What we learned from David Rubenstein

Every now and then, we get the chance to speak to a global influencer with his or her finger on the pulse of businesses and economies around the world.

Barry Glassman interviewed David Rubenstein for the third time earlier this summer at an event hosted by BisNow. David is a billionaire, philanthropist, DC resident, and co-founder of The Carlyle Group, one of the largest private equity firms in the world.

This fascinating conversation between Barry and David included his outlook for the global economy, United States, and DC area in particular. The audience consisted of local business owners, real estate investors, consultants, and government representatives from the DC area.

Here are a few interesting take-a-ways from their discussion:

How is the Washington DC economy positioned for the future?

Washington DC has always been a government city. Back in the World War II days, they began to build business related to real estate and professional services, and this has been the case ever since. Washington DC has become one of the major metropolitan areas in addition to New York City and Silicon Valley. Washington is a global city and will increasingly expand. The government, businesses, and economy will continue to grow, when you consider that the metropolitan area has one of the highest incomes per capita in the nation – and suburbs are massively wealthy. Generally, Washington is doing very well and will continue to do so.

With our next President coming into office, what are the first few things he or she needs to do?

They need to reunite the country as much as possible. They should certainly try to get Congress to work more closely – the government needs to be working together. Things in DC are broken now – and this needs to be fixed, first and foremost. The President also need to determine how to increase economic growth to 3-4% and stimulate the economy, whether it’s through infrastructure spending or encouraging higher spending by the general public. The next President should also address tax reform. This is long overdue, and it needs to be done.

One of the other biggest items the President should address is income inequality. After the recession ended in June 2009, we’ve yet to grow the economy by 3-4%. Can we grow at this rate? I believe so, but we have to recognize that income inequality is a great concern.

Given the swings in oil, and the fact that there is a lot of money committed and available for investing in the private equity world, where will the opportunities ahead be and what will they look like?

At some point over the next few years, a barrel of oil will most likely cost $70-$80 per barrel again. The opportunities in the US are in production and exploration but also storage and transportation. Fracking will play a large part in this – and the methods of transportation will benefit. There are more opportunities overseas in areas where there has been no exploration or development so that could be an opportunity as well.

There has been a lot of talk about international trade in this election. How do you see a currency war playing out, if it came to it?

The Japanese Yen is strong – and they would like to weaken it. The US government doesn’t have a plan that I can see to keep other currencies at a constant rate. It was former Treasury Secretary, Bob Rubin who had a stated belief that you never admitted to a weak dollar – and always claimed that we favor a strong dollar. The Fed would like to keep currencies where they are now but they don’t have much of an ability to affect it.

Who has the ability to be successful at devaluing their currency?

The Chinese certainly have the ability because they have a very strong and centralized government. The Europeans as well – have been trying to devalue the euro – and ultimately the dollar is in a reasonable spot right now.

We have a lot of former Orioles fans in the audience – are you still an Orioles fan?

I was a big Orioles fan when I grew up in Baltimore. One thing is certain – and that is the fact that I do not bet on anything; although you could argue that investing is betting. In 1963, a person I knew said that there was an 18-1 chance that the Orioles would sweep the Dodgers. I lost the best, and the $18 – and from that point forward, I never bet on anything again. It didn’t feel good to lose money, especially $18! I do think that the Nationals were a great investment for Ted Lerner. Sports teams, especially, are one of the best investments anyone could have made in the past few years.