Watch: Citadel CEO Ken Griffin at WSJ Invest Live | WSJ

Thank you very much, Gunjan. And good morning, everyone. And a big thank you to Ken for joining us today for a discussion about—who knows where it's going to take us, Ken. We'll see. But it's almost impossible to know where to start. There's so much going on in the markets, in the world, certainly in the news cycle. So I thought I'd start with a very simple question. Somebody's just handed you a suitcase of freshly minted... What are you gonna do with those dollars?

This sounds like a trick KYC, Know Your Customer, AML question. Sounds like I need to call the FBI and go, 'I got a suitcase full of cash here.'

Okay, after you've done that and they've said it's fine, you can keep them.

So we've got clean money.

Clean money. Clean money.

Great. So first of all, thank you for being here in South Florida.

It's my pleasure. The weather notwithstanding.

It's still about 40 degrees warmer than New York.

True.

So yes, 55 is freezing, but it's not truly freezing. So if I was handed a suitcase of money today, this is like such a strange way to frame a question. Look, what investors need to focus on is what is the purpose of their portfolio. And so if you're in your early 20s, your investment objective is very different than if you're in your mid-70s. And you need to always invest your money from the vantage point of what you need to achieve with your investment portfolio. So if you're in your 20s, even though the equity markets are somewhat frothy right now, you're still going to be investing the preponderance of that money in equity markets around the world. And if you're in your mid-70s, obviously you worry about inflation, you worry about downside risk, you worry about the fact that you don't have 20 or 30 years potentially as your investment horizon.

You're gonna have much more of that money invested in TIPS or in commercial real estate or in other assets that have greater protection from the potential damaging influence of inflation.

But let's say the investor is you. It's your money. Where would you put it?

Well, so I know my investment portfolio. And my partners and I at Citadel, we're the largest investor in our hedge fund. And we deploy that capital across a variety of alternative investment strategies. But that's a very different question, because I have a chance to work with dozens of the world's best investors, and they get to deploy the capital, the partnership, across really interesting opportunities from the energy market to equities, and it's a really fun place to be a part of.

Good. What he hasn't said is what he said to me backstage, which is he'd put it under his mattress. Sorry.

She had way too much fun with that.

Right. Okay. On to more serious matters. Debt. Now, you've always made it very clear that you think debt levels in this country have got too high. The national debt is now running at, exceeding, $38 trillion. And off the back of that, there's some evidence of a sort of "sell America" trade going on. So my question to you is, do you think we're witnessing the early stages of a genuine challenge to dollar primacy?

Look, the U.S. dollar has lost some of its luster over the last 12 months. There's no doubt about that. And I do believe that the United States is unquestionably still one of the great safe harbors in the world. And there's a bit of an irony here. The United States, from a geopolitical perspective, is asserting its strength in very profound ways. If we look, for example, what happened in Venezuela just a few days ago, the United States pulled off a military mission that was, in some sense, almost like it was out of a Mission: Impossible movie. Can you believe we actually extracted the leader of a narco-terrorism organization from his bed in his home country? It's incomprehensible. But the U.S. military today has really reshaped the conception of what the United States is able to accomplish from a national security perspective.

And at the same time, policies relating to tariffs, some of the rhetoric from the administration has taken some of the shine off of the dollar. And at the end of the day, I do believe that when it's all said and done, if you are the strongest nation in the world, you are going to be predisposed to having a strong currency. And that strong currency, that reserve currency status, reduces your cost of capital, brings down interest rates, all else being equal, increases the quality of living for those citizens of that nation, and allows us to engage in the global economy on a much stronger footing. Yes, it makes exports a bit more challenging, but the fact that we can amass so much capital and deploy it across Corporate America

is stunning. If you think about it, there's very few companies in Europe with a market cap of north of $10 billion. Anthropic raised that in a couple days just recently to fuel their continued growth in their AI business. I mean, the juxtaposition between the strength of America's capital markets and virtually every other country in the world is breathtaking. And we want to protect that. That ability for American firms to raise tens of billions or hundreds of billions of dollars, whether it's to build hyperscale data centers, whether it's to pursue pharmaceutical R&D, leaves us in an envied position by the rest of the world.

So what do you think the administration needs to do to sort of make sure that that supremacy is maintained? Is it on the right fiscal track to do that?

So we need to increase fiscal discipline in the United States. We're late in an economic cycle. We don't know if we're in the sixth inning or seventh inning or eighth inning, but very few cycles run as long as this cycle has run. And we're still running a significant deficit. At this point in the economic cycle, we should be running close to a break-even. I mean, if you're not paying down your national debt at moments like this, when will you pay it down? And the fact that we're still running a very large annual deficit does tell you that too much of the economy is being supported by the sugar high of fiscal spending. We need to dial that back. We need to have more discipline in both spending and thoughtfulness in how we generate revenues.

We need to put our fiscal house in order. And I do worry that that's lost attention and focus in Washington. And I know the president has to be frustrated. His first term, his tax cuts were about reigniting growth in America and to get Americans to, in essence, be bolder again. How do we increase investment? How do we increase productivity? And he's trying to play the same playbook again. But what I think is being missed in this analysis is the incredible amount of spending during the pandemic. Right, that three-year era of profligate spending, just out-of-control spending, we need to deal with the reality that we need to pay that debt down. And America did this after World War II, and America should be doing that again here today.

And how—I mean, politically, though, it's a difficult needle to thread, that one. How would you, if you had the presidency, what would you say to him? What should he do to bring that deficit down?

Look, in the United States, I'm not sure if I have the exact pronunciation right, but Simpson-Bowles was the committee formed decades ago to address this issue in a prior administration. You need—and I know this sounds very, almost fanciful—you need to get bipartisan agreement on the steps we're going to take to put our fiscal house in order. And here's the big issue: politicians deferring some of these decisions means that the impact of future decisions will be so much more painful for the American people. Like, that's what we're really doing is we're not deferring some fixed amount of pain; we're going to cause far more pain 20 years down the road. I mean, could you imagine today being in your 20s and you see Social Security come out of your paycheck each and every year?

Okay, will the government safety net be there for you when it's your turn to retire? That's a legitimate question given the level of deficit spending we have today.

So another area of pain, certainly one that you've highlighted a lot, is that of tariffs, which for the last year has been this sort of flip-flopping story—one minute they're up, one minute they're down, one country's up, whatever. Only yesterday we learned that tariffs on India are going to be cut to 18%. How difficult is it to sort of come up with an investment strategy thesis when this backdrop keeps changing all the time?

I see my colleagues firsthand have to grapple with this problem over the last year. I mean, all of us do in the money management business. How do you create a portfolio when every single company that you invest in can have the terms of engagement changed by the stroke of a pen in Washington? And this goes to—you often hear businesspeople say, "Just don't change the rules, all right?" And you sit there and go like, "Are they that inflexible? Are they that unwilling to change? Can't they go with the flow?" But the problem is that when you're running a business and you're trying to grow that business, you're making decisions that have horizons often of three years, five years, 10 years, 20 years.

I mean, we're building a new office building in New York for Citadel. That's a 50- to 100-year horizon decision. Okay, if you tell me the rules of the road are gonna change every couple of years, you make that decision a far more difficult choice. If you tell me the rules of the road are gonna change every couple months, I'm best off making no decision. Right? And that's where Washington needs to think about what is the pace of change it's trying to create in the economy, and having certainty or having a higher degree of confidence in what the rules of the road will be will actually help the president achieve his goal of, in my opinion, of creating more capital investment in the United States and strengthening America's manufacturing base.

So talking of certainty, there was a big announcement last week, a new Fed chairman, Kevin Warsh. I wondered what you made of that appointment and also how you think he's going to manage in what's clearly going to be quite a tricky role.

Look, the front runners in the choice coming into that decision day were Rick and Kevin. Both were outstanding, outstanding candidates for the role. And I applaud the president for picking somebody who has—and both choices were great choices. But either choice would have represented choosing a professional with credibility with global investors, who understands economics, who will carry on the role of the chairman of the Fed to make the decisions that we need to make to balance the risk of inflation and trying to maximize full employment. So I think the president made a really solid choice with Kevin. But I'm more impressed by a process that brought us to two really strong candidates at the finish line.

There's been a lot of debate around whether or not this administration was going to undermine the independence of the Fed. And frankly, they did some things that made that a legitimate question. But the choice by the president here, I think it's a powerful assertion that the Fed will maintain needed independence in policy decision-making.

And then, so on the issue of inflation, I mean, you have said that, I've got it here, you wouldn't underestimate how grating a 3% inflation rate would be to tens of millions of American households. And you said that unless they get that under control, it could cost them the midterms. I'm not quite sure when you said that, but anyway, what's your message to the White House as we head into the midterms in November?

It's really interesting. There are a couple of issues that the president won this election with. One was the border and the chaos that we had on the southern border of the United States. And the president has been true to his word. He has secured the border. There's no doubt that there's a huge sigh of relief across our country that we're now in a position to pursue a thoughtful legal immigration policy. That's a huge win by the president. And then the second area that was important or fundamental to the president winning the White House was the inflation of the Biden administration. I mean, prices in America rose at a stunning clip in some sense because of the same profligate fiscal spending we spoke about just a few minutes ago.

And what we saw was the American voter doesn't like the inflation genie out of the bottle. And in particular, if you're in your 50s or 60s or 70s, and you're seeing your purchasing power of your savings eroded, that's a very frightening place to be. Now, I give the Democrats real credit. In 12 months, they've changed the dialogue from inflation, where they got killed by this administration in the elections, to the dialogue being affordability. Like, we changed one word. All right? But what we're really talking about is the same set of issues, which is that for the American people, prices are a lot higher than they were five years ago. And the president, he's very right to be focused on how do I respond to the voters' angst and anxiety over inflation?

The appointment of Kevin is a step in the right direction. The rolling back of tariffs on a number of goods that consumers buy day in, day out is a step in the right direction. The focus on housing affordability is a step in the right direction. I really do hope the president is able to make enough moves over the next few months to convince the American voters that he really is passionate about controlling the issue of inflation in the United States.

I wanted to ask you about sort of the dangers of crony capitalism. You are a big free market champion, you always have been, but there is, there has been sort of, you know, you were very clear that you didn't like the regulation, regulatory burden of the previous administration, very outspoken on that. But now you've got a situation where the government is taking stakes in companies. You've got sort of talk about a credit card, a cap on interest on credit cards. You've got all the interference with tariffs and the attempt to reshore manufacturing. Do you think there's a role for that sort of interference, given that America has to sort of take a stand against the biggest crony capitalist of all, China?

Or does that sort of behavior make you shudder?

Well, let's take a huge step back. Government has a really important role to play in the economy. It has an important role in the economy to ensure that consumers have fair and reasonable disclosure. Like when you're a consumer that picks a credit card, you should be able to get through the fine print pretty quickly and understand the cost and interest rates you're going to pay. Government has a really important role in the economy in preventing externalities. The archetype of that being pollution. You can't just build a factory and dump your waste into the river in the backyard. You just can't do that. So I think it's important to appreciate that no one, when they argue for less regulation, is arguing for a reversal

of these very important policies that protect the safety, health, and welfare of the American people. But what we are seeing today in Washington is something different. We're seeing this involvement of government in corporate America in a distinctly different way than 20 or 30 years ago. We saw the green shoots of this in the Obama and Biden administrations when the government started to invest into the various green energy companies. And you and I both know a number of those companies ended up in bankruptcy, and all the monies just, in some sense, disappeared into thin air. And as a taxpayer, that's really frustrating. We have an incredible venture capital community in the United States. We don't need the US government to pretend to be venture capitalists.

They're not, all right? You've got Sequoia and New Enterprise and a16z. You've got a tremendous number of great VC firms in the United States. You don't need the US government to pretend to be something it's not. And when the US government starts to engage in corporate America in a way that tastes of favoritism, I know for most CEOs that I'm friends with, they find it incredibly distasteful. Like, we want to go run our businesses and win on the merits of providing a better product to our customers at a lower price. Like, that's how we win. And when you start to say that you're going to win or lose because you get a regulatory favor out of Washington, do you know what you say? God, I mean, I'm close to this administration, but does that mean the next administration's going to grant a favor to one of my competitors?

Or take a favor away from me because I don't support them publicly? Most CEOs just don't want to find themselves in the business of having to, in some sense, suck up to one administration after another to succeed in running their business. They want to focus on better products, better marketing, better distribution, more value created for their customers, some of which is shared with their shareholders.

So these are all great points, and we live in a world, in a country where people really look up to corporate leaders. Why is it so difficult for the corporate world to voice publicly the sort of thing you're saying now?

So I think there's a couple of challenges that corporate executives face on this front. What we saw over the last, we go back over the last 10 years, companies that found themselves in the middle of the whole woke movement would find their products either embraced or ostracized by tens of millions of Americans overnight. And that's created a level of fear and apprehension amongst the corporate CEO class to insert themselves in any publicly facing issues these days. Like, the power of social media to persuade millions or tens of millions of consumers to make a product choice is really terrifying to corporate executives. And I think it's put them in a very, just intrinsically, like, withdrawn position.

And I think we want to think about this. Is it really good that the people that are so focused, that they create the jobs that we all need in our lives, do we really want to have their voices completely extinguished? They have very important voices. Otherwise, you're crowding out. You get the voices of like Mamdani. Good luck creating a job other than at the expense of a taxpayer. Good luck. He's never built anything. We need the voices of America's corporate leadership in the halls of Washington, in the front page of papers, to talk about the issues that we need to have for domestic prosperity. So number one is social media's been a huge, huge impact on the voice of corporate America. I mean, even just look at the backlash on Elon Musk.

All right, we can quibble back and forth, and we can do more than quibble about some of the choices or things that he said, but do you know what? The most successful business person in the United States walked away from his companies to commit himself to public service for months. We may not love everything he did, but we should admire that willingness to give of oneself to make our country better.

So while we're on this subject, I wanted to ask you as well specifically about there has been a trend of people in the administration using their positions to enrich themselves personally. I don't know if you saw that the Journal, we did a story a couple of days ago about a half a billion donation that was made from an Abu Dhabi royal to the Trump crypto vehicle two days before the inauguration. Does that sort of behavior matter to you? Does it bother you?

I mean, of course it bothers me. Like, of course it does, right? One of the things that you want to believe is that those who serve the public interest have the public interest at heart in everything they do. And I think that this administration has definitely made missteps in choosing decisions or courses that have been very enriching to the families of those in the administration. And that calls into question, is the public interest being served? And I think that there's just a necessity for us as a society to re-embrace some of the critical concepts of ethics in public service. You know, we saw the same problem with the Supreme Court several years ago. Wherever you see the signs of conflicts of interest, you give rise to concerns about are the interests of the public being put first and foremost by those in public service.

And are you optimistic that we're on a trajectory to get back to a world where these sort of ethics take center stage?

No.

You're not?

No, I'm not.

Well, that's very depressing.

I think it's more important to be just objective about it, because that will then create the dialogue that maybe will permit us to effectuate change. But if we just say, 'Oh, of course it'll get better,' that actually sort of misses the big picture, which is, I think, for example, I think the work that you did at the *Journal* in exposing this story is the very work that we need to see done day in and day out to keep the American public informed about the behaviors of our politicians on both sides of the aisle.

Oh, absolutely.

Right? And to help to create—you know, the press has always been a very important part of the checks and balances in American society. It's a very important check on curtailing these types of conflicts of interest.

Great. Well, I definitely second that. Now, we haven't got much time, and there's so much I want to ask you. So very quickly, so that we get to everything, just quickly on AI. Do you think—there's obviously so much excitement around AI, all this incredible, innovative new technology, it's going to change everything, it's going to lead to these huge productivity gains, quite possibly already is. But there is also a creeping sense that I've picked up, certainly at Davos, that people are beginning to think, 'Oh my God, have we really thought hard enough about the impact it's going to have on society?' Do you think AI is going to come more to the fore this year as a sort of potentially political issue?

That's a great question. And I don't think it's going to be—I will dread these words in nine months—I don't think this is going to be a major election issue in this cycle. And you've caught me thinking through a problem here, right? One of the challenges that exists is during the pandemic, the labor markets were very tight. It was very hard to hire people. And across corporate America, companies hoarded labor. A number of friends who are in the tech space, they would tell you openly that their workforces were 20% bigger, they were 30% bigger than need be. But they didn't want to let anybody go because no one knew what work from home was going to mean in terms of productivity. Clearly, most of the country's gone back to work in the office, but in that transition, there was a lot of turnover of people.

Citadel put in place a 'thou must come back to the office' very early, and we lost a few percent of our workforce over that. For us, it was worth it for the collaboration that goes with that, but these were the kinds of issues that corporate America was navigating. Okay, the employment market today is still reasonably robust, but it's not as tight as it was two years ago. And companies are now saying, 'Do you know what? I can trim some of my workforce in areas that are not strategic. I can tighten my belt a little bit here at this moment in time.' What a great headline: 'I'm sorry I'm letting you go because we've introduced AI in our business.' It's just much more kinder and gentler than saying, 'I've kind of employed you for the last three years, but I don't really need you.'

So I think AI has gotten a lot of very negative headlines in terms of being the excuse that companies have used to trim their workforces down. But objectively, I think very few businesses are actually seeing productivity gains that come anywhere close to the headline of job losses that we have seen. I haven't seen it.

Great. Okay, so to other matters altogether, we're here in this beautiful art museum. You are a very prolific art collector, and I understand you moved a lot of your collection here from Chicago. Why did you make the decision to do that?

To move from Chicago or to move my art from Chicago? Well, the art. The art. Yeah. Look, I couldn't, you know, there's a natural question here, which is, why did you leave Chicago? Indeed. I think that's actually the more important question. We're in Palm Beach, Florida. So, you're at the start of the pandemic. It's a respiratory virus. Most respiratory viruses are less transmissible in hot, humid environments. This is just science. So, we're going to open an office in one of the hottest, most humid parts of the United States that we can find. And we rented the entire Four Seasons just down the street. In about five days, we assembled enough technology and infrastructure that we could run the entire U.S. equity market, if need be, from the ballroom of the Four Seasons in Palm Beach, Florida.

And it was one of the coolest things I've ever seen done. We had 200 people working three shifts, five days straight. I mean, they brought in a portable truck with a generator they use in a hurricane to power the thousands of servers. Why am I sharing this? Because the government of the state of Florida was 110% behind us in transforming the Four Seasons into NYSE South, if need be. Like, the sense of, 'We're in a national crisis, and we will be a constructive partner with you as you literally turn a hotel into a trading floor. No problem.' The people that came here, they lived in a bubble. You could not come and go from the hotel property, period. No one was allowed to come or go. So, think about the conditions they lived under, which were actually pretty good in retrospect, because at least they had the company of a few hundred of their friends and family.

When they moved back to Chicago, one of my most senior partners came to my office and said, 'I have a question. Why did we come back?' And I said, 'Well, I mean, what do you mean?' 'Quality of life in Florida is better. In particular, the streets are safer. The schools are better. The weather's certainly better. Why do we come back? Why do we come back to a city that is gripped in violence, where the schools are failing the children, where it's very hard to recruit talent today because of these headlines? Why do we come back?' And since that moment in time, Miami has become our third-largest office in the world, far bigger than Chicago. Everyone who's moved here has been extraordinarily pleased to be in a community which has so much positive vibrancy and energy.

I must tell you, it's really fun to go out with friends at night and just talk about how your kids are doing and what you're building and where your life's going. Whereas in Chicago, you frankly often end up talking about violent crime because it touched your life in such a profound way each and every day. So, having said that, this being home, this will be my home for the rest of my life. Of course, things like my art collection moved from Chicago to Palm Beach.

Okay, fair enough.

It's not complicated once you understand the big picture. Good. And I will tell you that the Norton is one of the great art museums in the southeastern United States. And it's been really great to see this museum really, I mean, just thrive under its current leadership over the last several years. It's really great to see that.

Good. Okay, I have got time for one more question. Last night, I went around asking people what question—I was soliciting them, saying, 'What question would you like me to ask Ken?' And it was remarkably consistent what they said. 'Can you—' and I'm going to ask you, do you know what that question is that they want me to ask you?

I mean, I always get asked, 'Is the market going up or down over the next three months?'

Nope, it's not that. Want to know? Sure. They want to know if you've ever considered throwing your hat into the ring for public office, even for the presidency.

That's a bold question.

Indeed, they asked me to ask you.

So I studied economics and government at Harvard and have always had deep interest in public policy issues. I'd like to believe that at a future point in my life, I will be involved in public service. I'm very grateful for the opportunities that this nation has afforded me. But over the next few years, I love my job, I love the colleagues I work with, and I'm very fortunate to have a number of ties to friends and to acquaintances in Washington on both sides of the aisle. And I think that I, I've been able to have my voice heard on important issues. And I'd like to think that I've nudged the country in small ways in good directions. I mean, the president and I worked on Operation Warp Speed together in the first administration.

The flights out of Wuhan, Mike Pompeo and I made most of that happen together. So, you know, I found that this administration and, for that matter, the Obama administration were administrations that you could, you could make meaningful things happen that benefited the American people. You know, in the, in the Biden administration, we were able to take an idea that we funded in Chicago. A small group of us funded providing every child in Chicago in the pandemic with internet access. I mean, it's like incomprehensible to believe that there are kids in America that did not have access to the internet, and there were tens of thousands of such kids in Chicago. That concept was rolled into one of the national infrastructure bills in the Biden administration.

So I'd like to believe that I can continue to pursue philanthropic efforts and efforts that do help to improve—let me use different words—to ensure that every single child in America can still get on that on-ramp to the American Dream.

Great. Well, that's a very positive answer to the bold question. Thank you very much, Ken Griffin.

Thank you so much.