Adena Friedman, Chair and CEO, Nasdaq
C.S. Venkatakrishnan, Group Chief Executive, Barclays
In conversation with: Lee Clifford, Executive Editor, Enterprise, Fortune

Fortune Global Forum 2024: The Next Decade in Finance

Photograph by Michael O’Shea for Fortune

Conferences

Hello, everyone. Uh well, be out. We're going to dive right in. Uh tell us what you make of the US election results and did Wall Street get what it wanted? Um Well, the markets think so. Uh Thank you for, for Lee, for having me and uh being part of this wonderful panel with Lena. So the election results, I think obviously saw a great premium that kept into the equity markets. Markets did well. Uh they did well for banks and financial firms and they did well more broadly. I think there are a couple of reasons. One is clarity is always welcomed by Wall Street. Uh Second is there's a greater clarity. It doesn't matter which side you're on when all the three parts of the legislative and, and, and, and the executive align the President House and Senate. Um and it happened quickly and people were fearing that it would not happen quickly. So I think those three things and then thoughts about what might happen in terms of regulation or might attack the economy all led immediately to the, to the, to the rally in the market, I think uh when you step back and especially if you look at it from abroad. You know, I work at a British Bank. Uh People will start asking themselves deeper questions about what does this mean for trade? What does this mean for defense expenditure? What does this mean for geopolitical realignment? How do the countries, especially the ones in Europe which are having growth challenges fund themselves in what this new world will be? And then ultimately, where does it go into broader social questions of ESG and climate? Well, Adina, you were saying that you see what's happening in the markets the past week or so as a sugar rush, are we gonna come off the high or what? What's your prediction? Well, I actually, II, I would say not specifically a sugar rush but certainly a honeymoon uh associated with everything that the Vin cat just described. Uh and, and what's happening right now is you've got one thing that's very certain, which is with the way that the um the legislative branches and the administrative branches are aligned, there's going to be a tax policy change. There actually has to be a tax uh tax discussion within the next year because the current tax rates, the tax um plan expires. So with knowing that it's aligned um down down the line with the Republicans, I think that there's an expectation that will benefit um you know, the corporate world or at least retain the benefits we already have. And I think that that's obviously seen as a positive in terms of, of Corporates and, and the ability for them to generate profit and retain those profits. I think that's AAA benefit. And then the second thing is uh the notion of, of smart regulation, you know, how do can we get to an era of what I call smart regulation, outcome oriented re regulation as opposed to input oriented regulation, looking at regulations and saying, did we actually achieve its original intent? Are we measuring the those outcomes as opposed to just creating activity traps within the financial industry and others industries that frankly suck capital away from more productive activities? And if that also is kind of, there's a general sense that that's a possibility and that also could create a lift both in terms of, you know, the ability to retain those profits, but also in terms of being able to deploy those profits into growth and into liquidity in the markets. So I think all of that is kind of manifesting themselves, but there are the super questions, there are the longer term impacts. I think those people want to wait to see what actually does come out of um the, you know, kind of the the policy decisions around tariffs and other things to know how that might impact um different sectors over time. I I think that there's still that to be played out. Yeah. Well, drilling down a little bit, I know you love to talk about fixed income. So tell us what's ahead. Well, the bond markets have backed up a little, which means rates have gone up. I think what they're seeing or looking for is that, uh obviously with lower taxes, uh greater spending might be inflationary interest rates will have to be higher for, for longer. Uh We'll, of course, you know, have to look at what the fed does and what central banks around the world do. But stepping back, we're in a place where I think you've had a very soft landing. I sometimes call it a featherbed landing. That's happened certainly in the US and in the UK where if we had asked ourselves two or three years ago, would we have got, had growth come back to be normal, inflation come back to be normal levels and had held on to the very strong levels of employment. Then we would have all thought that, that, you know, we would have welcomed such an outcome and thought it not likely to be possible, right? But here it is. And here we are. So we started that very, very good place. Now, economic issues clearly had an effect on the uh on the election, but that was probably more about inflation than anything else. So I think the bond markets are looking for a period of some calmness but probably with higher levels of inflation. What do you see happening in the equity markets? Well, I I everything that, that Vinca just talked about to um you know, we always say cost of capital matters, right? And right now, we still have a pretty big delta between actual inflation that's occurring in the country and the interest rates that people are paying. And while I do agree with you that the citizens in this country really were impacted by inflation. And that was definitely um a a key element of the election outcome. They're also on the flip side, like on the back side of now, seeing lower prices going up less fast, they're having a much higher cost of capital. So they're kind of been hit with a double whammy. Um And so if we can start to and we're starting to see the fed, you know, taking those slow actions to normalize rates against the inflation rate. I think that's a positive in terms of both from a corporate perspective and from a consumer perspective and that obviously creates a lift in the markets. But I agree with Vinca that they're gonna, you know that right now they've taken, they've taken two actions pretty quickly. The question, do they kind of start to slow, roll it because of the fact that they won't know what this, what, what any sort of policy decisions are with the new administration. But they also do see the fact that the economy at the aggregate level has remained strong and therefore they can take a slower, slower process going forward. But there is an opportunity to continue to bring rates down over the next year. Just depends on how fast. Yeah. Um, well, we all love big predictions. So we're here to talk about the next decade in finance. Uh Could you give us a couple big forces or predictions that you see playing out over the next decade? Then you can go first. Well, look, technology and technological change is very much a part of the financial landscape. And you know, if you look at the period through the up to the financial crisis, it was financial technology, it was the way in which you did what was called financial engineering. I think now it's going to be much more straightforward. It's going to be how do you analyze data? How do you take information and make better decisions, financial decisions and investment decisions which have an impact on the financial system and then how do you continue to manage money? You know, we run a large retail bank uh digitally and make that broadly available to your society and do it with all the trust and the security that people are coming to expect. And that's harder to provide in an age when you know, there are as many bad guys out there trying to get into the system. I mean, I, I think that there's, this is a renaissance period for technology in the industry and it will be for the next decade. Uh I, I think it'll unleash a lot of opportunities for us to continue to globalize capital flows, reduce friction in terms of global payments, make it so that we have more of an opportunity to create more. I would say a a more what we're approaching is because we provide technology to 100 and 30 other markets around the world. In addition to our own, we provide very scale technology around risk management, regulatory reporting and anti fin crime to the banking industry to the extent we can create a more harmonized experience across the capital markets in the world with tech. So absolutely, a domestic market is something that will continue to be a a critical component of every economy. How do we to drive more liquidity into those domestic markets by opening up the capital flows, making there be less friction and and having flows go across the world in addition to and that's a lot of a lot of technology, payment rails will modernize et cetera. Having more of a cloud orientation towards running markets will create more scalability, the ability to manage the data more effectively and will open them up the exchanges and the market participants up to new services. So the next decade and obviously A I plays a huge role in all of that. And then on the on the protection side, I do think it's critically important that the banks and providers like us who provide services to the banks that we are able to leverage the A I capabilities to the best of its ability in order to catch the bad guys. And because you can, as I can assure you, the bad guys are gonna use it to the best of its ability, as fast as they possibly can. And to the extent that A I is a force that can be used for good purpose, which it really is in terms of um finding criminal actors getting them out of the system. It's really important that I think we unleash the power that takes technology for those defensive purposes. And so that's a big part of our, of our mandate. It's a big part of the mandate that banks have and it's something that we're very aligned on with many of the governments around the world. So very excited about what we can do there to advance um the ability to, to manage crime out of the system. Yeah, I'll say if anyone has a question, please put up your hand and one of our Mike Wranglers will find you. I wanted to shift gears for a second. And you know, if we're looking at 10 years, the types of people that you might need to hire, you don't even know what jobs they're going to be doing 10 years from now. So what are you looking for now in the people that you're bringing into your organization and promoting up through your ranks of leaders? Yeah. And I think, you know, it's, it's one of the toughest questions which any large organizational leader faces because it's not just what kind of people you want now, but what will the skills they need to have? 1020 30 years from now? Um As they are then senior people in organizations, I think clearly in the banking industry or in finance, some amount of economics and finance and accounting is important. But the technological skill set and the ability to use it, understand it, deploy it, understand its potential and its risks is absolutely important in all the ways in which Tina said, which is just efficiency, automation protection and, and service delivery and, and and then equally how is it that you understand where your clients are going and how they are going to use the technology and how do you serve them better? So you know, what's the role for bots and customer service? What's the role for digital payments? And then how do you help? Because we reach lots of retail customers. How do you help the people who are slower on adoption? Yeah, that's actually really an interesting point in terms of wealth, there still is very much a role for the human in manage, helping people manage their wealth. But there are a lot of tools that even those humans can use now to augment their, their capabilities. And I think that'll accelerate. But in terms of skills, uh we are a technology company. So and we have about 50% of the people inside of NASDAQ are in the development and engineering organization. And so obviously, as we continue to bring more A I capabilities into our products and embed them into the agile teams. Data science is a critical component of our skill set, um Data engineering as well in addition to traditional engineering um development abilities. But then I also would say there's always going to be relationships that you, you know, the soft skills are still very important as well. And one of the things that we really focus on are kind of having a culture where we have constant curiosity, you know, a growth mindset, which means in humility and in terms of what you know, and what you don't know um as well as curiosity about the world around you and what can change and how you wanna bring that change into the organization, serve our clients team orientation, so low ego. Um and as well as I think a way as well as like hard expertise, whether it's market structure expertise or engineering expertise or, you know, uh governance expertise or other things in terms of the services that we offer. And, and that's a, you know, that's a well rounded person. Yeah. And at the end of the day, we are always, we will always look for well rounded people regardless of the role they're in. But that data science capability is gonna be an increasing part of the skill set that we bring in. If I may just add to what I said, there's something, you know, deeply important there because the only thing we know for certain is there will be change. And so those people who are then adaptable and resilient are the ones who will then thrive. Agree. Agree completely. You're looking for the low ego, people who wanna go work on Wall Street. I think we have um a question up here. Well, now that you put it that way, I thank you all so much for the insightful conversation. Uh My name is Ashton Jackson. I'm a reporter at C NBC. And I feel like with young people, young millennials, Gen Zers, there's kind of this like FOMO about investing and it's leading them to invest in or make speculative investments and things like Cryptocurrency and uh and um uh meme stocks. So my question you is, what advice do you have to give young people when it comes to balancing risk, reward and long term financial planning in such like a fast paced hyper competitive environment? All right. So I have uh two sons who are in their mid, mid to late twenties. And so I'm, I, I, I'm living that OK. And it's really interesting because I learned so much from them. Uh One of my sons the other night was showing me um how he was engaging on an event marketplace. And um and he was calling and he was making a market so he was taking different sides of the trade all night long on like what the temperature of New York was gonna be overnight. Um And it was just fascinating and he was showing me the app and he was showing me how he was laying in his orders and what it was. So and I mean, I'm talking like $10 increments. I just want to be very clear. But what was so cool about it is he was learning market structure. He didn't even realize he was learning market structure, but he was learning market structure. That is awesome. So, of course, my, my first question is always, how much money are you spending? Not? How much money are you investing? How much money are you spending? Because it, you know, if he ends up making money great, but if he ends up losing money, I want him to think about it as I'm spending money on, on enter, you know, to entertain myself, you know, in this particular case, and I might have an opportunity to learn and I might have an opportunity to make money on it. But, but he's not, you know, kind of spending his life on it. He's not and he's, and he's experimenting in it. Uh Now, when it comes to what we see in terms of a very engaged retail investor base, the most important thing that you can do as a retail investor is get educated. Um And in some way of getting educated is just learn by doing. But with small amounts of money, learn by doing with small amounts of money or even on platforms where you don't actually have to use real money because there are platforms like that. Um But at the same time as you get more engaged and more educated, then you can start to take more risk if you feel like you understand the risk reward that you're really, really entering into and, and, and then you get, you know, kind of get more confidence, but you recognize at any point, those strategies can go either way. And so you have to be ready for any outcome and if that's the case then get engaged, you know, and, and one of one of the great things about the US, and I would say we've been looking at this, um you know, it's, it's one thing to kind of take, take some, some of your dollars and investigate and explore and, and experiment and learn. But at the end of the day, it's another thing to make sure you are investing for your future. And with that, be thoughtful, be long term, be fundamentally oriented because that's what's going to make it so that you can uh afford your schools or your children's schools, afford a home and, and afford to travel the world and experience the world. And those are more serious things that you want to make sure that you're having a long term orientation around while you take a little bit of your extra cash and, and, and apply it in some of the short term. And so it's, it's something I care a lot about because we um we're very excited by the fact that, you know, 39% of household income in the United States is invested directly in equities that is the highest in the, in the world. Um But actually Sweden is 36. I just want to point out it was really interesting to, to look at the Sweden as a, as a real marker there. Whereas other parts of Europe and other parts of the world are really in the twenties and below. So that is important because it, it is a foundational element of wealth creation in this country. And so it should remain that while people can experiment on new things. Sorry. Yeah. No, no, I absolutely agree. I think the most important thing for young people is to understand that investing in their future is really one of the biggest decisions they can make that they should start young with that first paycheck, have a really long term view and the equity markets are a really important part of that. And you have to think about building that future and you've got to get interested, right? And the most important problem I see. And I've got three kids, the youngest of whom is 18 is the risk of disengagement. Um And you know, you mentioned equity market participation in the UK. It used to be like the US 30 years ago and now it's just barely into the double digits and part of it is the pension system and so on. But the equity market is a fundamental part of growth and a part of everybody's investment portfolio and I think we have to end it there. Thank you guys so much for such a great conversation. Thank you.

Coins2Day Global Forum 2024: The Next Decade in Finance