A New Paradigm for Global Business
Please welcome a moderator editor at large television Erik Schatzker and his panelists. President of the New York Stock Exchange Group Stacey Cunningham CEO of PBS Group Peace. Qatar managing director and vice chairman of PIMCO. John Simpson Scheme and chairman of UBS Group Axel. Well good morning everybody. I'm absolutely delighted to be here with my lively and highly engaged panel and to see you here this morning. Before we begin I do want to remind you that you have the apps. You've been using them already to answer the panels. Excuse me answer the
polls. But you can also use them to send questions for the panel. And I'll be looking for your questions as they come in. And I'll try to weave them into our conversation. So please engage with me engage with the panel and we'll make it collaborative. We have a great question to answer today. It is a question that every CEO every CIO and every boardroom around the world should be asking itself. Is there a new paradigm for global business. We have a pretty good idea of what the old paradigm was.
We could call it globalization. And that paradigm had some highly identifiable characteristics. Free movement of capital for example trade liberalisation supply chain expansion cross-border interdependence and multilateralism. Also resource exploitation. Wage stagnation to a degree. Institutional authority. It sure feels to me and I think to others here that that paradigm has changed awfully fast. I would point to among other things inflation ESG and crypto as evidence that something is happening. So I'd like to begin by asking our panel do you believe that there is a new paradigm for global business. If so what are its dominant characteristics. Are they different from the old ones and if so how. And if there
isn't a new paradigm for global business why not. Stacey I'd like you to start the conversation. Well there's definitely a new paradigm for global business and I'm not sure that any one of us up here can tell you exactly what that's going to look like just yet because there are so many unknowns and there are so many things happening at the same time. And their interaction is really what is going to decide and determine what the future of business looks like. And so many of the topics that Eric mentioned are related to that and woven into that. But it's other things as well. And some of them are driven by the
consumer consumer wanting a more direct impact on their choices employees wanting a more direct impact on how they decide what they want to do what flexibility they want the wages where they're working what industries there. And I mean there's so many things happening at the same time with also looking at the globalization globalization of so many industries. So it's definitely gonna change. But I'm not smart enough to tell you what it's going to look like. Who is. Well Eric I. I think we also know first of all I think we've seen the dots but we haven't. It's going to take us quite a few years to be able to
connect the dots to see what the new paradigm looks like. I do think though focusing on Tracy's comment about the individual I think one of the things this whole debate about climate reaction Covid is really the first major sustainability crisis and it's game changing. But I think that also reintroduces this whole discussion of the common good. And I think the expression of the common good is something we're very conscious of. But it varies culturally and it's something that the Americans talk about. And it's obviously something now the Chinese very much talk about in the context of
common prosperity and the recent plenum. So I think we need to add to Stacey's point the individual and this sort of me orientation particularly in very much in the American economy to the notion of the common good and how the do business model is going to address the common good. So to I can come in the post. Well I'm not in the camp of the world as beagle gliding. And maybe you Doug about that separately. One of two messages. First is I don't think there's just a new paradigm
for global business. I think that the new paradigm for how we run the world and that's a lot more consequential than how you run a business. I think there are two big drivers which we need to be really cognizant of. One is we're playing to we know we're from a fossil fuel carbon led economy something we've created over the last hundred fifty years and very rapidly switched to a completely new economic construct that's trillions and trillions of dollars of extant infrastructure investment which needs to be transition. That's no small feat. The second is people haven't blogged about it so much. Once you Sean mentioned it. I think the impact of technology the next decade is going to be completely game changing. That includes a
web three itself sovereign individual and seven sovereign identities. It includes A.I. artificial general intelligence increasingly allowing us to outsource our brains. And it includes a 5G world where holographic and 3D et cetera make virtual reality possible. I think when you couple this these two pedals I think the green pedal and the technology better. One consequence of this is going to be massive social redistribution. So the poor people the poor countries the less developed countries with Fed fears the brunt of this transition more than better people. And that is going to get a lot of social unrest. So in that context I think that's my second message. We have to rethink how we run the world and that has to
take big dimensions. One is the role of governments. I think you will increasingly get to a world where you have to have a lot more activist role of the public sector. That doesn't necessarily mean big government but it does mean more activist government because some of the questions we're going to deal with are questions of what makes us human what makes us philosophically. The personal philosophy. I need people to help shepherd a common state for society in direction. That's an activist government. I think you need government to catalyze investments. You need government to need esque investments.
That's an activist government. By the way this is not the first time it's happened. It's happened in the 18th century. In the fiscal sense it happened with Japan post-World War II. It happened with Japan Nassau driving Silicon Valley in the US. And frankly I've seen it in Singapore Singapore. The best case point was government. But I think you'll also need a private sector which is a little bit more attuned to what's popularly not called stakeholder capitalism i.e. a common good agenda not just
a shareholder agenda. So I think you need to come together and I think the BPP will be public private then people because the capacity of the individual to have a voice with social media and the new world means the people sector is going to be a relevant sector. One thing I think we need to take away from this when I say manage the world current global multilateral institutions are failing us. We will have to come together as one people. And therefore I can see again one dish on a completely new infrastructure an architecture for managing the digital world in the digital economy at a global level. The United Nations for digital. But also I see maybe dialing up within the current infrastructure a new impetus for the green economy in the green world. I think that a lot of shifts we need to see in the coming decade
or if I just I think every time we are in a crisis people say this time is different. Every time we come out of a crisis one of the strongest features we find in mankind is that we go back to our old ways. So I'm much more on the page. Yes we are in the crisis. Crises usually are best managed by governments because they have unlimited resources and can act
fast and they can actually enforce things. So that's why we created states. That's why we created governments. And governments do their job in a crisis. I mean see Hank in the room. Governments did their job in the financial crisis. Governments would do their job in the pandemic crisis. We had repeated crises in finance. That's why we created the financial
crisis infrastructure at the global level with the IMF world banks. We didn't have that in the pandemic world. We're now moving from pandemic to endemic. We have to start living with viruses globally and we need to create a kind of infrastructure there. WTO existed but it wasn't the global coordinator and the responses were fragmented national even regional. And we looked
down systems we looked down downs. That's not a good response. And I think we need to move to a better place in response. But I think the way we will do business will be influenced by other things then the pandemic. The pandemic has sort of shown us that we're vulnerable on globalization because now every crisis we had is global by definition and there would be other global crises. One of the crises that is in the back is the sort of environmental crisis. But I'm a stern believer that through research development but also through determined efforts we get on top of these. So the megatrends that we're seeing that you
mentioned digitalization the whole sustainability discussion those will be parts of doing business. They're not external events that influence business. They are part of how we do business in the DAX to be put in our business models. And I think that's how we will change. But that's adaption to the circumstance. And I think that's what mankind has really done
all the time. I don't think we're in a new normal. We're just coming out of a really bad situation and we'll learn our lessons from that and be better in the future. I completely agree with you that that government played such a critical role in crisis and is so necessary and we saw swift action back in spring of 2020. But the private sector did too. And we wouldn't be sitting here together if we weren't all vaccinated. And businesses didn't rise to the challenge of heroics to develop vaccines. We saw so many businesses over the past 18 months looking for
ways to solve problems whether they be about sustainability in ESG or you know from my seat of New York Stock Exchange we're seeing companies coming public all the time. Many of them providing technologies to address issues that they recognize whether it be supporting small and midsize businesses or I see Sarah Fryer out there next door developing communities because community is such such an important part of our recovery. And so all of those things that the private sector is doing are so critical. Yet there is such an adversarial relationship between the public sector and the private sector. DAX it's no contradiction because what you see is in a situation where you are in a crisis the government could play a role by coordinating and by intervening. It's as important when you come out of the crisis that the government retreats that the government lets markets and corporates take over again. We've seen that in the financial crisis. There was a reregulation but now the financial
industry is actually much stronger than we were before the crisis. So it's a given that the government plays a role in the crisis. But if they stay in crisis mode all the time we're really moving down the wrong track. I agree with you. I think one thing I wanted to bridge this conversation. I I think actually it really depends what country and culture you're in. If if you go to Europe the governments have a much more engaged role in running the society. If you go to America for example where it's become very the new political agenda is so short term missed in America that the people who are assuming a much bigger role in the society are the very big corporations. And one of the things that's interesting Stacey is who are the people that are having the
biggest impact on climate. And during the vaccine movement it's actually the employees of the big companies and the pension fund holders of the big companies because every day the CEO now in the last two or three years has has to deal with activist groups internally. So these groups are having a big influence on issues of climate brown to green big influence on vaccines big influence on how the pandemic is managed and big influence on lifestyle. So I think it varies. And then you go to Asia where you have a very different dynamic between the governments and the corporations. So I think you can't really generalize. The thing we can't forget though and I want to keep this reintroducing the individual here. We have the governments this
whole climate debate. We have governments and we have corporations. You don't hear enough about what the average person who doesn't want to get left behind. Where is that person going to be in terms of getting retrained with digital to all the things that you can raise. We have a question here that pertains to what we've already discussed and I'm going to pose it to the panel. Can we rely on companies to protect the common good through ESG
and voluntary compliance or do we need to ask government to use the mandatory levers of taxes and regulation to accomplish that. You are about to say something so I'm going to throw this to you. Well I think the answer is yes and yes. I think without a doubt the business agenda and company agenda is morphing. If it wasn't already there. So the roundtable of the Business Leaders Roundtable in the U.S. the case in point. But increasingly the understanding of having to respond to multiple stakeholders is that on company the pension fund the investors the NGO or the marketplace the consumer. That implies then expecting it to well so you don't have a choice but by the media. I also come to this thing that if you think long term
then they're really not that much conflict between your shareholder commitments and other stakeholder commitments. I mean if we wanted to give a decent return to a shareholder with ideas you'd better be around for 30 years. And the only way you around would that the US is need a license from civil society. So you go down that license.
But at the same time there are other things with the public sector. The only way you get to play a role you want to go a global attacks on Bob. And I can tell you no private sector company can get a DAX governing of the government. To do that you need a rules that on measurements you need to do that on this in both ways. If you don't have an activist public sector
all this will never happen. So as with everything we saw in the financial sector the GFC you can leave the market forces completely to themselves and then done that. That's inadequate. You need to have stronger regulation supervision frameworks. So I think that balance is what they need and that's why. Yes. And yes I want to quickly go back to this earlier point. I think. One thing this is that I think some of the responses of do you need active government only in a crisis. Or do you need active government all the time in the social political issue. I'm going to combine most Paul Sweeney we are. It has been an
active government and maybe we can do that. Talking about it in Singapore a small country 5 million people. But the fantastic example for what an activist government can do to say good. Not just in crisis. I do actually want to come back to that point. But because we're eager to engage the audience. I want to talk about this. I referred to the old paradigm. I gave it a name globalization before but it had a supportive environment right. Of subdued market volatility when we didn't have a financial crisis on our hands. Political stability and of course low inflation. We have a poll and I'll bring it up so that you can see it folks. This is the question. Are central banks underestimating
inflation. Answer a yes. There's too much government stimulus spending excuse me in monetary stimulus. B absolutely. It's structural. And we're heading for stagflation. See no inflation is a temporary phenomenon linked to supply shocks and worker shortages. So let's give the audience a chance to answer that question. And as they do. Panel how would you have answered the question Stacey. I would go with C. But temporary is a subjective term. Would you prefer transitory. Hard to it's hard to say exactly how long
that will last. Bush I don't agree. I think inflation is getting to be a lot more structure for it to t that. The only good observations. One is a lot of inflation is low wage inflation. I'm seeing wages go up everywhere not just in the U.S. but not part of the world. I was mentioning before I announced in December that there'd be no wage increases in my company this year. That pronouncement lasted a hundred days. I started losing people. We had to double and most of my clients are doing that. Said Region vision is sticky. It doesn't go away. Second the energy issues
as we're trying to deal disinvest in the fossil fuel economy and shifting. I think that the structure shift is going to drive energy price inflation and on the supply chain all our clients I talked to and the boards of the ships and so on. I don't think the supply chain is one beautiful month. It should be two three four quarters. And what happens is when you start seeing sticker prices of 6 and 7 percent that starts building inflationary expectations. And once inflation expectations get anchored then you get into the spiral. So I don't think that's such a temporary phenomenon. John how would you answer. Let's remember
inflation's at a 31 year high. At least the data that came out of the United States. It's clearly going to remain high for the foreseeable future. So there's two issues. There's one. Where's it going. Where's it ultimately going to remain when it does come into some new new paradigm normalization. I think there's global argy bargy in terms of supply chains. PE people reestablishing their models. And this sort of de globalization is going to continue for several years probably three to five years. So it's going to be a period of time where inflation is going to be very volatile. So the issue is inflation is going to
remain high. The issue is where it's going to reset. Will it reset around 2 percent which has been the Fed target or or higher than that. So that's what we should be focusing on. Axel combination of A and B except for B I don't believe we had for stagflation. I think we would see continued growth. We're going up to our own projected growth trajectories. But in my view
there is some structural elements that are not just transitory or temporary. And I think we'll have uncomfortably high rates of inflation for you know one to three years like that. Then it really depends on policy because if you assume as in a that monetary policy and government spending remains extremely expansionary then I think we get more structural problems that we run into. But if they do their job and normalize policies and normalize spending coming out of the crisis move to a more
normal mode of operation it can be more short lived. But I think it really depends on you know how these levers are moved into next year. I'm not sure if we have the results of our poll. I'm sure will come up in a moment and we'll be able to see how all of you in this room. Here we go. Do you agree with our panel. Well our panel had mixed views and so do you. There we go again.
I'm going to make reference to the old paradigm. We could call it the old global business model and make an assertion that it was guided by a singular goal profit. And there's something of a consensus emerging today that the pursuit of profit not only isn't enough but also explains why the old business model is variously destroying the planet. Creating. The larger wealth gaps and not delivering on the promise of shared prosperity. Axel. Even if you don't agree that there will be a new paradigm does there need to be a new sense of purpose for the global business. I think global business needs to really focus on not
creating externalities like pollution and global warming. And so clearly the cost of doing business globally in bringing that back to to levels that are sustainable will have much much increased costs. So I'm with peers. There will be a lot of green inflation and a lot of things we do. And it will hit consumers. And it will also you know just a stark reminder we're talking
about distribution and whether there's inequality in our societies. It's not a new phenomenon. Remember the Communist Party just had its hundreds anniversary angina. Marx Marx and Lenin had been sort of over a hundred years ago transforming political views in Europe. So everything repeats. It just comes back in shorter or longer cycles. So I'm not that excited about it. We'll get on top of these problems. So I don't think we're in the new world. Would you see more the morphing of the old world into something that looks different. But it's the same underlying thing. I sort of think we have to keep in mind this
is but I think the fiftieth anniversary of Milton Friedman's sort of definition of the purpose of the corporation and maximizing profit if you actually read that article carefully its purpose of the corporations to maximize profit. Common karma all things considered which gets into this logic that acts is referring to in terms of what I call stakeholder capitalism which means the broader purview. And I think we're now living in an environment where people are and you see this now with the recent Chinese plenum and you also see this with the big American corporations. They're more focused not on maximizing profit. But when I call stable growth and stable growth doesn't imply volatility and growth. It implies managed growth over a period of time because they're looking at more long term are indeed. And they've got a number
of objectives. So I think you're seeing a shift from more volatile growth to or projected stable growth in the developed world. But also. And that's one of the things the Chinese are equally focused on. There's a relevant question from the audience here. Given that the given the impressive job done by the private sector you
mentioned the Stacy to develop vaccines in record time. Given that it required public investment and facilitation do we also need an operation warp speed to rapidly develop new technologies to address the climate crisis. Well an all require public investment. I mean Pfizer that was made a decision on themselves. Right. So I think that there is that opportunity. I do believe though that there is a place for the government to work together with the private sector in a constructive way less adversarial. So we can that we can advance those initiatives. And I think it's I think it's really important when we think about oh I just lost my chance. I'll let you go. Well let me pick up on that. I think autonomy is important. And oftentimes
you know in the pharma industry the private sector does that. Indeed you dig the Internet a large part of that was driven by DARPA and the defense administration. And then no more not. So suddenly it is India is an example of the public sector can play a critical role in Singapore. We are an agency gold star. We have not only budget of about 21 22 billion dollars for every five year period and we along with partners and private sector to figure out where to put those dollars to work and a substantial amount of it is not going. And things about you know how to do what needs to be solutions. Greening the economy creating is to do some learning driving the educational agenda on some of these subjects. I think the public sector can play a
role. They're not in conflict. You know it can be a commercial opportunity and to be focused on profit and to be focused on long term growth and stable growth. And that's the environment I believe we should be fostering. When I think about some of the decisions we've made in our own business just looking back through time in 2003 we're investing in environmental markets with the climate exchange that we acquired in 2010 because of we thought the importance of that work and also the commercial opportunities that we predicted we were going to see from that same logic when we announced our launch of Natural Asset Companies which provides an opportunity for investors to invest in the natural resources that we want to see become nature positive so that we can have a positive influence. That's the commercial opportunity. It's also a successful endeavor for all of us and mankind. And I believe strongly we should be fostering those those projects. One of the things Erik I think we've got to be at following what Stacy has said is there's a whole ESG area has been managed with a PR point of view as being very negative. Everything is what I call negative ESG negative climates. Every. You can't. Obviously you've got to constrain
call. You've got to constrain carbon. You've got to constrain methane. But let's be on the offensive side. There's an extraordinary number of industries the green industries which are not given enough attention. They're not given enough profile. Many of them are not in America. Which is probably why they're not given enough profile. Many of them are in Europe or in Asia particularly in China where there's a big growing business. So I
think we need to figure out broader policies to make sure that these companies are given Stacy more profile more capital more opportunities to expand and really set aside given incentives tax incentives and other incentives more than what we have now in order to grow because this is this is going to take the industrial revolution. Took a long time. This is going to take a long time. And we've got to transition this. This isn't about turning off hydrocarbons and turning this on because this is still very nascent. We need to sort of but we need to focus on the positive side of where the investment is needs to be. Again part of that investment activity is what you said John. It is the foundation. We've got to get industries to move from ground to light brown light brown the light green and light green to green. It's not going to go one to another trillion. But our opportunity. Absolutely. You
started your comments in this conversation talking about how we run the world and the need for activist governments. The rise of crypto embodies a mistrust of institutions especially monetary institutions and governments. And it embodies the collective desire for a decentralization of financial power. How in the context of this conversation do you
think about decentralization and tools like cryptocurrency. Well that's the challenge I alluded to. So you know maybe not in this room but if you talk to any young kid today you talk to the technocrat you talk to the evangelists they will tell you that the future of the world is so sovereign. Eight billion people each of us can be sovereign. We have our own identity is localized. My details my own interactions on own. I deal in smartphone DAX. I will have my own currency. So went to zero.
The big risk was new. Debate between the kingdom of Facebook was in the kingdom of Sweden in web 3 0. ISE thought even that is it. You become. And so somebody did in work with that. And believe me there's hundreds of millions of people who think that's the future. And which way. I say it's a massive paradigm shift. Good thinking. I don't believe that will happen. I think there is a lot vested in cultural identity as nation states. What we. Know the best fit in democracy is I don't think will happen but don't require us to think very hard on how do we construct a system where a large number of people think I don't need a dumb one I don't need a currency I don't need a fiat currency I don't need a bank. I don't need a central bank. I don't need a stock machine. So how do you balance these two and create the artifacts that you need to run the world and the futures that ISE boxes. I want
you to jump in here. You've run institutions on the public and the private side. What do you think. Well look you. Yes about crypto. It's a hybrid. And people usually talk about the hybrid instead of the details. We really like the technology behind that block chain technology distributed ledger. We do a lot of that trade finance as banks with that. The crypto part is where
I'm skeptical because the whole idea is let's sort of move payments from banks and cash to something that is an anonymous vehicle where both sides of the transactions are not known. That will not survive. The only part where you had that in the old paradigm was bank notes. Governments have faced out large denomination bank notes because they didn't want large transactions with no fingerprint and no ISE on it.
And crypto trying to do that in digital is going to be jumped upon by government as much in the traditional world wars as it will be in the sort of digital world. So I love the technology. I think the idea of having instantaneous transaction between a large number of people are fantastic. But I think it needs to have a KYC know your client an AML procedure around it. Otherwise it would not survive. Governments are working hard to avoid illegal activities that could be done through transaction in financial sphere. And governments would not tolerate this to become really big. Regulation will definitely follow and
governments are definitely going to get involved. But the Rabi revolution that drove crypto I didn't get to John's point about the individuals saying hey this system doesn't work for me. You know they feel left out and that decentralization we don't address those underlying themes of individuals not feeling part of the framework that we've created. We're going to see that that conflict continue. Whether we define it as a new paradigm or an evolution of the old paradigm I think you all have a much better sense of what the world we're living in today looks like and what more importantly what it's going to look like in the days the weeks the months and years ahead. Please join me in thanking our panel.