We're off to a great start and I encourage everyone to continue using the breakout sessions to discuss possible areas of collaboration. At the same time, we're looking ahead to the 8th annual forum next year and we'll start the morning with an exciting announcement. At least I think it is exciting. With the full support of our friends in Singapore, next year we'll take the forum to a new country, India.
From October 13th to the 15th, 2026, we'll gather in New Delhi with the cooperation and support of Prime Minister Modi. The Prime Minister has commended both the 60-year friendship between India and Singapore and the success of the forum. And I'm glad to report that he's looking forward to welcoming us. We're already looking forward to the involvement of leaders here in Singapore at that forum and we'll continue to grow and expand our network of partners and we're confident it will be another productive gathering.
First though, let's hear from a good friend of the forum and of mine. She's somebody I've known for a very long time, Gina Raimondo. If you're not familiar with her full resume, it's very impressive. Harvard, Yale, a Rhodes scholarship, a stint in venture capital, and before running for elective office and becoming one of the most effective governors in the United States. And that's how our paths first crossed. She was independent-minded, no-nonsense, pro-business, my kind of leader. As Secretary of Commerce under the previous administration, Gina led the charge in supporting economic development, including helping pass both a major infrastructure bill through the US Congress and a landmark law that helped strengthen America's chip industry.
She has a long history of bringing government and business together and getting big things done, and that's made her an ideal leader to participate in this forum. And we're glad that she agreed to co-chair the forum's advisory board. She's also been very active in helping to shape this year's program and all of us on the Bloomberg team appreciate her partnership. Yesterday I did have the opportunity to sit down with Gina and a diverse group of trade ministers and CEOs and it was a fascinating conversation. I'm glad our full forum audience now has the chance to hear from her. So please help me in welcoming Gina Raimondo.
Good morning. It's wonderful to see everybody. Thank you, Mike. That was a very kind and generous introduction. We were chatting backstage and it wasn't clear that it was going to be that friendly. So, I appreciate that. Anyone who knows Mike knows what I mean. The truth is Mike and I have been friends for decades. And I admire him so much because of the way he led and his public service. He didn't have to. He left an incredible career and chose to serve and did it as a model public servant I think. So when he asked me to do this, of course I said yes because we're friends. But the truth is I knew that if we did it together, he would drive impact and so and plus it would be fun. So that's why I'm here. And I couldn't be happier to do it.
But the truth is also in addition to Mike, I believe deeply in what this community stands for. Collaboration across borders, across sectors to solve the toughest problems we face. And it's fantastic to be with you. Many are friends, some new friends, and I'm excited to see what will come out of this gathering. It's also great to be back in Singapore. Whenever I'm in Singapore, we heard from the prime minister last night who I thought was fantastic. Whenever I'm here in Singapore, I leave more optimistic than when I arrived. Singapore to me is a city that proves openness and innovation can coexist with discipline and purpose. And I also think it's a model of what can happen when the public sector works together with the private sector. If the public sector and the private sector pull in the same direction, which is what Mike tried to achieve as mayor, I tried to achieve as governor, we could solve any problem. And I frankly think the US could learn a little bit from Singapore's experience.
Okay, I have one primary message for you this morning. My message to all of you here, business leaders from around the world, is that America still wants to work with you. Trust me on this one. Trust me on this one. I know the messages coming out of Washington can sometimes be unsettling, confusing, but I talk to businesses, entrepreneurs, citizens of America every day. They don't want isolation. They do not want isolation.
Relationships still matter. The bonds that tie our companies, our universities, our entrepreneurs together, these relationships are personal, meaningful, and resilient. And the truth is, they've been tested over decades, and they endure. And they will endure now. Why? Because they've been built on trust, a belief in shared opportunity, and a history of working together successfully to solve problems.
I'm sure you've heard the new slogan, America first. You've gotten that memo. Don't confuse it. Don't confuse America first with America alone. Listen, I have stood for elections many times. All tough elections. When you govern the way I do, it's tough elections. America first was born out of real frustration in our country. Okay. America first was born out of the fact that in many communities in our country, whole states saw their factories closing, their livelihoods eroding, and their dignity slipping away over decades.
That pain was real. That pain was real and it deserved a response. By the way, we lived that pain in my family. I'm from Rhode Island, heavy manufacturing state. My dad, when he was 56, after working 30 years at the same factory, lost his job unceremoniously dismissed. It doesn't feel good. It's hard. And he never, you know, really had a good job again. So, it's appropriate. You can understand that we would have to give that a response.
So, you know, some amount of reindustrializing, some amount of bringing back critical manufacturing to the US, it's necessary. And by the way, it's healthy. It's healthy for America and for the global economy. A strong, innovative, productive America is a good thing. It means we're a better partner, not a weaker one. And every American business I talk to knows this. That's what I want to reassure you of. Every American business knows this. So yes, we will continue to invest in manufacturing, strengthening supply chains, but also we want to do that with you with our partners around the world. We want to compete, but also be resilient.
The area I know best is semiconductors. I know more than I ever thought I would know about semiconductors. And in that instance, when it takes American capital, Asian know-how, and European technology to manufacture the most advanced semiconductors, that's not dependency. That's durability. That's what we want to achieve. That kind of globalization. When American companies work on clean energy solutions in Asia together with local entrepreneurs, that's shared growth. That is a good thing. When our universities, some of the best in the world, researchers and investors collaborate to fight disease or test the boundaries of physics. That's also a good thing. That fuels progress.
I was a commerce secretary. Best job I ever had. You're all in commerce. Commerce isn't zero sum. Sometimes politics is. Commerce is not zero sum. It's the connective tissue that keeps the global economy alive, creates jobs, spurs growth. So even though the political winds have shifted at the moment, and I do believe it's temporary, I believe it's a pendulum and we'll swing back.
It's on us. I would issue a challenge to all of us here, including myself, to step up right now as governments, as business leaders, investors, educators, innovators. Do what you can to steady the course. I think this moment is a test. It's a test for all of us who believe in connected, rules-based, opportunity-driven global economy. The reality is security and resilience don't have to amount to isolationism and a global retreat. Let's do both. Let's strengthen our supply chains, manufacturing and workforce at home and collaborate abroad.
So if you take one thing away from my comments, I would urge you all, double down on the partnerships. Double down on the partnerships that you create here that have endured for decades. And by the way, that will also endure this political cycle, right? The partnerships we have, the commerce we do, what we do together will endure this political cycle. And I also believe look at the challenges we have to solve. Climate change, global health, we will not solve these problems. Food security and insecurity. We will not solve these problems unless we collaborate as among countries. So don't let the combative politics that we have now all around the world and in our country define this global conversation.
If commerce leads, we all win. If commerce leads, we have a shared prosperity. And I want to tell you, and I'm sure Mike would agree, and many of you are American business people here, the average American has not changed. The average American entrepreneur, business leader of businesses, small and large, are the same. We're creative. We're risk-takers. We want to succeed. And most of all, we believe in openness. So let's collaborate faithfully. Let's compete because that's when that happens, the world gets along better. So thank you Singapore. Thank you for hosting us. Thank you for sharing that spirit of partnership. And thank you to my dear friend Mike for bringing us all together. I mean Mike brings the world together to solve problems and I think it's incredible. So, thank you and have a fantastic day.
So Gina was just saying we're going to get together to solve problems. We're just going to fix the future of capitalism in this session. Or maybe just take a bite out of it. When you study economics, the first textbook that you take you have the first chapter introduces students to the market and the state. Then there's a bunch about supply demand, goods and services, savings and investment, elasticities, all those things. But it keeps coming back to that line that you draw between the market and the state. How the market can work with the state to produce the most productive use of resources but in a way that also makes people feel that it's working for them. And we keep coming back to that in one way or another at these forums and I think we're going to keep sort of taking bites out of it. But I want to think about that balance and how we're sort of shifting our ideas of how a market and state can work together, particularly when it comes to the financial markets, which is so important to many people in this room. And we have this terrific panel to think about how we can build resilience, make people feel more engaged in the financial system, and sort of just produce better economic outcomes. Let me start with you, Raph. And you have asked me to call you Raph. You're in a really interesting position because you are investing on behalf of you're investing public money, the Australian Sovereign Wealth Fund, and the conversations we've had. I know you've had a really an evolution in how you think about that job and how as you scour the world, what you're looking for in that right kind of balance between market and state and a healthy economy for investors. So just talk us through a little bit of that.
Yeah, thanks. So I guess I sit in the nexus of I'm a public servant. I work for the government and I work in financial markets. So in some perfect guest for your economy forum, you know maybe the invisible hand's a bit too invisible at the moment I think. Like this system we've got is for sure the best system there is to allocate resources, create jobs, grow wealth, grow the pie for everyone but it's far from perfect and if you look back at human history firstly I would say capitalism hasn't existed for very long in its current form and secondly it doesn't get things right very regularly in terms of it. It moves forward, it moves back, governments regulate more, less, people feel they're participating or not. We're certainly better off than we've ever been. And my colleagues here on the panel are examples of how we get the benefits of the financial systems out to the people. But I think one thing we've observed is we're moving into a phase now where because of the huge leveraging of the economy really since World War II and because we've had a series of crises in the last 20 years where the solutions have made rich people richer but not necessarily made young and working people participate in that. There's a rising view of inequality right around the world and that's leading to more populist policy, more intervention in markets and in general that's a bad thing. It leads to lower growth, a smaller pie, more inflation and that's not good for society. So we've been thinking quite hard one about how to invest into that world. You talk about resilience but two about what can be done to smooth that effect so that markets, governments step in in the right way but they don't break the system.
And where just to follow up on that I mean where are you seeing that what kind of because obviously you as an investor you also just want to get the highest return for Australians but what have you seen that seem to be helpful interventions to sort of make people feel there's more confidence in the system.
So I come from Australia. It's a great example. It's got amongst the highest median household net wealth in the world. I think it's second. Why? Because we have a compulsory savings system in superannuation. It's been around for 40 years now. That means everyone who works in any job has to put money away for their retirement. My 24 and 21 year old kids who are both in casual jobs are already saving for their retirement. And not only that, they had to pick which fund to go with. So they did some research. So they've engaged with it. They get a statement every quarter. That makes a big difference. But I also think governments need to treat their constituents as educated grown-ups. You know, there's too much of this populism taking advantage of bias and short-termism, and we know that leads to poorer results. And so, one of the things we've tried to do, we feel like as a government investment fund, it's our job not just to invest well, but to help everyone get better together. And so, we've started to issue discussion papers on the issues we see in the world, the fundamental change that's going on, what that might lead to, and what can be done about it.
Okay. Now David, I wanted to go to you because you know you've created the new bank and obviously in an environment in Brazil and Latin America that has a large number of unbanked has potentially a lot of suspicion of financial products or just an exclusion from the financial system and yet the bank has done extraordinarily well and brought democratized financial services for so many people. So how did you how do you think about that and what do you think some of the lessons are of the experience?
Sure. And I was thinking about the topic of the panel and my answer related to this our specific example is capitalism needs a reboot in the direction of more capitalism not less. And this is I think a good example of why I would say that across Latin America you had 300 million people completely outside the banking system. And a lot of people tried to access it. They couldn't get it. Banks had no interest in serving consumers. There was effectively a banking oligopoly in every market. Today you see around the world this is actually a global five six banks owning 85 90% of the assets. So when you have that oligopoly that means capitalism is actually not working. There is no competition. And some countries in Latin America decided that they wanted to use government banks to try to include all of these people into the financial services. That actually did not end up working. It was too expensive. People were not included. The government banks were not well managed. The flip side, what Brazil did very well was this regulator saw we need more competition technology, smartphone penetration around 2013 are creating this window of opportunity to bring more entrants, more startups, fintechs to compete with these big bank oligopoly and they set up some very clear regulations and very well thought infrastructure about digital payments. And in our case, in 12 years, we've been able to bring over 40 million people to a banking system. We have contributed to decrease that concentration in the big banks from 85% to 65% over 10 years. We've saved over $50 billion in fees that consumers 100 million consumers were paying to that big oligopoly. Now it's being distributed to more competitors and it's been still saved in consumers pockets and ultimately interest rates are coming down. Financial inclusion is increasing. Customer service is improving. So here a shock of capitalism where more where the government doubled down on more competition and thought that oligopoly ended up delivering for the majority of the population and I see that as a really good example of the role of the private sector and the public sector. There is a role for both the government created this very clear regulatory environment and infrastructure and then they let a lot of people go compete created a market and the best people at providing that service were able to win.
I mean obviously and whole books get written about the regulation financial regulation and how to balance that with allowing innovation and you've presented it as a perfect example. It sounds almost too good to be true that the regulators would have hit on just the right amount to prevent any kind of problems coming from that kind of innovation. You know, usually particularly in finance, you have a wave of innovation that produces enormous benefits, but there is normally there are a few crashes along the way. Latin America, we've had financial crisis that have come after a period of great innovation or opening up of economy. So how was that avoided or you know what mistakes have been learned?
Sure. Yeah. And I think you're totally right. So regulators always discuss or think about the balance between systemic risk and competition and historically due to cycles a lot of the focus was on systemic risk and that meant prioritizing four or five banks that own effectively the entire market. You end up hurting access you end up hurting competition on that front. There was a change in view from regulators in the case of Brazil were saying well it's time to bet more on competition and let more people enter and as 40 50 60 different banks went in and competed there were certainly some that didn't work out there were some bank failures small bank failures but it happened that's part of capitalism ultimately this creative destruction right you're going to have some big wins you're going to have some failure there's got to be a sense of enabling or allowing a number of failures because otherwise you wouldn't get the big successes but the flip side though that is the understanding that a very concentrated market is safe is actually also a misunderstanding because you end up with this too big to fail type of bank. So while you have the appearance of a lot of systemic risk on having a lot of concentrations you end up having situations like you had in the US with the big financial crisis where you end up with too big to fail type of bank. So there's the right sense in the middle probably both extremes are careful what you see in crypto for example in our part of the world a lot of fraud a lot of entrants a lot of speculation that's probably too much on the extreme of too many people coming in there is a right balance but certainly a lot of the answers in some of these lacks of access is more competition is more entry versus government trying to deliver products or services that the private sector should be trying to deliver.
I mean, Adena, you're sitting at NASDAQ. You know, obviously there's a context now in which we're talking about public private and this is the difference between public and private takes on a different meaning these days when we have private markets and private capital has become such a huge feature and we had Mark Rowan on the stage yesterday. How do you see the sort of more traditional end of public capital markets being part of this approach and trying to sort of build people's trust in the system?
Well, I think first I think it's important to recognize that the public markets are the most accessible markets in the world. So, if you want to engage the entire population in the economy, then the public markets need to be vibrant and accessible to them. And you want to have companies want to go public so that every citizen in a country has the opportunity to be an owner of those companies. And that is really what public markets are there to create for the economy. And I think as a result we've thought a lot about what is the public company experience that we should have. How much regulation is the right amount of regulation for a company to go public and be public? How much regulation, how do we think about investor protection and making sure that there are proper rules of the road for every player in the public markets to be able to operate but also keep the investors always in the front of their mind and I think that's where that balance of regulation on both issuance and the public company experience as well as on trading and the public investment experience is one of the most important roles the government can play.
I think that in the United States it has been interesting. I've been I've started at NASDAQ 32 years ago. So I've been part of the growth of the economy and part of the growth of NASDAQ for many years and I've seen a lot of different I would say cycles in terms of regulatory oversight. And it's hard to strike the right balance. If you think about a public company, they are beholden to their owners and their owners are shareholders and their shareholders are every citizen in the world and they deserve to have the right to information. You know, there should be some transparency that every investor gets to have at the same time so that there's no inherent bias or advantage that any investor has. You want to make sure that there's proper liquidity so that you can get in and out of those companies freely. You can make those investment choices at any second of the day and you can execute those trades successfully. And then you need to have integrity. You need to make sure that there's market surveillance and that there's trade surveillance, that there's anti-financial crime and all the things that are necessary and proper rules of the road to make it so investors have the right experience. And that I think is what we think NASDAQ and the US markets are the most liquid. You know, they're the deepest pool of liquidity in the world. And I think that over the decades of a capitalist system, the United States has pretty much struck the right balance.
But today, the path to going public is a huge it's like crossing a Rubicon. It is such a huge difference between being a private company and a public company. So how do we start to moderate those rules to give better access to companies that who want to go public who want to access those public investors? Thinking about the disclosure regime probably there's too much disclosure. There's certain disclosures that are probably not necessary for an investor to make a proper investment decision. There's also the cadence of disclosure. Does every company need to report every quarter or can there be semiannual reporting for companies that have certain profiles? Also then there's the proxy process which if you ask any company who's public today, one of their least favorite things is the proxy process. And for instance, any individual who owns $2,000 worth of stock, I think it holds it for a year, can put a proposal on the proxy of a company. That's like saying every citizen of the United States gets to put a bill on the floor of Congress and force the Congress to debate and discuss and decide on it. It's democracy, but it's chaos, you know. So you have to think about what is the holding period and the level of investment that an investor should have before they can actually put a proposal on the proxy. What's the purpose of the proxy? How do you think about the proxy advisors and the role of them and the oversight of them? I think there needs to be more oversight.
And then there's the third thing is the litigation environment in the United States. You know when you go public you are subject to class action lawsuits from shareholders and you know we have a class action environment in the United States but you have to say you know is there another model that would work better and the SEC chair has actually had the commission vote to say that for companies going public in the future you can put in your prospectus that you are going to be subject to mandatory arbitration as opposed to a class action lawsuits and that is a game-changing opportunity for companies to go public and know that there is an avenue for disputes. There is an avenue for shareholders to have an opportunity to express themselves, but it's in a way that's more consistent with the public company model. We as an industry are subject to mandatory arbitration. So kind of bringing that into the public company model also I think is really important. So those are the types of things that create a better balance and make it so more companies want to cross that Rubicon and be part of the public markets.
And the administration is I think has sort of in general had a stance of wanting to liberalize a bit more potentially could be answering some of your concerns and also increase liquidity in the market, have more trading, all of those things. There seems to be some support for that. But at the same time, there's also a very desire to be very hands-off in relation to things that have inspired some nervousness. I mean, crypto and a lot of that innovation. So, I just wonder how do you think about that balance?
Well, what we advocate for in Washington is always what's right for the investor. And we talk a lot about that idea of liquidity, transparency, and integrity. And those are the three ingredients to a successful market. But they need all three. So if you're a private market then you don't necessarily have the level of transparency and liquidity that makes it so that every investor necessarily should have those investments necessarily not should not necessarily be available to every investor unless you're able to provide that liquid and transparent model and then you need to start to think about what are the rules of the road to opening up those private markets to the everyday investors because they need they deserve that. I think when it comes to the crypto markets, the SEC and the CFTC, the legislature, they're all grappling with what are the rules of the road that they want to create for this new asset class. Is there a model that harmonizes between a security and a commodity? Are these securities are these commodities? How do you therefore kind of regulate and oversee them? And there's a big debate that's underway in the United States around that. We're very happy that there is a debate that there's actually a discussion and a pragmatic way of thinking about how this asset class should be governed and regulated because it's becoming a big part of the retail investor experience and there are no rules of the road today and as you said that gives rise to a lot of negative consequences. So how do we bring them into a regulated environment while you allow for innovation but you also put proper oversight and the rules of the road that allow investors to have the right experience and that's the debate that's underway right now.
And just to remind you I'll have the questions coming through if you want to scan the QR code and offer some questions. Can I ask though did your sons which fund did they decide to invest in?
I've been wondering. I would just say all of the big super funds in Australia are excellently run. I know all the stuff.
Well but on that though I mean I had so many questions to ask you but Raph if you are looking and we obviously you're thinking in terms of countries as well as individual investments you know what your portfolio geographical allocations are but Adena talks about the importance of integrity transparency liquidity in markets if you look at the combination of those things in the US now in the mix of US markets and the administration's approach. Does that look like a resilient system for you? Do you feel like it's moving in the right direction?
Well, I think that's a leading question, but it's look, it's very volatile and unpredictable. And I think, you know, there's a few markets maybe belling the cat, we say, about where we're at in the cycle. One is you talked about litigation funding. Litigation funding is now an institutional asset class. I can invest in litigation funding that I mean, that's a good sign or a bad sign.
I'm saying it's a bad sign. Because I invest in the companies that are getting sued too, right?
So I think if we just have clear rules, they spread wealth and as you say, transparency and people can make informed decisions, that's the point, then we're all better off. Otherwise, we're just paying lawyers or maybe institutional funders of lawyers. Look, the US has been a remarkable economy and a remarkable market and it's done incredibly well since World War II and we have an extremely large exposure, it's almost half the portfolio and we've benefited greatly from that as has the world. But the reality is that at the same time that the rest of the world is growing faster than the US. So while the US still has the biggest economy in the world, it's a smaller proportion of the world, same with the capital markets, except in the last few years, obviously with the tech boom and AI, we've had a concentration.
The rules of the game are at risk and are changing. And for a non-American global investor, we want to know what are the rules around trade, capital flows, taxes, regulation and they are changing and they're changing with not much predictability and that does concern us and as a sovereign investor into the US some of the retaliatory tax provisions in the one big beautiful bill act which were repealed really alarmed us. And as a result of that and some of the volatility we've seen around trade policy after liberation day, we've already made the decision to reduce our US exposure and have done that and continue to do that. That's not to say that we don't think there are great opportunities in the US. It will remain our largest exposure but it's just a riskier place to invest than it used to be and we've lifted the expected return we need as a result.
There seems to me there is a tension I mean we talked about and I want to sort of keep coming back to this idea of also you know some of the populism we've seen and Raph you talked about the pressure that's come from the increase in inequality and the people feeling that the system has not worked for them and the moves that you would make that people might support on this panel to engage people more in the markets are often about making it more accessible, more fun, have people feel like they're engaged in the process, but some of the most fun investments are not necessarily ones that are going to go into the most productive uses for the economy and they may indeed you end up getting burnt. So I just I mean how does one think about the balance because you want people to be engaged but you do also want there to be a path to long-term investing and not to be having it be completely a game.
Yeah. I think the first thing is access is people across all different segments being able to know that they can access the equities markets or the fixed income markets or the crypto markets and I think a lot of the new fintechs and in a lot of the different platforms have been able to provide that access but then that has to come right next with a lot of financial education and products that are very easily to understand and then there are certain business models that are very incentivized is speculation and that's I think when a lot of people end up getting hurt incentivizing speculation versus long-term investing. In our case, for example, we have one of the largest crypto platforms and investment platforms in Brazil, but we instead of showing 700 different crypto assets, we pick five. The fact that we would ourselves invest our money and our kids money behind and we add a lot of education and expertise to the different people that are participating in the platform. And so far I think people have been able to invest and create wealth. But the flip side of that is that there is an instinct to avoid people getting hurt or buying investments is removing access completely and making it almost illegal which was what's happening in the US over the past four years. Crypto was this asset class that nobody wanted to talk about. Everybody was investing but it was almost like this it was effectively a black market. And so there again there's a balance here. You have to provide access. You have to provide disclosure, but the answer is neither let everybody let a thousand flowers bloom or create black markets or make it illegal because ultimately people will find a way to get in.
But is liquidity always the answer? I just think you talk about your kids, you know, they can't take the money out. They can be engaged in choosing, but it's inherently a long-term.
They can't take at least under the current rules, they can't take the money out until they're 65. So for my oldest child, that's in 41 years. And you know compound interest works. I think one of the issues like we're talking about the issues with the system from within the system but one of the issues I observe is the capitalist system doesn't really think intergenerationally very well you know it gives wealth or if you take risk to people who already have it or have built it up through their lifetime. And so how to engage the younger generations in the possibility but also help them participate is critical here because you know we can complain about the regulators but the regulators such as we think they're overregulating are responding to the policy makers and in a democracy they're responding to the voters and so we need to spread the wealth. We're growing the whole pie for the whole population. And if you can save for your retirement or access funding because you've got an idea you want to start a business or grow a business, that's how you grow the pie.
I just I think it's important to recognize that there's a role for different types of duration of investing. There's a different type. So for instance, I mean there's 401ks and there pension funds that help people save for retirement. The superannuation funds are an incredible creation. I mean they are an incredible creation. I mean, I think that if we were to kind of restart the United States, that would be a model that we should really kind of lean in on because it allows everyone to have an opportunity to engage in the economy, to be an owner of the economy for their life and then that creates that safety net, that kind of nest egg that allows them to know that they can live their lives with some security. And then at the same time they then have their annual income and they can decide whether or not they want to do things that are in shorter term and they want to engage in the markets in a different way and invest in certain maybe some things that are more speculative maybe some things that are really exciting to them maybe some things that are long-term dividend income generators but that's what's so great about the public markets is that you have the opportunity to do all of that and having all of those mechanisms available I think is the most important thing that an economy and a government can create for their population. So it is an incredible model what's been created in Australia. We in the United States we have about 58% of American households own equities but that means 42% don't. And if you think about that bifurcation of wealth that's being created as a result of that it's actually something that I think systemically we need to address.
And there is something that came out of the big beautiful bill that is actually really interesting, which is the America Invest program, where every newborn starting January 1st in the United States is going to be given a $1,000 investment account that's going to be professionally managed through essentially index funds. And they will not be able to take that money out until they're 18. So they have 18 years of compounding returns. And that will give them a chance then to have income for education, for housing, for things that are important to them as they enter their adult lives. But it gets them engaged in the US economy in a way that it just doesn't happen today. So it is one of the most innovative things that we've seen coming into the financial system in a long time in the United States and we're very excited about it.
It's quite innovative although I think Gordon Brown would recognize it as what he introduced in the UK. We had the baby bonds which was exactly this model that was in place in that administration before the global financial crisis and George Osborne. So I think it'd be fascinating that this is now being picked up by the Trump administration.
But I think it's a little different I would say only because it's an equity account instead of a bond account. So you become an owner. You become an owner in these companies and then what I really like about the program is they're going to have an app that allows them to see not just that they're invested in the S&P 500, but they're going to see all 500 stocks they're invested in.
It was in shares. It was just called a baby bond, but it chose between.
Which is great. I mean, that is, I think, such an important creation and it's going to have this long legacy, I think, of engaging the population in a way that's never been engaged before. So the more we can come up with those types of innovative approaches to get the population of every country more engaged in the economy, I think the better off our economy will be.
We have there's a few questions and we've run out of time so that's going to be very quick fire because I think that they're good questions. There's a couple of people who are interested in how can governments encourage long-term investing. We've been talking a bit about that, but Adena specifically Ian McDonald is interested in your and so am I on the proposal to drop quarterly reporting because I think certainly people in this room would see both sides of that.
Yeah, I know and there are two sides to it. So I think we are supportive of the notion of thinking about a different disclosure regime. And we think about it really is a one-size-fits-all model the best model for every public company in the United States. We have, you know, 4,000 listed companies and is every company really do they do investors need that? So, I'll give you a prime example. Our biotech companies and we are the market for biotech. We're really proud of that at NASDAQ. But biotech companies can go years without much change in their financial profile as they're developing and going through. And any sort of change in their financial profile would be subject to an 8-K. I mean, you know, they have material if a trial goes well, if a trial goes poorly, they have to report that. But every single quarter they have to go through this incredible process of putting together the financials, getting them audited, going through the prep for an earnings call and then communicating with their shareholders when it's probably nothing much is changing, but it's a huge tax on being that company where they're still trying to survive until they can generate revenue.
And I'm not sure that the quarterly process is really appropriate for a company in that mode. And we have thousands of companies that are small companies that are just trying to make their way and they want to give their access, you know, they want to have ownership of every citizen, but they also need to figure out how to earn their way into growth. And I just want to point out, you know, small companies right now are paying on average 40% of their earnings in interest expense. So if they are having to pay 40% of their earnings in interest expense, which by the way went way up in the last few years, right? because the interest rates went way up and most of them are short-term borrowers and variable rate borrowers. So, you've got that going on. Then on top of that, you've got this incredible cost of being a public company. It's a huge tax that makes it so that they're less competitive with their larger peers. And so, anything we can do to try to moderate that and think differently, I think is important for us to have that discussion and debate. So we see it as a way I heard one investor say great investors don't need the quarterly process like they should be able to understand the overall nature especially in a long-term orientation of what is happening in the company and the 8-K process will continue to be required for material non-public information.
I'm going to take this next question which has to be very rapid-fire. I'm going to take that as your answer even I'm going to take as your answer what you've just said to this question and the others to get a quick response. Which part of the existing financial markets do you want to change or eliminate if you have a magic wand?
Magic wand I think we should be growing value not trading you know for the long run. So I agree on the quarterly reporting we don't need it we don't want it.
I think the magic wand is going to be tokenization of assets. And what tokenization really enables is going to be an unbelievable increase in terms of the availability of different investment types and access to a lot of different markets. Brazil or Latin America, for example, has very little access to the world capital markets. With tokenization, you're going to be able to have Singaporean investors buying credit card receivables of a Brazilian city. You're going to have all of these with a lot of transparency in a centralized market around the world. So, I think that that will solve a lot of the liquidity that will solve a lot of the access that could provide a lot of transparency and that might be a big facilitator of flowing or taking capital to areas of the world that does not have access to that type of capital.
Exciting and upbeat ends to the panel. Thank you very much all three of you. Thank you.
Good morning. Global supply chains are intricate and they're exposed to all sorts of disruption. Trade wars, geopolitics, inflation, regulation, and as much as resilience has become a mantra for all companies around the world, nobody really knows what that means. How far we're willing to go and how much we're willing to pay. So, how do we start thinking about resilience in global supply chains? How do we shockproof, I suppose, global supply chains? Shannon, let's start with you, a macro perspective. Global supply chains have already seen stresses: COVID, the Ukraine war, US-China tensions, and now tariffs. Would you say they're agile or fragile?
Well, that's a great question and I would actually say as we look at these last number of years and yes, we can point to disruptions in COVID where you didn't have goods that you wanted. The really the story is one of agility and you saw the whole world shut down there and within weeks, sometimes just a few months, everything was back on the shelves. You found a way to move it around and I would say again we are seeing a shock with the United States putting on all sorts of tariffs, sort of the levels changing day in and day out as we sort of settle into something, other governments responding, either some retaliating like China, others responding by going abroad and negotiating other free trade agreements with other countries. So a real changing of these rules and again you are seeing an agility, right? You're not seeing huge changes as of yet in supply, right? Things are still going to various countries and my colleagues here are in the midst of that, they're moving it around those countries. But you're also seeing it in pricing and the like that there's been a lot of agility there. So a lot has not changed even with significant both physical disruptions with COVID and then policy disruptions over these last several months.
Raj, agile? I mean you move $2 trillion worth of goods every single year. When you take a look at the supply chains now, how are they different from five years ago?
Well, the first thing I would say is that if in 2018 or 19 we had this conference right here, this topic wouldn't have been on the agenda. Nobody really cared about supply chains and it's gone from there to be a boardroom conversation. Now even talking things like tariffs and de minimis. So all the things we do have are become very cool for everybody now. I think the world has completely changed as you saw a lot of things were taken for granted on the supply chain side of the equation and then when there was a disruption suddenly there's a lot of attention being paid. But I think we got to trace the origins of trade. Back after the Second World War, trade was 4.5% of global GDP, it peaked for around a quarter and it's kind of been there and thereabouts since then. And so FedEx, moving 17 million packages a day, we are a referendum on the high-value supply chain. Like you said, we moved $2 trillion of commerce. We see the patterns changing quite dramatically now, especially in the last 6 to 12 months. I think we are moving from one set of equilibrium state to another and we are right in the middle of it and that's what we are now seeing. The word that Shannon just used, agility, is what's really really important both from a physical point of view and a technological point of view. I'll just finish with one point. You use the word resilience, which is exactly the right word. People have talked about you have to be just in time or just in case, but you have to find the right balance where you're efficient and reliable at the same time. And that's where resilience comes in. And the only way to do this is at the intersection of the physical networks in place and the technological networks that work hand in hand with that.
Peter, I can't help but feel like there's just too much optimism. This agility and we're going to be okay. There are still vulnerabilities out there. Where are they?
No, thanks for that and it's great to be here. Let me piggyback on what we just heard as a first statement. I think this is actually not new over the last 6 to 12 months. As we heard, this started much earlier. I think earlier it was more the consumer which was driving actually to a more sustainable supply chain and I think many companies have actually reacted to that rather earlier. But it takes a long time to change supply chains and you have to be careful that you find the right balance as we just heard between the costs you have on the inventory so you keep the products in your hand versus actually the cost of disruption. And I think it has shifted that companies across the world in all industries are taking much more into account that the disruption effect is much more costlier compared to actually keeping your product more on the inventory side. And if you talk about those type of comparisons, then you're also thinking about where do I actually have my supply chain because there you also have a risk of disruption if you are banking on just one factor and we can come back to that later. Some companies have always done this in a very different way and have the benefit at the moment. But it is quite clear we have the vulnerabilities, we have that we can talk about rare earth metals, we can talk about the tech sector, the chip sector, etc. And there we have vulnerabilities which are some of them are more politically driven and we heard the trade etc and the tariffs but others are also because of the evolution of the tech side in the products themselves which gives us more vulnerability and therefore we have to think through in a different way how we structure our supply chain.
How are you thinking about resilience in your business? You're in more than 100 countries.
Yeah, absolutely. So, we have the scale which allows us to do more on different things, but we have never actually had a global supply chain at ABB. My predecessors had the vision that we go max for a regional supply chain or what we do which is very in favor today is we produce local for local. So if I take the US, we are 80% plus of what we sell we produce in the US, it's 85% in China, it's 95% in Europe. So we always had that strategy that we developed the supply chain within the country or within the region that gave us a lot of resilience during the difficult times like the COVIDs but it also helped us actually to design the products for the specific needs of the markets and therefore also developed the local supply chains attached to that. So we never went for full efficiency. We had actually a good mixture between reliability, kind of cost of inventory which we also had to have and not just optimizing the last cent.
Right, so because of your scale there's a lot of localization happening but for a lot of countries and companies that's not the case. There is a trade-off, resilience costs money. So how do you think about just in case, just in time, how do you square that, Shannon?
You know, as I think about this and as you see sort of geopolitical factors, I mean there's a benefit, there's been challenges from diversification if you kind of cross those geopolitical fault lines especially with the policies that have come down from lots of countries, right? Not just the United States, not just China, but from others. But there's also, and many companies have found this, is that there is also a challenge of geographic concentration, right? And that challenge can be a natural disaster which takes out a particular place you are. We saw that in the United States with Hurricane Maria, all kinds of medical equipment was no longer coming from Puerto Rico. So you get that sort of challenge. You have a challenge of geographic concentration if you have a point of failure. We've seen that too in the United States with baby formula where a plant goes down and all of a sudden we don't import that and we don't have access. So that is one challenge that I think you face from that concentration. And then there's more sort of amorphous indirect which is that you don't necessarily have access to the latest innovations or incremental changes. You don't have access to sort of the networks that you're talking about, the economies of scale and scope. And so I think as we see some government policies have this ambition to reshore, bring things all much closer, this idea of I think regionalization is sort of the Goldilocks, right? You're not so far away that you hit geopolitical fault lines but you're not so close that you lose the benefits of economies of scale and scope. And I think one thing as we look at the policies that are being laid out is for any government, even a very wealthy government, it's going to be very hard to subsidize more than maybe a couple industries indefinitely, right? In the end, you're going to have to be commercially viable. And the way you do that is you do need some sort of diversification.
Raj, just in time, just in case, at some point, redundancy is just waste.
Yeah, that's for sure. But I want to talk about this for one second here. I think from a FedEx point of view, we are here to serve other people's supply chains. That's our role, it's different in the sense that we are a referendum on the global supply chains every single day. So the advantage that a company like us has got right now is the fact that we have spent over 52 years now building the networks that's already in place. To the point Shannon was talking about, those networks are very very critical in that redundancy because as our customers start to change their supply chain patterns and some of them, for example, our B2C customers move faster than B2B customers to Peter's point, but when they move, the fact that we are already in those places because we're already serving those places is an advantage that companies which have already well-established networks have today. So we, for example, right here in Asia, in the last few months literally we have added flights intra-Asia, for example we have added flights from Taiwan to Korea, we've added direct flight US to Singapore, we have different connections from Penang and Thailand. So those things we just are able to connect it, we can move much faster than manufacturing can move their capacity. So that's the agility and the resilience that we have. The world is going from one equilibrium state, maybe of globalization, I don't think it's deglobalization. I think it's reglobalization. There is a new pattern, the sets that are evolving as we speak. And then finally, I would just say to answer your question, the role of technology becomes extremely critical. At some point, because of the networks and the data and the insights that we have, we created a digital twin of FedEx that we are able to partner with our customers in a very different way than a supplier-vendor relationship and to then optimize supply chains. We are getting started in the early stages here, but that's going to get increasingly more and more important as we go forward. That's the only way to balance the inefficiency of more inventory and diversification. How do you bring it together? Technology is going to have to play a huge part.
When it comes to supply chain, there's a lot of talk about how you need to pull back from your reliance on China. What would be the result of that? Do you see a decoupling of some sort for someone who's operating in China, Peter, in a big way? China is your second largest market. How do you look at that?
Given the way we are positioned from a supply chain point of view, a little bit less of a problem for us because we are quite self-standing in China, but we obviously we are serving a lot of customers and we see this actually happening. It is not a complete fact that the companies are leaving China, where they're building their supply chain in a different way. The one thing which is a concern to me is that a lot of companies start to do actually or make the changes into tier one suppliers. But that's actually if you really want to go for the safety net for a reliable supply chain which is not just in one country, you need to deal with your entire supply chain. Your tier two and tier three is as important as your tier one because otherwise you are still depending on certain jurisdictions where you don't want to have a dependency and we see this really happening. I think there are two trends. One is that it's not China plus one. I wouldn't call it this way. I think it is that the supply chains are much more regionalized and localized. So that's kind of one trend. And also through that the manufacturing, they're actually getting smaller. So instead of building one global manufacturing base, you may actually, customers are building three or four or five. Now one would argue that that's a lot of costs. But given the fact that through automation, through robotization, through the use of technology on AI etc. the costs actually are coming down, you can run even in a high labor environment like Europe, you can run now manufacturing at a let's say at a competitive level to most countries in the world. So all of these effects are actually at work at this stage. Let me add one thing because I'm also chair of the largest terminal operator, container terminal operator in the world, PSA International here in Singapore and what we see is actually the network there we see some shifts but those who have an established network they can react much faster and we discussed this before. Everybody talks about the final customer, the beneficial cargo owner and that's the last mile but what are about the 10,000 miles which we are actually covering. That's a slightly different game. And there you can't just have a lorry driving up in front of your house. You need a structure. You need a network and you need the digital and the softwares to run this in an efficient way so that you can actually help your customer to have an optimized supply chain. And we forget that from time to time as we just click and we order what it actually means to order something over 10,000 miles. That's his job and that's my job as well.
Peter and Raj taking offense. We will not forget just about the last mile. You know we talk about de-risking from China. Can we de-risk from China without decoupling? Shannon?
You know what's interesting to me and just picking up what Peter was saying is that, you know, China, you look back 10, 15 years ago and trade was about 60, 65% of its GDP and it has systematically decreased, now roughly a third. Right? It has been lowering the amount of trade as part of its GDP and part of that is bringing in fewer imports and not just soybeans and things like that but intermediate goods, right? Making things within the country and part of this sort of China plus one or China for China has been that sort of creating the whole product there and then shipping many things out as we've seen and an increasing amount of exports that are going out into the world. So in some ways they've been de-risking themselves, right? In the reliance and I think that actually is probably the story of the last eight plus years is that as the world has started talking about distancing, China's taken this seriously and very systematically and comprehensively and the rest of the world has not as much, lots of talk about it but less of that. As I look at the model and the policies that are out there, China's moving in this direction and the United States has an ambition too to distance here and they've been somewhat successful but some of these policies, if we had a China plus one model, I think we may be headed at least in some industries to a US plus one model, right? It will be profitable to produce lots in the United States because it's a very wealthy economy and the prices will be higher because it'll be a protected market. So, there'll be reasons to produce there. But perhaps not producing there for export to other markets because the products will be more costly coming off of the assembly line or the shelf. Or some of these other trade agreements that are being signed around the world, not with the United States, will change some of the access to markets and the ability to get into those markets. So I think as we look at this, yes, we're seeing distancing, I think in some ways led by China successfully over this last eight plus years. But then, the US policies will sort of double down on that and we'll get sort of two different hubs for at least some products that are producing for those own local markets.
What are your flows showing?
So I think from what we see is that China to US traffic is down because of especially as a result of the de minimis going away. However, China intra-Asia flows are up. China Europe flows are up. China Latin America flows are up. So, and then the intra-regional numbers is also now starting to change as well. So, this is a much much more complex question than just China plus one at this point. Like I said there's a new equilibrium state being formed in this new supply chain patterns and they're much more regional in nature and the mix of China's exports are now fundamentally shifted away from the United States primarily in the B2C now perhaps more in B2B later and then they are moving into other lanes.
You say more regional, you see a lot more within ASEAN for instance?
We do and that's why like I said we have added more capacity, more flights within the region connecting some of the other, Vietnam and Singapore, I mean connecting directly to Singapore, United States for example. So those kind of things are happening as we speak. That's the agility, we can move our capacity far faster than manufacturing can move. So we know from the bottom up we see these signals and we can react.
Are these disruptions permanent or are we looking at them lasting through President Trump's term? I mean we know that when it comes to investing in resilience, it takes a lot of money, right? You get a sense that it is going to be permanent. Peter?
I think disruption doesn't follow election cycles. They follow actually fundamental changes in the markets. So I think these disruptions, they will stay. I think the supply chain is now really being adjusted. It normally brings a lot of investment dollars and companies cannot just switch that from one day to another. You have got assets on the ground and therefore you have to actually use them. So I think we are looking at a really changing pattern here which will stay and I think for the first time since World War II we see industrial national policies coming up left, right and center and I think they will not go away that fast. There will be multilateral agreements where like-minded countries as the Prime Minister here also said in Singapore will work together but those who have the power and the markets they will most probably go more the bilateral path and hence I think these things will be here for the longer term.
Yeah, I think as I said earlier the industrial economy is going to take a little longer to change but once they change it's difficult to go back. So that's why I mentioned that we are going from one set of equilibrium state to another and we are right in the middle of this process. Once you get there, it ain't coming back. I mean, so it's going to be there. The other thing is fundamental. I think ultimately the people in the world want to trade and travel. So they're going to figure ways out and it's not particular one administration or the other. It's ultimately but the idea of a reglobalized world is probably something that's real.
Industrial policy is not just the US and China because the US and China are doing it, other countries will follow suit.
Yeah. You're seeing that. And then just to pick up on Raj's point about technology. I mean as you think about building new factories and like you're not going to build the factories of 20 years ago, right? You're going to build a totally different factory. And we've talked about here, dark factories and maybe they won't have no lights, but we're going to see a very different element and that capital investment, the technological investment, there will be opportunities to put in places where you might not have put 20 years ago. And I think that will be part of this disruption once you start building those. I think it does not depend on electoral cycles. It really depends on the technological cycles. And if you look at the investment that's happening around the world, particularly in the United States, but all over, right, it is in those technologies. It's in energy and data centers and that future and that matters for some of the services that we often talk about but it's going to matter for this nuts and bolts of factories as well.
All right, let's pause for a poll. The question today is what's the best way to reduce supply chain risk? What is the best way to reduce supply chain risk? A, stockpiling. B, nearshoring. C, data transparency and security. D, diversification. Sorry, no choices for all of the above. Just one of them. Stockpiling, nearshoring, data transparency, security, diversification. Tough choice. I think in the meantime, perhaps you can talk about, you touched on how technology data will be important, right? I mean, you use that to anticipate the black swan events. How is it playing out for you?
Well, this is a very critical point here and I think especially as we, the things are changing, we see the demand pattern changing like we talked about. Operationally we are on the front lines, we're one of the largest brokers in America so we have to now as we move products from one country to another through the borders, before people took it for granted but now it's getting increasingly more complex and we have to operationally do that. Well, the other component of this is technology. Just think about it. For every commodity, every country to every other country, for every commodity, we have the data for classification. We needed to do, we have the data because we needed to have it for doing our jobs. But what we have done is created a data structure and platform and now it comes with GenAI to run against these models. So for example, if somebody is trying to ship something from place A to place B, the number of possible combinations of classification codes you need today are incredible. I mean before people didn't need it because there was various mechanisms, de minimis, whatnot to get through that. But today you don't have that choice. You have to now figure out what is your classification code that's going to get you across the border. So we are now using GenAI tools to be able to predict that with more and more confidence using the data that we have. So now the data that we have had over the last 40 years, 50 years of operation becomes extremely critical and that's why technology is going to play a significant role. And the other part of it and I'll just briefly mention it is that when we talk about supply chain resilience, to be able to create common data platforms with our customers so that we can build the best supply chain solution together versus a supplier-vendor mentality of before.
I just want to refer to the results of the poll. Diversification 72%, nearshoring 24%, data transparency and security 4%, stockpiling zero. Interesting. Stockpiling. I mean it wasn't too long ago that people thought stockpiling was the way to go, right Shannon?
And it may be the way to go in areas of economic security, right? It may be for basic medicines. It may be for critical minerals. It may be for certain things. You do want stockpiles. And we're seeing governments talk about that, adding that. But right, I mean, I think what this poll shows and what the conversation shows is that when we're thinking about the broad economy, that's not how you're going to do it, right? It has to be a different pattern. I mean, one thing I just to add on what you're talking about technology. I mean, one thing that's interesting to me as I watch these free trade agreements signed and many that the United States just signed with Asian countries on the recent visit of President Trump is, there's lots written in there about transshipment, about rules of origin, fuzzy, not yet defined, but if you're going to continue to see these trade and the movement, at least with the United States, there's going to have to be more tracing than there is. And the technology is there, the US customs is investing billions of dollars to have some of that that they can scale up and companies are going to have to do it as well with FedEx or others.
Well, the complexity is clearly going up and the days of doing basic algebra is over. You need to do advanced calculus and that's why we need people like us.
We talked about all the costs which are coming in because of the supply chain changes. I think technology is going to be the key which works the other way which actually takes costs out of the system. Because the transparency of where your products are, how the ship sailing will go, in our case, in your case it's the airplanes etc. There we have now technologies which will save us costs on the one side but it will also be very very positive for example for climate change because the more we can reduce the sailing time because we have optimized data, the less CO2 actually we will be burning. So there is, I think we need to see this in a very integrated way that it is not only a cost, it's actually an opportunity and there is value attached to that if we apply the technology in the right way and I think that's where and you use the partnerships with the customer, I think that's where the trust element comes into it. So a company like ABB but also PSA International which I also chair, we need to and we will work with our customers, container lines, in order to optimize actually the supply chain and through that we can actually also therefore produce incremental value for the ultimate customer which would also help on the pricing side.
One of the key discussions right now is the supply chain of rare earth, right? Because there is a dominance, China's dominance in the space. How should we start thinking about it? I mean the thing about rare earths is that it is not rare, it's just producing it gets complicated because it comes with an environmental cost. How do you build that resilience in rare earths? How do you start thinking about a strategy for it when there are few alternatives?
Right, well this is sort of that idea of diversification that rose in the poll. I think on areas like this it's where it's most important and you've seen as you say a concentration in the processing and the refining that has given if not a monopoly a real dominance in the market, ability to control price or just access. And what's interesting to me is just in a few weeks we have seen or a few months we have seen governments begin to react fairly really quickly, right? You see the US government investing in taking stakes in companies that will process rare earths, create rare earth magnets. You have seen the beginnings of long-term contracts. So, you're not dependent on market prices, which when you have a dominant player, you can drive them up. You can drive them to zero to drive people out of the market. So, you're starting to see, and it's not just the US, Europe and others are going there. And this isn't just this administration, right? We saw in the last administration, from the United States side at least, going out and looking for like a critical mineral security partnership, engaging with other countries. And we've talked a lot about the worries here, but this is a huge opportunity because, as you say, rare earths are not that rare and there are a lot of countries out there that want to be involved in sort of technological supply chains and this is an entree for many that have reserves or could also do some of this next step up in sort of the value chain.
But it takes a long time.
It does take a long time but it is something where you can move and I think that is the challenge, right? We saw 10 plus years ago Japan had a similar challenge with rare earth and access to them and they started changing their supply chain and are not as dependent and now it's time for I think other countries to do the same.
I would like to add here R&D. So it's not just that you optimize your supply chain today, it has a big impact on how you do R&D. I use one example. We are the biggest electric motor producer as ABB. We just brought the first one into the market now where we don't use magnets, because you need magnets in motors. We don't use rare earth metals anymore. We just do it without. So I think the point which I'm trying to make here is actually that the innovation capabilities are now really coming to the forefront and this is triggered now to find different solutions to deal with the dependency on maybe one dominant player and I think we shouldn't underestimate that one. It will take time but I think everybody is working on solutions on this one.
Well I just, I think you answered the rare earths pretty well. I'll just take a broader point here. I mean the theory of comparative advantage was the way things happened for many years. Now suddenly a lot of things under the national security umbrella are now being, you know, we have restrictions on that. So rare earths fall under that bucket. There are many other things. So we need to have a cogent policy around it. We used to talk about small yard but tall walls to make sure that there's a clarity on what those things are. I think we need to get back to that place where if we're going to do some of these commodities as restricted then you need to be clear about what those are so the rules of the game are clear and people can work towards that. I think it's when it is in flux is when there's a lot of questions.
As we wrap up, I just want to ask a question to every one of you. What's a key point, whether it's technology, policy, regulation, what's key to securing supply chain resilience? Let's start with you.
I think for me it's technology. I think we and this, I use technology in various ways here but I think the impact of the newest technologies like AI, previously was digital, but also the way we develop our supply chains and the products. We even redesign products because for local specific requirements because we cannot produce a certain component within that country. Then instead of actually importing it we just redesign the product and therefore technology plays an enormous role in the medium and long term here.
I think robust physical networks, and I've used those word very carefully, networks, and that is you can get from one place anywhere in the world to any other place, combined with the technology, combined with an equilibrium set of rules of the game. I think when those three come together then we get to a new state of resiliency.
Shannon, the final word. You know, as I look at all these policies, technology, network, all of those I think are important but in the end to create sort of viable and competitive networks it's going to end up with market forces. So I think that is where companies are going to have to be making decisions, what is the right price and where am I going to place myself. So I think we're going to see some movement but in the end I would just say supply chains are rather sticky and through all of these disruptions if you have a supplier and a customer that you know and you know well, it's hard to change. So I think we may see less movement than the policies or these other things we're talking about would suggest.
Shannon, Raj, Peter, thank you so much for your time today.
Thank you. Thank you very much.
Prime Minister Rishi Sunak's inaugural AI summit kicks off next week. He's trying to position the UK at the forefront of development and regulation of a technology that he said could be paradigm shifting.
Mitigating the risk of extinction from AI should be a global priority alongside other societal scale risks such as pandemics and nuclear war.
Please welcome to the stage Rishi Sunak, former Prime Minister and Member of Parliament for the United Kingdom for a conversation with Bloomberg's Parmy Olson.
All right. Okay. Well, thank you and Rishi, welcome to the Bloomberg New Economy Forum. It's exciting to speak to you. Obviously you were former Prime Minister of the United Kingdom, but you also have a background in tech. You went to Stanford in California. You've had a deep interest in technology and you're now an adviser to Anthropic and Microsoft. So a lot to learn from you about this kind of interplay. But let's start with a big question, the 10,000 foot view. Everybody's talking about the global AI race. That's kind of how it's being framed and winning it and it being a battle between the US, China and Europe sort of overseeing perhaps from a regulatory perspective. What does that even mean to win the AI race? Can you define that?
Yes. Well, morning Parmy, morning everyone. Great to be here and delighted to be able to have this conversation with you. Obviously, it's something that you've thought about deeply as well. Now, taking a step back before we talk about the AI race, I think we're living at a time which is both paradoxically the most dangerous of our lifetimes, but also the most transformational. I say dangerous because the old unipolar world order that we were used to is gone. We're not quite sure what's replacing it. Great power competition is back. Technology is obviously a part of that. But also this is transformational because AI, I genuinely think, will be a general purpose technology like electricity, like steam, and these things don't come along that often and when they do they have the potential to transform societies, economies. And that's really exciting. So that's where we kind of situate ourselves at this moment. Now when it comes to the AI race, there is all this focus on the race to AGI. Who's going to get to the singularity? Is it the US? Is it China? I actually think that's the wrong race to focus on. And I actually think the race we should probably pay a little bit more attention to is the race for who can adopt technology and AI in particular the fastest. If you look at the history of general purpose technologies, and actually there's a professor called Jeffrey Ding who's written about this and I found his book very powerful. What history tells us is you don't have to be the country that invents the technology to be the one that disproportionately benefits from it. And you think all the way back to the printing press invented in Germany. Actually, it was the UK and the Netherlands which really capitalized on that innovation. And similarly with the second industrial revolution, even though Britain did a lot of the innovating, America did a lot of the commercializing. And I think that's the interesting thing to think about. So, who can sprint to the finish line of getting this AI spread across their economy, across their society in a way that benefits their citizens, a little bit more focus on that race, I think, would be beneficial.
So, diffusing the technology to people is part of winning it. And it sort of makes sense when you think about how much money is being spent on building AI infrastructure that if Europe or the UK capitalizes on that, they don't have to spend that kind of money and just build on top. I want to ask you about your role in AI. When you were Prime Minister, you established the AI Safety Summit, the very first one in 2023 at Bletchley Park. Since then there's been a kind of noticeable shift in tone I think among governments from let's oversee AI and make sure it's used properly to let's adopt it as quickly as possible. Do you think that's a correct shift? And do you think there's a possibility that actually there could be a price to pay if governments focus so much on just implementing this new and untested technology so quickly?
Well, I don't think the two things are incompatible. And I think it's important to focus on both. Now, we touched on the diffusion point. I think it is important that governments are building what I'd call the diffusion infrastructure. What does it take to get the technology deployed across your country? It's about training people, training small businesses, bringing public opinion along with you, making sure that you and the public sector are actually doing your bit to drive innovation and transform people's lives that way. So, I think that is a really important focus for government. Now look, alongside that, government's first responsibility is to ensure the security and safety of its population, of its citizens, that's the first order of business if you have the privilege of leading a country. And obviously when a new tool like this comes along, yes, enormous potential for good but also potential to be misused. And my view was it was important that governments develop the technical capability to evaluate those risks and talk about it with peers. And that was the genesis of the AI Safety Initiative and the summit that I held and I'm really pleased that that has now become a fixture on the international calendar.
So South Korea did the next summit. France did the summit earlier this year, although the name changed.
Yeah. Which I think is completely fine.
It changed to the AI Action Summit, AI Safety...
And I think India's summit next year will be the AI Impact Summit and I think that's right. I think the more important thing is that leaders are coming together every year to focus on AI. I think having a dedicated event where world leaders have the ability to talk about it and paying attention to it is absolutely the main prize here and now that has been firmly established as I said. But I think the important point here is the right thing to do is in my view not to regulate, it's developing the technical capability to evaluate risk. And we set up the AI, what is now called the AI Safety Institute, which has been rightly mimicked around the world. And I see Gina sitting there and her and I worked on this together when we were both in government and I think government's developing that expertise to work with these labs to evaluate the risks and that does have to involve your national security institutions as well is the right thing to do.
Yeah. And it's fortunate that the tech companies who are building AI models like OpenAI and Anthropic and Google are working with AI Safety Institutes to voluntarily give them access to their models. But what happens if those companies decide they don't want to give that access? And for example Mark Zuckerberg who is making open-source models with Llama recently has been saying actually we'll probably go more closed source as our models become more capable as they get closer to that threshold of building machines that are smarter than humans. Doesn't that mean that maybe the AI Safety Institute won't get that access it needs to test those models? What do we do then if they become more opaque?
Yeah. Well, so far we haven't reached that point which I think is positive. And what I've seen for the most part is companies committed to what they would call responsible scaling practices and working really well with our institute in the UK, the institute in the US and others to do what's called pre-deployment testing. So before the models are released to go through that red teaming and those exercises. And I think actually what those companies have found is they benefit from that interaction because ultimately they don't have the same national security expertise that exists within governments. So having those people be involved in the process of...
Exactly. That collaboration is valuable to the companies. Look, I don't think anyone wants to put something out there into the world which they think could genuinely cause significant harm whether it's cyber, biological or nuclear or chemical.
They don't tend to put...
Exactly. So if we have the ability to look, let's work through those things with you in a collaborative fashion and this is not regulation. This is a technical evaluation.
But just to make sure that there are no unintended consequences with algorithms that are perhaps designed for engagement the same way social media put out technology meant to connect us but it did end up having these harmful consequences.
And that's exactly the point. And look these companies all themselves conduct this testing as they should but I said I don't think you can as a government just say this has got nothing to do with us. Of course you need to be able to make those evaluations yourself and add something to what the companies themselves are doing. And so far that has been I think a mutually beneficial and positive collaboration. Certainly in the UK we found those conversations with the companies have been positive, productive and they are committed to continuing to engage and long may that continue.
I was going to say long may that continue because that is a great place for things to be right now and let's hope that that continues to be the case. Let's just talk about something a bit broader which perhaps a lot of members of our audience can relate to. And that's the job market and particularly preparing our children for that job market. I have a 15-year-old, you have a 13 and 14-year-old. We were talking about being parents of teenagers backstage and what that entails. With so many university graduates now struggling to get jobs because companies are using AI for intern-style roles, how do you prepare your own kids for that? What kind of skills do you think are most important for them?
Yeah, I have two kind of teenage, young teenage girls, so they much rather talk about skincare products than they would talk about preparing for the job market. But no, I mean the way I've thought about it a little bit and this is actually informed as well by looking at the work that Stanford economists are doing where I spend some time and also looking at the data on LinkedIn which I think is a fascinating insight into what's happening in the job market.
So you're just looking at LinkedIn yourself, just looking for those...
And seeing what's happening. And what you take away from that, what I take away from that, what I tell my girls is that first and foremost, of course you just need to be familiar with how to use these tools. I think everyone accepts that, you see jobs requiring some degree of AI literacy are doubling year on year in the UK, in the US. I think that will continue. And
That's not software experts or computer scientists. Whatever job you're doing, having the AI literacy skills so that you don't lose your job to someone who is proficient with them, I think is critical. So I think that's kind of the overriding piece of advice. A few specific things I think about is, look, we're never going to lose the importance of being able to think, to reason, to question critically. So I think those skills will be incredibly important for our young people to develop. And similarly, those human skills. Actually, if you look at the LinkedIn top-ranked skills, you know, only one or two of them relate to AI. The rest of them are all things that talk to human-to-human interaction, interpersonal dynamics, empathy. And so I'd make sure that my girls were making sure that they spend time developing those skills as they grow up. And then I think the last thing, which is going to be a real change actually, is everyone, whether you're a new graduate or a senior leader, is going to have to get used to managing a team of agents. And I think that will be, yeah, the age of agents will come relatively quickly. And it's great, you know, we're used to learning how to manage teams of people, but I think actually very young graduates will soon have to learn how to manage a team of agents and understand what that means, how to divide up tasks, how to make sure that the work being done is right. And that will be a new skill. And I think that, you know, the nature of work is going to change in that regard. And you know, my kids, your kids are going to grow up into that world, and I'm excited for them. But it will require, I think, a mindset to just keep learning and keep curious, being able to adapt.
Well, Richie, honestly, I have so many more questions I could ask you, but we are unfortunately out of time. So we are going to be bringing on our panelists shortly. But for now, thank you very much, Rishi, for that wonderful conversation.
Please welcome to the stage Muhammad Kande, global chairman of PwC, and Forest Li, founder and CEO of Sea Limited.
Well, welcome to our panelists for this next segment. This is on AI's report card. You know, in 10 days it's going to be ChatGPT's third birthday. So, who would have known three years ago that this little text box would turn into an AI boom that would lead companies to spend trillions of dollars? But here we are. And it really shows we don't know what's coming. When things happen, they can take us by surprise. So, I'd love to speak to our panel now about how it's all gone so far. And I'd love to start with Muhammad, who's the chairman of PricewaterhouseCoopers. We know the AI adoption has been so fast for consumers. ChatGPT is used by 800 million people a week. But it's been slow for businesses. Now, part of your work is helping businesses implement it. And you're also using AI a lot yourself at PwC. So, what are the wins and what are the struggles for you guys?
Very interesting question. I would tell you that when it comes to the wins, I think we are past the stage where companies, including ourselves, are asking whether they should adopt artificial intelligence or not. That is no longer the question. The question is now how fast can we go. So some of the wins that we have seen are companies using AI to become more productive or more efficient. We did it ourselves with different people, the people that we have across the world, and this has been a success. The first thing that we had to do is to make sure that people didn't fear artificial intelligence for their jobs, because it's one thing to use artificial intelligence in your personal life. On the job, there were some threats around job replacement for artificial intelligence. So some of the wins that we have noticed are companies using artificial intelligence and making sure that they have the people embracing artificial intelligence. I mean, one of the first decisions that I had to make was to decide how do I make our people learn about artificial intelligence on the job. We gave access to all of them in all 139 countries where we operate. And I had to ask my question, what do I do in the US? What do I do in Europe? In Asia? And that was the wrong question. I said, 'Give it to all of them. Just give it to everybody and let them play with it.' And we saw a lot of the productivity improvement coming directly from our employees. And as you and I discussed, we even told them, do not think that artificial intelligence is a threat to your job. Consider artificial intelligence as a digital colleague. It flips the mindset of the people for adoption. So those are some of the wins that we have seen. Some of the struggles were around how do you measure the return on investment? Because you see the adoption on the productivity side, but in many companies, including us, this has not led to letting people go or attrition or replacement. It was more augmentation. That's what we have seen. And augmentation sometimes is hard to measure because it's the thing that you choose not to do rather than the thing that you stop doing. So that's what we saw. And now we are seeing that for artificial intelligence, things are moving into how do companies use artificial intelligence to change what they do, to do things differently, or even do things that they never did before. So that's where the struggles are today. But I would tell you that we're in a very different place. You said almost three years for ChatGPT. We're in a very different place about asking our question whether we should use it or not now. How fast do we go? It's a no-brainer. By the way, it's not that the future is coming. It is already here.
Forest, you run and have founded Sea Limited, which is essentially the Amazon of Southeast Asia. That's how some people refer to it. It's the e-commerce giant among other software and online services that you provide. Asia has seen a huge adoption of AI. How is your company using it and what's worked and what hasn't worked?
Well, I mean, as a technology company, we are super, super excited about what we have seen in terms of the AI advancement and the development. And we would admire what has been developed in Silicon Valley and the rest of the world in terms of the fundamental technology breakthrough. But as a technology company, specifically working and focused on individual consumers and specifically working in emerging markets, specifically in Southeast Asia and Latin America, we are more excited about what that means to people's daily life. And we have seen a lot of impact. And I would describe AI as a very, very powerful production tool at this moment. And I think, like for us, we all grew up, we are familiar with the PC, with a laptop, and probably more recently the smartphones. Just imagine how much less you can do on a daily basis without access to a PC and without access to your phone, right? And I think that is the way I think about it. Definitely, the new powerful tool, AI, will just make everybody's daily life more productive and probably more enjoyable. So that's because of the PC, because of the laptop, my life is much, much more productive and enjoyable. Specifically in e-commerce, I think I'd love to give the audience a bit of a sense about what we have seen is really, really working. And we are serving not only hundreds of millions of consumers, but we are also serving tens of millions of sellers. They could be individuals, could be small and medium-sized businesses. They're all entrepreneurs, and they are selling things through our e-commerce platform, Shopee. And a small example could be, even if I'm a good seller, I can get my merchandise in a more cost-affordable way, but I don't know how to introduce it. I'm never really educated how to write a product description and how to take a nice photo, because that requires very specific skills, and how to shoot a nice video. And I may need to hire an agency and hire somebody to do the work, and the quality may not be always there, and it also depends on how much I can afford, depends on what I sell, what is my margin. And now, from the platform perspective, we just provide those AI tools to millions of sellers, and they can easily just use our tools and put just a picture, whatever you have, and the AI tools will kind of generate a much nicer photo. And what AI even can do is that they just combine several photos into a quick video, and it's very, very useful when buyers look at it. Now, I don't know, I never read a text manual about how to use a product. I always just go to YouTube, search 'how to use these things,' I just watch a one-minute video and I get it, right? And I think that is a kind of similar experience on e-commerce platforms. People don't want to read a product description or just look at photos. A quick video helps.
And Forest, can I just ask, since you've implemented that, have you noticed any—I know it's early days—but have you noticed any difference in sort of your revenues or the number of products being put up on the site? Has that feature actually helped the business in some way?
Yes, we provide this kind of thing for free to all the sellers because we think that, in general, it benefits everybody, both the sellers and the buyers. Buyers also love to see nice content. And clearly, we see the adoption is very, very high. It has increased. As a seller, they can choose to use it or they can choose not to use it, and the take rate is very, very high. And on the buyer side, we realize the engagement level is going up and the conversion rate is going up. They stay longer with the product, they want to know more, and it's quite an enjoyable experience to watch a video. And then also, there's more conversion in terms of placing an order. And another part from the buyer perspective is, usually people love to read reviews. There could be for one product, one seller, people care how other people think about it. There could be hundreds of reviews, and it takes time to read all of them and you have to process which makes more sense, which is more relevant, which one do I trust. And now there's a kind of quick AI summary. Okay, so this is in general how many people think about this, this is a good seller, this is a good product. And then if you really want to dig into details, you can still read the review, but the AI summary can give you a quick sense about the seller and the product.
That's such a great rundown of how that's working for you, because I think one thing on the minds of so many businesses is return on investment for AI, because it is expensive. Of course, it's expensive for the companies to develop. And as you, Muhammad, mentioned, you can see that there's productivity, but that's perhaps a little bit difficult to measure. In Forest's case, that seems very clear. You've got very clear metrics that you can measure. Government, how on earth do you even measure the return on investment on AI?
You know, listening to Forest's absolutely brilliant example of how he's using it is a good reminder to me and people in government. You know, our primary job actually is just to create an environment where people like Forest can go and innovate and do what they do. And so that's when we had the conversation earlier about regulation, why I've always been in the camp of saying that we must be pro-innovation when it comes to this new technology. We're in the very early days of it. What we don't want to do is do anything that will stifle Forest's and entrepreneurs like his ability to try new things to generate value for their customers. So I think that was a great reminder on that. On government, the most easy thing to do is, look, how can we automate all the government services that everyone of you has to interact with on a weekly basis, daily basis, to just make that both cheaper and more efficient, which particularly for constrained European economies is of paramount importance right now to find some savings in government spending. But how can we just make people's lives easier? And Forest also mentioned that from a commercial perspective, but government should set itself the same bar, which is, you know, how do we just make those interactions with government easier and make people's lives better? And to give you one practical example, one of the initiatives I'm particularly passionate about is helping introduce a targeted screening program for prostate cancer in the UK. Now, prostate cancer has become the most common cancer of men in the UK. One in eight men will be diagnosed with it. And I've been advocating for a targeted screening program, a national screening program, because prostate cancer, if you identify it early, we're very good at treating you and keeping you alive. And the problem is it's symptomless. So if you miss it and you only pick it up later, then your chances of survival drop quite precipitously. Now, obviously, introducing a targeted screening program on a countrywide basis is quite an expensive and costly undertaking. However, AI has changed the dynamics on that because now AI can read all those MRI scans that are part of the diagnostic pathway. And sorry, by the way, you mean generative AI, the latest tool, not the classical machine learning stuff. This is this new opportunity. Which has meant that whereas before you think, well, look, do we have enough radiologists, can the system handle all of this, now it's very clear, yes, it can, because these new tools are incredibly accurate and quick at assisting our clinicians at going through the MRI scans, which now makes it much more easy to say, look, we should introduce this targeted screening program, we can afford it, we can handle it from a capacity perspective, and in the process then save lots of people's lives and keep people's loved ones alive. Now, those are kind of the practical examples where people can see, okay, this is making a difference to me, and this is, you know, the government, the state has helped make that a reality. So I think trying to find those examples is really, really important beyond just saving money.
So the return on investment can be saving actual human life for governments. So the title of this panel was the AI report card. So I'm going to ask you all a quickfire question. I'm going to start with you, Muhammad. Since you were like one of the first power users of generative AI at PwC, what kind of grade would you give generative AI in terms of how useful it is today? With A being the best and F being it's a total flop.
I give it an A. And I would tell you why I give it an A. It's not because of what we see today, but what might come. We got to truly believe that artificial intelligence is going to create a new age of innovation. There is so much capital being invested. The example that you just gave, you are innovating how you're running your business. You're talking about innovating around screening for diseases, etc. What's coming next? So when I look at the potential today of artificial intelligence, not just generative intelligence, you have industrial AI, artificial intelligence coming in, and all of the things that are currently in development and the amount of capital that's being deployed. We are only witnessing the beginning of a new innovation age. I truly believe that, and the last time we saw that was 25 years ago. And the amount of capital going in is a reason you're optimistic. The fact that so much and the speed of development that we are seeing, the way the models are improving really, really fast, looking at all the use cases or the agents that are being developed. Richie and Forest gave some examples how it's being used every day. We are seeing new examples not based on what is being provided, the large language models. Yes, I know a lot of innovation, the new chipsets that are even more powerful than before. But Richie, I would tell you, I totally agree with you. The supply side of AI, providing AI, is a great thing. We need it. The adoption side of AI is what's going to create the future. The diffusion that you talk about. The diffusion is important because that's when you create new business models, new companies, new ways of solving problems. And that is why I give it an A. Not because of doing what we do today more efficiently, but about the things that we will be able to do that we cannot do today.
Okay. So Muhammad, Forest, Muhammad's grade is based on the future. You can do that too, or you could give it a grade for today. So please, what would you say?
Well, I would say I will give a seven. And in the context is, I'm truly excited and I'm very convinced AI will be a great development and will create a lot of value and will change people's daily life in many, many aspects. And in general, I think it will make people's life better. But I think the reason I give a little bit lower score than Muhammad is I feel we are still at a very, very early stage. So we shouldn't be too satisfied with what we have seen compared to what we're going to see in the next 3 years, 5 years, 10 years. I think like 10 years later, when we truly appreciate what AI can do and can change society, change community, change life, whatever we have done today is very, very small. It's kind of like, yeah, so that's it. It's still, I think, the reality will be beyond today what we can imagine. So that is my take. And specifically, I think there will be many, many aspects that will be changed. But today, in our organization, we just completely embrace AI. So from our employees, they ask us what is our company's view and standpoint, like, can we use all the AI tools and what is the consideration in terms of safety and confidentiality concerns, all those things. And in general, our approach is, okay, we just embrace it and you do it, and we try to figure out all those things by working closely with all the big giants like Google or OpenAI, to embrace and adopt their models. And at the same time, we figure out all those issues that are in people's minds. But in general, say, okay, do it, and if something didn't work out, we'll fix it. And at the same time, in the company, we also developed our own agent platform. So we provide the productivity tools for all the employees, and then even our operational team, without any coding experience, they can develop their own agent to do this for their day-to-day work, solve their pain points. I can give a quick example, I think everybody kind of appreciates. We handle millions of parcels every day in the e-commerce business, and we always get concerns, like people say, 'I didn't receive my parcel,' or 'How come it's supposed to be here but I didn't?' Every time we get those customer complaints, we have to investigate it. Is it delivered to the wrong place, or maybe the delivery driver stole it, or the customer just gave us a false report? There's so much work. And if it's an individual case, you make several phone calls, it's handled. But if you think about it on a scale of millions, and even just 1% or 2%, that is a lot of work. And our Malaysia local logistics team, using our in-house agent platform, developed an agent. So basically, every time when the delivery man delivers the parcel to the customer's home, the delivery man needs to take a photo as proof and upload it. Before, they also uploaded to our database, but now they upload and the agent can immediately give feedback on the photo. 'Oh, it's not clear enough,' or 'It's not a good proof. Oh, you should make the address clearly show this is an apartment or this is just a house, right?' And this resolves a lot of pre-disputes. People say, 'Okay, I submitted the photo as proof, but the customer says I didn't receive it.' And it's like a whole other workforce that you've got doing that for you. Yes. And it's pretty much real-time. So that solves a lot of problems. And I think we have many, many tools. Again, this is the tool that empowers people without any coding experience, and they can develop such a software tool. Yeah. And like relatively quickly and put into daily use to solve practical issues they have today.
That's a nice example. Rishi, what's your view on this?
Yeah, I tend to agree with Forest. But you know, listening to him, you think, isn't that an extraordinary use case already for a technology that, as you said, is barely a couple of years old. And I think that's the exciting thing. That's why Muhammad is giving it, you know, an A grade today, is because the pace that it is improving at is really quite striking. And that was the thing that I found in the job. And it's tricky for policymakers or any of us to kind of understand exponential growth in general. But the speed at which these models are improving themselves, and then you kind of think through what that will mean in a few years' time.
What grade would you give it?
I probably, where Forest is, B, C.
Yeah. Exactly. Exactly. Would you be seven or eight? You're the optimist.
But I would say though that I totally agree with the two comments, but we are very early. Right. This is the point. We are in the foothills of this and it is improving so quickly that you can feel very optimistic about where we're headed.
Well, Muhammad made this point, a very important point about capital and how much is being spent, and for you it's a sign of a reason to be optimistic, the fact that so much is being spent, presumably because in the past when a lot was spent then it led to good things. But this is unprecedented, trillions of dollars being earmarked for data centers and chips and other forms of infrastructure. And what I think is really paradoxical for a lot of us, and probably for you as well, is it's not really within our control. We will be affected by it. But these decisions and this money is largely being spent by a handful of very, very large companies. And some would look at that and say that's a real consolidation of power happening economically, in terms of influence and of impact. If something goes wrong, or if someone with a crazy radical agenda gets in control, we might pay a price for that. And I just wonder how problematic is that, that concentration of power that we're seeing in AI? Or is that status quo actually, it's worked out fine and it should continue? And I put that to the panel.
You know, this is a great question because we think about there's only a few companies that have the capital to do this, right? It costs a lot of money. And in artificial intelligence, as we all know, it's not just the development of the models, build-out of the data centers that you mentioned, buying chips, cooling equipment, industrial equipment, real estate. It costs a lot of money. You don't have enough companies in the world that have the balance sheet to do that or the capital to do it. And by the way, you cited a couple of other things like the printing press, the industrial revolution, and all this. It was not that many companies that built it because it's too much capital. So when you look at the signals of today, they're the same that we saw before. We call it this intelligence age with artificial intelligence, but the same fact pattern happened before. So that concentration is okay on the supply side. Now on the demand side, on the diffusion side or adoption side, that's why you will have creation of new business models, new companies are going to come in. People will change how to do drug development, how Forest is running its business today. You might actually build some new business lines because of artificial intelligence. So, it's okay to have concentration of power on the supply side because it will create innovation on the demand side. That is why I don't worry about this as long as they keep spending. And your point around spending, you know, a lot of questions were being asked to us around how do you, what's going to happen next? How do you measure return on investment and EBITDA and all these things? We were trained for the past 15 years to have the answers. You know, if you were doing the following things, what will happen next? The world is changing. It's uncertain. Nobody can predict the future. So what do you do then? You look at leading indicators because you don't have the lagging indicators. And the leading indicators are speed of innovation, capital being invested, number of use cases that people are trying. And if all of these things are happening, something good is coming on the other end, including innovation for companies that like Forest is running today. That is why I'm so optimistic. But I would tell you, I don't fear the concentration. I'm actually glad that they're spending the money because we are all going to benefit from it.
On that point, and feel free to talk on this, the other question, but people have talked about an AI bubble. It sounds from all of you like that's not a huge concern because this is all being steered in the right direction. Or am I wrong in saying that?
Well, I mean, I think it's like, how do you define an AI bubble, right? And I think it's like considering what value potentially could be created. I think it's totally fine because, as you mentioned, the key drivers of this AI new technology revolution is by several big giant companies in the world, technology giant companies, and they are all commercial companies. And they all calculate the return, right? And they are all very savvy and very disciplined in terms of every single dollar to invest. Because they are, I mean, I have a lot of interaction with them, and they have been all in the public, most of them in the public company for many, many years, right? And they have built up this discipline and capability in how to deploy capital, how to do the capital allocation efficiently. I think if they believe, okay, so as you mentioned, it's like hundreds of billions of dollars put into this new technology development on an annual basis, and the returns are huge. And I think from the talk about a bubble perspective, then it's about what time horizon you look at. And you think now, it's like things, a shortage of data centers, a lot of investment goes to the data center, goes to the hardware, then it goes to the electricity, goes to the power, the water. It may be like in the short period of time, is it perfectly paced with the technology development and the transfer to the real value of people's daily life? Maybe there's ahead, then there's behind, right? But in the short term, there's always this adjustment that needs to happen. But in the longer term, right, I think all those infrastructure we build today will eventually benefit the whole human society. And technology never disappoints human beings in history, right? And we always believe technology advancement is the single biggest value creator in human history. And from that perspective, I think there's no bubble. But that doesn't mean no bubble from the very long-term perspective. But it doesn't mean, okay, so you buy AI-related stock and tomorrow you're making money. So I'm not commenting on that from the capital market perspective, but from the technology, eventually the value creation, I think that's fine.
I think, you know, there's an interesting thing that Forest just said there, which is about, you know, historically we've always benefited from new technologies and it has worked out and created a lot of positive impact for society. The interesting thing if you look at it today is amongst Western countries, and I'd say the Anglosphere in particular, there is actually an enormous amount of fear and skepticism about AI. There's a lot of fear. And that is interesting and it's different in two respects. It's different to what you're seeing in countries like China or India or the Gulf or here in Asia more generally, you know, where people have just a different view about it. You know, they're more positive about it impacting their lives. They feel good about using it. You know, you are not seeing that in the West in the same way. And secondly, it's different to the past because if you look at the last digital revolution, you didn't see that. And so when we had the previous digital revolutions, people in even in the US and the UK were very positive about the technology and they are not in the same way today. They are more fearful. And I think that is a challenge. And also, but companies who are driving this, fear missing out. So that's just another type of fear in a way that's also driving and that's where you're getting the investment from. So I think in order, you know, in order to make sure we get all the benefits that, you know, we're all talking about, I think it's incumbent on actually everybody. It comes from political leadership, but also from industry, to be able to bring their populations in these countries with them. Because actually that, to me, is the thing that I look at and I think it's all great and we can sit here and talk about all these wonderful things, but you've got huge swathes of your population that are skeptical or nervous. We need to overcome that. And I think that is something that, you know, I think a little bit about, and jobs are obviously a part of that, but it goes more broadly than that. And this is happening very quickly. And I think, Madam, you touched on this at the beginning, and you look back at these technological revolutions, it took, you know, when you look at how long it took 100 million people to use a technology, I think it took something like 50-odd years for 100 million people to use electricity or to have electricity. And you fast forward to the PC, I think it took something like 15 years. And then the internet was 7 years, right? ChatGPT was 2 months, right? Like that is the speed that this is happening around the world is quite unprecedented. Which is exciting, but it does mean that, as said, we have to work harder and quicker to bring people along with us.
One final question. Does anyone want to just answer something that addresses what Rishi said about the fear that people have and how would you address overcoming that fear that people have of AI? Is it about just showing them how it works or is it a policy move or is it a cultural thing?
I would say transparency, governance, and also a set of regulations that are being developed by people that actually understand artificial intelligence.
Yeah. Great answer. Okay. So very optimistic panel here on AI but also with some concrete points about how things need to improve. So thank you so much to our panel and thank you very much to our audience for listening.
Please welcome to the stage His Excellency Ashwini Vaishnaw, Union Minister for Railways, Information and Broadcasting, and Electronics and Information Technology for the Republic of India, for a conversation with Bloomberg's Eric Schatzker.
Good morning, everyone. Minister, it's such a pleasure to have you here.
Hi. Welcome to the New Economy Forum.
Which of course, I'll remind everyone, is going to India next year. And one further reminder, the QR code, please submit questions. Minister, here's where I'd like to begin. The global technology landscape is rapidly bifurcating into two competing regimes, right? On the one hand, you have a US-led Western regime, and on the other, you have a Chinese-led Eastern regime. Each of those regimes has its own semiconductors, its own supply chains, its own compute infrastructure, its own AI models, its own social media, data governance, regulation. Where in this bipolar order does India fit?
I don't think it's bipolar. It's more like T3. Three technology countries which will dominate the future. India will be part of that T3.
The United States, China and India. Okay. India has a ways to go before it can compete in all of those arenas with the United States and China. What's the strategy?
Our design capabilities, our ability to look at very complex problems and solve them, our ability to have a talent pool which can be basically deployed in any major technological stuff. These are certain advantages which we think will hold us very strong going forward. I'll give you certain examples. I'll give you a few examples too. First is let's take the case of semiconductors. Now we started on the semiconductor journey just about three years back, three and a half years back. Today we already have an ecosystem developing just in three, three and a half years where production of chips is starting. Design of some of the most complex chips is now happening in India all the way up to 2 nanometers. I'll give you a second example. Take the case of space. Now we opened up this sector just a few years ago. Just about four and a half, five years ago. Within a short time frame we have about 80 startups working in space technologies. I'll give you one more example. Just about 10 years ago India had just about 400, 500 startups. Today we have 190,000 startups. We are among the top three startup ecosystems in the entire world. The entrepreneurial energy, which is one of the foundations of our civilization, was kind of throttled because of the policies since 1950. Those have been released by our Prime Minister Narendra Modi ji. In the last decade so much simplification has happened. So many of those constraints have been removed that the entrepreneurial energy is coming forward and that's what drives technology, that's what drives innovation, that's what gives me the confidence that the world will have a T3 configuration in which these three countries, India, China and US, will be leading most of the technologies.
How long will it take for India to be competitive on all of those different levels with those other two countries, the United States and China?
Different technologies and different streams will have of course different time frames, trajectories. I can say in case of semiconductors by 2031, 2032, in that time frame we'll be equivalent to what many of these countries are at today and then it will be a race which will be a very fair and a level playing field. Similar things will happen in other technologies also.
Minister, conditions matter. Has the widening divide, or maybe deepening competition, another way of looking at it, between the United States and China changed the calculus for India's ambitions, its opportunity in technology?
Our Prime Minister has always told us that we should strengthen our line. We should make our line longer. We should make ourselves more stronger. We should make sure that our capabilities increase rather than trying to reduce somebody else's capabilities. We don't think in zero-sum terms. We think that we have made lots of contributions to human society over the last 5,000 years and we as a civilization will continue to make those contributions. We should be able to strengthen our capabilities, further our capabilities going forward.
Most countries are forced to make a choice. Am I going to align myself with the United States? Am I going to align myself with China? For India, is there such a thing as digital non-alignment, digital sovereignty, if you like?
Digital sovereignty is a point that practically every country today thinks about, would like to have the luxury to think about. More like ability to have control over your own future. Yes, in that sense, in a digital world there are no boundaries as we know, internet doesn't follow geographic boundaries. Digital sovereignty is definitely important, but our policy has been, our foreign policy as well as our technology policies, of multi-alignment. Our policy has been that how do we contribute to the growth of technology and betterment of entire humanity through our contributions. That's the way we think.
In a world of, let's call it, weaponized supply chains, and that is the reality today. Where at the moment, I'm not talking about 2031, but where at the moment does neutrality end and alignment begin? Where do you need to work with at least one of those two other regimes? Whether it's semiconductors, artificial intelligence, 5G wireless or the next 6G wireless, critical minerals. How do you think about that?
Today's supply chains are, I don't think they are in a 0-1 state, right? Multiple players are there, multiple geographies. A small component, a chip which gets manufactured, passes through so many boundaries by the time it gets its final finished shape. So we have to work with so many different countries and so many different partners and that's where the factor of trust comes in. We believe that India is a trusted geography. It's a trusted country because we believe in IP rights. We very strongly protect IP. We believe in developing, or rather co-developing solutions. I'll give you one example. End-to-end telecom stack for 4G and 5G. There were just about two companies from China, one from Samsung, and two from Europe. Now we are the next country where we have developed the complete 4G and 5G telecom stack. With your own proprietary technology? With our own proprietary technology, and we have given a level of sophistication which is better than the existing products. And that's possible only when we work with so many different partners. That's not possible working alone. You have to work with partners. That's the way technology works in my understanding.
Minister, I'd like to ask you about social media. As the minister, this minister, as you can see, has a very large portfolio. As the minister both for information and broadcasting and also electronics and information technology, you are at the nexus, aren't you, of one of the most important debates in global governance, how to regulate social media. You have two competing forces. You have the need for a harmonious and governable society and you have the need for the freedom of expression. How do you balance the two? How do you keep algorithms from poisoning democracy?
It's indeed a very big challenge that all of us are facing. My interactions with practically every minister, whether it's from tough kind of governments to a very liberal kind of government, everybody is worried about the very significant influence that social media is having on the trust between institutions and the citizens. That trust is getting absolutely broken because of deepfakes, because of synthetic material which is flowing around, because of rumors which get amplified at the speed of light. So all those things are really, really worrying everybody. And in my opinion, I'm not saying that's the policy of government of India, in my opinion, social media platforms must start taking responsibility of what they are publishing so that the society at large doesn't get harmed by what they publish.
They're not doing that of their own free will. That's obvious. So what approach does India take? Does it take a more rules-based approach like Brussels? Does it take a more free market approach like the United States? Or does it take a more state-directed approach like China?
So we take the approach called a techno-legal approach. Such technical problems cannot be solved by simply legislating something. Such technical problems cannot be solved by mandating something. We have to have a combination of technology as well as legal structures where we can govern. And I'll give you one example. Our data protection act, for example. Unlike Europe, we decided to go for a principles-based law. Now we have defined the principles. We know that technology evolves every quarter, sometimes every month. So under such circumstances you cannot have a very prescriptive kind of law which scuttles innovation. We believe in a combination of innovation and regulation where our bias is more towards innovation. Our tilt is more towards innovation so that the good things can come to the society while the harm can be separated. And it's a difficult thing but we are very deeply engaged with the industry as well as civil society for getting this right balance.
The government has been at times willing to issue takedown orders and demands for content moderation, excuse me. It makes me wonder in your experience whether, do you paint all of these social media platforms with the same brush? Are they all equally challenging or would you differentiate between say YouTube, extremely popular in India? Facebook, also extremely popular. Instagram, Snapchat, X. Is there a differentiation between them? Would you call any of them out as being easier to work with and others as being harder to work with?
See, the point is very simple. Every company which works in India must follow India's constitution, must follow India's laws. It's rule of law which has to be followed by everybody.
But do they follow the law?
They have to follow, otherwise how will they function? Yes.
Well, if they all followed the law, there'd be no need for regulation, would there? And enforcement.
There are challenges of course, and as you rightly said, some of the platforms have much larger reach compared to some other platforms. Our request, and in fact we have been discussing this with the platforms even at the topmost levels, every platform must understand what is the social structure of the country in which they are operating. The society of US is not...
The same as society of India. There are differences. How does a platform react to the circumstances? How does it operate in the diversity that we have in a country? That must be respected, that must be followed, that must be taken into account when they make their community guidelines, they make their policies and they operate. That is something that social media platforms must understand to be successful, otherwise there will be stronger regulations. That has to be, otherwise society will be disturbed.
