>> for five years now, the massachusetts institute of technology has been led by its president, rafael reif, a scientist with 13 patents. washington politicians underestimate how close america is to losing its global edge in science and technology. president reif: in some areas, we've lost it. >> we sat down with emojis president and discussed the rising cost of education. president reif: we are experimenting with different models to lower the cost of education to make it far more affordable. >> the impact of the new gop tax plan on m.i.t.'s $15 billion

endowment. of particular concern is how trump's travel ban and the crackdown on h-1b visas for skilled workers will curtail the flow of talent. it is going to hurt, and what hurts him i.t. hurts the country. >> for this venezuelan born educator who came to the u.s. as a graduate student in 1974, it's personal. president reif: i was lucky enough to find the path that led me to education. >> coming up, a conversation with m.i.t. president rafael reif. i want to talk about trump's travel ban. he has restricted people from eight nations. if this band was in place when you were trying to come here, would it have been difficult for you to get here? president reif: probably. partly it would have been

difficult, but also it is the mental state. i wanted to come to america because i wanted to be among the felt --t, but i also the attitude today, the way we put tray ourselves -- portray ourselves to the rest of the welcoming.ss perhaps unfriendly. tom cole in this year alone, m.i.t. has filed seven amicus briefs against the travel ban -- alone.is year your name is on those documents. is this personal for your? president reif: yes. i was lucky enough to find a path that led minute education, and i was fortunate enough to be able to come to america and the able to be in an institution

that allowed me all of this. there are so many people out there that want to make a difference and want just to do the best they can for the world. i just want this place to continue to be that magnet for talent and just be a beacon for the world. tom: speaking of that talent, h-1b thesis, important to him i.t.. these are skilled workers with a bachelors degree or better. there's a crackdown now from the trump administration. people are already being rejected. you probably know this better than i do. 40% of your graduate students or faculty are from somewhere else. what does this problem due to a place like m.i.t.? going to reif: it is hurt, and when it hurts m.i.t., it hurts the country. immigrants from places like m.i.t. and elsewhere help the american economy.

that has to be understood. of course, the whole nation will hurt with this perception that we are not as welcoming as we used to be. the world is competitive, and there are opportunities elsewhere. at the time i came, the option was unquestionably, if you want to be in a land of opportunity where they welcome talent from all over the world, the place is america. there was no question about it, m.i.t. or stanford. perception is something has changed. yes, i have heard also the anecdotes -- tom: anecdotes of people that may have come to m.i.t.? president reif: that may have come to m.i.t. in other times and also anecdotes of having significant difficulty getting here. we are recruiting to start september 1 and visas got so

delayed. they are anecdotes. i cannot quantify them. tom: talk to me about how this changes the american technology workforce. president reif: it is serious stuff. we are very proud of our nobel laureates. our american nobel laureates, look where they were born. just pay attention to that. tom: everywhere, right? president reif: everywhere. but we benefit from the fact that they are here and america nobeldited for these laureates, but they came from somewhere else to make a life here. look at many of the technology leaders in the new companies, the startups. those leading these enterprises, many of them were not born in america. we are fortunate to benefit from

the supply of talent because of the welcoming culture of america. you stop that supply of talent and it will have huge applications for the future. particularly right now. it is a very competitive world. we are competing with china for all sorts of things, including the economy. five times the population of america. we need the best towel and we can get to be able to compete economically and in technology and science, talent from all over the world that wants to come from america should be our asset. tom: can you name specific companies that would be hard hit? it? -- hardest president reif: the issue we have today is we need talent in all the new economy, all areas of the new economy. when we think of the new economy, we quickly think of companies like alphabet, google,

facebook, and the like, and indeed, they are thriving in the new economy, but every single , all those companies, not just digital companies -- all companies need digital know-how. we are not producing enough of those here. oneident reif: -- tom: rationale for all this, as you know, is that this gives american workers a better chance at these better jobs. without the crackdown, would american workers be displaced? is that a problem? president reif: there is clearly a problem with displacement of workers in the new economy. there is no question about that, but that is the function of the new economy. it is not a function of the fact that we have immigration right now.

tom: if you cut those skilled workers off from coming in, don't you solve the problem? president reif: we would have a problem anyway because the problem is about free training the workforce of today to understand and work in the new economy -- the problem is about re-training the workforce of today. we will not be able to compete , particularly with as worthy and opponent -- as worthy a competitor's china -- as worthy a competitor as china, if we do not have the talent. i think, unfortunately, we just will have to do $10 million less, so what will we have to cut? tom: and the university pricing new real estate. ♪

tom: welcome back to our conversation with m.i.t. president rafael reif. m.i.t.'s is the sixth largest university endowment in the u.s., and according to bloomberg data, it is the best performing over the last 10 years. i asked why it has been so successful. have you had a lot to do with it? i have president reif: something to do with choosing the talent that is around me, but it is all about people.

a 1.4%e tax plan puts excise tax on the endowment investment returns. we figure -- and this is only an estimate -- this might be up to $12 million a year for a place like m.i.t.. how big a hit is this for you? president reif: it is a big hit. basically, it is giving us a budget cut. tom: what does it mean -- tuition and fees go up? no, we try to: keep that as under control as possible, but it means less money for all the things we're expected to do. less money for financial aid, less money to support grad students, less money for less money for innovation education. it is a very surprising move that is going to hurt. tom: how does it change your strategy? will you have to set aside more

cash to pay this tax? president reif: we have to figure this out. unfortunately, i think we just will have to do $10 million less, so what do we want to cut? tom: where do you think the biggest area will be hurt? you mentioned financial aid. president reif: i don't want to just wanted toi mention the pressure. that's where the money goes. we just want to make this place accessible to everybody who belongs here. that will hurt in producing that kind of support, but i have not made any decisions, and i have to see all the options. we just have to figure this out, but there's no question that it is just going to hurt. tax,some have called this other measures they were planning that did not get into war one called this a higher education. do you think that is true?

president reif: i think there is a serious lack of understanding among some people about the importance of higher education. i think the narrative about the tax reform bill is to help the economy to help corporations have more money and hire more people and create more innovation and so forth, and that narrative makes perfect itse, but in that narrative, hurts these institutions that in theignificant force nation that produce graduates .hat will start companies that is what institutions like m.i.t. can do. to help corporations bring more jobs makes perfect sense, but to hurt institutions that create innovation, create startups and prepare people for those jobs, i just don't understand that, so i a very big is

misunderstanding of the role of higher education in the american economy. tom: how do you change that? president reif: we have to talk to the people who do not know about that, just have to spend time with them. our house representatives are elected by voters in their district, and they have to respond to what the voters in the district want and need. that is part of the way things i do not know -- it is hard to believe that in some , people would not have that higheron education leads to science, which leads to innovation. that is a big picture thing, but somebody has to worry about the nation as a whole. places like m.i.t. and others

are a fundamental part of that big picture. clearly our is responsibility to talk to them, to explain to them how important we are to the nation. tom: brokers have told us about kendall square. they say it might be the priciest real estate on the east coast per square foot. earlier this year, you bought a 14-acre parcel there for $750 million to do all kinds of things with it. mixed use, they call it. that money came from the endowment. is that an unconventional use of the money? president reif: this is an investment for the endowment, clearly, and i believe the investment will produce returns, believehe same time, i conventionally in the system. we need the ecosystem of the area to keep bringing the right , to give graduates

places to go to start their businesses and hire people and so forth. we have to provide that type of tunityment, and the to get that space so close to us comes one time in history, so it would not want to be missed. of course we wanted to have mixed-use. we want people not just to come and work here but to come and play and live here. to outsourcechose its real estate endowment to bain. any chance of m.i.t. doing the same? president reif: if anything, we are blessed by having some of the most talented people in the area. we do not plan to outsource that. we plan to do the best we can to keep what we have. tom: up next and our conversation with him i.t. president rafael reif, the rising cost of higher education

-- up next in our conversation with him i.t. president rafael reif. we basicallyf: subsidize the education of every single student that comes to m.i.t.. tom: and how china is threatening american innovation. how close are we to losing our edge, our privacy to china? president reif: in some areas, we have lost it. tom: that is coming up. ♪

tom: let's talk for a minute about the cost of education, higher ed. at m.i.t., i figure it's about $60,000 a year. i do know there is generous financial aid here, but even at $30,000,t, higher ed, $40,000 a year, that is a heavy lift for families, and it seems to be going up. where does this price escalation end? how do we end this creep up? president reif: let's talk about the cost to educate a student here. you use the word "cost," but tuition is what we charge. that is the cost to a student that can afford to pay.

9% thatonly for that pays it. 91% do not pay full tuition, but in theue is it costs us neighborhood of close to $100,000 a year to educate a student, so we basically subsidize the education of every single student that comes to m.i.t., even those that pay full tuition. you may wonder how can that be. well, the best education in the world is the one you get if you have a tutor personal to you in youworld teaching everything. that is unaffordable. the next best level of education is to come to a place like this room of you are in a students with a professor who lectures you and you leave here work and studynd

with other students, and you learn with them as well. at m.i.t., the costs 90 grand -- that costs 90 grand a year. we don't charge that because nobody would pay that. when you go to buy a car, there are all those people who sell cars. they sell the premium version, the expensive one, and they sell a less expensive one. we have to find a way to produce an education that is less that ite but recognize may not be as good as the one you would get here. we have to look at that portfolio and provide a high-quality education that is much less expensive but is good enough for you to compete in the market. told "boston" magazine in the fall the key issue for

trump and his administration ought to be china, and it does not look like it is. is the rise of china the reason you are so concerned about these visa crackdowns and the travel ban? does that connect? president reif: it is all connected. china has done amazing things and will continue to do so. china's population is close to 1.5 billion. we are a little over 300 million. in population, they are five times america's population. from that standpoint, our competition will be very strong with people who are very smart. we know that because we have them here. my concern is we need to recognize we have a very worthy competitor. tom: you don't think we recognize that? president reif: it does not sound to me like we do. i think now perhaps people are beginning to pay attention.

i think the corporations, people fighting every day for market share, they know that. it's not clear to me that enough people in washington know or .ecognize that that is the issue that i want -- and the only way you compete for the economy, to maintain the position we have right now is with talent and with research funding. that is the foundation of our future. the innovation comes from investments we're making right now. today's innovation came from investments made 20 years ago. if we do not pay attention to that -- and i think it is also forso much the funding research in isolation as much as the funding for research vis-a-vis what china is doing. funding in america is more or going down, but

funding for research in china is on a straight slope going up. are we to losing our edge, our primacy if you will, to china? president reif: in some areas we have lost. tom: what areas? president reif: china is investing heavily in artificial .ntelligence, in supercomputers i think in some areas we have already lost it. tom: is that a loss we can overcome? president reif: of course. but what do we need to overcome? talent and believing that the research and investments we produce benefit america's economy. tom: that brings us back to a guy who came here from venezuela in 1974. president reif: a very lucky guy. you are five years in. are we halfway through the reif

regime at m.i.t.? probably.reif: i think a typical successful run on jobs like this is eight to 10 years, so i would say we are halfway there. this interview, we have talked a lot about getting a message to washington about of our shortfalls in technology and so forth, the .alent what is it when you look back even on the five years that you would want people to know what you did about that, about spreading that message? president reif: what i think is important is the decision -- i do that with the decisions that make here at m.i.t. i think it is important for decision-makers and policymakers to make decisions based on knowing all the information there is to know before you make a decision.

i would like policymakers in washington to be aware of all makenformation before they a decision. all i am trying to do is to make sure they know that, they pay attention to things that perhaps they are not aware of and do their homework before making decisions. i am not going to criticize the tax reform bill as a whole. i have not studied the whole thing, but i can say that hurting the american institutions that are the best in the world and that support the economy of the nation the way they did -- it suggests to me -- i do not think they want to punish. i do not think they want to be at war. it sounds to me they just do not understand. it sounds to me like in five years i have not succeeded at that, so i have to keep working at it. tom: if we could have president trump pull up a chair with us, i

would stop talking, what would you say about all this? president reif: i would like him to understand that there are many issues he has to deal with, but there are two important issues for the nation, and one is maintaining the importance of education for our country because the new economy is going to need more and more educated people, that in order to compete globally, we need the best talent in the world from america and the rest of the world, which means we have to have an open immigration policy so that the best talent can come to america, the 19th century was the century of the u.k., the 20th century was the century of the u.s., the 21st century is the century of china, and we just need to recognize things are changing. in order to maintain our position, we have to fine-tune our competitiveness. you do not strike me

as someone who panics, but you are worried, aren't you? president reif: a few years ago, i spoke to the ceo of intel, and he said only the paranoid survive. i would not say i'm paranoid, but when i see trends that are so of the is, things going like this in america and going like , research, gdp, r&d, those are trends. you do not have to be in m.i.t. graduate to see that. i just want people to see that, particularly those who make such important decisions for our country. ♪

>> coming up on "bloomberg best ," the stories that shaped the week in business around the world. a new year brings a new assessment of global risks from eurasia group. distinguished guests delve into the details. >> the number one risk ceo's see out there is geopolitical. >> this transition from the u.s. is going to china. china is creating an alternative. >> the unpredictable and the leaders, the lack of a north star with the united states stepping back in so many ways. shery: mifid ii rules take effect, and the u.s. releases the old