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[Applause] um next up uh Larry Summers [Applause] we'll let your winners [Music]
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[Music] Larry is an absolutely incredible human being um he was the president of Harvard he
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was a treasury secretary under Clinton he was Obama's head of the NEC he's been on the board of some very well-known
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Tech startups like Square now block um he's been a great friend of mine for 12 or 13 years he taught my son calculus
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but I wanted to start with one very quick story Larry was staying at my house and uh
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he runs in to the kitchen and he says the internet is not working I have an extremely important Zoom
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and I said oh yeah no problem you can just use this thing over here and he goes oh I need you to help me get on the
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zoom so I'm like this it guy helping him get on the zoom pops a picture of the governor of the boj the bank of
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Japan and I was like what's going on and he says I'm a little peckish could I just get anything you have over here to
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eat so I go outside my mom's like what is going on and I said oh Larry Summers has a meeting with the with the head of
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the boj she goes dead of the brj and she stops me on that trip we must make him something to eat and so
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[Laughter] we made scrambled eggs and orange juice and then at the end of it she's like who
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is he this person talking to the head of the beer and I said it's Larry Summers blah blah and then once she heard that
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it was Clinton she hit me on the top of the head again and she worked for Clinton he said we should have given him
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fresh squeeze orange juice [Laughter] okay he is literally one of the most stimulating intellectual people that I
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know so let's start with uh the most impressing question CPI is going to come out tomorrow Larry you have basically
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become the shadow Secretary of the Treasury and the shadow fed Governor uh where are we going where are we in the
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cycle what is happening to the consumer give us just the five-minute Redux on the economy
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we have a thing in politics um chamoth it's called the management of expectations and you have just failed me
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[Laughter] again uh in that regard look there are two kinds of economists there's those who know they don't know
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and those who don't know they don't know I'm in the first category so I'll give you my best guesses but that's what uh
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they are what Samuel Johnson said about second marriage is true of soft Landings
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they represent the Triumph of Hope over experience [Laughter] [Applause] there's never been a time when inflation
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was above four and unemployment was below four and the U.S economy didn't go into recession before that situation was
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resolved that's why I've been kind of a Cassandra on uh inflation and the cyclical outlook
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for the last couple of years here's the way I think about uh soft Landing You've Got This Plane
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it's ultimately aspiring to fly very fast and then land on an aircraft carrier it was way off course and seemingly out
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of control pilate figured out that it was all screwed up and now the pilots got the plane on a
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reasonable uh course and that's good but it's still 300 yards above the deck of the aircraft
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carrier and it still going very fast and it's still an open question whether it's gonna hit the aircraft
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carrier rather than land on the aircraft carrier or whether it's going to overfly the
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aircraft carrier and have to turn around and achieve a soft Landing and I think all of that
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is still very much at risk the people who say it's all okay we never need to worry about inflation
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inflation was nine inflation's now three and a half it's all under control we're
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all done don't know what they're talking about could turn out to be right but inflation was never on an underlying
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basis anything like eight or nine it was like five artificially pushed up by used cars and
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airline fares and a bunch of stuff like uh that gasoline and the thing about stuff that mean reverts is that it mean
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reverse and so when that stuff was going up real fast we had eight percent inflation with an underlying inflation
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rate of five percent when that stuff collapses we have an underlying rate of inflation of four or five percent and we
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see inflation below that so that's what happened so if you try to measure what's happened
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to the actual underlying rate of inflation it's down a little maybe it's down half a percent maybe it's down a
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percent that's more than I would have expected and that is genuinely good news but it's a long way from where we are
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now to a soft landing and I think you've got risks on both sides I think you've got
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risks that the consumers going to slow down hard that monetary policy operated with a lag the credit's going to be
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crunched and that you're going to see the economy have a bit the Wiley Coyote aspect to bit the ball rolling off a
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table aspect I think that risk is there I think there's a larger probably risk that we don't really have inflation on a
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secure path down below three and a half and that the FED thinks it's got it under control and it doesn't and that
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it's going to have to go back to uh raising uh rates so you are nervous okay you're nervous so if you're Jay Powell
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if you had Jay Powell's job right now what is the Delta from what he's doing what would you do differently do you
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think I I thought Jake Powell was a million miles off course two years ago I thought
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he was talking about zero interest rates until 2024 he was talking about inflation being transitory it was all on
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a different planet than the one that I thought I was seeing starting about a year ago
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he has recognized that the principal problem is inflation that the Fed was way behind the curve
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that he needed to focus on getting inflation back to Target and so my differences would be small and on
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tactics rather than large and fundamental I think the FED probably needs to be investing a bit more in its
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credibility by emphasizing that it's prepared to raise rates again if it doesn't see inflation
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uh decline I think the FED should be recognizing that the extraordinary size of the U.S budget
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deficit and where it is in Prospect is going to complicate the macro policy task and should be more willing to call
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that out than it is I think the FED on matters relating to financial regulation should
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be giving more attention to market prices and the market values of assets and less to a variety of Book value
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regulatory Concepts than it tends to emphasize but again I think that what we did in 2021
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when the FED when the government basically infused 2.9 trillion dollars into a rapidly recovering economy and
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when the FED promised it was going to keep interest rates at zero till uh 2024 and when the FED bought Bonds on a
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massive scale that put us way off course since then we've been working our way on
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the monetary policy side back to course in basically reasonable uh ways but that
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doesn't mean you know if you get all the wrong answers on the first third of the
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exam you can do great on the second two parts the second two thirds of the exam and you still won't get a very good
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grade for the overall experience so it's a hard problem so my interpretation would happen in 2021 is in q1 they you
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know they passed that two trillion dollar American Rescue plan that last coveted relief bill you absolutely
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nailed it by warning that this could set off inflation and the politics of that was that the administration everyone who
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wanted the bill basically said oh no Larry doesn't know what he's talking about they sort of pooh-pooed your
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warnings and then sure enough the inflation came that summer and that's when they they almost I think for
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political reasons have to say was transitory because they didn't want to admit that you had been right and they
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had been wrong three months before and as a result of that the FED waited another nine months to start raising
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interest rates and so everything got delayed they should have reacted back in the summer of 2021. I know that's my
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interpretation you know in terms of how they behave to Sax's Point are they thinking about
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the politics and the current Administration I or are they acting independently like they're supposed to
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first of all I don't I think I'm I'm a spectator and commentator not uh not the dominant uh actor by uh any
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stretch I I I'll leave it to others to speculate about everybody's motives it's it's not only people in political
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situations who when they develop a strong View change it only slowly in response to
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evidence I'm basically someone who mostly goes to Washington and explains when I'm in
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Washington that there are limits to our knowledge and limits to our competence and so it's often true that the best
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thing we can do is get out of the way so I I believe that but I also think that it's a mistake
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to think whenever anybody makes a judgment that doesn't turn out right in Washington
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that it's because they had some bad political motive and were playing politics rather than they were using
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their best judgment and they turned out to be wrong and like human beings in public environments they changed their
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mind slowly in uh the face of evidence look there's a very broad thing it you all who work in companies experience it
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you experience it in your personal lives we experience it in our relationships when something isn't going great
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you always have to decide is it that we need to give it time persevere with what we think is right
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double down and keep going or do we need to say we got this all screwed up you need to suddenly change
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course and that's a decision we all are always making and it's not that it's always the right thing to change course
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at the first hint of failure and so I think a little more I think people obviously made bad decisions and they
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kept making them and they made them too long and I was on the other side but I think that it's a mistake really a
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serious mistake to go quite so quickly uh to uh to to to motive and I want to say one other thing just because it I
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was struck by what came before look I I really do worry a lot about regulation but it's important to understand that
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the largest part of the good that cops do is not that they catch people breaking
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into houses or that they pull people away when they're trying to murder somebody
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the large reason why cops are good is because everybody knows that they're cops around and they commit far fewer
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crimes than they otherwise would and therefore evaluating the police only by the incidents where the police are
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actively involved gets a judgment about crime wrong and the same thing is true with respect
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to regulation and we do need to recognize that all the things that we take for granted that make this place a
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very different place to do business than Argentina and a much greater place to do
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business than it was a hundred years ago have to do with institutions and regulations and so I
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think that's a perspective you all need to keep in mind if there had not been major regulation
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that was regarded as oppressive totalitarian wrong and anti-market beginning in the late 1940s
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it would be impossible for this Gathering to exist because the smog in Los Angeles would be so profoundly
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serious where their excesses was the craziness of course there was but let's also keep
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in mind that you need Frameworks in which Freedom can flourish let me ask you a basic question
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we had Ray dalio yesterday um and he was you know going over the arcs of history and maybe America being
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you know past its peak in Decline uh and I'm curious what you think about the perhaps existential crisis for America
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in terms of our spending Trump added a trillion to the deficit Biden already four trillion we've had this debate on
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the pod are we in an existential crisis in terms of how much we're spending debt to GDP
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ratio is that the most acute issue for America and then what are your thoughts about America on the global stage versus
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other emerging Powers China and India so there are a lot of parts of that question yeah
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I think the most important theme in American history is resilience I'm old enough I'm not that old but I'm
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old enough I'm old compared to the people in this room I guess um but I'm old enough to remember when
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Jimmy Carter declared a crisis of the national spirit and a pervasive malaise I'm old enough to remember when the
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country was being torn apart by the Vietnam War and the president United States couldn't
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go speak anywhere in the country pretty much except on a military base and where there was gunfire
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on college campuses I'm old enough to remember when I'm not old enough to remember but I've read
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about when Joe McCarthy had the country uh in his thrall and people on University campuses were afraid to
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express Progressive beliefs if you read the history almost everyone advised FDR in 1932
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that he needed to use his inaugural address to declare dictatorial powers to take the country over
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to deal with the depression because democracy wasn't up to it Patrick Henry said in 1792
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1792. that the spirit of the revolution had already been lost and so I think the theme in American
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history is the capacity for self-denying prophecy it is the capacity for the Jeremiah's
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that generate all this alarm that set in set in motion the processes which uh lead uh to renewal
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and it won't be that way always they'll come the end just as there comes that come the end for everything uh
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uh great historically but I'd rather be playing the hand of the United States than the hand that Xi Jinping has played
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then the hand that India is playing certainly then the hand that Societies in Asia where they're only going to be
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half as many people a century from now are playing certainly than the societies of Western
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uh Europe that doesn't mean that those of us who are financially minded don't need to be terribly terribly
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concerned that the government's finances are not on a sustainable path and won't be on a
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sustainable path until we figure out how to raise the revenue that a society facing grave National Security threats
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and aging population and a rising price of medical care and education relative to flat screen TVs
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and houses needs to finance its government that doesn't mean that there aren't huge
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challenges as well as opportunities associated with everything that's coming out of information
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uh technology that doesn't mean that I'm not fearful of so much that's happening
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in our educational uh system and I think that we have in our educational system and this is true of our great
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universities and it's true of our unionized elementary schools we have gone from thinking
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that self-esteem comes from Achievement sort of thinking that achievement comes from self-esteem
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and that is a embarrassment that the grade point average of the average student at Harvard
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University is above 3.7 that by far the most common grade is a right and that the big education reform
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idea of the moment is to eliminate standardized tests that actually measure what people uh what what people know
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and so this kind of moves away from Traditional Values of Excellence achievement
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the importance of learning is something that I think is very much uh uh a uh a problem so yeah am I worried
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about the national sociology problem represented by the fact that we used to be a country 60 years ago where four
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percent of men between 25 and 54 were not working and now we're a country where 14
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are not working at any point in time and a quarter of them don't work for more than three months within a two-year
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period am I worried about that yeah I absolutely am am I worried about the finances am I yes am I worried about uh
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our inadequate investment in technology leadership am I worried about a kind of broad
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constipation um there's many of you have probably been to Harvard Square there's a bridge
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the bridge goes over the Charles River it's 362 feet long it had been around for a hundred years
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it needed to be fixed did need to be fixed 62 months five years and two months with one lane
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of traffic closed in order to renovate a 362-foot bridge to put that in perspective
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patent built a bridge over the Rhine 3000 feet in one day but but they're better things about spending
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your life hanging around in a university and so I wandered over to the classics Department one day
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and I learned that Julius Caesar Julius Caesar built his Bridge Over the Rhine three
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thousand feet not 300 feet in nine days and this is what it took us so do we have huge problems yes
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is this the first time we've had huge problems hell no is there the prospect that we can solve those problems yes I
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think uh there is do I think we all things considered have a more solvable set of problems
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and a more Dynamic Society for solving them yeah I do then uh the other places and never forget them never forget this
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no we always forget it when we make policy in the relevant area Larry but but the best
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the best test is we are the place that people from every part of the world want to come to
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[Music] um I want to ask you a question let's just actually go to that quickly which is you
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were the president of Harvard there was a very let's call it important divisive foundational case that just went through
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the Supreme Court on affirmative action um you wrote actually a pretty interesting op-ed about all of this give
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us your thoughts about what is working inside of higher education what you think about that ruling just Society in
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general as a reflection of that I wish that ruling hadn't happened I wish that great universities were in a
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position to set their course and to compete with each other and to admit students as uh they uh saw fit
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but I think after that ruling it is clear what the right theme should be and that theme is opportunity
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the great strength of our universities should be that they make it certain everyone
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has an opportunity to succeed and get to the top no matter where and in what circumstances that they were born
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and I think there's much more that our great universities can do and they're things that are much more
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important than arguing about diversity policies that could get us there here are some of them
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whatever the right way to think about this was 40 years ago the time for legacy admissions is over
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problem solved if there are scarce spots in our great universities having your father
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hire a fantastic coach to teach you to play a country's Club sport at an extraordinary level
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should not be a path to admission to our leading intellectual institutions let's
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end athletic recruiting for Aristocrat for aristocratic uh Sports it's really a nice thing it's a nice
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thing it's a good thing it has a lot of good things for most of the people in this room that
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there exists early decision and early action but it basically Works to help the privileged
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and it basically prevents the underprivileged less privileged from shopping their financial aid authors and
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getting the deals they should we would not permit Goldman Sachs to make exploding offers to our MBA students
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why should great colleges make exploding offers to admitted students you guys it's like the word like I
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didn't I didn't really know until I got involved with Silicon Valley that scale was a verb as distinct from a noun I
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thought it was something you kind of stepped on in uh the bathroom about it any Institution
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almost any in the society nearly a tenth as successful as Stanford or Harvard would have far more customers today
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than it did 50 years ago right obviously and yet our universities have not grown
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their size of their students on campus and they have moved only glacially to use the incredible opportunities that
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technology presents provide education which and this is what's remarkable about educational technology if you
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think about it it can be much vaster scale and at the same time be much more personalized
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you can go at your own pace you can hit you can hyperlink you can go deeper in things that you're interested in and so
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scale plus personalization creates incredible possibility and our great universities have only
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scratched uh the surface of what's possible so there's an immense amount they can do last question because we're
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running out of time I just want to make sure you touch free speech on campuses and how it's actually
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affecting the rest of society as well look uh uh vigorous argument in which all ideas
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can be put forward and in which no idea gains its Authority from who said it or some fashion
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rather than its Merit in open debate that is the essence of liberal Society that is the essence of great
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Universities at their best it is the essence of a great University at its best that when I was president of
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Harvard and I was teaching a freshman seminar some freshmen some some freshman could come in and read my paper and
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explain how those kind of an interesting paper by President Summers but it was really pretty completely confused
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thing he wasn't right but it was a fantastic it was a fantastic thing and yet so much of what we should
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be able to argue about and discuss is off limits some of that is the speakers who get
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disinvited and that's terrible but much more of it is a culture that there are only certain views you're
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allowed to have on questions about identity that they're only certain questions you're allowed to
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have on questions about markets and redistribution that there are only certain views you're allowed to have
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about how children should be raised there shouldn't be any views you're not allowed to have
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[Applause] freedom be an app an absolute but academic freedom does not mean freedom from criticism
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freedom from debate freedom from challenge that is what that is the essence of the most successful human
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institutions and our universities should be modeling and demonstrating that rather than
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leading a charge is it too often seems they are towards an orgy of mutual self-regard
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respect and care rather than getting closer to the truth in the most excellent way ladies and gentlemen
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Larry Summers another standing ovation and Summers [Music] you'll let your winners
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[Music] we open source it to the fans and they've just gone crazy [Music] besties
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[Music] rolling [Music]