Kenneth C. Griffin, Founder & CEO, Citadel (Economic Club of Chicago, 10/4/21)

Today's conversation will be moderated by Eric Schatzker, a correspondent for Bloomberg TV. Eric has spent the last two decades covering technology and financial services and interviewing some of the most prominent individuals from around the world. Today, his focus is on Wall Street and its leadership. Welcome and thank you, Eric. And of course, as most of you know, our featured speaker, Ken Griffin, is the founder and CEO of Citadel, one of the world's leading investment firms and founder of Citadel Securities, a leading global market maker. After catching the attention of hedge fund pioneer Frank Meyer, founder of Glenwood Capital Investments, while he was still an undergraduate at Harvard, Ken moved to Chicago after graduation and founded Citadel in 1990.

Citadel is now the third most profitable hedge fund of all time. Citadel Securities interacts with approximately one out of every four shares executed in the U.S. markets. Now, Ken has been recognized by Forbes as one of the top 25 philanthropists in America for his catalytic giving in areas such as education, health care, and economic opportunity. He's given more than a billion dollars in recent years, including game-changing gifts to support Chicago's world-renowned cultural institutions, enhance our city's public spaces, reduce violent crime, improve our public schools, endow institutions of higher education, and provide broadband access to our city's students in need. And all of us know, who enjoy the Chicago lakefront, how wonderful some of the changes have been there for the bikers and riders, one of the many things that Ken has done.

One of the many. So we appreciate his role in our city. And he and his Citadel partners also played a leading role in combating COVID-19 by advising high-level government officials, accelerating promising scientific solutions, and addressing urgent needs within our communities. Ken serves on the Board of Trustees for the University of Chicago, the Board of Directors of the Chicago Public Education Fund, the Board of Trustees for the Art Institute of Chicago, and the Museum of Contemporary Art Chicago. Now, it is a rare exception that we invite somebody to address our Club more than once. In fact, Ken's 2013 address remains among one of the most popular in the Club's history. And we're pleased, yes.

We're pleased that he's again joined us today. So thank you, and please welcome Ken Griffin.

Hello, everybody, and hello, Ken. Ken, it's good to see you. Eric, it's great to see you. Thank you so much for being here today. My pleasure. I don't get to Chicago often enough. We should jump right into it, don't you think? Absolutely. So, as Mary just said, you instantly became one of the Club's most popular and provocative speakers the last time you were here in 2013. And I know you're not going to disappoint the hometown crowd, those in the room, those online with us virtually, and those tuning in live on Bloomberg Television and radio around the world. Ken, much of our conversation is going to turn on politics or policy in one way or another. Everyone here in our audience knows that over the years you've become increasingly active and involved in politics and policymaking, both as an advisor and as a funder on the local, state, and national level.

So I think it makes sense, because it's probably a question for everyone here, for me to ask to begin before we get into the details: Do you have any political ambitions?

That is the out-of-left-field starting question. I've been asked that. I've got three young children and I've got a great full-time job. So for the time being, I'm going to stay focused on my family and on my work. But I am involved in politics because, regretfully, that's become such an important part of day-to-day life in America. As you're well aware, I've been involved in supporting a variety of charitable causes for a very long time. And it is heartbreaking to see hard-earned gains wiped out with the stroke of a pen from a thoughtless politician. And so I have become more involved in politics over the years because I'm trying to protect the American Dream. I'm trying to protect the opportunity that everyone in this country should have to have a great life, a great education, and to have a life well lived.

As you may imagine, folks, Ken and I are going to return to the topic of politics a little later in the show, but for the moment, I want to talk to you about the pandemic. Ken, you've been deeply involved in the fight against COVID-19. You personally lobbied the Trump administration at the very highest levels to fund vaccine development by pre-purchasing doses from multiple drug companies, what, of course, became Operation Warp Speed, and you pulled levers to push the FDA to speed approval of COVID-19 treatments. How do we beat the virus when only 56% of Americans are fully vaccinated? So let me reframe the question.

The great part of working with the Trump administration is you could reason with the individuals who ran our country. And with Operation Warp Speed, it was a very simple concept that spending a few billion dollars without knowing which vaccines were gonna work, but to start the manufacturing process before we had FDA approval would greatly compress time-to-market. And so if we had a winning vaccine, if we had a vaccine that was going to be successful, we could bring that to Americans far faster than the alternative. And that worked beautifully. The United States really, out of the gate, had a supply of vaccines that was unparalleled in the rest of the large economies around the world. Operation Warp Speed was a home run.

And it really goes back to having people in the White House, whether it was the president or Jared Kushner or Vice President Pence, who were able to understand the concepts of real options theory and how to apply that to save American lives. $9 billion was spent, give or take, on Operation Warp Speed. Hundreds of thousands of lives were saved. It was one of the great accomplishments of the Trump administration. And I'm really indebted to my team for having come up with the idea for this strategy that has so impacted our country for the better. Now, having said that, one of the frustrations is that vaccination rates in the United States have plateaued out at an unacceptably low level. If you look at my firm, where we have one of the great biotech investment teams in the world, we're about 98% vaccinated.

So where you have the facts, the hard data, the unequivocal scientific judgment to make a decision and to educate your team around why you should be vaccinated, we saw a voluntary vaccination rate, voluntary, not mandated at Citadel, of 98%. And I think we have fallen short as a country in communicating to our population just how important the vaccines are to change the destiny of this disease if you're infected.

You haven't had to impose a vaccine mandate at Citadel, clearly not, if 98 out of 100 of your employees are fully vaccinated. What about everybody else? Do you believe in vaccine mandates?

So now that we have FDA approval, we are going to start to face some pretty hard decisions as a country as to whether or not we vaccinate people mandatorily in key jobs. And I think if you're in healthcare, if you're in nursing homes, and if you're in occupations where you're gonna touch the lives of others who may be immunocompromised, older in years, you're gonna have to be vaccinated. And then hopefully we'll get an FDA approval, not just an emergency use authorization, but an FDA approval for children in the foreseeable future, which will allow us to mandate vaccines for school-age children, just as we do for a number of other diseases. This should help to reduce the surface area in which the virus can thrive

And reduce the risk of mutations and other impacts that go with the endemic nature of the disease as we face it today.

There are people in this room, people watching live around the world, who are struggling. They're corporate leaders themselves, or they're government leaders, and they're struggling with what decision to make. Should I mandate a vaccine? In other words, "no jab, no job." Should that apply? Should private employers have that freedom, and should governments be able to do that?

So let's be clear. You need to respect, for example, people's religious right to refuse a vaccine. So it cannot be as a country that everyone has to be vaccinated, because we as a nation have a deep respect for people's individual and religious rights. Having put that aside, if we go back to those areas of the economy where people are in frequent contact with others, and in particular with others who would be greatly adversely impacted by the disease, I think the issue of public safety dominates and vaccination mandates are appropriate in those realms. Again, nursing home care workers, for example. But I'd really like to think that as a nation that we can use, in some sense, our celebrities and our influencers and our politicians and our business leaders to drive home the point that the best decision you can make to protect your health, your loved ones' health, and your family's health is to be vaccinated.

You know, this will sum it up really well. One of my friends runs surgery for a major hospital chain in the United States. People come in and they're sick with COVID. You know what the first thing they ask is? "Can I get vaccinated?" That is the single most common question from people who are sick with COVID who walk into one of the major hospitals of the United States. And you're too late. And we need to get past the hesitancy and conspiracy theories that are really undermining the acceptance of this vaccine amongst our broader population.

Ken, big companies across the country have pushed the return to office back to November, back to December, in some cases into 2022. Talk to me about the approach you've taken at Citadel and Citadel Securities and whether you think it's a model others should follow.

So you asked the question exactly right. Big companies have pushed back the return to work. Smaller companies are back at work. And in some sense, it's a pretty straightforward reason. Small companies are always on the edge of their own existence. They don't have a big economic moat or a big consumer brand name. If you're a small business, you're trying to literally make it from day to day, week to week, and trying to realize your dream and to make your business successful. And the productivity hit of being in a remote environment by Zoom—you're just not gonna be successful. Your business is just too fragile. And so what we see is a very stark difference in the return to office programs between small and medium enterprises and the large global multinationals.

Now, at Citadel, we have been 100% back at work since June, and we were at 50% back at work through most of the pandemic. It was that very initial phase where we were shut down like the rest of the country. We were fortunately able to literally build a trading floor in the Four Seasons of Palm Beach, Florida, in five days, bring a hundred and some people down to Florida, and to run a substantial part of the U.S. capital markets from a hotel in the middle of South Florida. And that's a real credit to my team for their engineering ingenuity and their ability just to get the damn job done. And I really appreciate my team members who made that happen. It was incredibly important to the strong functioning of the U.S. markets in equities and fixed income and other assets that we pulled that off.

But having said this, if you are early in your career, you are making a grave mistake not being back at work. It's incredibly difficult to have the managerial experiences and the interpersonal experiences that you need to have to take your career forward in a working-remotely environment. Working remotely is very good at maintaining the status quo, but the world's not static. Competitive pressures from around the world will put American businesses continually under pressure. The Chinese have been back at work literally from almost the start. They're continuing to evolve at a very rapid rate of innovation. And we are, in many ways, stuck in patterns from 18 months ago because it is so much harder to create and to innovate in a remote working environment.

So for our youngest members of our workforce, I'm gravely concerned that the loss of early career development opportunities is going to cost us dearly over the decades to come. That's where I think the biggest hit's gonna be, looking forward, in America.

In other words, working from home has an economic consequence for the country. For the country and for a generation. You've addressed the millennial question. The CEOs I speak to tell me they're also struggling, Ken, with another group of people in addition to those millennials. And that's the top producers, the senior people who don't want to go back to the office. They're just happy, thank you very much, working from home in the Hamptons or from Palm Beach or from Aspen. And when they don't go back to the office, those young people whom we've just talked about dragging back in don't get the apprenticeship.

You're exactly right. You're exactly right. And this is where leadership matters. This is where the CEO being in the office is so important. It's the tone from the top that we're going to get back together, we're going to get back to work. I really wish the President of the United States would make this part of a keynote address. It's time for America to get back to work. And in the meantime...

And in the meantime, that burden of responsibility falls on corporate leadership and civic leadership to do the same thing?

Absolutely. And what's disheartening is when you see some of our corporate leaders like Jamie Dimon really trying to push the return-to-work message, the blowback from the popular press. Do you think that's why other CEOs aren't doing what he's doing and what you've just done? Oh, I know it. If you talk to other CEOs, they live in fear of how they'll be publicly persecuted for delivering the straightforward message, 'It's time to go back to work.' So why shouldn't they be scared? They are scared, and that's part of what we're seeing right now. And that's why, again, from a leadership perspective, if our president were to address this really grave concern, I think as a country we'd be much better off.

If you look at the U.K., for example, the message to the civil service is cut-and-dry. It's time to get back to work. We need that same message in Washington. We need it for our government workers. We need it for our corporate leaders. We, as a country, it's time to get back at it.

Ken, there's a huge divide between the camp that thinks the economy still needs more stimulus to fully recover from the pandemic and the other camp that thinks the government has done far too much stimulating already. I think I know what you're going to say, but I'm going to ask you nonetheless, which camp are you in?

So I was in the White House in March of 2020, and President Trump was going to put forth, in fact, did put forth the proposal for a tax holiday on Social Security. And I had to point out to the president the issue wasn't people who were at work. The issue our country faced was people who could not work. The waitress, the hotel staff member, people in the travel industry who just, like, literally, a light switch flicked, and they were out of work. And we all know the stats of the stunning proportion of our population that has no savings. And it's not a pleasant place to be to disagree with President Trump, but I had to drive home the point. We needed to get checks in the hands of Americans as fast as we possibly could who had lost any ability

to maintain their basic needs in life. Like, this pandemic was going to wipe out millions, tens of millions of households that had no savings and no prospects of working for an unknown period of time. And I take my hat off to Washington for moving quickly on the first stimulus package where we got those checks out the doors to American families and we protected people's ability to have the basic needs of life addressed. Now this has grown and grown over time to just a plethora of programs that have ultimately destroyed the incentive to work. You and I both know of the number of people today, or until recently, who are making more money on the palette of government handouts than they were in their full-time employment.

And that's crippled the supply chain in America. A real-life, tangible example: I was at a restaurant in the northern suburbs of Chicago with one of my friends who's actually in the audience. And we'd ordered dinner, and the owner came out after an hour—a Hispanic man, incredibly, you could just feel the emotional angst. He's like, "I am so sorry that you're having such an awful experience." We hadn't even complained. But he just knew that things weren't right. And he goes, "This should be a great moment for my business. I can't hire people, and I can't keep people." And just the anguish in his face was heartbreaking. And that's what so many small businesses are facing today in America. It's so hard to find people to come back to work, to do the jobs that we need to have done, whether it's working in the energy industries, it's delivering products and packages, it's being in manufacturing facilities, making goods and services.

We're struggling to find—we have 11 million open jobs in America. We're struggling to find people willing to do them.

How does that get fixed, Ken? Is it simply a matter of turning off the fiscal tap and turning off the monetary tap?

So it's really interesting that from a classic economic perspective, you would keep some level of government support in place to help us get back to full employment. And so your monetary approach is your general way of doing that, and that's the ultra-low interest rates that we have in America and the very aggressive asset purchase programs being run by the Fed. The problem is, is that in Washington, the fiscal policies are actually work-disincentivizing. So we're undermining all the work that Powell and team are doing at the Fed by creating so many incentives to not work. That's what we need to change. We need to align our fiscal policies with "go back to work"—and here's why—with our monetary policies that are very effective at encouraging capital formation and capital growth.

Just so I'm clear then, and I think there are people here who'd like to know, the monetary policy that the Fed has pursued and is pursuing, you're fine with. You're aware that there are people who think they should have started to taper asset purchases long ago and that the next meeting is far too late and that we should be talking about the path to normalization for interest rates. So, I'm gonna tell you, it is a job that I would be so happy not to have. It just so happens you don't have it.

And I'm so grateful I don't have that job. It's a no-win job right now. The Fed has a dual mandate of price stability and managing to have us at full employment. That is the only mandate of the Fed, price stability and full employment. And let's be clear, right now we don't have price stability. Inflation at 5% is amongst the highest numbers that many in this room have ever seen in their lifetime. And the bet is it's transitory, and that's a big bet. But we're nowhere near full employment either. So, the Fed's in a really tough box. And the challenge is the Fed has to take the regulatory and fiscal policies of Washington as a given. They can't influence those policies. And to the extent that those policies are working against what the Fed's trying to accomplish, they are really in no-man's-land in terms of a struggle.

I think if I am Chairman Powell, I stay the course that I'm on, as unnerving as that is, because to see inflation running this hot is really unsettling. There's a fear that we unanchor inflation expectations. And if that happens, we're going to have to go from an ultra-low interest rate environment to a much higher interest rate environment very quickly, and that will unquestionably plunge us into a recession. Huge risk, but all the same, you think the Fed under Chairman Powell should stay that course? I think he has to stay the course, given his dual mandate. Remember, it's not what we would want to do. It's what he is directed to do by mandate. And for what it's worth, I believe the sanctity of that mandate's important.

Once we change the Fed's mandate to something that's more nebulous, I think the opportunity for political capture goes up dramatically. And I think that could be devastating to our country.

There was a lot of talk during the last presidential administration that the Fed had become politicized. Do you think the Fed has become sufficiently depoliticized?

It was perhaps the only time that I really publicly spoke out against Trump—was actually defending Chairman Powell. Because I believe that Trump's efforts to cajole the Fed were inappropriate. We need to maintain the belief in the separation of the Fed from the whims of Washington to maintain a strong dollar. It's just that simple. And so every time a politician goes after the Fed in a very personal and inappropriate way, if you're part of the financial community, you need to give pause to that. You need to push back on that. You need to make it clear that we need the separation between the halls of Washington and the choices made within the Federal Reserve Board.

There is a geopolitical factor, Ken, that is weighing on both fiscal policy and monetary policy, and that geopolitical factor is China. There are many Americans who believe that we're locked in an existential battle with China, a battle that will define the 21st century, and that it's high time we fought back. That's what they think. I want to be clear, and in fact, more importantly, I want you to be clear, but as I understand it, you believe the United States is making a huge mistake by trying to decouple this economy from China's, and that you believe it's just as existential a question. Am I correct?

I think more troubling is, I think, in many very important ways we have already decoupled. By restricting Chinese access to American semiconductors and to American software, we have pushed them into a national campaign to eliminate their dependency on the West in technology. So you can imagine a world where there's two completely independent hardware and software stacks. So in the United States, for example, it's Intel, it's Windows, it's Intel, it's Linux, and then it's the software ecosystem that lives on top of that that is used by so much of the Western society, from Germany to France to Canada to Japan to Australia. I mean, the United States' dominance in technology over the last 50 years has been just stunning and a huge source of economic growth in our country.

By cutting the Chinese off from access to American technology, we're forcing them to—in some sense, their space race is to become technologically independent. And in their space race, they're going to win. They're going to make this happen. They graduate about two times as many graduates a year from college as we do, half of whom have STEM degrees. In contrast, about 20, 22, 23% in the United States. So they're graduating, ballpark, five times more engineering-talented professionals than we are per annum. The belief that we will be technologically dominant against those statistics is simply naive, misplaced. And so, as the Chinese build out their semiconductors of this decade and their technology stack of this decade, not only will they use it in the biggest market in the world, which is their own domestic market of 1.4 billion people,

but they'll push it to all their trading partners, the Brazils of the world, the Chiles of the world, all of Africa. And I can picture a world in 30 to 40 years from now where, in some sense, we have divided the world up between East and West technologically. And given the massive scale economies they have, I don't like our position in that outcome.

You're aware that there's some skepticism about China's ability to compete on even footing with the West when it comes to super-high, advanced technologies like the lithography required to put wires on tiny little semiconductors. They haven't gotten there yet, and there are very few companies in the West that are capable of doing that. And there are similar arguments that are made about China's ability to innovate and think creatively in other areas of technology. You think that's nonsense?

I think it's nonsense. In fact, I don't think—I can just demonstrate it. The world's leading country in semiconductors is perhaps Taiwan. Now, China will argue it's part of China, so you have an interesting quagmire right there. But TSMC is unquestionably one of the world's greatest, greatest manufacturers of semiconductors. Now, they don't have the entire solution. They still buy a variety of equipment from around the world. But talk about being a powerhouse. AMD's chip, which right now is the dominant chip in the Intel-AMD war, is made by TSMC. It's made by TSMC. And going back to my point earlier, China views Taiwan as part of China. There's no way they will be technologically impotent compared to America over the next 20 years.

They will get there one way or another.

Ken, what do you say to Americans who are angry that engagement with China, until now, has been on China's terms? And partly, if not largely, as a result of that dynamic, the United States has lost some of its technological superiority. What don't they understand about China?

Well, I think there's actually a far more troubling part of this story. So first of all, let's go back to the theory of the case. China is going to evolve towards capitalism. The United States embraces that transformation wholeheartedly because our theory of the case was as they became capitalistic, they would embrace democracy. And we were clearly willing to leave value on the table for the Chinese to accelerate that journey, because to have the most populous country in the world be part of the Western ethos of democracy is incredibly strategically important. And it's a much better outcome than facing, for example, the dynamic that we faced between us and the Soviet Union for 50 years post-World War II.

Right, which path would you pick? You want to bring them into our sphere of thought, and our belief was that them becoming capitalists would inevitably bring them into being a democracy. When we wrote the rules of the road with them, we did it with this mindset of making that happen. Now, let's take a step back. Unquestionably, the American consumers writ large won huge. China became a huge source of goods that we consume in the United States at an incredibly low cost. I mean, a giant consumer windfall for Americans. You walk into Walmart, I mean, just flip everything over. Made in China, made in China, made in China. The challenge that we underestimated was how devastating this was going to be to small towns that would have a single factory that would shut down as its manufacturing was moved to China.

That was the giant policy error that I think we all underappreciated. Wasn't how it was going to impact New York City or Chicago or L.A., but how it was going to impact a small town in Upstate New York or in Michigan or in Ohio who lost jobs that would never be replaced to China. That was a terrible policy miscalculation, not done in bad faith, but we didn't have the training or the relocation strategies to help people get back on their feet. And so a substantial number of Americans really felt the brunt of this policy in a way that was not appreciated, I think, in the halls of Washington, again, or by economists at the time. And we've been slow as a nation to respond to that.

So you're willing to bet, you just said it a few moments ago, on China's ability and China's will to compete. Are you willing to bet on America's ability and will to compete?

We need to get back to our core values if we're going to win. What does that mean? That means that our children in school need to be taught the virtues of competition and of winning. They need to be taught the virtue of earned success. It can't be that every time a race is won, there's two gold medal winners. And earned success is so important to the psychological health of our country. When people know they've done a job well, they take pride in that. They derive psychological value from that. You know, if you look at the United States, amongst our children, 1 in 10 suffer from severe depression. It's incomprehensible to me that 1 in 10 children in our country are severely depressed. And this, I think, traces back to a loss of meaning in life.

When life revolves around your Instagram and Facebook account and not around how well you do on the sports field, how well you do in class, how well you do in your drama activities after school, you've lost your way in life. We need to teach our children math and science and how to read and how to write and how to compete and how to take joy in success because we need these children to lead our country in 20 years. For me, the most heartbreaking part of the pandemic, let me give you two stories. Number one is, why haven't we brought the scientists from Moderna and Johnson & Johnson to the White House to recognize them publicly for their unbelievable accomplishment of developing a vaccine in a year?

These men and women are the heroes of our lifetime, and yet they're nameless to everybody in this room for all intents and purposes. But they're the heroes of our lifetime. It took us four years, which was our fastest prior time to market for development of a vaccine. This is like a miracle of science. And yet there are no heroes amongst this group. There are no people that our children are looking up to saying, 'I want to be like her. I want to make that happen one day.' That's not happening. And at the same time, this is a nation—we won World War II because we outproduced the Germans. We produced more planes, more tanks, more ships, more artillery than one could ever have imagined up front to win World War II.

I mean, it grossly understates the sacrifice of life and minimizes the bravery of those who fought for us in both the Pacific and in Europe. But a big part of the success story of America in World War II was the men and women who went to work in our factories to arm our military to win. Why do I talk about this? We couldn't make ventilators. We couldn't make ventilators. I don't know what our heroes of World War II would say about a country that in 60 years lost its management capability and block-and-tackle execution skills to make ventilators.

Ken, part of what you attribute this lack of competitiveness to is functional. It's a problem in the education system, and part of it is cultural—this lack of drive for earned accomplishment. Is it possible that there's another factor as well, that if more Americans believed that the odds of success weren't tilted so far in favor of those with money, power, influence, and historic advantages, they'd be more competitive? In other words, inequality is part of the problem?

There is no doubt that we have narrowed the window of opportunity in our country by our broken K-12 educational system. There's no doubt. And it traces back to the rise of the teachers' unions in the 1960s, where we put the interests of our teachers as professionals in front of those of our children who are the future of our country. And to be clear, I was at my high school class reunion a few weeks ago, largely to pay tribute to one of my teachers who was so important in my life, who was able to attend and celebrate his birthday with us. We all have those teachers in our lives who left such a mark on who we are. But yet, I watched Mayor Emanuel just absolutely get attacked by the teachers' union for trying to do the basic necessity of having a longer school year and longer school day.

Chicago has one of the shortest school years in the country. We have less hours of instructional opportunity for our kids than almost any other major city. And our mayor went to bat to change that and got batted over the head by the teachers' union. And it was a disgrace. He worked so hard to improve our public schools in Chicago. And to see that undermined continually by the unions has been heartbreaking. And now what's even more remarkable is the idea of us unionizing our principals. We're going to take away the people who are most accountable. And I got to tell you, I hosted a dinner for our principals a few years ago just to thank them—for a number of our higher-achieving principals—just dinner to thank them for a job well done.

And when you hear the struggles they face in dealing with the teachers' union, and you hear how hard families work to overcome these obstacles. One teacher spoke about, or one principal spoke about how they, by union contract, cannot teach a certain math class in their school with their staff. And the parents have to carpool to come pick up children to take them from one school to another school for an hour of instruction and to bring them back. I mean, this is just an absurdity.

Ken, I want to remind those who are just tuning in outside this room that we're speaking with Ken Griffin. He's the founder and CEO of Citadel and Citadel Securities. Ken, turning the focus back again to government, if you will, and fiscal policy, where do you agree and where do you disagree with President Biden's economic agenda?

Well, one thing is he has such an expansive agenda, there's plenty to like and there's plenty not to like. There are a few things that he has spot on right. We need to reduce regulatory requirements that make it difficult for people to have careers. A number of states, for example, have just absurd requirements to be a hairdresser. It diminishes opportunity. Going back to your earlier point, people want to have a chance to get ahead. Why we have so many states that have so many antiquated rules designed to protect trades from new entrants is beyond me. President Biden has that spot on right. He hasn't spot on right that non-compete agreements that prevent people in low skilled service jobs from moving from one employer to another should be prohibited.

He's absolutely right. Protecting intellectual property is really important, but stopping a house cleaner from going from one hotel chain to another is disgraceful. He's got that spot on right. The core infrastructure bill passed by our bipartisan leadership in the Senate, that's really needed infrastructure for America, for roads, for airports, to help to address the digital divide that exists in America. Huge, huge supporter of that legislation. It helps to tear down the barriers to getting ahead. Spot on right. The three-and-a-half-trillion-dollar spendfest? Thank God for Senator Manchin. And he's spot on right. We are not in a position to be taking on crippling debt at the end of an era of taking on crippling debt.

To engage in just an absolute, there's only like a portfolio of pork-belly spending unlike any we've seen before. You know, this sums it up. We can debate EVs and their impact on climate, but if we're going to agree that electric vehicles are good for climate change, then I don't see why one vehicle is better than the other. But they want to have a subsidy for electric vehicles made in America in unionized plants, but not plants that are not unionized. This is really an incredibly partisan, and in my opinion, corrupt piece of legislation. And I give Manchin credit for having swore—he says in his op-ed, "I swore an allegiance to the nation and the fidelity of its Constitution, not to a political party."

I wish we saw more people in Washington who understood: when elected to office, America comes first.

But it appears the federal government is going to have to make—is going to have a bigger problem on its hands than whether to pass the infrastructure bill or whether to pass the spending bill far sooner. And that has to do with the possibility that in days from now the United States will breach the debt ceiling and technically, if you will, default. What if that happens?

Wow. You know, we've played this game of chicken before. And every time, somebody blinks, and I hope that cooler minds prevail and we blink again before we go over the cliff. I do think the Democrats have a responsibility to push the solution to this problem forward. It's their profligate spending that is causing so much unrest within the moderates of their party across the Republican flank. If they're going to try to push a $3.5 trillion spending bill, they should be pushing, first and foremost, the solution to the debt ceiling issue. They've got to give on this front.

Not the Republicans? Not Senator McConnell?

Look, I think Senator McConnell's in a really tough spot to be put. Like, you're supposed to sign off on a spending bill that not one member of your party approves of. This is where we need compromise. And both sides need to come to the table to compromise, and one side's not even at the table right now.

Ken, a few questions for you about the markets in which your companies operate. Citadel Securities is at the center of the debate over so-called payment for order flow, or buying the right to execute buy and sell orders from brokerages such as Robinhood or Charles Schwab. And it's one of the reasons that you had to testify before Congress over the GameStop situation earlier this year. To those uninitiated, payment for order flow is why retail investors can effectively trade for free. But critics argue that there's nothing free about it. And the hidden costs of why firms like yours are making so much money—a hidden cost, excuse me, are the reason firms like yours are making so much money as market makers.

I'm not going to get into that debate over whether it is beneficial or whether it's not beneficial. We can litigate that elsewhere. But there is, Ken, a renewed interest in Washington in regulating payment for order flow. And I'd like to know, what's at stake for Citadel Securities if payment for order flow were banned?

Let us hope that in Washington we maintain the status quo, that brokerage firms have a duty to secure the best execution they can for their customers. That's the basis on which we compete. That's the basis on which we win. Now, let's take a step back. Payment for order flow is a cost to me. So if you're going to tell me that by regulatory fiat that one of my major items of expense disappears, I'm okay with that.

You would be quite fine if payment for order flow were to disappear tomorrow.

At 100,000 feet, I'm quite fine with that, so long as we leave the standard that execution quality is how orders should be allocated amongst market centers. Now, having said that, I think that the diminution of participation in our capital markets from the reintroduction of commissions would be a huge loss. My hat's off to the team at Schwab, which is now Schwab Ameritrade, or E-Trade, or Robinhood, for really democratizing finance in America. It hasn't all been good, but it's been really good in broad strokes. And free trading has been a big part of the story. The cost of trading has come down dramatically since I was in college. I used to spend $20 or $30 a trade. Now you can trade for free. And work by firms like Citadel Securities made that a reality.

So from my vantage point, we want to hold onto this democratization of finance that's taken place. If payment for order flow helps to maintain that as a reality, I think that's good for everybody. But from my vantage point, having one of my major cost lines eliminated, I'm going to be a winner in that scenario. So I find this to be a very curious debate that we're seeing unfold in Washington, because as I testified, all I want to know is what are the rules of the road? If I have to drive on the left, I'll drive on the left. If I have to drive on the right, I'll drive on the right. Just tell me how you want me to drive.

Others would love to know what you think about crypto. Cryptocurrencies have become a $2 trillion market. And a number of other big trading firms, including those in this town, such as DRW and Jump Trading, are making a big push into crypto. Do you believe in crypto? And even if you don't, Ken, should your businesses be active investors or traders in crypto anyway?

That is a great question. So first and foremost, I wish all this passion and energy that went into crypto was directed towards making the United States stronger. I mean, let's face it, it's a jihadist call that we don't believe in the dollar. I mean, what a crazy concept this is that we as a country embrace so many bright, young, talented people to come up with a replacement for our reserve currency, which helps to make our standard of living a reality and accrues incredible benefits back to our country. Let's replace the dollar, the global reserve currency, with Bitcoin. That's a brilliant idea. By the way, let's go ahead and build several hundred new power plants that produce an unbelievable amount of carbon to make that dream a reality.

I think I maybe just told you how I feel about crypto.

No, could you please be a little more explicit?

So I will have so much hate mail in my inbox and on my Twitter account in about 30 minutes, I can't count it. But we don't trade crypto because of the regulatory uncertainty. We often make markets in companies whose business models I don't really have fondness for because one of our jobs as a market maker is to meet the liquidity demands of American families that want to invest in X, Y, or Z. And frankly, it's not my job to tell them if they're right or wrong. It's my job to provide them with the best possible price. Because of the lack of regulatory certainty around cryptocurrency, we just aren't involved today. And I really believe that Chairperson Gensler is spot on on the need to have thoughtful regulation around cryptocurrency.

I actually think that doing so will make it a smaller market because it'll become a far more competitive market when there's regulatory clarity. And that will be good—a smaller market, less people involved who are frankly just trying to make a quick buck. And whatever the virtues are of that product, and I think those are pretty nebulous, will become—will become very different in a world of competitive exchanges and competitive pricing by tier-one market makers willing to put their best foot forward. So I really believe that Chairperson Gensler is spot on on the need for regulation. And the SEC's got a solid, solid history of writing good regulatory policy. To be clear, though, if it were regulated, you would trade it?

I would trade it because it would meet the needs of our online brokerage partners who want to have a tier-one firm making prices. I mean, part of the reason that we are so significant in retail market making is our incredibly high reliability. We're there every day and every minute of every day. And we provide a great service every day and every minute of every day. And they want us to provide pricing in crypto. I just don't want to take on the regulatory risk in this regulatory void that some of my contemporaries are willing to take on.

Ken, when you last spoke here at The Economic Club of Chicago in 2013, you described this as a city and state, and I'm quoting you directly, with broken schools, bankrupt pensions, rising crime, a declining tax base, and public corruption. Here we are. It's 2021, eight years later. How's Chicago doing, better or worse?

No, I can't believe I actually gave that quote. Because the bottom line is, it's even worse. It's even worse. Since I last spoke in 2013, 25,000 of my fellow Chicagoans have been shot. And it is a disgrace that our governor will not insert himself into the challenge of addressing crime in our city. It is a disgrace. I was on a call with him back in the height of the civil unrest and arguing with him to declare a state of emergency to deploy the National Guard. Now, the governor and I don't really get along very much, as you might imagine, given some of the ballot initiatives that haven't gone his way. But I told him to deploy the National Guard. And he goes, 'It won't look good for there to be men and women on Michigan Avenue with assault weapons.'

If that saves the life of a child, I don't care. And he doesn't care. We have our work cut out for us because we have a government in our state that continually puts votes in front of people, votes in front of lives, votes in front of schools, and we need to start to take the state back inch by inch from people that put their politics first and put our people second. And I definitely will not be getting a fruit basket this year.

Of course, we're here not just to talk about problems, Ken. We're here to talk about solutions. Give me three suggestions, the three most critical steps that the elected leadership in this city and this state, Mayor Lightfoot and Governor Pritzker, should take to reverse Chicago's slide.

We have known what to do since I spoke in 2013. We've known what to do since the start of this century. That's what makes this so frustrating. We need to reform our pensions to make the state fiscally sustainable. I do not see why new state employees are not put into Social Security like the rest of us. And to the extent that we want to augment their pensions, we have a defined contribution plan like the rest of us in this room have. That gets our spending under control in the long run. Number two, and this is a far more recent problem, we need to support our colleagues in public safety, our police force. We need them. We need our police officers to know that they are also entitled to the benefits of being an American citizen, that you are innocent until proven guilty.

It's incredibly hard to do your job as a police officer if the moment you have to protect yourself, you have to wonder, will you go to jail? Will you lose your job? Will you be publicly persecuted and humiliated before any of the facts come forth? And that's where you are as a Chicago police officer today, and it's just wrong. Now, this is no excuse for the acts of police brutality that have taken place in our city and across the country. But we need our police officers who have our backs on the street to feel like we have their backs in doing their job. And third is we need to fix our schools. I spoke about it earlier that Chicago continues to have a very short school day, a very short school year.

And we now have children who have lost a full year of learning due to the pandemic. And there's no real plan to put them back on track. And we need to deal with that issue. And we deal with it here and now.

Ken, at the risk of being blunt, why are you still here in Chicago? And why are Citadel and Citadel Securities still here in Chicago?

We aren't as here in Chicago to bird as much in 2013. We now have well over a thousand people in New York. It's become the center point for our hedge fund. It's becoming ever more difficult to have this as our global headquarters, a city which has so much violence. I mean, Chicago is like Afghanistan on a good day. And that's a problem. You just mentioned New York. I mean, I'll put this in black and white. I probably had 25 bullet shops in the glass window of the retail space in the building I live in. They tried to carjack the security detail that sits outside my house. That didn't go so well for the carjacker. But it just tells you how deep crime runs in this city. There is nowhere where you can feel safe today walking home at 9.30 at night.

And you worry about your kids going to and from school. That's no way for our city to exist. And it's really hard to recruit people to Chicago when they read the headlines, they know the facts. I can't look people in the eye like I did 20 years ago. 20 years ago, "This is a great place to raise a family. This is a great place to call home." And I could say that with a genuineness that resonated with people and they would bring their wives and children here or their husbands as the case may be. I can't give that same speech today. I can't in good conscience.

So for how much longer is this the global headquarters for Citadel?

It's probably measured in years, not decades if we don't change course.

You mentioned the jobs you created in New York, and that's because, I presume, New York offered something of an antidote to the dysfunction you've just described in Chicago. Do you still believe as strongly that New York is the antidote?

You guys need some new medicine, too, because some of the same problems that we have faced are now unfolding in New York. And I hope that the new mayor-elect will understand that when they look across the country and see what's happened in Detroit or here in our great city, the path New York's on is a scary path. And this is where Giuliani and Bloomberg get so much credit. In cleaning up crime, you can have a great global city.

This may be the same question asked two ways. Where are business conditions in this country best? And where are you doing most of your hiring today?

Those are two very different questions. So business conditions in this country are definitively far stronger across most of the Sunbelt states. Less regulation. Less taxes. A workforce that generally is very much of the ethos of, 'I'm here to earn it.' The northern cities still have a phenomenal advantage. In Chicago, it's called University of Chicago. It's Northwestern. In New York, it's Columbia. It's Yale. In Boston, it's Harvard. Our great universities are epicenters of success, Silicon Valley and Stanford. And those schools anchor our great northern cities. The South doesn't have that yet writ large. But as that changes over the years to come, as universities in the South continue to get stronger, University of Texas at Austin or Rice or Georgia Tech, which is unbelievably good, you're going to see the balance of power shift from the North to the South as the ease of doing business in the South triumphs the richness of human capital that is created by the great schools in the North.

Okay, that's the first question.

Where are you doing all your hiring? We are doing our hiring now all over the country. New York's still a huge source of hiring for us. Chicago has become smaller on a relative basis. And then we are about to sign an office space in Miami. And that will be for quite a bit of square footage, and we are going to have a lot of people living there.

Earlier today, you said it breaks your heart to be so personally and financially engaged in politics that you wouldn't do it if you didn't have to, in other words. What is your personal philosophy on political engagement? When will you spend your money and why to fight political battles? And is there a limit to the distance you'll go?

We went pretty far in the Fair Tax bill, if I may say so. For those who...

I should explain. For those who don't know, both Governor Pritzker and Ken here spent in excess, if I'm not mistaken, of $50 million of their own money fighting a bill over a graduated tax rate, and the proposal was defeated, which is to say you and your allies in that respect were victorious.

We resoundingly defeated the governor, and we did for one simple reason. And resounding is the right choice of words, too. He's not coming for just the rich; he's coming for everybody. The graduated tax bill in Illinois was just another mechanism to take more money from the hands of hardworking Illinois families and put it into the corrupt coffers of Springfield. And I know every person in this room would sign up for higher taxes if it meant reform of our pension plans and an end to corruption. I know every person in this room would agree with that. And we have seen—and I met with the governor on this very issue—and he talked about taking $50 million out of the IT budget. $50 million in a state that has a $240 billion problem.

He lives in a different reality. I mean, if you look at this state, Exelon just got a $700 million bailout for its nuclear fleet, having admitted it was engaged in corruption just a few months ago. There is no end to the amount of corruption that takes place in Illinois, and it loses the credibility of Springfield and of the office of the governor. So, Illinois has to put its house in order, and we've got to do it quickly because every single day that slips through our fingers, the liabilities get bigger and the ability to change course gets smaller. And I really hope—and this is what kills me—J.B. Pritzker, Governor Pritzker, understands the math. He understands the issues. I can't believe he won't actually use the stunning amount of political capital he has to fix the problem.

The truth of the matter, of course, Ken, is that for the time being and for all intents and purposes, the Democratic Party controls politics in this state and this city. What is the future for that party, and who will you support in the race for governor?

So that's unclear at this point in time. We're in the early days of a race. And to be clear, the Democrats have had—I mean, Rahm Emanuel in his office had four photos from his days in the White House administration, four. One was when they signed NAFTA, one of the great accomplishments of North America. No one in this room has ever woken up and said, 'I'm worried about going to war with Canada or Mexico.'

Now think about that for a second.

How many countries in the world can you say the citizens of that country have never had that fear? Like, you've never woken up and said, 'We might go to war with the Canadians.' I'll guarantee you that. But you can't say that if you're in Europe. You can't say that if you're in Asia. I mean, could you imagine living in South Korea and you have the risk of nuclear annihilation every day from your neighbor to the north? So in Rahm Emanuel's office: NAFTA, welfare reform. Ready for the next one? This next one's breathtaking: a balanced budget at the federal level. We've had great leadership from the Democratic Party over the years on important issues. It's not just one party can do this and the other can't.

It's about the leadership in the party fighting the fight for what's right. This is where President Biden has to hold the line against the socialist wing of his party and reject the $3.5 trillion stimulus bill. He knows—he knows that's the right thing to do. And so I've supported people from both parties in races across the country, Democrats and Republicans. I don't care about the sticker on your back. I care about how you're going to play on the field and what you're going to stand for as a politician.

Ken, you spoke favorably about your interactions with the Trump administration and recalled the one time in which you spoke out publicly against the president. Would you support Donald Trump if he runs again for president in 2024? I think it's time for America to move on.

The four years under President Trump were so pointlessly divisive, it was not constructive for our country. And I never actually financially supported the president. He called my office—or not he, but one of his fundraisers did, one of his very senior fundraisers who I knew. And I opened with, 'I grew up in South Florida,' and I found it incredibly offensive, his attacks on the Hispanic community. Because in South Florida, when you grow up there, those are the people that build your houses, they serve your food at restaurants, and they were my teammates on the soccer field. And I was so appalled by his willingness to play identity politics that I was never willing to support him. Now, his economic policies, by and large, were pretty damn good for America.

But his willingness to attack people on the basis of where they came from or the color of their skin was completely inappropriate, and we need to put that chapter in American history behind us.

You've recently—well, over the past several months, let's put it that way—I've been giving significant amounts of money to Governor DeSantis, not directly to him, of course. In Florida, is he your pick to be the Republican nominee?

We'll see how Governor DeSantis traverses the next year as governor before we'll come to a conclusion. Out of the gate, he did an incredible, incredible job of protecting the retirees in South Florida, or all Florida, from COVID. I mean, just knocked the ball out of the park. And what amazed me was how much praise Cuomo got in New York for managing the pandemic and how much DeSantis was attacked. And I think the record bears it out that in the early days of the pandemic, the team in Florida did a great job of protecting our most vulnerable. Just a great job. I've been frustrated, and we have been very clear in this frustration. I've been frustrated with his position on masks because it has overshadowed his messaging on vaccinations.

He's caught himself up in a political maelstrom of putting the concept of personal freedom first and foremost around masks. And I understand the principle. But Florida's a really diverse state. He should have let each county make a decision on its own. Palm Beach, everyone would wear three masks if they could. And in the Panhandle, no one would wear a mask. Florida is like a microcosm of America. And he should have respected the passion that this issue would have had amongst his citizens. And in this sort of giant political mess he's made, he's lost the messaging point—and he's been really good on this—about the importance of vaccines. I know we pushed him long and hard to try to go out there and make it clear Florida would be the first state to have booster shots for retirees. I mean, I think that's a really great talking point for somebody looking to run for president is to make it clear that you will do whatever it takes to protect our most vulnerable, and I think he's lost that window of opportunity. He's got 12 more months to show how strong he could be as governor, and let's be clear: he's super sharp.

He's done a phenomenal job of getting Florida's economy through this pandemic. We've had an outcome with COVID in that state that's lackluster, unfortunately. But I think people that live in the state feel like they've really had their personal rights respected. And that came down to a very central point around the whole pandemic from day one. From my vantage point, America had two choices, and I told this to the president. We can declare war on the virus like they did in South Korea, and we can do whatever it takes to contain it like they did in South Korea or Taiwan or Israel, or we're going to have to accept that we're going to look like some form of Sweden, and with that goes the significant cost of life.

And we never picked a path in America, in some sense got the worst possible outcome you could ever get by not picking a path. We got the economic damage of having no strategy and a loss of life that wasn't meaningfully different than Sweden. But holistically, our country wasn't willing to declare war against COVID-19. One of the areas that we funded right out of the gate was for contact tracing for cell phones to mirror what they were doing in South Korea. And the pushback from Big Tech was like getting slammed by a tidal wave. 'It doesn't fit the marketing motto of privacy.' Marketing motto? For God's sake, like, we are being attacked by a virus that is going to kill hundreds of thousands of Americans, and you're worried about your marketing motto?

The country lost this battle in the first attack when we weren't willing to do what it took to shut down America, to truly contain COVID-19, and then to get back on our feet. And we've all paid just a catastrophic price as a result.

Ken, we have had a conversation. We have to end on a different note, too, because that's like such a downer. And we are about to end on a different note, everybody. We had a conversation that I know everyone would agree has been profound and, as advertised, provocative. But I would be remiss here in Chicago if I didn't ask you whether the Bears should move from playing in the city to Arlington Heights.

I so hope they stay in Chicago. I see it as I lose my friends one by one from this great city. It's really strange to be home on a Tuesday night and not have somebody to call to go to dinner with. But that's the reality that I live in. I can't tell you how many friends are now holding in their wallets licenses from Florida, from Colorado, from Wyoming, from all over the country other than Chicago. And the combination of crime and estate tax, that's incredibly higher than most states. People just don't want to call this home as they get older. And so, not only are we losing a generation, and a really important generation of business leaders, we're losing the wisdom that goes with that community.

And that wisdom is not just in the form of mentoring young professionals. And in this room is Andy McKenna. And I remember when I was in my 30s, Andy took me out to lunch—I'd never met him—to talk to me about the rich heritage of this city, where the baton is passed from one generation to another in terms of civic responsibility and duty. It was an incredibly touching gesture and moment. And he made it really clear that as an up-and-coming business leader, there are high expectations of how you will impact the city we live in. But as we lose our fellow Chicagoans like Andy McKenna to other places in this country, we lose that ethos of what has made Chicago such an incredible success story.

And I'm gravely concerned about that. You cannot replace the wisdom that they impart on the people that follow behind them. Ladies and gentlemen, Ken Griffin.