683: Professor of Finance at Copenhagen Business School, Jesper Rangvid, on the End of 40 Years of Falling Interest Rates

0:02And when there is no vision, the people perish. We choose to go to the moon. If today were the last day of my life, would I want to do what I am about to do today? Change will not come if we wait for some other person, or if we wait for some other time. We are the ones we've been waiting for. Welcome to the Strategy Skills Podcast, where strategy partners teach you the tools and techniques to solve mankind's greatest problems.

0:47Welcome to the Strategy Skills Podcast. I'm your host, Krista Farova. And today we have a podcast sponsor, strategytraining.com. And we have some gifts for you. You can download the overall approach used in well-managed strategy studies at firmsconsulting.com forward slash overall approach. You can also get McKinsey and BCG winning resume, which is a resume that works very well for those firms, but also for pretty much many, many major organizations outside of consulting as well. And you can get it at firmsconsulting.com forward slash resume PDF. And today we have with us very special guest Jasper Ranvit, who is a professor of finance at Copenhagen Business School.

1:30I'm in Copenhagen now. And we actually were supposed to meet in person today and do this interview in person, but something came up. And Jasper actually also an associate dean of the executive MBA and co-directs the Pension Research Center. and he chaired the Danish government committee that investigated the causes of the financial crisis, known internationally as the Ranvit Report. And he's the author of a new book called How Low Interest Rates Change the World. Jesper, welcome.

2:03Jesper Rangvid: Thank you, Kristina. Thanks a lot. It's an honor to be with you today. Let's start with an overview of your journey. How did you end up getting to a point in your life right now? I've been in academia all my life. So that means I've been doing the academic way. That is after my graduate studies, after my master in economics, I did my PhD and then I stayed at Copenhagen Business School doing the academic career. And then at some point, having written enough scientific articles to be able to be promoted as a professor. But luckily, I think I have been so lucky that I have also been able to engage substantially with, so we call it the outside world, the real world or what we want to call it.

2:57Jesper Rangvid: So both with public organizations, with governments and so on, but for sure also with private organizations in many different roles. So I do consultancy. I sit on a number of board of non-executive directors. in different companies and so on. And for me, this interaction, if one may say so, between academia and the industry, this is, I think, extremely rewarding for me personally, for sure, but hopefully also for the industry in the sense that I can come with some academic knowledge and we can have feedback and we can have dialogues and so on. So, yeah. And you studied outside of Copenhagen as well, outside of Denmark.

3:47What were your experiences like once you went outside your home country and what made you come back as well?

3:55Jesper Rangvid: I did part of my PhD in Germany, in Bonn. It's a university with a very good economics department. So I was in Bonn actually one and a half year during my PhD, which was a fantastic experience actually. and then afterwards I've been two times in Spain and Barcelona associated with Pompeo Fabra University in Barcelona and again a fantastic experience I mean of course it gives a lot being away from home so to say cultural wise and so on but of course also academically and so on you learn in different ways and you also study different questions and so on but I think to some extent And I think what's the most inspiring thing is simply that being abroad, right, is just an amazing thing and seeing other, talking to other people than those you see every day and learn from them.

4:52Jesper Rangvid: I think that's amazing. Jasper, and as you were building your career, do you think there were certain key trade-offs that you accepted that most people would not accept to become a professional in your track? There's no doubt that I have prioritized spending quite a lot of time on engaging with, let me call it the rest of the world, meaning as a non-academic industry and so on in society. I spent quite a lot of time on talking to journalists, being in the media, and again, helping companies in different ways. And it's for sure not all academics that do that. Many academics, they stay in academia and they perhaps even become better academics than I am, for sure, because they use even more time on that.

5:43Jesper Rangvid: But this is a clear choice I made at some point that what I want to use my life for, that is facilitating and bridging the gap between academia and the industry. And that has, for me personally, been, again, extremely rewarding. I've received a lot of offers. So it's been extremely rewarding, extremely interesting. But for sure, you also sacrifice things, obviously. For instance, some of my colleagues, they can spend even more time on that academic article that I cannot spend because I do different things. So that's a clear priority that I have made. Do you remember a moment when you made this decision to allocate quite a lot of time to engage with real world?

6:32I don't remember exactly one moment, but I remember one episode at least.

6:38Jesper Rangvid: And that was the first time I was in TV. So the first time I was in Danish TV, which is now more than 20 years ago in the early 2000s. So a long time, many years ago, I was in TV and I was asked to, I'm not exactly sure. I think it was about house prices. I'm not exactly sure what it was about, but something. And then it turned out that I was actually pretty good at explaining difficult economic and financial concepts in ways that people could understand. And so that was the first time and where it became clear that this is something I find interesting and something I can do. and that then started that whole process, you can record it, or experience.

7:23Jesper Rangvid: And then people asked me to comment on this or comment on that and so on. But yeah, it was an eye-opener sitting in the TV because of course the first time you're in TV, at least I was a little bit afraid and so on. What is this, a national wide TV and so on. But it worked well and I thought it was very interesting. And it is definitely a skill we need more in the world, because so many times even on TV things are not explained. It's not even a problem that they explained in a bad way, but a lot of the important key points are not mentioned, so people cannot have an informed understanding of the issues.

8:04Jesper Rangvid: Yeah, exactly. And I agree very much on that. I agree very much on that. I think it's important to my role. I'm not a politician, right? So I'm not out there to influence people in a specific direction, or at least that's not the primary goal. The primary goal is to explain things and to help people understand things and companies and so on, of course, and then make decisions. And I agree, in times we're living with very fast news and social media and so on, it's also important that we have things like we're doing right now. a deep dive and a comprehensive discussion on certain issues. And the listeners who will understand us the most are the listeners who are experts on certain area and then can see how it is presented on TV.

8:59And they can then see what is the glaring gaps that leave people who are not experts with no choice, but having misunderstanding about what is going on and how to think about certain issues. as you were going through all these experiences and exciting projects and commitments and work you have done so far. What do you think were some key lessons you feel comfortable sharing along the way that really changed how you approach things?

9:27Jesper Rangvid: I mean, again, of course, again, if I may say so, I'm an academic. That is my, that's where I start from, that's where I come from. and as an academic what you do as an academic is you build models they don't have to be mathematical models right but but you build models you build chains of argumentation chains of reasoning if i do this then this happens and then this happens and so on that's what i mean by models um and and to be able to sometimes put aside those models and think more broadly. So where you're not 100 % sure about the question, because it's a little bit outside your quote-unquote model, that can for many academics be outside of their comfort zone.

10:15Jesper Rangvid: So this is something that you have to learn. It's something that many people do and many people are good at. But in particular for academics, that can be a little bit difficult because we're in that narrow field. We deal with that narrow question, whatever that is. And then that's where you're an expert on that particular narrow question, but then sometimes it can be a little bit difficult to broaden the perspective and talk about something else. So this is something that I've learned to do, of course, but also something that I had to train. Definitely. And you have so many opportunities coming your way because you are in two worlds at the same time.

10:53How do you decide what not to do and what to prioritize?

10:57Jesper Rangvid: that's awesome it's very difficult of course it's a very broad question if I may so I mean so so so so so in the beginning when you're young then you think you can do everything or at least I thought I could do everything or a lot of things at least and then at some point you realize you cannot do everything there's simply only 24 hours a day and seven days in a week and so on. And that's where you then have to start prioritizing, of course, what is it then that you can do? And sometimes I think that's for all of us, right? I mean, that you have short-term deadlines and you have long-term challenges and opportunities and always prioritizing between these two things can be difficult.

11:45Jesper Rangvid: We have this and this and this and this and this deadline coming up right now. So this is what we tend to prioritize because it's right now we have to do it. Even though perhaps that other question reserves more attention, that other bigger question that lies out there, that other bigger thing that lies out there, but you don't give it enough attention because there are so many daily deadlines. I think that prioritization is extremely important. And for me, at least, it's something that you learn along the way to say there are some things you say no to. They might sound interesting on the short run, but actually they're only interesting on the short run.

12:24Jesper Rangvid: They're probably not particularly relevant on the long run. Then you need to prioritize your time. And I think it's something that you learn along the way to try to distinguish between those things that are really important and those things that are less important. And for our listeners who don't know you, you're also a runner. So you have a third point because how many people can dedicate serious time to be really good at a certain sport-related activity. So that adds additional complexity. A question I wanted to ask you is, what have you deliberately removed from your life to have time for all the things you decided are important?

13:01Jesper Rangvid: There's no doubt. As of 10 years ago, I'm of course from Denmark. So I'm mainly in the Danish news, Danish newspapers, Danish TV, Danish radio, and so on. also international, but of course mainly in the Danish. And there's no doubt that 10, 15 years ago, I was a lot in the media. So I was really, really, really a lot in the media. So I really did a lot, a lot, a lot of interviews on a daily basis, talking to two or three different media outlets, one or two newspapers, radio, TV. I mean, it sounds very interesting maybe. and it is when you are in it, it is interesting because yeah, you talk and so on but I have very deliberately scaled a lot down on that it simply takes too much time so I'm still giving interviews and so on but compared to 10 years ago, 15 years ago much less, so I simply spent much less time on that I was a I was recognized when you're down in the supermarket and wherever you are outside because I was a household name simply in Denmark 10-15 years ago.

14:19Jesper Rangvid: But I'm not that anymore simply because I've decided it just takes too much time simply. It sounds a little bit privileged, I know that, so saying it like this, but yeah, I've been there. I've done that, so yeah. Did you enjoy being recognized? What were the pros and cons? I think some of our listeners would want to know. Yeah. No, of course, you feel this demand for you. And I think we all like when people, when you're sought after, whether it's family, friends, in your daily job. Of course, everybody likes being sought after, and people are asking for your advice, asking for your help, or asking you to do something.

15:04Jesper Rangvid: And so I think we all like that. So I think so. I think we all like to be in demand from where I understand. So that's, of course, fantastic. It's, of course, fantastic when you're in high demand. That makes you proud and it makes you humble also and so on. So that's really great. But it can also just take too much time. So, of course, to some extent, it's nice being recognized on the street. People are saying, you're doing it well in TV. I saw you yesterday evening and now I understand it. and so on. Of course, that gives you a, I mean, it's not salary or anything, but it just gives you a certain personal satisfaction or you become happy.

15:44Jesper Rangvid: But at some point, is it really worth all that time? And that's a decision I made, at least, that I don't have to be that much. You basically were a professor for entire country on that topic. Yeah, to some extent, it's true. what running gives you that made you prioritize it in your life i think this you know thinking about what is really important so what is it what was really important uh what is it really that you want to achieve i think that so that can be an engagement with a company right that you really want to help that company or or yeah or or big bigger projects that that yeah that they get the time they deserve.

16:32Jasper, and you are a serious runner. What do you think are the key benefits that made you select that type of activity, physical activity versus other options?

16:44Jesper Rangvid: Running is, you don't have, you can do it exactly when you want. So it's extremely flexible, right? As you just go out your house door and then you start running. So it's very flexible. And so I think that's the main argument. It's extremely flexible. You can do it exactly whenever it fits into your schedule. Yeah. And then I just like running. You don't have to plan to do it with anybody, right? You can just do it when you want, in the morning, afternoon, or whenever. So this, that you can do it. Yeah, so flexible, I think that was actually. And then, you know, I just like running. I don't do anything when I run.

17:23Jesper Rangvid: I don't listen to podcasts. I don't have earphones on. I don't do anything. I run on my own. So for me, it's a time of reflection, right? So you just run and nothing else happens. So you can think about things when you run. Many of us, probably everyone experienced aha moments in the shower. Would you say that running for you is something similar? Do you feel there are moments like that when you have those aha moments? Yes, absolutely. So absolutely. So I use running to think about things. So think about, you know, yeah, the things that we all struggle with or think about, I think about them when I'm running.

18:09Jesper Rangvid: So yes, and then, you know, you run there on your own, and then you have, as you say, that aha moment. Oh, that's how I should do whatever it is. So yes, yeah, that's true. Would you say that running for you is the go-to activity if you need to get to aha moment on a particular point, a particular issue? Yeah, to some extent. To some extent, yes. It really is this when you're running, so an hour or two or even more. Then you have to think about things and there's nobody to disturb you and so on. I love it. I do it during lawn walks. I noticed if I have something important to decide, if I go alone and I just think through the issue, eventually I will get to something that just will blow my mind.

19:02How does it happen for you? Does it take quite a long time? Is it the particular steps that need to lead generally to that moment when everything clicks?

19:12Jesper Rangvid: I don't know if I have a specific recipe for that. It really is. You think about that thing that it is that you're thinking about or that challenge or whatever is the problem that you're having. And then when you run, you have time to digest it from different angles, right? And then, yeah, and sometimes you get a good idea and sometimes not. Then the problem still hangs around when you come back. But I actually think very often that you get things thought through. I agree. Definitely for me, the same way. I have to think about it from different angles to a point that if I was having a conversation with someone, they would get bored.

19:50It's too much time spent on a topic. but when you're alone you don't need to please anybody you can just focus on what needs to be done to solve an issue exactly exactly are there any things that you observed adapted that allows you to get into a deep work mode when you need to really do something that requires deep concentration and really getting into a state of flow i don't have any specifics so so but of course

20:20Jesper Rangvid: So, no, I have nothing specific. I mean, I would say, I mean, those periods where you have to concentrate, it works for me best working from home, no doubt about that. So it's really just, you know, where you have to do concentrated work. Then for me, at least, even though I have an office where I can close my door, I don't have a shared office, even though I can close my door in my office, working from home is more productive in these moments, you know, where you really have to think. But that's different from person to person, of course. I 100 % agree. An ability to be somewhere where you're not going to get interrupted.

20:59Because once you're in that state, you need to leverage that. It's a magical time. So you recently wrote another book, Congratulations. How did you select the topic?

21:10Jesper Rangvid: I'm a professor of finance. And when I'm not engaged with the outside world, it's always about finance. My area is finance and finance in markets. So that's, of course, to some extent, the starting point. And then I have often, when I've been teaching, when I've been teaching both undergraduates, graduates, and executives, and so on. I mean, of course, the interest rate is an important variable, if you call it like that. So when companies borrow to finance their investments and so on, of course, the interest rate plays, of course, a very important role. And then I've been thinking for a long time about this stylized fact that interest rates, they have been falling since the early 80s until right after the pandemic.

22:04Jesper Rangvid: So for 40 years, I've been thinking, I've been talking about that. I've been giving speeches about that and so on. And then, yeah, and then I thought it was actually so important that this became the topic of my book. So it actually started from speeches and teaching and so on that I discussed this, but then actually I thought it actually had such wide-ranging consequences and so on that I decided to write a book about it. Of course, it's a very important topic, and people need to understand this a lot more. And I'm so glad that you are there to explain things to people. Maybe you could cover some of the key things you feel people don't understand.

22:47Specifically, many of our listeners would be the type of leader that are in your executive MBA programs. So what do you notice when people come to do executive MBA, they do not yet understand about interest rates?

23:00Jesper Rangvid: I think, so if it's okay, Kristina, I think just very briefly, tell very briefly about the book, because that will help me explain or answer your question. Of course, and it doesn't have to be brief all the time you want. Thank you, Kristina. Thank you. So the title of the book is How Low Interest Rates Changed the World. This is, of course, a very, very dynamic title or what you want to call it, a broad title, Change the World. It's, of course, really big words. I'm very much aware of that. But the point is that things that we discuss a lot, both among households, ourselves, our friends and family, but certainly also, for sure, among executives, are things that I think are very much influenced by the interest rates.

23:51Jesper Rangvid: And that's what this book is about. Let me give you a couple of examples. So we have had a period also during these 40 years where in many, many, many countries, house prices, they have just been going up. So that has, of course, meant a lot if you are in the construction sector, if you are a bank and so on, that you have to finance construction activities and so on. So this fact that house prices just have been increasing in many, many, many countries for the last many years, three, four decades. We have had that in basically all countries to a large extent, at least many developed countries, advanced countries, US, Canada, Europe, and so on.

24:31Jesper Rangvid: And my point in the book is to say one of the main reasons why we have seen this long period of rising house prices is because interest rates have just become low, under, under. And of course, when the interest rate is low, it's relatively cheap to borrow. and that means when it's relatively cheap to borrow, then you can take out a bigger mortgage and you can buy a more expensive home and that pushes up house prices, which of course creates a lot of problems. We have young people today who would like to enter the housing market, but they cannot afford to buy a house because house prices now are just too high in many areas.

25:05Jesper Rangvid: So this is one of the things that I discuss in the book, which also of course matters for executives. I mean, of course, the main direct implication of all this for executives, that is for the cost of capital. So what does it cost to raise capital? What does it cost to borrow if I need to borrow to finance my investments? And I think, so I discussed this, why have interest rates fallen and all that. But I think the main, to some extent, lesson probably for an executive, that is that we have had 40 years of falling interest rates. this was a completely unique historical period. We have never before had 40 years of falling interest rates.

25:48Jesper Rangvid: So if you are an executive during the 80s, the 90s, the early 2000s, and you just saw it just became cheaper and cheaper and cheaper to borrow, meaning you can justify more and more investments because the cost of capital just goes down. That development was very unique and means that that's not a development that you can expect going forward. So I think that's an important lesson for everybody, but also for executives. 100%. And maybe you could explain to our listeners why half-interest rates were falling during that period. Yes. So of course, I discuss that in the book. And you can say that there are a couple of things.

26:29Jesper Rangvid: the first clear thing is that inflation, meaning how fast prices in society are rising, how much more expensive is it to buy bread and butter, basically, right? So how fast are prices rising in the economy? And in the early 80s, so 40 years ago, 45 years ago, inflation was very high, right? Inflation was often 10%, 15%, 20 % in many countries. So inflation was very, very high. And then we have had a long period up until the pandemic We had up until 22, where inflation just was falling and falling and falling. And when inflation falls, then that also means that interest rates fall, because interest rates, they consist of both what we call the real interest rate and then a compensation for inflation.

27:16Jesper Rangvid: So lower inflation has been an important factor driving down interest rates. Other important factors have been that we are living in lots to do with demographics. So with demographics, so we're living longer and longer. That's great. Of course, fantastic. We are getting older and older. We are on average, of course, life expectancy goes up and that's just nice. But it, of course, also means that you need to save more for retirement because then for many people, that also means that they will be retired longer. And for interest rates, that means that there are more savings in the economy. We save more for our retirement.

27:58Jesper Rangvid: and savings, they push down interest rates because when we save, we, for instance, buy a bond and then we push up the bond price and that means a falling interest rate. So demographics, this fact, this stylized fact that we live longer and longer also has been a contributing factor to lower interest rates. Thank you. And of course, we still have the situation with people living longer, but other things are pushing inflation higher. Can we speak about what is happening now? Yes, absolutely. So absolutely. And that's actually quite fascinating because I actually started, if I may say, just a personal reflection.

28:38Jesper Rangvid: I actually started on the book, writing the book in 22. And that was before we had the inflation in 22, 23, right? So I thought actually this book would just be, you know, interest rates are low and they have been falling for 40 years and probably inflation and interest rates will stay low forever. And then, you know, one year after, we got the very high inflation after the pandemic. So I had to add, you know, several chapters to the book, but that's perfect. We are now in a situation where interest rates are considerably higher than just after the pandemic. In several countries in 2019, 2020, interest rates were even negative.

29:18Jesper Rangvid: So, for instance, in Denmark, in Switzerland, in Sweden, several countries, we had negative interest rates. It's something that we have, again, never had in history. So, it's a complete strange experience, actually, that you can get paid for borrowed money. It's really weird. But that's what a negative interest rate is. Then, after the pandemic, we had the inflation flare-up, as you rightly, of course, say, Christina. So we saw really inflation coming up very substantially. The inflation has been coming down a little bit again, but it is considerably higher right now than it has been, at least before the pandemic.

29:58Jesper Rangvid: We also see interest rates coming up now. And these days where we are speaking here in the middle of August 2026, there's been a lot of discussion about actually interest rates going up and that leads to falling stock prices and things like that. So I think that we are in that sense in a different world

30:24Jesper Rangvid: where we probably for a number of years will not have negative interest rates again. Can interest rates never become negative again? No, no, that's what I was saying, because exactly as you just said, Christina, we are still living longer and longer. So some of these things that push down interest rates up until the pandemic, they're still with us. But right now, while we're speaking, and this month and this year and so on, we are clearly seeing signs that interest rates, they are on the rise. We're seeing inflation still being too high in a number of countries. We are seeing a lot of governments having a lot of debt that they need to finance, and that worries about that, that pushes up interest rates.

31:12Jesper Rangvid: And at the moment also, we are also seeing many of the hyperscalers. We are seeing many of the AI companies investing enormously in AI. And while they were able to finance these enormously large investments via their cash flows, via their free cash flows, via their earnings, now these investments have become so large that they need to borrow to finance these investments. And these things, all in all, are what we're seeing right now playing out and actually at the moment pushing up interest rates somewhat. Jasper, and what do you think will likely be happening with inflation going forward? I know it's very hard to say for the entire world, so maybe we just limit it to Denmark and the US.

31:56Jesper Rangvid: Yes. I mean, Denmark, let me start with the US. That's a bigger country. I think that's more interesting for the broader audience. Let's start with the US, right? The U.S. has an inflation target of 2%. So the official target of the Fed is that inflation in the U.S. should be 2%. And inflation has been above 2 % for five years now. So for five years, the Fed has missed its target. That's serious. That's really bad. I mean, imagine that you are an executive in a company and you have these strategic goals that you want to grow by 2 % per year or whatever the strategic goal is, and you for five years in a row missed that goal, that's certainly not good.

32:39Jesper Rangvid: So the Fed is really, I would say, under serious trouble. I think it's really, yeah, I think it's very bad that you for five years have missed a goal. It might be that you miss it one year or two years because you have a pandemic, something that you cannot foresee, and that causes a lot of unforeseen consequences, but that you are not able to bring down inflation to target afterwards is a huge problem. And of course, also played a role in the presidential campaign, right? that the prices are too high and inflation is too high and so on. So that's really an issue. And at the moment, of course, inflation in the U.S.

33:11Jesper Rangvid: is not held by the fact that we have an, as we say, Iran conflict at least, where pushing up oil prices, oil prices still being high, contributing positively to inflation. And we have tariffs all the time. One day, more tariffs. Next day, also more tariffs. Also, of course, pushing up prices. So the U.S. is facing a challenge with its inflation, no doubt about that. And, you know, for a long time you had hoped inflation would just come down again, but now it's five years, right? Then you cannot say it would probably come down tomorrow. Hope is not as bright as it, right? Now you have seen that hope was not fulfilled.

33:54Jesper Rangvid: So, yeah. And in Denmark, by the way, my own small country, inflation is doing pretty fine. And so we actually was able to bring down inflation relatively fast after the pandemic, and inflation has been relatively low. So I think that's more balanced. Thank you so much. And why do you think they were not able to bring down inflation, just for our listeners to understand? Yes. I mean, the toolkit of the central bank, that is, when inflation is too high, the central bank should raise its interest rate, the monetary policy interest rate. So the Fed, the toolkit of the Fed basically is, what it should do basically according to the toolkit is, if inflation keeps on being too high or is too high, then the Fed should raise interest rates.

34:42Jesper Rangvid: So in principle, I would say the Fed could have, if I may say, fixed its inflation problem by raising interest rates even more. The problem is, of course, that raising interest rates causes troubles. That's, of course, the problem. And that's the dilemma for the Fed, obviously, every day, every hour, the dilemma for the Fed that, yes, inflation is too high. We can fix it by raising the interest rate. But if we do that, mortgage rates will go up. It will become even more expensive to borrow, to buy a house. For companies, it will become more expensive to borrow, which will hurt investments. For governments, for the Fed, oh, sorry, for the U.S.

35:21Jesper Rangvid: government, which is extremely indebted, it will become more expensive to borrow. So the problem is, you know, in principle, you know what you quote unquote should do to bring down inflation. But it's not always easy to do that because it has a lot of other negative consequences. And that's really the dilemma, right, that they're thinking a lot about. Should we raise interest rates to bring down that inflation, knowing that the mechanism is when we increase inflation, then it reduces economic activity that brings down inflation. But reducing economic activity is, of course, a bad thing. We actually want as much of economic activity as possible.

35:59Jesper Rangvid: So that is the dilemma. Makes a lot of sense. Jasper, and for someone who will read your book, what are the key things you want them to take away? I want them to take away that very often we are cherishing low interest rates. Very often we are saying, great, the interest rate went down. That's really great because then I can actually maybe afford to buy that house. Right. That's an example. It's great when interest rates are low and firms saying great interest rates are low because now it's cheaper to borrow and then we can finance that investment, whatever investment we are thinking about. The point of my book is to say that lower and lower interest rates, in particular, of course, when it's for such a long period, 40 years or so, that interest rates just become lower and lower.

36:48Jesper Rangvid: It also has a number of negative consequences. And that's really the main point in my book. That is that lower and lower interest rates are not always good. They also come with some negative things. And some of the negative things are, again, higher house prices. It's great if you own a house that your house goes up in value. That's fantastic. If you already own the house and it goes up in value, you can sell it for an even higher. That's just great. But for the young people that want to enter the housing market, it's not so great when they cannot afford to actually enter the housing market at all.

37:20Jesper Rangvid: they cannot afford an apartment in the big cities. So that has a negative consequence. Lower interest rates are, again, also great because it's cheaper to borrow, but it also incentivizes borrowing. So that means that when the interest rate falls and falls and falls, we have had a number of governments throughout the world just borrowing like crazy. So we have these problems in many, many countries, in the U.S., in France, in the U.K., and Italy, and many countries, that governments, they're just so indebted now. They just have so much debt that, you know, there's a huge problem, actually. And that is not least caused by the fact that interest rates up until the pandemic were so super low.

37:59Jesper Rangvid: So you thought, wow, it cost me nothing to borrow. Let me borrow like crazy. So the point is to say, yes, there are many great things about low interest rates, but there are also some negative consequences that we might not always think about. Let's say just if we talk about the United States, what do you think is likely going to happen with interest rates? and inflation? I think the United States has very large challenges. I think the public deficit, so the government deficit, so the difference between what the federal government collects in taxes and what it spends on expenditures is just enormous.

38:40Jesper Rangvid: And there has been a deficit on the government budget for many, many years, right? and it's huge. It's a huge government deficit, I would say. And it's particularly a huge government deficit in light of the fact that the US economy is actually doing very well. Unemployment is very low. There's economic growth. The economy is actually doing well. The stock market is doing fantastic. But in spite of a very strong economy, there's a very large deficit on the government budget. And that's a problem. You can have government deficits for many years, But at some point, you cannot continue. At some point, you have to pay back your debt.

39:19Jesper Rangvid: And nobody knows when that point in time will come. Nobody knows whether the U.S. government can borrow 50 % of GDP more, or if you can only borrow 10 % of GDP more. Nobody knows how much more the U.S. government can borrow. But at some point in time, of course, those that had lent the money will say, I want my money back. So there's a limit. and the US. And of course, I'm in Denmark, but when I follow the political debate, it's pretty clear to me, at least, that there's not a lot of consensus on how we should bring down the government deficit. So what should change so that you can bring down the US government deficit?

39:56Jesper Rangvid: And the problem is, as long as this deficit just continues and grows, because it will grow, because with an even larger debt, you have to pay even more on interest rate expenditures because the debt is higher and you have to pay interest rate on that debt or interest on that. And that pushes up interest rates in the States. It's clear that that's a positive factor on interest rates in the United States. So I have to say I'm not super optimistic on that. And that does not mean that things have to go wrong tomorrow. But on the long term, this is a situation that just cannot continue. Jasper, and I cannot not ask you about AI, given we are doing this podcast now at the time when there's so much uncertainty.

40:44What are your thoughts? What would you share with our listeners in terms of how you think about AI and what kind of new ways they can look at it that maybe can take away some of the anxiety and also allow people to leverage this moment in history versus miss it?

41:03Jesper Rangvid: That was probably the most difficult question of today. I know it's not your area of expertise, but you're a highly intelligent, incredible person. I would love to get your opinion on that. No, I mean, the question is, as you were saying, or the point, of course, as you were saying, is we're living at a moment where uncertainty in general, along many dimensions, is very high geopolitical uncertainty, inflated, blah, blah, blah, blah. But what we're talking about right now, uncertainty about how AI will develop and how it will influence our, and I think it's fair to say society at large. This is, of course, not only a question for companies, but it's for society at large.

41:47Jesper Rangvid: How that will play out is extremely difficult to foresee. perhaps one way of framing it perhaps is that you know one of the big questions of course there are so many questions obviously related to ai because it probably will change our societies but one of them of course is i mean how much can productivity rise because of ai and thereby as a consequence or follow-up, how fewer people do we need in corporations? Or another way of saying that, will we see mass layoffs? Will we see very high unemployment? And so on. And again, of course, everything is uncertain. Everything is so unclear. And et cetera, et cetera, et cetera.

42:43Jesper Rangvid: Personally, I am more in the camp that is more optimistic, meaning in the camp that is not so pessimistic, in the camp that does not foresee these very high rates of unemployment that some people talk about, that we don't need drivers anymore because we will have driverless cars, etc., etc., etc. So many people will have to be laid off.

43:15Jesper Rangvid: looking back at all technological inventions throughout history of course this is not what we have seen we have seen transitions we have seen a period where some people got laid off because there was a new technology and what they did was replaced by the technology so that for sure we will see that but I'm also this optimistic person that says that every time in history we have had a technological innovation, a big technological innovation, we have found something else to do. As a society, of course, not each individual, but as a society, we have found something else to do. And I believe the same.

43:54Jesper Rangvid: The big difference here, of course, and that's what makes it so extremely difficult, all the other times we have had technological innovations, we have been better at machines, you can say. AI is that we're getting better at thinking or somebody else thinks for us, so to say, cognitive abilities. And that's, of course, the uncertainty in all this. So I'm saying, I do believe we will find something else to do. But of course, I'm also in doubt now because it is such a different technological innovation this time around that we might not say we have been able to do that throughout history, so it would also happen again.

44:39Jesper Rangvid: That's basically what I'm saying. And maybe this is so different that that will not play out. But until I've seen that almost, then I stick to that. What do you think are things that people should do now in terms of skills development that will bulletproof, so to say, a little more their careers? When I teach my EMBAs, I ask them a question, you know, interest rates are going up. What does that imply for your corporation or something like that? Just as an example. And in principle, all of them could just go back to their computer or do it in the auditorium and ask the chat or whatever program they are using.

45:22Jesper Rangvid: What happens to my corporation? I'm working this corporation, X and X. The chatbot already knows its balance sheet and its latest income statement, blah, blah, blah, blah, blah, everything. Boom, it would spit out an answer saying something. What I clearly experience is that, of course, anybody can generate that answer in 10 seconds now, just asking the chatbot. But what is very clear is that facilitating a discussion among executives is still unbelievably useful. So, of course, the chat can spit out this answer to your cooperation. That would mean whatever, something. But, of course, it's not always exactly the way it is.

46:09Jesper Rangvid: Perhaps there's also this, perhaps there's also that, and perhaps there's also this. And, of course, you can ask the chatbot, but what about if this and that and this? But you can also bring a group of people together, and you can ask them to think about this, discuss this, and so on. And, for sure, this is what they prefer. For sure, they prefer actually sitting together and discussing things. And we discuss things in class and discuss things with me and all that compared to sitting half an hour, having a dialogue with your chatbot. So what I'm probably saying is I do believe there's still value in having us exchanging views, having us exchanging knowledge and so on, even though we had that chatbox that is so incredibly knowledgeable.

46:54Definitely. And it also will probably take quite a long time before the answers. The example that you gave, maybe it's a little easier for AI to answer, but for many questions, the answer you get, if you actually understand what you're asking, is not the right answer if you want a very good outcome of whatever you are doing.

47:15Jesper Rangvid: Absolutely. Right. I completely agree. We still need different perspectives for things. We still need to ask the question in a different way. and we get one answer to that question that leads us thinking, oh, maybe I should also think about that and so on. And this is a process, right? And I still believe in those processes and those dialogues. Jesper, anything else you want to share that you maybe wanted me to ask and I didn't? That will be a great time. I think we've been through a lot, Christina. I think it has been great. I think it has been great. I think we've been through a lot. So there's nothing that comes to my mind immediately as such.

47:51Jesper Rangvid: I think you've asked a lot of very good questions. Thank you. Where can our listeners learn more about you, buy your book, anything you want to share? It's my webpage. I have no so... Yes, I have a blog, right? And so on. I have a LinkedIn page, but there's no particular place they can... That is simply rangved.com. Amazing. Justin, thank you so much. I really enjoyed our discussion and you really do have a gift of making complicated things simple. So thank you so much for spending this time with us today. I really enjoyed it. And looking forward to hopefully speaking more down the road. Thank you.

48:29Our guest today was Jesper Ranvit, who is a professor of finance at Copenhagen Business School. And by the way, guys, I'm in Copenhagen now, and it is such a beautiful place. Definitely should be on everyone's list if you want to visit. Jesper, I understand why you love running, because this place was made for running. It's so beautiful. It has so many places to run that you will just enjoy. or working, whatever you prefer. And our podcast sponsor today is strategytraining.com. We have some gifts for you. If you are building a consulting practice right now, you can access episode one of how to build a consulting practice at firmsconsulting.com forward slash build.

49:08You can also get the overall approach used in well-managed strategy studies at firmsconsulting.com forward slash overall approach. And you can get McKinsey and BCG winning resume example, which is a template we use with all our clients. Most of our clients are senior people. They're not even applying to McKinsey or BCG or maybe they previously worked there. But that template works really well. So we wanted to share it with you and you can get it at firmsconsulting.com forward slash resume PDF. Thank you so much for tuning in and I'm looking forward to connect with you all next time.

49:47Thanks for listening to this episode of the Strategy Skills Podcast. Stay up to date on all of our latest training by signing up for our email updates on firmsconsulting.com. We look forward to helping you develop your strategy, critical thinking, decision-making, and communication skills next time here on the Strategy Skills Podcast.

50:16Thank you.