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World Economic Forum 2010

Davos opens up about the new normal

Marketplace Staff Jan 27, 2010
World Economic Forum 2010

Davos opens up about the new normal

Marketplace Staff Jan 27, 2010


Kai Ryssdal: Those are the bells of Saint Johann’s church in Davos, Switzerland. About which there is this story to tell you. The church was built nearly 700 years ago. And over time its spire was twisted by the stiff Alpine winds, the story goes. It was repaired at great cost, only later to be bent out of shape once again. Not what you would call the most promising of omens for a conference who’s official theme this year is “Improving the State of the World.”

David Rubenstein is what you might call a Davos regular. He runs the huge private equity firm The Carlyle Group. He has been to the World Economic Forum eight times. When I spoke with him earlier today from Davos, I wanted to know from him what people were really talking about. In the panels and group discussions, sure. But also out in the hallways over a cup of coffee.

David Rubenstein: Well, I think three messages. One is the economy generally around the world is better than it was a year ago, so people are happier than they were. Two, there is some concern about overregulation and perhaps some political attacks on the business community. At least there’s concerns by the business community about that. And third, I think there’s a general view that the global scene is much better than it was before. There’s more cooperation among governments than perhaps there was before on certain global issues, and there’s a sense that there’s more optimism here than there was I would say a year or two ago.

Ryssdal: Is there an awareness that perhaps out on the global economy writ large that that might not be the case?

Rubenstein: Of course, there’s no doubt there’s a recognition of the fact that not everybody at Davos represents the whole world. People at Davos are a small sliver of the population of the world, for sure.

Ryssdal: Well, along those lines, then, the panel you were on this morning is about the new normal after the Great Recession. And I’d love your thoughts on what that new normal in the global economy might look like.

Rubenstein: I think the general view is that investors will probably get somewhat lower rates of return. That governments need to be more involved in trying to prevent the kinds of problems that we’ve experienced over the last couple of years. And that generally the business community hasn’t been doing a very good job of explaining how it tries to create jobs, how it tries to respond to what government wants, and I think there’s a sense that the business community can probably do a better job of that.

Ryssdal: Mr. Rubenstein, what’s your take on efforts here in the United States to tighten up regulations on the financial industry?

Rubenstein: Well, I think every time you have a crisis of any type, financial crisis, or energy crisis, or any kind of problem, there’s always an effort to tighten regulations or improve the oversight of the industry that might be involved. Regulation is probably warranted in some areas to improve what the current situation is, but my hope is that there isn’t an overreaction, and we don’t get overregulation that impairs the business community’s ability to create jobs and to create profits.

Ryssdal: Well, so what would overregulation be? Should your firm — The Carlyle Group — a huge private equity firm, should it be regulated?

Rubenstein: Well, we are regulated already by the SEC. We are a registered investment adviser, as many other large private equity firms are. We expect that there will be some type of registration of large private equity firms, and smaller private equity firms as well, as well as hedge funds. I suspect that will probably happen, and we accept that that is probably a given. But I think doing things that would impair the ability of private equity firms to do what they do, which is to invest money, hopefully create jobs, and make companies more efficient, impairing that ability I think would be a concern, yes.

Ryssdal: Even though what you guys do, you and many other companies like you, has a huge effect on the overall economy, even outside the world of private equity.

Rubenstein: Well, it does, though, in fairness the private equity industry is a relatively small part of the global economy and a small part of even the U.S. economy. We do get attention when we buy companies that are well-known brand names, we make mistakes from time to time, as everybody does, and we try to correct those mistakes. But generally we think we’ve been responsible, we just have to let people know what we’re doing better than we have in the past.

Ryssdal: What’s left for you in Davos this year, Mr. Rubenstein?

Rubenstein: Well, I think for me it’s a matter of meeting people that I already know or meeting some new people that I think I would like to get to know.

Ryssdal: I have to tell you, though, you seem like the kind of guy who could probably pick up the phone and meet anybody you want. Why do you have to go to Davos to do that?

Rubenstein: You know, despite what people think about the new technologies we have, there’s nothing that quite replaces face-to-face contact with people. And so yes, maybe I can call a lot of people, and maybe they will return my phone calls, but if you can meet just a small fracture of the people here, I think it’s worthwhile, and it’s a useful endeavor for people in the business community and other parts of the global economy to come to.

Ryssdal: David Rubenstein, managing director and co-founder of The Carlyle Group. Mr. Rubenstein, thanks a lot for your time.

Rubenstein: Thank you.

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