Robert Hormats of Goldman Sachs & James Lucier of Prudential Securities
Monday, September 04, 2006SUSIE GHARIB: For more analysis on how terrorism is affecting the American business landscape, we turn now to two experts: Robert Hormats, vice chairman of Goldman Sachs International; and James Lucier, senior Washington analyst at Prudential Securities.
We began our discussion talking about how 9/11 has changed consumer habits and the way businesses operate.
ROBERT HORMATS, VICE CHAIRMAN, GOLDMAN SACHS INTERNATIONAL: Immediately after 9/11, there was a great deal of concern about security, and people were reluctant to travel. Companies put in a lot of security devices.
I think companies are still exercising a lot of security controls -- access to buildings, security over their infrastructure and information. But I think the average individual now is more willing to travel, at least up until the events that occurred recently in London.
GHARIB: Jim, do you see noticeable changes since 9/11?
JAMES LUCIER, SR. WASHINGTON ANALYST, PRUDENTIAL: I think so. I think every type of business -- the large businesses, the international businesses -- are all in the risk management business today. And I think businesses are operating differently to observe this risk and deal with it, which is one reason why it`s less visible to the ordinary person.
GHARIB: Bob, since 9/11, terrorism has had little impact on the world economy. Do you see that changing in the future?
HORMATS: I think it probably will, in the sense that if the countries that are supporters of terrorism have their way -- Iran, for instance, which is a large supporter of terrorism -- and if they gain more influence, for instance if they get a nuclear weapon, then I think there is a lot more concern about stability in the major oil-producing areas of the world, Saudi Arabia and other parts of that region. And I think that would have a major effect on the world economy because of its affect on energy.
GHARIB: Jim, we`ve seen how airlines have been beefing up security, especially in view of the London terror plot most recently. Do you think that looking ahead, that these new measures are going to slow down business travel and pleasure travel for consumers, and what would be the impact of that? LUCIER: Well, I think that they`ll certainly raise travel costs to some degree. Businesses have to travel. Businesses are willing to pay what it takes to pay for the additional freight. But I really don`t see much of a slowdown in the volume of consumer travel. I mean, the consumers, as I said, seem to be a little more removed from the day-to-day reality of these risks.
GHARIB: Well, Bob, you travel all over the world for Goldman Sachs. Will you be cutting back, and do you see your counterparts in Europe and China doing the same?
HORMATS: I would say half the trips I take I could avoid if I used video conferencing. Meeting with one on one clients, you could do that on television or you could do that on the telephone. You don`t really have to travel as much. And I, for one, am going to look much more carefully at ways of avoiding traveling, not just because of the security problem, but because it`s going to become more and more inconvenient. And I think once people catch on to this, that you can use technology very effectively, travel will be reduced, at least that`s certainly my personal intent.
GHARIB: So what would be the economic impact, potentially?
HORMATS: I think economic impact is negative for airlines, negative for hotels, and very positive for new communications technology.
GHARIB: Jim, we keep talking about more security. At some point, could security paralyze the system?
LUCIER: It can, if you`re thinking entirely of safeguards. But what Bob just mentioned is very important. People are thinking of new ways of approaching things, whether it`s using video technology or trying to achieve the same end in a different way. We are re-engineering business processes. So while the security we go through may seem constrictive, in fact, it`s a force in function. It`s forcing us to find new and better and probably more efficient ways to do things.
GHARIB: Bob, people talk about the war on terror. Can we win this war, or is it like the war on poverty, it`s just this never-ending dilemma?
HORMATS: I don`t think we can win it overnight. It`s going to be a long war. It`s not like World War II, where it was over when it was over. We`re going to be threatened by terrorists for a very long time to come. The London events are one reminder of that; what happened in India; what happened in Spain.
The key point for us to remember is that we have got our priorities distorted in this country. We`ve cut taxes dramatically over the last few years, and we`ve dramatically underfunded our security requirements, infrastructure of security, all types of security, intelligence. We`ve got to get our priorities back in order. This is going to be a long war against terrorism, and we`re going to have to find ways of paying for it. And it seems to me that`s a much higher priority than holding down taxes. If we have to raise taxes to pay for it, we should.
GHARIB: Bob Hormats, Jim Lucier, thank you very much.
LUCIER: Thank you.
HORMATS: Great to be here on this show.