♪ emily: he cofounded tpg, one of the largest private equity firms in the world. jim coulter along with david bonderman got their start by investing in a bankrupt continental airlines in 1993. today, tpg has its hands in everything from j.crew to movie studios. healthcare in china and cell towers in southeast asia. and two of the most prominent tech unicorns, uber and airbnb. as these companies take longer to go public, tpg's investment strategy is undergoing a new evolution in the era of private

markets. joining me today on bloomberg studio 1.0, tpg co-ceo jim coulter. so tpg is an investor in uber, airbnb, vice, spotify, what do all these companies have in common and what does it tell us about your strategy? jim: i think they all have in common that they are driving disruptions in their industries. if you look at tpg, we are often called a private equity firm, in fact we have been disruption investors. from the beginning when we started with continental airlines. people thought we were airline investors, but that was a moment in time. we have not done much airline investing in 10 years, but since that founding 25 years ago, we have constantly specialized in finding where the economy is changing and how we can expose capital to it. emily: you and david cofounded tpg in 1993.

what was it in those early days that set the stage for what tpg became? jim: we came to the industry from a different place. first of all, it is a bit aggressive to call it an industry in 1990. in fact, it was a backwater piece of the investment world. but in those early days, there were a couple of small funds, kkr literally managing hundreds of millions of dollars him about -- dollars. players of the largest were family. and as the industry grew up, the gene pools on one side wall street, on the other side families, came together to form what is now called the private equity industry. we came from that different gene pool that has affected how we behave as investors. emily: tpg did take some hits during the financial crisis. how has that changed the way you do things? jim: you always have to learn from your mistakes. what we learned last cycle was that the larger deals we did often thought to be safer in areas like utilities or casinos actually did not do as well as

the companies that were fundamentally growth companies. as we have come through the last decade and you look at what tpg has done, we have been focused on the midsize companies driving industry change. emily: you are fresh off your lp meeting. what are your investors asking you that they were not 15 years ago? jim: what we are seeing is that the venture capital market is active, but today more companies are staying private longer. so activities that used to happen in the public market are happening in the private market, and our investors are trying to understand how to participate in that and how to sort it out in their mind. emily: you have talked about this upcoming era of the private markets. is this good for the economy? jim: i think so. i am obviously an advocate for private markets, but i do think that over time the public market has evolved to be a little more

short-term, a little more indexed, and the private markets have grown up to where we can bring to our companies a toolkit of value added that is difficult for public market investors to bring. emily: softbank has about $100 billion to invest in tech. the cofounder of paypal said it is like the asteroid in the room. how dramatically is softbank changing the investment landscape, the competitive landscape? jim: i have seen a lot of astroid scares over my career, so i am trying to take a balanced view of it. so what we have in softbank is a large fish in a very large pond, so the question is how is that large fish going to change life in that very large pond? i do think their appearance as a market leader will shift some of the tech investing landscape, but i also think it will shift more tech dollars into the private market over time and may actually expand the opportunities set as well as affecting the price dynamics.

emily: what you think about the position uber is an today? -- is in today? what do you think uber is worth with dara khosrowshahi as ceo? jim: i am very excited to have dara in the seat. i think the market will tell us what the values are over time. if uber continues the growth that it has exhibited so far and continues to broaden what it does, uber eats is a fascinating idea, doing really well, i think there is an exciting path ahead for uber, but it has a lot to clean up. i won't comment on the values today, but if it has the success that we believe it can under

dara, it may surprise us all. emily: would you think the potential is for uber eats? jim: local delivery starting with food, packages, etc., is a truly interesting issue. you see amazon struggling with it. you see retailers struggling with it. once you get a network effect, what can you deliver? the delivery of people is the most difficult thing. started.ow uber maybe there is more we can deliver in more markets around the world. emily: what do you think travis kalanick's role should be at the company? jim: i think the board will decide that. emily: so he is on the board. some people think he should not be on the board at all. jim: i think the board and travis will decide what his role is going forward. i suspect travis will remain a large shareholder of the company and hopefully a positive player in the company's evolution. emily: has your position on travis's role changed? because tpg did not sign that original letter asking for him to resign. curious how your own position as

a main investor has a fault. -- has evolved? jim: we have a huge amount of respect for what was accomplished of the company and what was accomplished for ridesharing generally. companies have to evolve, so we have then in favor of evolution positive ways. i don't think that is necessarily a focus on any individual, but we are are pleased to see the company moving forward on a number of fronts in the way that they must. emily: what is the lesson tpg has learned from the way uber story has unfolded? jim: uber works in reverse dog years. if i take away one message it is that governance and culture really matter. we knew that, but sometimes in the flurry of growth out here in silicon valley we need to keep focus on governance and culture. emily: how so?

jim: i think it is making sure that has we build revenues, we also build the cultural aspects that make companies what they are, and that governance models evolve as a company moves through its life history. uber moves through life history so quickly that at times the models have grinded to keep up. i think there is a general lesson to make sure those models around governance and culture bear the same discussion in companies as the business models, which often drive them. emily: so david bonderman the cofounder of tpg was on the board of uber and made an off-color remark about women and he resigned. is that kind of remark acceptable, that kind of attitude? jim: david's remark was unexplainable and inexcusable,

so clearly inappropriate. david immediately apologize broadly and deeply and immediately stepped off the board so that was not part of the discussion. there is no excuse for what was done. david's actions prove that we in fact understand that. there is obviously a broader discussion going on on these issues and i think it is not really just about uber. it is about a journey that businesses everywhere have to move more quickly on. emily: does it concern you at all that it could change the level of influence tpg has added -- had at uber? jim: no, uber is moving towards regular governance and we are just one seat in the board room, but i do think that we live in the world of large-scale, international companies, and it has been a boardroom that has not had as many voices with that background. and as the board expands and we

bring in new members, it will be a very positive thing for the company. emily: as you alluded to sexism is a huge problem in tech, in investing, in business. what is tpg doing to improve its own culture in this regard? jim: to be clear, it is the right thing to do, but it is also the smart thing to do. i have no doubt that more than 50% of the world's iq and 50% of the wisdom lies with the female gender, so we need that wisdom at this time in business and in the world. we have to be more inclusive. when our co-ceo join tpg, he brought a lot of efforts that have been launched decades ago a goldman to begin to grow their commitment to diversity, and we have been traveling that path with vigor and with focus for years at tpg. if anything, we have two accelerate it. emily: how so?

jim: to understand unconscious bias where it exists and really encourage diversity of all sorts to enter our organization everywhere. from the boards that we appoint to the entry-level recruiting we do. for example, last year, of the partners we made, over 30% were women. that for our industry is a high number, but i am embarrassed it is a high number for our industry, and we have a long, concerted effort ahead of us. ♪ emily: what is the single most important thing this administration needs to address? ♪

♪ emily: tpg and others have been a lot more vocal about policy, especially during the trump administration. are there other issues you think you will speak up about? jim: we spoke up on the bathroom bill in texas. we spoke up on a number of issues. for most of my career in private

equity, we did everything we could to keep our head down. i think there is a general shift in business, and it is about doing the right thing. you can't stand on the sidelines the way you used to. emily: what is the single most important thing this administration needs to address? jim: the division in the country. at the end of the day we have a system built on compromising governing, and not divisiveness in politics. governing ae and not divisiveness in politics. we need a government that governs. emily: is the divisiveness, these political issues, the volatility, market uncertainty, is that having an impact on your investment decisions? jim: yes, but if you think in a macro sense, one of the things that concerns me the most is how little people are concerned with the market flirting with new highs every day or breaking them. what you see in the business pages and the front pages aren't aligning as they have most of my

career, so how that uncertainty plays through our investments is something we are discussing deeply and trying to express in the portfolio. our favorite way to express it is trying not to invest in the macro. we are trying to invest in situations, companies and industries, that are interesting and changing. that is where our focus is. emily: so what are you most concerned about? jim: i am most concerned about what i can't predict, and that is geopolitical events. what today would be the subprime of the future. we don't know. so that combined with the geopolitical events means life is more complicated than the low volatility in the market indicates. emily: when it comes to tax reform, what are you most concerned about as it pertains to dealmaking? jim: generally i am not

optimistic that we will have tax reform. we may have tax cuts, tax changes, but tax reform is one of the most difficult things that governments do. my job is to take the cards as they are dealt and play them well. unfortunately we cannot affect tax reform, but we are anxious to see what will happen here and from there we will play our cards well. emily: what sorts of moves could materially impact tpg's behavior as an investor? jim: i think most notably for us would be changes in interest deductibility. a portion of what we do, the use of leverage is important, and there has been various potential moves on the deductibility of interest in that i think would change the relative attractiveness of certain types of capital structures. emily: carried interest has been an issue for more than a decade. will the change, first of all, and if it does, will that materially impact your behavior? jim: i have no idea if it will change.

i think it will arguably affect behavior broadly. i think one of the interesting things about carried interest is that it tends to be discussed as if it were particular to the private equity industry. it is real estate. it is to ensure capital. capital.e it is entrepreneurship. it is small family businesses. it is something that has been in the tax code for 100 years, so if they decide to take it, they will change it, but it will affect the economy more broadly than the discussion typically captures. emily: tpg has long been active in asia. what is the most significant investment trend that you are seeing there, whether it is in china or elsewhere? jim: my favorite trend in asia is health care. people want to spend more on their health and well-being come yet the existing systems are not set up for either the economy or change in health care delivery. to give you a sense, we own one of the largest maternity hospitals in china.

we are building cancer centers across hong kong and southeast asia. we are doing surgery centers across india, so this concept of catching the demographic wave, but also catching what is a global change in the delivery of health care, is a truly interesting investment area. emily: you were in saudi arabia recently. what to do think those opportunities are? jim: you have an economy built on hydrocarbons which is pivoting to an economy involved in the global markets technology. that is a massive, bold move. i think it will create investment opportunities in several ways. emily: any plans to open an office there? jim: i don't think they need us to open an office there to help in the economy. it's funny, i spoke with a number of local investors while i was there. the point i made to them is they don't need chevron. they need aramco.

emily: any plans to partner with the saudi public investment fund? jim: i would be happy to partner with them. we are happy to partner with a lot of the sovereign wealth funds. as they transfer capital, i expect we will be active with them. ♪ emily: do you think tpg will still go public someday, and if so, when? ♪

♪ emily: uber and airbnb are often compared as two of the most highly valued unicorns. you are an investor in both. uber or airbnb, how do you see the trajectory of these two companies playing out and comparing them. jim: hard to know. which of your children do you love best? each has an opportunity. we tried to choose specific companies that have places in their industry which are special, and i think that is

true of uber, airbnb, spotify, and vice. what interests me as an analog to uber eats is that they are now beginning to focus on experiences at airbnb. if you think about traveling to a hotel, you don't just want the room. you want the concierge and its exposure around the city. i have been a big advocate of a general shift in the economy from things to experiences, and i am really interested in how uber is building uber eats, but airbnb is building its connection to experiences. emily: uber surrendered in china. airbnb is pushing forward in china. they are not the market leader there. could you foresee a partnership with the local rival? jim: i would not use the word surrender in china for uber. it is that partnerships and alliances are smart.

i think as anyone tries to expand at rates that these companies are, finding partnerships and alliances is smart business. emily: you guys are putting more money to work in content and entertainment than almost anyone when it comes to vice or caa. what is giving you the confidence? jim: over-the-top the top and delivery of content when you wanted is fundamentally changing elements of the consumer industries out there. and we don't even know quite where it will end. "game of thrones" would have been almost unimaginable a few years ago, and now we have a move from that content to short form. so the idea of content and content shifting is to me one of the most interesting things happening. emily: are you at all worried that too much money is getting put into content? are we in a tv bubble? jim: we are certainly increasing the number of scripted shows in

tv very rapidly, and the pendulum will swing back and forth. so for me, i am fascinated about the concept of enjoy watching. binge concept of watching. watching.hing is just binge watching is how people will watch in the future. you will see it becoming some of the dominant dollars in content. emily: you are also an investor in spotify. what makes you think spotify can take on apple in the long run? jim: taking on apple is daunting, but spotify has shown rapid growth and effective positioning doing that. one of the things about spotify is that it is positioned as a data company, so its ability to

evolve to meet the customer need. so i think it will be one of the winners. i think we tend to believe there will be one winner in a lot of these industries, but generally spotify will clearly be one of the winners in the music business going forward, and maybe adjacent to music. emily: you brought in an outsider as co-ceo, you are a founder yourself. that is a tricky position. how have you split up responsibilities? jim: in the old days, you simply had to invest well. now we have to invest to higher standards, but we have to manage ourselves well. those skills of investing in managing are sometimes not present in one person and certainly take a broad set of efforts and personalities. my background is a little bit more as an investor, although i have been a manager for long time. john's was more as a manager, although he had been an investor running a goldman sachs division

reporting to him. so it was bringing the best those two together. emily: you guys will start raising a new fund next year. we heard the cap is as high as $13 billion. can you share anything about your plans? jim: our goal is to have enough capital, but not too much. emily: tpg has remained private while your competitors are publicly traded, whether it is blackstone, kkr, or carlyle. do you think tpg will still go public, and if so, when? jim: it is still unclear to me. we have no real desire to go public. emily: but there were plans to go public, and those plans were shelved. jim: they were shelved, and the reason was because we said we will only do it if we think we need to do it. and what has become clear to me is that those who have gone public are maybe not as pleased

with being public has they might have anticipated. there is now capital available in the private markets for companies like tpg also. why go public if you don't have to and don't particularly want to? emily: jim coulter, cofounder and ceo of tpg, it has been great to have you. thank you. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ nejra: the benefits of dodd-frank deregulation. we break down the details of the senate hearing. a new world for investment research. most say they will absorb costs, but does that mean they could get priced out? and we get an insight on how stephen meyer is feeling about the landmark legislation ahead of next month's launch. ♪ nejra: welcome to "bloomberg markets: rules & returns."