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00:00At the start of the year, you and Adam Posen wrote this paper warning about inflation at 4%,
00:04and that turned out to be very prescient. You doubled down on your concerns about inflation,
00:09talking about it at Semaphore. At this moment, though, it is risk markets at all-time highs.
00:14Governments are still spending, companies are spending, people are spending. Gravity hasn't
00:18kicked in yet. It's what you deemed the roadrunner moment. So how much longer can we go without the
00:24force of gravity caving in? Well, I think it's starting to. I mean, if you look at the producer
00:28price index from last week, for example, you're starting to see the pass-through from what's
00:34happening in the Middle East into a variety of prices. But the big lesson here is when supply
00:39shocks happen, whether it be a pandemic or tariffs or now the closure of the Strait of Hormuz,
00:46it takes a while to play through to prices because, first of all, firms have to figure out how long
00:53this thing is going to last, and then they've got inventories that they can draw down, and it's only
00:57after a prolonged period that it feeds through into prices. That's the big lesson.
01:02So it's feeding through to prices, but what about to markets? We're only now just in recent days
01:06starting to feel the pinch of higher yields, but markets are just below all-time highs. Again,
01:12it feels like there's somewhat of a disconnect about what you're talking about and how market
01:16participants are behaving. I think we should distinguish equity and debt markets, but in the
01:21equity market, a lot of the story remains an AI-driven one. So all of this is happening at
01:27the same time as remarkable innovation in artificial intelligence, and those two things are kind of
01:33competing for investors' attention.
01:35So gravity need not apply as long as this AI data infrastructure spend is ongoing?
01:39Not necessarily to the big hyperscalers and the other AI players. They're less affected by what's
01:47happening in the Middle East.
01:47Does that continue even if the bond market sees yields move higher, something around 5% for 30-year
01:54yields, trading at the highest since 2007? At some point, does that have wider ramifications?
01:58It can. Look, I mean, look, stock prices are affected by the discount rate that you're applying
02:02to future earnings, but mostly what's happening here is people are projecting forward all the
02:08transformation that they believe is going to happen from artificial intelligence, and against that,
02:13a slightly higher discount rate only has a marginal effect.
02:15So is it fair to say AI is basically the new macro? That's what matters for this economy?
02:20The U.S. economy today is being driven by AI and high-income consumers.
02:24So to that point, capital markets have been incredibly robust, too. And a lot of it feels
02:29that it's tied to the AI trade. The next era, which you were the only lead advisor on,
02:33that deal with Dominion. I mean, do we need to start dreaming up of new and bigger deals that are
02:38happening because of the demand for things like energy and compute tied to AI?
02:42I think there's a huge benefit to scale, to being, you know, at a scale that's commensurate with the
02:50challenges that we face. We were very excited to be the lead advisor on the next era Dominion
02:57combination. And that's an example of where the companies believe that they can deliver better
03:03outcomes to their consumers and to the hyperscalers and to others through the combination.
03:08How competitive is it in your industry right now to get on these deals? Because, again,
03:12they are blockbuster in size. And I mean, it had the impact of moving you way up the rankings just
03:17in this one deal, given it was, I think, your second biggest advisory deal ever and the biggest ever
03:22in power.
03:23And the fourth largest ever across the board. Look, these relationships tend to be very long term.
03:29We've been working with NextEra for a long time. There's a vice president on the team that did this
03:35deal that has been serving NextEra since becoming an analyst at Lazard. So that's an example of the
03:42longevity of these kinds of relationships.
03:44What other kind of deals are you seeing in the pipeline that relate to AI? What should we be
03:49looking out for? Is it things of this size? Do they keep getting bigger? Do they expand into more
03:55industries?
03:56I think large deals are in the offing right now for two reasons. One is because when technology changes and
04:02also when the global economy is changing, there is, you know, the desire to respond to that.
04:08But then secondly, there is a window here where boards and C-suites believe that the regulatory
04:15environment is more accommodating. It might be a bit more political, but it's also more accommodating
04:19than it may be after the next presidential election in particular. And so get your deals done now.
04:25One of the other comments I've heard, and Paul Taubman had said this to me, that yes,
04:30deals are getting done because of regulation. But in 2026, when affordability is an issue,
04:35that there might be some deals that don't occur or they get a little bit more regulatory scrutiny
04:40than you would imagine for a Trump administration. Power is a great example. There's been a big
04:44political pushback. Do you expect there to be any type of regulation or just any involvement
04:50from Washington, D.C. because of concerns of higher energy prices, for example?
04:54Well, hopefully in a lot of these transactions, what you're delivering is more efficiency and therefore
04:58lower prices for consumers. That's certainly what the NextEra Dominion combination is expected to
05:07produce is a more efficient outcome, which can then be shared with consumers also.
05:12A lot of the deals that have taken form in tech and related to AI also aren't outright mergers.
05:18It's a lot of circularity where you buy my chips, I make this investment, I buy this amount of your
05:23company. Does that all concern you? There has been a lot of commentary that these companies are
05:27becoming too interdependent on each other. Well, I would step back and just, again, look at the
05:32macroeconomy because if you look at the sources of growth in the U.S., it is artificial intelligence
05:37and then high-income consumers. But those high-income consumers are benefiting from the equity run-up
05:42that is being driven by AI. So there is this circularity. And, you know, at this point, the U.S.
05:48economy is a levered bet on AI. That's kind of scary, though, isn't it, Peter? That you have this
05:54one kind of pillar supporting us. But I'm also really excited about the technology. And so
06:00I think that's a good bet to be making. May or may not, like many bets, it may or may
06:06not pay off,
06:07but it's a good bet to be making. And like many bets, we might go too far. Are there areas
06:12you're
06:12concerned that feel a little bit bandwagon-y, that are a little bit too much hype as we go in
06:17this next
06:17era of innovation? This is inevitably part of a dynamic sector. What I would say is I think that
06:26to the extent the bet pays off, there are likely going to be labor market effects and social effects
06:31that we'll have to work our way through because labor markets deal well with small shocks that
06:37happen fast or large shocks that happen slow. This could be a large shock that happens fast. And
06:43labor markets are just not that well equipped to dealing with that in the very near term.
06:47I'm hopeful over the medium term. And I think there's been more thought about the kinds of
06:51things that even in the AI future will still provide employment and will still be promising.
06:57There will probably be, I agree with the thought, there will probably be a premium
07:01on human-to-human interaction in certain sectors and in certain settings.
07:05I have to say, you're more forward-thinking and outspoken than I think a lot of banking executives
07:10when it comes to AI. We have, though, seen various financial institutions start to make changes
07:14to their staff. Standard Charter this week, for example, is saying that they were laying off a
07:19whole swath of people. The words the CEO used was lower value human capital, which feels a little
07:26bit harsh. Is that how we should be thinking about things now?
07:30No, here's what I would say is I think, let me just speak about Lazard.
07:33Sure.
07:33I think there's a huge opportunity here to reimagine the way that the work is done on behalf of our
07:39clients
07:39so that we're even more effective on behalf of our clients and that for the most junior parts of
07:46our team, the analysts and associates, the work is somewhat less repetitive and you can move people
07:53up the responsibility stack quicker. That's the exciting opportunity. And in some ways, that's kind
07:59of back to the future because if you go back 30 or 40 years, there was this opportunity for upward
08:06mobility at a place like Lazard that as the teams grew larger, it became a little bit more
08:11stultifying and a little bit harder to continue to deliver on that. And I think we've got this
08:16opportunity to reinstill that historical notion that you can really move up quickly at a place like Lazard
08:25by serving clients well and by using these new tools effectively.
08:29Well, to the point of this disruption that's big and happening faster, something you rarely don't see in
08:35history. And I know you're a student of history as you are a market leader with your PhD for LSE.
08:39I'd be remiss if I didn't mention that. I mean, of course, the growth at Anthropoc, just as an
08:45example, has been mind boggling, bigger than Google during the dot-com era, bigger than Zoom during the
08:49pandemic. How do you as a corporate leader, just thinking about the rapid pace of change, think about
08:56what Lazard looks like in five to 10 years. What does it actually look like to be an AI forward
09:01bank?
09:02I think some degree of humility is required here. But what I'm trying to do and what our senior team
09:07is trying to do and what everyone at Lazard is increasingly trying to do is to experiment with
09:12the tools ourselves so that you get a comfort level, you get a sense of what they're good at
09:17and what they might still be lacking. And that helps inform a vision of what the future might look
09:23like. We're also delighted that we have Dmitry Shevolenko, the deputy at Perplexity, on our board. I was
09:29really, really excited to recruit him to the board. And he's definitely helpful, along with other board
09:34members, in helping us to scenario plan about what the future might look like.
09:39Has the type of person you're hiring now changed because of any of this?
09:43I wouldn't say it's changed dramatically, but I think the skill sets that we're going to be looking
09:48for in the future are probably going to evolve towards those where you can engender trust,
09:56you can show judgment, you can be client-facing earlier in your career.
10:02And in a sense, historically, you spent a lot of time with Excel and PowerPoint.
10:05But are the kids ready for that, Peter? Because they've just been...
10:08The kids, let's not, you know...
10:09I know, I've actually heard you say this before, don't call them kids.
10:12Okay, are the young professionals, right? I mean, they just spent so much of their formative
10:16college years on Zoom, behind computer screens, because of the pandemic. You're looking for
10:20more people skills. Are there more people skills out there?
10:23I think so. They may be latent. They may need to be kind of drawn out of people. But
10:28what we're seeing in the talent that is coming to Lazard is a remarkable ability to connect
10:34with their peers and with colleagues. And kind of those interpersonal skills,
10:38I think, are very strong.
10:39Peter, before I let you go, this is the deal show. So I have to ask you about one of
10:42your
10:42acquisitions about Camel Lutchen's beefing up your private equity exposure. I wonder why this deal
10:49now? Because it does feel that that area of the M&A market has been lagging when everything else is
10:54moving full steam ahead. The really important thing to realize about this deal is we're super
11:00excited to become the world leader in pro forma after the combination in both primary and secondary
11:06fundraising. And when things slow down in private equity deal making, typically the secondaries market
11:12actually will pick up because that's a alternative way of getting liquidity into the system. And so
11:19it's not only a fast growing part of the market, it's also a form of diversification
11:25precisely against the, you know, overall trend in other private equity activity.
11:30I'm sure you get this all the time when you do a deal, but what's next? What other areas are
11:34you
11:34looking at filling up in Lazard's business?
11:38We're constantly looking at things. I think the thing that we're most actively looking at right
11:41now is our wealth management business and what we can, we have a fantastic wealth management
11:46business in France and kind of what's next for that. We're systematically, as part of this
11:51broader Lazard 2030 vision. We've been making lots of investments in financial advisory. We're now
11:56creating a third leg with the Campbell elections fundraising business. Our asset management
12:02business is being transformed in our new leadership. And so the fourth piece is what's the future of
12:08wealth management and we're actively looking at that.
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