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Richard Helppie
Hello. Welcome to The Common Bridge. I'm your host, Rich Helppie, here in our sixth season. And of course, we like to talk about policy. One of the biggest policies that we're talking about every day, because we're involved with it every day, is the economy. As a return guest to The Common Bridge, Mr. Kerry Killinger - you can look up his bio - has an extensive background in business and in finance, and is the co-author, along with his wife Linda, of the book "Nothing is Too Big to Fail.” Kerry, it's great to see you.
Kerry Killinger
Hi Rich, great to see you, and look forward to having a fun discussion with you.
Richard Helppie
Well, there's a lot to be discussed, and we'll try to hold it to a reasonable point so our listeners, readers and viewers have time for the rest of their lives, not that they're not enthusiastic about The Common Bridge.
Kerry Killinger
You're my favorite podcast, by the way.
Richard Helppie
Well, I appreciate that.
Kerry Killinger
Every episode. I think you do a great job of hitting so many great topics, and one of these days, we're going to find a lot of better policy decisions to come to.
Richard Helppie
It's weird that there's a lane for people just to talk policy and facts and the like but here we are. So Kerry, look, the new administration has talked about really going after the federal bureaucracies. And when I think about that, I'm saying, All right, let's say that the new administration comes in and they're going to do what Elon Musk thinks we should do, we're going to take out thousands of people from the federal workforce. I mean, wouldn't that have a negative impact on unemployment?
Kerry Killinger
In the short run, of course, anytime you go through a major change in employment, it can have a negative short term impact but you have to keep it in perspective. The total federal government employment, it's in that four million range out of a total for the whole country of over 160 million. Got to keep it in perspective a little bit, that even if we get through that efficiency within the federal government, the impact it's going to have on the overall unemployment rate is not going to be all that great. Now, might be a lot more of a deal to those in the Washington, DC area, and a lot of dislocations and businesses and others that help support all that. If there really is a substantial program to reduce and change that, yes, it would increase the the unemployment rate, but I don't think it's something that's going to be a real driving force of the economy. It's just one of the things that'll happen in the short run.
Richard Helppie
I'm encouraged by that, and I always like to cite the statistic that in 1900, 50% of the United States workforce was involved in agriculture, and today 2% are involved in agriculture. Theoretically, we should have 48% unemployment. And if that kind of change can be made, if - I don't know - a million people come out of that four million person workforce through retirement attrition and the like, they'll be gainfully employed doing something else, but think it a step further. What if an entire department, like the Department of Education, whatever they do, is eliminated. What impact will that have on the economy? Because someone's waste is someone else's revenue, and all that waste, all that payroll, which we talked about, the offices, the transportation, et cetera, that spend's coming out of the economy.
Kerry Killinger
Well, you're absolutely right. I think one thing to keep in perspective, though, take the Department of Education, and that one's getting a little bit of press right now, because it's been mentioned by President Trump. There are only about 4000 people there, and again, out of four million, it's not a big deal. If they make meaningful impacts on the major employers - the largest is actually the Postal Service and the second would be the overall military complex - the Army, Navy and on into Homeland Security - those are the really big ticket ones. Smaller departments like the Department of Education are not going to have an impact on the big overall economy, particularly in that case. Though, I suspect if you focus on Department of Education - and that's an area I know something about because I came from a family of educators, at one point I chaired a group called Achieve, which sat in on the National Education summits and worked with the presidents and everything else, trying to see if we could have an impact on improving. But if you're not going to do those things out of Washington DC, a lot of that activity will just get pushed back to the local and state education providers, and that's where most of it's done anyway. I think in Washington, DC, the Department of Education was predominantly set up just to take care of some of the federal programs, which isn't the heart of education. It's just a small part of what they're doing. So again, I think we'll find a way to land on our feet, but it could have some impact on the Washington, DC area.
Richard Helppie
As you know, I work charitably inside school systems, and there's never a mention about the Federal Department of Education, unless it's a new mandate that has to come down, and things like the Individual Education Plans, IEPs, for special needs students. Health and Human Services could administer that. And of course, we're still stuck with this crazy student loan program which, you've heard my answer on that. The people that got the money are the colleges and universities, and the lenders hit them with an excise tax; clear that debt and maybe refund money to people that paid for their own education. But when I think about the human cry around cutting our spending back at the same time, people are alarmed by the federal deficit and the national debt. Well, are we addicted to deficit spending, and is there any sign that Americans are ready to pay the price to end or reduce this deficit spending?
Kerry Killinger
That's a great question, and the reality is that we have been hooked on deficit spending since the Clinton administration. I think Clinton was the last one to get a balanced budget, and since then, we've been in these huge deficits and growing, it has just been cascading each year. Got accelerated with COVID and all the spending we did there, and we're still stuck up about $1.7 trillion a year of budget deficits. And it's an equal contributor from the Left and the Right. The Left is pushing for a lot of social programs, transfer payments from their agenda and on the Right side, there are tax cuts and trying to maintain, be it military or other kind of spending priorities. Congress and the executive branch have basically have just decided we're not going to attend to budget discipline, and so there's been no adult supervision in the room. As a result, when you go to those kinds of budget deficits, then you start to create these enormous ongoing federal debt that we have to finance. And so we have gone from relatively little federal debt in this country to about $36 trillion. The interest expense on that debt now is $1.2 trillion a year. It is becoming the largest budget item in the federal budget now, so we're going to have to count on over a trillion dollars a year just to pay for the interest cost on the debt that we've already built. And if we don't start to rein that in moving forward, we're going to be in a real world of hurt. Now what's interesting is, again, congress and the executive branch, in my opinion, have failed miserably and are letting that thing run up. The only disciplinary in the room are now the capital markets themselves. Interest rates, about three or four years ago, that 30 year treasury bond had a 1% return on it and that was relatively inexpensive debt for the country to borrow. But now that we built it up, investors have come back and said, no, you guys are getting riskier, you're undisciplined. We're going to increase the interest rate to about 5%, where it is today. As a funny little anecdote, that 1% interest rate bond that you had from about about three or four years ago, do you know that it is now selling about 45 cents on the dollar (Rich Helppie: No kidding.) so instead of par value you can buy it for about 45 cents. Said another way, investors who invested in our treasury and were on the other side of that transaction three or four years ago have lost more than half their money. So I'm telling you, the capital markets are now disciplining us, and I think they're probably the only ones who can do it, because I'm not seeing it out of congress. I'm not seeing it out of the executive branch, and it's hard to imagine that the new administration is going to hit the ground running by raising taxes to close that gap. If anything, the Trump agenda will focus, I would think, on maintaining or maybe even increasing tax cuts, and then it all comes down to the burden on the other side or can we really get some cost saves out of the government? Are we really going to get serious on that front? We started this conversation talking a bit about the Department of Education. In reality, it's kind of a rounding error. The really big ones are going to be, how do we get productivity and improvements and enhancement and efficiency out of the real big ticket items? You have a big background in healthcare. One of the largest federal expenses is on the VA for healthcare and is that the most efficient way, or what are they going to do? How are they going to going to handle that? Then we have, of course, Social Security and Medicare and the military and everything else. Will we be able to step up and find ways to get huge improvements in productivity there? And if not, again, we're going to be burdened with some real challenges on the federal deficits.
Richard Helppie
Indeed. And all of this is solvable if we went at the restructuring the way - I'm loath to make this comparison - but what a private enterprise might do. So we've talked about two things, fairly big healthcare and the United States Postal Service. I've had, as you know, many people on the show here talking about healthcare. They come from all points on the political spectrum, all points within the healthcare delivery and financing system. Everybody concludes, to a person, that we are doing it in the worst way possible from a financial point of view. Now we have purchased a lot of great capacity, and we do some amazing things in the system of care delivery itself, but our payment system isn't even a system. It's a mess. One hundred percent agree that what we need to do is move toward a universal foundational level of health insurance and then allow a free market to go above and beyond that. It's the only way we can become efficient. You mentioned the VA, we do need to take care of all of our veterans for life. That is part of the covenant we made with them, and there are changes that have been made of allowing those veterans to go to a private health provider instead of a VA facility, and we could do that across the system. We really don't need the VA hospitals per se, but we could issue lifetime insurance. The United States Post Office; we've actually had Professor Rick Geddes on the show several times, and he is an expert on the Postal Service, written a book about it. When I look at the United States Postal Service, there's so much now that goes through other means, Federal Express, UPS, letters, DocuSign, all those type of technologies. What would make a lot more sense would be to look at postal services like garbage pickup. Your garbage pickup days are Tuesdays and Fridays; your mail delivery days are Mondays and Thursdays, mine are Tuesdays and Saturdays. You could get the same delivery for a lot less money. But we have a lot of barriers to that kind of reform, and a political system that only puts a president in there for four years, and we've seen already that there are bureaucrats determined to mess up the works for the incoming administration. I don't know how we get out of this, until people actually revolt about it.
Kerry Killinger
Well, you're making some really good points, and I think something interesting. I often think about the - I'll call it the executive bureaucracy from all the agencies and everything - that is really the fourth branch of government now, and maybe the most powerful. The average employee has three times the longevity as private industry. And so they've been in there for a long, long time, and they've learned that if all they have to do is wait out the current executive branch because they're going to be gone in four years or eight years, whatever it might be, and they've been in for decades. So they have a natural tendency to keep wanting to do business in the same way. If we really want to break through it and again, I laud the incoming president's, desire to at least take it on. The history has been that making significant progress has been limited, but maybe, though, with Elon Musk and whatever they do this time, they'll have a shot to really, really make a go. But a couple of points on that is, if you think of a lot of the key services that are done, both in the private sector and the public sector, we all know that you've got to figure out how do you get the maximum return on the dollars you put into it for really good things. And for example, in the space area, do you want to bet on Space X or the combination of Boeing and NASA, the way we did it horribly. I mean, they've revolutionized it and are really probably going to knock it out. Would you want to invest... do you think you get a better return on UPS or FedEx or Amazon and what they're delivering and their effectiveness, or the US Postal Service? I think it's going to be interesting. In the military, we have the greatest military in the world by far, but a lot of it is based on how do we have the best technology for the most expensive systems in the world. So our ships, our planes, our missiles, our anti-ballistic systems are just fabulous. But how's that productivity really going to be in the long run if the future is around very low cost drones, and what happens if we start replacing people with unmanned things in an increasing deal? How do we put that into our equation? I hope somebody's thinking and working through that. We talked about education; we have a way that we have educated but isn't our goal to put certain dollars in and to get the best educated population we possibly can to the greatest number of people? I think it's hard pressed to say that we are educating more people better at a lower cost today than we did 20, 30 years ago. That has to raise the issue around do you want to consider vouchers on homeschooling and charter schools and everything, in addition to the approach that we've done in the past? So there's a lot of exciting things that we potentially could do. One other point I'd like to make on this that I think important is, in all industry we know that you cannot manage what you don't measure, and if you don't have key performance indicators and you're not on top of saying what are the dollars I'm putting in and what is the outcome I really want to have for everything you're doing; if you don't stay on top of that, you're going to be in trouble. One of the issues around Federal employees is that we do not have effective measures of knowing where are the employees. Are they coming into the office? Are they staying at home? What's not only the productivity, but are those dollars delivering the output that we really want. One of the companies I happen to be very close to, their name happens to be Sapience Analytics, they help large corporations manage all these remote workforces and are able to manage what's going on with all of their outsourcing and technology and everything else; where people are doing that. And what's been interesting on that is now that we've gone to these remote work days when COVID first hit, the data is showing clearly that productivity improves slightly when we allowed working from home and remote. But the last three years that productivity has been plummeting because, in most cases, we don't know how to measure are people really working. Where are they working? How are they working, and all the kind of things that all the large corporations now are figuring out they have to have. And I just wonder, why in the world wouldn't the federal government have something similar to that to allow them to really have the numbers in front of them? What is my effectiveness on all the employees and do we really want to be in offices, or do we want to be working from home? But that lack of measurement, I think, is putting us out in limbo where we can't say definitively we're getting a reasonable return on our investments.
Richard Helppie
Indeed, it's difficult to measure output of government. And I think there are two big things that I want to comment on, first of all, cutting large workforces. I've been in the economy a long time. I'm distrustful of bureaucracies, public and private. By way of example, turn the Postal Service over to Amazon; it's just going to be another bureaucracy. Might be privately owned, but it's going to end up in the same place, because all bureaucracies eventually turn in and start serving the bureaucracy versus serving the customer. To your point about, are we getting value for money, there isn't a way to measure are we serving the people we're supposed to serve. In the private enterprises, you've got a customer, and if your customer doesn't like what they're getting, they quit buying your stuff and then you have to make adjustments. We don't get that through the public sector, because they have, in effect, monopolies, and they need to be guided as such. But my sense is that you can go make big cuts - and I've seen it happen in the automotive companies, in banking - and the workforce leaks back in over time. You can cut back; Elon Musk went through Twitter, now X, and made huge cuts, and everything still seems to be running and running well. When we get to remote workforces... and remember, I'm a person that built what I think might have been one of the first remote companies, I know it was one of the first companies to have a distributed workforce like that. I don't know anybody that was doing it beforehand, but one of the things that I know from that is that there is a limitation on what can be learned remote. So by way of example, when people of our age think back about their early careers, it wasn't that we were in a specific meeting, there weren't screens necessarily that we were looking at. It was informal conversations in hallways at lunches; hey, go get this document for me, etc, that people learn their jobs. So the decrease in productivity doesn't surprise me because the people entering the workforce aren't getting that informal mentoring. You can't set an appointment to make me smart, you just kind of have to be there and I think that reality is leaking in right now.
Kerry Killinger
You're right on that, Rich, and the other thing, you've got to have certain amount of in-person meetings and things like that, to share the culture, the values, the mentoring, all those softer things that are so important to the success of any organization. A hundred percent remote, without ever having to come in close physical contact with fellow workers, I think it's probably a model that doesn't work for most, but probably we're all going to end up with some kind of a hybrid, or somewhere in between, because there are advantages on remote, there are advantages on being central. The point I was making before, I would not want to be running an organization without the tools and measurements in front of me to know what I'm really dealing with. I think there's a lot of - particularly in the government and also still in some businesses - where they don't have good visibility into what's really going on in this new model. And that's why I think we're seeing such a growth in these kind of systems that allow people to know really well where everybody is, what they're doing, and how effective things are.
Richard Helppie
Again, begging the question, are we measuring the right thing? How does that extend into the economy? And of course, look, when people aren't commuting into work, they're not utilizing roadways or public transit. They don't need to park their car. They're not going to a restaurant or take out for lunch and those types of things. Most people will put in an honest day's work. Then there are really creative people that have an at home job and they have a side business that they're doing at the same time, so it is difficult to manage. And of course, we found people that, over time, would be on two payrolls at a time, working for two different companies.
Kerry Killinger
Rich, on that note, one of the funny little anecdotes on this company I was mentioning that can help with the measurement - this is going into sophisticated companies who should be on top of this stuff - but what they found in many cases is that a lot of large companies will outsource to call centers or outsource IT work to India or wherever it might be. They found - in many, many cases - that they were getting double and triple billed, and that the people that they had hired to do these things were working on three things at the same time and billing for all three of them. When they figured this out, the savings and the productivity enhancements to these large companies was in the hundreds of millions of dollars. So you can imagine if you were somebody running one of these companies and you figured out that's available, you can see why the demand is growing pretty quickly for that kind of a service.
Richard Helppie
A variation on that is somebody working at home for a call center hires three of their friends to also take calls. If they're getting paid on a per piece basis, they can... what, you worked 18 hours yesterday? Yes, I did. Well, it's Tom Sawyer all over again. We don't read the classic; now we're back to education. But look, with education, I'd love to see some kind of measurement, like see the president of the United States say we're going to have basic physics education for every high school grad in the country, some people will be better at it and go deeper but everybody should understand something about physics. They need to understand fundamental math, and that's how we get things to work. And when I see some of the things - like the devastation in California - it's pretty much these folks never managed anything, didn't know how to construct anything. They got really good at talking, but they couldn't actually do anything. Kerry, as we talk about the economy, for most people when they think about the economy, it's pretty basic. Am I going to have a job that I can do? Is that job going to consume a reasonable amount of my time? Am I going to have the spending power for a reasonable standard of living? There's been a lot written lately that, hey, our economy has never been in better shape. You've got a counter argument that says, yeah, wages are up, but the price of living has gone up. From your chair today, how does our economy look?
Kerry Killinger
Well, those are great questions. First of all, I think the economy is in reasonable shape. Today, we're projecting to have about 2% GDP growth in 2025. Unemployment rate is only 4.1% so that's pretty good. Inflation has come down. It'll be about two and a half percent, plus or minus, run rate right now. That's better than seven, eight percent of two or three years ago. At one level it looks reasonably good, but to have the full perspective, the reason it has held up as well as it has is that the federal government pumps so much money into the COVID and other relief. Of those budget deficits, the stimulative impacts of that loaded people up with a lot of excess money, and so the savings rate in the country went to an all time record following COVID. But now we've spent it all. We're back down to extraordinarily low savings rate. Credit card debt is now at a record level and delinquencies are rising very rapidly. So you can come to a conclusion that the consumer is basically tapped out now, and that's what drives our economy for the most part. It's going to be hard getting, I think, a lot of growth out of here. I think employment is still going to remain in pretty good shape. I do think that it looks right now that wages are going to continue to grow at about three and a half percent, and if inflation can stay at around two and a half percent, that'll be okay. I mean, it's not going to be great, but at least people are not going to have to suffer from the hyper-inflation that the government policies produced coming out of COVID. The things I worry more about for the consumer is not the underlying economy. It's that so much of the consumer's well-being is tied up into the price of their homes and into their 401k's and retirement plans and those have all been inflated with the rise in the stock market and the hyper-inflation that went on in housing for a few years. Now some of those assets - in particular stocks and the stock market and housing - are at valuation levels we never seen before. And that doesn't mean it's going to fall overnight, but it does set you up for the biggest risk I've seen in maybe decades, in terms of what the valuation levels are. And if something pierces that bubble or really deflates it in some way, in an uncontrolled way, it's reminiscent of what we all had to go through in the financial crisis back in early 2007-2008 and that's the last thing we want to have happen because that is so devastating on an economy. So I don't think it's a high chance but if the policy holders don't get it right, they could easily put us into that kind of a downturn.
Richard Helppie
Well, I can see that. And as I look around, just observation, credit card delinquencies are on the rise, yet I go to the airport and the lines are long and it's just packed. We go out to restaurants, you look around, the lines are long, everything is packed. Went to Home Goods over the weekend, you couldn't get through the aisles because there were so many people. Then I looked around and I said, well, who's doing the shopping? Well, they mostly look like baby boomers. I'm wondering if anyone's done any kind of analysis on what happens with that wealth transfer? When us baby boomers die off that's going to go into both tax receipts and into the economy, correct?
Kerry Killinger
Yeah, it will, and that is going to be a real positive for the next... I mean, there's such a large wealth transfer particularly if the taxes remain such that it's not heavily taxed on death. There will be a big wealth transfer to the next generation or two, and that will help sustain some things going forward there, but that is a major migration that's going to go on. The worry I have is if for any reason the bubbles get broken in the stock market and the housing market, then that enormous wealth that the baby boomers think they have could get compressed somewhat. That's why I want to be sure the policy makers are on top of things and don't allow us to ever repeat the mistakes they made in the last financial crisis.
Richard Helppie
For every dollar that's in that stock market valuation, at the end of it there's a consumer, and if the consumer can't buy the good or service, it's going to depress earnings. For every one of those companies you depress earnings, you're going to bring down the price of the stock. You bring down the price of the stock, you're going to bring down people's paper wealth. And when you bring down the paper wealth, people tend to conserve and not spend as much, when you don't spend as much, then it doesn't show up as someone's revenue, and you start getting into this downward spiral. Again, we just call that the business cycle. Then people got tired of, let's not have a recession anymore. Let's spend money again and they did, and we pulled out. You wrote a lot in your book, "Nothing too Big to Fail," about six bubbles. We updated it when we talked several months ago about whistling past the economic graveyard. As you revisit that well-researched book, is there anything that struck you that you said, well, I'm glad that didn't happen or, uh-oh, we're on the course? When you contemplate that, what kind of things do you think about?
Kerry Killinger
Well, let me talk for just a minute about a couple of those bubbles that had us worried and where they are now. The bubbles that have broken, let me talk about those first. We were concerned about commercial real estate, because with super low interest rates and commercial real estate had increased so much in value, it looked over-valued. And sure enough, that bubble burst a couple years ago and is down about 18% on average across all commercial real estate. Now granted, the biggest parts are going to be in office buildings and communities that were impacted negatively by COVID and now by crime or whatever it might be. The B and C office buildings, some retail malls, lots of things, have been through a real difficult period. That was bailed out for a while with industrial warehouse because Amazon was building up a storm. But even industrial warehouse space now is getting over-built. So commercial real estate is going through a correction. It's not a disaster, but that bubble has clearly come down. The other bubbles, remember, there were things like NFTs, non fungible tokens, that was a hot thing; those blew apart. SPACs, remember, we're doing special purpose acquisition. Those blew apart. The one that didn't blow apart is Bitcoin, and we'll just have to see how that plays out. But certainly, a lot of people feel that it's really difficult to get your arms around what is Bitcoin really worth. The other one is art. Art's gone through a major downturn now. The last two years, the art markets have softened considerably. I think auction values were down 48% over the past two years. So art is off that pedestal a little bit. The other ones, though, the two big ones that have been in bubble status, in my opinion haven't corrected yet, are stocks and housing. Those are the ones. And the last thing I want to do is hope that happens. I really hope we can manage ourselves through. But again, stock prices, the earnings are doing fine, but today, with the valuations, we're paying more than twice for each dollar of earnings than we have historically. So the price to adjusted earnings for that cyclically adjusted earnings is like twice. It's average is 17 times, today it's 37. If you look at stock prices overall to the gross domestic product of the country, it's averaged about 100%, today it's over 200%. The companies are doing fine, but the valuations have gotten extraordinarily high by any historic standard, and that just means it'd be very easy to have a significant price correction. And I worry about those two the most, because those impact everyday people and impact how people decide to purchase or not purchase into the future, and that could easily lead us into a major correction of some type, if, for whatever reason, those bubbles get burst.
Richard Helppie
With the stock market and the housing market, all of that deficit spending that came out through the various spending programs had to go someplace. And to your earlier point, you put it into a debt instrument, you'd be 55% behind at this point, or you'd get 1% to the upside. Not a great investment. And so I think some of the inflation tailwinds right now is all that massive money supply; it's got to go someplace so it goes into stocks and into housing. Bitcoin and art, I mean, those are people, I think, desperately looking for stores of value. It'd be difficult to say a dollar is a good store of value, given the deficits also defeat the value of that. So I guess we might come back to where we started; the deficit spending; are we addicted and what happens if we cut the supply? We just don't spend as much money as the United States Federal government.
Kerry Killinger
So again, no doubt that we are addicted to debt as a country, in deficits as a country, and unwinding that addiction could be very difficult, and in the short run, it has to be negative on short term economic growth. But if we don't get our arms around that long run, I think we're getting to our limits, and a lot of people are starting to use the words tipping point. We might be at a tipping point, not only politically and socially and how this country wants to operate, but just saying that the directions we've gone the last 20 or 30 years need to be reined in somehow. That maybe this country, politically, went pretty far to the left on some things. Maybe we went pretty heavy on the side of deficits and and spending all of our kids money into the future. Maybe we need to have some semblance of bringing that pendulum back to the middle. I think if that can be done in a very smart way, I think it'd be wonderful for the country.
Richard Helppie
I think that's well articulated. Then the definition of where's the middle; by way of example, owning a car. When I look at the price of a car, more and more payments now are over $1,000 and I contrast that with where wages are. It's like a young person trying to go buy a new car today, that's quite a hurdle, and that was always a mark on your road to older adulthood when you could afford that first new car. I read an interesting article the other day that said, hey, slow down, we had this idealized version of the United States many decades ago; single wage earner, middle class standard living. But they pointed out a family might have one or no cars, that you might have one bathroom in the house for the entire family, and that you had a set of school clothes, Sunday's clothes, and then you had play clothes, and that was it. The middle now is completely different. The ratio of people to bathroom facilities, for example, in your home, square footage in your home, is different. Number of vehicles that are owned by a household considerably higher. One telephone in the house with basic service for a few dollars a month, versus everybody's running around a phone in their pocket with a data plan. Locating that middle of what constitutes a middle class standard of living these days in the United States, because it's different around the world. That, to me, is a thing for politicians and our policy makers to decide what is a reasonable expectation these days.
Kerry Killinger
Now Rich, I think one of the silver linings in all this is going to be the impact that productivity and technology is going to have for us. The United States is a leader in the world of being able to come up with new technology to make things better and allow us to be more productive. I think we're just hitting the start of it and I think when we fully implement what AI can do over the long run, we put that with quantum computers in the long run, and we just let that marketplace play out. You mentioned cars. I'm not sure 20 years from now the model will be anywhere near the same it is here. I'm assuming for a minute that self-driving cars will be the standard and safest way to transport. Do we really all want to have a bunch of unused cars in our garages and then pay for them to be parked downtown or the office building to be vacant all day or is that going to be some kind of the next iteration of an Uber. Or is that car going to be used by somebody else when I'm not using it, and maybe even I own it, or whatever the model is. But I think technology is going to give us a tool we hadn't even dreamt of ten years ago and if we take that all the way through with what it could do into the sciences, into our healthcare, into government bureaucracies. I don't know about you, but if I want to prepare for something now, what I can do with ChatGPT in coming up with extraordinary writing, or extraordinary research, or whatever else, in half the time of what it was even a year ago, it's just a different experience. If you're in the middle of business right now, I wouldn't be concerned about losing my job to artificial intelligence. I'd be worried about losing my job to an employee that knows how to use AI and I don't. I just think you've got to embrace all these new tools that are coming up. Now, some will pan out, some will not. But you talk about the cell phone; I could not imagine, 30 years ago, what I can do with this thing now. Watching your Detroit game when the Lions are playing, or whatever it might be, all the way from that to the communication, to the computer to the internet, blah, blah, blah, anyway, it has made me an entirely different productive person than what I might have been a few decades ago. And now integrating that with artificial intelligence and just the growth in that, I think that could be a really optimistic outcome of where we are, ten, 20 years from now. The only other thing I'd remind is just from an economic standpoint, the only way an economy can grow is a combination of population growth and productivity. In this country, we have zero population growth naturally because we're not making any babies, and we won't for the foreseeable future. For net growth, it'll be negative, in fact, as the baby boomers come through, and then you have to augment that with immigration. Hopefully we choose the policies we want to have and who we let in but that population growth at most will be 1% a year. Then the only way to grow above that is going to have to be from productivity and that's all technology related. So if you want any economic growth it all has to come through productivity. I think in the next ten years productivity is going to grow very nicely if we can find the right way to use all the tools that are being presented now.
Richard Helppie
Well, look, I think you're making a compelling case for that. My concern, I used the ChatGPT when it first came out and I wasn't that impressed; I haven't gone back there. And part of it I thought, that's on my turf, because I can come up with a clever turn of phrase and such; I can't go as fast as they can go. But you can also see with the aging population and the need for more support, sure, I'd like to have a humanoid robot to clean my house and a self-driving car; that would be really great at this point in life. I'm confident that my kids or my grandkids will get there someday. This has been a great conversation. Is there anything that we didn't talk about that we should, and perhaps any closing comments, if you have them?
Kerry Killinger
No, Rich, I think, no. I think we've covered most. This is an exciting time. Again, we have a new administration coming in, a lot of optimism that maybe things can get shaken up a little bit. I think there's a better chance than I've seen in the last 20 years for significant changes. It's hard to tell. I mean, if you're a betting person, you always bet on the bureaucracy, I guess, in government, and so they may thwart most of the major improvements that they're going to try to do, but at least they're going to take on a number of things. I do think we're starting with an economy that's in decent shape, with the caveat that we're just worried about the valuation on the stock and the housing markets, and that could get in the way of other things. But I think it's going to be a really fun time, and we've just got to stay on top of it and enjoy it. I just encourage everybody to keep embracing technology in the best way they can.
Richard Helppie
Kerry, is there any change to the things that we've always said to people, get marketable skills so that you can contribute and get paid for it and live on less than you make? Is there any change to that, given the economy and all the changes in the world?
Kerry Killinger
Well, I think, it's always good to to live on what you make and don't overdo it. I think we got sloppy as a society following COVID, because we gave everybody extra money. Again, savings rates went to a record level, and people were flush with so much money, they just went out and spent it up. That's gone now. The savings rate is gone. Credit cards are tapped. Everyone has to live back within their means. I think we're going to get back to basic blocking and tackling saying, okay, limit the amount of debt you get into. Stay there. Then it's going to be about what skill sets will get me to the jobs that I really want. I think people are getting educated that it's not a very smart decision to go out and get a college degree in something that's not a highly sought after skill and go heavily in debt. We got way out too far on that spectrum. You've got to critically assess; if you're going to take student debt out be sure it's going into a degree that makes reasonable economic returns to whatever you need. Increasingly, people are saying a college degree historically guaranteed 50% higher earnings over your lifetime than no college degree, and that differential is starting to compress. Because, number one, some of the college degrees didn't provide the kind of economic upside that people would hope for, and they were starting to spend way too much on college to do it. The universities got very expensive and kept raising their [cost] to take care of their bureaucracies and in the end, student debt filled the gap. I think it's going to be harder on student debt. I think they're going to be a little more limiting as to how and what you do, and maybe even have to pay them back sometimes. There's a lot of shaking up that's going to go on now.
Richard Helppie
There are only two places you can borrow money from and owe more than you borrowed at the beginning, and that is from a loan shark, from your local mafia, or getting a student loan. That's topic for another day, but it's an outrage. We've been talking today with Kerry Killinger about the economy, about the social impacts, about where the world's going, technology, productivity. Thank you all for subscribing to and/or dialing into The Common Bridge. With our guest, Kerry Killinger, this is your host, Rich Helppie, signing off on The Common Bridge.
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