Chapter 1: What is the main topic discussed in this episode?
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Thank you all so much for joining for this conversation. Ken, thank you so much for sitting down with me this evening.
It is great to be here today, and it is such a pleasure to be in Europe, particularly during this time of year.
Should we start with that? Because perhaps everyone will have noticed it's two Americans speaking in Europe. Ken, it feels like recently there's been a lot of American barbs, let's say, thrown at Europe. President Trump warning about end of civilization because of Europe's over-reliance on America. Jamie Dimon saying it's a region that's anti-business, that has a lack of innovation.
Are those most dire of forecasts for Europe? Are they correct?
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Chapter 2: What are Ken Griffin's thoughts on Europe's economic challenges?
Let's talk about leadership in the US, because it's also been a moment of questions. In the early elections, local elections, governor elections, the trend has been very clear. When Democrats run on affordability, they have been winning. 2026 is a midterm year. Do the Republicans risk losing the American public?
So it's quite ironic to see how the tables have turned, because just 12 months ago, President Trump and the Republicans swept into office on the issue of inflation. And the Democrats have rebranded the problem of inflation as the issue of affordability. And they are now well poised to return to control the House.
And there's even discussion of them retaking the Senate on the back of how the affordability issue strikes a chord with the American public. And the big picture is the American consumer is tired of the persistent and sticky inflation. They feel like they can't get ahead in a world where their savings and their wages are constantly deprecated by the impact of inflation.
Why aren't Republicans speaking to that? Is it an issue of not having the policies, of not communicating the policies correctly?
So I think it's actually fairly complicated. I think that the Republicans struggle with the reality that many of their policies, which they ran on, for example, ending illegal immigration into the United States, are actually pro-inflationary. When you end illegal immigration, you reduce the size of the available workforce, that's pro-inflation.
And so the Republicans are grappling with tariffs, another case study. You impose a tariff, it's a regressive tax on consumers. It's pro-inflation. So some of the very policies that the Republicans have put forth and have been successful in implementing are actually the very policies that tend to be pro-inflation.
Some of the other policies, for example, deregulation, are just going to take longer to play out. And ultimately, ultimately deregulation, which should unleash productivity gains, will create a reduction in inflation, a very healthy reduction, but we need to get to that point in time.
It's a timing issue, and President Trump Said something similar, not exactly what you're saying, Ken, but he had spoken to the Wall Street Journal just this week saying that the reason the American public hasn't realized his policies are working is just because they take time to take effect. And what Americans are experiencing now is Democrat-led inflation.
It seems like you would maybe take issue with the latter, that maybe it's current policies leading to some of the stickiness?
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Chapter 3: How do GOP policies contribute to inflation?
It's just what will be the role of generative AI in that story. One of the large firms, I'll leave them nameless, in their advertising campaign for AI, laid out three key principles for the successful implementation of generative AI in the workplace. And the very first point is, was in essence, use this moment to rethink and re-architect your business processes. That's timeless advice.
Every business has to episodically go back and re-underwrite how it does what it does to do things better.
We've seen a lot of that, though, of companies saying they're laying off people and have specifically cited AI. Are you saying that's more of an excuse at this stage, then?
Look, I think the AI-driven layoffs, if one may use that choice of words, number one is when businesses do go back and re-architect their processes, they realize often they can do things with fewer people, whether or not they use generative AI. We've made a huge push in using technology at Citadel over the last several years to streamline and automate processes.
Now, we haven't had to lay people off because of that. We're rapidly growing, so those people are put into other new areas of work for us. But we've taken a lot of labor out of what we do each and every day in our business. Corporate America is doing this everywhere. The second dynamic that's happening right now is some of the labor hoarding of the pandemic era is ending.
And it's much easier to tell your employees, because of AI, we're reducing head count, than to say, because we've maintained a fair number of people on our team that we really didn't have good work for, we're reducing our workforce. One depersonalizes a decision. It's a technological transformation that's out of my control, and I'm sorry this is happening.
Whereas admitting that you hoarded labor for years is just a very different message, one that people don't want to make, state, or hear.
There have been plenty of surveys that younger people coming out of college feel a lot of anxiety, and maybe it's because the headlines that are driven by executives saying this. Ken, what advice would you give to someone who's newly graduating and considering pursuing a field in finance somewhere?
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Chapter 4: What is the relationship between tariffs and inflation?
Do they need to drastically rethink of what they study, how they enter the field, and what their jobs exactly will be because of changes in technology or because of the state of the labor market?
Look, I think the most important advice I can give is not to the person who just graduated, it's the person who's just starting college. Pursue a course of study where you will learn to be a good problem solver. Pursue a course of study in which you will have the toolkit the mathematical skills, the statistics background, to really be highly employable in this global economy we live in today.
There's still a huge deficit in the Western world of individuals with backgrounds and STEM degrees. It's really important that you think about your college years as doing two things. It creates for you the foundation to be a lifetime learner. Because whether you just graduated from college or you're just starting college, you're going to have to learn for the rest of your life.
Because what you learn in college or just learned in college will soon be antiquated. And if you're not a lifetime learner, you've got a really rough road ahead of you. And then number two is the world will always value people who can solve problems. If you could put your hand up and say, I will take that challenge on, you will always have a job in the Western economy.
Can we talk about a young Ken, entrepreneurial Ken, in college, coming out of college? In 1987, when you started your first fund at 19 years of age, and you made an absolute killing because you were short the market going into Black Monday. Should you be in that scenario now?
Do you think that there's something you could bet against in this market currently that you could recreate the magic of what happened in that year?
You mean the good luck?
Hey, good luck. Anything you think would give you a little bit of skill in achieving that good luck?
So, you know, it's funny.
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Chapter 5: How does deregulation affect inflation in the U.S.?
I look back at the crash of 87 and I was long a portfolio of convertible bonds. And the uncertainty in how that portfolio would behave in a bear market was high. So for choice, I was short a bit more stock than I should have been. Risk management's about trying to deal with the unknown when things go wrong.
And because of that, I was a bit more short than one might mathematically have said would be optimal. So that was the good fortune of 1987. Look, I think that we really spend our time at Citadel playing offense, wherever value be created. And then, of course, we take the time to think about how do we risk manage the portfolio that we're building.
But the story, the success story of America is a success story written by optimists. And I think that in building a business or in building your career, it's really important that you bring optimism first and foremost each and every day to what you do in life. So we're always looking for how do you create value.
And then having said that, survival is about having the realistic paranoia that the world will go through difficult times. And how do you create the risk management to get through those difficult times? But we come to work as optimists first, paranoid, pessimists, making sure we can survive difficult times second.
Can I just quickly ask, because we're almost out of time, a lot of folks have expressed paranoia and that a lot of risk from public markets has shifted into private markets. Does that hit the list of your paranoia at all?
Look, I think there's a lot of virtues to the rise and death of the private markets in the United States. You have a tremendous number of mid-sized companies or even large companies owned by private equity firms. And you have very tight agency between the owner of the business and the management of the business. That's been very instrumental in increasing American productivity.
I think that's the great strength of the private equity system that we have in the United States. The downside in private markets, one of the downsides is you don't have good price discovery. And price discovery is one of the ways that you, as a management team, have an appreciation for how the world values what you're doing.
and that investors are able to use as a metric or milestone in measuring their own skills as an investor. One of my concerns with private credit, for example, the vast majority of companies will never default. You invest your money today in a company's credit,
You won't know for five or seven years if you made a good investment, which means that a substantial portion of your career will have slipped through your fingers before you learn whether or not you made a good underwriting decision. And as we go back to the start of the story, one of the distinguishing factors of the American success story is the depth and efficiency of our capital markets.
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