♪ tom: for five years now, the massachusetts institute of technology has been led by its president, rafael reif, a scientist with 13 patents. he fears washington politicians , president trump included underestimate how close america , is to losing its global edge in science and technology. president reif: in some areas, we've lost it. tom: we sat down with m.i.t.'s 17th 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. tom: the impact of the new gop tax plan on m.i.t.'s $15 billion endowment. >> the government is giving us

cuts. tom: 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. president reif: it is going to hurt, and what hurts m.i.t. hurts the country. tom: 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. tom: coming up, a conversation with m.i.t. president rafael reif. ♪ tom: i want to talk about trump's travel ban. he has restricted people from eight nations. some from venezuela. 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 very best and figure out how good could i be among the very best but i also felt -- the attitude today, the way we portray ourselves to the rest of the world is less welcoming. perhaps unfriendly. tom: this year alone, m.i.t. has filed seven amicus briefs against the travel ban. your name is on those documents. is this a personal thing for you? president reif: yes. education was important for me, my parents did not have any. i was lucky enough to find a path that led minute education, -- that led to my 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 these opportunities. 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. so 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 visas, important to m.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 do to a place like m.i.t.? president reif: it is going to hurt, and when it hurts m.i.t., it hurts the country. what happens thanks to this, 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. when 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. america was the place. right now, the 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. some people we are recruiting to start september 1 and visas got so delayed. also, they are anecdotes. i cannot quantify them.

this is something that was not there before. 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 is credited for these nobel 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. you stop that supply of talent, 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 implications 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. china is five times the population of america. we need the best talent we can get to be able to compete economically and in technology and science, talent from all over the world that wants to come to america should be our asset. tom: can you name specific companies that would be hardest hit? maybe the larger ones that would really suffer? 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 company, all those companies, not just digital companies -- all companies need digital know-how. we are not producing enough of those here. we need people from all over. tom: one 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. that is a 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 re-training the workforce of today to understand and work in the new economy. that is a problem, even if we have integration of town. those two issues. we will not be able to compete globally, particularly with as worthy a competitor as china, if we do not have the talent. tom: still to come, on the $15 billion endowment. president reif: 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. president reif: the opportunity to get that space so close to us comes one time in history. not one to be missed.

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♪ tom: welcome back to our conversation with m.i.t. president rafael reif. at $15 billion, 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? president reif: i have something to do with choosing the talent that is around me. but it is all about people.

all about talent. tom: the tax plan puts a 1.4% 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 the government is giving us a budget cut. tom: what does it mean -- tuition and fees go up? president reif: 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 research, less money for innovation education. it is a very surprising move that is going to hurt. tom: how does it change your strategy? for instance 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 hurt that, but i just wanted to mention the pressure. that's where the money goes. we just want to make this place accessible to everybody who belongs here. that can fit 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. tom: some have called this tax, other measures they were planning that did not get into the package have called this a , war on 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 sense, but in that narrative, it hurts these institutions that are a significant force in the economy of the nation that produce graduates that will start companies. graduates have started more than 33,000 company -- 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 think there is a very big 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. there is an important issue here. 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 are, and i do not know -- it is hard to believe that in some districts, people would not have the connection that higher 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. tom: the big picture. president reif: the big picture. places like m.i.t. and others are a fundamental part of that big picture.

not seeing back, i believe it is clearly our 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, but at the same time, i believe conventionally in the system. we need the ecosystem of the area to keep bringing the right companies, do have room for the startups, to give graduates places to go to start their businesses and hire people and

so forth. we have to provide that type of environment, and the opportunity to get that space so close to us comes one time in history, so it was not one 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. tom: harvard chose to outsource its real estate endowment to bain. any chance of m.i.t. doing the same? president reif: we have a terrific team doing a terrific job. if anything, we are blessed by having some of the most talented people in the area. tom: i figured i might get that answer. president reif: 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 -- in our conversation with him -- with m.i.t. president rafael reif, the rising cost of higher education.

president reif: we basically 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? -- our primacy to china? president reif: in some areas, we have lost it. tom: that is coming up. ♪

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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. you are quick to point out 9% pay the full amount. i do know there is generous financial aid here, but even at a discount, higher ed, $30,000, $40,000 a year, that is a heavy lift for families, and it seems to be going up. my question is this, where does this price escalation end? how do we end this creep up? president reif: complicated. let's talk about the cost to educate a student here. you use the word "cost," but tuition is what we charge. tuition and0 for another $10,000 for room and board. that is the cost to a student that can afford to pay. that is only for that 9% that

pays it. 91% do not pay full tuition, but the issue is it costs us in the 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 the world teaching you everything. that is unaffordable. the next best level of education is to come to a place like this in which you are in a room of students with a professor who lectures you and you leave here so you can go and work and study with other students, and you learn with them as well.

that is second-best. that is expensive. that would cost $90,000 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 expensive but recognize that it may not be as good as the one you would get here. which may not be as good as if you could afford a tutor for every class. 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. tom: you 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. first of all, is the rise of

china the reason you are so concerned about these visa crackdowns and the travel ban? is -- 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, the 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 recognize 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 not so much the funding for research in isolation as much as the funding for research vis-a-vis what china is doing. while the funding for research funding in america is more or less wavering or going down, but funding for research in china is on a straight slope going up.

in a couple of years, they will spend more money than we do. tom: how close 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 intelligence, in supercomputers. in manufacturing, they are probably king of the hill. 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. tom: you are five years in. your friend is stepping down next year. are we halfway through the reif regime at m.i.t.?

president reif: probably. i think a typical successful run on jobs like this is eight to 10 years, so i would say we are halfway there. tom: even in this interview, we have talked a lot about getting a message to washington about the urgency of our shortfalls in technology and so forth, the talent. 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 makers -- i do that with the decisions that i 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

the information before they make 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. in my view 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, and that the future of 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. that we, in order to maintain our position, we have to fine-tune our competitiveness. tom: 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 obvious, things going like this in america and going like this in china, research, gdp, r&d, those are trends. those are trends. extrapolate more and you the -- you see things crossing. 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. ♪

♪ jonathan: from new york city for our viewers worldwide, i'm jonathan ferro. with 30 minutes dedicated to fixed income, this is "bloomberg real yield." ♪ jonathan: coming up, u.s. payrolls disappoint, wage growth stalls, and unemployment sticks at 4.1%. analysts say one week of an expected jobs report is unlikely to derail the federal reserve. growth rich inflation poor. the economic data in europe looks hot, but inflation cools. we begin with a big issue -- the payrolls report. >> it isn't bad. i wouldn't overreact to this report. >> growth in the jobs market is solid. >> disappointing in many ways.