>> welcome to "bloomberg businessweek." >> i'm jesse kelly. on ais week building franchise "bloomberg businessweek" magazine and its global nba program. we went to top of the schools. have class outside over at columbia business school. we heard from the faculty program.he >> so much fun out there on college.

profiletalked with high alumni that continue to shape the business community including .organ stanley chairman ceo [indiscernible] >> we'll hear from james gorman at other chats we had up columbia business school and many of those topics, they are week.d this >> that included a top story war.week, u.s.-china trade however, economics editor warns of unintended consequences. u.s.'s almost as if the and china same to be intent on twoding the world into separate spheres just like really globalization in reverse. use a much more recent analogy, it's like the period ii and the cold war when there was soviet

blocked comic-con and western doingies really not commerce with each other. that was not good for prosperity anyone. conversationst with the columbia business school this week. talked about u.s.-china trade. there's too much to be lost on both sides. if the united states and china don't work together. >> that is right. involved, yougos get other things aside from the economy involved like national security considerations, then up inakes sense sitting columbia and thinking about the economics of it, don't play that the real world. what we're seeing is there's logic by which the trade war instead of cooling off

is heating up. it gets -- amplifies. on for a while longer. on for a while longer in terms of the war, sort we're talkingat about. generationsg-term, consequences for the economy. >> tri-america integration of economies. the problem is, trust once it's restore.'s hard to as i said, there's no just moment. huawei, we have two tech companies both in telecommunication which is restricted on purchases of chips, critical components from

the u.s. is xi jinping is going to say a problem. we have to redouble our efforts chain.lop our supply jason said that, has long-term consequences. long timeins take a to create. there's lot to it. vendors, trust of having them make the products according to your specifications. we're seeing that change happening where the u.s. talked to some of them, are finding way to put production to vietnam, thailand, places in are doing it out of necessity, not preference. >> we talked china trade with the new dean of columbia school. >> after teach ing at the school. about how the trade war is impacting students

crossing boarders and cost of degree. >> we always trying to take cost out of the equation. providing goodn financial aid to our students to essentially facilitate that investment on their part. are focused on the value the degree. because business is undergoing change now, it's a great opportunity for us to innovate in the value that we students.ur i actually believe that the mba now it's a fantastic investment. time and return simply because you need new in practice.ceed that's what we're striving to do here. degree isat the pretty robust. change we'ree junior going it's more valuable

now. john: those business leaders gorman will be with us. when he and his friends and fellow alum are visiting with you, what are you they asking for that maybe different from what you are teaching and turning students you're out? >> i think when you talk to you realizeders, that their encountering two things. acknowledging data analytics is the business is transacted. they understand that the nature jobs, the types of jobs graduates will do it's time.ng all the they want to see in what way we will best prepare students in order to participate in the digital future. they ask what we doing in the curriculum and the learning, how do we bring mba students

together with engineering to learn how to collaborate. that's what they will do when to work.ut carol:i'm curious how much you about the u.s.-china and trade. what that done to students who come to columbia school to get a business degree. curious if you seeing pushback or a decline in wantnts from overseas that to apply? >> for now, at columbia, we have haven't experienced that. all?: no change at >> almost no change. 40%ontinue to have international students. about 60% just graduated that to stay in the u.s. and found jobs in the u.s. and of the 40% that left, lot of them wanted to go back in different areas of the world. said that, our service dependshere in the u.s.

on high skill human capital. this is a problem we need to business just for education but for essentially training any type of neighbor that we would like to retain in the country. hopefully we'll get to have the a solution. move to john: coming up more on president trump trade war how manufacturing and his reelection. carol: more from the columbia business school and exclusive gorman.w with james john: this is "bloomberg businessweek."

john: welcome back to "bloomberg businessweek" i'm gentleman son .elly massar.'m carol

online atcan find us business week.com. economics, recession already gripping corners of the united states. that could signal trouble for president trump come the year.on next carol: here's this week's explainer.ek >> china is often seen the mac story.hat stole joined the year china world trade organization, they as a loss.ed last year it posted $24 billion healthy profit. inmins makes 40% of engines china. they call it a gigantic tax on economy. the company expect to spend

$150 million on tariff this year. surge in manufacturing jobs the first two years of the has -- trumpidency presidency has gone in reverse. of22 states the number people working in factories contracted in the first seven years. pennsylvania lost 8000 factory jobs. will voterstion, war? the trade carol: for more how u.s. are backed by the trade war with china. john: how it might impact president trump reelection bid -- >> it's hard to tell. way out from long this election. thatworth remembering canada just launching election campaign. days.ill take 41 ours is longer. there's a lot that can happen in the economy in between. talk to manufacturings, they see things getting worse

not better. is bad industrial states pennsylvania,, ohio, michigan, indiana. all of which are pretty for donald trump in 2016. we're already seeing the manufacturing jobs growth that this administration was able to in the first two years slow down in places like pennsylvania, it's gone into reverse. pennsylvania lost 8000 firstcturing jobs in the seven months of this year. things again are not going to better. that should bode badly for the politically. as we know, donald trump seems to have an ability to ride out things. carol: this is where the story gets political. a your story, there has been manufacturing job gains since donald trump took office as president. politically, those important states and there are

lot of them that he did well around, their manufacturing job gains are down.g >> absolutely. sometimes direction matters more gains.e long-term president obama second term, the u.s. created lot of jobs between the trough in 2010 and end of his administration, the obama administration saw something more manufacture be year.n the in meant lot of people in the swing states and that industrial weren't feeling as good about where they were or yearsthey were going in before. carol: one quick last question. jobs, theing manufacturing sector as important to the republicans as it is to the democrats or that's different? >> that's an interesting thing. we often associate or historically associated

manufacturing sector manufacturing workers that blue americanon of the economy with the democrats and labor unions. actually, if you look at the to battleground states, counties that went for donald trump tend to be more heavily manufacturing than counties that voted for hillary clinton. thatu get the downturn, could hurt donald trump more than a democratic challenger. who's trulyr feeling the brunt of the trade war -- back to columbia business school. we spoke there with a professor. international in development and economics. >> it's kind of a sequence of events that happens. tariffs saw a tax on imports. consumers start to see rise in parts on imported goods. towardsuld switch domestic goods. that means there's going to be a

consumersrom u.s. potentially higher prices to u.s. producers benefiting from prices. then the government collects the tariffs revenue. is to calculate what are the transfers that are going on. things werprising found in the research, when you chartedthe data, you the time path what happens to goods that are targeted with as they come in the u.s. it's an important number for an understand what happens to the price. the presidentfrom for instance, said that the theese will be paying for tariffs. in principle that, is possible. the wait that could work, if the u.s. imposes a tariffs, chinese price soay lower per that the post-tariff price will change for the u.s. consumer. possible. that would be a condition under

which the chinese eating the tariffs. when we look at the data, that's not what's going on. split can be anywhere between 0% and hundred 1%. consumers the economy is bearing the full incident of the tariffs. john: coming up more from our visit to columbia business school. chatting with faculty and our exclusive interviews with the lulu wong. morganjames gorman from stanley ceo. this is "bloomberg businessweek."

john: welcome back to "bloomberg businessweek." carol: i'm carol massar. to us on then

inio in new york, 106.1 boston -- john: on long and through app.berg business we continue with special coverage from columbia business building on best b-school ranking. we went out to one of the schools that's always on the with faculty driving the program and high alumni that are shaping .he business community carol: lulu wang graduated from columbia business school. financial money management for decades. globale to her about the economy and ongoing unrest in hong kong. it's a very fraught situation. i hear from friends and sides.ues on both they are both equally grieved. out is the way it works

that i don't think beijing realize it's going to go this far. aey do not want to have tiananmen square. have to begin to calm the crowd. the beefortunately, that the demonstrators have is really more with the hong kong than with beijing. with carrie lamb and begin to negotiate on the that theer conditions protesters have set up, there's potential to work through some understanding. carol: is there a role for folks outside of hong kong and outside china? there's been some push among the protesters to involve the united states. that? your role on >> i do think there's a role in job, i'm also on the of ay asia group, trying to

u.s. and asia. we have been busy talking to issues.es about the --hink if we can find ways china cannot be humiliated. if there's a way they can stay with the one somery two systems, control over hong kong but not heavy-handedness. i think there will be solutions. john: business leaders and investors are talking increasingly of decoupling china you spent decades coupling u.s. and china, worry that that may become a reality? >> i think there are many people concerned this is going to one win one loses. i'm a believer it can be a win-win situation. have twoight now, we leader who are both under

pressure to resolve some the problems. he has, playing the long game. i think he believes that the china is future of very conditioned on china economic, political, butnecessarily military, geopolitical power. the question is does the economy crumble before he can achieve this? he has many levers that are not to america. he has been pulling levers. moving more liquidity into the system. of thinksng some companies both multinational and to doe to begin to try more investing in the economy. he's trying to bring more investment back in china. thel: i'm curious, are

expectations from u.s. folks that you're talking to, folks in be some kindwill of trade deal? or is the fear we keep hearing, china gogoing to see off with their plans and have its allies and the u.s. will go it on its plans and when comes to trade and developing expect?gy, what do you >> it will be difficult. connected.s too the supply chain and markets. we are interdependent. can truly exist separately. i do think that some of the isorms that the u.s. pressuring china to make are not bad for china. progresses in china have been there all language. they have been outnumbered by the hawks. i think with this current situation she's under pressure internally for having managed in way, it's going to provide some opportunity for the itgressives to say look, makes sense that we open our

markets. that we sense liberalize. let's do some of this. make it appear it's our own initiation. the west has to not to play the hand. tot's important for xi overcome. i think it can come out better. john: one of the biggest concerns for investors is this notion of negative yields, a world where pensions and other huge institutional investors are just not making the money they need. do you see a short-term change that? you're so involved in these big astitutions as customers and an advisor? of liquiditylot around. puzzle and frustrated that they've been short and the

market continues to want its way up. that money wants to find a place. world, they troubled u.s. and u.s. dollar seems to be relative safe haven. find some we can stabilization of the economic situation that money can go back work, the u.s. certainly have a capital cycle. we have not been investing in our capital equipment. get somef we can just predictability, stability, i think both china inthe u.s. and put money toes can economy.the carol: i want to ask you about your market outlook. people are talking about recession and they want lower rates. how do you see the economic outlook? >> i don't think we're headed to a recession. a slow down. in

when that happens, you get lot panic and certainly geopolitical situation is troublesome. volatility gives opportunity.at you get another 800.3 the next day. had some stocks i'm not tofortable with, good chance clean house. carol: coming up columbia ofiness school alumnus class 1997. john: we talk with morgan stanley chairman james gorman. this is "bloomberg businessweek."

carol: welcome back to "bloomberg businessweek." jason: this week, a special visit to columbia business school to hear from top faculty and high-profile alum. carol: a ranking of the top mba programs, we went to a school that is always on that list. >> the thesis here is that the nexus you get between the business schools and alumni networks, that's why people come to business school. you get a crash course in the greatest curriculum you can get but you also get the case study feeling that comes from real-world applications. for us, we look at the stories we do as case studies. making the world of business come to life via stories is what we do, which is not that the similar from a classroom setting. for us, this feels like the water we swim in and the air we breathe.

columbia embodies the spirit. we are witnessing it here with mr. gorman, this is a powerful place to play. carol: you dice and slice what goes on in a business school community, but you figure out the nuances that make each program distinct. one thing about columbia is you are in new york city. >> it is part of it. something we lean into in rankings is data. how do we make this data set be extraordinary? jason: new york city is a big piece of it. what is it about it? >> the tagline is "at the very center of business." you cannot imagine a better setting for a business school. when you have the real world applications. carol: now, to a high-profile alum of the school and a business leader in the financial community. jason: james gorman is the ceo of morgan stanley class of 87. james: i remember most the interest rate on my student loan, 24%. which i think is a world record. i thought i had died and gone to heaven because america welcomed me to come here, learn, grow, and it was unbelievable. i arrived in august in the classic sweltering heat. it was just so excited. this university is just extraordinary. i could not have been happier to be given that chance. and i am still here 30 plus years later.

carol: let's talk about the market, there are so many stories out there. and how do you view the global market right now? james: it is a conundrum. on one level, record low unemployment. the world is performing strongly. china is performing strongly.

europe is mixed it has been mixed for two decades now. on one level, the fundamentals are quite strong. at the other level, there is a sense of confidence and inevitability. statistically, there is a recession every seven years. but it does not have to be. in australia, they have not had a recession for 28 years. carol: why is there so much pressure on the federal reserve? >> because the economy is slowing. the job of the fed is to balance monetary policy with economic outlook and fiscal policy. they should feather rates. their job is to raise and slow down.

i have supported the latest rate cut and i suspect they will do one or two more and then it is time for a pause. the problem with cutting is that it is one of the few tools you have got. if you give it away to easily, what do you have if you have a real problem? jason: i want to go back to something you said. squaring some of the different elements. businesses that certainly see more cautious with a consumer that is not showing signs of caution at all. how do you square those things? what do you see that could help explain that dichotomy? >> we are in a bit of an echo chamber. if you are a business leader, we all talk to each other. so a little bit of it is that we must be at the end of the cycle.

we have had an inverted yield curve which is predictive of a recession. so there is hard evidence things are more likely to slow down than accelerate. so you would be prudent to be cautious. consumers are not yet experiencing that. i have got cheap debt, housing is recovering. consumer credit is in strong shape. the consumer balance sheet is still strong, and that is why is lagging behind the corporate

attitude. carol: are there implications from low rates? >> i mean, it's all about finding equilibrium between economic growth and the cost of money. there are only implications if it creates a bubble. cheap money eventually will create a bubble but we are a long way away. i see no bubbles. jason: how do you manage your business given all of those different inputs and outputs? where do you hire, where do you stay steady? where do you invest across the empire? >> empire. [laughter] never thought about it that way. we are just a simple business. firstly, we are very long the u.s.

90 plus percent u.s. and at least half of our securities businesses are here. this is an $18 trillion economy, the strongest and most important in the world. we have been aggressively building our asian business which is 14% or so of the company. with the trade talks, things have slowed across asia. but our job is to try and look past six months hiccups or slowdowns. certainly, my job is to think out five years. traders are thinking every five minutes, i'm trying to think five years. carol: can you do that in this environment? it does feel like we have been going back and forth. james: you have got to. we have been around for 85 years. we have been managing 2.6 trillion of people's money. they are not selling in and buying on the next, things actually move in small increments. it is things like the public markets or m&a transactions. but most of our core businesses are relatively immune to what is going on. you would not see the impact on our wealth management business.

jason: let's talk about the public markets. the public markets have been something to watch, to say the least. talking about cognitive dissonance between public and private market valuations. why is that happening? james: the public markets are record high. so where is the dissonance? jason: in the ipo markets. some of these mega-unicorn companies going public. james: there are rounds of fundraising and companies have tended to go public later. with that comes some risk, obviously. you have got investors who come in relatively late and we have seen that in some companies that look like they will go public lower than the last couple of rounds. that is unusual. we have not seen that for a long time. it is also a function of frothy money. jason: has that changed? is private money getting smarter? james: these people are not stupid. these are very savvy people. and listen, this is the corrective mechanism that occurs.

they see companies go public at lower than the valuation, that's a good corrective mechanism. that's ok. that pinpricks of the bubbles that are out there. carol: you can hear all of our interview with james gorman on our extra podcast. jason: it was wide-ranging. from how he lived as a student to things he is doing now. even creating a more diverse bank. carol: i thought that was really telling. jason: still ahead, more from our visit to columbia business

school. carol: we speak to a ceo on his time at the program and getting his start in online luxury. jason: and we step off columbia to a look at another university. the money manager who is in charge of yale's fortune. this is "bloomberg businessweek." ♪

jason: welcome back to "bloomberg businessweek." carol: join us every day on the radio starting at 2 p.m. wall street time. you can also catch up by listening to our podcast. jason: and find us online at businessweek.com and through our mobile app. back to our visit to columbia business school. it is always on the list of the top mba schools. one reason is the faculty. carol: here is an assistant professor of business. >> when people ask me about my degree in psychology and working in business school, my answer is that there are people are

working in unique situations. i'm not sure if you've noticed, there are group dynamics, what makes them happy, what makes them productive? so there are a lot of psychologists trying to understand the dynamics of organizations. jason: so give us a sense of an exercise you might give. >> we do a lot of cases and i think that's what students benefit the most from. we throw them in, give them a role, and tell them to assume their own preferences and negotiate. the biggest lesson they get his feedback from other students. like, wait, i lost so much money. i felt good about the negotiation, but now maybe i see i could have pushed harder. so it is the feedback they get but also seeing how well they performed. carol: we turn from columbia to yale. it is about a legend at the university and its highest-paid employee. he is the money manager who, for 34 years, has been in charge of the yale endowment. >> he has been the chief investment officer at yale since 1985, which is a long time. and if you think about 1985, yale was mostly invested in stocks and bonds.

to be diversified was to be diversified in stocks and bonds and he changed the world. you think of private equity, hedge funds, how institutional investors invest, that was, in some ways, because of him. you think about private equity money will be tied up for years, in some cases decades. and if you are investing for centuries, which is what yale endowments are doing, you can't afford to have that money locked up and there is a liquidity

premium. we know this today, but back then, that was not how things were done. carol: you think about the junk bond market, is part of normal investing today but when it was created it was considered innovative. that is where he was coming from. >> yes. and he cautions that you cannot replicate this. we have a great part of our story from charlie ellis, chair of the investment committee. you can't replicate 35 years of this. building up the networks and the network is really important. his network of outside managers which yale finds to manage various strategies. and, that is how we have gotten to today.

jason: up next, more from high-profile alumni. we talk luxury e-commerce. carol: and building a brand with the founder of siggy's icelandic yogurt. this is "bloomberg businessweek." ♪

carol: welcome back to "bloomberg businessweek." jason: you can also listen to us on the radio on sirius xm channel 119, and on a.m. 1130 in new york, 106.1 in boston, 99.1 f.m. in washington, d.c. carol: a.m. 960 in the bay area, in london on dab digital, and of course through the bloomberg business app. carol: our coverage from columbia continues. we sat down with notable faculty and high-profile alumni. one alumni and was ahead of his time when it comes to online luxury retail. today, he is a chairman and ceo.

>> at columbia my started, for example my favorite classes were retailing as i loved customers. it was an amazing class. i member i interacted with michael drexel. we emailed each other analysis about the italian market. he was the ceo of gap at the time. the exposure as a young student you get, he was like a hero. and then i took classes and my

business plan about a fast food environment. it is a concept that has been developed recently. jason: talk about ahead of your time. >> but then i realized i did not want to be behind the counter preparing food for 20 years. i was italian, going back to italy after my mba. the competitive advantage of italian is food, fashion, and furniture. food, good with that, furniture -- fashion was probably the right thing. basically, you could say i had the vision. i thought that fashion and luxury would one day converge with the internet. in 99, they were two opposite worlds. they did not like each other. so my role in the last 20 years has been the link between these two worlds.

carol: but who would have thought you would spend thousands of dollars for a high end piece and buy it online. >> i invented the shop of my dreams. i am the ceo and customer number one. all my strategies, i put myself in the shoes of the customer. i thought, why not? not only bags and shoes the ready-to-wear, now it can be counterintuitive. in 2016, having convinced all of the fashion brands to go online in the last 15 years, i thought it may be was time to convince hard luxury, so watches and jewelry. and now the price is not a limit. there is no limit for pricing. we are selling watches and jewelry over $200,000.

jason: luxury seems to be having something of a moment right now. we were just talking with the author of a new book called "fashionopolis." they rejected the economics of fast fashion. the opposite, essentially, of what you do. do you feel society is moving towards a place where it values things a little bit more and thinks about all aspects of a product? carol: quality versus quantity, to some extent. >> when i started to put together, i always wanted to create something that was sustainable and good. that's why you look very early on, in 2008 and 2009 we launched a complete sustainable fashion area. and now, we are showcasing all

of these great designers launching sustainable fashion. that is what the customers want. 2009, i was a little bit early. now we are perfectly on time. it has been 10 years we have been developing so we have a huge advantage. jason: another business school alumni who is behind a well-known consumer brand is siggi. carol: she is the founder of the popular icelandic yogurt company that bears his name. he talks about how columbia made

it all possible. >> one of the most important things i learned was supply chains but that was almost by luck. very thankful. jason: it feels like you anticipated a place where we are now when it comes to food and ingredients and people's willingness to pay up for high-quality and to care about where their food is coming from. what convinced you this was the way to go? >> that's pretty easy to answer. when i came here, i not only missed the icelandic yogurt, but i noticed that they were very sweet here. the most popular yogurt in america at the time have more sugar per ounce than a can of coke. and the difference between coke and yogurt is that people drink

coca-cola and they know it is not healthy. with yogurt, has the halo of the health product. people were totally indiscriminate of eating it even if contained more sugar. so i thought this was a contradiction, people need to know about this. so when we started the company, i wanted to make the yogurt but not make it so sweet that was equivalent to candy or soda. and that was a challenge. people were not super receptive at first but then it really took off 2012. carol: fast-forward you got this company people are like, yeah i need healthy ingredients. there's more competition. how do you continue to get the

shelf space to set yourself apart? >> we were very lucky in that regard. when we started, nobody was focused on that. the weirdest thing i found was that we did not get a lot of competition. we heard rumors that the companies have looked at our space and thought people would not like that. it's not sweet enough. all of a sudden, we were starting to have a meaningful share of the u.s. grocery market. then, the competition came in. carol: your advice to other entrepreneurs? >> plan for success. there is nothing worse than having the demand and things out there that people want and not

being able to supply them. build the infrastructure. jason: bloomberg businessweek is available now. carol: also online and on our mobile app. jason: and across all of those platforms, you can find this week's cover story. can you trust the generics? 90% of pharmaceuticals sold in the u.s. are generic and the fda is waking up to a quality control nightmare that maybe putting your health at risk. here is our reporter with a sneak peak. >> while we highlight this one company and this very big consequence that has affected millions, there are others out there that are going through some of the same issues and we just don't know how big the extent of this could be. carol: you are talking about the companies that make the generics that are sold to the world. >> exactly. a lot of our generics, particularly the active ingredients used in those drugs, are made in china. so 80% of active ingredients for drugs taken in the u.s. are made in china or india. what happens is you have a company in either of those countries who can make the active ingredient a lot cheaper and they sell it to big companies. jason: more bloomberg television starts right now. ♪ here, it all starts with a simple...

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