McGuire: Public-Private Partnerships are Needed to Compete Globally

This week, Bloomberg Invest convened in Lower Manhattan to talk with some of the leaders of Global Wall Street about what investors should be thinking about. We talked with Ray McGuire, president of Lazard, and started with what he sees as driving the need for investment over the next few years. That goes to kind of a macro opportunities that we have, and I would put them in five categories. One would be generative AI in the drop down box. There is the amount of capital that we're going to need deploy in order to support generative AI data centers. As an example, renewable energy or energy transition would be another of a macro trend. And the drop down box of renewable energy and energy transition is how do we invest in the infrastructure that's going to allow us to remain competitive and energy transition and also be effective and how we go about energy transition. The other is this has taken on a different nomenclature dependent upon who's communicating. It's either onshoring, fringe shoring, deglobalization, or what I would call reglobalization. And the reglobalization means how do we invest in US manufacturing. Remember we peaked in US manufacturing in June of 1979 where one in five Americans worked in a factory in the manufacturing base. Today that's probably one in 20 and much of the dependence that we have in the manufacturing world for all the things that we do are dependent upon the supply chain. So re globalization is going to be another factor. The other factor that I would look to is the largest growing population that exists in North America is 65 years and older. And so how we drop down box, how do we engage in healthcare for that demographic? How do we manage the transfer of wealth or not? And the last is cybersecurity, macro themes and the investment that we will have to make from the private sector is investment that we also today see being led by what's taking place in Washington. The IRA as an example of the CHIPS Act fundamental to how we compete going forward. Just where I wanted to go, which is the role of private versus public in some of that financing. Because you you mentioned the CHIPS Act, which obviously has a lot to do with generative AI. Government's a big player in that and also energy transition. Goodness knows where the IRA government, big player as we go forward. As you look at from your point of view at Lazard, what is the right role for the government? What's the right role for the private sector in supplying the capital that's needed? It's going to have to be a partnership, especially for the elements of the macro transit in order for us to compete. It's going to have to be public private partnerships, which we're seeing in many ways, I think with the IRA and with the CHIPS Act and look at the number of private enterprises that are involved in that with the support of the government. So there's those partnerships and each one of these macro themes is going to have to be public private partnerships as we reglobalize, how do we invest in the elements of that reglobalization? The way that we do that is through we need government policy that's going to be supportive, and then we need private enterprise to partner. And across the spectrum, you're going to see public private partnerships that lead our ability to remain competitive. Let me pick up on one of the things you've mentioned a couple times. This is workers, the number of workers, but also trained workers is going to be trained workers. In order to grow as an economy, you need more laborers. In the recent past, it appears that we've been sustained to some extent by legal immigration, actually legal migrants being added as a workforce. What's the role of immigration in terms of the growth of the US economy? Check as you look at some of those huge projects where you need the workers and also the trained workers. Well, apart from the political implications of that, first of all, we need to make certain that the workforce that we currently have as a workforce that is trained to be able to address the huge opportunities, the demand for labor. And my sense is that as you think about the IRA and you think about projects like Gateway and you think about the the organizations today that train the labor that there's a tremendous opportunity for us to continue to invest in that. Unions as an example, how do we invest in that and how do we make certain that the unions supportive so they can go train the workforce, reducing the requirements that you have a college degree in order to do some of the work that's going to be necessary. So workforce training is critical. By the same token, workforce housing is going to be critical. So for 72,000 people commuting into this geography, where do you house them? That's going to be part of the overall thought process and part of the overall architecture as we think about projects like Gateway and as I think about what gateways the implications of Gateway profound and exciting and a reflection of what we can do when we decide to to invest in in this country and invest in the the most important part of the country, which is the talent. When we talk about things like generative AI as well as the energy transition, it's hard to have that discussion without talking about China somehow, because China's really put a lot of investment into those. There's obviously national security issues with China. At the same time, how can we get along, if I can put it that way, with China in terms of economies so that we both get the best of it without conceding or compromising our national security. So I would say when it comes to generative AI that we are ahead in the actual generative AI, the technology of generative AI, if you look at who, The Who, who are the architects of that, they reside in this country. So I take confidence in that. When it comes to the energy sources that are necessary for energy transition, as an example, 70 to 90% of the raw materials necessary for renewable energy, energy transition is refined by China. And so as we think about that, we'll have to reduce our exposure to the supply chain and invest more, which is why I come back to what we're doing with the CHIPS Act and the public private partnerships that reside there exist there and and other examples out there. So I would say there is a reliance today that we have to reduce our exposure, but that comes to not trying, but China plus many, not China plus one. And I spoke about Mexico or India or Poland or if I look at the global S coming from Tierra del Fuego up and the natural resources that exist there and the relationships that we are developing there to, to generate or to get our exposure increase to raw materials and minerals, that's increasing. And I think there's an acknowledgement that we need to increase that.