In Good Company with Nicolai Tangen - Brookfield CEO: Private vs. public markets, investment style and value creation

Episode Date: December 13, 2023

Bruce Flatt became the CEO of Brookfield in 2002 when the company was primarily a Canadian-based real estate firm with a market value of $5 billion. Under his leadership, it transformed into a global alternative asset manager, managing over $850 billion in assets across various sectors: real estate, infrastructure, renewable energy, private equity, and credit. In light of such diverse investments, what are the benefits of investing in private markets? What are the major global megatrends shaping these investments? And what qualities define a good investor? The production team on this episode were PLAN-B's Nikolai Ovenberg and Niklas Figenschau Johansen. Background research was done by Sigurd Brekke with input from portfolio manager Erlend Kvendseth.Links:Watch the episode on YouTube: Norges Bank Investment Management - YouTubeWant to learn more about the fund? The fund | Norges Bank Investment Management (nbim.no)Follow Nicolai Tangen on LinkedIn: Nicolai Tangen | LinkedInFollow NBIM on LinkedIn: Norges Bank Investment Management: Administrator for bedriftsside | LinkedInFollow NBIM on Instagram: Explore Norges Bank Investment Management on Instagram Hosted on Acast. See acast.com/privacy for more information.

Hi, everybody. I'm here with Bruce Flatt, and it's really, really an honor to have you here. With $850 billion of assets, you are actually one of the largest alternative asset managers in the world. You've been here for more than 20 years and still going strong. And some people refer to you as the Warren Buffett of Canada, which is a pretty cool comparison. So, pleasure to have you on. Thank you. Thank you for having me. Now, I wanted to start with a big question. So you have identified three megatrends as a firm, decarbonization, deglobalization, and digitalization. So if we start then with decarbonisation, what are the investment

opportunities in that field? Look, the most interesting thing that's going on in the world today is that, and to put it in the most simplest terms, the age of gas and oil fuelled everything. And what we now need to do is take carbon out of the energy system and industrial processes in the world. And really, it's just taking carbon out. And it's not that you have to have no carbon. It's you just have to have less. And the easiest or thermal coal plants is to have renewables. That's the simplest way. But there are many other processes. And we identified early that because we were in the renewables business, that this was

a trend that was happening. And therefore, we're investing very large sums of money behind the transition of the economy. And it's really behind the transition of the economy. And it's really just the transition of companies to less carbon. What type of renewable stuff are you doing? So we started in the water business, but you can't build many water plants anymore. And when wind became economic, we started building wind around the world. When wind became economic, we started building wind around the world.

When solar became economic seven years ago, we started into solar big. We're the largest installer, builder of solar plants in the world today. And when you look forward, what do you think is going to be the dominant source? Look, wind and solar are going to take very large market share. But the wind mostly blows at night, and the sun only shines during the day. So there is an intermittency problem. And what's really important is that batteries become economic to be able to augment when you have power. And the good news is, just like solar and wind, the cost curve of batteries is coming down dramatically.

And that's going to be a very significant thing in the world. So renewables will be dominated by wind, solar, and batteries. But coming on the horizon is hydrogen. And we own Westinghouse Electric, the nuclear business, and I think there's no full transition without nuclear energy around the world. The good news is our big plants, the AP1000 or 1000 megawatt plants, we're coming with a 300 and we're coming even with a 20 megawatt small battery. Can you just expand a bit on the nuclear option?

Because we don't talk so much about that in Europe. No, look, it had a bad reputation for a long period of time. I think unfair. We bought Westing— Well, they did have some accidents. Yeah, yes, yes. But the amount of deaths caused by coal and the amount of deaths that have been caused by nuclear are dramatically different. And coal is much higher.

But the reputational issues are there. But they're getting safer and safer and safer all the time. And because we're building now, we're getting into smaller plants. It's going to be economic. People will be able to build them with less risk. And the issues with them are now largely behind us. And so I think it's going to be very important for the full transformation of transition of the energy system for nuclear to continue to build out. Who's going to finance this whole energy transition? Look, it's the good news today.

And I think this is actually what happened. People say, oh, everyone thought it was a great thing now. And we're going to change and all be good and be green. But what really happened is that solar and wind today in almost every country in the world are the lowest cost energy. And that's what happened. That's actually what happened is economics say, if you have a gas plant or a coal plant, and you have to build a new one, if it's sunk cost, that's one thing.

But if you have a gas plant or a coal plant, and you need to build new renewables, renewables is the lowest cost in almost every country in the world. Is this going to be taken care of by companies which are already on the stock exchange, or you in more like unlisted? Look, I would say, yes, some of it will be companies on the stock exchange, but the pools of money like Norges and that we deal with all around the world, sovereigns, institutions, an enormous amount

of this money that are in these pools is perfect to fund the transition because it's private investment that earns good returns on a low-risk basis, and it's doing well. So these are companies such as us, pension funds, public entities, which give you money to finance the green transition. So we started a transition fund three years ago. It invests in the backbone of the transition. So it's buying, building infrastructure for the transition. And the first pool of money we raised was a $15 billion fund. We're now raising a second fund.

It'll be larger than that $15 billion. And it's all from institutional investors on a global basis. And you think you'll make profits in that fund? Not only are we going to make profits, we're going to make very good profits. This targets 15% returns in the fund. It compounds over 10, 15 years. These are excellent returns on a low-risk basis. So we're going to do good, but we're going to do well. Do you think there is a philosophical question having people like yourselves owning Do you think there is a philosophical question having people like yourselves owning large infrastructure projects? Look, I think… Shouldn't a state do all this?

You can… Sorry for being a bit socialist. No, I would say private… Sorry for being a bit socialist in my question. Private enterprise has proven to be highly effective at building and owning infrastructure around the world. And as long as the groups are responsible, as long as they do a good job. And remember, we own some of the most critical infrastructure on the planet. We own all of the gas pipelines in Brazil, for example.

We own all of the telecom towers of India. 60% of all the phone messages go across our telecom towers of India, 60% of all the phone messages go across our telecom towers. So these are big, large backbone infrastructure pieces. Everyone can't own those. The government and companies make sure that responsible owners have them. But when we own them, our cost of capital is lower than the government. We can run them more efficiently. We can often run them better.

And we want to put money behind them and grow. And it's not that government isn't important. There's a lot of places where government should be involved. But there's a lot of places where private enterprise can be involved. I'd say it's a combination of the two are really important. And increasingly, more and more infrastructure investment is going into private hands. And that's why infrastructure used to be, 25 years ago when we started talking to institutions about infrastructure investments, it was 1% or 2% in their funds or zero. Today,

broadly, it's probably 10%. I think it's going to 15%, 20% of allocations of funds, because these are ideal investments to have in institutional accounts. Why? They're very long term, they're low risk, and they compound good returns. And as you know, compounding 15% for very long periods of time. If you compound, I'll go back. If you compound north of 12, if you're in a 12% return, you compound for 35 years, it's very meaningful. No, not totally.

I mean, we have the fund, you know, this fund has compounded between 6% and 7%. And already that's quite something. And what you say is that the projects you have can compound at twice that rate. Yeah. And as you compound at 6%, and you're abroad because you need to keep a liquidity pool, you need to keep fixed income, so you have a more diversified portfolio. But for a component of that portfolio, if you can compound at 12% plus compound at 12% plus on a relatively low risk basis and not take hits. The difference in returns over the longer term are very, very dramatic. Absolutely. Oh, I can see why they call you the Warren Buffett of Canada.

But hey, moving on to the second topic here, deglobalization. Why is that a megatrend? So I think what happened in the last little while is the world, I'd call it split. And partly due to COVID, partly because of the issues with Russia, partly due to people just saying, I can't have all my production capacity in one place. People just saying, I can't have all my production capacity in one place. And it's almost deglobalization. It was a D. We had to have Ds in our numbers. I see that.

But part of it is it's diversification. They needed diversification, as another D, for their supply chains, where they got goods from, how they shipped, who they were dependent upon. Some of it is, I'd say high-end goods are moving back to places like America. So high-end electronics, super high-quality semiconductor chips, we're building Intels, an Intel fab in Arizona with them. Pharma, at the very high end, is moving back to countries because people are saying, I want my vaccine manufacturing facility here. I don't want it somewhere else. They found that issue when COVID happened. So that's on high end things. But part of it is they're just saying, if we're going to have manufacturing capacity, we can't have it all in China.

And it's not they don't want capacity in China. They still want capacity in China. It's important to them. But they want to have resiliency on countries. So they're building in Vietnam. They're building in India. And probably the biggest one we've seen where the movement is happening is India. There's a big benefit of industrial companies coming into India and calling us with our platform we have in India and saying to us, can you help us build out manufacturing and real estate and other things in the country? Because we need to bring capacity to India. Now, it's more expensive to produce close to home. What do you think it does to global inflation, this particular trend? So here's what I'd say is the

the things that are moving to the very expensive places are just the very high-end commodities. It's maybe a little more expensive, but the IRA Act in the United States is there to help facilitate that. So that's helping. The Inflation Reduction Act, FYI. Where the goods are going in other parts of Asia, the costs are not that much different than what they are in China today. On balance, though, it's inflationary. And it probably puts a little more inflation into the world than you would have otherwise

had. Although you know this better than I do. But five years ago, all we talked about was deflation. So a little inflation isn't bad. The fact is, for the last year and a half, we just had too much. And that's what the Fed has been trying to calm down. When you look at where to place businesses, how do you assess Europe versus the US? Europe is an excellent place.

It's a value market. It's not a value market. It's not a growth market. What does that mean? It's a place where you need to understand your entry point and make sure you don't pay too much because growth is not significant. And why is Europe not growing? Population.

It has a small population. Growth rate is not significant. There isn't large in migration. And I think the entrepreneurialism isn't like America, if I had to pick three. Some examples of lack of entrepreneurialism? I just think it's the bankruptcy laws in the United States are conducive to people being entrepreneurial and starting over again. And they're not as conducive to that in Europe.

Like you go bust quickly and move on. Yes, yes. The bankruptcy laws in the United States, you deal with it, you move on, you come out, you start again. And I'm not saying, I'm not making... You can go bust and still be considered a proper citizen. Still be the president of the United States.

For instance. Okay. Very good. The third one, digitalization. I mean, that seems a bit obvious, but how do you position yourself here? The third megatrend on digitalization is really what you have behind your phone. So we identified, basically our infrastructure business is we move, we're behind the scenes of the global economy. We own all the backbone. And it's on moving people, goods. And years ago,

we identified data. And the data that comes onto your phone, how does it get there? It goes by fiber out of this building we're in. It then goes up to a tower, and it gets stored at a data center. And all those things behind the scene have historically been provided by telecom companies, which are now needing funding to do this, and the big technology businesses. So we're funding all of those things. We're funding fiber. We're building out fiber.

We own the telecom towers. And we're building enormous amounts of data centers, which originally was for cloud. So when you store data off-site versus at your business. Today, increasingly, it's for AI. And it's for machine learning and artificial intelligence that are models that are learning and the amount of data center capacity that's being taken globally right now.

So these would be data centers which would run things like Amazon Web Services. Originally, it was that. Today, it's large language models training. Yeah, yeah. And the amount of capacity being taken for that is almost unprecedented than anything we've seen before. Yeah, I saw an article saying that it could account

for 3.5% of world's electricity consumption. It is dramatic. The only good news is it's all green. And so our renewables business is providing enormous amounts of green capacity. 10 years ago, most of our capacity got sold to the grid. Now, most of it gets sold to corporates, a lot of it to the technology companies that are using it for green capacity. Most of the technology businesses have committed to net zero. In fact, Microsoft's committed to not only net zero, they committed

to take out all energy usage and make it green from when they started. So they have a very dramatic movement, and all these companies are taking large amounts of green capacity from us. Are they the ones doing it because they have so much money that they can afford it? Look, again, I go back to economics. They're doing it because they think it's the right thing, I believe. But in addition, renewables are the lowest cost generation in virtually every market today in the world. Economics drive many things.

It's nice to say, we're going to do the right thing. But 10 years ago, we used to try to get people to do the right thing, and nobody did. Today, it's the most economic power power and therefore, they're doing it. Now, you say economics drive a lot of things. And you also said that you are seeing more inflation. Now, how does inflation change your investment outlook generally? So look, I would say the good news is today, maybe to start off with, is the Fed's actually done a very good job bringing inflation down. And the global central banks have cranked up interest rates, as you know, and they've

tamped down inflation. So inflation is more or less getting under control. So we're not having 1970s out-of-control inflation. We might have had that, but we're not going to have it. You don't think we'll have it? No. No, I think they've done a very effective job of tamping down inflation. For many of our businesses, it's actually a positive thing.

Because for example, infrastructure, we get paid a stream of income, and it gets adjusted by CPI monthly, quarterly, annually. CPI is the price increase. Yes. So inflation, we actually get an inflation adjuster. So if you had fixed rate financing, the interest costs are the same. The revenues are going up because of inflation. So many of our businesses actually, they're positively disposed to inflation.

But you're also a big player in the property market. And this is not good for your real estate. So what I was going to say is the place where it affects us and affects groups like us is that higher inflation has meant higher interest rates for the time being. And that has affected the values of assets. The only thing I would say to you is, first, a lot of property is financed with long-term mortgages. Therefore, the interest rates are the same as they were before. And secondly, it's the coupon that's relevant, not the Treasury rate.

And the coupon is the combination of both the Treasury rate and the spread. At the bottom of the market, spreads were very high, and today, they're less high. The all-in rate is not that far off. What's more important to real estate is good real estate today is really great, and bad real estate is terrible. This happens- We're sitting in some pretty swanky offices here in the Hudson River. So this office where we are, it's 10 million square feet. It's 100% let. In fact, this office

right now, you can see it's a pretty nice office. We have to move because we don't have enough space to expand one of our tenants. And we're going to give them our space. But we have 30 million square feet in the city. We don't have another space to go to. So we're struggling right now to figure out where do we put our own offices because we're so full. I'll tell you one thing, Bruce. We actually have some vacancy you can take at Norris Bank. We own some properties, and I may have got something for you.

We can make a deal here afterwards. But I think the point is high-quality space is very highly sought after, and rents are very high. But if you have poor space, poorly located in the wrong spots or in the wrong cities, it's very bad. So you have a lot of different things. You've got property, you've got infrastructure projects, you've got all kinds of things. So now I'm going to give you $1 million.

Where would you want to put it? Look, we have been a believer in diversification. You can't spread it out. You have to put it into one thing. Where would you put it now? Am I a sovereign plan or an individual? You are getting it as an individual. I'd buy infrastructure and compound for the next 25 years at 14%.

The transition, the energy transition. Okay. Moving on a bit more to private markets generally, how have private markets changed since you started in this business, i.e. the unlisted part of the economy? Look, our business is almost solely private markets. A group like us didn't exist 25 years ago. When I started out trying to take, we were an operator of industrial businesses. We ran infrastructure, power plants, and real estate for ourself. We just invested on our own behalf. And our business evolved the way it's evolved because we decided we needed to grow and we

wanted to be international and where could we get the money. We would introduce partners with us into deals. And we started that way and then we created funds. The way we think of it is we invest our money in these things that we do and we bring along partners with us. So you and 150 other partners might come into our infrastructure fund or our private equity fund or a real estate fund and it's 20% our money from our balance sheet and 80% your money. And we're buying these things. OK. So we are in the boat together.

We're in the boat together. That industry didn't exist 25 years ago. And what's been created is something really, really interesting. What's been created is something really, really interesting because now, outside of the public markets, you can come with us and you can own private assets and private businesses in a systematic basis with us or others like us and own those assets and earn greater returns than you can in the public markets, or possibly be more assured of the outcomes versus the public markets. Why? As you know, the public markets, the value of businesses is this price. And the price of them goes up and down in the public markets

based on information that may or may not be relevant to each business. Whereas in the private markets, when you and we own something, we control our outcome. We bought a business. It generates cash. We're growing it. We know exactly where we're going. So do you think this will be sustained going forward as well in a higher interest rate environment? Yes.

Yes. This is not stopping. Interest rates are still very low. Everyone focuses on they're higher than they were two years ago. Two years ago was an anomaly. Today, they're moderate interest rates. And they're too high. They're going to come back down a little bit.

But they're in the range of moderate returns. What we earn in the private markets is on the low end, we're in 10. The high end, we're in 25. What are some of the things that you can do in the unlisted market which a public listed company couldn't do? So for example, when we run a private business, we do not necessarily care what the quarterly earnings are. What we care about is the long-term value of the business, how we create customers, how we build the business, how we grow it, how we invest into it. And all of those things sometimes are in contrast to what quarterly earnings tell people they

should be doing. So when you're a public company and you miss your quarterly earnings, sometimes it's terrible in the public markets. And therefore, people make decisions. I'd turn it around. People make decisions when they're in the public market, which are not in the best interest of the business. And when you're in the private market, you are only focused on what's best for the business. How do we build the best business,

make the best returns, have the best client service. And if you do that, in the fullness of time, it will convert to cash flows, and you will grow the value of your company. You are not the only ones doing this. You are up against competition. So how do you differentiate yourself against the likes of Blackstone and so on? So everyone in business should try to have some way to differentiate their capital. Otherwise, it's just capital. And our strategy over time has been we're very global.

We're in 35 countries. We've built out a system to be able to invest in places and be value investors around the world. And often markets change. You asked about Europe earlier. The United States, they all change at different times. Our size gives us a scale that not too many others can compete with. And we came from an operating background as industrial owners of businesses. And therefore, these are businesses that we run so when we say we're in a business often we've been in this business for 25 years 30 years 40 years

and it just makes us different so it's not like we're buying a business being in it for a little while and it goes away we've been in the renewables business for 40 years. And there may be plants that we've owned, built, sold, but the business and the people, the 3,000 people that run our operations are Brookfield employees, and they don't go. And so the way we operate is just a little bit different. And we're a partner to the institutional clients, because we put a very sizable amount of money that we've built up in our holding company beside our investors. So we eat our own cooking as well. There has been historically some criticism of lack of transparency in this industry.

How do your clients know what you actually do? of transparency in this industry. How do your clients know what you actually do? So what's really interesting is every quarter, we give the numbers on each of the businesses we own with our clients. We take them through it, and we actually do valuations. So quarterly, annually, we do audits. And so we have 100 in each one of our businesses, each one of our assets.

We have 150 partners who are looking at the numbers. And they're combining it into their results. So when you're a partner with us in a fund or an investment, you get the same results we do. And you see them every day. And you see the full inside details of everything going on. So, in fact, it's almost the opposite. It's highly, highly transparent. Is it more transparent than it was 10 years ago, 20 years ago?

I think what it is is we get better all the time. We're learning. Remember, this industry started from nothing 25 years ago, and we're getting better every day providing information to clients. An investor in your fund gets full insights into what you do and the value of each part of it. Yeah. Each one takes advantage or capitalizes on it different, but some of the large ones sit

on the boards of our companies with us. They're very, very involved. What about ESG? So E, S, and G are all different. Absolutely. The E is really the transition. I'd say it's extremely important. Yeah.

The governance, look, we operate with the best and most sophisticated institutional investors in the planet. You know how you apply governance in your fund. The funds in the world are getting more sophisticated all the time. They're our partners. We need to have the highest governance we can possibly have. We can never afford conflicts. We can never afford to have a situation where there isn't transparent information going to them. You know, we make mistakes from time to time. We've got to be very forthright with them. So I'd say governance, we operate at the highest standards

in everything we do. What do you think about the efficiency in the boards that you have compared to the listed companies? What do you think about the efficiency in the boards that you have compared to the listed companies? Look, if I look at a public company we have and a private business we have, the public companies we have, and we try to operate as close to a private one as we can when you're in a public forum, but a lot of it's about governance and quarterly results and things that are going on. In a private company, all we're doing is how are we driving value? And that's really the difference.

How do we drive value out of a business every day? What are we doing with clients? How do we focus on the business? Are we expanding? Can we grow? What money can we invest into the business? So you think these boards are more efficient? Yes. Yes.

Yes. And there's many things we can do in a private business. And I'll give you an example. We're trying to buy a business in Australia which has, it's in the energy transition, and we're going to, today it distributes electricity to 2 million homes. Its production of electricity is all by thermal uses, coal and natural gas. Over the next 10 years, our plan is to buy the company, privatize it, and invest $20 billion to build renewables and at the same time shut down the coal and gas plants. We're going to green it. and at the same time shut down the coal and gas plants.

We're going to green it. It's not possible in a public form that you could have a business that has a $6 billion market cap invest $20 billion. And every year for the next 10 years do a $2 billion equity issue. It would just be impossible to do it in a public form. Because it doesn't accord to what the public markets want in a security. And therefore, in private, we can do that. And I think it'll be an exceptional investment for our private clients. It's something that's almost impossible to pull off in the public markets. And I think increasingly, that's what's happening with private markets.

And that's why private markets are really important. And that's why they're growing and growing in institutional accounts. So, Bruce, you do all this work, you create all this value, but there is a perception that fees in this industry is very high. So, the first thing is we have hurdles that we have to meet. So if we take capital from an institutional investor, they get an 8% return. And they get that no matter what. If not, if we don't get that, we don't earn anything. So in the case where we only earn an 8% return, which I think the hurdles of your returns in the fund are around 8.

So by investing with us, you can earn 8. We don't get anything if we don't get 8. After that, we share. Some of the upside is shared with us. And it depends on transaction and type of investment. But there's a sharing of it. And only if you earn, we earn something. And therefore, there's close alignment between them after eight.

And so I think it's been structured to be in a situation where you're going to get a minimum, and then we're going to share in some of the upside. in a situation where you're going to get a minimum, and then we're going to share in some of the upside. And I think on a net basis, the returns have been excellent for those that invest in private markets for a long period of time. Absolutely, absolutely. There's also something called co-investments, so investors can put in additional investments on the side, right?

So many of our funds are large, but we have the largest institutions in the world with us. And the reason they come into the funds is because we also generate large co-investments beside the funds. And often we're bringing in those clients into direct investments with us. So for example, we just bought a payments company in our private equity business.

And 30% of the money went in our fund, and 70% of it went directly to our partners in the fund as co-investment. And much less or no fees get charged on those co-investments. Do large investors like us get better fees than small investors? Yeah, so the way it breaks, if you're putting small amounts of money in a fund, you're going to recharge X. Large investors who put large sums in drive much better terms, and the fees are the least.

What is a good time to enter the private market? MICHAEL GREENSTONE, I think actually 2024 will be a great time to invest in private markets. 2021 would not have been the right time because money was free. It was sloshing around the world. And right now, the banks are constrained. Transaction activity is lower. Institutional investors are struggling. Sponsors are struggling to get raised money for institutional investors, in some case because of constraints on their capital.

Therefore, that's a time when private markets are the right time to enter. So I would say at this point in time, the vintages starting right now for the next 24 months will be excellent vintages in almost every sector that you invest into. So this is a very good time to be entering in if that helps. Is that something you say every year? Look, I would say that's a good question. I would say private markets in general have been, people should have been and have been allocating more money to private markets for the past 20 years. I think it's going to keep going for another 20 years. So the answer is yes, although some vintages are better times. They're just better times to invest. When markets are tougher, when there's banking markets, when credit markets are tougher, you just get better deals.

Yeah. Because there are a lot of negative articles in media these days, which I always think is good news, right? It's good news. And so I would just say it's the interest rate chaos, the war, like leave aside all the situations that have happened. That creates animosity. It creates confusion out in the markets. And people are not sure where things are.

And therefore, capital is less freely available. The banks are constrained because of their own financial situations. And that just means valuations are better. Entry point in investments is extremely important. Bringing us on to your investment style. So there was an article in the Sunday Times where you say that your guiding principles are to buy cheaply and having patience. Now, buying cheaply is pretty obvious, but tell me about the patience side. You know, buying cheaply is not

exactly obvious because you're never sure what's cheap. And I'd say that's the most important thing of what we do as a business is we're assembling information all the time and trying to figure out, is it different this time or is it the same? And what information do we have? But once you're into an investment, what you can't do is give up. You have to have your convictions because often the best investments are ones where they continue to go down. And the markets continue to be tougher. But once it turns, you have to have the conviction to stay and be invested. And it just takes patience. It takes patience, fortitude, and actually being around. Investing is one of the few things in life where you get better as you get older.

Are you more patient now than you were when you were young? Yes. Isn't that really odd that we are young and we feel we are in such a hurry despite having a long time left, and now we are approaching death and we suddenly become really long-term? we are approaching death and we suddenly become really long term. What's interesting is you in golf, your score goes down. Tennis, your score goes down. Racquetball, your score goes down. Everything gets worse as you get older. Walking, running, whatever it is, it gets harder. With investing, you've just seen it. And everything isn't the same,

but it's similar. And what we try to do is have a combination of, I'll call it, older executives who are around and younger people that can drive the business. And it's a combination of having that, the amount of people with knowledge from the past with young people that can combine the aggressiveness and drive. So you became CEO when you were in your 30s, and now you are no longer in your 30s. So what's the main difference between the young Bruce Flatt and today's Bruce Flatt? I would say I am similar to before, but I do different things today. We're training a whole new generation of people that are coming through the business, and they will eventually take over this business. And the day that nobody knows my name and doesn't want to talk to me and wants to talk to them, I will have done my job. How do you train them?

On the job. They're in the office all the time. We're working together. We're learning. We're, you know, we're, they're working on deals. They're making mistakes. What type of people do you hire? We hire people that are passionate about business, want to work hard, of course, probably are above average smart, but mostly have an EQ that allows them to deal with people and to grow a team. And teamwork is probably the most important thing. And with EQ, you mean emotional? Just the ability to deal with people.

That's really, really important, especially in large businesses with large groups of people. You say you're in the office all the time. And you personally really are in the office all the time, aren't you? We have been in the office all the time. We have a view that the office is important. The interactivity of people within the office is important. And so that's a part of our culture. But I mean, you personally also work all the time. Yeah, look, I have a history of liking to work. It's something I enjoy. And I would say it's different today than it was 30 years ago. Yes, I was in the office all the time. Today, I'm working all the time, but it's different. It's client management.

I'm doing podcasts. I usually heard you're doing well. I'm at client management. I'm flying to a conference in some country to be with one of our clients or a number of our clients. That's working, but it's different. It's really interesting because the thing that allows you to transform a business is about learning and meeting people, but you get to do amazing things. And that's one of the great luxuries of having a position like I have. Why do you work so hard?

It's fun. It's fun. The minute it isn't fun, I won't do it. And what is it that makes it fun? The people that you deal with every day. The sophistication of the clients and what they want to do. Accomplishing things that others may not be able to do. And building businesses, which some of them are incredible.

Like some of the things we do and accomplish. And we have a business in Brazil that delivers water to and takes sanitation from 17 million people a day. Before we were there, they didn't have proper water. That's an amazing business. We're changing the lives of people, and they're surviving today greater because they get clean water and they get their sanitation taken away. There are some amazing businesses that we have and invested in that are changing the lives of people. And that's what's exciting.

And we can control the outcomes and grow the businesses and, again, do well, but also do really good. You talk about the importance of having a winning culture. What does that mean? What does that mean? Look, our people want to be in a successful place. We try to have teamwork of people. We try to have teams of people, but we want them to win. We want them to be successful for our clients, and we want our clients to be successful. All of that together is just, I'd say, a winning culture. How do you spend your time? It's changed over the years. Probably a third

of my time is client relationships, client and relationship related. I'm trying to solve at a high level for a client the things that we can do for them that can make us different and help them out. A third is people, internal things we're doing, people related. I call it business related. And a third is I sit on all our investment committees, and I'm the final say, or once in a while, I actually get involved in a deal. One of our teams, the most exciting thing for me is one of our teams call me and say, we need help with XYZ company, CEO, we need you to come with us. That's an exhilarating thing. I used to do that every day. And now it's fun to do it sometimes with senior groups around

the world where they need my help. You say somewhere that you think employees should make small mistakes daily. What does that mean? Nobody's ever perfect. And unless you make some mistakes, you're not pushing the edges. Because if you have a culture that says you can't make mistakes, what it means is that you'll never, no one will ever take a risk. What we want people to do here is to take measured risks. Never bet too much that that measured risk on any business, fund, investment, company will ever harm any one of them. But small risks mean that you're going to get better over time. And I say that because we want the culture of the place to grow, excel, try things, and be better.

to grow, excel, try things, and be better. And by allowing small mistakes and not judging them is important. You said that one day when nobody remembered who you were, then you'll have done your job. But you do want to leave a legacy behind, I suspect. What kind of legacy would you like to leave? Look, we're trying to build Brookfield, and this is not just me. This is a group of people that have been with me for a long period of time.

We're trying to build Brookfield into one of the great alternative investment managers on the planet. And we're going to keep doing that. to build Brookfield into one of the great alternative investment managers on the planet. We're going to keep doing that. The group coming behind us is going to do the same thing. The legacy of ours is going to be that the next generation is going to be better than us. If we can make them better than us, this will be an unbelievably powerful organization for a long period of time.

What do you read? I read business books. I like books on culture. I read a book on cryptocurrencies recently just because someone's I get books. I don't know if you get this, but I get five books every week sent to me. So I picked them out and I picked one out on crypto. I work in the public sector, so I have to buy them. It was a really good book but I like culture of countries and ethnicities and so I read a lot of books on culture. And what part of culture do you find particularly intriguing for the time being?

I find, look, everything that goes on in the Middle East is very interesting. Interesting may not be the word that everyone puts to it, but I read a lot. I love to learn about, I'm a North American, so I understand North America, but I've traveled in my job as a luxury of it is to travel to most countries in the world. And each one of them has its own distinct culture and environment. And I love to learn about them. But you talk about culture and you say you were a North American. I mean, a North American is not a North American.

Isn't that Canadian different from a US person or not? I would say, you know what I've learned over the years? And I've lived in many places. I've lived in New York for a long time, London part-time, spent time all over the world. People are all the same. They're all the same. Everyone wants the same things really in life. They do it a little differently. There's cultures a little different. Yes, Americans are a little different than Canadians. But at the root bottom of it, people want the same things. They want their children to be educated, to do well. They want to earn an amount of money.

Some want more, some want less. And they just want to be successful in what they do. Well, Bruce, you say everybody's the same. I'm not sure I quite agree with that. I think you have done something really, really special here. You know, big congratulations. Thank you.