WEBVTT - Overcoming "Short-Termism" 0:00:01.040 --> 0:00:04.680 This is Bloomberg Business Week with Carol Masser and Jason 0:00:04.760 --> 0:00:09.440 Kelly on Bloomberg Radio. So he is well known to 0:00:09.720 --> 0:00:12.160 our listeners in the global business community. Named ce of 0:00:12.160 --> 0:00:16.360 Honeywell in O to stay there until early former CEO 0:00:16.520 --> 0:00:20.239 of tr W, senior exec at GE and today his 0:00:20.360 --> 0:00:23.160 chairman Avertive Holdings. Also a senior adviser at the private 0:00:23.160 --> 0:00:25.680 equity firm kk Are. He is out with a new book. 0:00:26.239 --> 0:00:29.560 It's called Winning Now, Winning Later, How companies can succeed 0:00:29.640 --> 0:00:32.240 in the short term while investing for the long term. 0:00:32.520 --> 0:00:34.600 We're delighted to have with us David Cote, he joins 0:00:34.680 --> 0:00:37.279 us on the phone from Atlanta. Dave, nice to have 0:00:37.479 --> 0:00:40.400 you here with Jason and myself. How are you and 0:00:40.440 --> 0:00:44.320 how is Atlanta? Oh, things are going pretty well and 0:00:44.400 --> 0:00:49.880 we just tasked the short range stormage beautiful right now. Well, 0:00:49.920 --> 0:00:51.960 I was talking to my folks down there day. They 0:00:52.080 --> 0:00:54.280 live there in the Atlanta area, right in Buckhead, and 0:00:54.360 --> 0:00:56.280 you know, they were saying, it's just it's kind of 0:00:56.320 --> 0:00:59.720 a strange time because obviously the cases are arising a 0:00:59.760 --> 0:01:02.800 little bit, but Atlanta it feels a little bit open. 0:01:02.880 --> 0:01:06.759 I mean, I wonder as someone who understands so much 0:01:06.760 --> 0:01:09.440 of this, especially from an economic and a business perspective. 0:01:09.959 --> 0:01:12.040 You know, what's your short term and we're gonna talk 0:01:12.040 --> 0:01:13.839 about short term and long term, but what's your short 0:01:13.959 --> 0:01:19.440 term outlook for the local economy there? Well, I mean, 0:01:19.480 --> 0:01:22.680 you're right, things are a little more subdued here as 0:01:22.720 --> 0:01:26.160 they are everywhere. But when it comes to how do 0:01:26.200 --> 0:01:29.160 we manage our way through this, it comes back to 0:01:29.240 --> 0:01:32.600 me that same principle short term, long term, and that's 0:01:33.440 --> 0:01:35.720 you have to figure out how do you accomplish two 0:01:35.800 --> 0:01:40.039 seemingly conflicting things at the same time. And that's always 0:01:40.080 --> 0:01:44.080 true in business, and I'd argue in life it's true 0:01:44.120 --> 0:01:46.160 whether it's how do you accomplish short term and long 0:01:46.280 --> 0:01:49.400 term but not mutually exclusive. The same is true with 0:01:49.640 --> 0:01:52.360 how do you open the economy but keep everybody safe? 0:01:53.240 --> 0:01:57.120 And everybody seems to human nature tends to want one thing. 0:01:57.360 --> 0:02:00.760 You either keep everybody safe and stay at home, or 0:02:00.960 --> 0:02:04.080 you just completely reopened. And we just need to be 0:02:04.120 --> 0:02:07.560 thoughtful about how we how we do this. And you're 0:02:07.560 --> 0:02:10.679 seeing different experiences everywhere because I don't think everybody is 0:02:10.680 --> 0:02:13.800 always as careful as they ought to be, because they 0:02:13.840 --> 0:02:17.720 start thinking, oh, well, everything's fine now, it's not something 0:02:17.800 --> 0:02:22.400 that's a binary choice out of way to accomplish those Yeah, 0:02:22.440 --> 0:02:24.760 and that's not tricky certainly, this as we've seen in 0:02:24.880 --> 0:02:27.160 terms of how it plays out. You know, it's interesting though, 0:02:27.240 --> 0:02:29.240 you know, this whole short term long term Jason and 0:02:29.280 --> 0:02:32.680 I Dave have a lot of conversations, um about the 0:02:32.760 --> 0:02:36.760 lack of long term planning. Certainly maybe on a government level, uh, 0:02:36.800 --> 0:02:39.200 in terms of some of the needed programs around the country, 0:02:39.200 --> 0:02:41.799 but even it's difficult, I think if you're a publicly 0:02:41.800 --> 0:02:46.560 held company to think long term, um, tell us when 0:02:46.560 --> 0:02:49.440 you were, you know, running your company's whether it was honeywell, 0:02:49.440 --> 0:02:52.080 whether it's t r W, you know, constantly thinking about 0:02:52.080 --> 0:02:55.800 that quarter to quarter, and I know we report on it. Um, 0:02:55.800 --> 0:03:00.520 how that kind of ties your hands? Well, this is 0:03:00.560 --> 0:03:04.360 where uh, my view is different, and it's not so 0:03:04.440 --> 0:03:07.919 much that it ties your hands. It's that you need 0:03:07.960 --> 0:03:10.960 to just think differently about how you run the company. 0:03:11.000 --> 0:03:14.360 And that's why the title of the first chapter is 0:03:14.400 --> 0:03:18.800 banishing intellectual laziness, because it's too easy to just say, well, 0:03:18.840 --> 0:03:20.880 you know, markets demand it, you got to make the quarter, 0:03:21.000 --> 0:03:23.400 so we have no money to do this stuff. But 0:03:23.440 --> 0:03:25.160 instead if you look at start to look at your 0:03:25.240 --> 0:03:29.519 business differently and say, all right, I have to accomplish both. 0:03:30.120 --> 0:03:32.919 How do I make sure I start thinking about both 0:03:32.960 --> 0:03:35.440 an accomplishing boat at the same time. So you start 0:03:36.080 --> 0:03:39.560 planning differently, and instead of we'll say long range planning 0:03:39.640 --> 0:03:43.280 or strategic planning, be an annual event. You start to 0:03:43.320 --> 0:03:46.200 figure out, how do I make this more short term 0:03:46.840 --> 0:03:49.920 so that I got these milestones or even better inch 0:03:50.040 --> 0:03:53.360 stones to make sure I'm making progress. How do I 0:03:53.480 --> 0:03:56.920 run my operations so that I generate enough money so 0:03:57.000 --> 0:04:00.080 that I have the flexibility to provide the return and 0:04:00.240 --> 0:04:02.800 my investors are looking for, but at the same time 0:04:02.960 --> 0:04:05.400 invest in the future. If you take a look at Honeywall, 0:04:05.440 --> 0:04:08.920 for example, we had an empty pipeline of everything in 0:04:08.920 --> 0:04:12.760 the beginning, and we slightly outperformed the S and P 0:04:12.960 --> 0:04:16.640 five dred the first four or five years, and I 0:04:16.720 --> 0:04:19.120 used to get questions from investors about it. Why isn't 0:04:19.120 --> 0:04:22.159 it better, And I'd say, well, I've got an empty pipeline. 0:04:22.160 --> 0:04:23.960 I gotta put money into this stuff. And if you 0:04:24.000 --> 0:04:27.400 take a look at the subsequent ten years, we just 0:04:27.440 --> 0:04:29.400 blew away the S and P five hundred, so that 0:04:29.480 --> 0:04:33.960 over sixteen years, we generated eight return two and a 0:04:33.960 --> 0:04:36.560 half times the SNP five. Because all that long term 0:04:36.600 --> 0:04:41.719 stuff pays off. So why don't more people do that? 0:04:42.120 --> 0:04:46.120 David Um I think it's it. First of all, it 0:04:46.200 --> 0:04:50.200 takes a lot of work, and you do have to 0:04:50.240 --> 0:04:54.200 really think about your business differently, and it's not an 0:04:54.200 --> 0:04:57.400 easy mindset for people to grasp having to do the 0:04:57.560 --> 0:05:01.040 two conflicting things at the same time. Right, human nation 0:05:01.160 --> 0:05:03.440 always wants one, you know, tell me, boss, what's the 0:05:03.480 --> 0:05:07.120 one thing you want? It's it's too easy to gravitate 0:05:07.160 --> 0:05:10.800 to that. Whether you've got ten people, thousand people, a 0:05:10.880 --> 0:05:16.159 hundred thousand people, it's an easy refuge. Do you think 0:05:16.160 --> 0:05:19.440 the companies that ultimately do well, like and I think about, 0:05:20.600 --> 0:05:23.599 you know, are those that really do manage it well 0:05:23.640 --> 0:05:27.560 and maybe give up some quarterly growth perhaps, but they 0:05:27.680 --> 0:05:32.360 understand and they communicate it well to their investors about 0:05:32.400 --> 0:05:35.880 what they're doing. Those are the companies that potentially and 0:05:36.160 --> 0:05:38.360 ultimately survived. Like I think about a company like Ge. 0:05:38.440 --> 0:05:40.839 You spend time at Ge. You know, they spent a 0:05:40.839 --> 0:05:42.320 lot of money and a lot of different things, and 0:05:42.360 --> 0:05:48.200 then you know they really got into a really rough spot. Yeah, 0:05:48.880 --> 0:05:53.280 not all long term spending makes sense. Just because it's 0:05:53.320 --> 0:05:55.960 long term doesn't mean it's gonna work. And this is 0:05:55.960 --> 0:05:58.000 where I get to You've gotta have some kind of 0:05:58.040 --> 0:06:01.400 short term milestone of inch stones, if you will, to 0:06:01.440 --> 0:06:05.680 say okay, is this working? And I often say there's 0:06:05.720 --> 0:06:09.440 three aspects of leadership. The first is mobilizing a large group, 0:06:09.640 --> 0:06:12.520 which is the most visible, but it's five pc of 0:06:12.520 --> 0:06:15.839 the job. The second one is picking the right direction, 0:06:16.520 --> 0:06:18.640 and then the third one is making sure that the 0:06:18.839 --> 0:06:22.200 entire organization moves in that direction. And I think we 0:06:22.320 --> 0:06:24.920 get a pretty good job at Honeywell and saying, Okay, 0:06:24.920 --> 0:06:29.200 what are these long term seeds that were planting and 0:06:29.360 --> 0:06:31.760 are they going to pay? And if they've stopped paying 0:06:31.800 --> 0:06:35.440 while we stopped working on it, my successor is doing 0:06:35.440 --> 0:06:38.720 the same thing. So it makes you feel pretty good 0:06:38.720 --> 0:06:41.360 about where that's going. And that's what we're doing Invertive 0:06:41.400 --> 0:06:44.880 Holes were executive chairman. I gotta ask you about leadership 0:06:45.000 --> 0:06:48.840 because we have gone through the last few months it 0:06:48.880 --> 0:06:53.360 feels like waxing and waning as a society as a culture. 0:06:53.960 --> 0:06:58.280 Um so many crises that we're facing. And you know, 0:06:58.480 --> 0:07:01.000 you served at the top of number of companies you 0:07:01.040 --> 0:07:03.640 also served on the board of the Federal Reserve Bank 0:07:03.680 --> 0:07:06.920 of New York. I believe so you understand the workings 0:07:06.960 --> 0:07:11.000 of government, UH and companies in the corporate world, what 0:07:11.080 --> 0:07:14.400 do you make of leadership of the Let's just start 0:07:14.440 --> 0:07:18.000 with the first crisis, the coronavirus crisis that we've seen 0:07:18.080 --> 0:07:21.080 from both the government level and and maybe the state 0:07:21.080 --> 0:07:25.440 and local level. Well, I think there's gonna be a 0:07:25.440 --> 0:07:27.600 lot to learn when we do the post mortem of 0:07:28.160 --> 0:07:32.040 how could we have handled this differently? The if we 0:07:32.120 --> 0:07:35.640 take a look at the economic cost of how we 0:07:35.680 --> 0:07:41.760 went about it, it's absolutely huge and we need to 0:07:42.040 --> 0:07:44.240 be a lot more thoughsible about how we handle these 0:07:44.240 --> 0:07:48.160 things in the future. UH. Supply chains for key medical 0:07:48.840 --> 0:07:54.200 equipment is something that's gonna need to get revisited, making 0:07:54.200 --> 0:07:57.840 sure we've got the capacity to handle issues that comp 0:07:57.920 --> 0:08:03.640 in the future, and just getting better compliance across the country. 0:08:03.680 --> 0:08:06.720 When it comes to what exactly everybody ought to be 0:08:06.760 --> 0:08:10.840 doing this is we just weren't that prepared for it, 0:08:10.960 --> 0:08:13.160 and nobody was. I mean there was no country that was. 0:08:13.240 --> 0:08:16.960 So I don't fault anybody for this, but we sure 0:08:17.120 --> 0:08:20.600 ought to learn from this on how to make sure 0:08:20.640 --> 0:08:24.320 we have better early warning systems. UH, more money going 0:08:24.360 --> 0:08:28.920 into some of the national organizations that understand what to 0:08:28.960 --> 0:08:32.080 do with these crises and for forecast them a little better. 0:08:32.080 --> 0:08:34.880 When you see a smidge of something happening, how do 0:08:34.960 --> 0:08:37.440 you respond to it? So I think it's gonna be 0:08:38.200 --> 0:08:41.480 hopefully a really good post mortem analysis done here on 0:08:41.760 --> 0:08:44.600 after action report on what do we do, what do 0:08:44.640 --> 0:08:47.559 we do with the next time it happens, Because we've 0:08:47.600 --> 0:08:50.079 got to assume that was especially the population of the 0:08:50.120 --> 0:08:53.320 planet going a ten billion people over the next thirty 0:08:53.320 --> 0:08:56.680 five years according to the u N report, and it's 0:08:56.720 --> 0:09:00.840 more expensive travel. This is gonna happen again. We need 0:09:00.840 --> 0:09:04.760 to be a lot better prepared, flexible and responsive. We're 0:09:04.760 --> 0:09:07.600 never going to be able to predict exactly what it is, 0:09:08.120 --> 0:09:10.640 but we can sure make ourselves a lot more flexible 0:09:10.679 --> 0:09:14.920 in terms of response. Yeah, exactly, And I do wonder 0:09:14.960 --> 0:09:17.280 you know, it's interesting leadership this time around. You know, 0:09:17.400 --> 0:09:20.000 if it wasn't coming necessarily on the federal level, we 0:09:20.000 --> 0:09:22.280 certainly saw it on the local level. We also saw Dave, 0:09:22.800 --> 0:09:25.000 you know, C E O S I feel like, step 0:09:25.080 --> 0:09:27.680 up and whether it was taking care of their workers, 0:09:27.840 --> 0:09:29.720 you know, when they needed to and I do wonder 0:09:30.120 --> 0:09:33.880 you know how that you know if that change is 0:09:33.960 --> 0:09:36.679 going forward, that you know companies understand that in some 0:09:36.720 --> 0:09:41.240 cases they may be on their own with this. Yeah, 0:09:41.600 --> 0:09:44.080 I'd say that's probably going to be pretty typical, just 0:09:44.160 --> 0:09:49.960 because companies are smaller than governments, so you can respond faster. 0:09:50.160 --> 0:09:51.880 You don't have to convince a lot of people to 0:09:51.960 --> 0:09:53.800 do something, you can just go ahead and do it, 0:09:54.440 --> 0:09:57.040 So you are going to be able to respond faster. 0:09:57.480 --> 0:09:59.880 And yeah, I think everybody should be pretty proud of 0:09:59.880 --> 0:10:05.160 how companies responded overall here, whether it's trying to get 0:10:05.200 --> 0:10:09.280 the key uh supply things that were needed, the how 0:10:09.320 --> 0:10:11.920 do they protect their workers. I think companies have been 0:10:11.920 --> 0:10:15.600 a pretty good job. But everybody's gonna need to up 0:10:15.600 --> 0:10:18.040 their game going forward because it's been a huge learning 0:10:18.080 --> 0:10:24.360 experience for companies, state governments, federal governments, UH, medical uh, 0:10:24.440 --> 0:10:29.720 whether they're hospitals, doctors, agencies, everybody is going to have 0:10:29.760 --> 0:10:33.840 to up their game here we'll speak of upping their game, David. 0:10:33.840 --> 0:10:37.120 There seems to be consensus that companies need to do 0:10:37.160 --> 0:10:42.640 more and need to be more methodical and more proactive 0:10:43.040 --> 0:10:47.640 and make real decisions and maybe some hard choices around 0:10:47.679 --> 0:10:51.880 diversity and equality. Uh, you know you're there in Atlanta 0:10:51.920 --> 0:10:55.679 where so many things have happened historically and of late 0:10:56.480 --> 0:10:59.720 around questions of civil rights and and the gross in 0:10:59.720 --> 0:11:01.760 equal all these that exists in our system, so much 0:11:01.800 --> 0:11:04.760 of it is economic. As a leader, how do you 0:11:04.840 --> 0:11:07.040 think about this, how do you think about it at 0:11:07.120 --> 0:11:12.120 your company? And what are some of the conversations you're having. Well, 0:11:12.160 --> 0:11:14.680 I'd say, uh, I have to preface all of this 0:11:14.800 --> 0:11:19.240 a cars with I'm a sixty seven year old, white 0:11:19.280 --> 0:11:22.360 male former CEO who grew up in New Hampshire, So 0:11:23.120 --> 0:11:25.920 it's not Uh. The last thing I ever want to 0:11:25.960 --> 0:11:28.920 pretend to is that I'm an expert in this area 0:11:29.320 --> 0:11:33.760 or I've got it right, I would say, though, I 0:11:33.840 --> 0:11:37.800 do think this is another area where both a short 0:11:37.960 --> 0:11:41.760 term and a long term approach can make a difference. 0:11:42.520 --> 0:11:45.440 On the short term side, there's all the stuff that 0:11:45.679 --> 0:11:49.040 we need to just do better than we do today, 0:11:49.800 --> 0:11:53.439 the hiring side of it, well, and I was pretty 0:11:53.480 --> 0:11:58.199 proud of our track record at uh Honeywell, criminal justice reform, 0:11:58.559 --> 0:12:03.000 policing tactics, those are all things we ought to address. However, 0:12:03.440 --> 0:12:06.400 there's a big long term aspect to this that I 0:12:06.480 --> 0:12:09.760 don't think gets talked about all that much. And that's okay. 0:12:09.800 --> 0:12:13.960 What are some of the root causes for why minority 0:12:14.080 --> 0:12:20.960 UH populations are overrepresented in the lower socioeconomic classes? And 0:12:21.000 --> 0:12:23.880 if we take a look at one, I'd say education 0:12:24.800 --> 0:12:29.040 and the way we fund education based on property taxes largely, 0:12:29.160 --> 0:12:33.959 which means wealthy school districts have more money, better schools, 0:12:34.280 --> 0:12:38.160 whole ones don't. And if unless we do something to 0:12:38.280 --> 0:12:43.440 address that, we just perpetuate these class distinctions, which yes 0:12:43.600 --> 0:12:48.480 sex minorities, but also affects UH white families that are 0:12:48.480 --> 0:12:52.160 in the same boat. Now, I mus be more discussion 0:12:52.200 --> 0:12:54.120 about some of those What are some of the longer 0:12:54.280 --> 0:12:56.760 term things we need to do? All right, David Cody, 0:12:57.160 --> 0:12:59.000 gotta leave it there, Thank you so much. Come back. 0:12:59.040 --> 0:13:01.520 We would love to talk to war David Cody, of course, 0:13:01.559 --> 0:13:04.480 former Honeywell CEO. Check out his book Winning Now, Winning Later.