Delivering Alpha Videos: Dalio, Lasry, Cooperman, Mnuchin, Chanos, Robertson And More

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Delivering Alpha conference video interviews and clips below – 2016 highlights here. The full Julian Roberston, Ray Dalio and other CNBC interview texts can be found at the bottom of the post

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Ray Dalio: If Gary Cohn were to leave administration, it would be terrible

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Steven Mnuchin: Fed Chair Janet Yellen is 'obviously quite talented'

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Treasury's Mnuchin: Markets are rallying on tax reform expectations

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Jim Chanos: We are seeing select stocks go down on bad news

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Jim Chanos: Giving Trump credit for rally in US stocks a 'stretch'

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Tiger Management's Julian Robertson: Market is very high on a historic basis

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Tiger Management's Julian Robertson: Market is very high on a historic basis from CNBC.

Full interview below

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Julian H. Robertson, Jr., Tiger Management Co-Founder, Chairman and CEO, live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Tuesday, September 12th.

Following is a link to the video of the interview on

Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.

KELLY EVANS: Mr. Robertson, thank you so much for your time.

JULIAN ROBERTSON: Thank you, Kelly, for having me here.

KELLY EVANS: We are the only thing standing between these fine people and lunch. So just bear that in mind.

JULIAN ROBERTSON: No, I can see it beginning to empty out pretty quickly.


JULIAN ROBERTSON: It's a wonderful excuse.

KELLY EVANS: And by the end of our conversation, I'll probably -- you know, my Southern lilt, I'll be saying "y'all" in 20 minutes time here.

It's really a pleasure. We're so glad that you could join us. You started Tiger almost 40 years ago now, but this is the first time you've been here at Delivering Alpha. And it comes at a time of a lot of shakeout for the hedge fund industry. You've talked about this in the past. Do you think that shakeout is largely over now, or is it still going to be a rough time ahead?

JULIAN ROBERTSON: Well, if you look at the shakeout in the industry, I don't think that's the right term to use. What's happened to the hedge funds is that instead of competing with bank managers and trust funds, that sort of thing, hedge funds are having to compete with more hedge funds. And let me assure you, that's much more competition. So I think the difficulties that hedge funds are having is because of more competition within the industry rather than anything else.

KELLY EVANS: And that said, you still think there are some funds who are thriving in this environment; is that right?

JULIAN ROBERTSON: Some of them are thriving in this environment, and there's no question about it. We've talked about that.

KELLY EVANS: A couple of your own.


KELLY EVANS: Well, you've seeded a couple dozen ones now. That's a big, big part of what you do. And some of them are having great -- your Sparrow was, I think we talked about, loan tying are some examples.

What is it that they're getting right in this environment?

JULIAN ROBERTSON: Well, I think they're getting alpha well. And they are really, you know, getting good loans and good shorts. And that's the secret of this.

KELLY EVANS: And we'll come back and talk a little bit about, you know, how you've supported them. But I just wonder what you think generally of where we are in the equity market today, where we are in the stock market in terms of valuation.

JULIAN ROBERTSON: Well, we're very, very high -- have very high valuations in most stocks. The market, as a whole, is quite high on a historic basis. And I think that's due to the fact that interest rates are so low that there's no real competition for the money other than art and real estate. And so I think that's why the valuations are so high. I think when rates do start to go up and the bonds become more attractive to investors, it will affect the margins.

KELLY EVANS: Do you think they're dangerously high right now?

JULIAN ROBERTSON: Well, that's a -- you know, it's pretty -- they're high.

KELLY EVANS: Is it the Federal Reserve's fault or...

JULIAN ROBERTSON: Yes. It's the Federal Reserve's fault, and the Federal Reserves all over the world. I mean, in Germany, in order to buy a bond, until recently, you actually had to pay interest. And, you know, that's certainly going to discourage a lot of people from doing so. You know, you could get a fairly good dividend in Nestle, but if you wanted to buy a Nestle bond, you had to pay a fairly heavy penalty.

KELLY EVANS: Doesn't seem to make a lot of sense.


KELLY EVANS: That said, this morning, the Treasury Secretary Steve Mnuchin, who was here, said that he thought that Chair Janet Yellen is, in his words, "obviously quite talented," when asked about her potential to lead the Fed for another term.

Do you disagree with him?

JULIAN ROBERTSON: I think she's going to probably be asked to stay on for a while. But I think because there's been collusion all over the world, let's get interest rates down. And it's not just the United States, it's all over the world.

KELLY EVANS: What about, you know, actually the last time we spoke was just before the election and we were talking about some of the news in currencies. And you said you thought that the peso was hit way too hard, the Mexican peso, and would start to come back. That partly because you thought Hillary Clinton was going to win, there would be no wall, and I think you said you were actually apoplectic at the idea that she was going to win. But, before we get into any politics, just on this point about the dollar, which is now -- I mean, you know, Trump got elected and it went up so strongly, and now it's come down so much. Is there anything there that you think is linked to what you're saying about the way that central banks have handled policy?

JULIAN ROBERTSON: Yeah, I'm sure there is. But I also think that the main thing there is that Trump has made it fairly obvious that he is not a proponent of a strong dollar. And he has a pretty good faction of people who would probably, as voters, who would probably do better with a weak dollar.

KELLY EVANS: Are you okay with that kind of policy? Do we need a strong dollar policy?

JULIAN ROBERTSON: Well, I think we need interest rates to appreciate, to go up, and to be . . . Because I think we are creating a bubble.

KELLY EVANS: A bubble in the market?


KELLY EVANS: In the stock market?


KELLY EVANS: So there's a couple of things, you know, you've been a longtime supporter of the GOP and of its candidates and of its causes. And when we spoke last time you said you were going to vote for the Bill Weld, the Libertarian candidate in the election, and I'm just wondering if you did so and what you think about the job President Trump has done so far.

JULIAN ROBERTSON: I voted for Weld and --

KELLY EVANS: Was it Gary?

JULIAN ROBERTSON: Gary, whatever his name is, the jokester.


JULIAN ROBERTSON: But I voted for them.

KELLY EVANS: And that's a reference to his use of marijuana, right?


JULIAN ROBERTSON: But I think, you know, Donald Trump is our President, and I've tried to support the choices he's made that I agree with. I've contributed towards the Supreme Court Justice that he elected, and I'm going to give him my support while he's there.

KELLY EVANS: Even if he's making deals with Schumer and Pelosi?

JULIAN ROBERTSON: Well, he's got to make deals from time to time. That's part of the game. I mean, I'm not -- they all do that.

KELLY EVANS: All right. One more question just because we spoke a lot this morning about tax reform and different people have come out here and said, you know, they think it's going to be a 23% rate or a 25% rate and -- but it looks like it's definitely coming.

Is that a prerogative of yours? Is that a big deal for this country to see that happen, drop the corporate tax rate into reform?

JULIAN ROBERTSON: I think definitely this country needs a lower corporate tax rate and tax reform so that we can get our profits that we've made overseas back into the country without heavy penalties. And if that happens, I think that would be very good for the market and all of that. And I think they are smart enough to know that probably those tax cuts will not benefit people in this room and . . . I mean, directly, anyway.

KELLY EVANS: And that's a good thing?

JULIAN ROBERTSON: Well, I think it's necessary to get the bill through.

KELLY EVANS: All right. Let me ask you about a couple of particular companies, just thinking about Apple, for example, which has a lot of cash overseas.

You were a holder of that going back a couple of years, and they have a big event today and are launching a bunch of new products. But has it just become too expensive for you guys, is it not -- or would you look at investing in Apple again?

JULIAN ROBERTSON: No, I think we should definitely look at Apple. Apple is not that expensive of a stock. There are a lot of disadvantages of being an old goat. One of the few advantages is the fact that we've seen all this a little bit before. And right now the Apples, the Facebooks, the Googles, those great growth companies are priced cheaper than they would have ever been in the '60 s , '70 s , and '80 s .


JULIAN ROBERTSON: And I don't think a lot of people realize that.

KELLY EVANS: Well, you're trimming your positions in Facebook, and Google, and you're not in Apple right now.

JULIAN ROBERTSON: Well, I don't think I've . . . I kind of trade Facebook and those things a little bit. And I consider myself kind of a long-term player of Facebook.

KELLY EVANS: Even though you think the markets overall are expensive, these emblematic tech same names you actually don't think are that expensive?


KELLY EVANS: And we've spoken about Netflix before, too, which then you said that one might maybe got a little out of reach.

JULIAN ROBERTSON: That might be a little out of reach, but that one is awfully tempting to me because it's run by really good people and -- and I love it, too.


JULIAN ROBERTSON: Anybody that doesn't like Netflix, that's like saying you hate Santa Claus.

KELLY EVANS: Do you have a favorite show right now?

JULIAN ROBERTSON: No, but I just . . . I like all of them.

KELLY EVANS: Well, I remember we talked about Uber, as well, the last time we spoke, and that was something you guys had invested in. What do you think about -- I don't know if you're still in it, but I mean --

JULIAN ROBERTSON: I don't know, I can't get this across. I've never been in Uber.

KELLY EVANS: Oh, you've never been in Uber?

JULIAN ROBERTSON: No, I'm sorry, I haven't. My God. I think I'm in it through -- a small amount through a fund I'm in --


JULIAN ROBERTSON: -- but not really.

KELLY EVANS: Well, one thing that's interesting as well are your views on the cruise industry. You guys have Royal Caribbean, I think you recently added Norwegian, and if I have this right you said it's because, you know, it's easy to get your hands on an airplane and it's a lot harder to get your hands on a cruise ship. Is that part of why these are interesting areas to invest in for you?

JULIAN ROBERTSON: Well, I think the cruise industry has come of age. And older people my age are attracted to the cruise ship industry. And they are booming right now, and all over the world they are booming. And I think they're for the golden oldies, and there are more and more of them around.

KELLY EVANS: So you like the industry, broadly speaking, for a generational mode.


KELLY EVANS: Air Canada, was one last time. You said you thought it was the best investment in history, practically. It was trading at 3 1/2 times earnings. And now I think there's a couple others, Ryanair, that you guys are involved with as well. So is that just simply kind of a valuation thing. You look and you see a cheaply valued company, and has that done well for you? And why no U.S. airlines?

JULIAN ROBERTSON: Well, Air Canada is really just sort of what you said. Air Canada, I think we got into it at around 8 or 9. And it's now 23, approaching 24. And the multiple is about the same as when we got in, which is all of five times earnings.


JULIAN ROBERTSON: So we have too much Air Canada, but I can't make myself sell it. I mean, I think it's going to be -- continuing to be a great stock.

KELLY EVANS: One thing you did sell a little of last time, I think you said you were almost throwing in the towel on Gilead, which just did a big acquisition of Kite Pharma and a promising new area of therapies.

JULIAN ROBERTSON: Well, that's what -- if they wanted me, they should've done that earlier, because they were slow to get that underway. And we like that area.

KELLY EVANS: Of the CAR-T therapeutics. So you could get involved in Gilead and some of these other companies like that again?

JULIAN ROBERTSON: Oh, yeah. I mean, those companies, the developments that are occurring in science are just unbelievable. I mean, remember Jimmy Carter caught cancer, you know, several months ago and had a few shots and he's fine. I mean, that's this development of the body's immune systems to fight the cancer themselves. It's a whole new thing. This is a whole new thing. It's huge.

KELLY EVANS: Yeah. That was a Merck drug, Keytruda.

Let me ask you about one more investment that I know you're a big proponent of right now, before we move on, this Alibaba. And Jim Chanos was just on our network talking about how he doesn't trust the accounting. There have been plenty of other short sellers out there who say no way can we believe in this company. Why are you confident in Alibaba's prospects?

JULIAN ROBERTSON: Well, I mean, it would have to be such a giant fraud. I mean, I can't imagine anything would be that colossal.

KELLY EVANS: Well, we've seen a few. We've seen an Enron. We've seen a few.

JULIAN ROBERTSON: I mean, that's drivel compared to this. I mean, this thing is -- and I mean, I don't think you can disguise sales figures. They are really going . . .

KELLY EVANS: The 60% sales growth. Yeah.

So you guys, you're in -- by the way, there are a lot of hedge funds in Alibaba right now, which is up something like 70% this year. I mean, it's just been huge. So is this a momentum kind of thing where you go, you know what? Great prospects, great growth, or is this a long-term holding for you?

JULIAN ROBERTSON: Well, I've had a long-term history with Alibaba. I bought Alibaba at a very low price, you know, probably seven or eight years ago. And then sold it when it got to about a hundred. And I've just gone back into it. And I think they're clicking on all burners. And you're not talking about rules, penny junctions, roadways. I think we're talking about something like 50% improvement in earnings this year. And that's unbelievable for a company that massive.

KELLY EVANS: Yeah, it is. It's pretty shocking. By the way, also shocking -- and I know we talked a lot about bubbles and maybe what's happening in the stock market, but what do you think about Bitcoin? I mean, that thing has been parabolic. Got any thoughts just in general about what's playing out here?

JULIAN ROBERTSON: I've never understood it, and I don't think I'm going to. And I had a very close friend of mine's son who was very big into Bitcoin. And he tried to explain it to me. And I don't know what it is. Have you got anybody here today that's going to talk about that?


JULIAN ROBERTSON: Because I'd love to stick around.


JULIAN ROBERTSON: Unfortunately, I'm totally incapable of discussing the subject.

KELLY EVANS: Well, you know, we've heard various people say, oh, it's not really a currency. It's a software. And oh, it's not about the currency, it's about the underlying blockchain technology, and that's really going to change the world. And meanwhile, you know, there's a scarcity valuing the coin. I've heard probably 30 different rationalizations of it. So you're -- what would you -- are any of the Tiger funds allowed to invest in these cryptocurrencies, or would that just make you. . .

JULIAN ROBERTSON: I've certainly not put out anything that says they can't do it. But to my knowledge, no one has. I'll probably get a phone call this afternoon from somebody --


JULIAN ROBERTSON: -- That says I'm very big in Bitcoin, you don't know what you're talking about. But at any rate, I don't understand it.

KELLY EVANS: What are you proudest about when you look at a lot of the funds that you've spawned, and the way -- and a lot of them, they're in your office. Right? I mean, you've got a couple dozen of these guys, some of which have been around for a couple decades on their own right now with incredible track records. Of course, others have struggled. It's not a perfect batting average. But what are you proudest about in terms of how they've all blossomed?

JULIAN ROBERTSON: I'm really, I think, proudest of the men those people have become -- and women, too. They're all going to make this place better than it was when they came. And that's by far the thing I'm proudest about.

KELLY EVANS: Any regrets?

JULIAN ROBERTSON: Yeah, there are a lot of regrets. There are a lot of regrets. But by and all -- large, it's been a fabulous, fortunate thing for me to have gotten exposed to those wonderful people that we have working for us. And I'm glad -- thrilled every time I see the progress they're all making.

KELLY EVANS: Do you have any mistakes that you've made along the way, things you would've done differently?

JULIAN ROBERTSON: Boy, a lot. And we've gone forever.

KELLY EVANS: How about just a couple examples?

JULIAN ROBERTSON: Well, the biggest example is that instead of being hurt, when these good employees of mine that are almost like brothers and sons, instead of getting upset when they left, the thing I should've done was say let me help you start and, you know, just give me a tiny little bit of your action.


KELLY EVANS: But that's what you ended up doing, ultimately.

JULIAN ROBERTSON: Not really, no. Not really. I don't have much of that.


JULIAN ROBERTSON: But, look. They're fabulous people. It's been my great privilege to know them.

KELLY EVANS: What would you say to people who want to get into the hedge fund industry today?

JULIAN ROBERTSON: Have you got two minutes?


JULIAN ROBERTSON: When I got out of the Navy, I knew a lot of . . . I had gone through the naval ROTC program. And so I knew I vy League people. I was from North Carolina, a southern school, and so I got to know some of them while I was in the Navy. And guess where all those hotshots, the guys that were really smart and attractive and all that, guess where they were going? They were going into advertising. That was the hot thing then. Now they're all headed for hedge funds and the financial field, various exotics, I think. I think they ought to be darn sure they love the field.

That should be what guides them. They should take -- I mean, I took a test what, sort of -- and you can get them from any college, and they try to marry your best abilities with your best interests. And I would take that test and say, What am I best fitted for? And if it came back, you know, a shoe salesman, you know, think about that.


KELLY EVANS: Yeah. And what did yours say?

JULIAN ROBERTSON: Mine kind of agreed with what I wanted to do.

KELLY EVANS: Which was?

JULIAN ROBERTSON: You know, finance. But it was so fortunate. I mean, I was a late bloomer and I didn't carry much of a record from college. And, you know, the investment banks were desperate for people, so they'd take a swab like me.


KELLY EVANS: So your message to young people today is get into advertising.


JULIAN ROBERTSON: My message is get into what you love and really want to do and can do. And there are these tests you can take for that. All the colleges have them. And they should spend a couple hours and do that.

KELLY EVANS: I think we should pass one out to everybody here.

JULIAN ROBERTSON: I don't have one just right on me now.

KELLY EVANS: (Laughing) Julian, thank you so much for your time today.

JULIAN ROBERTSON: Kelly, thank you.

KELLY EVANS: It's really been a pleasure. Thank you so much.

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Stephen A. Schwarzman, The Blackstone Group Chairman, CEO and Co-Founder, live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Tuesday, September 12th.

Following are links to the video of the interview on, and

Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.

MICHELLE CARUSO-CABRERA: Thanks everyone for being here. Very excited to be with you, Mr. Schwarzman, a pleasure. Thanks for doing this.


MICHELLE CARUSO-CABRERA: Let's start with the guerilla in the room. This is the first time you have spoken publicly since the leadership councils was disbanded. You're the head of one of the leadership councils. The narrative that emerged that day was that you and Jack Welsh were trying to hold the thing together. Is that true? Do you want to tell us what happened that day?

STEPHEN SCHWARZMAN: Well, this was a complex time, around Charlottesville. And it was sort of unprecedented, and it reminded me of the 1960 s , without going into every strand of why, and what happened is, people who were running public companies at that time were concerned about employee reaction to conflict and what the President said or didn't say.

There were customer issues for those countries where some of the CEO s felt that they were under pressure. There were shareholders who were unhappy with people's affiliation, and so we actually had a very interesting order of process.

I asked each person what they wanted to do, and I gave them one minute.


STEPHEN SCHWARZMAN: Each. I wasn't interested in anyone's life history. What do you want to do? We had a few options. And virtually anyone running a public company that was on that group could not deal with the pressure from the constituents.

And so I basically said, well, it seems pretty clear. I really didn't want to have a melting ice cube. And people were under legitimate astonishing pressure. You should've seen some of the emails that I got.



STEPHEN SCHWARZMAN: You know, I was accused by people of being a Nazi. And I'm Jewish.


MICHELLE CARUSO-CABRERA: It struck you as absurd, right?



STEPHEN SCHWARZMAN: And I got hundreds of these things. And so it was pretty clear that the country, itself, it felt like it was going out of control. We had a logical meeting and decided that there was just too much pressure, or too many people all running public companies.

MICHELLE CARUSO-CABRERA: Anybody voice stay, to hold it together?

STEPHEN SCHWARZMAN: I'm not -- person. It seemed pretty widespread that this was just so hot. It was hard to just have all those constituents, you know, attacking the CEOs.

MICHELLE CARUSO-CABRERA: Just so we can check off more boxes on the narrative that emerged, to make sure that the story is accurate, the New York Times reported that you were outraged by what the President had said during that news conference.



STEPHEN SCHWARZMAN: I don't know where the New York Times got that one.

MICHELLE CARUSO-CABRERA: Well, they didn't quote you, but they quoted people familiar with the --

STEPHEN SCHWARZMAN: Well, of course they didn't quote me, because it wasn't true.


Another one of the narratives was that -- okay, so there was your outrage, you said that's incorrect.

You and Jack tried to hold it together?

STEPHEN SCHWARZMAN: I think we did it alphabetically. I'm a great believer in order. By the top --

MICHELLE CARUSO-CABRERA: So you and Jack would've been close to the bottom.

STEPHEN SCHWARZMAN: By the time you got to "W," it didn't much matter.


The other narrative was that you were miffed/annoyed/confused that there had been an agreement; that there was going to be a statement that you jointly agreed what was best for everybody. You know, it's not you; it's me. Or it's me, it's not you. And then the President kind of, confronted that with his tweet saying, you know, "They can't disband it, I'm firing." [Laughing]

So were you miffed by that? I mean, was that what was supposed to be happening and didn't happen?

STEPHEN SCHWARZMAN: Well, this is the political world. And I don't control the political world. And there's a secret to communicate that decision --

MICHELLE CARUSO-CABRERA: Do you still talk to the President?



STEPHEN SCHWARZMAN: That's your business.


MICHELLE CARUSO-CABRERA: Have you talked to him recently?

STEPHEN SCHWARZMAN: Still not your business. Maybe it is your business. It's not my business.

MICHELLE CARUSO-CABRERA: We hear he's very fond of you. In New York City circles, it's known that he's very fond of you, that he admires you a lot, your real estate portfolio. And do you still -- you know, some people would say, you know, that you're the Trump Whisperer. Is that calling it too much?


STEPHEN SCHWARZMAN: I can't comment on my relationships like that.

You know, I've tried to help a number of presidents. Worked on a bunch of sensitive stuff with President Obama -- push during the financial crisis. People who know his background as well as -- it should help the government, it helps society. That now has actually been a little controversial, apparently. But I think you have an obligation. And if you can make things better, it doesn't matter if they're Democrats or Republicans, you know. You do what you're personally comfortable with. You give advice, help out. And more people should do it.

I think if people don't want to listen to you on occasion, that happens. If they like to, you know, hear what you have to say and mostly do, and that's good. I mean, we all have a higher obligation, I think, than just making money.

MICHELLE CARUSO-CABRERA: Have you Googled yourself lately?

STEPHEN SCHWARZMAN: I've never Googled myself. What does it say?

MICHELLE CARUSO-CABRERA: Well, I only bring it up because you said we have a higher obligation than making money. And so I Googled -- I hadn't Googled you even until yesterday. I discovered I didn't get invited to your bank's very swanky 60th. Okay. But, I wouldn't recommend it. I quite mean. You joined the Trump Administration because it's going to help you make money. "Washington Monthly" says that Yale should shun your money, and it's based on a blog post by a student who said that you take advantage of the poor through your real estate portfolio.

I'm not going to ask you to answer all of those things, but when you tell me you received hundreds of emails that you're a white supremacist, when you're Jewish, the tenor in the country against people like you has gotten so ugly. And I'm not sure why.

STEPHEN SCHWARZMAN: Well, it's not just about people like me; it's an adversarial society, and it's very broad. It's very deep. There are a lot of experts who can tell you how we got there. But it's a terrible position for the country. I mean, if you look at universities which don't commit to free speech -- I grew up in the '60 s . One, there was plenty of free speech. You didn't have to agree with a lot of it, but you heard it.

MICHELLE CARUSO-CABRERA: Because it wasn't the only thing that was free back then.

STEPHEN SCHWARZMAN: It was -- it was informative. And now, you know, sometimes you can't say anything for fear of being shunned. That is not the way a democracy is supposed to work. I happen to think we're, like, really off course. And ultimately these things get corrected.

MICHELLE CARUSO-CABRERA: On a political question, DACA, we know that this is important to you and that Schwarzman scholars, one in particular, Carlos, they've been trying to influence the President about that. He's seemed to have backed down from his harsher positions --

STEPHEN SCHWARZMAN: I think the issue with DACA right now is really a legal issue. I think there was, in the prior administration, there was another issue involving 5 million people, was thrown out of court. And I think the perception was here that a similar outcome would happen. And so it was thrown into the Congress.

I'm really passionate about this issue. There's 800,000 kids who were brought in the United States, and they were asked to register, they did, and their outcomes in their short lives, less time, more achievement. Really great outcomes. Where are you going to send them? I mean, they're kids.

MICHELLE CARUSO-CABRERA: Some of them are adults. Right? I mean, when Apple says they've got a certain number, I mean, you could apply when you were 31. They could be 37 right now. Really the case -- they may not speak the language of their home country.

STEPHEN SCHWARZMAN: I strongly support these people, believe they're as American as you are. I support, strongly, their ability to be in this country, contribute to this country.

I can't imagine taking people who were brought here, not of their own volition, and asking them to leave. And I'm not an immigration expert. I don't know exactly what status one should have. But if it would be beyond and against our own self-interest, I would believe -- to have them leave.

MICHELLE CARUSO-CABRERA: You acknowledge, though, it appears to be a legal issue. And really, it's never going to get fixed permanently. It's got to be done by Congress.


MICHELLE CARUSO-CABRERA: Any confidence it's going to happen?

STEPHEN SCHWARZMAN: I think it will, because despite partisan types of things, I think there's a moral dimension to this that we'll overcome in the political you know, to'ing and fro'ing. And I'm optimistic that people will stand up. This is good for America. It's a certain simple test, I think, something basically literally not good. I think this was an easy call.

MICHELLE CARUSO-CABRERA: You think tax reform is good for America?

STEPHEN SCHWARZMAN: It depends how it's done. What's done --

MICHELLE CARUSO-CABRERA: You confident it's going to happen? We're going to get a tax cut?

STEPHEN SCHWARZMAN: I think, as political people, I know -- want to be able to have the next term. And if you're a Republican, and you find a way not to do tax reform as well as not be able to do healthcare reform, you have a midterm election. If you don't think you're more vulnerable, then perhaps you shouldn't be in that position in the first place.

So I think self-interest will drive that, as well as it being good for the country. So I'm optimistic that the worst we'll do in that area is a tax cut somewhere between 25 and 28%.

MICHELLE CARUSO-CABRERA: For the final rate on corporations?



STEPHEN SCHWARZMAN: And so I think there's certainly consensus to do that. And then anything deeper really requires tax reform, which is harder just by the nature that somebody's losing. You take away deductions. And -- but I think the probability that something gets done is quite high.

MICHELLE CARUSO-CABRERA: Can we talk about some specific Blackstone stuff in the news recently?

STEPHEN SCHWARZMAN: Whatever you like.

MICHELLE CARUSO-CABRERA: You're selling a lot of London real estate, office space. Why? Is that because of Brexit?

STEPHEN SCHWARZMAN: No, not at all. We own a huge amount of real estate. I think we're the largest owner of real estate in the world. And, you know, the building we just sold we bought and we knew the tenant would be leaving.

MICHELLE CARUSO-CABRERA: This is the lake on house, the --

STEPHEN SCHWARZMAN: It was an empty building. And, in fact, we leased it up. And we sold it. We did very well. You know, in our real estate business, we basically have an approach of buy it, fix it, sell it. And we're quite, you know, disciplined about that. And we have some properties in London that we bought at a good price and did that. And there was nothing extraordinary about doing that. The demand for property in London is quite good outside the city, where the financial companies are.

And so business continues to be done there pretty brisk.

MICHELLE CARUSO-CABRERA: Back at a buck thirty this morning, Brexit is a problem, it's not a problem?

STEPHEN SCHWARZMAN: That's one of those we'll find out, and it's highly complex. And I think it's a lot like any divorce, apparently, where there is a lever and a leavee. And the Brits are the leavers, and the EU is the leavee. And what tends to happen in those situations is the person that's been left is angry, and the person who's leaving is enthusiastic. And so how that translates into negotiation and outcomes is hard to know. Thus far, it appears they haven't made much progress.

Because, like most divorces, the most important thing is the money. And until you resolve the money, you can't resolve the kids.

MICHELLE CARUSO-CABRERA: [Laughing] Right. The weekend house, and all that again, yeah.

STEPHEN SCHWARZMAN: But you've got to get the money right.


STEPHEN SCHWARZMAN: And, you know, so there's an aggressive ask by the EU, and there's a difficult situation for the UK. And my sense is this is such a complicated deal, so many things are touched that getting this done in a two-year period is -- is like really --

MICHELLE CARUSO-CABRERA: What you do in the UK relevant to Brexit or not?

STEPHEN SCHWARZMAN: No. I mean, the operations of Blackstone, no, because we don't -- you know, we don't trade and sell European securities, so, you know, for us it's -- we've already had our Luxembourg office, you know, for some other reasons and so we did add a few people to that. It's not material at all.

MICHELLE CARUSO-CABRERA: You're selling an app.

STEPHEN SCHWARZMAN: Well, I don't know what I'm allowed to say about this, because I think we're in registration, you know, or going to be.

MICHELLE CARUSO-CABRERA: Have you ever used it? [Laughing] You use any apps?

STEPHEN SCHWARZMAN: No, you know, I'm barely literate technologically.


STEPHEN SCHWARZMAN: I don't do any of that.

MICHELLE CARUSO-CABRERA: No, none of that. Okay.

It's a security app and it makes for smart homes, something like that, yeah.

STEPHEN SCHWARZMAN: Yes. It's the leading smart home company. And they have really great technology on how you turn things on and off remote and also security types of applications.

MICHELLE CARUSO-CABRERA: So you don't use any of that stuff. But, tell me, a deal comes, think about -- you have advisers to tell you do it and you trust them or do you really -- I mean, how do you approach it when you're not a user of the product?

STEPHEN SCHWARZMAN: You know, well, basically, we're in the investment business.


STEPHEN SCHWARZMAN: And to be in the investment business and be successful, like we are, we've earned, in our block of products, somewhere around 900 over the S&P for about 30 years. There are not many investors in the world who have done that. So you have to have a process and buy-in. And we start from the premise of "don't lose money." I realize that's not a profound concept. But if you almost never lose and you always win, it's like a baseball team, you know, that only plays the first inning, right? You keep getting runners on home base.

And so we're sort of analytically intensive/ruthless with each other in terms of analyzing where the downsides are on everything. And usually there are two to four real drivers. And part of it is just debating internally with a lot of knowledge and analysis of what the outcomes would be with each of those sort of variables, and which ones are correlating with each other. Because if you think you've nailed each one, but then two of them are actually multiplied, that's a bad outcome.

So we're extremely thorough, and we're open. We believe we're in openness, horizontal management structure. Everybody at the firm is equal. And the reason they're equal is they're equally smart. Some are just younger. They'll be -- when they get older, they'll be the same as the other people. And we encourage everyone to speak up. Everybody's got to have a point of view. And we're in a lifetime learning business, and we express that with each of our proposed, you know, investments. And, you know, we know where we want to come out.

And the way we do it, and it's quite interesting, that I learned at the beginning it's like a great man syndrome where you sit at the end of the table and you tell everybody, you know, this is like, you know, in Hollywood, you know. Yea and nay is not the way it works, actually. There are very few geniuses. I'm not one of them. And what you do is you make every person at the table criticize the proposal that's on the table. And everyone says something, and no one who's brought the deal feels they're being attacked by anybody.

And so you can be completely objective and analytic about that, because people know that when they're sitting at a table on the other side --

MICHELLE CARUSO-CABRERA: It's going to happen to them.

STEPHEN SCHWARZMAN: It's going to happen. It's just what happens at the firm. And so we have like a cheerful, you know, active approach to everything. One of the advantages is if anything ever goes wrong, it's almost always one of those variables. As a group, we've assessed it. So the people who bring the investment are not to blame for it not working out as well. It's not their fault, we all evaluated it.

So we have very few people who leave our firm because it's actually an exciting place to work. And we were voted the best place to work in finance. So we can't be all bad.

MICHELLE CARUSO-CABRERA: So, avoiding downsides. Is there downside in the equity market today? What do you think about valuation?

STEPHEN SCHWARZMAN: Well, yeah. The issue, as you probably already experienced with your first one or two or three speakers, is that the economies around the world are pretty good. So, you know, whether it's Europe growing over two, which nobody believed, U.S. growing, China, India, and even Japan. So the issue isn't particularly economic in terms of markets. And it's not that we have central banks where people get overly excited. They're not trying to create a recession where there's hardly any inflation. The issue is geopolitical, and there are some bad things going on in the world.

And a conventional analysis says things will be fine. But whether it's North Korea, whether it's trade, there are a number of issues that people don't want to focus on because the outcome would be really bad. And those are the things I think about. I don't spend my time on the things that are good.

MICHELLE CARUSO-CABRERA: So North Korea, for example. Do you think about it a lot?


MICHELLE CARUSO-CABRERA: And you think about it in terms of asset allocation, what you would do with a firm, what you should invest in or not invest in, or in just terms of likes?


MICHELLE CARUSO-CABRERA: Okay. So that means, therefore, at Blackstone you would do A but not B, or tell me how it actually plays out.

STEPHEN SCHWARZMAN: Well, you know, I wouldn't be buying office buildings in Seoul right now.


MICHELLE CARUSO-CABRERA: That's a little obvious. Got anything else?


STEPHEN SCHWARZMAN: You asked me a question. I told you I've been doing that.


STEPHEN SCHWARZMAN: And, you know, it's very complicated.

MICHELLE CARUSO-CABRERA: You're just back from China. Any insights from what they were thinking about North Korea?

STEPHEN SCHWARZMAN: To the Chinese, it's a lot of different things. You know, first, their relationship with the North Koreans is not good and has not been good for a very long time. So America somehow feels that they're close allies. I don't believe that is true at all. The Chinese do not want to nuclearize Korean -- and they're really serious about that. They also don't want to have a shooting war occur and have 20 million refugees from North Korea going to China. So it's complicated for them as to what to do. And what we've been doing is dealing with them during a period where they're actually having what we would call an election.

There aren't that many major decisions made right before a U.S. election. And it's the same in China. And they'll be finished --

MICHELLE CARUSO-CABRERA: The next-party Congress, you're talking about, which is coming up?

STEPHEN SCHWARZMAN: Yes. It's like an election. I'm trying to make this accessible to the viewers.

And so that will be finished by October, end of October. And, you know, they'll have their array of leaders set. And I think they'll have more freedom of that in terms of what they do. If you notice, they have been supporting these U.N. resolutions and I don't think the leader of North Korea has ever been to China.

MICHELLE CARUSO-CABRERA: So you would agree that ultimately it's up to them, right? I mean, they may not be close allies. They may not like each other. But North Korea survives because of China. And if there's going to be any change in North Korea, China can best effect that change, correct? They understand that responsibility.

STEPHEN SCHWARZMAN: Well, it's complicated for them because you also have the Russians involved. But that's why this is -- the perception is this is just China and North Korea is not correct.


STEPHEN SCHWARZMAN: That's how we think about it. So there's a lot of actors in this drama, you know. There's South Korea, there's Japanese, missiles flying over them. This is a very dangerous situation.

MICHELLE CARUSO-CABRERA: But when the President says China could be doing more, do you agree with that?

STEPHEN SCHWARZMAN: It doesn't matter what I think. I'm -- it's complicated, and you only find out what people will do at the end of the drama.

MICHELLE CARUSO-CABRERA: Mmhmm. I just don't quite get -- think I got an answer to the question that I asked earlier about the valuations in the stock market in the United States.

Do you think they're higher?

STEPHEN SCHWARZMAN: They're high by most people's . . . The economy's doing well. If you get tax reform, if you get an infrastructure bill that's substantial, you can have the economy go on for some time. On an absolute level it's pretty high, particularly if you believe that interest rates are going to go up over time. We've got a very stimulative effect. And, you know, eventually they'll all start unwinding some of their positions. They could carry those positions for a very long time.

When we started the financial crisis, the Central Bank in the United States had $800 billion of assets.


STEPHEN SCHWARZMAN: At that same time I believe that one bank, Citibank, had 3.6 trillion. So one bank in the United States was four times the size of Central Bank. So the idea that they've increased to where they are is, in my perspective, not the end of the world. They've been back. They'll do that over time.

MICHELLE CARUSO-CABRERA: Will it hurt the market?

STEPHEN SCHWARZMAN: Will it hurt the market? It depends how big, how fast.

MICHELLE CARUSO-CABRERA: Ten years with Blackstone since you went public.

STEPHEN SCHWARZMAN: Yep. In fact, we had our road show right in this room.


STEPHEN SCHWARZMAN: And we had balloons all over. It was really quite a to-do.

MICHELLE CARUSO-CABRERA: Are you happy with the stock price?

STEPHEN SCHWARZMAN: I don't think there's any CEO that's ever happy with their stock price. So I'll join the vast majority. But we've run the business, it's about 4 1/2 times, roughly, then we're the fastest-growing, decent-sized financial institution in the world. We make a lot of money. We yield somewhere around, I don't know, 7.5, 8%. Nobody has a yield like that. And we have the most important thing, we have wonderful people and a great culture. And we're in the part of the money management area where people really have to put money, because that's where you get the credit. And we've only been doing that for 32 years.

For some people, some reason, people think it's temporary. It just keeps happening. And that's because it's meant to happen, because we have an approach to investing that's been validated. And we have some handicaps. We're a master limited partnership. Some people feel they can't buy us, day one, instead of something else. And so we're a little handicapped in that regard. But the business itself is magnificent. And it's fun to be here for everyone. And stock prices ultimately will take care of themselves.

MICHELLE CARUSO-CABRERA: Well, it's been great fun to have you. Thank you so much for doing this. We really appreciate it.


Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Raymond Dalio, Bridgewater Associates Founder, ?Chairman and Chief Investment Officer, live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Tuesday, September 12th.

Following are links to the video of the interview on, and

Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.

ANDREW ROSS SORKIN: Thank you, and thank you for indulging me a second time. And thank you, Ray, for being here.

We've been here together now a number of times. We were together, I don't know if you remember this, last year with the former Treasury Secretary, Tim Geithner. And as we were discussing the economy, my first question to both of you then was about what the potential growth rate in the GDP in the United States could really be, what was possible. And at the time President then -- or rather, I say, Candidate Trump was suggesting we could maybe get to 4%. You thought that was a bit high then. I'm curious a year later, today, where you think we really are and where we could possibly go.

RAYMOND DALIO: I still think we're probably in a 2 1/2% type of growth environment. I mean, the real question is, to some extent, whether you can unleash the productivity by some of the changes that a pro-business environment can produce. I think there was more hope for that, more pop in that productivity with structural changes. But I think that now the problems of the conflicts have slowed all that down. So we're looking at something like a 2 1/2 or 3% environment. But we've gotten past the worst of all the leveraging.

So I think if we look at the reasons, we have never had, still, so many obligations that are to be paid. So it's not just a matter of debt. It's a matter of pensions. It's a matter of health care, those kinds of obligations to be paid.

I think that they're going to mean that there are going to be drains on productivity. So we have the equivalent of a very, still, highly burdened economy that's a problem.

ANDREW ROSS SORKIN: Even though we just talked to the Treasury Secretary about taxes and some of the other programs that he is still very optimistic and confident about, A, do you have confidence in any of those things happening? And if they do happen, what kind -- how would that change the equation?

RAYMOND DALIO: Well, I think --

ANDREW ROSS SORKIN: You're not even --

RAYMOND DALIO: I think there are pros and cons. I think that what's going to happen will probably be a watered-down version of what was anticipated to happen. So, for example, corporate tax rate. I think it will probably come later. I don't know exactly when it will come, but maybe end of this quarter, end of the year, maybe early next year. And it will probably have something like 23% rate. I can't tell you. But it's not going to be what it was.

And so -- and that will be -- these will be one-time incidences. If you reduce government regulation, that's the next influence, and so on.

The other unknown -- part of this is, you know, let's step back. I think the most analogous period I mentioned is the late '30s.




RAYMOND DALIO: Well, I think, let's just look at mechanically because we can maybe handle it differently. You know, in 1929, '32 we had the downturn that was very similar to the 2008 downturn. And then interest rates hit zero, and we had a lot of debt. And at that point the government printed a lot of money, actually bought financial assets, pushed financial assets up, pushed the economy up; and that was sort of a beautiful de-leveraging because we had growth, lower inflation and so on.

We got the interest rates down to zero and -- with that quantitative easing. So when we began this cycle, most recently, there was a concerted effort to even get interest rates negative. And there were calculations as to how negative exactly they could push that, how much it was going to cost to carry money in cash and banks in vaults, and what would the vaults base be because we would push it down, they would push it down lower. And all the assets were built on a carry-off of those essentially negative interest rates. That's now stopped.

So now we are in an environment which, very similar to 1937 in terms of the early stages of perhaps the beginning of a tightening.

At the same time during that period of time, there was a big wealth gap because of these circumstances. Up two-tenths of 1% of the population of today's net worth is equal to the bottom 90% of the population's net worth, and there's a great tension.

And if you look at the bottom 60%, what the economy is like for the bottom 60% of the population -- so still there's a lot of tension, right? And that has -- and that kind of an environment creates populism. It's a word that we didn't hear much of --


RAYMOND DALIO: -- until basically in the '30s. And that populism means the electing of people who are strong characters in one segment in a battle against the other segment. And so we're now in an environment of a lot of conflict. In other words, conflict within the administration, conflict between parties, conflict between other countries and so on. I think it will be very important, you know, how that conflict is handled.

This is very important. This is even more important than how the tax changes are going to take place.

I think the most important thing is there must not be a downturn in the economy. Because if there's a downturn in the economy, with this kind of a wealth gap, imagine what that would be. I think the Federal Reserve has done a much better job of realizing such things. And so I think we're in this kind of environment in which there are these cross-currents. Economy is not too hot, not too cold, and assets are kind of there, and we just hope that we are conscious --

ANDREW ROSS SORKIN: Let's put a fine point on it. When you talk about the 1930s, this ends in war.

RAYMOND DALIO: The circumstances can be handled differently. Destiny does not mean -- there are lessons to be learned from history. Okay?

So I think the real question from this relating to conflict is how we deal with each other. In other words, do the principles that bind us together, are they stronger than the ones that divide us? Are we going to get -- how are we going to deal with this in a principled way?


RAYMOND DALIO: I think -- so I think in terms of monetary policy. There are lessons to be learned by the Federal Reserve or the Central Banks. So I don't think that it means -- but I do think we are in a situation where those -- that situation is set up similarly.

ANDREW ROSS SORKIN: Okay. But you've written about this relatively extensively recently on LinkedIn and some of your notes to investors. And I have to say, you freaked out a lot of people with this.

What I'm trying to understand is, given this view of the world, what do you do about it as an investor?

RAYMOND DALIO: Well, you know, there's alpha and there's beta. We are in an alpha conference, right?


RAYMOND DALIO: There's alpha and beta. The most important thing is to know how to separate those two things. In other words, know what your strategic allocation mix is. Right? That's your data portfolio. And know how to achieve balance, because that's where you're still heading.

ANDREW ROSS SORKIN: You've talked about buying gold, for example.

RAYMOND DALIO: That's essential -- I think, an essential part of the balance. We're in a monetary -- gold is an effective diversifier of assets and an effective diversifier also in terms of currency regimes. We have a situation where gold's position in the world as a reserve currency started with Brentwood's monetary system, you know, 1944. And we now have a dollar-denominated system. And that dollar is very much subject to the demand around the world and the positioning of the United States.

So it's a -- you know, it's a fiat paper currency. It's also something in which there's -- when there's conflict. So it's an alternative version of cash. It should be part of everybody's portfolio, between 5 and 10%. Not just -- not because it's necessarily the best thing. It's most importantly because of how it serves as an effective diversifier, particularly at a time when we're looking at the United States and the role in the world.

The United States' position in the world is now one of a few countries that -- powerful countries. And, you know, it's unique in many ways. But it's role -- what's actually happening and the dollar's role in the world, you know, can't be taken for granted.

ANDREW ROSS SORKIN: Let me ask you, one of those other powerful countries, China. The "Wall Street Journal" on Friday, also the "New York Times," Bridgewater planning to launch a China investment fund three decades in the making. What can you tell us about this?

RAYMOND DALIO: Well, I started to go to China in 1984. Not for money, but because of curiosity. They invited me over to teach them about the financial markets. And I developed wonderful relationships with people there.

When they formed the financial markets in 1989 and 1990, there were seven people in a run-down hotel room put together by these various companies who make financial markets. And over that period of time, I've been lucky enough to have those people as friends and build relationships and help them to develop some of their financial markets.

So naturally, an extension of that is that when they're opening up to the world for investment, that it's something we want to do. We've been managing money since 1993 for Chinese institutions outside, and now their capital markets are developing, and we want to invest inside, for investors on IBM side, and for Chinese investors who want to invest.

ANDREW ROSS SORKIN: What do the Chinese think of us, the U.S. right now, of President Trump, of the politics of the moment and our economy?

RAYMOND DALIO: Well, I don't know that it would be appropriate for me to speak for the Chinese other than to say "quizzical."

I found the Chinese leadership to be intelligent, having equanimity and like good chess players. And so I think they are in the process of figuring out what the new administration is like and what we're going to be like. And I think the administration itself is in the process of figuring out what it's like.

ANDREW ROSS SORKIN: How concerned are you about the situation in North Korea, both itself, but also in terms of our relationship, the United States' relationship with China and how that's going to affect businesses like yours?

RAYMOND DALIO: Well, it's all going to be a function of how they're going to be together. It's a big question. Let's take North Korea. I think the North Korean question, the world is looking at United States and what its power will be. You know, there's, "Speak softly and carry a big stick." Are we doing that?

ANDREW ROSS SORKIN: Are we doing that?

RAYMOND DALIO: Are we doing that? Are we doing the opposite of that? What is the power?

ANDREW ROSS SORKIN: You ask some very good questions. What's the answer?

RAYMOND DALIO: I'm not finished with my answer.


And I think that this has geopolitical implications. In other words, Korea can reshape what the whole Asian region is like. Countries in that region think, Who am I going to be affiliated with? How does that work?

So this will have implications all through the region. So...

ANDREW ROSS SORKIN: And your sense, though, of how -- for example, everybody here is trying to figure out, in terms of putting percentages on it, can you trade around this? Is there a trade? Is there a way to hedge this, if you think there's a -- how do you at Bridgewater think about that?

RAYMOND DALIO: Well, we always think about hedging risk. And there's a beta component to this. And what we think about is how to take it off the table, and you think of using of options, you think of hedges in terms of structures, in terms of gold. You know, basically, in our alpha portfolio, we want to have a least correlation with anything. So we want to try to minimize that.

ANDREW ROSS SORKIN: But North Korea is clearly taken into account, and I ask because there are other people who say, look, it's a binary event. There's no way to think it through. There's no way to actually hedge it in any meaningful way. So why the --

RAYMOND DALIO: Well, I don't think that's true. If you look at the market behavior, you could basically calculate, essentially, the betas to the North Korea event by just watching how the market reacts. We see it every day.

So you could say that. You know, of course, there are many betas to many different things. You know, you have Brexit. Before that you have this and that, and these things have been flowing. They happen immediately. So you can achieve greater degrees of hedges. It's certainly mechanically possible, but you can't do it perfectly.

ANDREW ROSS SORKIN: One of the big questions around the market is the future of the Fed -- once said that Bridgewater may have better information than the Fed.

A, I'm curious about what information you think that you have that they don't, but also what you think about the future of the Fed and who's going to run it?

RAYMOND DALIO: Well, it will be a very important -- I don't have any particular insights. It will be a very important decision because a lot of [inaudible], not only the head of the Fed are up, and I think that it's very important that a Fed chairman have a combination of the technical skills, wisdom, and a global perspective. You know, there aren't many people who have those things, and you have to put together a committee of such people who will have those qualities.

ANDREW ROSS SORKIN: You know Gary Cohn. Does he have those things?

RAYMOND DALIO: I think Gary Cohn is a very capable man who also has his greatest strength in being able to know who also to speak to. And he's open-minded. And so that ability to draw upon the best thinking, particularly people who have thoughtful disagreement, you know. That is my big thing, how you can have thoughtful disagreement, sort through that disagreement to get to the right answer. I think Gary Cohn has that. So...

ANDREW ROSS SORKIN: How important is he in the administration? If he were to leave, would that be a signal of any sort to you?

RAYMOND DALIO: First of all, I'm not, you know, inside, and I wouldn't -- if I was inside --

ANDREW ROSS SORKIN: You wouldn't tell us.

RAYMOND DALIO: In terms of my reaction, though, I would say if he was to leave, it would be terrible, because -- it would be terrible in two dimensions. It would undermine the future progress of economic with foreign -- and it would also represent in challenge in putting together the administration, which you probably know in terms of the number of jobs that are filled in this organization, Treasury Department is short of people. And the capabilities, the time and attention. And then I think it becomes also representative of what it might be like to be in the administration. It might be difficult to get the quality people in the administration. I would be concerned about the leadership. So I think it would be terrible if Gary left.

ANDREW ROSS SORKIN: And terrible for the market?


ANDREW ROSS SORKIN: Oh, yeah, and it would manifest itself --

RAYMOND DALIO: I think it would -- yeah, I think it would be bad for the market.

ANDREW ROSS SORKIN: When President Trump was first elected, you called it broadly positive -- I think was the quote -- "broadly positive" in terms of what it could mean for the markets and the economy. Do you still feel that way?

RAYMOND DALIO: Yeah. We're in the process of figuring this out. But I think we're faced between a pro business -- look, there are a lot of policies that I disagree with and choices I would make that would be different. However, there's a notion of a pro business environment and, of course, then it's just the mechanics. You lower a tax rate, you cause the stocks to be worth more.

So it's positive, because everybody's -- lump sum payment and the investment is a lump sum payment for future cash flows. Those future cash flows would be initially enhanced by those kinds of stimulus.

They're a two-edged sword. If you lower regulations, you have -- maybe you have a boost to the economy, a boost to profit, and then maybe you have something else to pay. If you eliminate, you know, let's say climate, that might have a cost in terms of the environment, but it could also be profitable for businesses.

So I'm not saying that it's -- how the negative that is other than to say that that pro business environment. I think that if we can have a pro business environment, like it's okay to make money, it's a good thing to make money and make jobs and all that, and you have that at the same time as you have togetherness, work pool, pooling the American dream, you know, for all Americans. How do you do that for all Americans?

A big element is going to be how we deal with the bottom 60%.

ANDREW ROSS SORKIN: I want to turn to "Principles" in just a moment. But I have two other questions.

As a risk manager, when you wake up in the morning, what are you most worried about? What's the single thing?

RAYMOND DALIO: There's -- there are the risks, like, North Korea. I don't think that that's probable. I think as a manager, over the longer term, I'm worried more about the wealth and social gap and the conflicts that we're going to have with each other. I worry about the very large burdens that we have in the form of debts and pensions and other things that are not going to be adequately be surfaced.

I'm not worried -- unlike 2007, anticipated the financial crisis. Went through the calculations, and we could say -- we could see who couldn't pay their debts.

ANDREW ROSS SORKIN: They structuralized that.

RAYMOND DALIO: There's nothing right now that I can see. We're in the part of the cycle and we have the cash flows to support our debts for the time being.

I'm expecting a slow squeeze, there's going to be an increasing squeeze. There's social tensions. That's what worries me.

ANDREW ROSS SORKIN: How about the ETF market? You guys use ETFs very frequently, aggressively. There is a concern out there among many that the ETF market unto itself is dangerous, especially the levered ETF market. Do you believe that structurally there's a problem?

RAYMOND DALIO: I think those types of problem -- it's not a systemic problem. I don't think it's a systemic problem. It's a market moving. It could be a market moving thing. And that's always the case. Right?


RAYMOND DALIO: You know, and you always have those things come along. You have a pop. You have opinion. You know, I don't know, there's a bunch of those things. I'm not particularly worried about those. I'd like to try to find them out and play them.

ANDREW ROSS SORKIN: I want to turn to "Principles," a new book that's coming out next Tuesday. I believe everybody here may be getting a copy.

RAYMOND DALIO: You're welcome, too.



ANDREW ROSS SORKIN: Here's the question for you. The idea of the "Principles," you tell a story about getting a memo from your top three lieutenants. It's effectively a performance review of you. This is back in 1993. And the performance review, as great as the positive parts were, the bad parts were pretty -- pretty bad. And they all took you to dinner. And it seems to me that that moment in the book explains the principles better than anything else.

What happened at that dinner?

RAYMOND DALIO: I was told that my process of being, like, totally radically truthful was hurting people's morale. So -- and, I mean, that's basically what they said to me. Basically what they said to me is that whole total straightforwardness was causing people to be demoralized or whatever it is, and I didn't know that.

And these principles of being radically transparent -- I should explain to you in a minute -- those principles -- how we would deal with disagreement. And the biggest issues, I think, that we all face as individuals is not knowing whether we're right or wrong and not being straightforward with each other.

And the ability of being able to have disagreement. Can you have straightforward disagreement without it being a problem was the dilemma. And I was demoralizing people.

And so what it struck me as, we should then have a discussion. What could I do about that? I didn't want to demoralize people, and I particularly wanted to have great relationships with these people.

ANDREW ROSS SORKIN: You also didn't want to sugarcoat things.

RAYMOND DALIO: And I didn't want to sugarcoat things. So what it led me to do is to start to write down -- reach mutual agreement. How am I going to be with you? How should you be with me?

In other words, should I tell you what I really think? Can you be free to tell me what you really think? Or should I not do that? And we would have those conversations of people I worked with. And then we would write down -- I would write down the principles.

And, by the way, these principles, not me, has been the basis of whatever success I've had. It's not -- principles. And that mostly about the idea of how to have thoughtful disagreement, which I think people don't know how to do very well. And then I'd like to maybe take a minute and explain this, if you'll let me do that.

ANDREW ROSS SORKIN: I will, but I want to understand this. I want to understand about criticism, accepting criticism. Do you think you take criticism well, personally?

RAYMOND DALIO: I try. It depends on the moment. I know that I want it. And I think that if I don't, in the moments that I don't do it well, what I do is, afterwards I try to reflect. I get -- I force it on people. I force people to give it to me, right, at Bridgewater. I know it's always welcome. So that's --

ANDREW ROSS SORKIN: Are you ever hurt by it?


ANDREW ROSS SORKIN: Are you ever hurt by it?

RAYMOND DALIO: No. No, no. It depends if the person has -- look, it's either one of two things. They either have good intentions or they have bad intentions. If they're hurt -- if they're bad intentions, I'm angry, not hurt. And if they have good intentions, I really have learned that I need to reflect on that. And the market's told me that.

Like, in my early years -- you know, it's a mix of confidence and then humility. And I remember, like, in 1980s, I was so wrong in talking about and expecting the worst economic conditions. And it was -- anyway, I was terribly wrong, and it hurt me. And, you know, you can read about it in the book.

But what it does -- hugely mistake.


RAYMOND DALIO: And it shifted my mentality from thinking I'm right, to asking myself: How do I know I'm right? And the only way I know I'm right is by being able to have thoughtful disagreement.

So in my opinion there are three things -- be an IBM meritocracy. That's the reason of whatever success we have. In order to be successful, we have to have independent thinkers, so independent that they'll bet against the consensus. But when you bet against the consensus, you're going to be wrong a lot. So I need a bunch of independent thinkers who are operating with me, and we need a process of working ourselves through that.

So the three steps that you need to do to have an IBM meritocracy is first, you have to put your honest thoughts on the table. And a lot of people won't do that because I don't -- it's not --

ANDREW ROSS SORKIN: Because it hurts.

RAYMOND DALIO: But if you get past it, it's healthy. Anyway, it's healthy to put your honest thoughts on the table.


RAYMOND DALIO: Second, you have to have thoughtful disagreement. In other words, there's an art to be able to listen and take in. And you have to have protocols for doing that well, so that that disagreement can create a better decision than you can make individually.

And, third, if you have, still, disagreements, you have to have IBM meritocratic ways of getting around them. Because you can either have an autocracy, in other words, the boss tells people how it's going to be; or you can have a democracy, one man, one vote. Both of those are bad. The best thing you can do is have believability-weighted decision-making.

If you want to know the key to whatever Bridgewater's success has been, it's not me. Okay? It's not what's in my head. It's -- my ability to deal with my not knowing is better than my ability to defend things that I have that I know. And it's through that process and that kind of a community that it's powerful, because the power of great collective decision-making is so much greater than the power of any individual's decision-making.

ANDREW ROSS SORKIN: I told you this before. I read the book and I took an enormous amount away on a very personal level in terms of how to think and be humble and try to understand the other side and hope that everybody has good intentions. But the question I was left with is really about the scalability of this in other large and even small organizations, which is to say, you record the meetings at Bridgewater so that everybody can see them. People are on apps judging each other.

And in an environment right now where people are apparently searching for safe spaces and calling other people "snowflakes" if they disagree, it's hard for me to see how this works on a broader level.

RAYMOND DALIO: Well, I think two things. First, you want an IBM meritocracy, or not. That becomes the first question.

Then the second question about scale, I think it's coming at you whether you want it or not. In other words, what's happening is we're now living in a world of radical transparency; that all the data that you have on each of you out there, that the world could know about you, you are leaving all this data all over, and they could know very personally what you're like.

And the question is how that's felt together in terms of --


RAYMOND DALIO: That's what I'm saying. Algorithms is what my TED Talk was about. Algorithms and radical transparency. So radical transparency is coming at you fast. You're not going to be able to view it. You can't avoid it.

And then the algorithms are going to be part of your life. And those algorithms are going to be used in you transparency. Now, do you want to do that openly? Do you want to -- do we want to agree on what those algorithms and rules of the game are? Do you want to do it, or do you want to do it behind the scenes? I want to do it out in the open because that enhances an IBM meritocracy.

ANDREW ROSS SORKIN: Let me ask you a separate question. What is the role of privacy in this world? And let me also say in your piece over the weekend that suggested only ten people inside Bridgewater know actually about the investments at any one time.

For all the radical transparency that may go on inside the firm, there's an argument that maybe the public isn't necessarily -- we're not all radically transparent to each other.

RAYMOND DALIO: When I mean radical transparency, I don't mean total transparency.


Total transparency, I mean radical transparency. I'm not going to tell what trades, what particular decision rules that we're using. I'm not going to tell proprietary stuff. And I'm not going to try to offend anybody in terms of privacy. You know, in other words, if there's a personal question, it's not transparent -- it's not transparent. There are certain things.

The question is, by and large, can you be radically forthright with each other? If you don't show people things, you're going to have manipulation. You're going to have politics by it. You can't have an IBM meritocracy. I don't care the exact way. I describe it in the book.

The real question is: Do you know what somebody else is really thinking? Do you know what they're like? Do they know what you're really thinking? Do they know what you're really like?

Think about how much better that would be, how much more efficient it would be. And then also, you know, that's straightforwardness. You might cut through it, it's a very powerful tool.

It's worked. It's the reason for success for 42 years, so it's got some reason behind it, you know?

ANDREW ROSS SORKIN: When people say that -- when people question and say: Is Bridgewater successful because of this remarkable social experiment? Or they say: Is it so successful that it can afford to pay for this social experiment, you think what?

RAYMOND DALIO: I never had any money. I started it from a two-bedroom apartment. I had the approach and learned the approach through painful mistakes over there. And that brought the success. It wasn't the other way around. I didn't start with anything, right?

I looked at the biggest institutions in the world. I looked at the biggest institutions in the world because of an IBM meritocracy. Like what's so wrong with being radically truthful, radically transparent with each other and having this meaningful work and meaningful relationships because you are in it together? In one word it's an IBM meritocracy which the goal is to have meaningful work and meaningful relationships through radical truthfulness and radical transparency.

ANDREW ROSS SORKIN: One of my favorite principles in the whole book is pay north of fair. How much is that?


ANDREW ROSS SORKIN: Is it a 10% premium?

RAYMOND DALIO: No. What I do is give people great opportunity. So here's my basic philosophy: Make your -- whatever you're earning, comfortable to take care of whatever you need to take care of, those are your basic things, not the luxuries. Okay? And then come for opportunity. Enter this thing and then take a big share of the opportunity and make everybody rich if they together make the pie bigger. Don't worry about slicing the pie precisely.

ANDREW ROSS SORKIN: Final question. When you were introduced, we talked -- there was a brief mention of your philanthropy. And you agreed to be part of the giving pledge to give half your money away.

There's a fascinating line in the book about a realization you've had that even people with enormous amount of money realize that they actually can't do all the things that they wish they could do. What do you mean by that?

RAYMOND DALIO: Well, when I started off, you know, obviously, as I say, I was -- I started off as a, you know, middle class kid -- middle class kid, maybe, and I made an enormous amount of money. Even then when I had it, and I decided I was going to give a significant amount away, I thought I had a lot of money.

And then when I started to get involved with some of the things that we got involved with to try to help in terms of education or health care or whatever it is, I started to realize that I had nothing, very little, in relationship to the enormity of the things that needed to be done. And then I started to -- before I would be almost, you know, very generous of this, this and this and then I realized the enormity what has to be done. It's enormous, right? So we have very little.

Some people think that when you have a lot of money -- you never have enough in terms of the goals and the aspiration. The aspirations change, you know? At this stage of my life my aspirations are very different than my aspirations before.

I am now at a stage of my life -- that's why I wrote the book. This is a year of transition from my second stage of my life in which I'm working and helping others who are dependent on me to passing along whatever I have to help them. And that includes money, and that includes these others.

So when you start to get into that stage of your life, you know, it's -- it's a different perspective, including realizing you don't have enough.

ANDREW ROSS SORKIN: We wish you luck with the third act. And we appreciate your time very much. Thank you, Ray.



TYLER MATHISEN: Before you go, can I ask you a question?

A lot of what you guys fascinatingly just talked about was the idea of radical transparency between one another. How do I know -- am I willing to say what I really think? Am I willing to -- for you to tell me what you really think?

But how do you know what you really think, internally? How do you know and what level of confidence do you have that what I think is right?

RAYMOND DALIO: That's exactly -- that's exactly the issue. If you watch this TED Talk, it's 16 minutes.


RAYMOND DALIO: It will explain the tools that we do it. What happens is the only way that you're going to know that it is through high-quality triangulation. In other words, like you think something.

The greatest tragedy of mankind, or one of them, is that people needlessly hold long opinions in their minds. And so they don't know if what they're thinking.

TYLER MATHISEN: They don't know what they're thinking. They have anti-confidence --

RAYMOND DALIO: It's so easy, okay, if you're going to put it out there and triangulate with believable people, particularly people who disagree with you, and you work that through. And that's what -- how you can raise your profitability of being right. I mean, I learned it in the markets. I could raise my profitability of being right if I could put those ideas that might be wrong out there and stress test them. And you learn a lot. You learn a lot because there are perspectives that weren't in your head. What you don't know is so much greater than what you do know.

ANDREW ROSS SORKIN: I wrote that down.

RAYMOND DALIO: So, anyway, it's -- anyway, put it out there, triangulate. Right?

TYLER MATHISEN: Thank you so much. You can be my shrink, okay?

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Treasury Secretary Steven Mnuchin and “Squawk Box” Co-Anchors
Joe Kernen, Becky Quick and Andrew Ross Sorkin live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Tuesday, September 12th.

Following are links to the video of the interview on, , and

Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.

BECKY QUICK:  Thank you so much.

STEVEN MNUCHIN:  Thank you.  It's a pleasure to be with you in New York.

BECKY QUICK:  It's a pleasure to have you here.  This whole conference is about Delivering Alpha, and we know that you know this and understand it very well from your previous life at Goldman Sachs and beyond.  And we have an entire list of questions that we want to ask you about in that vein.  But, given the historic events that we've seen over the last several days, first with Hurricane Harvey and now with Hurricane Irma, we would like to maybe start off in this vein.  I know you've been meeting with the President recently, and I just wonder if you can give us an update from the Administration's point of view about where we stand with these storms right now.

STEVEN MNUCHIN:  Sure.  Well, starting with the first storm, the President has just been incredibly engaged.  We've been having cabinet meetings constantly, working with FEMA.  On Sunday I was with the President at Camp David.  We were monitoring the situation via video.  And then Sunday afternoon I went with the Vice President to FEMA headquarters.

Let me just especially thank all the people in both the states and the federal government who have been working round the clock to save lives.  It's been an incredibly -- you know, a very important response to just two historically terrible storms.

BECKY QUICK:  We know that it is still very early to try and get a feel for the financial impact of these storms.  We are still in a recovery and making sure that people are getting through the storm.  But we also know that those numbers will be very large, billions and billions of dollars.  We've seen an initial payment for that coming from the government with the bill that has been passed for $15 billion for Harvey.  But what do we do with the second round of funding?  We know the numbers will go up.

STEVEN MNUCHIN:  Again, I think the first thing is the President wanted to be very clear, we needed to make sure we got the money to the states so that they could protect citizens and property, which was the most important issue.  And we accomplished that.  And the first payment is a down payment.  We'll see what we need to spend more.  But the President will make sure that whatever the federal government needs to contribute to this, we will do so.

JOE KERNEN: 100 to 150 is Moody's latest estimate for both storms, which would be equal to Katrina.  Any effect on ongoing GDP numbers, do you think?

Do you have an estimate, maybe half a percent perhaps; and, secondly, does the Fed change anything that it was planning to do based on this, and even had Mark Grant say, it's not just -- because they were going to hold off supposedly in September, anyway -- they might even cut at this point.  Could you imagine that?

STEVEN MNUCHIN:  Well, I can't comment on what the Federal did because, as you know, as Treasury Secretary I respect their independence.  I would say there clearly is going to be an impact on GDP in the short run.  We will make it up in the long run as we rebuild.  That will help GDP.  So I think it's too early to tell what the exact estimates will be, but, you know, I think it won't have a bad impact on the economy.

JOE KERNEN: We may not get back to the Fed, so I got to ask you, Yellen, did he get reappointed?

STEVEN MNUCHIN:  I'm working closely with the President on the issue.  He hasn't made any decisions, and that's one of the things he's still considering.

JOE KERNEN: He has a bunch of people now that there are some openings on the Fed.

STEVEN MNUCHIN:  Yeah, there's a lot of good people.  The Chair is, obviously, quite talented and she's being considered, but there's a lot of great people that we have been meeting with, considering as well.

BECKY QUICK:  Is Gary Cohn still on that list?

ANDREW ROSS SORKIN: Where do you think Gary Cohn stands in all of this, given that the President has talked about him as a candidate and, yet, what we do hear constantly, at least over the past couple of weeks post-Charlottesville and some of the comments he made publicly, that perhaps maybe the relationship has been compromised.

STEVEN MNUCHIN:  I appreciate you asking me, and I would be disappointed if you didn't.  But I obviously will respect the confidentiality of the process and not make any comments on any specific people that the President is considering.

ANDREW ROSS SORKIN: Putting that aside, what about the relationship with Gary Cohn, your own relationship with him, the President's relationship with him?

There's a view within the marketplace, and when we talk to Ray Dalio and others all about this, that Gary Cohn and you represent a very important piece of this administration; and that if, perhaps, Gary Cohn were to leave, that the markets would take that as a bad sign.

STEVEN MNUCHIN:  Well, let me say, Gary and I have worked very close together for a very long period of time.  We worked together at Goldman Sachs.  We were in the same partner cross at Goldman Sachs, working very closely together on taxes.  I was with him yesterday on the Hill.  We will be back on the Hill this afternoon, we'll both be at the White House for a dinner with the President tonight on tax reform.  And, let me just say, you know, I appreciate working with him.

JOE KERNEN: You mentioned taxes now.  You are helping us get into all the different areas where we want to go.

The "kumbaya" moment, I think that's one of your words you use a lot.


JOE KERNEN: Senator Schumer, Speaker Pelosi, does that -- that the President had recently, does that change the dynamic, in your view, of how to approach tax reform?

STEVEN MNUCHIN:  Not at all.  I would say, first of all, I give the President a lot of credit.  We were in the middle of two major hurricanes.  We needed to get money to the states.  We were in the middle of having the debt limit, and the President was very clear.  He wanted to cut a deal.  He wanted to cut a deal quickly.  He moved the debt limit substantially further back.  We had to fund the government.  We were running out of money.  I was operating it like a piggy bank, and we got out of there and showed the American public that we are putting politics aside.

As it relates to tax reform, it's been my number one priority, it will be, and we're going to get this done.

JOE KERNEN: Does it change it from reconciliation to a bipartisan, oh, the President flew with Senator Heitkamp back to North Dakota.  Do you foresee this being permanent in 60 votes, or what we just said Senator Perdue said just outright, said this is going to be reconciliation?

STEVEN MNUCHIN:  I always said our hope is that it is bipartisan.  This is about creating jobs.  This is about creating a middle income tax cut.  This is about making our businesses competitive.  We have one of the highest tax rates in the world.  We have tax on worldwide income, we have this crazy concept of deferral.  We have trillions of dollars offshore.  So these are issues that both Democrats and Republicans should understand.

Having said that, if we can't get 60 votes, we are prepared to use reconciliation to get it done.  This is the most important issue for the American economy.

BECKY QUICK:  Let's talk about the meetings you have later today.  You just mentioned that you will be going to Capitol Hill to talk to Senators there about it.  I know you are meeting with Republicans.  Will you also be meeting with Democrats there from the Senate Budget Committee?

STEVEN MNUCHIN:  Well, first of all, I have been meeting with Democrats and Republicans since January.  I have been working on taxes with the President since the campaign.  This program we have been working on for a long time and meeting with lots of different groups, both Republicans and Democrats on this.

BECKY QUICK:  As you are getting closer to finding more details, I know you said that those will be released later this month.  But we still hear a pretty wide variety of opinions about where we could see a corporate tax rate; everyone from Paul Ryan who says in the low 20s recently to the President saying 15%.

Where do you think it falls within those ranges?

STEVEN MNUCHIN:  Well, let me just comment, I think on the business side -- and I mentioned this is business, so this isn't just the corporate tax rate.  This is also we want to create relief for pass-throughs, which are a major part of the economy.  We need to make this system competitive, and that's what we're trying to do, and as I mentioned, turning it from a worldwide system to a territorial system.

The President has made it clear since the campaign, ideally he'd like to get it down to 15%.  I don't know if we will be able to achieve that, given the budget issues.  But we're going to get this down to a very competitive level, and what the exact number is less important.  And what's more important is making sure we have a competitive field.

ANDREW ROSS SORKIN:  If that's in the mid 20s, is that a win?

STEVEN MNUCHIN:  Yet I'm not going to comment on what's a win and what's not a win.  As I said, this is a pass-fail exercise.  So passing tax reform, which hasn't been done in 31 years, that's a win.  And what the exact number is, we'll see.

JOE KERNEN: The pass-through issue is what drives a lot of people on the left crazy, because all the rich people are going to rush, become LLCs to get to 15% or 20%, and that's part of the 5 trillion that the left is worried about they're saying could add to the deficit.  2 trillion of it almost is from the past-through issue.  You're not going to get any -- I can't imagine any Democrats coming on board for that.

STEVEN MNUCHIN:  Well, first of all, we are very concerned about the debt.  As you know, it has gone from 10 trillion to 20 trillion, which we just passed, okay?  And we are concerned about that.

Having said that, we are focused on economic growth.  The difference between 2 and 3% is over $2 trillion to the government.  And we're going to make sure that when we set pass-through rules -- and, again, this is what we have been working on since January -- that they are not used as loopholes.

JOE KERNEN: There's a way to do that.

STEVEN MNUCHIN:  That they are.

ANDREW ROSS SORKIN:  How do you do it?  Just give us a framework for what that looks like.

STEVEN MNUCHIN:  For one, services companies that are pass-throughs will not get the benefit of the rate.  So, you know, kind of what we're not looking to do is, if you earn money that's clearly income, okay, if you are an accountant firm and that's clearly income, you'll be taxed at income rates.  You won't be taxed at pass-through rates.

If you are a business that's creating manufacturing jobs, you're going to get the benefit of that rate, because that's going to be passed through to help create jobs and better wages.

ANDREW ROSS SORKIN: One of the other issues, which matters a bit in most part to this audience has been the issue of carried interest and what rate that gets taxed at.  The President talked for a long time about of closing that loophole.  Does that get closed or changed under your tax plan?

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STEVEN MNUCHIN:  The President's been very clear that for hedge funds they will not have the benefit of carried interest.  One of the things that we are working on is, as it relates to other entities that do create jobs, whether it's in different sectors, we want to make sure that we encourage jobs.  So that's something we're still working on.

ANDREW ROSS SORKIN: This is where it gets complicated, because partnership accounting is difficult.  And then you get into oil and gas, you get into real estate, private equity.  How do you separate them out?

STEVEN MNUCHIN:  Well, the good news is we have over a hundred people at the Treasury working on this.  We have a lot of people at the House and the Senate.  Those --


STEVEN MNUCHIN:  I know this issue is incredibly important to everybody in this room.  It's less important to the American public and creating jobs.

JOE KERNEN: You alluded to the difference between 3% and 2%.  So we're talking about dynamic scoring.  We're talking about not paying for this.

I imagine that's going to be in the final plan.  It's not going to be what the Democrats want in terms of every dollar being accounted for.  That's still the case.

STEVEN MNUCHIN:  I can't comment on what the Democrats want, but I can comment on what makes sense.  So, first of all, dynamic scoring does work, okay, to the extent that you change rules.

So if we go from an international system to a territorial system, we will bring back jobs.  We will bring back trillions of dollars, and that's going to have an impact on the economy.  So, yes, I expect there will be a couple hundred billion dollars accounted for on dynamic scoring.

JOE KERNEN: I think Larry Summers called it a ludicrous supply side --

BECKY QUICK:  I think that was the word.

JOE KERNEN: -- fantasies or something.

STEVEN MNUCHIN:  Well, I would never say anything bad about another Treasury Secretary, although there's lots and lots of economists that will line up on the other side of that argument.

JOE KERNEN: Let me just take this one more step further.  Let's say -- and I don't know whether you know for sure that it won't happen.  Let's say the President says, Chuck, Nancy, I'm going to give you infrastructure along with this if you go along with this.

You're talking about dynamic scoring potentially adding deficit and an infrastructure bill.  Is that possible that we -- we would be at 30 trillion, in no time.

STEVEN MNUCHIN:  Again, we have no doubt, we are not going from 20 trillion to 30 trillion.  But what the President is focused on is creating jobs, creating economic opportunities, creating manufacturing in the United States, having us competitive.  And that's what we're going to do.

JOE KERNEN: Do you see him proposing that, or do you know whether he will, as a way to bring them in?

STEVEN MNUCHIN:  Absolutely.  The President is very focused on infrastructure.  We've been working on a plan.  We will reach out to Democrats on that plan.  And that's absolutely on --

JOE KERNEN:  Would it be part of tax reform?

STEVEN MNUCHIN:  You know, people have asked us whether we should put them together or not.  My inclination is that it makes it more complicated.  You're talking about two complicated issues.  I think when you put them together, it's harder to do, but to the extent that the Democrats and the Republicans want to put it together, Congress has that option.

ANDREW ROSS SORKIN: Let me just ask you about the timing involved, which is you've had a remarkable sense of confidence that something is going to happen, something is going to happen this fall.  But you also were quite confident and explicit earlier in the year, suggesting that we would have signed tax reform by August.

What was the miss in terms of the confidence, then and has something changed?

STEVEN MNUCHIN:  Well, one of the things this audience understands, as do I, that markets move.  So the answer was, in January, we had a plan that was lined out, working with Congress, that we thought we could get tax reform done by August.  And that was based upon doing health care first and doing health care fast.

I think, as you know, health care took longer than we expected.  We then got into the August recess.  That's what pushed back tax reform.  So the market moved.  I'm now incredibly hopeful we're going to get this done by the end of the year.

BECKY QUICK:  The President still occasionally tweets about health care.  Is it off the agenda, as far as you're concerned, right now?  Are we moving on to tax reform and beyond before that circles back around?

STEVEN MNUCHIN:  The President still very much wants to get health care done.  So it's not the major focus at the moment.  But on the President's agenda, he wants to get health care done.

ANDREW ROSS SORKIN: Steve Bannon, over the weekend on 60 Minutes, effectively said that you were misled; that the administration was misled by the Senate, by Congress, about what was possible in terms of this time line.  Do you think you were misled?

STEVEN MNUCHIN:  Again, I had the opportunity to work with Steve closely on the campaign and over the last year, and I respect him.  I think the word "misled" was a little extreme.

I do think there was an agenda.  As he said on TV, when the President got elected, we sat down with the leadership and we looked at a calendar.  Having said that, let me be clear.  Obama took a long time to get his two major accomplishments done.  So for us to get one accomplishment done this year in the President's first term will be historic, and that's what we're working on.

BECKY QUICK:  Is there any way that tax reform could be backdated to January 1st of 2017?

STEVEN MNUCHIN:  Absolutely.  Still something we're considering, and would be a big boon to the economy.

JOE KERNEN: Does it matter if it's only ten years?

STEVEN MNUCHIN:  I've been consistent on this.  Permanent is better than temporary, and temporary is better than nothing.

JOE KERNEN: So you wanted 18 months.  This has been reported.  You wanted 18 months on this debt ceiling, and then at the last minute supposedly you tried to talk him into six.  It came out three.  Maybe not what you wanted.

Does it set us up for this brinkmanship -- I'm sorry.  Does it set the Republicans up for brinkmanship in December with the Democrats, when they say, We're not going to do tax reform unless you do this our way?

STEVEN MNUCHIN:  Well, I did want 18 months.  And as Treasury Secretary, I obviously want the longest period of time for the debt ceiling.  You know, as I said, Congress has every right to control spend debt.  And if ultimately the government shuts down, which would not be a good thing, that's their right if they can't agree on spending.  The debt ceiling is about paying for things that we've already committed to.

So I did want to extend it longer.  The President, rightfully so, wanted to get this done.  And particularly in the wake of two hurricanes, we'll come back on the debt ceiling again.  We have a commitment from the Democrats and the Republicans that we're never going to let the government default.  And I'm comfortable where we are.

JOE KERNEN: The rationale was we can get this debt ceiling stuff out of the way and work on tax reform.  But a lot of other people say it just makes it even more difficult.  It mucks up the works in December for getting tax reform.

STEVEN MNUCHIN:  I don't think so at all.  We are super-focused on tax reform now.  It clears the calendar for tax reform for December 8th.  We have the continuing funding of the government through December 8th, so we don't have a shutdown at the end of this month in the middle of two hurricanes.  And I think that's something the President was very focused on.

And for December, we will be negotiating funding.  Now, we could have done -- and this wasn't widely reported.  We could have done a one-year deal on the debt ceiling.  Had we done that, it would have been linked to one year of additional funding for the government.

But the President wants to raise military spending.  That's one of his main priorities.  Particularly in the midst of what's going on in North Korea and other areas.  The President wants to increase military spending, and that's something he's going to demand for December.

ANDREW ROSS SORKIN: Let's go back to taxes for one sec, and on the individual side.

I remember when you sat with us on the set of "Squawk Box," and one of the things you said was that the wealthiest among us, their tax rate will not go down.  Do you think that's still true?

STEVEN MNUCHIN:  So I feel very honored from that interview because in my confirmation I now have a rule named after me.  So there's the Buffett Rule and the Volcker Rule, and now there's the Mnuchin Rule, which was named after what I said.

And the objective, I think, as you know, we're looking at a system where we get rid of state and local tax deductions.  We're trying to get the federal government out of the business of subsidizing the states.

So in the high-tax states, two of which I've had the opportunity to live in, New York and California, yes, I can assure you that there will not be a tax decrease.

BECKY QUICK:  What will that mean for states like New York, Connecticut, New Jersey, California, that can no longer be backed up by the federal government; that they will have to have these high rates and realize that their taxpayers are going to get crushed?

STEVEN MNUCHIN:  Well, I'm hopeful in these states that taxes don't go up.  So we'll have a slight rate decrease on the high end to offset the deductions.  And I'm hopeful we can size that so that it doesn't hurt New York and California.  They may not get a tax decrease.  But these are the people that will --

BECKY QUICK:  They will get a federal tax decrease, but will end up paying it in state taxes.  That's how it's going to go down?

STEVEN MNUCHIN:  Again, I'm hopeful that they'll get a slight decrease in federal government, which will offset what they will lose on the state deductions.  But, again, these are the details that, although the group of six has a plan, are going to go through final negotiation and the two tax-writing committees.

ANDREW ROSS SORKIN: Talking about state taxes.  It appears when you think of the competition going on amongst states these days and in the incentives that they've been offering for different companies to comes to them -- Foxconn obviously making the big deal with the state of Wisconsin, Amazon just announced last week a big competition for them to come.  Some of these incentives seem great because they're great jobs.  But there's a larger question in the case of Foxconn about whether they actually pay off and whether it takes 25 to 30 years, even, to pay off.  How do you think states should think about that?

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STEVEN MNUCHIN:  I think the great thing about the Foxconn announcement is that we have manufacturing being brought back into the United States and being brought back into the heartland of the United States where we need jobs.  So I think the President was instrumental in that, and to me that's a huge win.

I can't comment on the state negotiations, because I wasn't part of that.  We were part of the deal of bringing them into the U.S. and making sure that we could create a competitive system.  And I think one of the reasons they did that is because they were comfortable in where we were going on tax reform.

ANDREW ROSS SORKIN: Okay.  That make sense to you.  But I'm saying from a state's perspective, if you said to yourself, as a citizen of a state, it will take 25, 30 years for us to get our money back, if we get it back at all, does that make sense?

STEVEN MNUCHIN:  Again, I haven't looked at the specifics -- I mean, I'm familiar with what the state offered, but I haven't gone through the numbers on whether it makes sense or not.  I assume they think it does make sense, and I think competition between the states is healthy.

JOE KERNEN: You downplayed the overtures to the Democrats a little bit, that the President agreed upon, based upon that it was necessary for hurricane relief, et cetera.  But it's been obviously played up a lot in terms of how Mitch McConnell feels about this, about how -- whether Paul Ryan, you know, looked askance at the way it went.

Are you worried that certain relationships are beyond repair between the President and certain Republicans at this point, and that he needs to actually court Democrats at this point?

Or you think all those Republicans will be there for you?  They weren't there for you on health care.

STEVEN MNUCHIN:  Well, I don't want to downplay it, because I think it was important that the President reached out to Democrats and showed that he could get things done on a bipartisan basis.  And I think that's incredibly important.  The President would like to have bipartisan support.

Having said that, I can tell you, I was with Paul yesterday.  He was with the President at dinner earlier in the week.  I'm going to be with Mitch again today.

These relationships are very important, and the relationships with the President are there.

JOE KERNEN: I saw a headline that it was the end of the two-party system.

STEVEN MNUCHIN:  I don't think we have to worry about the failure of the two-party system.

JOE KERNEN: The President is still Republican?

STEVEN MNUCHIN:  The President is absolutely a Republican.

ANDREW ROSS SORKIN:  I wanted to turn the conversation --

STEVEN MNUCHIN:  As am I, by the way.  I know on this show and others that's a question.

ANDREW ROSS SORKIN: I want to ask you about North Korea and where we are.  North Korea has said that the U.S. will "pay a due price" for leading this drive of additional U.N. sanctions.  And you, on the other hand, have said that their behavior is unacceptable.  What do you have in your toolkit at this point?

STEVEN MNUCHIN:  Well, I think it's a great opportunity being Treasury Secretary, and I had a lot of experience in domestic and international finance.  There's a major part of Treasury, I probably spend 50% of my time on National Security, and the Treasury staff has given me a Ph.D.

So these sanctions work.  They worked with Iran.  The President, I fundamentally believe that we had Iran on the 5-yard line, and we could have cut a better deal; that a 10-year deal was not good enough on Iran.

And in North Korea, economic warfare works.  I made it clear that the President was strongly considering and we sent a message that anybody that wanted to trade with North Korea, we would consider them not trading with us.  We can put on economic sanctions to stop people trading.

Worked very closely with the U.N.  I'm very pleased with the resolution that was just passed.  This is some of the strongest items.  We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on North Korea until they stop this behavior.

ANDREW ROSS SORKIN: But we haven't been able to move the needle on China, which seems to be the real mover on this, in terms of being able to apply the real pressure.

What do you think the issue is?  What is the problem?

STEVEN MNUCHIN:  I think we have absolutely moved the needle on China.  I think what they agreed to yesterday was historic.  I'd also say I put sanctions on a major Chinese bank.  That's the first time that's ever been done.  And if China doesn't follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system.  And that's quite meaningful.

ANDREW ROSS SORKIN: Does that put the U.S. multinationals at risk?

STEVEN MNUCHIN:  Again, our number was --

ANDREW ROSS SORKIN: There's a balancing act in all of this.

STEVEN MNUCHIN:  Let me be clear, the President's number one concern is North Korea and is security.  So when it comes to nuclear testing, when it comes to missiles, our number one priority is the safety of the American people, not the economics of multinational companies.

BECKY QUICK:  One of the other issues with security has to do with cyber security.  And we just learned about 143 million Americans' identities being compromised by Equifax.

That's certainly not the first of the data breaches that we've seen, but it looks more and more likely like Americans can just expect these things to happen.

What can Treasury do about this?

STEVEN MNUCHIN:  Well, Americans shouldn't expect these things to happen, and the current situation is obviously quite unfortunate.

I can't comment on the specifics of that, but I can tell you this is something that I am actively involved in.  Tom Dosser and I, who is the Homeland Security Advisor, were on several calls yesterday.

Cyber is a big focus of mine for two reasons.  One, I oversee the I.R.S., so we have an incredible amount of personal data, and we want to make sure that that is safe.  And, number two, I'm concerned about the global financial system and keeping it protected.  And I can assure you that we're working with all of the intelligence agencies on cyber issues to keep Americans' information safe.

ANDREW ROSS SORKIN: What do you think the liabilities should be for American corporations involved in data breaches?

Meaning, there's a piece that they're a victim.  We all become victims.  And on the other side, you have to decide, you know, whether they have done all of the right things in advance.

STEVEN MNUCHIN:  I think it's a complicated issue.  You have both international and government actors, as well as you have private people.  I can't comment, again, on the specifics of this.

Our number one concern is making sure that the data is safe and working with industry on that.  But I do agree with you, the issue of liability and responsibility for corporations, that those are very important issues.  And I think public-private partnerships on cyber is critical.

This is not something that the private sector can do alone, and it's not something the government Congress can do alone.

JOE KERNEN: If Congress doesn't act in six months on DACA, what would the President do?

STEVEN MNUCHIN:  I can't comment on what the President will do.  He wants them to act, but...

JOE KERNEN: After Speaker Pelosi answering the tweet he tweeted, that we'll deal with it at that point.

He saw, CEOs once again, the new arbiters of all morality, CEOs once again wrote a lot of letters about DACA, as they did about Virginia and everything else. And they wrote you about whether you're going to stay on.  They are PR canaries in the coal mine to start with, or canaries in the PR coal mine.  Have they become too sensitive to some of these things, or do you welcome them speaking out on every issue?

STEVEN MNUCHIN:  Well, first of all, I'm definitely staying on.  It's a great opportunity to serve the President and the country.

As it relates to DACA, again, these are complicated issues.  We have to have laws in our country, so there have to be immigration laws.  And we can't just pick and choose what laws we want to enforce and what laws we don't want to enforce.  So this is an issue that the President had said it's not legal the way it's done; that Congress should work on that.

And, you know, the one comment I would make on CEOs, I think CEOs have a responsibility to their company, and that's their responsibility.  But they also have responsibilities to advise the government.  And if every time there's an issue that the government does that CEOs say, "We don't like this and we're not going to give you advice anymore," that, to me, doesn't make sense.

ANDREW ROSS SORKIN: So what was your reaction, then, to the councils being dismantled?

STEVEN MNUCHIN:  Again, my view is that CEOs being on the councils didn't necessarily mean that they endorsed every single policy of the administration or the President.  The purpose of the councils was to give the President advice on issues that they had --

ANDREW ROSS SORKIN: And do you feel like you've been cut -- that there's been a cut-off?

STEVEN MNUCHIN:  Not at all.  I think --

ANDREW ROSS SORKIN:  So was it just symbolic?

STEVEN MNUCHIN:  Again, I think there's still plenty of CEOs who come in and meet with us, and we will continue to reach out.  But I personally think it was a mistake that the councils were disbanded.

BECKY QUICK:  The stock market yesterday, the S&P 500, closed at another record level.  When I spoke with you earlier in the year, we talked a little bit about how the administration kind of sees that as their report card or what's going on.  Do you still see it that way?

STEVEN MNUCHIN:  I think there's no question that the stock market has an expectation that we're going to get tax reform done, and that's partially built in.

I think also the stock market has expectations that we're going to create significant growth, which is what this President and this administration is focused on.  So, yes, I take that as a big vote of confidence in the economic plan.

ANDREW ROSS SORKIN:  A couple more quickies before we wrap up.  Do you want to touch just on Russia and what you thought of Facebook's announcement last week that there were $100,000 worth of ads that had been bought by government-sponsored entities to influence the election?

STEVEN MNUCHIN:  You know, again, I've obviously seen intelligence on this, and I can't comment on any classified information or what their role was or what it wasn't.

I personally think the sooner we get these investigations over and behind us, the better we are.  Again, I'm not going to comment on this.

JOE KERNEN: The latest leak was still about Don Jr.'s meeting.  After the last three months.  Still nothing, no new stuff?  Nothing else?  No smoking guns?  No leaks?  We are still on the Don Jr. investigation.

We've got to talk to Hope Hicks.  That's where it is now?  Is that enough smoke, or is that a water pistol?

STEVEN MNUCHIN:  It seems a little overblown to me.  I can't comment on the specifics.

ANDREW ROSS SORKIN: All right.  Personal question.  Steve Bannon said over the weekend to Charlie Rose something fascinating about the way he thought about his relationship with the President.  He says, "When you side with a man, you side with him.  And you side with him that way publicly.  But you don't necessarily side with him that way privately."

What's the difference between the conversations you're having with us now and the conversations you had with him inside the room?

STEVEN MNUCHIN:  Well, look, first of all, I've known the President for over 15 years.  I worked with him on the campaign.  So I've had the benefit of working with him for a long time.  And I obviously feel comfortable with telling him my ideas on things.  Sometimes we'll agree.  Sometimes we don't agree.  He's the President, and I respect that.  And no different than a lieutenant who reports to the general, I work for him.

ANDREW ROSS SORKIN: Fair enough.  The Treasury Secretary, Mr. Mnuchin.  Thank you.

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with James G. Coulter, TPG Founding Partner, live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Tuesday, September 12th.

Following is a link to the video of the interview on

Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.

DAVID FABER: Jim Coulter, thank you for being with us. You know, funny, speaking of memory, I've been covering mergers and acquisitions for a very long time. And when I think of TPG, I typically end up going back to the early ops and to the period of the big buyouts, which you had very few. And think of the firm from that perspective. Big public buyouts. And so in doing work for this and speaking to you about our interview today, it was interesting for me to say wait a second, TPG owns Uber, Airbnb, EAA, Vice, Spotify. What are you guys doing and why did you make that, let's call it, use a word that you use a lot out there on the West Coast, pivot?

JAMES COULTER: It actually wasn't a pivot at all. We started our career testing for family. One of the interesting things when you invest for family is, you have one pool of capital, and there's no labels. You just go and find returns. And I was surprised in 1992 when we moved the institutional markets, suddenly you had to have a label because each of the investors had a bucket. And if you didn't fit in that bucket, forget starting out.

So I've been on a 25-year -- this is our 25th anniversary -- I've been on a 25-year journey to go back to where I was in 1987 so that we could look across asset types and across products to find opportunities.

And so we started in big buyouts because in the age of data, basically, that was an interesting place to be. But I think we're in a very different age now. And we were lucky enough to set up the firm in San Francisco at a particular moment. And we have some strong views as to what you have to be doing at this point.

DAVID FABER: Why is the expertise at TPG able to be transferred, though, from doing a large public equity buyout to buying a noncontrolled position in Uber?

JAMES COULTER: When I started out, doing a buyout was something pretty mystical. I have a 20-year-old son. He's a sophomore in college. He could design a capital structure for a buyout today. The product has become demystified. So at the end of the day, while I'm called sometimes a buyout person, I'm just an investor. A buyout is a tool. And you find that once tools are used often, they lose their value. So what doesn't lose value is insight, information, and difference. And what we've been trying to drive is a company that is not tool-dependent. So we're set up more by sector, expressing that across growth, across buyouts, across real estate, as opposed to across tools, which I believe is a funny way to -- to organize the market.

DAVID FABER: All right. Well, I want to talk about your specific investments. Now, you just said in a public market buyouts have lost -- have they lost value to those points you're making?

JAMES COULTER: No. I think it ebbs and flows. So if you look at TPG's investment pace in the buyout market, we were probably investing at three times the rate we are today back in 2009 and '10. There was a moment in time where it was a value market. You leaned in, you bought good companies, you put leverage on them, and you played what would be an improvement in the businesses and an improvement in the multiples. And that double dip, better business performance, better multiple performance, has driven a lot of buyout performance.

Today we're late in the cycle. I don't know when the cycle is over. You have other people who will comment on the macro. But I have to drive looking out four years. And at the extent of my headlights, I have to assume a recession within that time frame. So what do you do at this moment? What I don't think you do is buy a levered beta. What I think you do is try to find alpha and try to find growth. And that question, where do you find alpha and where do you find growth today, is what's really driving us.

DAVID FABER: All right. Well, a lot of the people in this room are trying to do that. We're also trying to do that at this conference, hence the name. But they tend to focus on the public markets. You seem to be focused on the private markets as the place to find that alpha.

JAMES COULTER: Yeah, I think there's a possibility, and I'll be a bit provocative here, that we're going into a period of time that will be known as the era of the private markets. And so I'm not a public market person, but I'm an observer of industries. Those of you in the public market, take this as an amateur from the side. But if you described a product that its participants, customers, were down 40%, if you were described a product where people who would normally be buying the product are not buying the product and where the product itself is becoming undifferentiated because people want to buy it on an algorithm, you'd be describing the public market.

A number of public companies are down 42% from the high of 7500 down to 42. And in the last cycle of innovation, maybe craziness in the tech market, there were 80 billion of venture capital went into 6,000 companies. And then in a pretty short period of time, 1,100 of them went public for $253 billion. Think about that. This cycle, there's been 250 billion that's gone into venture capital in 42,000 companies. I would expect a massive IPO boom. But what's happened, there's only been 319 IP0 s at $80 billion in value. So the exact opposite. The companies are opting to stay private longer.

Obviously that will work itself out over time.

DAVID FABER: Well, what does that mean actually, it will work itself out over time? Are you sure it will?

JAMES COULTER: No, there's always going to be a pendulum that will swing back. But might happen, I don't know, the public market people could potentially give you better insight, but there are two things happening that I think are key.

First of all, more companies are being bought by the banks. So if you think of a company like Instagram, right? That might have been a great IPO, but rather than go to the public market, it derivatively went to the public market in a way that the beta players could play it. I would love to be trading Instagram, but instead you have to trade Facebook to participate in that.

So I think more and more what you'll see is just given how difficult it is to go public, look what Snap is going through, that basically people will opt to sell into the big public players.

The second thing is people will just stay private as long as they can. And because there's a robust market in place of people like us, when we used to sell our investments, we predominantly sold them into the public market. Now we actually sell them into the private market.

I don't know how this all works out, but I would, just as a corollary, point my finger at the real estate market. And, you know, we, in the corporate market, have always assumed that the public market was the end state. The real estate market, you have a relatively small number of reefs and then you have a bunch of private market assets that trade in a private market. So I do think there's a moment in time where finding alpha in the public market has gotten more difficult as the market has consolidated and moved to passive at the margin.

Not to say it can't be done. It's just more difficult. You can see that in hedge funds, where the seals of alpha, basically people are voting away from the seals. And so a lot of that alpha pressure is going into the private market.

And on the other side, if you think about the private markets -- this is a staggering statistic someone gave me the other day -- 95% of private market investors say that private equity has met or exceeded their expectations.

I mean, I can't get 95% of anybody to do anything. But that realization, for better or worse, is going to drive more capital and more searching for alpha into the private market. So what we're trying to do at TPG is just set up a vehicle to do that.

DAVID FABER: Well, let's talk about a couple of the investments, then. And I'm curious as to what the conversation, if there is any, with your LP s is like. When you make an investment, noncontrolled position, you get a board seat, make a large investment at already a very conceivably high valuation, certainly in our dollar terms -- I don't know where you guys came in specifically. What do -- what is the expectation there?

JAMES COULTER: First of all, we did a ton of work on it. Right? So the time we invested in Uber, it was about a 3 billion post-money, and it was largely only in San Francisco. And what we had were a very strong set of unit economics and a very strong understanding of that market as users. And we could almost see what it would be like to open other stores.

DAVID FABER: So to put that into perspective, that was only four years ago, wasn't it?

JAMES COULTER: Yeah. Uber basically works in reverse dog years. You know, basically what would happen in seven years happens in one at Uber in all things.

DAVID FABER: Okay. But explain to me. You were explaining the thinking in terms of why at that point.

JAMES COULTER: It was a huge market. Listen, all of you know the Uber story. So it was a huge market to disrupt. One of the things we found is the disruption seldom comes from the incumbents. The taxi companies weren't going to figure this out. And unlike Cisco, or even Google in the early days, Uber was a disruption you could absolutely understand very quickly. So, it was a question of could it scale, could it scale quickly. And as soon as you decided yes, it was actually a pretty easy investment to make.

DAVID FABER: Why not sell it now? I would assume, given where you got in, those are numbers that anybody would be happy with.

JAMES COULTER: First of all, it's not clear there's not farther to go. But secondly, here's one of the issues of a private market, which is the sale is not yet available to all players. There's some, as you know, shadow market sales going on. But I think we're happy with our position in the company. It's been an interesting ride. But generally, we're going to --

DAVID FABER: Tell me about your expectations then for the future of this company. I mean, clearly there's been a lot of, I think it's fair to say, pummel. If not even more so on the board level and at the company lately. You have a new CEO. You still have a founder who's on the board who conceivably will get a couple of more board seats if possible. He's being sued by another board member. It doesn't necessarily sound like a recipe for --

JAMES COULTER: Great for the media, though.


JAMES COULTER: I had someone do a search for the number of media mentions of "Uber," and in June it was eight times the number of "Kim Kardashian."


JAMES COULTER: So I have to admit, it was an intention in my career to be involved with something eight times Kim Kardashian. But just to give you a scale of it, if you added Walmart and GE together in terms of media mentions, Uber was 30% bigger. So my goal today is not to increase that number and to let Kim get back on top.


JAMES COULTER: But I do think there have been -- I do think there have been a few lessons for us. First of all, we had a very different role in this company because we were -- we typically control companies or have influence. This was a rare company where we were on the board but someone else controlled it.

Secondly, it is going to happen. If you're going to invest in this area, be ready for reverse dog years. Things are going to happen quickly at places like Spotify and Uber, and you have to go at that pace.

And it turned out all things went quickly. And the last point is culture and governance matter, you know. In a world where we focus on words like "pam" and other things, culture and governance matter. When the hurricane blows in at your foundation -- so over the past month, I'm actually proud of the role we've played at TPG because while we have an excellent set of people at Uber, the board has not dealt with this type of issue before.

Bringing in a new CEO is something we do at TPG often. Repositioning companies is something we do often. That's a skill that isn't as resident in the Valley as it is within private equity. So my partner David Trujillo and TPG I think have played an important role, generally staying very much out of the press.

DAVID FABER: Well, despite what has been the tumult at the board level and the lack of management, the company itself has been performing well, hasn't it? I think so.

JAMES COULTER: Well, I would assume you judge it by similar metrics that we all do.

DAVID FABER: Why do you think so?

JAMES COULTER: I'm not going to go there. Because, as you know, there's transactions in the marketplace on this company. But I think I would ask all of you, has your life changed because of Uber and its competitors? And that change, you feel in your own life, it's played out around the world. And you don't see that very often.

DAVID FABER: At the risk of staying on this topic too long but --

JAMES COULTER: Well past that risk.


DAVID FABER: Good. So we've gotten that out of the way. We'll just keep going. I will make it a final question. When you think about the long term, as you have to as a significant investor, and the rise of autonomy, do you wonder about whether that ultimately is a real threat to a company that doesn't own the underlying fleet?

JAMES COULTER: Yeah. So there's a term that as an investor I'm spending a lot of time on now. It's called punctuated equilibrium. I don't know if any of you are naturalists, but turns out that Darwin's theory is no longer viewed as exactly correct. Change doesn't happen gradually over long periods of time. Life kind of goes along. There's a moment of each mutation. All hell breaks loose. Then it goes back into a steadiness.

So Detroit, they started the car industry. It sorts itself into three cars. It sticks there for 50 years. And then all of a sudden, in the past few years, we have Tesla, we have Uber, we have autonomous vehicles all coming in a massive moment of mutation for a very large industry. All I know is that we will find a new equilibrium, and Uber has to figure out its role in that equilibrium. But sorting it out at this moment is going to be more than interesting; it's going to be where fortunes are made and lost.

DAVID FABER: Well, let's move on to some of the other names in the portfolio, Vice, for example, in our world, to a certain extent. Again, you come in there with a significant investment, I believe at a valuation of around $5.5 billion. I'm relying on the press for this so it may not be completely accurate. Why is that something that you believe is a worthwhile investment, given, many would say, certainly, the valuation is exceedingly high when compared to other public groups.

JAMES COULTER: So, first of all, this concept of disruption is driving everything we're doing. So if you think about industries that are going through this moment of punctuated equilibrium, one of the markets is the media business. And if you break the media business up, and the record business, which was the first business to hit it -- I mean, we used to buy albums. Remember that? And today, in a very short period of time, we've sorted ourselves out to streaming and Spotify.

In the movie business, suddenly Netflix. I mean, Netflix used to send you stuff at home, right? And now it's basically the conduit for OTP. So I'm fascinated by your business, which is the media business as it relates to nonfiction media. And if you ask a hundred people how they get their media today, you will get 150 answers. So there's this new moment of -- and Vice is one of those platforms, one of the newest platforms that have emerged and are in the middle of reshaping the media platform.

Now, what will it be? I think when Facebook bought Instagram for a billion dollars, people thought they were nuts, right? And if it stayed what it was, that would have been one thing. If it continued to evolve, I think that was a great buy. And let's see what happens with Vice over time.

DAVID FABER: When you think about making investments like Uber and Vice, I believe, which are noncontrolled, how does that differ from more typical, DAA, which you own majority of, and/or others? I mean, does it figure into your thinking about the ultimate return that you're going to get?

JAMES COULTER: Yes. Usually you're trading out some control for some structure. And when you see prices related to deals in the private market, you should always know that until you see the structure, you don't have the full story. So when you have a structure as a form of controlling your returns, and within certain bands, a different form of control is actually to control the company. I am most comfortable with that type of control.

But to my earlier point -- and this is where you have to be careful of labels -- you're investing in ideas.

A buyout is a tool. A structured minority growth investment is a tool. We want to be able to use different tools, but it's the idea that's important.

DAVID FABER: All right. So what are the larger ideas at play here when we talk about an Uber or an Airbnb or Vice or --

JAMES COULTER: Okay. Let's, kind of a quick speed dating, hit a couple of ideas. Whenever -- if you want to play content, for most of history, buyout firms have played distribution. We bought cable TV; we bought TV stations; we bought networks. Today, with over-the-top, there's a massive shift. The pipes are breaking. The water is finding its own level. And content is taking a bigger piece of the pie. So the question is how do you invest in content? I can't tell you that Bad Robot, you know, is going to be a great content producer.

It's hard for me to do that. But one of the things that I found when I got to know CAA is they essentially are 8 to 10% of the content market. They own pieces of all this -- so they're a diversified investment on the expansion of the content market. That was issue one. And CAA and WME, these are two -- there's a very few special players that have that tendency.

The second thing, and this was -- I would put it out for all of you investors to think about, it's been my experience, is that when markets get more complicated, middlemen become more valuable. And so if you think about the rise of the value of the investment banks, when the financial markets deregulated, the rise of the advertising companies, the rise of the commodity players. So, CAA is in the middle of this market that is more complex, so their ability to create value goes up with that complexity.

We've been very happy with our investment in CAA, but it's also been an extraordinary window into what's happening in that marketplace that has spawned other investments. And one of them, for example, would be Cirque du Soliel. One of the things we noticed within the portfolio of CAA is that live events are growing. Look, we're here today, right? Comic-Con has 130,000 people that go to it. So the question of -- everyone thought that you were going to live in your digital world and just kind of, you know, move into the basement. And in fact, what's happened is people live in their digital world and then find ways to connect at conferences like this.

But we began to look very strongly -- and, by the way, if you go back, there was a discontinuity about eight years ago where the relationship of what people spent on things and experiences suddenly gapped. And everyone thought it was millennials, but it's actually across the age group.

DAVID FABER: What accounts for that?

JAMES COULTER: I would say three things. And so maybe we always wanted to buy experiences. Maybe experiences were just hard to buy. So you'd go feel a sweater. But if you wanted to buy -- wanted to go to a restaurant in Barcelona, you got a Frommer's Guide, some old guy that told you where to go. And you weren't very sure about that so you didn't want to spend your money on it. Today if you want to go to a restaurant in Barcelona, you can go on TripAdvisor and get a hundred relevant reviewers, pictures of yesterday's food. You can buy with more confidence. That's issue one.

Issue two is, it always amazes me, anyplace you go -- I don't know how you don't have this happen here. There's people, like, streaming. Right? They hold their phones up. And I always thought that was crazy until I saw some research that says experiences are more valuable if you can share them. So the very fact that people can share experiences are actually increasing the relative value of experience.

And the last thing, and I saw this with my kids, is when we were growing up, we used to wear things with logos because we were branding ourselves. I'm the guy with a crocodile on my shirt. Right? That said something about me. This generation brands itself by having an experience and showing it to all their friends over their streaming. So suddenly, the brand dollars that used to go to things are in some ways going through experiences. So another experience company. We're investors in Viking Cruises. Which does river cruises up and down Europe. And it has a new cruise company. Julian was just saying how he likes cruise. Our cruise company has no water slides, no casinos, no kids.


JAMES COULTER: Because what we offer is a professorial, small-port experience, and it's flying off the shelves.

DAVID FABER: On this theme, of course, of experiences, it seems to potentially come at the expense of buying stuff. You have some experience in retail. You took J. Crew private twice. First time was great; second time perhaps not the charm there. But what lessons have you learned in terms of retail through the lens of J. Crew and others, especially given what you're talking about.

JAMES COULTER: Well, I think I've learned that you have to look for that moment of punctuated equilibrium. So I would argue that we've entered a moment of punctuated equilibrium in retail. And we sold a number of our retail positions, Neiman Marcus, Petco, we'd seen that coming, and others we didn't sell we're repositioning for that new world.

What does that moment look like? A number of things hit all at once. Everyone knows the Amazon phenomenon, but the real Amazon phenomena is that -- as it relates to J. Crew is that people go to a mall one less time, right? That has huge impact on the people kind of walking by a J. Crew store and buying.

So your marketing and channel changes.

The second thing is the same time the e-commerce wave hit -- by the way, we're over 50% e-commerce now at J. Crew -- we basically have a brand-new model coming in, which is called fast fashion. So, fast fashion, ZARA, and H&M are the equivalent of Southwest Airlines for retail. Suddenly an entirely new business model comes in with a different supply chain, different economic model, and just like at Continental Airlines, we had to adapt our business strategy for the reality of Southwest, J. Crew and the entire retail industry has to adapt its strategy for that moment of reduction in brand engagement, e-commerce, and ZARA.

DAVID FABER: That's a lot to ask of people who have typically been used to selling out of a big-box store, isn't it? Are the management teams in place to actually deal with that new reality?

JAMES COULTER: Yes, or you continue to evolve them and make sure. So you bring in more digital talent, etc.

So to give you an example of how you can do that. So Cirque du Soleil, when we got there, it's Cirque du Soleil is as large as Broadway in terms of tickets sold. You don't see it in one place so you don't realize how large it is. But it had a ticketing system that was out of the '50 s , you know. It's the same paper-based ticketing system. And we have a millennial base that buys last-minute. So what did we do? We brought our experts in pricing and digital in, we created a new mobile ticketing app, and we moved cash flow in Vegas alone by $30 million in a quarter, right? Because we just brought in a new technology to evolve it to the new world.

So part of our goal is to not be -- to embrace change. Never easy, as someone once told me. No one but a 2-year-old in a dirty diaper really likes change.


JAMES COULTER: You know, people don't embrace change. But when change is happening, our job is to embrace it and help our companies prosper.

DAVID FABER: Do you think retail is going to be able to succeed through this --

JAMES COULTER: Yes, retail isn't going away, right? Retail is shifting. Airlines, everyone thought it was the death of the airline business when Southwest showed up. And it was a change in airlines, but -- so as you know, we are on a space basis over retail. But what we're asking is -- I think this is a huge opportunity -- what are all these malls going to become? We own a company called Lifetime Fitness, which is a large box, kind of new-age fitness company. So we're engaging with the mall owners to fill in Crate & Barrels or whatever, you know, they're moving out at the moment, and we're getting the real estate essentially for free.

I mean, this is, you know, whenever a door closes, a window opens. This is a huge opportunity. So our goal is to recognize the disruption, prepare our companies for it, and then look for the opportunities that are clearly coming.

And one of my weird ones is fear. One of the things that -- again, you look for disruption. A few years ago I noticed a chart that the U.S. public believes very strongly that crime is going up, even though the stats say that crime has been going down. And so why is that?

It turns out that in the media world we live in, when you're constantly bombarded, we are wired with something called the amygdala, which basically lights up for something that scares you. So as you're looking at the media landscape, you notice all the things that could go wrong.

So it turns out there's been a massive growth in physical security things. We own Gavin de Becker and Associates. We just opened a new terminal in Los Angeles that essentially allows people for a fee to go in, clear security themselves, essentially have a private airline experience, and then the car just takes you onto the public plane. And it creates a safer feel to travel.

And obviously the number one fear of Americans is having their credit card information stolen, even though you probably have no real risk for that. And so we are large investors in cybersecurity; bought Mc Afee, we have a number of smaller investments.

So again, our goal is to find things that are changing in society and express them.

Your earlier point, yes, we're a buyout person, but yes, we're a growth person, and yes, we're a turnaround person. You know, at the end of the day we want to be an investor.

DAVID FABER: Right. I want to get back to, in our final moments here, this larger issue that you raised about public versus private market, rise in capital, index funds, but also this idea that so many of these companies can stay private longer.

Uber, though, eventually is going to go public. Airbnb -- I mean, these, of course, are the largest of the large -- they will go public. You mentioned you can't -- I mean, if you wanted to sell your stake it would be difficult because of a lack of liquidity. Aren't they eventually going to end up on the public market, as will so many others?

JAMES COULTER: Yeah, I think one of the risks of looking at any complex market is to use labels or focus on a few companies. So just like calling me a buyout person is probably a risk, focusing on the entire nature of the public market on what a few leaders will do is probably a risk.

So I suspect for the large players there will be a path to the public market that will make sense. You know, there will be. There have been 319 IPO s , but there haven't been 1100.

DAVID FABER: No, there haven't.

JAMES COULTER: But you'll have more companies opt, either stay private longer or to sell into the public players.

DAVID FABER: And interestingly, I'm curious to your thoughts, a lot of their great growth is taking place during the phase they're private regardless. The public market is not able to really participate as much as it might have previously, in the public market space of these companies.

JAMES COULTER: After the original excitement -- so think about Amazon, right? I admit along the way I asked some questions. Bezos got it totally right. Think about the grief he took in a long-range, you know, growth, sacrificing near-term profit for long-term success. I mean, he got beat up for years, right? So if you're -- in these good business models, which scale at a different rate, it will make sense to sacrifice near-term profitability for long-term market position. And the public market is an uncomfortable place to do that, so they will try to stay in the more comfortable place where they can with investors.

I mean, Uber has never had a problem finding investors -- never had a problem finding investor. But think about all those quarters Jim Cramer where, you know, Bezos got beat up because he didn't provide something that now we go he's a genius.

I do think that for certain types of companies, delaying going private for longer than last cycle will make sense.

DAVID FABER: And finally, what about your company? You're a cofounder with David Bonderman, 25 years, as you said. What do you see as the future?

You know, it occurs to me that VisionFund -- I mean, speaking about a hundred billion dollar fund run by Masa, which may compete with you on some of these investments, also bought Fortress. I mean, that was one of their earliest. Would they ever consider buying a TPG, and would you ever consider, as you think about succession, selling?

JAMES COULTER: You know, I think the cobblers children have no shoes. So we often look at other industries and talk about disruptions. One of the biggest disruptions I see in industries is in the investment industry, and particularly in alternative. So there's coinvestment; there's new entrants; there's new products; there's new investors. So we're going to see a fair amount of change in our business. And we're going to keep doing what we've always done, which is focus on the ideas, capitalize in the right way. We'll make our mistakes along the way.

But if you stay focused on the ideas, it works and it will continue to work. And the ideas now are alpha - don't get pulled into the beta data game. And disruption. And that's where we're spending a lot of our time.

DAVID FABER: Well, Jim, we appreciate you spending a little bit of your time with us. Thank you, Jim Coulter.


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