KKR & Co. Inc. (KKR) Earnings Call Transcript & Summary

Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Good morning, everyone. I'm Mike Cyprys, Morgan Stanley's brokers, asset managers and exchanges analyst, and welcome to our fireside chat with KKR. And we're excited to have with us here this morning, Ken Mehlman, Global Head of Public Affairs and Co-Head of Global Impact at KKR. Ken has spent 12 years in national politics and government service, including Chairman of the GOP National Committee and campaign manager of President Bush's 2004 reelection campaign before joining KKR in 2008. As you know, KKR is a global investment firm that offers alternative investment management, capital markets and insurance solutions and has nearly $480 billion of assets under management. Ken, thank you so much for joining us this morning.

Appreciate the opportunity. Thank you.

Great. So I'll kick off with some questions and we'll see if we have time for audience questions as well. So Ken, you wear a number of hats at KKR. Can you give us a sense of your responsibilities in the roles that you have and your priorities?

Sure. So you can view my responsibilities as falling into 2 broad buckets, but they both are underlyingly related to the same question, and that is how does public policy influence our business and impact our business? So one area of focus is the traditional role in public affairs responsible for focusing on questions like regulatory issues, license to operate issues, public policy issues as well as our broad corporate brand communications, et cetera. And then the other focus is how do we think about, as investors, the interplay between our work as investors and the stakeholders that are affected by the investments we make. That includes a real focus on sustainability, equity, ESG, public policy and in particular, how do we identify structural challenges around the world that we as investors can build solutions to, to the investments we make.

Great. Now KKR has embarked on its first ESG initiatives within its private equity business before expanding those initiatives across other asset classes. Today, I know part of your responsibility is to focus on the dedicated Impact Fund, which we'll talk about. But before we do, let's just get a sense of some of the more recent initiatives. Perhaps, you can provide some perspective on KKR's evolutionary path with respect to ESG, just how we got to where we are today, where it all started because you guys were a little bit earlier than many.

So we began thinking about this in 2008 as a firm in a very systematic way. And over the last 14, 15 years, we've learned a couple of lessons, and I'll put 4 in particular that I would cite. The first is that if you focus on investing in underlying structural trends and challenges, for example, the energy transition in green energy, we made our first investment in 2008 or '09, with the need to retrain workers in the workplace where we have been investing for a number of years; companies that are focused on managing energy in a more responsible way, in a more circular way that reduces -- managing waste, excuse me, that reduces the amount of waste that is generated. All of those were trends that we began investing in, in 2008, and what we discovered was you could really do very well as investors by doing good by solving those problems, first. Second area of our evolution, I would say, is really understanding focus on what matters most. There's a lot of focus, and there should be today, about companies reducing their climate impact or their human capital, and those are critical. The most important thing we think any company can focus on is what is material to its business model that affects key stakeholders. So for example, an industrial company needs to focus on safety, first and foremost. If it's a technology platform or a social media company, content moderation and data privacy are more important than anything else. And so one of the things we've worked over the last 14 years is to systematically, across how we invest, across all of our investment strategies, having a deep understanding of what are those material issues, what matters most and trying to affect them. Third lesson is humility. And that is there are a lot of people that have spent their lives, quite honestly, thinking about sustainability, thinking about equity, thinking about good governance. And rather than reinvent the wheel or think we know better, we try to learn from them and bring them on as important advisers to us. And we've done that for the last 14 years. They're part of our Board. They're part of our governance structure. They're outside advisers. They're built into how we operate. And I would say the last lesson that's most interesting to us is that if you, as a fiduciary, want to really reduce risk or create value in companies, there are 3 areas where we've seen real opportunity to do both those things. First is human capital. If you can better align the workforce, if you can engage the workforce in a way that's different than previous investors in those companies, you can really create expanded alpha. Second, environmental footprint. Reducing your energy use, the use of forest products, your water use and the generation of waste creates bottom line benefits not just for the environment but it reduces expenses. And third, supply chain. At more than 30 companies, we have focused on really understanding their supply chain from a resiliency perspective, from a labor perspective, from an environmental perspective, and that served us well. So I would say those 4 lessons are really relevant to our evolution.

Great. And why don't we talk a little bit about how KKR is integrating ESG principles throughout the investment process all around the firm, including in credit and real estate in Asia? How does ESG inform investment decisions at KKR? Is there a standard and do you leave that with individual teams? Or do you centralize that?

The answer is that we work with the individual teams in a way that reflects the centralized governance, knowledge base, focus and areas based on the components I just described, where we think there's the biggest impact. So let me describe it. It really has 3 components as I would see it. One is ESG integration. Every investment we make across every single asset class needs to have a systematic approach to, as I said in my second lesson, what matters most. How do we do that? We do that by looking at and using essentially the Sustainability Accounting Standards Board or SASB standards as our base case, and then based on that, determining what we think are material ESG issues. We also, across the board though, try to look at these human capital questions and environmental footprint questions. To your point, this isn't just something that obviously gets done in the private equity business. It's done across the board. So in 2021, we developed a proprietary approach to measuring ESG across all of our credit positions. We've done it in more than 1,000 positions. We look at those positions every single quarter, and we look at a combination of, one, what industry are they in? Two, if they had reputational or regulatory or license to operate issues going past or forward; three, are they heavy emitters when it comes to climate and carbon; four, how do they think about questions like DEI and employee engagement and other key issues? And we do that across the board, that's built in. And remember, those were some of the same areas we try to focus that I mentioned earlier in our other strategies. So first, integrating ESG across the board, every investment strategy, every region where we invest, in a way that is appropriate to that region, of course, but is based on the underlying broad lessons of the firm and the broad governance of the firm. That's one thing that we've done that we think is very important. The second is value creation. And I mentioned, if you remember, in terms of lessons, a couple of things that we're now in the process of building in across everything we do. So what we've learned is that if you can really impact employee engagement and if you can build a company that has more diverse leadership, you're going to create more alpha. And the best example occurred a few weeks ago. Got a lot of attention. A garage door company. You wouldn't think of a garage door company as an example of ESG but it really is because under the excellent leadership of one of my colleagues, Pete Stavros, it's the latest example. We've actually done it in more than 20 companies, where the alpha we created, the value creation that we, as investors, brought to the table was partnering with management to really engage the workforce. Pete learned this because Pete grew up in a home where his dad was an industrial worker, was a union member, worked at a company, and his dad would come home every day really annoyed by the fact that management wasn't paying attention and that there was a lot he could offer in terms of how the place operated. And so Pete spent much of his career studying how do you do that. And one way you do that is you make everyone that works with the company outside the C-suite an owner of the company. They all have real meaningful stock in the company. They get dividends. They get voice in how the company operates. They understand what EBITDA is. All of these are things that we have found that if you do, you really create additional alpha. So that's something we're now -- we've expanded significantly and are going to expand even further. The second area that we're focused on across the firm when it comes to value creation, as I said, making sure we're measuring the environmental footprint, in particular the climate footprint, and improving it during our ownership. That's the second thing. Third thing, cybersecurity. Obviously, cyber attacks are a huge issue. It's a huge challenge. We have developed an effort that we apply across our portfolio, across our assets to help our companies as stewards, providing them with tools to address cybersecurity. And so value creation, we think in those 3 areas as well as depending on the business, the material issue, is something we try to integrate and build across the board in a way that is measured, reported to our investors and we think really helps reduce risk or create opportunity. And then the third area is this idea of investing in solutions to some of the world's biggest problems. If you actually look back since 2010, KKR has put $25 billion in equity in companies where the company's core business model was, for example, renewables or energy efficiency or safe and reliable food production in markets where that wasn't happening before we made the investment or companies focused on training workers to be upgraded for the skills they need for the jobs that exist today or cybersecurity. And we think we can invest a multiple of that going forward. So as we go forward, those 3 key buckets are important, but our most important at our core is making sure we really understand, as fiduciaries, we're doing this makes a real difference. And to achieve that, we've made 2 big changes in the last year. First, we bought a company called ERM, which is the world's largest environmental sustainability consultancy. And not only did we buy them because we believe in this as a secular theme where we think there's interesting opportunities, there's a tremendous amount we can learn from them. And the second thing is we established a Sustainability Experts Advisory Committee. We call it the SEAC. It's chaired by a gentleman named Bob Eccles, who many of you have probably heard of. Bob Eccles was one of the founders of the SASB board. But we've identified a series of individuals who we think are real world leaders when it comes to each area where we think, as fiduciaries, ESG focus should matter the most. So for example, Dr. Alexandra Givens, she is the Chairman of and the Head of -- the CEO of the Center for Democracy & Technology, the leading organization that thinks about data privacy and human rights issues when it comes to AI. And we think that's something that we can learn from in a lot of our companies. I mentioned human capital. Andy Stern, the former International President of the SEIU, is part of this Board, as is Roy Swan, who leads mission and purpose at the Ford Foundation. He thinks a lot about good jobs in the future and good workplaces in the future, and he can help us as well. In addition, Nat Keohane is part of this effort. Nat Keohane is someone who is a real leader when it comes to climate. So these individuals obviously are not working for KKR. They're an advisory committee that's helping challenge us to be smarter about these questions and helping, as we make investments, us think about this. So we think if we bring that in place, we created in the last year an ESG committee comprised of senior leaders of the firm, it's something that we build into our DNA to how we think, how we operate. We think we can continue to generate both more unique investment opportunities and increase alpha in our investments.

So ESG and Impact both have gotten a lot of attention across the industry. Still early days, it seems, in the private market space. Then you guys launched the Impact business back in 2018, earlier than many others. I guess, what led to the creation of that business? What were some of the initial goals? And I guess, how do you view the difference between the Impact Fund, the Impact strategy versus the ESG integration more broadly at KKR?

I remember having a conversation with Henry Kravis and George Roberts in 2013 about creating an Impact business. And we spent a lot of time, Robert Antablin, my partner and I, thinking about it before we launched it. And we really looked at the world and we said, "What do we think we can bring to the table that is different?" And a lot of what we could bring to the table we thought was based on those lessons I just described. So first, let me describe what we are, the Global Impact Fund. Essentially, it is a private equity-focused strategy around generating impact investments that we think can scale solutions to some of the biggest problems in the world. And so how did we come to that? We came to it a number of ways. First, as you remember, I described to you the fact that we learned over a number of years that there was tremendous opportunity to invest in solving these structural challenges. But guess what we saw when we looked at that. What we saw was a lot of the companies in that space where I would describe them as middle market from a private equity perspective. They were companies where you're writing a $75 million, $85 million, $95 million, $105 million check, and our funds have gotten too big. So we were saying no to investments at KKR even though we knew the theme, we had pattern recognition with respect to the industry and the company and we were missing opportunities. So we established this in first, in part, because we wanted to avoid missing those opportunities. We identified 4 broad areas where we thought there were big structural tailwinds very thematically. They are climate action. They are sustainable living, lifelong learning and inclusive growth. And the reason we identified them was these were areas where KKR had done a lot of work. We had a lot of existing intellectual capital and ideas and relationships and we focused on those areas. We focus on companies where the company's core business model, so where they derive a majority of their revenue, addresses, in a measurable way, a locally relevant United Nations Sustainable Development Goal. So we're looking for all those questions and all those factors. And we're applying a playbook -- and this is where I think things are a little different. That is, we're not betting on, for example, technology. There are a lot of people that are investing in this space that bet on technology, which is awesome, but we're not. We're not betting on science. We're betting on what KKR has done a pretty good job of betting on for 46 years. And that is, can you take a proven business model and based on what you can bring to the table, not just with capital but also with active governance, also with supporting M&A, helping enter new markets, helping the company reposition itself? Can you help that company grow? And that's what we've seen the opportunity to do, and that's what we've been doing since 2018. And that's, I think, what makes us a little bit different. Last point, really important to these businesses is that we focus on their ESG footprint. So for example, if you're investing in a company that is focused on training people for upgrading their skills and they're incurring a lot of debt in that process, you failed. I don't care how good your impact is on their skills. Fundamentally, that is an ESG issue you have to address. And so we also think about really leaning into those questions in the companies we invest in and the Impact Fund too.

Now in 2019, you raised the first Impact Fund, $1.2 billion, and I believe you've already launched fundraising for the second fund. So I guess how is the first fund performing? And what are the conversations like with LPs on the second fund?

Can't discuss fundraising, as you know. Mr. Larson would be appalled if I did. Fund I, we've made 15 investments. It's actually performing very well. If you look at the gross IRR, it's about 50.1% right now. I think part of why it's doing very well is these are structural tailwinds that we're investing behind. So our portfolio was EBITDA positive in 2020, a year when a lot of companies were not doing as well because of the volatility associated with COVID that was happening. I think investors came to us when we first had a conversation or we came to them usually, the focus was, we like the concept but we don't have a lot of proof points around impact investing and what you're talking about. And what's different this time is there's proof points. And so I feel like the investors appreciate, one, that the thesis we had regarding the ability to really transform middle-market companies with an established private equity playbook around these key themes, we've got a number of examples to kind of prove that out. Second of all, they like the level of specificity, and this is really important that we provide with respect to measuring impact, measuring ESG and reporting on it. And so we're having very good conversations, and we're excited about the opportunity to continue to build this platform.

But one thing that comes to mind when people hear ESG and impact is, is there a give-up on returns? Now clearly, the 50% in your first fund would suggest that's not the case, perhaps. But I guess, why is that? How do you think about that? I'm sure you got that question, particularly with the first-time fund where you didn't have that track record. I guess, can you talk a little bit about the returns that you're expecting relative to more traditional PE? Is there -- do you expect any sort of differential there? And then talk a little bit about your underwriting process and criteria.

We don't expect a difference. We expect traditional PE returns. And the reason that we do is -- comes to the themes you're investing behind and the nature of businesses you're investing behind. So when it comes to underwriting the investment, if you came to one of our investment committees or our pre-ICs and you came to an investment committee or pre-IC of the Europe or Americas or Asia PE business, it would look very similar from a financial perspective. So there's a similar analysis of the underlying businesses position vis-à-vis the market. It's macro risks, the potential for that business to grow, the understanding of the industry, the quality of the management, all of those, how it's differentiated, the moats around its operations. All those things are things we think about in a very similar way. If you look at our team, we have about north of 20 people today that work in the business. Except for myself or another person, the people that are leading this business look like -- they are traditional PE investors, same background, same experience and all that. And then there are 2 others that are myself and another individual that have different backgrounds. So from an underwriting perspective, it's very similar. But what's different? What's different, as I said, is we are definitionally investing in what are fundamentally structural, you might even call them imbalances or structural challenges that require a generation to address. And as a result, what we have found, if you had looked at these questions over the last 15 years, if you invested over the last 15 years in a portfolio that was comprised of companies focused on worker training and lifelong learning, focusing on efforts to mitigate and manage waste, focusing on addressing the energy transition and climate action, and you looked at how they performed versus the market, you'll see that it performed not only better than the market, but it really was less subject to the vicissitudes of market challenges of overall economic factors because of the fact that it's addressing these structural challenges. And in some ways, when the market goes down, there's an increased imperative to train those workers or upgrade those workers. When the market goes down and there is fiscal stimulus by governments, a lot of times, it focuses on things like how do we make our infrastructure more resilient or how do we invest in the energy transition, see the Europe Green deal. So that's what we think helps us be in a place where we're able to generate these private equity returns. The combination of, one, the thematics we're investing behind; and two, the traditional PE, both underwriting and playbook, to create value.

Maybe we could dig in a little bit more on this deployment backdrop here. Clearly, macro environment's a little bit more challenging today, inflation, supply chain pressures, rising rates, among many other dynamics at play. I guess how is this shaping your outlook for deploying capital here? And what are the opportunities that you think are most compelling?

So I would say that it's a good time to be putting capital to work. Obviously, the markets, at least partial corrections, some would argue, a lot more is coming. It's useful if you've got dry powder, which we do. I think that, again though, we spend a huge amount of time with Henry McVey and the global macro team at KKR, a Morgan Stanley alum, I would note. And we spend a lot of time thinking about, again, this underlying question is if there's inflation, if there's stagflation, if there's a downturn, if there's supply chain disruption, what does this mean to this portfolio and this company? And it gets back to this question of we're investing behind our themes that are, in some ways, much less subject to market risk and market conditions than are others. So for example, one of the themes we've invested a lot behind is climate action. One of the components we've really focused on in climate action are companies that mitigate the impact of climate change, particularly around water quality and upskill -- essentially upskilling the land that is going to potentially face this. So we've invested behind green infrastructure businesses and also companies that focus on water quality issues. Regardless of where the market is, the reality that today, huge numbers of cities, counties and municipalities don't meet their EPA standards because their water quality isn't meeting the standards. And the reason they don't is because increased climate events relating to heavy rain produces flash flooding, which essentially washes human activity into the water. And when you see -- when you go down and if you're on a lake or on a river and you see things like the algae blooms, that's what you're seeing. You're essentially seeing the aquaculture, the fish in the water and the plants in the water, dying. And you're also having potential problems to human health and you're not meeting your EPA standards. The reason that happens is because heavy rain events prevent the rain from essentially washing through the wet lands or washing through streams and ultimately getting into the water supply. They run off right into the water supply. And we have potential solutions to that. One is to build more of that green infrastructure. And two is at the wastewater treatment facility to address that. That has to be done regardless of where the economy is going. And so that's an example of just one of a number of trends we've invested behind that I think and we think about deploying while you have to think about the economic question. Fundamentally, they're less subject to the vicissitudes of the market. I would say the same thing even more so when it comes to training workers, when it comes to, for example, vocational education. All of these are areas that are addressing underlying challenges. I think it's 1/3 of the workforce is going to have to be retrained between now and 2030 globally. A huge portion of the skill that workers had in 2018 are obsolete today. No matter what business you're in, you have to upgrade and train your workforce and we're investing in companies that are providing that solution. So again, by investing in companies that are focused on dealing with very deep structural, generational even, tailwinds and dealing with underlying challenges that have to be addressed, you are able to not only put the capital to work because of market correction provides opportunity, but very importantly, you're able to be in a place where you feel pretty good about underwriting how these companies are going to do depending on where the market is.

And when you're sort of tracking and watching, managing your portfolio of companies, how do you assess the progress along the ESG metrics? How do you influence the impact on these companies? And maybe touch upon how you measure the impact and report it to your clients.

It's really important. It's critically the central component of our underwriting and investment committee process but also our stewardship. And so how do we do it? So we have a number of components. The first component is, again, making sure that we are tracking how this company is contributing by its core business model to a locally relevant and measurable United Nations Sustainable Development Goal. So that requires us from the very beginning to say, what's the goal? Is it measurable? Can we improve it? And very importantly, is it locally relevant? So that's all 4 factors we have to figure out and understand, first. Second, we tie everything to third-party standards. So when it comes to the underlying impact, it's the UN Sustainable Development Goals. We look for things like the SDG Compass. There have been a series of things that have been created that help investors think about not just the goal but how to achieve the particular goal. So that's something that we look at. And then when it comes to ESG, again, we use that I mentioned earlier, the Sustainability Accounting Standards Board and we focus on that as well. Third, once we've done that, we then partner with the company management, the investment team that focuses on it, the groups internally I told you about and a third party called Business for Social Responsibility to identify what is the third-party metric that will help us determine how we're doing vis-à-vis that particular goal. And then finally, we also want to look not just are we achieving that goal but are we achieving that goal in a way that is optimal and efficacious based on the underlying goal. So let me give you an example. We have a company that's one of my favorites, not that I choose favorites, but it is. It's a company called Graduation Alliance. It's a company that helps with high school dropouts. High school dropout is a huge challenge for our country. If you look at so many factors, whether it's economic opportunity, whether it's social breakdown, there's a huge correlation between challenge and those individuals that have dropped out of high school. And if people can graduate from high school, it's transformational for their lives. And so this company provides the interventions for those who have dropped out of high school. It does it in a bit of a differentiated way. Why do most people drop out of high school? Usually, it's economic. They have an unexpected kid that comes along or a parent gets sick or they have a challenge at home, which means they can't spend the day in school. And so what it provides is an online high-quality content, customized to the individual in which they can learn when it's right for them to learn. But as we learned during COVID, online is not enough. So it combines that with personalized coaching. Coaches are often teachers who do this on the side. There are others who really help these individuals think about not only what they're learning, but ultimately, what they want to do with their lives. Last year, 10,800 individuals who had dropped out of high school were learning again. And that's an important metric that we measure and that we see how we're doing. But equally important is this underlying efficacy question I mentioned a minute ago. So we brought on an organization called Mission Measurement to determine how does this intervention compare to others. And what we found? We found that it's 25% more effective than other interventions in terms of getting people their degrees and ultimately graduating. But it's 33% more cost effective. We've also looked and determined from a longitudinal perspective, we have adults in the program, too. So you have people in high school that have dropped out, but then you got people in their 20s or 30s that dropped out that want to come back. There, we look at questions like what job were they able to get at the end of this experience and what was their income. And we're expanding that longitudinal analysis even further to look years after they've graduated to see the impact. And we're trying to disaggregate the data because what very often has happened over the years in the education space is we're told, X school districts improved by Y percent. But what they don't tell you is it's improved, but among, for example, immigrant communities or communities of color or others, it hasn't improved as much. So we're working to actually disaggregate the data to make sure that the entire population and components of that population, we're serving well. That's the kind of stuff that we want to look at that we report to our investors on. Similarly, very rigorous approach to ESG. So for every company in our portfolio, we're reporting on, one, human capital, 30% Board diversity being our goal for every single company. We're reporting on job creation and we're reporting on employee engagement at the companies. We're reporting across the board on carbon footprint, direct measurement of Scope 1 and Scope 2 and, where relevant, Scope 3 emissions. And as we move forward with our strategy, we'll be focusing on decarbonizing consistent with net zero across the portfolio going forward. We focus on the key important SASB topic depending on the underlying nature of the business. And we focus on cybersecurity and ensuring the company is thoughtful when it comes to cyber hygiene. So those are all things -- our report is usually about 120 to 140 pages to investors. If anyone in this room has insomnia, it's awesome for that, and that's how we think about it.

Great. Big picture question. If we think about your Impact platform today, looking out 5, 10 years, I guess, what's your vision for the Impact platform at KKR? What are some of the opportunities for innovation and other strategies?

So look, I mentioned that in the last 15 years, we put $25 billion to work in companies where the company's core business model was addressing a critical global challenge. I think we can have a very significant multiple of that, put to work. I think that what we've built in the private equity space, we continue to grow. I think there's a real opportunity in the credit space to invest in companies that are focused in these same areas. I think the platform going forward has an opportunity to massively scale some of the value creation solutions that can create a very cool double bottom line. So that example I gave you of the garage door company, remember, that's been done at 25 companies. This is real alpha created by sharing ownership of the company with all the workers. 45,000 employees have received billions of dollars in equity in those 25 companies. So imagine a world where that is expanding to a much, much larger population. I think we can be real leaders as a firm because of how we govern our companies when it comes to ESG transformations. They can be social or environmental transformation, brown to green. So all of those are components of what I think is a very exciting opportunity going forward.

Great. With the last couple of minutes left, why don't we shift and talk a little bit about politics? I can't resist here, just given your background, in particular with climate, right? There's kind of been this debate out there on the political arena, varying views out there. I guess how do you see that debate shifting at all on the political stage regarding climate change?

So look, I think we're in a moment now, and I say this as someone who hasn't been in politics for 14 years, but I do feel like everything has become politicized. And part of that is because for a lot of people, politics has become performative as opposed to about performance. And so I think that explains some of it. I will tell you my own perspective on the climate question. The actions we take around climate action in our portfolio, both where we invest and also with respect to what we're doing across our portfolio, we're doing because we're fiduciaries, because I don't want to end up with a stranded asset, because I don't want to be surprised that all of a sudden, there's a supply chain disruption, because I don't want a real estate asset to be subject to an event because of a bad storm that I didn't anticipate or think about. So what's, right now, happening is there's a debate that's a little bit, I think, of a false choice between those who are saying, ESG is taking away from people's leadership as fiduciaries versus those who say, ESG needs to go forward. My own experience is the reason we focus so much on this space is because we're fiduciaries. And I would note that the most important shareholders we have are tens of millions of people that spend their lives as teachers or fire or police serving the public, and our obligation to deliver for them is critical. And my experience is if you are very focused on aligning when it comes to human capital, improving your environmental footprint, being thoughtful around your supply chain, and taking cybersecurity and privacy seriously in companies where you have data, if you do those 4 things as well as managing your material issues, your returns will be better. So I do think it's a little bit, at least when I hear the debate, I feel like they're 2 people yelling at each other that are missing at least how we think about it.

Great. We have 2 minutes left. November elections coming up. Some are expecting the GOP to retake the House, maybe even the Senate. So just curious, your thoughts there, what's your take? And can this populist environment persist?

The populist environment is going to persist for many years to come, in my opinion, and it has a lot more to do than who the President is. It's the fact -- there are a lot of factors that explain it. The most important is what I call the Gutenberg 2 moment. So if you think about it, the printing press is invented, the greatest populist moment in history. There's revolutions that transformed science, everything else around the world, religion. Because fundamentally, human beings, when they discover what previously only popes or sovereigns knew, are furious. Today, every single person is a creator of information. Every single person is a witness. Every single person is a journalist. Every single person is an activist because it's not just that information is spread but the ability of every individual to spread it becomes transformational. Combine that with the fact that we have certain, again, very big structural challenges: one, around inequality; two, around the nature of what industrial revolutions do to people's jobs and people's communities; three, regarding also obviously, climate and what that does. All those things create huge challenges that reinforce the populism. As to November, look, presidents in their first midterms with one exception, George W. Bush in 2002, almost always have a very bad first midterm. President -- I mean, literally, if you think back, so President Clinton did. Bush did not. Obama did. Trump did. Reagan did. Before this, I'm not going to remember. But the reality is -- and I would love to say that the reason Bush didn't was because of the genius of his White House political director who happens to be me. But the truth is, it was because of 9/11 and that disrupted politics broadly. And so I think that, that's the challenge that this administration faces and that's the challenge our political leaders face.

All right. We'll have to leave it there. Ken, thank you so much.

Thanks a lot. Thanks.