somebody years ago to join Carlyle. I think he was a very talented person leaving the government, and his name was Jay Powell.


DAVID RUBENSTEIN: And he worked in our firm for a number of years. I thought he was a very good private equity person. When he wanted to leave, I said, "The highest calling of mankind is private equity; why would you want to do something else?" But he decided he wanted to do something in public policy, and he's now the Chairman of the Federal Reserve. He testified the other day that right now he doesn't see any reason not to continue the program that they have, which is basically you could probably have interest rates go up two more times this year, 25 basis points apiece, and probably get interest rates up to the Fed punch rates of about 2.4% by next year, so that if a slowdown does come, they can lower interest rates. But right now, I think he feels the economy is doing reasonably well, and I do, too. We don't see any evidence of a slowdown. We have 275 companies that Carlyle owns around the world. And we get, every quarter, their numbers, and we correlate them with what we see GDP trends to be. And we don't really see any slowdown right now. Now, it will happen at some point; but this year and next year, we don't see any signs of a slowdown.

BECKY QUICK: Neither does the market, if you look at stocks. But there's always been a premium for buying control of a company.


BECKY QUICK: And I've heard from a lot of investors recently that they think buying control of a company, that premium that you pay, is higher than just about they've ever seen. I think if you go back and you look over the last year, you see about seven times EBITDA. Now, it's closer to 12 to 13 times. So almost doubling over the last year.

DAVID RUBENSTEIN: For that reason, many of the private equity firms do a lot of minority stake deals. The highest area of growth actually is minority stake transactions by private equity firms, growth capital. You'll see much more growth capital and/or minority stake deals in mature companies. So you can't buy control all the time. Or the premium you have to pay is not worth it in some cases.

BECKY QUICK: But you would agree with that, though; buying control of a company is --

DAVID RUBENSTEIN: It's harder to do than before. And it's not something you don't want to do. It's better to have control, and you can make the changes you want. But very often, if you're taking a minority stake, you do negotiate to have certain rights to change management or make certain you have impact on management changes and the ability to sell when you want to sell. So a minority stake is not completely a passive position.

BECKY QUICK: Let's just talk about Wall Street's view on private equity companies, the ones that are publicly traded. David Faber interviewed John Gray earlier from Blackstone and asked him why hadn't stocks not appreciated more. What gives? If there are so many wonderful things, why doesn't Wall Street appreciate it?

DAVID RUBENSTEIN: All right. I'll tell you, look, there are three great mysteries in the world. One is: What existed before the Big Bang? Nobody knows. Second: Is there an afterlife? And what is it like, if there is? Nobody knows. And third: Why do private equity firms not trade at a higher price? To me, those are the three great mysteries of the world. Now, the answer to the first two, I'm not sure I'm going to come up with those answers. But I can tell you why they probably don't trade as well as we would like them to. The private equity world has basically been a business where you say to your investors when the business first started, "Pay us a small management fee to cover our costs, but give us 20% of the profits." That was enormous change in the world of money management. For 200 years, if you managed people's money, you got a fee when the money was managed and you didn't get a piece of the profits. Private equity people came along in the '60s and '70s and said give us 20% of the profits. That's how our business has really been grown and why people give us money, because they want us to be incented to make this 20% high, because their 80% will be high, as well. When you're a publicly traded company, the people that follow stocks, the analysts, they want to know not when you're going to sell a company and might get a carried interest, because it's very hard to predict that because you don't know when you're going to sell, they want to measure your management fees, how much money you're making on fees that are very predictable, so that they can say to their customers or clients: In the next quarter Carlyle or Blackstone will earn X, and next year they will earn Y. And therefore, the big premium on management fees, which our investors don't really want us to earn too much of, there's a little premium on carried interest, which is what our investors want. So there's a bit of a dichotomy there, and we're all sorting our way through it. Clearly, a lot of people have commented, as I have, it's not really fair in some ways because we have built these gigantic cash cows, money machines, but they aren't valued as highly as we think they should be.

BECKY QUICK: So why do you bother going public in the first place?

DAVID RUBENSTEIN: That's a whole separate issue. I think there's a couple reasons why the private equity -- remember, there are 7,500 private equity firms, but only a limited number are public. So it's not for everybody. The biggest four are Blackstone, Apollo, KKR, and Carlyle. They're the biggest four. And we went public for roughly the same reasons. One, some of our competitors had done it, so it was something we wanted to do. Because the competitors had stock they gave to employees to recruit and retain them; secondly, you could have stock to make acquisitions. There's no doubt, though, a third factor, which many people won't want to admit. I have observed over the years that people tend to monetize what they've built when they hit the age of the 60. Because when you hit 60, you know you've lived more than you're going to live. When you hit the age of 50, you know, you can say, I've lived 50 years. I might make another 50. When you hit 60, you know you've lived a little bit more than you're going to live, and therefore you might want to begin to monetize what you've built. So the private equity firms tended to go public, it turns out, when the founders were around 60. They began to think how can they monetize what they have built. And so that was a factor. But I think another factor was that we thought we could run companies much better for our investors because we'd have more resources and more breadth and depth. And I think the companies have grown quite nicely as public companies. They just haven't -- the stock price hasn't grown, but they've grown as very large money management companies.

BECKY QUICK: So you guys didn't get the memo from AARP that if 50 is the new 30, 60 is the new 40. You've got lots of time.

DAVID RUBENSTEIN: Well, AARP is a great organization. I must be a member of it. I think you get to be a member when you're 50 years old, right? 50. So when you turn 50, you get a publication from them telling them you you're now eligible, and I guess I signed up when I was 50.

BECKY QUICK: All right. Let's talk about the sovereign wealth funds. These are sophisticated organizations, sovereign wealth funds. Would you quantify them as smart money or dumb money?

DAVID RUBENSTEIN: Well, they invest with us, so they're obviously smart, right? If you have a gigantic pool of capital, you have a big responsibility. So these sovereign wealth funds are very well-trained now in how to invest this kind of money. In the early days of sovereign wealth funds, they were relatively modest. The first ones were probably the Kuwait investments starting in the early 1960s. Now they have become gigantic money managers, and they kind of attract very good people. Like the government of Singapore Investment Corporation is a very, very sophisticated investment operation. I think they are very sophisticated. They know what they're doing.

BECKY QUICK: Okay. The reason I ask you this is because there's new research out that shows that sovereign wealth funds at this point, as a group, have less than half of their money invested with active investors. They're leaning much more towards indexes and passive investment. So do you still think they're the smart money?

DAVID RUBENSTEIN: Okay, but they still have a lot of money with us. Now, nobody, no sovereign wealth fund, if you have 300, 400, 500, 600 billion dollars, nobody, not anybody in the private equity world, would say put 100% of your money with private equity. So they have an appropriate percentage. I don't know if it's 5 or 10 or 15%, but they have an appropriate percentage and they are very happy with the returns. So I think they are smart money.

BECKY QUICK: I tried to get into this because we watch pendulum swings, and when you see investors chase after active management, it's usually at the wrong time. When you see them chase after passive management, it's probably at the wrong time.

DAVID RUBENSTEIN: Well, one of the appeals of private equity is that you're kind of locked up if you go into a fund for ten years.


DAVID RUBENSTEIN: And the appeal of that is a kind of an enforced savings program, because if you were to invest in the stock market, most people, when the stock market is going up, what do they do? They buy more stocks. If the stock market is going down, what do they do? They sell. And so you tend to do the wrong thing at the wrong -- at a certain time. But private equity, when the markets are going down, if you might otherwise sell, you don't, because you're in a program that lets you stay for 10 years or so. So I think private equity does tend to have people who invest for a longer period of time, 10 years or 12 years in a typical fund. I think that has given the good returns that we've shown over the years.

BECKY QUICK: I want to talk about Masa Son. He's somebody who you've interviewed --


BECKY QUICK: -- on your television program before. And I've had other investors tell me that venture capitalists can't do what they do anymore because Masa Son has driven them out of business. He's running up prices on things, so they have to find new ways to compete. And I ask this because I wonder if there's anyone like that when it comes to private equity.

DAVID RUBENSTEIN: Well, for those who aren't familiar, he's a person that raised the Vision Fund. It's almost $100 billion. Nobody'd ever had a fund that big to do technology investments. And the two biggest investors I think are the PIF Fund in Saudi Arabia and Mubadala in UAE. So they probably put in 45 -- no, about 60 billion of the 100 billion or so. So they are big investors. And what he's done is he's taken large stakes in very well-known technology companies. In the buyout world, there's nothing quite like that. There's nobody that's so dominant that it or she or he can get anything they want at almost any price. He does tend to pay prices that some people say are higher than other people would be willing to pay.

BECKY QUICK: All right. Let's tap into your political knowledge base at this point. We've got the 2018 midterm elections coming up.


BECKY QUICK: What do you think is going to drive those elections, and who do you think will win?

DAVID RUBENSTEIN: Historically, midterm elections, the House of Representatives goes against the President's power and President in office, the party of the President, by about 22 or 23 House seats. In other words, if a Democrat is President, historically, in midterms, in the first midterm of a President, you'll have that president lose 22 or 23 seats in the House and two or three in the Senate. If that were to happen, it would make it very close in the House, because the Democrats need to pick up roughly 25 seats to gain control of the House. I think about two months ago, most people in Washington, the conventional wisdom Washington, which as John Kenneth Galbraith said once is almost always wrong, but the conventional wisdom in Washington was that the Democrats would probably pick up the House. I'd say that's not necessarily conventional wisdom today. It's going to be very, very close. I think people probably think the Democrats will pick it up, but very, very close if they do. So it's just too hard to say. And one of the reasons is this: Whatever you think of the President, one way or the other, there's no doubt the economy's in good shape. And when the economy's in good shape, people tend to be happier. Now, obviously people at the bottom of the economic totem pole are not happy. But unemployment is at a record low, and therefore you've got a lot of people working, a lot of people are making money, not as much as they might want in some parts of the economic strata, but there isn't the economic concern that you often have after, let's say, Ronald Reagan. When Ronald Reagan was President of the United States, in the first two years we had a recession. And he lost a lot of seats in the first midterm election. Jimmy Carter lost a number of seats. We had an economic slowdown, as well. So I think right now the economy is doing pretty well, and I don't think it's going to slow down between now and November.

BECKY QUICK: If it's a coin toss at this point, what will it mean in either scenario for the markets and for business confidence?

DAVID RUBENSTEIN: I think the markets right now are looking at many other factors than just whether the House goes Democratic or Republican. I think they see the President's policies are generally ones that businesses generally are happy with, though I think the tariff issues are of some concern. They haven't really had an impact on the economy yet. We don't know whether they will, but right now we don't see any really impact. It's relatively de minimis so far. But if you had a long-standing trade war, that wouldn't be something people would like. And I do think that right now there hasn't been as much concern about something I'm concerned about. I'm less concerned about the trade deficit, honestly, than I am about the budget deficit. The budget deficit that we have this fiscal year will be $900 billion. Next year it's projected to be $1.2 trillion, and after that, one and a half trillion or so into the future. We have 21 trillion of federal debt. We're adding $1 trillion every year. In 10 years, we'll have about $35 trillion of federal indebtedness. And at some point I think the markets will say, you know, can we really pay that off. Because right now, the indebtedness is growing faster than the economy is growing, and so that's a problem. So at what point you'll have to say the entitlements, which are 75% of the federal budget, if not 80%, they will have to be adjusted. And that's going to cause political problems.

BECKY QUICK: How come nobody cares about that right now when it comes to the market?

DAVID RUBENSTEIN: That is probably the fourth mystery of the world. I keep talking about it all the time. And somebody who passed away not long ago, Pete Peterson, was talking about it repeatedly. And he had a lot of impact, but we still haven't changed very much as a result. I think it's because the people in Washington say: If this was a problem, the people in New York, the bond people and the stock people, they have the market going down. And the people here say: Well, look, if Washington thinks they know what they're doing, well, let them get away with it. So nobody is willing to kind of say we've got to stop this. As of right now, until the economy slows down dramatically or until the Wall Street says we can't keep up with these deficits, I don't think there's going to be any big change. Nobody is going to come along and say we've got to do something. For example, under President Obama, who I think tried to address it, when -- he had a commission, the Simpson-Bowles Commission, and nothing was done as a result of the Simpson-Bowles Commission. Their report about how to deal with the entitlements program was more or less ignored in Washington. If we have a new commission, probably the same thing would happen, unless we were in a crisis mode.

BECKY QUICK: Is part of it just a reflection of investors around the world being willing and wanting to come to us, particularly when you look at the yield on the ten-year here versus the yield in Europe and elsewhere?

DAVID RUBENSTEIN: Yes. The yields and the ten years in Europe are 2% or less. And here it's now over 2% and heading higher, maybe 2.4% or something like that. So I'd say right now we have the only reserve currency. In very few times in the history of the world has there been only one currency that mattered, and we now have it. And so people want to buy our dollars. And as the interest rate is going up, the dollar is becoming higher and higher. It's up 14% from the low point of about a year and a half ago. So the dollar is pretty strong right now, and people feel comforted that the dollar is strong, because it means that this economy is doing pretty well. So right now, people aren't worried about the deficit or things like that. They're focused on other issues.

BECKY QUICK: You have been an advisor, not only to President Carter, but a friend to many presidents. I just wonder, if President Trump were to ask you for your advice right now, what would you tell him?

DAVID RUBENSTEIN: I'd say -- my hearing isn't as good as it used to be, but what was the question?

BECKY QUICK: If President Trump were to ask you for advice, what would you tell him? I'm not going to let you slip all the way.

DAVID RUBENSTEIN: Actually, I do know President Trump, and I did interview him once at the Economic Club of Washington. Before he was even running for President, I invited him to come down, and I interviewed him. And in the green room he said, "Ask me anything you want, but ask me two questions for sure. Ask me if I'm going to run for President." I said, "President of what?" He said, "President of the United States." I said, "Donald, you have no chance of being President of the United States. I know a lot about politics." And the other question was, "Ask me if my hair is real." Because, he said, "People don't think it's real; and you can feel it, if you want." I don't know if I want to feel it, but I'll ask it. And I did ask him, and he liked the interview. I think he was very happy with the interview. And, you know, it was -- he was very happy with the interview. And, you know, I'd say: President Trump, I have spent -- I've met with him a couple times he's been President, and I gave him a tour of the African-American History and Culture Museum. I'm Chairman of the Smithsonian, and that's a museum that we have. And I'd say -- if he asked me for advice, I would say, probably: Listen to your advisors a lot more, maybe than you have. I would say: I don't think tweeting is probably as helpful as you think it is. I don't do any tweeting, because I don't know how to do it. But, you know, look, he's a 72-year-old man. It's hard to change 72-year-old men, and he's set in his ways. And he has the same attitude that other presidents have. Because when you give the President advice -- any president, I've talked to many of them -- they say, "Well, okay, but if you're so smart, how come I'm President and you're not?" And, you know, you have to say, in President Trump's case, nobody thought he would be probably elected president, excluding maybe his own family. He got elected President. He has certain skills that obviously helped him be popular in the Republican party and win the nomination and win the election, so I don't know that he's going to want advice from somebody who worked for Jimmy Carter. So he hasn't asked for my advice.

BECKY QUICK: All right. For those of you who don't know, David has his own show, "The David Rubenstein Show." And it is something that gives great agita to people in my position, because he's so good at doing interviews. You'd think if he's great in one field, he's not going to be great at this, but he is. Over the years, he has interviewed Tim Cook, Brian Roberts, Phil Knight, Yo-Yo Ma, Oprah, Warren Buffet, Lloyd Blankfein, a couple of former presidents, both George Bush and President Clinton.

DAVID RUBENSTEIN: But the most important was Brian Roberts, the head of Comcast.


DAVID RUBENSTEIN: Who could be more important than that person, right?

BECKY QUICK: Exactly. But you interviewed all these people, and you prepare so well for it. You have great questions that you dig into. What's the most surprising thing you have learned in an interview?

DAVID RUBENSTEIN: Well, I've learned that people -- I wouldn't say it's surprising, but people really like to talk about what made them successful. The people I'm interviewing are obviously successful. I'm not interviewing unsuccessful people. And so when you're interviewing people, they all came from somewhere relatively modest, generally speaking. They did something that made it work for them, and they don't mind telling their story. Some people were on food stamps, some people were on welfare, some people got fired, some people lost a lot of their money, and then they came back and they did something that was useful, and they want to tell their story. And people are, I think, proud of telling how they got where they are. So I think that's a useful thing.

BECKY QUICK: Of all the people that you've interviewed, who would you bet the longest on, after you learned more about them?

DAVID RUBENSTEIN: Well, Warren Buffett is in a league by himself, I would say, in terms of his business skills and so forth. I did an interview recently at a private conference that Microsoft had of Bill Gates and Jeff Bezos. They had never been interviewed on a panel together, and we did it for an hour. I think you were there.

BECKY QUICK: I was. It was amazing.

DAVID RUBENSTEIN: And it was fun. And I think I asked them at the beginning, I said, "Tell me this. How can it be the case that the two richest people in the world not only live in the same country, not only in the same state, not only in the same city, but in the same street? I mean, is there something in the water here that we should know about? And if I bought a house here, would I be as wealthy as you?" But the point of it is getting people to tell their story. And the reason it's interesting is this. Everybody wants to know how did somebody else make it; did they have some skills that I can have or might have; and what can I learn from other people? So I kind of find it interesting, and it's something I enjoy doing.

BECKY QUICK: Well, David, we want to thank you for sharing your story with us today. We really appreciate it.

DAVID RUBENSTEIN: My pleasure. Thank you very much.

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