the American dream is alive and well because you started with a hundred and twenty thousand dollars you each put ten thousand you got the best right and closing bill today KKR had a market gap of 57 billion dollars well you're going to be a good entrepreneur what do you do you're either going to get through the wall or you're going to get over the wall but you're going to get to the other side somehow [Music] Heather gravis welcome to Guilford County and this event these are all business people I see three or four hyper University business students here they're all looking for jobs so you know you're but they all want to start the vice president you know that's that's sort of the idea I don't blame them so Henry kravis you were born in Tulsa Oklahoma and then you went to Claremont McKenna College in California then you went to Columbia to get your MBA and then you got a job at bernst Stearns and and you were a partner by age 31 and then something happened you didn't like someone didn't like your idea and you and your cousin George left and started KKR what's that all about what happened let us in on the secret well you know it's interesting uh we were at Bear Stearns George Roberts as you said it's my first cousin he grew up in Houston I grew up in Tulsa Oklahoma and we had been along with Jerry kohlberg Jerry was 19 years older than George and I George and I were both 32 at the time we started the firm and we actually went to the senior partner at Bear Stearns said to him uh We've you know we've been doing we'll call it private Equity now it's uh it's had all different names and uh they hated it because they were sales and trading firm and for them overnight was long term they never put a penny into any deal we ever did but they were happy to get the fees that we would bring in from that but didn't invest so we said we want to do this and we'd like to do it within bear Stearns we'll give you half of this new firm we'll call it KKR and we'll take half and the senior partner Cy Lewis said you're either here doing what we want you to do or you're out so we went back to our office and we said well there's our answer we're out so we left George and I didn't have any money we were young Partners there that didn't mean anything and so I put up ten thousand dollars that's all the money I had George put up 10 000 that's all he had and Jerry was 19 years older he put up a hundred so we started this firm with a hundred and twenty thousand dollars and the idea was which was what we had been doing at Bear Stearns was to make long-term Investments for Bear Stearns five to ten years that that was unheard of they didn't know what it meant for them long term was overnight they were sales and trading firms so we wanted to make long-term Investments and improve businesses that's really was the point of the investment and so we just bought a few companies and including a company in in Greensboro uh born clay products was one of our very first Investments that was in 1974 we started making investments in 69. and we uh made a little money with that for for the firm and so when we started we went out to raise a 25 million dollar fund and we went to a man in Pittsburgh named Henry Hillman now I had read an article that uh Henry Holman to put the money up to start Kleiner Perkins The Venture Capital firm about four months before so I called him and I said we'd like to come down he said great he didn't know what we did and I didn't we didn't know each other and so George and I went down to see him and we left after lunch and he said I'll be back to you in two weeks so fine that was sort of normal we were dealing with a Prudential Insurance Company Mass Mutual all took a long time and he five days go by and his right hand man Wes Adams called me said did you not like us and I said well what do you mean he said we even heard from his five days since you were here and I said well Mr Adams I thought that you and Mr Hillman said that you'd be back to us in in two weeks and he started laughing he said that's right he said that's what we said but he said the minute you and George walked out of the room Mr Hillman said you know I like those young guys I want half their fund so I did the Toyota leap thinking I'm on a pay phone at the O'Hare Airport saying wow we're in business well not so fast you have to understand we have left bear Stearns we had no money we each had three kids we're both 32 years old we couldn't raise a 25 million dollar fund on terms that made sense I'll tell you what happened so he was going to give us the first half of it 12 and a half million we went to the Prudential and Mass Mutual they said we love you made us a lot of money we'll take the other half but and the butt was they wanted to be the investment committee and George and I had had enough dealings with him that we didn't leave bear Stearns to go to work for the Prudential now I'm sorry if anybody in the audience is from the Prudential Insurance company but we did not want to work for the Prudential so we said thank you very much and there we are no money no job and no office actually at that point and well you're going to be a good entrepreneur what do you do you're either going to get through the wall or you're going to get over the wall but you're going to get to the other side somehow and so we went to dinner and we had a uh we had a cocktail and we said okay we got a problem we're out of a job three kids each uh what is it going to take to run uh KKR we had two offices George was going to be in San Francisco Jerry and I would be in New York held our finger in the air and said five hundred thousand dollars okay let's go to eight individuals and ask them to put up fifty thousand dollars each and if they put up the fifty thousand that's 400 000 the other hundred thousand we figured we need if we bought a company we get a fee you committed them for five years did you not yes and we committed them for five years uh at fifty thousand a year and what we said to them is in return for that we will give you the right to invest in any deal we have deal by deal but uh and then if you come in we said okay we've got to get part of the part a part of the profit well there was no such thing as carried interest in 1976. so we all George and I knew was the oil and gas business because George's father was a patrol was a an independent oil a gas operator my father was a petroleum engineer and in the oil business in those days uh what was standard was called a third for a quarter and that man if I came to you Neato and said uh we're going to drill well you're going to if you have the money to put up you I'll put up 25 of the money if you'll put up 75 percent of the money but in return for that uh we want a third for a quarter which meant we wanted 33 of the profits for our 25 interest so George and I knew that that's all we knew so we said why don't we do that we got part way into our dinner and we said well that's all great except we've got one problem we don't have 25 percent of the money to put up we have no money so what are we going to do he said well what does that sound like so we picked 20 percent of the profits now when I tell that story to private Equity people or tell uh Venture Capital hedge fund people they always say the same thing why didn't you pick 25 percent easy for you to say you know we had no money no job we're just trying to get started and there was no industry I mean there was no one doing what is called an alcohol private equity so that's that's really how we got started we started with 20 so so the interesting part to me is that the American dream is alive and well because you started with a hundred and twenty thousand dollars you each put ten thousand you had the rest right and closing bell today KKR at a market cap of 57 billion dollars that's right I'm interested in knowing and I suspect many people are interested knowing what are the fundamentals that you look at when you look at a company what are the fundamentals what are the one or two or three things that you look at this says to you I think this is a great opportunity I think we can make something of this what are those fundamentals well there's no set thing in fact we had an investment committee meeting today and one of the things that's pretty standard is what's the industry and where does this company fit in the industry because if it's number seven in an industry unless you have a pretty clear path to get it to one or two or three it's pretty tough to do anything unless it's a niche business so what we're looking for is what's the industry like is it the buggy whip business is going by the wayside or is it a real growth business so we look at that we look at and when we management is key whenever we buy a company now mistakes that we've made over the years is we waited too long to change out a bad management team and I will say this that pretty much what you see is what you're going to get when you first meet somebody uh yeah you can change them around the edges but after you spend you know a number of hours with them you pretty much size up the person and we used to make a lot of mistakes so today do we have somebody in mind who can be the CEO if not is there a big enough group of people that we could draw from that could come in and run it so management is key the industry management what's the purse where where is it and I'd say another thing that is very important is uh our risk factors what somebody told me years ago and I I never forgotten it if you always worry about what you can lose and never worry about how much you'll make you'll always make money and it and it's so true say that one more time if you cap your downside don't worry about how much money you're going to make on the upside then you're going to probably always do well so one of the things we look at is what's the risk involved okay if we're going to buy the company what's the price we have to pay um and by the way I will say that we've never been our mistakes we've made have not been because we paid overpaid mistakes we made were big macro mistakes we missed on gas prices we didn't realize gas prices would go from 12 to 2 very quickly we missed on wound Toys R Us was a big mistake for us and we didn't pay enough attention to this little company called Amazon and they came along and chewed our legs off and I can go down a long list and and boring what's the number of mistakes what happened with Toys R Us what what mistake did you make Toys R Us the mistake that we made there we bought the company uh we put too much leverage on it number one they had no e-commerce what's too much for average 40 30 no no no no no no no let me put it back into perspective so in the 80s when we would buy a company like we bought Safeway we paid 5.6 billion dollars to buy Safeway the supermarket chain 5.6 billion we put up 126 million dollars to own 100 of the equity and we borrowed 5.4 billion dollars in round numbers today you can't do that because when prices are higher you can't put that kind of Leverage on nor should you so today if we buy a company in today's market you might pay let's say you pay 12 times ebitda earnings before interest taxes depreciation and amortization you would put on uh maybe four or five times debt which means the rest of it has to come in the form of equity so uh the thing that we the mistakes we made on Toys R Us one they had they did not have a good e-commerce program and they were relying too much on Amazon to run it for them and Amazon learned about the toy business from Toys R Us and then said goodbye and there we were without anything and they gave it to them so that was a former management but we inherited a contract we couldn't get out of um they weren't Innovative enough you've got to be if you're going to be in that business you've got to keep changing so one of the things that I always like to say and I'll say it to students all the time uh if you don't like change you're going to like irrelevance a lot less and so if you can't change a business I said to our people at KKR all the time you know you've got to change you've got to innovate you've got to be willing to take risks so in Toys R Us mistake was e-commerce was a bigger part of the business than we thought I mean it was a smaller part of the business but it's going to be a bigger part of the of the industry bad management too many stores bad product so for example when you checked out tell you how bad it was we bought it you checked out and if you had electronic products with dolls and and other things you had to go through one line for the electronics and one lines for you know dolls and and bikes or whatever that's crazy so we finally got the right management but by that time it was too late and so a mistake that was made there um was uh and I'll tell you something as I'm thinking about it we had a um a mem the team came to the investment committee with a memo it was about us from the floor up to here and I said first of all I don't I'm not going to read all this stuff if you can't explain this to us in five or six pages maybe you got a real problem well they couldn't but we went ahead anyway and it was the number one toy retailer in the in the in the world and so a mistake was made yeah um you talked about you know first entree into North Carolina I think it was your first was born brick right at this neighborhood and then I think everybody in the room is quite aware of your acquisition of um RJR and um we've you know there's been a very very public thing we've read books about it and the media talked about it let us in a little bit now that time has passed what is your take on that acquisition and um what fascinated me is in the same year you made that acquisition rgr was the 19th largest company in the United States 19th largest I think you paid for 25 billion dollars Thirty Thirty Thirty billion dollars let's not pick on the details here I just found out and and um Henry in the same year you also bought Duracell and you bought Stop and Shop grocery chain right there's a lot to do in one year or was that the norm for you well keep in mind um uh that it was over actually we bought uh within about a two year period you're right um there was a lot of money available then you could leverage a company very very much for example in RJR okay we had been talking to the management of RG aronabisco about putting it together with Beatrice Beatrice Foods was a company that we had owned based in Chicago and we've been after Beatrice for a long time because it was one of the worst run companies that that I'd seen and George and I kept saying God if we could only buy that and the management would never talk to us and one day um uh we get a call that they just fired the CEO of Beatrice I said well let's dust off our numbers and and see what we can do now I'm going to lead up to to RJR in a minute and so um we did we said this would be great I called the banker and uh I said to him his name was Ira Harris and it was at Solomon Brothers at the time in Chicago and I said we'd like to buy Beatrice Foods think it was Satan you got to be kidding me and he said well if you have anything to say put it in writing now today you probably couldn't do this I called my secretary and I dictated a letter said we'd like to buy the company here's the price roughly that we would pay and I said it off figuring well nothing's going to happen or the lawyer is going to call back not at all he called back two days later he said we want to come see you so he and the interim CEO came to meet with me in long story short we ended up buying Beatrice for about 8.6 billion dollars after we bought Beatrice we then thought about combining it with RJR Nabisco we'd had a number of conversations with Ross Johnson and Ross got the idea jeez maybe I could buy the company and uh and uh you know Henry and and uh the CEO at Beatrice give me a really good idea so he went off and uh talked to a couple good friends of his and they put an offer in at 70 a share well we looked at it George and I looked said this is crazy this company is worth over a hundred dollars a share they're stealing the company and so uh that was on a Friday we worked all weekend and on Monday afternoon we sent a letter in at ninety dollars a share and uh well that started the the bidding uh uh contest and so what we saw in it was a very poorly managed business we saw a business that had incredible potential we were worried about the tobacco business because that was a part of it but that was the cash machine cash flow machine but we were worried about that what happens to it in the future and at the time we thought they can last long enough it's not going to be a real problem and so um we we send we send the letter in and the next thing you know they come back a week later with a 95 and so we're going back and forth we'll just give you an example of the waste that was in that company so I get a call one day from our lawyer and Dick Beatty and he said do you know uh one of the senior Executives at RJR by the name of G Shepherd I said I don't know any G Shepherd and he started laughing and I said were you laughing about he said well that is Ross Johnson's German Shepherd and that German Shepherd flies on the one of their 11 airplanes by himself so whenever Ross Johnson wanted to get his dog out to visit with him he'd send the plane for him that was the tip of the iceberg you know I mean there was just waste everywhere first of all what what company has 11 airplanes they had 11 airplanes and so we just saw where we could run the business so much better than it had been run we were lucky enough to be able to attract a guy named Lou gerstner Who was the president of American Express to come and be our CEO and you know we went to work and fix improving the business and so we go through all of this and in the end it was a lousy investment yeah we fixed a lot of it we wanted that after about four years we were going to split the company into two we were going to go with the tobacco business as one separate business and the food business the Nabisco business as a separate business but we had to wait five years to do it otherwise there was a big tax uh splitting the company apart after five years we could have done it and then we were worried because then a couple of Investigations started on the tobacco industry in general and we knew we'd be dragged into that as well so we couldn't split it apart and honestly the bottom line of RJR and Nabisco we made a little money but not a lot it got more publicity than it probably should have I had the opportunity to go to Washington and meet one-on-one with 33 Senators to talk to them about uh you know what this was what we were doing and the house Ways and Means Committee they wrote a book about it called barbarians of the gate and here we are I don't know 30 33 years later or something and they're finally we're finally getting rid of that name Barbarians at the gate so in in short it was not a great investment it was a great experience they made a movie out of it which was lousy I don't know I didn't if any of you saw it I have yet to see the whole movie I've fallen asleep twice trying to watch it but don't feel badly my wife Mary Jose he's here she'll tell you I fall asleep at all the movies so it doesn't matter but uh that is is no you know it didn't depict what really happened the book on the other hand if you haven't read it it's an interesting read and I would say it's about 85 percent accurate the quotes aren't but the story and what happened actually I learned a little from the book about what the other side was doing which I didn't know exactly what they were doing and it was craziness during this time because it was this fever of we've got to win and we were in the same mode as Ross Johnson and his team and Rossa teamed up uh with um shearson Lehman Brothers and uh they had uh Jim Robinson from American Express was helping him and so forth and it was sort of crazy it was a crazy time when you think about back on on this and and I'm often asked would you do it again yeah probably do it again but do it differently why do you have a sign in your office that says arrogant skills have you been in my office when you were out of town yeah twice well let me tell you NATO it's exactly right that sign my long serving assistant had it made for me and framed one Christmas because she said she'd heard me say that so many times and I just don't believe anybody should be arrogant I don't care who you are you know we all get dressed the same way and you know all given equal opportunities to a degree and I just don't believe in arrogance and I've seen more companies and more institutions and more people fall apart because being arrogant and that's why I have it there and I talk about it a lot you talk a lot about corporate culture yes what is in your view is the if not ideal a highly effective corporate culture well it's an interesting question when Jerry George and I started KKR uh we had two conversations back to back the first conversation was uh how we can split the economics that took about a minute and a half Jerry you're putting up a hundred thousand dollars and you're 19 years older than George and I we're putting up 10 each uh why don't you take 40 percent and we'll take 30 and then the first 10 points that we give up uh that is given up will come from you or even then we'll come down here no problem second conversation took not much longer it's probably the most important conversation that we ever had and that was uh what kind of culture do we want to have at KKR now we came out of bear Stearns which was an eat what you kill culture it was a culture where everybody raised their hand and said I did this I did that now Nita if I brought you in to the partner's dining room and I went back there about five uh you know six months later you might be in there with another partner and I wouldn't even know it because everybody was trying to just get whatever they could grab and everybody was running around the firm and I did this I did that we didn't want that we wanted a we firm not an i firm we wanted a firm where everybody participated whether you're a partner at the firm or you were not a partner whether you worked on a deal or you didn't and keep in mind that we started out which is private Equity that's all we did and just in the U.S and so we said that's what we want and today here we are 47 years later we had our birthday yesterday and it's exactly the same culture that is our DNA today it is the most important thing I tell young companies when they say what piece of advice would you give me I said have a culture whatever culture you have talk about it counselor I'm going to tell you what's the right culture for you but I'll tell you what's the right culture for us and you can't talk about it enough don't forget you're bringing in new people from time to time or all the time they don't know your culture when you hire we spend a lot of time on uh when we're hiring people trying to see how will they fit in the culture so one of the things that's very important for senior people we may have as many as 25 interviews for that person now all of you say geez that's a lot and it is there's a reason we want enough people in The Firm to say we want that person to come into the firm we think they'll fit in the culture uh and they come in with 25 supporters on day one 20 25. yes I could hire anybody we want but that's a doing a disservice to that person we're looking for signs of uh are they an eye person are they a we person are they a team player if we're interviewing a CEO for example for a job what I'm looking for is how many times did he talk about his team or she talked about her team did they only talk about themselves I did this and I did that well you know what it's like you run a huge university and very well there's no way that any of us can do it by ourselves I don't know who we are and so we're always looking for people that want to be part of a team and and so when we review people at the end of each year we review them in four areas one area and no particular importance I mean ranking one is management and Leadership these are particularly our top people management leadership commercial success uh culture and values are they living by our culture and values we have a lot of we've had people at the firm that did exceptionally uh well as far as making this money and we fired them because they didn't go to any meetings that wouldn't help anybody else at the firm and you'll kill a firm in my view if you do that so that and then the fourth area is uh diversity and inclusion very important part is we're trying to make sure that we have not only diversity in in gender ethnicity but we want diversity and thought we want different people all the time too many young people want to hire people like themselves and I think it's a big mistake you want people with different views different perspectives now I have to say and I give marriage Jose a lot of credit for this she kept asking me well you don't have enough women in the in the ranks at KC and the senior ranks and she was 100 right in fact Wall Street didn't all Wall Street and certainly the private Equity industry didn't and so George and I made up our mind that we're going to really have a a push on this and so we're making progress we're not to where we want to be yet but we have 38 percent of our Executives today are women we have a big push on ethnicity and uh you know that's really important to us now we've gone from three people to today we've got 2500 people we have 25 offices around the world we have about five a little over 500 billion dollars of assets under management and as you said we have a 57 billion dollar market cap the DNA of that as I said and I can't emphasize it enough is the is the culture it's the culture and values like you have here this is exactly what do you stand for and when we hire people one of the things we'll do for example with with senior people we're going to hire somebody or a senior we want to take them and their partner out to dinner why it's one thing sitting across the table from just one person I want to see how they treat people how do they treat the waiter how do they treat other people there how do they treat their partner are they arrogant uh is it all about them they come in and they just sit down and don't care about anybody else that's not going to work we call that sort of the the door tested they open the door for somebody else and so forth Henry I love hearing you say that that's exactly what we teach in this University I gotta tell you a little story this guy was trying to hire these three young guys just coming out of college he did exactly what you just said he took him out to dinner at the end of the dinner didn't look at her resume didn't look anything they're just looking at these guys the end of the dinner looked at one guy said get hired look at the other guy said go home we don't need you the guy to whom he said go home said what you didn't even ask me any questions I'm very capable I'm a you know terrific graduate from a great school he said no I know everything I need to know about you you made two things tonight that let me know you're not going to work in our firm number one you never said please you never said Thank you to This Server just what you just said Hey listen to what you just said what a basic concept number three he said when the food came in you put salt on your food before ever tasting it I can't have someone working with me who makes a decision before getting all the facts yeah life skills life skills all right so so in the time we've got I got so much stuff I got to ask you um first of all just the just one two words answer before it was Private Equity it was lbos leveraged buyout before that what was it well when we first started we called it bootstrap Acquisitions bootstrap Mac we didn't have any Equity so you put up a dollar and you could borrow fifty dollars a debt so as I said in Safeway uh you know we put up 126 million of equity against A 5.6 billion dollar you know total purchase price all the rest was down and today many people refer to you as the king of private Equity that's too bad yeah yeah you wanted them to refer to as the emperor Barbarian actually barbarian's funny um it's too bad but one time marriage Jose and I were in Germany and at the Bilderberg meeting and the chancellor at the at the time Germany came to be the dinner speaker and he started referring to people like us as locusts and he was a friend of mine and I went up to him afterward I said is that better or is that worse than Barbarian number one and why do you why do you do that he said I'm just trying to get elected so anyway so um Henry you've served of many many boards including Safeway um uh Owens Corning AutoNation my friend Wayne heisiga that I've had a lot of respect for um and now you're you're paying a lot of attention to tech companies and am I right on that investing in a lot of tech companies well personally I've been investing in Venture and startups since 1998. and I could do it because KKR never invested in Venture we were always you know established companies very profitable Etc so I do a lot of investing both in tech and and other things I love it because I learn from young people live you know for me it's exciting and they challenge me constantly see I have a belief that unless you're curious you can't be a good investor so I took somebody to the window at KKR and we're my office is on the 77th floor in New York and if I taken the window and I did a test I said what do you see out there they say that's a trick question let's see uh I see the tugboat in the Hudson River you failed I want you to see everything I want you to see opportunity I want you to see possibilities and that's the way I've always thought you know and by the way I say they're no dumb ideas they're just some ideas that are better than others and by the way there's nothing wrong with failing failing actually I'm hoping you will fail and you learn from it and you're going to be better the next time but I find more and more young people today are really reticent to take risk they're they're afraid of failing they probably get straight A's and they've done really well and they can answer every test exam because it's most of us multiple choice these days and uh but they don't know how to take risk they also don't know what's really important like we talked about what's important and if we're going to make an investment don't tell me how many blue trucks there are to matter how many blue trucks tell me what's going to what we can do today to make this company A Better Business going forward so technology is a very important part of this how do you make a business better there's no company there's no company today that doesn't use technology and you have to put technology at the beginning of the parade and for many many years it was at the end of the parade and it was oh yeah the guy that does the the I.T stuff we'll we'll see if he can fix our video no no make them right there at the beginning sit side by side with you and let them understand what are you trying to accomplish so two uh two people who've had great technology experience one of them is Steve Wozniak who is the co-founder of Apple he's in Residence here it teaches our students every semester the other one is Mark Randolph the co-founder of Netflix change the way we watch television I asked Steve uh Wozniak one time this question everybody wants to talk about AI a i a i uh artificial intelligence and and what do you think of it he said it's great it's going to change the world however he said there's no such thing as artificial wisdom you you speak from wisdom and I believe that college students today and young entrepreneurs and young business enterprisers ought to hear wisdom the wisdom that came from some feelings you just admitted you know Toys R Us were made a mistake for this reason and that reason let's talk about something else world affairs when you look at our world today geopolitically what is it you see what is it that scares you what is it that that gives you hope about the future so much is going all over the place we hear about it from all Corners we read about it endlessly is Henry Kravitz today saying that our world is in danger because of a b or c or are you saying no no I think we are on track because of abrc there is never a b or c and there's never everything's going straight up in my view um if you ask what is my biggest concern my biggest concern is what you teach here and what you T what other schools teach our education system in general has declined particularly in the in the Elementary and high school level and I worry about that our colleges are pretty good but getting there and you know how many students you bring here that aren't ready for college and yet they should be um I'm chairman of SEO we talked about on the introduction and we do a diagnostic test when we do the bring kids in and so how many kids have a 90 or above in the public schools where you are these hands go up and so forth I said well look why don't you forget about that 90 we're going to give you a standardized diagnostic test to see where you really are and where you should be in ninth grade that 90 and above is 55. so that means every kid today in the New York and the San Francisco school systems which are two areas right now before we're here in Guilford County are failing what's my biggest concern it's exactly that I worry about what does that mean what they're teaching they're teaching all sorts of stuff but they're forgot to teach history they're not teaching English and as you said the the wisdom side of it and but is that true all over the world I mean in China India they're teaching a lot of things right they're trying to eat our breakfast and lunch every day they're more the more people in China learning English as a second language then there are native English speakers in the entire world that's exactly right and so I worry about that because we're we're worried about things that honestly I don't think uh yeah they're important but they're not as important as understanding our history in America and understanding the world and how it relates to it uh I wish colleges did more um like they do in the UK and do in France at the end of your four years you have a comprehensive exams that you have to take too many students today learn to take the test they learn to pass the course but then they forget it because they cram for it today I worry about that so if we lose our education and the quality of Education that we have in America we have a chance of moving toward losing our democracy and that's a big statement but I'm worried about that so if you say what am I worried about look at the number of countries where democracy is declining in one way or another and I worry that we stand a chance if we're not careful in this country of diminishing the the uh our democracy Now having said that what we need in the country in my view is leadership we need real leadership somebody that doesn't care Republican or Democrat the problem is today no we talk to each other you know you know what it's like being a college President how many times you have somebody come on and you see it on college campuses and if they're too far to the right or too far to those we don't want them here we're on here I want everybody okay we went to college to learn to learn other from other people so I worry about that that freedom that ability to learn not just I only want to be with people like myself so I worry about that too we're not learning enough from each other am I worried about China of course you got to be worried about China having said that I don't think we're communicating with China we should be communicating with the Chinese leadership our government should be communicating and keep talking they're not going away and we're not going away and the less we talk to each other the more danger we have of something bad happening in my view so I worry I worry about that I can go on having said the worry side this is the greatest country in the world this country has so far if we don't lose it and that's what I'm talking about there we have today more opportunity than anywhere in the world and you just have to uh take advantage of it I'd like to say to young people take one sentence out of your vocabulary and that is I wish I had don't ever look back and say God I wish I had talked to that person or I wish I had tried that even if I failed I wish I had tried it and too many times people look back and say I wish I had and I didn't do it and I missed a real opportunity let me tell you students one thing there is no perfect job when you come out of college unless you are really lucky I have too many times young people say to me I said what are you going to do is I'm looking for the perfect job I said well you're gonna be looking a long time and I should get really lucky because there isn't that perfect job just get into the workforce and you never can tell open your mind and say I'm willing to try a lot of different things because you never can tell you may be on a plane going somewhere and you're sitting next to somebody who's the CEO of a company and you start talking to geez you sound really true I'd love to have you come interview well you didn't think you'd ever go to that company I'd also tell you go live in another country and learn what another country is like too many people say no I only want to stay in my neighborhood you're missing a real opportunity because the world is not your your neighborhood I promise you that and I can go on and on you have no idea we've got a couple of High Point people here you have no idea you're describing High Point University experiential learning Global education we give it free tuition free because we want you to go and and see the world and learn from the world we even have a cross-section of a an airplane on campus we teach you how to sit down talk to the guy next to you ask the right question listen Henry um you've got to be concerned about economics you've got to be concerned that the second major Bank in this country just failed you've got to be concerned about the fact that inflation has gone up to a high level you've got to be concerned about the fact we've just gone through covid and supply chain almost lost our knees reason I haven't mentioned the economy because it's transitional I've always been a Believer what goes up comes down and what's down we'll go back up when you went through the global financial crisis in 2008 2009 none of us had ever been through anything like that and I've been doing investing since for 54 years and I um I thought well what could I tell people that that is going to keep them calm and I said focus on what you can control there's noise in the system and you'll read stuff you can hear stuff 24 hours a day seven days a week but there's not a darn thing you can do about it but focus on the company where you're involved can you help them cut costs can you refinance the debt as soon as the debt markets open up and so forth we got through that just fine and I don't if you want to know okay where are you on the economy right now well I'll tell you where I am on the economy I think we will have a a recession you can't have interest rates continuing to go up and right now they're just under five percent the FED fed funds rate they'll go to a little over five in my view this week when the FED meets and I guess they'll do another quarter um four out of five times since the 1970s when interest rates got above five percent you had a recession so uh what but what's surprising right now is the country the economy in the U.S and in Europe for that matter is as resilient as it is I think people are still working off uh savings that they had I will be the first to say I think our government both Republican and Democrat side did the wrong thing in paying people based during covet they should have given money to the companies to keep people employed what happened is people dropped out they did then started they lost their skills of showing up in the morning working and so forth and many people by the way earn more money not working than than working I think it's a big mistake in France for example they basically the money to the companies to keep the people employed and it worked so today we have a lot of people that have dropped out of the workforce we have about 62 percent uh participation rate or so um but what's happened today where are we so you've got a uh the capital markets have basically dried up uh uh IPOs Bond offerings uh and the like used to be running normal at about eight percent of GDP right now they're 1.4 percent of GDP which means nothing much is happening in the capital markets Market uh the stock market in general is down 25 and and for most for most companies and when you start to get under 25 percent the history has shown since the 1970s that you've had a rebound in the first year when you come out of a recession uh of about a 19 increase in in markets for three years it's about a ten percent increase for five years is about the same so yeah I look at this as opportunity but we're not there yet because I'm surprised honestly that the stock market is as high as it is right now given that here's what I feel like I feel like I'm on the beach bright Sun the the the the the sea is as calm as can be and and I read though that there's a tsunami coming you got to be kidding there's no tsunami look how nice it is that's sort of what I feel like right now I don't feel yet that we're into where we're going to be but we think and I think the same that in the end of this year we'll have a recession I'm not calling for a deep recession I'm calling for a recession and into early next year we're calling for this year about a one and a half percent GDP growth for the for the year your first quarter was I think 1-1 um probably a slow down uh next year even lower a half of one percent to one percent growth is what we're we think it'll be but more importantly we think margins in companies will decline um and so we're because you can't have inflation like it is you can pass it on for a little bit but at some point the consumer and and the customer with this business uh to business or business to Consumer they say no Moss okay we're just not going to pay that and so then somebody has to absorb that if they're going to sell and that's the company so we see margins being squeezed uh over the next 12 plus months but we're going to come out of all this so there'll be a time to really lean in and we've made our best investments when we lean it I think inflation is going to stay high for a while I think growth is going to stay low for a while but there'll be a time when we feel okay let's really lean in now having said that they're always going to be opportunities companies you say that's a great company and yes we're probably paying more than we should today but we'll never buy it otherwise and we will lean in and buy that well um hope is eternal I think is what you're saying don't give up well but not that look at history you know I don't expect the world to come to an end I expect China to continue to be strong but by the way China's got lots of problems you know China is not a Panacea by any stretch they're coming out of their uh covet lockdown which was horrible and they'll probably grow five or five and a half percent this year okay but you know starting from lower levels and um they'll do fine and that's one of the reasons I think we'll get through this as their growth continues will benefit from that to a degree Europe is better today than I would have expected it to be gas prices or lower because had a warmer winter so they're able to store didn't have to pay as much for gas that was actually helpful so you know you got a little growth in Europe it's never been high growth but you you still have growth there so you know you got to look everywhere for opportunities if you had asked me and you know he said ask me five or ten years ago do you think you'll ever buy a company in Vietnam in Ethiopia in Serbia uh turkey are you crazy turkey name it I see crazy well we bought companies and every one of those because you're always going to find some opportunity somewhere to uh to invest in I'm curious for a a leader as busy as you are as intelligent as you are as invested as you have been um why and how did you become so interested in SEO SEO is a non-profit your history has been while you've been very philanthropic and there's evidence of this everywhere in fact Carnegie Foundation gave you the metal philanthropy um this is just good work for the good future of America in educating young people ensuring that they too will have an opportunity why is it that Henry kravis at this stage in your life and for the last um 10 years in SEO you've given so much interest why are you here tonight to talk about I forced you to talk about other subjects but really you want to talk about SEO and how it benefits students tell me tell me where you find that time and what is it that drives you so passionately about it first of all anybody that says gee I just don't have the time to do it you find the time you make the time because I think that's a lame excuse years ago when I was in my 40s I I called David Rockefeller David was one of the greatest philanthropists around and I said David would you have lunch with me and he said yes and I said you know I'm just starting to make a little money and could I ask you how I can best go about it and he said I'm not going to tell you where to and to spend your time or which charity you should get involved with I would only tell you one thing that whatever you do get involved don't just write a check and always remembered that and so I was lucky enough to have been involved in a number of things and I um have always been the kind that I either like to start something or take on a challenge where I think I can really grow it and so I'd never heard of SEO in in 2000 and what seven or eight something like that and one of my partners came to me and he said we have a chance to uh sponsor and really kick off a program and for SEO for the alternative investment area and I said SEO that's search engine optimization and he said no no it's sponsors for educational opportunity so I said okay uh let me meet William goodlow who's here tonight and I met William and that's all I needed to know William and I will say it I say it every time I get a chance as one of the best CEOs of a not-for-profit that I've ever had a chance to work with and so um I said yeah we'll kick this off and be one of the two along with tpg we'll kick it off so next thing I know same partner comes to me and he said they'd like to have you chair their Gala I said I want chair a Gala you know I do that a lot I really don't know this organization and he said I think you should do it so I got talked into it and I I go I go call William and I said William what's the most you've ever raised for one of these benefits and he said seven hundred thousand dollars and I said I don't mean to sound you know cheeky about this but I said in New York you know if you don't raise a million dollars it's hardly worth going out for dinner and there's so many charity events every night so I said all right that's a challenge I'm going to do it so we got lucky we raised a million too but I heard these kids that were up there the scholars and this program the SEO program is a program of taking kids in the ninth grade through college one of the only programs around it's an eight-year program and we're not looking for the brightest kids we're looking for uh minority students who come from basic household income of some were under forty thousand dollars and who really want the chance to go to college and so and we're also looking for that student who will probably be the first in that family to go to college so I heard these students and there were four students talking about their life talking about where they come from the hardships that they faced and what they were now able to do two of them were in college already and two were still in high school wanting to go to college so that got me really fired up I said wow there's lots of programs around that get you into college but don't pay any attention to you after you're in and so I started looking into this more and William and I talked a lot about it and I said so tell me in New York how many kids are you taking in the ninth grade well in New York we're taking 125 students as I had studied the program I said the program's too good to be taken only 125. students and so when they asked me to be chairman I said well William the first thing I want to do I want to double the number of students to from 125 students in New York to 250 he said well that's going to cost a lot of money I said I got it don't worry we'll raise it and so and so he said okay the next thing I know William and I are talking he said would you consider becoming chairman now I've gone from a Gala which I didn't want to do well the alternate investment program then to a Gala and then they honor me for the 50th anniversary and then I wasn't even on the board and I thought okay that's fine and the next thing I know they said would you become chairman and I've now been chairman for nine years it's the best program I've ever experienced let me tell you where we are so we went from 125 students we take about 270 a year in ninth grade in New York we're also in San Francisco where we take about 125 students a year in ninth grade ninth grade through college they come in they get that diagnostic test that I mentioned earlier they're all failing but we're going to get you to 90 or above and we're also going to get you into college and we're going to get you through college and you get through the high school part you're only halfway there so the thing that we try to do is okay a hundred percent of our kids that get through now I don't know how many of you in this room if your child came home and said hey Mom or Dad I got in this great program and I'm going to go to school 40 Saturdays a year from 8 45 in the morning to 4 30. and I'm going to go the month of July five days a week 8 45 to 4 30. well I know if any of my kids had come home and said that I take him to the psychiatrist thinking they'd fallen out of bed and hit their head because what kid wants to do something on a Saturday particularly and so but that's not the case these are determined kids we get 90 plus percent of our kids that go through the high school part we lose about 10 percent along the way 100 of those kids to get through the high school part get into college two-thirds of them are on tier one colleges and 90 percent of our kids graduate in six years almost all of them get a scholarship and may I inject one thought there yep that 90 percent Compares with 23 percent exactly national average that's right six-year graduation for students who come from those backgrounds absolutely that's exactly right we score higher on the SAT than the national average than any rate in any uh socioeconomic tier and because we're working with them these kids and and probably if they're lucky they'll have one parent because the average is about two two-thirds per these kids have one parent and there's nobody to help them at home we basically become that support system for them so when I became the chair and I was sitting around talking to our executive committee and I looked around and everyone was a minority and I said are you sure you want me I'm not an SEO grad I didn't go through the career program career program by the way is a program where uh we're going to college campuses over 100 of them and if you have a b average or better and you're a minority we will uh interview you if you pass the interview we give you 12 online courses you pass those we will send your resume out to companies and get you a summer job and today we're just under uh about 900 jobs that we get during the summer for these kids and 93 percent of these kids last year got full-time offers these are paid jobs these are paying jobs for the summer so we get that but then we have the scholars part which is different that's ninth grade through college and that graduation rate's incredible now I always ask the same question of these students when either they're over at our house for a cocktail party raising some money or they're coming to our board how many times did you think of dropping out every student said well many times I said why didn't you drop out who wants to go to school on Saturday now I thought they were going to say my mother wouldn't let me or my teacher wouldn't let me not at all I didn't drop out because of peer pressure 100 percent peer pressure we all even though we're at different schools we about we bind together on these Saturdays and we're in it together and we're going to pull each other along and we're to get through the program now when I spoke to the uh uh executive committee one of the things I did right away I said well buckle up we're going to go fast I want to take this thing nationally now I didn't have a complete understanding of how labor intensive it was this is nine years ago and I learned from San Francisco that is really labor intensive so during covid we had we were forced to go online there's three things we had to get the kids one you had to get them a computer that was easy two you had to make sure they had Wi-Fi we got them that and three you had to get them a place to where they could work that was the hard part you couldn't do that because they're in small apartments in New York or small houses and so but we got through and we did just fine but it gave us the idea that we could go National that the dream that I had of taking it national we could do it if we did it online now my dear friend Bobby long I had talked his ear off over the years about SEO and told them how great it was and I told him I said you know we've got this ability now we think to do it online we got a consulting firm in and we think we can do it online and Bobby says I want to be the first County to do it Guilford County and I said are you sure Bobby so it's a lot of money he said we're going to get it done he said this is exactly what we need for Guilford County it's exactly what we need we're losing employment here we're losing the ability to keep the young kids involved and so forth and so it is really Bobby uh very much that that got behind this and that's why we're here where we are today and we're kicking this off we I mean we have kicked it off in March our first class it's not big but that's the way San Francisco was San Francisco had about 10 or 15 students the first year they've got close to 120 540. this will grow and I'm excited about it yeah well just just know that Bobby does a lot of things like that but Bobby has knows how to bring people together like you have for the good cause and then we move onward and forward it's all about choices we make and the leaders we choose to work with so Henry let me let me ask you our time is one now you've been very patient with me and I appreciate it and I appreciate you ladies and gentlemen being here and listening attentively to uh I hope what is um for many a once in a lifetime opportunity to be in the presence of a person who has done it over and over and over again with great success Henry finish this sentence for me if I could live my life over again I would change if I live my life over again I probably would have educated my kids differently my kids were given every opportunity my son went to Duke and brown my daughter went to Harvard but I would have pushed them harder quite frankly you're saying you would have sent them to High Point University is that your point you know there's not been happier with their outcomes well let me tell you there's a lot to that no no I'm serious you know I didn't know much about High Point University until I started seeing your ads uh in the morning I thought they're fantastic and you and I've talked a little bit about that I thought it was fantastic no I would have really pushed him more to do more things with the opportunities they were given and you know oftentimes I say and I love them and they're they're wonderful children and they've given marriage Jose and me six wonderful grandchildren and uh they go from four to sixteen and uh so I've been blessed in many many ways but you know oftentimes I wonder if children who come from parents and it's hard parents who've been successful I wonder if they wouldn't be better off if they didn't have that burden I call it a burden because I think in many ways it is a burden and you know I often say many kids thank god dad was born first and because you know he gave him a lot or she gave him a lot of mother gave him a lot and unfortunately they don't take advantage of it yeah I thank God every day for the adversity I had in my life yeah learned a lot from it that's the best thing if you ask me today here's your choice can you um you have a choice of picking students in the top one percent from name your University non-ivy League non-stanford uh what would you do I said I go pick people from High Point University from Purdue from Georgia Tech because they're going to be Scrappy and you come out of Harvard I have nothing against Harvard Harvard's great we've got a lot of people from Harvard and Stanford and Wharton and you name it but to come out unfortunately feeling uh entitlement nobody should feel entitlement and I'm looking for that student or that person who's hungry and if you can teach that here and give them the tools they'll go a long long way one one last one last question of you um I Henry cavis want to do this before my time on Earth comes to an end what would that be that's a good question I just want to be I want to spend as much time as I possibly can with my wonderful wife Mary Jose I'm often asked in in these kinds of of interviews when they get to a lightning round if you could have dinner with anyone living or dead who would that be that's easy my wife and I mean it we we have a great relationship we have a lot of fun together uh we explore the world you're getting a lot of us in trouble as you speak that's why I hope you know that but that's why I'm saying it you know there's no free lunch here thanks a lot Henry you may think just putting my name up out there up here that that's going to get you something but forget it um well this has been fun has it been fun for you yes um [Applause] I uh Bobby thank you for bringing Henry here um I wish honestly Henry um I have a regret this afternoon every student at hype University should have been standing around this room listening because the greatest lesson that any one of us could ever have is to know that who you spend time with is where you become what you choose is what you get and to your point how you change is how you succeed and the more exposure we have that's why we have it in Residence 50 people as I told you business people because the more exposed we are to people who have done it have been there have learned how to be leaders Rob these are these are the ones who are going to culminate a future for us that is going to be healthy and purposeful for one and all um can I tell you something I like you I've read a lot about you I think often we get misrepresented you know we read about people we know people and you know you're a very warm person you know do you drink beer do I drink beer of course well I'll hang out with you someday and I'll I'll buy the beef we could have some fun yeah we can have some fun you know we might let Bobby come in and be with us too I hope so um you know it's funny you say that so one year this was after we bought RJR and for some reason the financial times decided they wanted to name George Robertson made men of the year so guy comes in I wasn't sure I would did wanted to interview because I don't do I didn't do much of any of that at the time and we finished the interview he said you're not anything like I thought you were I said what'd you think I was two heads and horns he said close to it and I said that's the problem yeah you know spend time with people get to know them when you get to know somebody you appreciate them a lot more so I'm getting to know you and I like you well I'm not taking your job don't don't worry about it you're doing too good again under crevice thank you for being with us thank you 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