Transcription
So your Investor Day today comes off the heels of, I think, a really exciting announcement for this industry of how you're positioning Brookfield that is growing your insurer and really letting that lead your investments. If this is it, in your words, an evolution, if this is Brookfield 2.0, what is Brookfield 2.0 look like?
I think it's Brookfield 5.0. But look, I would just say that the world is always evolving, and we're always just trying to figure out how do we fit, how do we take enough risk to expand the business, to grow it over time, and not not take any undue risks for shareholders? So we continually try to do that in the business. And the thing that has, what we've been doing is taking our own capital outside of our investment management business, taking our own capital and putting it into back insurance annuities and continuing to push that business out there and really just doing the same thing that we do in our have always done our investment business, just do it in the insurance company because the things that we invest into are ideally suited to back long tail liabilities in an insurance business. And so it's just traditional insurance. You make money out of insurance and you try to not lose money in investing. And if you flip that on its head, we're trying to not lose money in insurance and make our money in investing. And it's just a different way of looking at insurance. And there's been some obviously they've successfully deployed that methodology for years on that because you have Apollo, your Berkshire Hathaway. To what degree do you look like your rivals or not look like your rivals?
I'd say we're probably somewhere in the middle of those two. Apollo is a credit-led insurance business, and Berkshire Hathaway is an investment-led insurance business. And we're probably somewhere between the two, but probably closer to Berkshire Hathaway than than than Apollo.
So it is this moment where more capital is coming into this industry, be it from insurance or retail money. I know that this is something that a lot of people want to get their hands on. And Bank of America recently put out a note saying Brookfield is maybe behind some of its peers. Do you feel like this is a moment of catch-up for Brookfield?
No, I would say, look, we're in the we're in the first inning, and we're not even in the first inning of retail wealth like this is. There's a there's a $20 trillion market out there. We spent 25 years on the first $20 trillion, which is in institutional management. And now allocations to alternatives are 20, 30, 40, 50% in institutions. They are zero in retail, and we have a 20-year runway. What's going to going to lead to success is those that have experience and products that can fit into into retail accounts. And we have a 25-year track record in the exact products that should be in retail wealth. So we're not even in the first innings yet.
What is this industry look like in five, ten years from now when you have unlocked this retail capital? When retail becomes one of the bigger investor bases, what happens to you and your peers? What does that look like?
Look, I think private and private markets for the last 20 years have just been increasing. Increasing because you can you just own businesses and you don't have the distractions of the public markets. Public markets are going to, if you need liquidity, be in the public markets and generally be in ETFs. And that allows us as private market investors to use the capital markets actually to buy things because the people that get left, aside from the ETF market, you can take them private, but increasingly just more and more money is going into private. And that's exciting for all of us. And and it'll it's going to grow continue to grow both in institutional management as these sovereign institutional pension funds in the world just get bigger and bigger as they keep compounding returns. But in retail, you're starting at zero. And if we end up at 20, 30% in retirement accounts, that's an enormous amount of money to deliver to an industry of alternatives. And there's just not that many people that can do what we do.
I know another area that you've identified as a really big opportunity, and I was speaking with Conor about this earlier, is air infrastructure. And Brookfield is so uniquely placed because not only are you in the infrastructure side, but you're on the energy side as well. It's an industry infrastructure that takes a lot of resources, be it human resources, be it capital, be it that energy. Is there a risk that it's crowding out that so many resources are being ploughed into infrastructure, that other private investment, other public investment as well doesn't get the attention it needs?
So I would say we we're at the early, early again, we're at the early, early stages of this. And the buildout of artificial intelligence globally is going to be very, very. Is very large, but it is getting bigger every single year. And you've seen some of the big technology companies what they've been doing of late. But this is going to be it's it's it starts in the United States, but it's going global and it's really just the next backbone of the global economy. And that's we've been building out the backbone of the global economy for decades and decades. The artificial intelligence is going to be just really the table stakes that you must build in a country to deploy your businesses and for your businesses to get better. Because what this going to lead to is productivity advances in businesses and and those that don't have it will lose and those that have it are going to win. So it's going to be built out around the world in the amount of capital that's getting put into into centers, into power for this. And and really the compute capacity build out is very, very large. I've never we've actually never seen anything like this. And that probably says a lot from one of the largest backbone investors out there.
Well, you're you're talking about that they're going to be a lot of winners from this. But Bruce, it also sounds like there's going to be some real losers, some real people who who are left out in this transition.
You know, I actually think that these transformations, of course, there's always on the edges, there's always things that happen that aren't what you would want. But generally transformation. Think of the computer. When it came out, everyone thought that people were going to lose and your iPhone, people thought people were going to lose. What happens is we are we're a shrinking population generally in the world, and robotics and advanced productivity is just helping us do things better. And we're all going to be more productive. It means there's going to be greater wealth to spread around. And if we do it right, I think it's going to be great for the world.
But what about the Sam Altman comment a couple of weeks ago basically saying we're in the phase right now where investors are overexcited about?
I do think there is some over excitement, especially when it comes to pricing and saying. So remember, what we do is build the backbone of the global economy. So we are building power, data centers, compute capacity for the best of the world and for sovereign countries. And all of those have long-term contracts in place. And we're behind the scenes providing them enormous amounts of money. Like this is we're talking per center, fifth, 25, 50, $100 billion. This is enormous capital. Of course, when people when when excitement happens and everyone wants to get in on something, there are mistakes made by people. So I'm not saying there will not be mistakes, but I'd say for us, we're behind the scenes. We've been around this doing it a long time. And I think for it's a it's a great investment area for a long period of time.
You've you've again, been part of this for a while. Remember, in 2022, you had that partnership with Intel, building out some infrastructure there. One of the things that's changed in this is you have just taking Intel as an example, more involvement from the government, a 10% stake, the US government looking at taking. Does it change the calculus for investing in these types of things if you have governments more involved?
No, I look, I think they did that for specific reasons, which I don't need to comment on. I just think the the business world evolves. There's there's a lot of money out there and businesses continue to grow and build out. And we're going to see we are going to see governments are going to have to facilitate Vaya build out because they need a lot of sovereign capacity themselves, like they need governments, governments, your passport, driver's license, and everything else. When you come into the when you come into the United States, you go to the border now and it it reads your your picture on the screen and it let you in the country. And that that's data center capacity. And when you get down to it, like just to take it really simple, that's what it is. And every day those kind of things are going to artificial intelligence. You just thought that they saw your picture and let you in the country, but it's checked as you come to the border, checked your face, it's checked everything going on with you and it let you in. And and what happens is it just seeps into your life. And that's and people don't recognize that's happening. But what's behind that is trillions and trillions and trillions of dollars of it.
But I don't know whether to be excited or terrified about what you just said to me, Bruce. But if we are in this and governments need to be more involved, I mean the US measures, again, some have kind of criticized it being like, Oh, this is central planning, taking stakes in companies and at the same time trying to get revenue share from the likes of in video and AMD. Do those kinds of moves concern you or again, do you just see them as as necessary in this new world we're in?
Look, I just think the the United States government has a strategy. They're deploying it. They've done an excellent job in. Many of the things they're doing and they're supporting American business and they're going to build out American enterprise the way they best see fit. And they're doing a great job.
Just just to that point, Bruce, because you were just so uniquely positioned not only to see all the investment going into infrastructure, but just on the large swaths of this economy that Brookfield touches between. I built out and at the same time, a labor market slowing maybe corporations that are a little less certain. How do you feel about this American economy? Is it a moment of weakness? Is it a moment of slowing or is this still a very strong economy?
I'm a long-term thinker, and I would say what happens in the short term is not really relevant. We don't pay too much attention to it. Remember, we're building a infrastructure for next 40 or 50 years. That's what we're thinking about. The United States today has energy dominance, technology dominance, one of the largest economies in the world, one of the richest economy of the world, and a very entrepreneurial working class. It is going to win. And we continue to put a lot of money behind that. I think we've probably invested 30, 40, $50 billion in the U.S. this year. And the United States is going to be a great place to invest for a long period of time.