Policy Ken and the Market Impact

Thank you all so much for joining us this evening. And Ken, thank you for having me. It's great to be here. Thank you so much for being here today. And look, I think it's perhaps worth starting to acknowledge this is the annual Citadel Securities Conference. And just how much has changed from last year. The world was grappling with this technological advancement where it used to be experimentation. Now it's solving 80 year old math problems once unsolvable. Can I listen to a recent interview you gave where you talked about going home depressed one Friday because I could solve PhD level work in just a few hours? I know you get asked this a lot, just how much your view has changed, but

things are changing very quickly. Let's start with the future of work. When it comes to the future of work, just how much has your view changed and what I can and can't do? So there's no doubt that over it's remarkable. It's been a year, and in that year the advancement in AI models has been absolutely tremendous. And there's there's no doubt that in a number of fields I is literally game changing. I did it. I did give a speech or a talk at Stanford, where I discussed the fact that work that used to take our PhDs and Masters 4 to 6 weeks to complete high level white collar jobs, pressed the button on a keyboard. Wait a few hours.

There's the exact same answer. And I will tell you that when I went home after seeing this, it was a Friday. It was actually it was a very depressing moment because you're you're seeing all kinds of things, right? You're seeing the threat to white collar jobs playing out. As a business owner, you're seeing your competitive moats be filled in by bulldozers. Mhm. And then at the same time, you're thinking that this will be a golden era for entrepreneurs, that for new business formation for the young entrepreneurs in this country. What a golden opportunity this is. So you really have all three emotions unleashed as you watch this, this rapid development unfolding. And I think that all three have real implications for our economy.

For those who have careers that are in the sweet spot of what I can do, we as a country need to embrace reskilling. You know, for example, if your expertise is in translation from English to German, for example, you probably have already lost your job. And that's a difficult job to find a near substitute for. So that's where we as a nation need reskilling. And we need it in a profound way. And there's not there's there's talk about it. There's no action on that front. Right. For corporate America, the filling of your filling in of your competitive moats means you got to move your feet faster.

You're going to have to innovate faster. You're gonna have to create more customer value faster and figure out how to take cost out faster. But actually, that's all really good for the American consumer, the American public. Like that force will force corporate America to really step its game up, and the American consumer will win on the back of that. And then for this moment where we have this golden age, Roger Ailes. And what a great thing for our country, because when you have people who start small businesses, it does wonders for employment and in particular, people who have tarnished resumes have a shot to get really good jobs. Startups do something very important in

our country. Startups will hire somebody who wants to work hard, who doesn't have the perfect pedigree. And for that individual, getting a chance to join a startup gives them a chance, a whole new lane to build their career in. And we don't talk about that enough in America. We don't talk about the importance of startups and how they really help to jumpstart careers, particularly for people who have impaired pedigrees. And then these startups will unleash an enormous number of new products that you and I have never even thought of. Can I, if I may, it sounds like your depression has morphed into optimism.

Is that fair to say? I think it is, because the history, the history of our free market, is that we go through transitions like this. And to be clear, these transitions, they do cause the incumbents to face real challenges. And it is hard on people, but ultimately our lives are better. There's no doubt that you and I would rather live right here in 2026 than in 1926. There's just there's no comparison. And this will be part of the story of how we write. The year 2126 will be what happened at this moment in time with I.

Can we talk about how some of the changes are impacting you as a business leader who's trying to navigate this. You want about a year and a half ago said that I can't produce or deliver. Alpha has your changing. Has your thinking changed on that at all? So at the end of the day, most of our business is fundamental based investing. In fact, I would argue that the core of our business is actually research. It's almost like journalism. Like, can you get the story right? Can you get the narrative right? And trading is how we monetize our research. Right. So research is the core of the business.

Do we understand the business model. Do we understand the Tam. Do we understand the economics. Do we understand management incentives and bits and pieces of that? I can help shed some light on, but ultimately that narrative is still assembled by a person. And then what multipole to future cash flows or future earnings to ascribe to that business. How does it compare to other opportunities that you have to deploy your capital? But ultimately, I still firmly believe that the vast majority of the alpha that we create is a statement or testament to the two the creativity, the ingenuity, the analysis of the people on our team who conduct fundamental research. And then trading is how we monetize that. And in fact, the trading part of the of

the work has actually become the most automated part, the most, the most for leaning technologically. Because if you can monetize your research, well, you can run bigger positions and, and extract more alpha from your ideas. That's a really important part of any portfolio manager's job is how officially can I trade to maximize my return on my research? And the trading figures at Citadel have been hitting record after record for Citadel Securities. Part of it has been this volatility we've seen in markets and can I would love to get your view on this because over the past week we've seen semis log their biggest, longest losing streak since the great financial crisis.

You have IPOs delayed or push backs concerns about what I mean is this market experiencing a reset and was a reset necessary? So look, I think this market is actually experiencing people doing research right for the last couple of years. If you were on the thematic program of we're going to spend hundreds of billions or $1 trillion in data centers, we're going to build compute at a scale never seen before, which companies in that story are chokepoints and supply chains that will have abnormally high margins, and who will be the big winners from this transformation will be the Microsoft ORS, who will be the

gatekeepers to the foundational models, like who's going to earn the economic rents? But in some sense, like I'm just going to buy them all. I'm going to buy them. I'm going to buy the hyperscalers. I'm going to buy the chip companies. I'm going to buy. I'm going to buy businesses that make things I've never even heard of five years ago in Korea and Taiwan and in Japan. And now we're reaching a point where people are becoming more discerning. Right. Like, we do realize that we are seeing extremely high margins in Dram and MLCs in areas where there are real supply constraints. But people are now starting to look out. Two years.

Three years. How long is this going to last? And in particular and I, I don't want to be doom and gloom but GPUs. Like airlines have a very low marginal cost to run. Like the incremental seat on an airline that's not full. If you can sell that ticket for $20. You're making money in that seat. And that's one of the reasons that the airline industry is such a nightmare is because the moment you have overcapacity, pricing goes into freefall. We saw this actually with the telecom build out back in 2000, right. We built all this dark fiber. And the minute we built more fiber than we had need for sorry, it wasn't meant to be dark.

It was never turned on. It was never lit up because we didn't need it. Right. We built more fiber than we had demand for, and the price of telecommunications just went straight down. Is that what we're heading for right now? Well, that's that's the question mark, which is if we reach a point where the provisioning of GPUs exceeds demand for GPUs, marginal pricing will actually go into freefall. Mhm. And that really upends all the investment assumptions that people are working with today. That's issue number one. And issue number two is I think people are taking a step back and saying, what is the useful life of a GPU like right here, right now?

There's there's people that are earning extraordinary pricing and GPUs that are 5 or 6 years old that probably doesn't persist for another 5 or 6 years. And so there's there's a growing set of concerns that I can't give the same capitalization rate or the same revenue models to year seven, eight, nine of a chip in the future that maybe I was using 12 months ago. So I think we're really grappling with just how far will this demand carry us in the marketplace? And the second issue is the first conversation was like all the upside of I. And there's another narrative that's important. Corporate America is has been very uneven in its ability to extract value from AI models. And the most sophisticated companies in

the United States are becoming very sophisticated. At what parts of their business do they need to pay? Extremely high pricing for the state of the art models from OpenAI and anthropic? And what part of their business can they run on open source models at a fraction of the cost. I if you look at some of the companies that have really just done incredible things with AI internal, their four walls, they are quickly becoming very thoughtful on maximizing the return on their spend. And I think all of corporate America is looking at their bills from anthropic and OpenAI and going, okay, we need to think about how to make sure we're getting productivity out of this. And they will in many areas.

But in some areas you've got a lot of waste and people are going to have to pivot around that. Does that mean there's necessarily tension in this idea that the LMS are spending huge sums of money? The Journal had a report that anthropic in their S-1 is talking about $750 billion of spending to come that they're spending is increasing. At the same time, corporate America is trying to pull back and figuring out ways to cut down their costs. Is there necessary tension in those two things, Ken? There is. I mean, clearly you just answered the question as you posed it, right?

Like reading the witness. Sorry. Yes. You like the witness? Let me just say yes. Yes there is. And the question will be come down to how much will open. Sorry. Will anthropic. How much will anthropic make their models a must have. Mhm. So for example you know in life sciences will anthropic truly reach the point where they will help to unlock the cures for cancer or other life threatening diseases? Will they make themselves completely like a necessity in every farm or company in the world. And you'll pay any price for their knowhow and their tools, because it will unlock the health care treatments in the next century. So what we don't know is how as.

As these models become more intelligent, how much are they able to. To demand extremely high pricing. Because they help to actually solve the problems that have vexed humanity for centuries. Because people don't know the answer to that. Often the conversation goes to this, this bubble, one that maybe this is a bubble. Um, Ray Dalio thinks it is Howard. Mark says he's on bubble watch. The BIS says that it has echoes of the.com boom. And I wonder whether it is knowable if this is a bubble and if you have any particular thoughts about that, if it is a bubble and if it one, it's one that looks like it's going to burst, at least in certain parts of the different eye layers.

Well, so the big picture is there's there's almost certainly bubbles within this moment in time. And, and any radical transformation of our economy is generally intertwined with a bubble. All right, I remember back in 1999, 2000 and the metrics that we used to value internet companies. And let's be clear, some of these internet companies had pretty fanciful business models. But, I mean, I just wish I had kept my Amazon stock from that moment in time. And the internet, which was, you know, which was the great bubble.

Could it be more of a part of our daily life today than it is? I mean, like I, I've told this story before, but I was I updated my Xbox to my son a few years ago. He was 13 at the time. And he looks at me and he goes, dad. You lived before the internet existed. And I said, I did. I was born after the dinosaurs disappeared. But yes, there was life before the internet. And now it's. That's like an incomprehensible thought to a 20 year old. So these bubbles, if we're going to use that word, often coincide with these giant technological transformations, or the railroads, for example. But what's left in the wake of these bubbles, if we want to use that word, is

often game changing for the world. And the companies that are on the other side of that bubble are the market leaders for decades to come. Can I just say, I also find it quite lovely that you're still the help at home. Even with everything you do, you're still helping with the extra exercise. Still up the Xbox. Um, a lot of people also look at what the markets are doing in the sell offs that are happening and saying, this is just hedge fund deleveraging.

You might know a thing or two about that, Ken. And I wonder how you look at this past week how you sort of distinguish market reset, fundamental difference versus maybe someone just had to liquidate. Maybe there was a margin call somewhere. So everyone's favorite go to answer when they're losing money It's hedge funds are deleveraging. Okay. In fact, in the last ten years, I've seen the entire industry leveraged to zero at least 10,000 times. I mean, it's like every day there's a phone call with somebody goes, oh, it's

it's got to be hedge fund deleveraging. I mean, just imagine this hedge funds have recovered back up. All right. So and the reason that people love that answer is it actually washes your hands of accountability. Mhm. Right. Like the money you can sort of oh hedge fund deleveraging like no. Let's take a step back. What prices are changing and why. What don't we understand. What is playing out that we don't get. Because the minute I start to use an excuse. I actually stop learning. Right. So I, I always want the hedge fund deleveraging to be answer number ten on

the list of answers. And I want one through nine to be okay. What don't we understand? What does somebody else get? What are the guys? Are capital figure out or Fidelity or Wellington? Like what thoughts have they connected that we don't see? Hmm. Somebody else here knows the story and we don't know it. And let's go figure it out. And if we can't, if we exhaust, like, every path we possibly can. Okay. Let's not talk about who might be delivering, but that's like option ten of the list, not option one. How does that then that lens apply to what we did see in the summer with situational awareness, which I think by

any stretch of the imagination was a brilliant move. All the reporting suggests that it was the right timing that you sold into a market that was rallying. Can you just walk us through your thinking of how you think about taking those risks when there are clear deleveraging moment, and the ability to jump in and be confident that can pay off. So we have been involved in a number of large portfolio extractions over the restructurings over the last 20 years. You know, whether it was amaranth restructuring the energy portfolio back in roughly 2006 or so, were in 2007. Um, several other trades that have had

less attention or notoriety. But situational awareness was in a position where they as a as managers of assets, as fiduciaries, they needed to thoughtfully raise cash. And we gave them a holistic solution to meet their needs, to raise cash and to protect a substantial year to date gain like this was an important win for their investors. And let's be clear, you know, they're up significantly for the year or so. They've done a when it's all said and done they've they've been through a bit of a journey. But their investors have to be pleased that even with the turmoil they face.

They're up for the year. When we're looking at a situation like that. We're trying to understand what forces have been in play to create the events that have unfolded. And as situational awareness found itself in a more difficult situation, there's no doubt that a number of the more fast money accounts in the market would start to front run what they would have anticipated, situational awareness or its contemporaries would be doing like this, like a classic playbook in finance. You think somebody is in trouble and you start to try to anticipate the moves they're going to need to make, and whether it's a defense or offensive decision, you start to actually you

actually start to turn a possibility into a crystallized reality, right? So even if all you knew was, gee, you know, people that are watching this, I think are in trouble and they're going to be de-risking. So I'm not going to buy those stocks or I'm going to trim my exposures. You start to transform a possibility into a reality. Mhm. And situational found themselves in a position where again, out of an abundance of caution they needed to raise cash. Now what we have found in moments like that is, is that when you acquire a portfolio in

that market environment, you generally get a pretty sharp reversal in price as confidence is re-established. And the anxiety about a portfolio suffering an unexpected, uh, quick divestiture ends. And in some sense, we deployed our capital in the on the back of that theory. And we did okay. But it was a complicated portfolio to buy overnight. We did the trade in less than 24 hours And managing the risk profile of that portfolio did take a several days of trading in the marketplace. And that's one of the things that we do well, is we're we're very accustomed to analyzing portfolios.

And how do you cost efficiently bring down your key risks in the portfolio. And once you can nail down the key risks to the portfolio cost effectively, then you can start to pare out of individual positions. And we've got the systems, the know how and the people internally that can make those moves happen on a chessboard. Just given some of the bubbly attributes, if we want to use that word of this market, do you anticipate more events like that happening, or should we kind of assume, you know, again, not being the cause of maybe markets selling off, but it wouldn't be unusual to continue to see moments like that? It would be a bit surprising to see

another moment like this actually happen in my opinion. Mhm. Um, you know, they were caught in a pretty significant price downdraft caused by both the announcement of CME. Uh, other. Other chatter in the marketplace about the growth rate of some of the foundational model companies, some large pension plans that were reshaping their portfolios at that very moment in time. They got caught, I wouldn't say the perfect storm, but they got caught in three mid-sized storms. And, you know, clearly they must have had too much leverage in the portfolio at peak, caught in three mid sized

storms, pushed pretty hard in the marketplace and found themselves in a bit of a bit of turmoil. I would not manage my business for that to happen any time in the foreseeable future again. I mean, firms, firms will always there will always be some member firms that find themselves, um, in a tough spot. I mean, Citadel was in a tough spot in 2008, the height of the financial crisis. You know, Morgan Stanley had not achieved their funding with the Japanese and had failed. I don't think I'd be on stage today. Like every firm in financial services. If you survive long enough. Part of your history will be a moment in time of despair. Like if you survive long enough, every

lever for the institutional will have a footnote in their history of when their back was against the wall. Ken, if we could change gears because one of the big disruptions or market risks that we're living with, as I the other one happens in two weeks time and that's the mid-term. And it comes amid a moment of rising democratic socialist candidates of the president's own polling at a historic low of 33%. You've committed a lot of capital in order to help Republican candidates. And I just wonder where your sentiment is at the moment.

Are you still standing? I really like the last conversation better. I'm sure there's an eye angle in there actually is quite an eye angle in this, in this political conversation. But we can start with this first. Are you still spending? Are you optimistic that you can make a final push to help? Well, I mean, first of all, I think it's important to take a step back. The U.S. political process in the midterms is a check in balance on the party in power. All right, so the Republicans, President Trump, they will almost certainly lose one or both houses or both, both legislative branches, the House and the Senate.

They're both you know, the House is almost is in a really tough spot in the Senate. It's going to be really close. All right. Let's just be right to the point. And that's just part of the normal political cycle, right. There are a number of candidates in the House and Senate who I have support in the cycle, many of whom I've supported for many cycles. You know, people I think represent values that are important to the future of our country. Uh. And there are obviously candidates that we might be less enthusiastic about that perhaps I don't support. And to be clear, you know, it's not

limited to just Republicans. You know, I was one of Rahm Emanuel's biggest supporters in Chicago when he ran for mayor. I thought Rahm did a fantastic job as mayor. I had the notoriety being an elite bundlers in the United States for both parties and election cycle. We did an early fundraiser for President Obama, uh, during the primary. He was my center in Illinois. And I thought it was important for my team members to have a chance to, to meet with this person who I thought could be the future of the United States. And he came in and absolutely knocked the ball apart. So I think, you know, number one is

I want all my colleagues at Sidwell to be involved in politics. Um, I want all my colleagues to think about politics in America. And in my firm, you know, roughly a Slight majority are probably Democrats. And while that would leave the Republicans in the minority and that's okay. I love the fact that there are good, healthy debates that take place in our hallways, but it's never a point of friction. Mhm. But this is what I think. I think this is what I think we should look like as a people that we have good, healthy debates around who are the right people to run our country. And to be clear, everyone of my

colleagues who supports Democrats, like I really hope that they and supporting Democrats do what I do on the Republican side, which is try to support the candidates who have the right values, the right perspectives, who put our country first and who care about the issues. I think we all agree on, like K-12 education or how do we have safe streets, or how do we have a strong national defense? How do we have good alliances around the world? And there's lots of areas that we can find common ground on between our two parties that are important the future of our country.

Okay, so that aside, let's talk about the midterm. President's going to have some challenges here. There are parts of his policy that have been very unattractive to the American people. You know, for example, the war on Iran is very unpopular. I think he's done a very poor job of explaining why. I think it's important that we wake up in a world where Iran does not have a nuclear weapon. I just think that's some existential importance to our country. I think the president has not made that case in a powerful, meaningful way to the American people. I think that the way that we deal with

illegal immigrants is disgraceful. I think if you've come to our country at a point in time when our borders were open, you didn't view yourself as breaking the law at that moment in time. And you were you came in with millions of people. If you are here with your family or by yourself, and you are gainfully employed and you are working to find a better life for your family, there needs to be a way to stay in our country may not be a path of citizenship, but it's a path to being a contributing member of our society and we need to grow our economy. Like, this is like what's lost in Washington. If we're going to make good on Social Security,

Medicare, Medicaid and other entitlements, we need to grow our economy. It's just that simple and hard working people are a big part of how we're going to make that happen. And then I think that the tariff battles with Canada, with Europe, with our allies has just been a disaster. I talked about this when he first started this in his presidency. To be blunt, like, I hate to say it, but I've been right. It's been pro inflation. It has certainly taken supply chains around the world and severed them. And we're not going to industrialize efficiently in our country. Unemployment's low forms.

Like if you have this dream of a industrialized America, number one is most people don't want to live that dream. They don't want be in factories making Nike's and t shirts. They want to wear those. I was actually a comedian that came up with that line. I have to give credit where credit is due. And then we, you know, what we should really be doing is embracing robotics. You know, one of the reasons that I gave a recent gift of $3 billion to Carnegie Mellon University is their leadership in robotics.

We want to re industrialized America to be a really industrialized America with robotics running our factories. Like, that's forward thinking. That's how our country secures greater independence from the rest of the world on items that are important to our national interests. And then, of course, I think some of the things that you do really well, like closing the borders, that's long since been forgotten. Mhm. Right. But it's I got to tell you, I think, I think the vast majority of Americans agree that closing our borders, which we were told for four years, could not happen and it happened more or less overnight, has been a big win.

So it's it's a mixed scorecard. We got a midterm here where the American people are going to vote. I hope they vote thoughtfully. The rise of the Democratic socialists I'm not so worried about. You know, my. What's funny is my, my. I live in Miami. My friends who have connections or ties to the South don't even like. It's not part of the vocabulary. So this is just a New York bubble kind of thing. It's a New York, it's Illinois, it's a Michigan. It's a California. Bit of a bubble. And I will say, if you want to look at where socialism leads you to look at Frances last weekend. I it's the socialist dream.

The country spends 60% of its GDP at the government level. And yet the streets are awash in turmoil. It's heartbreaking. But, Ken, if I may. And by the way, Paris look pretty damned similar to Chicago in 21, 2022. Because this is where I wanted to go. Isn't isn't isn't France an isolated case? I mean, they try austerity, and, uh, the government doesn't survive. It's a people who not to be flippant about it, but are very willing to riot in protest at anything. Is that really the future that the US might be looking at? It's the future. I lived in Chicago. I can look out my window down at the Dior store.

They were very efficient. They would take a van. They drove right through the front glass, create a giant space for 50 people to run in. They could empty the store in about 300 seconds. All right. Like, we're maybe more efficient than the French, even at looting. But Paris, I think Paris would be a real wake up call to every single young American. France is the dream that the left talks about the liberal safety net safety net rich socialist Europe. And here's France. That dream. That dream is the nightmare I left from Chicago. That dream doesn't belong in our country.

You know, our economy, a society where it comes down to how much you can take from others. In the first, take your property and then they'll take your personal rights. That's not a society that we want to create. Do you see candidates that you're actually fearful that's the path they're going down? Oh, I, I, I very I mean, Jamie Pritzker, governor of Illinois. Yes, 100%, 100%. So where does the conversation then go? Can after this, if it is a drumming, if these candidates that you say are fearful increase in numbers, what then? What does the Republican Party do? Should the blame lay with the president. So, you know when a party's power is checked in the midterms. That is when that happens. Let's be clear.

The American people have spoken their mind, and you better damn well listen. And so what I do hope is that if Trump takes a beating here in the midterms, he doesn't double down. He takes a step back and says, what do I need to do to better reflect the voice of the American people? You know, J.B. Pritzker ran a bill in Illinois to raise taxes, to put in place a progressive tax system. And bit of background before he was seated as governor. I met with him and I said, you know, we both know the pensions in Illinois are out of control. It's a huge problem. The state of Illinois, the promises made to government employees are simply unsustainable. I said, if you will put a constitutional

amendment up to reform pensions, I will publicly support you in raising taxes. And I was the largest taxpayer in the state of Illinois, and my firm represented almost 2% of the state's income tax revenue. He told me to pound sand. Hmm. He then ran a constitutional amendment to create a progressive tax regime. Called it the Fair Tax Amendment. And he lost. And rather than take that loss and pivot to the voters have spoken. I need to get costs under control. I need to address the spending addiction we have in our state. He lashed out at me instead. Like you've missed the narrative. You know, Governor Pritzker.

You missed the fact the voters have said enough of the spending and corruption in Springfield, the spending and corruption in Springfield. Go put your house in order. Then come back and talk about taxes. This message in this midterm. I hope whatever that message is, whatever it is, the leaders in the House and the Senate and the white House listen carefully to the American people. It's Republicans that have increased a lot of spending, too, on a federal level.

Actually, it's the Republicans, I think, have their hands dirty with the tax cuts of the last two years and with spending increases. Right, right. That's the like if you want to be critical of the economic policies of this administration. And it's an interesting debate. You know, back when he cut taxes, what was it circa 2018? The view was this would reignite American productivity and entrepreneurism. And I think he was spot on. Right. Playing that playbook just a year and change ago.

There was one huge difference between 2018 and a year and a half ago, which was the spending orgy of the pandemic. Yeah. All right. So our country went from a fiscal situation that was difficult. And people forget this. We spent as much money during the pandemic as a percentage GDP that we basically spent to win World War two. Mhm. That was a what was the cost of us sitting in our couches. So we didn't have the fiscal space to renew the tax cuts in my opinion a year and change ago. And with the federal deficit of $40 trillion, the question of crowding out is now becoming front and center again. Like, why are mortgages so expensive?

Why is that 30 year old 30 year yield so high? It's multifactorial. Inflation has been unchecked. But our fiscal house is clearly not in order, and we need to put our fiscal house in order. What gets it in order, though? Because I know you say in Illinois, maybe voters wanted that, wanted a cut back in the amount of spending. But for the most part, it seems like politicians hesitant to cut any sort of programs to raise taxes. Is it then, as you say, because of this competition for capital? Is it the bond market? You think? So I think first and foremost, I think as a country, we really need to play the party card as hard as we can. Mhm.

All right. Like if you like in order of what priorities need to be number one grow the damn economy like grow this economy. And by the way to grow this economy, you actually want to push the Europeans to grow their economy. That's like the tariff war with Europe a fiasco. Because at this moment we should use all of our political capital. Europe. You want us to pay for your defense? Guess what? You're going to go back to work in France. There are strict limitations on how many hours you can work a week. Strict limitations.

It's ridiculous. Like the French want the Americans to provide the defense for Europe, and they don't want to go to work. This just doesn't work for the American people. So we've got to grow productivity. That means that we need to support the Arab Revolution. We need to make sure that data centers are built in America. But we need more oars in the water. We need more focus on nuclear fusion. Nuclear fission. We need more focus on batteries. We need more focus on robotics. We need more focus on the technologies that will unleash productivity for the next 20 years. Like that should be the singular focus

of our administration from an economic policy perspective. Grow our economy and push our allies to engage in meaningful reforms that grow their economies. The entire Western world is in the same boat together, and it's not. We're not going to get out of these waters by torturing each other. We're going to get out of these waters by making the pie bigger for all of us. That's number one. Number two is we have to fix education. We cannot have a country with broken schools and expect to have the prosperity we've enjoyed over the last 50 years. You know, back to Illinois.

It's easy talking points 2 or 3 years ago. 53 schools without a single child at grade level. Let me just let that sink in. 53 schools. Not one student in these schools could perform at grade level. That doesn't work. What we do know works is something like success academies here in New York with Moskowitz. You know, I've had a chance to walk into a classroom of seniors and feel, frankly, quite humbled. You walk into the art history class.

Here's a painting. Who's the artist? What was the year? What was the country? What was the social issue of that moment in time? Like, I don't know a lot of art. I don't even know this artist. And some kid in the classroom puts his hand up, says, that's so-and-so. France this year. These were the issues at the time. It is so both heartwarming and impressive at the same time. Right. Then number three is, you know, back to, you know, how do we recreate the Simpson-Bowles?

How do we create the up down vote on needed entitlement reforms in our country? And in particular, we have to honor the promises that we've made to our retirees and your retirees. But we need to have a really deep, thoughtful conversation about how do you work one more year or two more years, or how do we motivate you to work for 2 or 3 years before you take Social Security? and then immigration. Just right to the point. Every single brilliant person around the world. I want them to live. I want them to live in America. I want them here.

Our colleges are our elite. Schools are 15 to 20% foreigners often. Here's your degree. Here's your green card. We want them here in our country. So does it mean all of this essentially means that there is a path to grow our way out of deficits. That when the bond market starts flashing yellow and red lights, it's not as alarming because there is a path out of it and it's via growth. Is that kind of the direction? That's the only direction. So you're not concerned, for example, when you see bond yields at multi-decade highs.

Oh no I am worried. And this is like okay voters get to say their views of the House and Senate here in a few weeks. And the bond market is speaking pretty loudly now too. Do you think? And the market is telling the House and Senate you need to start to put the fiscal house in order. But with the bond market doesn't as clearly communicate is you're going to get the house to order by getting productivity up. Right. That's I mean, every talking point from Washington, D.C. should be about entrepreneurism, about productivity gains, about how we're going to grow our economy and how it's going to be an economy where everyone

feels like they're getting ahead. So the bond market is speaking. Do you think they're listening? Not yet. What happens if they don't? Uh, you know, we're going to see higher inflation. We're going to see the dollar weaken and we're going to see our standard of living fall. You know, kind of as you were talking about Governor Pritzker calling you out, I can't help but just think about you've been a punching bag in recent years for various politicians. Um, you've been particularly outspoken about Mayor Mamdani. Uh, when he started that. Yes he did. And I think everybody knows that, Ken. And I think everybody remembers the moment. You called it creepy and weird, too.

I think that stuck with a lot of people. He sense, uh, moved on to other issues, notably stopped name dropping you, which I assume you're quite happy about. Uh, the taxi was proposing stalled by the courts. Um, is there a relationship between you and the mayor? How do things stand there? There's not a relationship between the mayor and me, and that's. That's okay. Like, you know, I'll be right to the point. I live in Miami. Involved politics in Florida. I hope that New York picks really good leaders. But I just don't want to be involved in New York politics.

All right. I do have 2500 employees here who are deeply involved in New York politics, deeply involved, and I encourage that. But I really do think that New York needs to, for itself, sort out the leadership it needs for this great city. And New York is the greatest city in America, arguably the greatest city in the world, and New York deserves one of the greatest mayors in the world. Where do you see citadels center of gravity. You mentioned the strong employee base here. You have your Miami headquarters, too. Where's your center of gravity, Ken? It's somewhere over the middle of the Atlantic Ocean. You know, between London, Miami and New

York. Our center of gravity is somewhere over the middle of the Atlantic Ocean. And I think that's the right place for it to be. You know, it's a firm that takes, um, that's that's highly interconnected across the Western world. The Western world being principal Europe and the United States, there have been. It's been interesting just to look at some of the numbers of growth of financial professionals in Miami among you and your competitors. It's kind of in the tens, like 20 to 50 people, perhaps, of investment professionals that actually shrank in the past year. And I wonder what you make of that. Is there something missing in terms of growth investment professionals in Miami? Is it happening at the rate that you

would expect it to look. I think that the trajectory of cities is written over decades, like it's not written overnight. And frankly, that's that's good. I mean, you know, people put down roots. They become parts of communities. They become engaged in that community. We don't want a nation of nomads. We want a nation where people put down roots and call some place home. And so the forces that have pushed people towards Miami are strong, you know, incredibly pro-business environment, um, very high quality life, safe streets, good schools. And then there's challenges.

High cost of housing. Transportation is a real challenge. I mean, so many people moved to Miami over the last decade. The roads are they're really congested. So big picture. You know, Miami has experienced tremendous economic growth over the last 20 years. An enormous surge in wealth as a city. I mean, I can't it's like California now. Like, did California just send all their billionaires to Miami? It feels that way. And it's a city that very much embodies, I think, the best of our country. And frankly, a lot of it's due to the

Cuban immigrants. You know, they came. You know, I can't tell many people I've met whose parents came here and never saw their parents again. And they came here with nothing. They came here to live the American dream. They came here and had families. They're not about to embrace socialism. They're not about to give up their personal freedoms. And that just permeates the culture of Miami. This sort of sense of. I've come here for the American dream. I am going to reject things that. That are an affront to the values that this country was founded on. And I'm going to make sure that my kids are well educated. I'm going to make sure that my.

That I put in the effort to run my business. And I'm going to have safe streets and the Cuban community. Miami is just really important to the ethos of that great city, and I'm grateful for that. And we see this and the entrepreneurism in the city. And I really do believe that when Carnegie Mellon comes to Miami, it will only help to further accelerate that. You know, if you look at Pittsburgh. Pittsburgh's undergoing a second industrial revolution, this one led by robotics. There's a hundred companies in the field of robotics around Carnegie Mellon University's campus. You know, people forget CMU leads the

world in robotics. Number one in computer science. Number one in AI. Number one in cybersecurity. They are an extraordinary, extraordinary community of both students and faculty. And for them to build a campus in Miami with thousands of undergraduate and graduate students will transform the city of Miami in a profound way. Ken, we're just about out of time, but I actually just want to ask you finally about community. Um, it's something that you've been very clear about just within the culture of Citadel at Covid, you were one of the first leaders to really say it is important to have people together.

How do you think about that? If Citadel, if the center of gravity is somewhere in the middle of the Atlantic Ocean, how do you ensure cohesion as a team? So number one is we keep the teams within Citadel as much as possible in one geographical location. So if you look at the top level of the business and then you go down the verticals of what we do, those verticals are very geographically centered because we think that's very important for teams to work together physically whenever possible, like nothing beats a whiteboard and a good debate. And like, you walk in my office, there's a big whiteboard. You walk into all of our boardrooms, there's big whiteboards, our walls all over.

Many of our offices are rideable. You just get up and write on a wall. Nothing beats that, that person to person interaction. And what we find is that in terms of developing talent for our younger team members, to be in an immersive environment with your boss, who's your mentor, with your peers, who you're also, in many ways, your mentors. Nothing beats that physical proximity. And I think it does create a really special place. I think that's a wonderful note to end it on. Ken, thank you so much for spending the time. Thank you.

Thank you so much, everyone. Please join me in thanking Ken Griffin. Thank you. So.