S.3 Ep. 4: David Rubenstein - Investing with a PurposeS.3Ep.4:DavidRubenstein-InvestingwithaPurpose

Episode Transcript

>> Greetings and welcome and thank you for joining PGIM's Outthinking Investor Series. I'm David Hunt. I'm the president and CEO of PGIM, and I'm particularly delighted to welcome today David Rubenstein. David, as many of you know, is the co-founder and co-chairman of Carlyle, one of the largest private equity and alternatives investors in the world. But he is also a noted author. He's been on an active series of interviews and has his own television show. And he's one of our leading philanthropists and we'll be covering all of those topics with him today. David, welcome.

>> Pleasure is all mine. Thank you very much for inviting me.

>> So why don't we -- why don't we start, if we can, with private equity, which has certainly gotten its share of press these days? I certainly get a lot of questions from institutional investors that, gee, we look at our public, you know, equity portfolio down 20, 25% last year and yet our private equity is holding up remarkably well and has taken very few marks. How do you feel about the disparity between those results? And is that justified?

>> Well, you take the private markets, if you take private venture capital, those marks have come down a fair bit, and private growth capital, those marks have come down. Private equity buyouts have not come down quite as much. In fact, in some cases, they're almost flat. Why is that? Well, I think the public markets have oscillated all too much recently, probably over-oscillated and gone down probably more than is justified. The private marks in the private equity portfolio, buyout portfolio, I think, are reasonably conservative. Maybe they could be a little bit better in some respects in terms of accuracy. I think they're pretty accurate, though. In our own portfolio, we have tested these over and over again and we really don't think the marks deserve to be much lower than they are. In fact, we think what we have now is pretty much accurate. Now, we've had this criticism or commentary for the last year or so. And for the last year or so, every quarter when we go through the marks, we really can't see -- and we use outside experts as well to help us. We really can't see the marks are justified in going much down below where they are, if down at all. If anything, sometimes we've gone up. And that's in part because we spend a lot of time fixing these companies. They aren't subject to some of the pressures that you have in publicly traded companies. So I think the private equity marks certainly in buyouts are pretty much accurate. Venture and growth have gone down a fair bit and probably they're pretty accurate, too. They just haven't gone down, you know, the private equity buyout portfolio hasn't gone down all that much.

>> And as you look forward, I mean, private equity's had such a remarkable run, and in the last few years has also raised a huge amount of capital. How do you see the prospect for returns going forward? Will that amount of capital going after the same number of deals drive them down?

>> I think the private equity firms have done quite well in the last 10, 20, 30, and even 40 years. Not because of the charm and good looks of the founders of these firms, though that is a considerable factor, of course.

>> Certainly, I can see that.

>> But it's actually because, in the end, the techniques that are used by private equity people to add value have actually produced returns that have outperformed public market returns by, on average, anywhere from 200 to 500 basis points on any given year. Now, obviously, if you're in a top quartile fund, you might be 1,000 to 2,000 basis points over the public market averages. But on average, 200 to 500 basis points is probably what private equity does to outperform public markets. And as a result, people have been flocking to this area. It was 1978 when the Carter administration first said it's okay for publicly traded ERISA funds to go into this area. And ever since then, when the state of Washington, the state of Oregon went in, there's been a gigantic increase in private equity allocations of the public pension funds in the United States. And they've been followed by the sovereign wealth funds, the global pension funds, and now private family offices as well. And that's in part because the returns have been very, very good and they're probably likely to stay reasonably good. Now, one other factor I should take into account is that expectations of returns have come down. So when people allocate large sums to private equity, they're no longer expecting net internal rates of return of 20, 25%. That might have been true years ago when there was less competition. When I started Carlyle in 1987, there were 250 private equity firms in the entire world. Now there are probably 10,000 plus. And so prices do get bid up, but expectations for returns come down. So in the private equity world that I operate in, I would say today, investors will always want the highest potential rate of return. But generally, in buyout world, if you can get 15, 16, 17% net internal rate of return, I think investors are pretty happy with that.

>> Right, right. So one of the things that you did at Carlyle was to take the strong foundation in private equity but then begin to build out a series of other alternatives business, private credit, real estate, and others. Can you talk a little bit about kind of the rationale behind that? And then how well along that path do you feel Carlyle is?

>> Well, let me say it. Take insurance companies. Initially, I might sell one type of insurance and people say, well, they're really good at this kind of insurance. I'll buy another kind of insurance from them. And then basically you build out a product line of different kinds of insurance products. The same thing has happened in mutual funds. Fidelity or T. Rowe Price would say, "We're pretty good at stock picking." Then they'd say, "Well, we're pretty good at bond picking, and we're pretty good at other things as well." And so once the brand name becomes established and well regarded, people feel comfortable doing that. That had not happened in private equity. So in the early part of Carlyle, after we raised our first buyout fund, I said to my partners, "You guys invest this fund. You're the investment professionals." What I'm going to try to do is build out a brand of our firm using our brand name that's good in private equity. We'll go into growth capital, venture capital, real estate, and then eventually, we'll globalize it by going to Europe, Asia, and so forth. And we did that. Now other firms have done it and some have done it very, very successfully. So I don't think it's that unusual today to have a broad array of products. Now, most private equity firms only have one product, one fund. But there are the KKRs, Carlyles, Blackstones of the world, Apollo that do this, and, you know, each to his own. I mean, some investors say, I like Carlyle. I like Blackstone because they have an array of products. I'm very comfortable with them, and I don't have to pick an infinite number of managers. I can pick one manager and deal with various products they might have. So it works, not for everybody, but it does work.

>> And so as you look ahead, and you've just recruited a new CEO and Harvey Schwartz, and what are your expectations for the next couple of years under his leadership?

>> Harvey Schwartz is a very talented person. He was the co-president of Goldman Sachs, also the chief financial officer at one point, and really talented investment professional. We're very fortunate to get him. Harvey is going to bring in a fresh perspective because historically at Carlyle, we promoted from within, and I've been at the firm now from the beginning, of course, and everybody in the firm who rose up to leadership had been there pretty much from the beginning. We have now a fresh perspective, and we like a fresh perspective because it brings in some different ideas that we didn't have before. So we're very pleased that he's joined us, and he's been with us about seven weeks as we talked today, but already made a real change in the firm. He's really, I think, energized people. And I'm really, really pleased with him.

>> That's great. Great, great to hear. Maybe we can change course a little bit and talk about, you know, the kind of current state of the markets. And I wonder as you look at what the Fed has done and really the most rapidly rising rate environment that we've had since the '80s, how would you grade their performance? How has Chair Powell done in trying to tame inflation in your view?

>> I have a lot of experience in inflation because I worked in the White House when we got up to 15% or so in the Carter year, so I know a lot about inflation. You know, I haven't been invited back into government since then. Jay Powell is somebody who actually worked at Carlyle. I recruited him after he left the Bush 41 administration. He was with us for six or seven years, a very smart person. He then left to go into public policy and ultimately went to the Fed and became chair. I would think that he would say, and Janet Yellen would say that probably the government missed the inflation spiral that was coming because of the COVID injection of funds into the economy. Under President Trump and under President Biden, $5 trillion was injected into the economy to prevent a recession occurring because of COVID. That $5 trillion had a more inflationary impact that was realized at the time. And so inflation began to rear its head. People thought it was transitory. And Jay Powell used that word, so did Janet Yellen. It turns out it wasn't transitory. And that's because if you inject five trillion into an economy without corresponding tax increases, you're probably going to have inflation. I think Jay Powell has now recognized his legacy will depend on whether he can get inflation down. And so he's been increasing interest rates fairly steadily. And generally, when you increase interest rates, it has two side effects. One, you increase unemployment. And two, you decrease the GDP. So far, GDP has not gone down all that much, and unemployment hasn't gone up at all. And so that's because we have a labor shortage in the United States a bit, and also the full effect of the increase in interest rates hasn't yet been felt. It may take a year or so for that to happen. As we speak today, I suspect a recession is possible in the United States. Nobody really knows, but probably in the fourth quarter of this year or first quarter of next year, if we're going to have a recession because the interest rate increases, we'll probably have it by that time, if we have it.

>> So as you look where we are now, would your advice be to Chairman Powell to actually pause where we are on rates and let some of the constraining factors begin to play out now? Or do you think that rates will need to continue to go up, given that we haven't really seen a change in unemployment?

>> I would say there's a good reason Jay Powell hasn't called me because I'm probably not an expert at how to get inflation down. But if I were to be called and were to give him advice, I would say you probably have to be steady as you go. In other words, consistency is the most important thing. Tell us what you're going to do and do it. That's the most important thing. What the market doesn't want is inconsistency or many different voices. Sometimes these days the Federal Reserve speaks with many different voices. Because Jay Powell is not unwilling to let other people speak, the presidents of various Federal Reserve Boards around the country, they make speeches. Other members of the Federal Reserve Board make speeches. And so in the end, sometimes the markets get confused. But I'd say whatever you're going to do, tell us what you're about to do, if you can, and tell us what you've done after you've done it. This is a big change from the Paul Volcker days when the markets didn't really know what the Fed was going to do and didn't really get a good explanation afterwards. Ben Bernanke began to open up the Fed as a more, I would say, transparent place, and Jay Powell has carried that further. And I think that's good, but just keep the message consistent. If Jay Powell were to say all of a sudden, "Well, inflation is a big problem, but we have other problems as well," then I think the market would get very confused and not sure what he's going to do. The market today is expecting higher rate increases over a period of time, not gigantic ones, but expecting them. And I think if we don't get them, the market will be very surprised and they will think that inflation is not likely to come down. Now, there are some people in the market -- and maybe I'm one of them -- who think that the inflation goal of 2% is very, very low. To get to 2%, you might need to have unemployment go to 6%. Now the Fed can't say that because that's not going to sound very good. We want unemployment to go to 6%. But 2% is very low. We had it for the last 25 years. But normally, inflation in an economy of our size, historically, not counting the last 25 years, was probably closer to 3%. And if you get the Fed to get down to a 3% goal, I think that might be better. On the other hand, the Fed has been consistent in saying they want 2%, and that might take a longer time to get to.

>> But would you be of the view that maybe sometime, either later this year or early next, that that 2% could be revisited and maybe there is a revised 3 to 4 put in, which would take some of the pressure off the Fed?

>> The Fed has been very consistent every time this question is asked. No, we're 2%, we're 2%, we're 2%. So I don't know that there was going to be any big change, but I do think they might stretch out the period of time by which they need to get to 2%. So as you suggest, it might be that 3% is considered a good halfway mark to getting to 2%. But I do think the market is now anticipating another rate or rate increase of 25 basis points or 50 basis points this year, and then maybe, maybe a little increase next year. The market had been anticipating until a few months ago that the market would be reversed, and we would see rate cuts next year. I think the market is not thinking we're going to have rate cuts now for at least the first half of next year.

>> Now, David, you travel the world widely and talk to a lot of investors outside the US, and what would be their kind of perspective on the global economy? We obviously have troubles in Europe. We have, on the other hand, China that seems to be rebounding, at least economically, quite quickly. How are they reacting?

>> I think it depends on what part of the world you're in. If you're in the Middle East, right now the Middle East is doing quite well. Oil prices are high and they're going to get higher because of the decision by Saudi Arabia and really OPEC to cut production. So prices are -- Middle East is in reasonably good shape. China had about a 2% growth, if you believe the numbers last year in 2022. This year, I think 6 to 8% is more realistic because they've gone from a no-COVID policy to a 100% COVID policy. Now they're different and the economy is really booming again in China relative to what it was last year. I think Europe is a little bit behind the United States. I think Europe hasn't quite recovered as much as the United States has from COVID, and I think Europe has some weaker banks than we do in the United States. And so the economy is probably not going to be as robust in either the UK or the EU as it will be in the United States. So I think the global economy is really looking for a couple of things. One, what's going to happen in Ukraine? Two, how's the US-China relationship going to go forward? Three, is there likely to be any other breakout of wars or anything like that in the Middle East, which you often see from time to time? And what is next? What is the United States government going to do? Is it going to be consistent in fighting inflation, or is it going to ease up a bit? And those are questions people really don't know.

>> What's been your view on the great kind of globalization debate? Some people have argued that we kind of hit peak globalization and now actually with the China tensions, people are going to see trade retract. Or do you think it becomes more regional? Where does globalization go from here?

>> Globalization has been a boon to much of the United States. Remember, we're 5% of the world's population, about 18, 19% of the world's GDP, and we've been able to import an enormous number of low-cost products and export some of our high-cost products around the world. It's been a great boon for much of the United States. But if you go to places like southern Ohio, Kentucky, some parts of the south where many people feel they've lost jobs because production has moved to China or Asia or other low-income or low-cost places, those people are not happy with globalization. Around the rest of the world, I would say mostly people would say globalization means Americanization, which is to say the United States has been the biggest beneficiary of globalization. Because of COVID, we recognized how dependent we are on supply chains around the world, and so now we are trying to be less dependent on that, and as a result, globalization will shrink a bit because as we move some production back to the United States, the cost will be higher than we would have gotten if we bought the products in China, but we'll be not as dependent on foreign sources for products we need them when there's an emergency. Overall, I think globalization has kind of stalled for a while, but I suspect globalization is inevitable, just as evolution is inevitable, and Darwinian kind of view of things, I do think that globalization is inevitable because it's the most efficient way to produce products and services for an economy.

>> So with some of the uncertainties that you outlined, what has been your advice to large institutional investors about changes to their allocation? And what are some of the opportunities that you see over the next couple of years?

>> My advice is this. One, don't try to be Warren Buffett. It's unlikely that you're going to outperform the markets on a consistent basis. Warren Buffett has averaged a 20% return for 60 years. You're not likely to do that. If you have a different job and you're not a professional money manager, give your money to money managers who know what they're doing and expect reasonable rates of return that are consistent with public market averages. Don't try to beat the markets if you're an average person. If you're a professional money manager, I do think that the allocation to alternatives is justified. And I think if you put more money into alternatives, you're probably going to get an overall higher rate of return. And so I think now, more and more people are probably going to take some money out of the public equity markets and put more into bond markets because the income you're going to get because of the higher treasury rates is probably pretty good. But other than that, I would say keeping a pretty large allocation to alternatives, which would mean distressed debt, opportunistic real estate, venture capital, growth capital buyouts, and a fair mix of those, I think you're likely to get higher rates of return. You're going to get from anything else you can legally do with your money.

>> So you mentioned Warren Buffett. Maybe that's a great pivot a little bit. So last summer, while all of us were getting back to travel, you were putting the finishing touches on your fourth book, which is a fascinating look at the world's leading investors and in many ways driven off your interviews with them. This is your second book, I think, that's been kind of written with this interview style, the other one being on leadership. How did you come to that as a narrative form and how did you decide that that was a good way of telling many of these stories?

>> I didn't start out to be an interviewer. What happened was I started bringing people to Carlyle events and I had speakers and sometimes they were not that exciting. So I tried to liven up a little bit by interviewing them and using some humor. People liked it. Then I became the head of the Economic Club of Washington. The same thing; bring speakers in, let them speak. And the business people were a little boring. So I decided to go interviewing style and then TV picked it up. Bloomberg made a TV show out of it. And so I got in the habit of doing this more regularly. And generally, it wasn't something I expected to do. And then after doing a number of interviews, somebody said, "Well, why don't you put some in a book form?" And so I've done a number of those in book forms. And it's actually a relatively easy way to write a book because the interview text is already there. I have to edit a bit and then write summaries of each interview and then an introductory part. So in the two books you referred to, one is about leadership. There I had people from the political world, the governmental world, the business world, you know, Jeff Bezos, Bill Gates, Warren Buffett, Oprah Winfrey. And people found it interesting to kind of see their insights. And then I did one on investing recently where I took the leading investors in the United States from different categories, interviewed them, and then gave my own perspectives on investing. And, you know, people seem to like both these books.

>> No, I mean, the recent one particularly on how to invest, you know, kind of masters on the craft I thought was absolutely fascinating. In addition to the interviews, you did kind of set out your own views on what some of the common traits were. And some of them, I think, were things we might expect in terms of hard work or attention to detail. But others were maybe more surprising, like this incredible belief in, you know, needing to find problems with conventional wisdom and a desire to have an alternative view of how the world will work. How did you come to those views?

>> Well, of course, I interviewed a lot of people and consistently, they had certain things in common. They came from blue-collar families or lower-income middle-class families. They were pretty good at math. They were pretty good students. They loved to read. They liked to be in charge of things. They didn't like to delegate that much. But most importantly, they all defied conventional wisdom. They would say if the conventional wisdom is to buy, they would sell, and vice versa. And I think that's the best advice to give to people. As a general rule of thumb, when markets are going up, what do people do? They jump in. They don't want to miss something. Markets are going down, they're afraid they're going to lose all their money; they jump out. You should actually probably do the reverse. And that's what the great investors typically do. So today we're in an uncertain world. Are we going to have higher interest rates for a while? Are we going to go into a recession? Prices have come down in the stock market from their peak. Probably now is a good time to invest. If you try to time the top of the market exquisitely well, the bottom of the market, you're probably going to miss it. So right now, the market could go down a little bit from where we are now, but it's not likely to go down 50%. It could go down a little bit. But trying to get to the bottom market before you actually see the rise, I think, is a mistake. Over the next couple of years, I expect we'll have a bull market once we're through this period of time with higher inflation. And I think ultimately, just as the prices that were seen as expensive when we had the great recession, '07, '08, now are seen as cheap, I think today, the prices today will seem very cheap two or three years from now.

>> And do you think this kind of view of, you know, being kind of a skeptic of common wisdom is something that can be learned? Or did you sense from many of these great investors that that's how they were when they were eight and kind of they were born with that?

>> Well, some of them didn't want to be investors when they were young. Warren Buffett is unique because he wanted to be investor from an early age. But most of these people actually had different career ambitions and they kind of stumbled into investing. Jim Simons was a great mathematician. He didn't expect to be an investor, for example, but basically started quantitative investing. Or Stan Druckenmiller hoped to be a bank analyst and he ultimately got into trading and it became one of the greatest investors of our time. So people kind of stumbled into their career path. Generally, Warren Buffett aside, very often they've made mistakes. And when they make mistakes, they learn from them. And the mistakes that most of these people have made, they would say early in their career, is going with conventional wisdom. So if you go with the conventional wisdom, everybody will say, well, you're smart and you're doing the right thing. But in the end, you might be doing the wrong thing. So being a little bit of an iconoclastic person will probably help you more in the investing world than almost any other part of the world.

>> Right. Right. I do try to explain that to my boss quite a lot. But one of the things in your role as leading an investment firm is how do you create a culture that actually supports that. Because the iconoclasts are going to be wrong for a while before they're right, if they ever are right. But you've got to be able to support people like that through some difficult periods. How do you create a culture, a culture at Carlyle that will do that?

>> Well, it's not easy because it's easier to write a memo saying, well, everybody thinks this and so therefore we should do this. But you need to have people who have strong wills and are basically willing to argue with people. You don't want people that are so argumentative you can't deal with them. But you want people to say, I have a backbone and let me tell you why the conventional wisdom is wrong. Clearly, as you get a bigger and bigger organization, it's harder and harder to convey that to your professionals because they want to go along with the path of least resistance. So it's something any organization that's in the investment world has to really learn how to do. How do you keep your people from being afraid to say something that isn't normal? And so we try to do that and we're not perfect at it, but you've got to tell people, "Don't be afraid to tell us your views even if they're counter to the conventional wisdom because the conventional wisdom is going to be wrong." John Kenneth Galbraith once famously said, an economist, the conventional wisdom in Washington, DC, is almost always wrong. The conventional wisdom in the investment world is almost always wrong, too. So you have to be strong enough to fight against conventional wisdom.

>> Wow. Well, that is a really tall order for many, many investors. But it was a real pleasure to read the book and the summaries of what you found in that. Maybe we can turn to one other topic just with our remaining time, and that's philanthropy. I mean, you've brought your passion and vigor to philanthropy and you've obviously thought a lot about how to effectively give money away. And maybe you could share with our listeners some of your thoughts on what is the highest impact way of being a philanthropist.

>> I'll just say how I came to this. I came from a modest family. My parents were not college or high-school educated. My father worked in the post office, made $10,000 or so a year. So I didn't have a tradition of philanthropy in my family. But as I became wealthier, I realized that happiness is a very elusive thing, maybe the most elusive thing in life. But I was happier when I was helping other people and giving away money or helping them with my time. I like to remind people that philanthropy is derived from an ancient Greek word that means loving humanity. It doesn't mean writing checks necessarily. You can love humanity by giving your time, which is the most valuable thing you have. You can't make more time. You can make more money. And so as I got wealthier, I had more time to give to organizations and I had more money to give. And so I tried to find things to do that I thought would help my country a bit. Because I came from a very modest background and I wanted to help the country that made it possible for me to achieve what I did. So I had four rules. One, start something that wouldn't otherwise get started. Finish something that otherwise wouldn't get finished. Have an intellectual interest in it so that I will stay involved in not just writing checks. And four, I'd like to see progress in my lifetime. And so I've been involved heavily in cultural philanthropy, educational philanthropy, what I call patriotic philanthropy, reminding people of the history and heritage of our country. And it's been one of the great pleasures of my life. And I suspect that now, when my obituary is written, probably my philanthropic interest will probably be more significant to the writer of my obituary than my business interests.

>> I can absolutely imagine that. I mean, it's quite amazing the range of places that you've touched. And maybe we could spend a moment on the patriotic piece of what you've done and whether that, you know, range from what you've done with the Lincoln Memorial, the Magna Carta. I mean, how did you come up with that as a theme for philanthropy?

>> Like many great things that happen in life, it's by serendipity. So I used to be employed at McKinsey. And McKinsey is a wonderful company, great consulting firm. If I'd hired McKinsey and say, "How can I give back to the country," I'm sure they'd give me a long report, but probably wouldn't have stumbled into what I stumbled into. By happenstance, I went to an auction of the Magna Carta. I realized it was likely to leave the country unless somebody kept it in the country. It's the only one in private hands. So I bought it, put it on display permanently at the National Archives so people can see it. And then I started buying other rare documents, and then I started fixing historic buildings like the Washington Monument, Lincoln Memorial, Jefferson Memorial. Why do that? Well, because the human brain has not yet evolved such that seeing the computer slide of the Declaration of Independence is the same as seeing the real thing. And so if you go see the real thing, you're likely to learn more about the history of our country. Why is that important? Well, the theory of history is that we try to make improvements over the mistakes that were made in the past. And so we should learn from the past. If you don't know about the mistakes in the past, you can't improve upon them. Right now, history majors are down to a record low in this country. We don't teach civics very much in our high schools or junior high schools anymore. So people in this country really don't know much about our history and know much about how the government operates. And so in my modest way, I'm trying to preserve history and preserve some monuments and documents so that people might have a better chance of learning more about history. And that's one of my goals and that's what I call patriotic philanthropy.

>> A fabulous theme. Maybe we could spend just a moment more on the points you've made around civics. Because, obviously, as we stand here today, trust in public institutions is at an all-time low. There's more and more concern about whether or not we can hold an electoral process within the rule of law. And what can be done to begin to reverse some of the deep skepticism that we now find in this country?

>> Well, if I had a good answer, I'd be in Iowa, New Hampshire, so I don't know that I have a perfect answer for it. But I do think that educating people is important for a start. For example, right now, if you're not -- if you're going to be a naturalized citizen in this country, you take a citizenship test. You have to be a resident for five years, and then you take a test. You have 100 potential questions. You're asked 10 of those 100 potential. You have to get six correct. If you get six correct, you become a citizen. The same test, more or less, was given to millions of people in this country a few years ago. And in the test that was given to tens of millions of people, we found that people born in this country can't pass the basic citizenship test. And essentially what we learned is that in only one state, Vermont, could a bare majority of citizens born in this country pass the basic citizenship test that naturalized citizens have to take, which shows you that people aren't learning civics. They aren't learning history. So why is that significant? Well, if you can't find that more than one-third of Americans can tell you how many branches we have in the federal government, that's troubling. If you don't know who the first president of the United States is, that's troubling, but you find a large percentage of people don't know these things. So what we should try to do is have an informed citizenry. When our country was created, it was created on the foundation that we would have an informed citizenry. Now, everybody wasn't given the right to vote. In the early days, we were only letting white, Christian, property-owning men vote. But now we've expanded that so that theoretically almost everybody has a right to vote, but we should still have an informed citizenry, and we don't have that as much as we should. So if you don't have an informed citizenry, you're going to get a less good government. That's my theory.

>> But that is somewhat of a long-term fix in terms of a civics lesson for the country. Is there anything that can be done in the shorter term, just as we face a great number of these challenges leading up, for example, to the next election?

>> There's no one thing that can be done in the short term that's perfect, but I have tried to do some things like educating members of Congress about American history. I have an interview program in front of only members of Congress once a month. Most recently, I just interviewed John Meacham on his book on Lincoln. And I try to educate members of Congress and I ask them to come and sit with people from the opposite party, the opposite house, where there's no press going to see them fraternizing with people from the opposite party and try to get members to talk with each other more. We have a very bad divisiveness in our country right now, and it's reflected in Congress. It's not that members of Congress fought because the country is split down the middle. But to the extent that members of Congress are leaders, they can say, well, we ought to work together more. And if we can make some progress in that direction, I think we're not likely to go down the path that I'm afraid we're going down if we don't do something more to bring members of Congress together and actually our citizenry together.

>> Yeah, that engagement point is so important. And do you find that when the cameras are off and you have people in a private session that that level of engagement and the willingness to listen to each other is higher?

>> Well, many members of Congress tell me the most interesting thing they're doing in Congress is coming to these dinners, which shouldn't be the case. But they like it because there's no press there. They can talk with people in the opposite party. They can do things they don't normally get a chance to do. In the old days, we had congressional conference committees where you work out the difference between the Senate and the House. But since there are no bills anymore except appropriation bills and everything is worked out in the leadership, there are no conference committees, so members of the House barely know members of the Senate. And also members of the House have to spend so much time raising money that they barely are in their offices anymore. They have to leave their offices to go raise money. It's estimated they spend 40% of their time raising money. And how do you raise money? You don't raise money by saying, "Give me money because I want to be right down the middle. I'm going to come up with something that's a perfect balance." You raise money from the far left or far right. And the members are pulled on the far left and far right. And it's not a good situation. The money is really killing our ability to kind of bring people together. We can't change that anytime soon. But I do think we can make more progress in getting members to know each other and not feeling that they have to be fighting with other members of the opposite party in order to raise money.

>> Well, I must say that's a wonderfully optimistic note of the engagement and the fact that people are engaging with your dinners in Congress. So maybe that's a good place to leave it. We've covered an enormous amount of ground from investing in private equity to the markets and to your important philanthropy efforts, so thank you.

>> Thank you for giving me this time.

>> David, thank you for being with us.

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