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Davos Notes: Blackstone's Schwarzman "Walking with His Head Still On"

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At this evening's cocktail reception hosted by Yale University, Richard Levin, the school's president, was discussing the makeup of Obama's stimulus package, which he believes should include fewer tax cuts and more real spending on programs that will accelerate America's move to a green economy. "As industrial production drops, emissions are going to go down," he predicted, "and the sense of urgency to make the transition to green jobs will also go down. We mustn't miss this moment."

A few minutes later, I was talking to Jeffrey Rosen, Deputy Chairman of Lazard LLC (and Yale class of '69), when his classmate, Blackstone group CEO Stephen Schwarzman, walked up, clearly in an upbeat mood (unusual for financial types at Davos this year). He told us that, so far, he'd only been meeting with central bankers: "There is no other business to be done," he said with a shrug. "You are walking with your head high," I remarked. "I'm walking with my head still on," he replied. "That's the good news." The bad news? When I asked him for his estimate of how long the hard times will last, he told me: "Don't hold your breath. And don't buy new clothes."

In contrast, another Yalie, Tom Glocer, CEO of Thomson/Reuters, said that he had just come from a session with former GOP Congressman Chris Shays. "He was the most optimistic person I've run into in Davos," Glocer told me. "I couldn't tell if it was because he wants us all to keep investing or because he really believes it."

Read More Davos Notes:

Contrite Bankers, Overflow Interest in Philanthropy, Mistrusted Americans

Davos '09: Less Glitz, More Anxiety

Be sure to keep checking our Davos Big News page for the latest news, commentary, and video coming out of the World Economic Forum.

 
 
 

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07:57 PM on 01/31/2009
YALE--alma mater of the Bush Kingdom-----
07:53 PM on 01/31/2009
Central bankers.
10:34 PM on 01/29/2009
Deregulation was a huge scam from which tens of millions now suffer. Servile media conveniently
confused freedom of markets - and consequently deregulation - with individual freedom. This was in the sophistic Milton Freedman, Friedrich von Hayek tradition of argument : economic freeedom is the most important freedom - in fact the only real freedom. Freedom of thought, of expression, freedom of the person are irrelevant, if not actually harmful...
The deregulation mania aggressively fostered by lobbies of whom former Republican Senator Phil Gramm is a notorious representative, led to the 1999 and 2004 deregulation laws which removed the separation between commercial banking and derivative speculation (hypocritically called investment banking) and allowed the derivative industry to "self-regulate". (speak of allowing a drunkard to regulate all the liquor he drinks) Independent supervisory bodies were eliminated.
Huge fiancial bets were placed that went unrecorded - "off the books" - another grotesque sophism.
Financial executives awarded themselves enormous "performance bonuses".
When the debt edifice started collapsing, good stock had to be sold off to pay for all the bogus derivative plays. In October 2008, millions of people saw their savings invested in the stock market
shrink or disappear.
So much for how the argument of "free market philosophy" was used to pull the wool over peoples'
eyes to hide the immoral financial casino.
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ProgressiveVoice
02:03 PM on 01/29/2009
Our economic system of consumption of resources with no regard to sustainability was established long before science taught us that our planet was a system of interconnected systems, delicately balanced. There is an argument for the idea that humanity has been headed for exactly the economic collapse we are now experiencing since we embarked on the Industrial Revolution. Now that our scientific knowledge has caught up with our industrial abilities, it raises two concerns for the future.

The first is, how do we change our economy to embrace sustainability and still offer opportunities to the poor to increase wealth? One easy answer is reduce global population to no more than 2 billion people, instantly, but it's hardly a moral solution.

The second red flag is, what future problems are we creating with current scientific advances? We are rapidly reaching the point where one can genetically engineer our children. There is a lot of this kind of scientific research going on and no one is asking, "Just because we can, does it mean we should?"

We always speak of the harm we are doing as destruction of the planet when what we should say is, we are destroying ourselves. The planet will survive. It has survived many more, many larger catastrophes and will continue to do so. What is at risk is our species' chances of being around to witness it do so.
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breakingpoint
War is a Racket - Smedley Butler
01:13 PM on 01/29/2009
Arianna, I'm pretty convinced that you're probably the smartest and most powerful woman in the US, more than Hillary.
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10:49 AM on 01/29/2009
There are many things one can say about Steve Schwarzman, Arianna, but I'd be surprised if one of them was that he was Jeffrey Rosen's classmate at Yale in 1956. Schwarzman was my occasional babysitter in a Philadelphia suburb in the mid-60s and graduated from high school there in 1965. I don't know when Jeffrey Rosen graduated from college, but he was Schwarzman's roommate at Harvard Business School, where Schwarzman earned an MBA in 1972. In any case, if we're chronologically challenged, we can recall the multimillion-dollar 60th birthday bash to which Schwarzman treated himself in 2007, which I believe would mean he was 9 years old in 1956. He's smart, but not that smart....
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cplKlyde
10:26 AM on 01/29/2009
Why wouldn't Mr Schrawarzman be walking around with his head up. The economic downturn is going to affect him how? He'll have to lay off his night upstairs chamber maid? He'll have to delay the purchase of that new yatch? His next birthday party will have to be cut back to $8 million?
09:27 AM on 01/29/2009
Yalie's point

"As industrial production drops, emissions are going to go down," he predicted, "and the sense of urgency to make the transition to green jobs will also go down. We mustn't miss this moment."

is dangerously vague. "Green Jobs"? Seems like a potential for boondoggles, and worse like funding Carbon Credit nonsense that just enriches Al Gore's friends.

What is key is taking the opportunity to fund R&D into alternative energy technology, wind, wave, materials, cheaper solar, and perhaps most crucially better battery technology.

If you fund "green" programs where the primary objective is jobs, it will be largely wasted. If you fund "green" programs to shift money around with cap and trade nonsense you might as well just call up the Ponzi geniuses who brought down the banking system with worthless mortgages and pretend securities and have them run it.

The great thing about this as an R&D funding opportunity is that apart from the scale of the need (which almost requires government) you expect a lot of R&D to yield nothing commercial. It is built in to the assumptions. If you fund 10 R&D programs and 1 of them produces something significant and a couple of others produce something that might be useful and the other 7 just employ some engineers for a few years that is likely a huge success.
08:23 AM on 01/29/2009
The world's aristocracy gets together to discuss how to feed off the poor. R-E-V-O-L-U-T-I-O-N
12:32 PM on 01/29/2009
And what pray tell, after the REVOLUTION? You will have consumers with only slightly more money in their pockets, but you will have blown up the economic engine of wealth creation.

Better to seek EVOLUTION not REVOLUTION. Better regulation and coordination. More effective tax policy and government.
02:02 PM on 01/30/2009
Perhaps, but the mob wants to burn the house down because they are so mad they can't think straight. Be afraid, be very afraid, and start talking like a prole. It's in your best interest.
02:09 PM on 01/29/2009
I know. The hypocrisy of it all is astounding. And the world's aristocracy actually thinks we're not noticing :) Where are all those rich folks' underground bunkers? Can't be that hard to find.
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yannb
Noblesse oblige
07:27 AM on 01/29/2009
Davos is the bastion of capitalistic shame. The fascist swiss authorities have baffled the most elementary constitutional right of the swiss citizens by forbidding nationwide *any* kind of protests (peaceful or not) while Davos is on. We wouldn't want the rich and famous to feel embarrassed by questions relating protests, would we?
Reminiscent of the Titanic sinking: while the world economy is going down, drowning those poor lads who couldn't afford upper cabins, the wealthy passengers and captains continue to drink cocktails and congratulate each other on the upper deck. Millions of people die every year around the world because of the unreasonable decisions made by those money-swollen rotten barons of capitalism who meet in Davos every year. Giving them any kind of visibility is shameful. Man, this world is so, so, so sick.
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peeler
09:38 AM on 01/29/2009
Thank you, yannb, for explaining what DAVOS is. I truly did not know.
06:55 AM on 01/29/2009
Arianna,

You were amazing on CNBC this morning.

Anything you can do to drag some of our old rust belt industry leaders into thinking out of the box and embracing a world of collective knowledge as opposed to clinging to the pre defined and cemented notions of old the better our country will become.

Imagine no laptops in the oval office! From energy to autos to health care, we must modernize and become more transparent.

The democratization of information will finally lead to a renewed democracy of truth, logic and intelligent discourse.
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FrankKalder
05:12 AM on 01/29/2009
The Yale president believes, as Arianna reported, that Obama's stimulus package should include fewer tax cuts and more real spending on programs that will accelerate America's move to a green economy.

Well, that's an interesting prospect.
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racetoinfinity
racetoeternity
06:20 PM on 01/30/2009
I applaud that, in contrast to the Republicans' "neaderthal" failed trickle-down b.s. ideology of tax cuts for the wealthy and for corporations.

We need a move to a green economy not only for the economy, but also for the ecology of the planet; from now on, no economic calculation should be made without estimating the costs to the environment.

The President of Yale is on target as long as we re-regulate Wall St. and capitalism in general.
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Hugh Sansom
Photographer, student of economics, politics, phil
10:59 PM on 01/28/2009
Recall that Schwarzman distinguished himself a year or two ago by throwing himself a $10 million birthday party. It seems to me that a an obvious feature of a stimulus package would be to tax away the wealth of all the multimillionaires and billionaires who played a role in the international Ponzi scheme that has destroyed the US's financial system. The combined assets of the wealthiest 400 Americans amounted (before the current market collapse) to hundreds of billions -- more than enough to cover a huge chunk of any stimulus package. As for the claim by Michael Bloomberg and like-minded others that massive payouts to executives is necessary to "retain talent" -- the past year should tell us how much that line is worth. But if it isn't, John Kenneth Galbraith and others made mincemeat of the notion that massive compensation is justified (in The New Industrial State, among other writings). Finally, it's more than a little amusing to hear about Yale hosting a fatcat shindig at Davos -- Yale has lost something like one-quarter of its endowment thanks to it great minds.
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09:38 PM on 01/28/2009
Since I can't make it to Davos this year, as usual; I would just like to share this input. Solutions hardly ever look anything like the problems.

We all carry the solution to the world's economic - financial crisis around with us in our hearts. The problem is not really an economic or financial one; it is a fundamental and ancient human problem. That emptiness in the human heart that so many try to fill with money and all the things that money can buy can only be filled by love, an active love. We might translate that love as honesty, fairness, practicality and compassion for starters. This love lying dormant in so many human hearts is the only limitless resource we have, but it is the very thing that we need the most to put order and harmony back into human affairs, just as it puts meaning and purpose back into each person's life. This limitless resource of love, unlike any other resource, is best discovered by giving it away.
11:49 PM on 01/28/2009
That is well said. Our lives are built on commerce. And it's failed. Hopefully the economic downturn will show people that giving or doing with little will lead to more happiness. Living simply and appreciating all that you have--sharing with others kindness, for starters--is a noble way to live.
People like to buy stuff, especially luxury goods to distract themselves from the fact they are mortal.
It only makes them more miserable. I recently went on Facebook and saw how self-centered people were and thought "if these people stopped writing insipid things about themselves and donated their time to a good cause for just an hour a week, wouldn't our world be better?"
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rucognizant
06:43 AM on 01/29/2009
"Our lives are built on commerce. And it's failed"
My early life; high school years, were marked by 'successful commerce, LOCALLY owned businesses, a way to earn a living, employees were your neighbors thus treated with respect. The shops were closed on Weds. afternoons so people could go recreat that day. TV was more ENTERTAINMENT THAN SALES VEHICLE!
WHen did that model change, to never having enough, needing more more more?
And WHY?
03:39 AM on 01/29/2009
Spot on and beautifully said. The fallacy of scarcity, limited resources, and us versus them is at the root of the problem.
09:35 PM on 01/28/2009
Arianna, I’m glad many of the guests are seriously thinking about change. If they are feeling down, remind everyone that they have a Global work force available with lots of work to be done. Let regulations, ingenuity and fair competition be their compass.

Global Warming could create, through an International effort, a Reclamation Industry run regionally putting people back to work replanting forests and cleaning up the oceans for starters. We can run large pipelines of water for irrigation and turn arid land into farmlands. We need new factories built that can produce biodegradable products, and we need new ways to deal with waste among other things.

There are other technologies that scientists haven’t explored that might be used for generating clean energy and also space travel. Now is the time for Change.