Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business Week,
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Speaker 1: The Bloomberg Business Week Podcast with Carol Masser and Tim
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Speaker 2: No question the idea of safety on a lot of
Speaker 2: minds after the events over.
Speaker 3: The last few days.
Speaker 4: Absolutely okay.
Speaker 2: We heard from law enforcementerience stuff, law enforcement folks in
Speaker 2: Las Vegas a little earlier today. They talked about what
Speaker 2: happened in Las Vegas. We heard earlier in the day
Speaker 2: too about what happened in New Orleans. The event New
Speaker 2: Orleans talking that one specifically being called terrorism. FBI officials
Speaker 2: say they haven't found evidence linking separate deadly New Year's
Speaker 2: attacks in New Orleans and Las Vegas. Those are still unfolding,
Speaker 2: though the details there. The two incidents, though, rattling Americans
Speaker 2: as they rang in New Year's, prompting heightened concerns over
Speaker 2: US security less than three weeks before Donald Trump is
Speaker 2: set to take over as president.
Speaker 5: And then there was the spate of plane crashes late
Speaker 5: last month. The Azerbadjhan Airlines flight that crashed in Kazakhstan
Speaker 5: on Christmas Day, and then you also had the flight
Speaker 5: that crashed in South Korea, killing all but two on board.
Speaker 5: There's a lot of things going on that make us
Speaker 5: question safety security in today's environment.
Speaker 2: It's something Sean Galloway is always thinking about. He's CEO
Speaker 2: at Proacts Safety. It's a consulting firm that for more
Speaker 2: than thirty years has provided strategies for improving safety within
Speaker 2: different organizations, including organizations such as Boeing. He joins us
Speaker 2: from Houston, Texas. Sean, good to have you with us.
Speaker 2: Give us an idea of how you think about events
Speaker 2: over the last week, because what I just shared, we're
Speaker 2: certainly they really run the gamut of things that affect
Speaker 2: a person's safety and individual safety. But they're also rare, but
Speaker 2: they're top of mind because they're in the news. How
Speaker 2: do you think about events such as these?
Speaker 6: These are Carrollton, thank you for having me on here.
Speaker 6: These are some of these black swan events that you
Speaker 6: rarely see coming. However, they're often indicators. And what I've
Speaker 6: often said is anytime you're surprised by a significant event
Speaker 6: or a tragedy. Either you weren't paying attention to the indicators,
Speaker 6: you weren't giving them the attention that was necessary. It's
Speaker 6: it's unfortunate that events like this have to have to
Speaker 6: necessitate a change. If you look and there's a lot
Speaker 6: of great people that work for Boeing, I know many
Speaker 6: of them personally, and if you go back over a
Speaker 6: decade two thousand and five and several years later, you
Speaker 6: look at what happened with the BP events, the Texas
Speaker 6: City explosion in March of five that fifteen people lost
Speaker 6: their lives and over one hundred cerrusly injured. Then we
Speaker 6: had deep Water Horizon, the Waconda incident, both of those
Speaker 6: moments before, days before both of those locations, the rig
Speaker 6: and the plant vpleehip was there to give them an
Speaker 6: award for their safety performance, and then both of those
Speaker 6: tragedies occurred. It's the same situation kind of here. In
Speaker 6: my opinion with what's happening with Boeing is that they're
Speaker 6: a great organization, a legacy organization again in my opinion,
Speaker 6: with a lot of wonderful people with great intent. They also,
Speaker 6: from what I've seen, went from an organization that I
Speaker 6: would refer to having strong signals to an organization that
Speaker 6: had weak signals. It was an organization run by engineers.
Speaker 6: Engineering was often on the floor, people could talk about things,
Speaker 6: and unfortunately, over time it seem some of that became suppressed.
Speaker 5: Sel and take a step back for us, because we
Speaker 5: are intrigued by your relationship or your workings, your company's
Speaker 5: workings with Boeing in particular. Tell us how long you've
Speaker 5: been involved with the company. Tell us about kind of
Speaker 5: maybe the changes that you've seen and your involvement in
Speaker 5: helping them get through what has felt like crisis after
Speaker 5: crisis after crisis. Although things seem to be getting better,
Speaker 5: but it does feel like there's still a lot of
Speaker 5: questions to be answered.
Speaker 6: Yeah, I can't speak to the detailed specifics of the
Speaker 6: type of work that I do with organizations like Boeing.
Speaker 6: My work focuses on the pursuit of excellence and safety.
Speaker 6: So that's both performance and that's culture. So organizations like
Speaker 6: Boeing will bring people like me in from time to
Speaker 6: time to make sure they're not breathing their own exhaust,
Speaker 6: to make sure they're truly seeing things as they are,
Speaker 6: So they like an objective. Third party individual take a
Speaker 6: look at things. They also bring in people like me
Speaker 6: to keynote it at some of their events.
Speaker 4: What does that mean? What does that mean to keynote it?
Speaker 5: What does that mean when you come into Boeing and
Speaker 5: a company that's dealing with some really serious issues, what
Speaker 5: does it mean to keynote it.
Speaker 6: So this was in twenty seventeen, so it was prior
Speaker 6: to prior to the catastrophic events that happened in twenty
Speaker 6: eighteen twenty nineteen with the with the plane crashes. Keynoting
Speaker 6: a private event, so company leadership was there together to
Speaker 6: look at their long term safety strategy, look at their
Speaker 6: their business strategy. And at the time I had just
Speaker 6: authored a book called Forecasting Tomorrow, kind of looking at
Speaker 6: making predictions over the next ten years. So they brought
Speaker 6: me in to serve as a keynote speaker to that
Speaker 6: and that's what led to me having the privilege of
Speaker 6: walking the seven thirty seven Max factory floor in the
Speaker 6: end of February twenty seventeen. So for me personally, it's
Speaker 6: always stuck with me. Did I see one of those
Speaker 6: two planes in the assembly process? Obviously I'll never know,
Speaker 6: but it's It's something that's always resonated with me because
Speaker 6: most of my work is on the proactive side. That's
Speaker 6: the name of our company. However, we are brought in
Speaker 6: from time to time on either side of litigation, but
Speaker 6: primarily I'm brought in from the company standpoint to make
Speaker 6: sure events like this are they want to offer it
Speaker 6: so before.
Speaker 5: It goes so, before anything goes wrong, right to say,
Speaker 5: hey guys, here's what you need to be thinking about.
Speaker 6: That's exactly right. And sometimes this is done through attorney
Speaker 6: privileged documents so we can be fully transparent and tell them,
Speaker 6: you know, these are the issues. This is because culture
Speaker 6: is a byproduct. And now the FA and now all
Speaker 6: of these third party investigations are identifying these cultural deficits,
Speaker 6: some things that aren't where they want them to be
Speaker 6: as an organization. But every company of substance of size
Speaker 6: is going to have opportunities to improve culture. But culture
Speaker 6: is a by product. You can't directly manage the byproduct
Speaker 6: of culture, just like the results of an organization or
Speaker 6: byproducts sometimes of collective intentionality or sometimes luck.
Speaker 5: Son, you know, I do wonder you know Boing went
Speaker 5: through a lot of changes corporate culture. We talked about
Speaker 5: the changing of headquarters and senior management then not being
Speaker 5: you know, very far from you know, their main plant,
Speaker 5: to add on the west.
Speaker 4: Coast and so on and so forth.
Speaker 5: But I am wondering, when you keynoted the address or anything,
Speaker 5: did you start to see some changes did you give
Speaker 5: the company and it kind of heads up, like, wait
Speaker 5: a minute, you guys might want to rethink some of
Speaker 5: your strategy here.
Speaker 6: I think they had a good plan at the time.
Speaker 6: I didn't have insight into the potential business distructors of
Speaker 6: that plan because the safety strategy can't be a standalone
Speaker 6: concept or plan for an organization. The safety strategy has
Speaker 6: to support the overall business trajectory, but it also has
Speaker 6: to protect against internal and external risks that might affect
Speaker 6: that plan. So my work was primarily on the safety
Speaker 6: strategy side of things. The business strategy and organizations like Boeing,
Speaker 6: they typically are forecasting several decades out because they're looking
Speaker 6: at the next platform. They're looking at, you know, what's
Speaker 6: going to be coming twenty years from now. I saw
Speaker 6: some I saw a lot of great leaders with wonderful
Speaker 6: plans to execute on. But I think the erosion of
Speaker 6: trust and the erosion of communication and speaking up about
Speaker 6: quality or safety concerns. What seems in my opinion to
Speaker 6: have been unintentionally but suppressed over time is what led
Speaker 6: to one of the big contributing factors of kind of
Speaker 6: what's happening today that, as you mentioned, distancing senior leadership,
Speaker 6: who are ultimately responsible for any organizational culture, even though
Speaker 6: they're not really part of the culture because they're too
Speaker 6: far removed, they're responsible for it. And when I look
Speaker 6: at the plan that they have today, that's one thing
Speaker 6: that I would offer some advice on is that if
Speaker 6: you look at what they're focusing on, it's primarily around
Speaker 6: changing employee behavior versus what are the leadership truly being
Speaker 6: held account.
Speaker 2: We only have about thirty seconds left, but I open
Speaker 2: talking about the incidents on New Year's even New Year's
Speaker 2: Day in New Orleans and Las Vegas, respectively. How would
Speaker 2: you advise large municipalities just in thirty seconds to keep
Speaker 2: people safe during events such as these are during New
Speaker 2: Year's stuff like that.
Speaker 6: I think it's largely around having the showing the force,
Speaker 6: but it's also situational awareness. When I'd served in the military,
Speaker 6: keeping your head on a swivel. You have to pay
Speaker 6: attention happening around you at all times. You also have
Speaker 6: to have contingency plans. And if you look at this
Speaker 6: recent crash running into a wall, unfortunately, you know that
Speaker 6: wasn't part of the contingency thinking. So I think you
Speaker 6: have to have a proactive side of things, but you
Speaker 6: also have to have emergency response and reactive because things
Speaker 6: will not go to plan. And if and when things
Speaker 6: don't's what's the next step. What happens afterwards. So it's
Speaker 6: not all about prevention, it's also about recovery, all.
Speaker 5: Right, Gonna leave it on that note, Sean, Thank you
Speaker 5: so much, appreciate it. Sean Galloway, you CEO Proacts Safety.
Speaker 5: Joining us from Houston, Texas.
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Speaker 3: Cheryl get this.
Speaker 2: Yeah, did a deep dive into the USDA's economic statistics.
Speaker 2: I was just thinking about Mike McKee the whole time,
Speaker 2: because I know he like knows all this stuff.
Speaker 4: All right, what of that deep dives.
Speaker 2: Okay, fine food purchase and consumed outside the so think restaurants, fast,
Speaker 2: casual bars, hospital, schools, delis.
Speaker 3: Yes, they have this information. It's a category.
Speaker 2: Accounted for close to sixty percent of food expenditures in
Speaker 2: the US in twenty twenty three.
Speaker 3: Food away from home. It's a lot of money, right,
Speaker 3: a lot.
Speaker 4: Yeah.
Speaker 2: Food away from home spending climbed from one point three
Speaker 2: trillion in twenty twenty two to one point five trillion
Speaker 2: in twenty twenty three. This is according to the USDA's
Speaker 2: Economic Research Surface. I didn't know that even existed. It's
Speaker 2: pretty cool.
Speaker 4: Makes sense though.
Speaker 2: Phil Catharacis watches this number closely. He's the president and
Speaker 2: CEO over at IFMA, the Food Away from Home Association.
Speaker 2: It's a trade group for the food service industry. He
Speaker 2: joins US from Washington, d C.
Speaker 3: Phil.
Speaker 7: How are you good, great, Tim, Thanks for having me.
Speaker 2: Hey, good to have you on the program this afternoon.
Speaker 2: Food away from Home. I did decide to sort of
Speaker 2: deep dive into this because I had never looked closely
Speaker 2: into this category. But it really is exactly what it
Speaker 2: sounds like. Anything that you buy outside the house to
Speaker 2: consume outside the house. So bars, hospital, pre made fooded
Speaker 2: delis everything, right.
Speaker 8: Yes, It's a term that's been used by the government
Speaker 8: to report and we as an industry just started using
Speaker 8: it as we transformed our seventy year old organization from
Speaker 8: being a manufacturer driven to the food away from home,
Speaker 8: which includes everything you just mentioned, from food manufacturers to
Speaker 8: the distribution companies, the restaurants, independent restaurant chain restaurants, casual dining, hospitals,
Speaker 8: kiosks even now delivery is a component of all of this.
Speaker 3: That's what I wanted to ask.
Speaker 2: Yeah, so it includes like Uber eats, door dash, if
Speaker 2: I call the local Taie food place and they deliver
Speaker 2: on their own, it includes that as well.
Speaker 7: Yeah, delivery.
Speaker 8: You know, coming out of the pandemic, everybody was so
Speaker 8: caught up with how we were going to transform the business,
Speaker 8: and the resiliency of the restaurant industry just keeps surprising people.
Speaker 8: But delivery has become an incredible part of what's taken
Speaker 8: place and facilitated food away from home.
Speaker 2: This is a question that when I was talking to
Speaker 2: Carol about this during prep. This is a question that
Speaker 2: she had when I told her this number. She said,
Speaker 2: is this all about prices? Going up or is it
Speaker 2: people actually eating more outside the home like transaction?
Speaker 3: Yeah, what's happening here?
Speaker 7: Yeah?
Speaker 8: Yeah, of course, of course she has the it's both.
Speaker 8: Traffic has been a very stable, i would call it.
Speaker 8: In some instances, depending on the segment, it's been down. However,
Speaker 8: because prices have gone up and because of the promotional activity,
Speaker 8: you are getting more meals, higher check averages, and depending
Speaker 8: on the segment, you'll get more traffic. I'll give you
Speaker 8: an example, great organization in Darden and the way they
Speaker 8: run their business. They have multiple brands, you know, Olive Garden,
Speaker 8: and they have all the steakhouses.
Speaker 7: So when you look.
Speaker 8: At what they do at Olive Garden with the never
Speaker 8: ending pasta to get people back into their restaurants at
Speaker 8: thirteen ninety nine, that's a pretty good price point. So
Speaker 8: they're getting traffic, they're getting a higher check average because
Speaker 8: they're adding four ninety nine if you put some shrimp
Speaker 8: or protein.
Speaker 7: On that meal occasion.
Speaker 8: So the restaurant industry has been able to do some
Speaker 8: things to keep traffic up and also drive their check averages. However,
Speaker 8: you know there is a downside to all this, and
Speaker 8: we'll I'm sure talk about you know, pricing and inflation.
Speaker 5: Well, I'm the one that that DAWs my husband crazy
Speaker 5: and I'm like, yeah, let's get this. And then I'm
Speaker 5: like get this and the this, and they had this,
Speaker 5: and then like a simple salad all sudden is like
Speaker 5: forty bucks no.
Speaker 2: And then I'm like, I'm not going to get this delivered.
Speaker 2: I'm going to go pick it up myself and save
Speaker 2: twenty five percent because the delivery feel the tip.
Speaker 5: We do that all the time, or increasingly, not all
Speaker 5: the time, but increasingly if we can.
Speaker 4: All right, so what's the downside.
Speaker 8: Well, the other side of this is we got the
Speaker 8: inflation monsters roaring the beginning of the year.
Speaker 7: The commodity prices are soaring.
Speaker 8: I mean just when you think about coffee and chocolate
Speaker 8: alone and cacao and the coffee beans.
Speaker 7: But you know protein.
Speaker 8: If you go try to get a steak i ain OU's,
Speaker 8: you know filet somewhere depending on back to the dart
Speaker 8: and if you go to Ruth Chris you're going to
Speaker 8: pay eight ounces. You're probably going to get it for
Speaker 8: close to like fifty sixty bucks. If you're going to
Speaker 8: go to Longhorn, you can get a Texas t bone
Speaker 8: for twenty one to twenty two dollars. So, depending again
Speaker 8: on what you're looking for and what you're going to get,
Speaker 8: the concepts and the restaurant tours have been able a
Speaker 8: price accordingly. The problem though, is we've got costs in
Speaker 8: the supply chain. We've got not only commodity costs, but
Speaker 8: we also have organizational issues with not only the labor
Speaker 8: coming back, but labor is an issue when you think
Speaker 8: about just in cash and fast fast food in California
Speaker 8: starting it for one this year, twenty dollars minimum for
Speaker 8: being behind the counter at a McDonald's or a Burger King.
Speaker 8: So not only is it just availability of talent, but
Speaker 8: it also costs some money to be able to get
Speaker 8: the right people in the restaurant and make sure that
Speaker 8: the service is where you want it to be and
Speaker 8: they're trained and you don't have any problems.
Speaker 3: Hey, hey, I.
Speaker 2: Want to jump in real quick, twenty dollars minut wage
Speaker 2: for fast food workers in California. With the hindsight of
Speaker 2: a few months after that has been implemented, How has
Speaker 2: that worked out in your view.
Speaker 4: And how does the industry your members like? Are they
Speaker 4: happy about it?
Speaker 7: Yeah? No, no, one's happy about it, and.
Speaker 3: Then maybe the people who are working are happy.
Speaker 8: Right, the people that are working are happy about it,
Speaker 8: and it's not about that. I mean, we want to
Speaker 8: make sure workers are getting paid fairly, and you know,
Speaker 8: there's a balance here so that employment doesn't go down
Speaker 8: and people don't close restaurants because some have because of
Speaker 8: the labor problem. But you've got a situation in California
Speaker 8: where there's a panel of industry experts apparently that are
Speaker 8: going to determine what the rates are going to be,
Speaker 8: and it's a little bit awkward. Everybody's been trying to
Speaker 8: find a way to manage it properly, to keep to
Speaker 8: keep the staff, you know, feeling good about what's going on.
Speaker 8: But at the same time is a regulatory issue that
Speaker 8: is going to cause havoc and confusion as it goes
Speaker 8: across the states. Because there's also a tax credit a
Speaker 8: tip credit problem coming down the road. So when you
Speaker 8: start the factor that out and then you see what's
Speaker 8: happened with organized labor, people are paying attention to restaurant
Speaker 8: staff and servers and the back of the house and everybody.
Speaker 8: You need to be part of a happy, go lucky
Speaker 8: team that provides a great experience.
Speaker 5: Listen, we know, certainly coming off the pandemic, what a
Speaker 5: tough industry it is, the restaurant industry overall, even some
Speaker 5: of the really established names, the well known chefs and
Speaker 5: their organizations. I mean, it was not an easy environment,
Speaker 5: to say the least. Having said that, I mean, what
Speaker 5: is top of mind for the members of your organization
Speaker 5: as they look at twenty twenty five? Is it food costs?
Speaker 5: Is it labor costs? Is it the administration? Is it
Speaker 5: regulatory oversight? Is it concerns about the economy, the US
Speaker 5: economy and consumers pulling back?
Speaker 4: What is it?
Speaker 7: Oh my god, Carol, you named it all.
Speaker 8: I mean, part of what we talk about here is
Speaker 8: the VUCA environment when things or you know, there's volatility
Speaker 8: on certainty, complexity and ambiguity coming together. Well, that was
Speaker 8: happening when we came out of COVID. But now you've
Speaker 8: got you know, attention deficit disorder meets LUKA. Right now
Speaker 8: you have to be focused on what's going on in
Speaker 8: your restaurant, meaning that you've got to be careful with
Speaker 8: what's happening with your costs, your menu costs.
Speaker 7: You've got to be careful with what you've got on
Speaker 7: your menu.
Speaker 8: You got to have happy people restaurant in your restaurant,
Speaker 8: creating a service environment that people love. You've got to
Speaker 8: be on top of your promotional activity.
Speaker 7: To balance that out.
Speaker 8: You've got to be a good partner with your supply
Speaker 8: chain and the distribution community that's serving you and the
Speaker 8: manufacturers that are trying to get you product. You cannot
Speaker 8: be caught up in all this anticipatory, you know, distractions
Speaker 8: around tariffs and the immigration policy and some of these
Speaker 8: things that have been chatted about. Everybody's a little bit
Speaker 8: worried about what might happen. But you know, right now,
Speaker 8: I think everybody's spoken is really beyond the regulatory environment,
Speaker 8: and we have things in a regulatory that are taking
Speaker 8: place already that we've got to worry about. But it's
Speaker 8: those factors that again make up your P and L
Speaker 8: and make sure that the industry is not going to
Speaker 8: get caught up in some whipsaw because somebody is expecting
Speaker 8: that there might be.
Speaker 7: Terriffs or there might not be terriffs.
Speaker 8: There are things for us, particularly regulatory right now, that
Speaker 8: are taking place that are important to focus on that
Speaker 8: will cost restauranteurs in the supply chain and our members' money.
Speaker 5: Hey, one of the things Tim and I spend a
Speaker 5: lot of time talking about is the global food supply
Speaker 5: chain and the impact climate change has had on all
Speaker 5: of it. I am curious too that what you are
Speaker 5: hearing from members on that front how it is getting
Speaker 5: more difficult in terms of accessing the necessary food supplies
Speaker 5: that they need, and then how that potentially plays into
Speaker 5: inflationary pressures sticking around longer.
Speaker 7: Yeah, that's thank you for asking that question. One of
Speaker 7: the things that's going on right now.
Speaker 8: You're hearing a lot about it, and I've heard some
Speaker 8: of your experts talk about a cocoa and coffee. I
Speaker 8: mean the weather effects across the world. Are the adverse
Speaker 8: weather conditions that are taking place, particularly in the South
Speaker 8: in South America right now. The things that are happening,
Speaker 8: that drought in Brazil, the situation out in the Ivory
Speaker 8: Coast again not only crazy weather patterns but also a
Speaker 8: disease and the crop. When you're starting to look at
Speaker 8: those type of effects in the supply chain with raw
Speaker 8: materials that we import, that does drive prices to all
Speaker 8: time high, especially when you think about cocoa, and it
Speaker 8: also causes problems because you can't recover very quickly.
Speaker 7: In some of these instances. There's a thing called swollen.
Speaker 8: Swollen shoot disease that goes into the vines, and to
Speaker 8: replant coco something might take five years. So there's an
Speaker 8: effect with that. And then, of course the effect being
Speaker 8: halfway around the world is the supply chain, the cost
Speaker 8: of moving product from one end of it to the other,
Speaker 8: and that continues to be a point of concern when
Speaker 8: you're thinking about long term and you're thinking about short term,
Speaker 8: particularly when you're trying.
Speaker 7: To get bill coffee for less than five bucks.
Speaker 2: We only have thirty seconds left bird flu. How concerned
Speaker 2: are your customer? How concerned are your members about bird flu?
Speaker 7: Yeah?
Speaker 8: Since come up, everybody's a little freaked out about it
Speaker 8: because we did have it before the holidays.
Speaker 7: Folks are managing it.
Speaker 8: It's very localized, and at this point in time, it
Speaker 8: doesn't it hasn't created any major issues right now in
Speaker 8: the supply chain.
Speaker 3: We're all watching it, Okay, Phil, We're gonna have to
Speaker 3: leave it there. Hopefully.
Speaker 2: That's the extent of what happens when it comes to
Speaker 2: bird flu. Phil Cafaracus. He is president and CEO over
Speaker 2: at IFMA, the Food Away from Home Association, a trade
Speaker 2: group for the food services industry.
Speaker 1: This is the Bloomberg Business Week Podcast. Listen live each
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Speaker 2: Okay, we know about the Greatest Generation. Check the Silent Generation.
Speaker 3: Check.
Speaker 2: Do you know there's someone there's a generation before the
Speaker 2: Greatest Generation? What is it they are called?
Speaker 4: Are you serious?
Speaker 3: Yeah? The Lost Generation?
Speaker 4: Oh, I do know that. I do know that.
Speaker 2: And then I guess we forget about everyone before that.
Speaker 4: Right, And then there's right that's neither here, sorry everybody.
Speaker 4: And then there's the massive.
Speaker 3: Boomers boomers, Gen X, Gen X.
Speaker 4: Millennials yep, Gen Z yep. Then where else?
Speaker 2: Then it gets a little complicated. Yeah, Gen Alpha that's
Speaker 2: twenty thirteen to mid twenty twenties. Okay, those are my kids,
Speaker 2: I guess. Okay, and then now that we're in the
Speaker 2: mid twenty twenties, it's time for the next generation. We're
Speaker 2: talking Generation Beta. Okay, and they're born from twenty twenty
Speaker 2: five to twenty thirty nine, so most of them aren't even.
Speaker 5: Alive yet, all right, so we're waiting, but we're wait
Speaker 5: ejecting what there are a few of them, what they're
Speaker 5: going to be like?
Speaker 3: Okay, birthday to them.
Speaker 2: Despite that, PGM set out to figure out what this
Speaker 2: generation would look like. They interviewed doctors, scientists, parents, and
Speaker 2: more two thousand Americans to get predictions for the future
Speaker 2: of Generation Beta.
Speaker 5: David Blanchett is managing Director, portfolio manager, and head of
Speaker 5: Retirement Research at PGIM. He joins us from Lexington, Kentucky. David,
Speaker 5: Happy New Year. Great to have you here with Tim
Speaker 5: and myself. So tell us about this project because we
Speaker 5: really haven't talked about this next generation, Generation Beta. So
Speaker 5: tell us what you set out to do.
Speaker 9: Well, you know, first you all kind of introduced this
Speaker 9: idea of generations, and you mentioned Baby Boomers.
Speaker 10: They were actually the first generation to kind of have
Speaker 10: a name.
Speaker 9: It was essentially a group of individuals at a certain
Speaker 9: age and right, so we've kind of moved forward to
Speaker 9: the time you mentioned the Boomers, gen X, millennials.
Speaker 10: You know, the Alphas. Now we have the Beta.
Speaker 9: So everyone born on January first, twenty twenty five for
Speaker 9: the next fifteen years is going to be part of
Speaker 9: Generation Alpha. And obviously there's still a lot of those
Speaker 9: babies to come. But you know, we were curious, like,
Speaker 9: what what might the future hole? Like what are we
Speaker 9: looking at in terms of this newest generation? So, as
Speaker 9: you all mentioned, a pretty exhaustive survey, you know, reviewing
Speaker 9: kind of expert opinions, surveying two thousand Americans and lots
Speaker 9: of interesting perspectives people have about you know, things like
Speaker 9: life in general, retirement, longevity, just lots of interesting predictions
Speaker 9: about the future.
Speaker 2: I mean, don't you think if you went back in
Speaker 2: time I'm just trying to figure out a corollary here
Speaker 2: that makes sense. But if you went back in time,
Speaker 2: you know, to the to the nineteen seventies and said
Speaker 2: to folks, what do you think people born, you know,
Speaker 2: in the nineteen eighties to the two thousands would experience
Speaker 2: in life, Like they're not going to be talking about
Speaker 2: smartphones and you know, AI, they're going to be talking
Speaker 2: about flying cars, because that's what we thought would happen. Right,
Speaker 2: There's this disconnect between predictions and what actually happens right well,
Speaker 2: and as.
Speaker 9: I think that that's why like this is I think
Speaker 9: this is informative, it's useful, but it's really difficult to
Speaker 9: think about what's going to happen in the future. So
Speaker 9: you know, for example, you know, one of the questions
Speaker 9: in the survey was like, what would you call this generation?
Speaker 9: And you just said it a second ago, but like
Speaker 9: the most common nickname was Generation AI, like even even
Speaker 9: three or four years ago, that probably isn't the name
Speaker 9: that we'd used to describe this later, this latest cohort.
Speaker 9: So I do think there is a lot of things
Speaker 9: that are changing, but to me, like this idea of
Speaker 9: change was probably the biggest theme in the survey, where
Speaker 9: there is lots of expectations where you know, kind of
Speaker 9: every facet of raising children, of saving for retirement, of planning.
Speaker 10: For health care.
Speaker 9: People partople change in the future, especially for this generation BETA.
Speaker 5: What about in terms of I'm really curious about how
Speaker 5: we work right here, we are four years off the pandemic.
Speaker 5: We thought it was going to be transformational, and I
Speaker 5: guess for some who are still working from home, it is,
Speaker 5: but there's a lot more people who are being pressured
Speaker 5: to come back to the office. How do you think
Speaker 5: about this generation or what did you hear about how
Speaker 5: they think they will be working?
Speaker 9: Sure, so eighty three percent of respondents thought that retirement
Speaker 9: will look completely different for.
Speaker 10: Generation Beta, And well, why is that?
Speaker 9: It's because there's idea of many retirements and this idea
Speaker 9: that as we kind of evolve through the workforce, we're.
Speaker 10: Going to be changing changing jobs.
Speaker 9: So, you know, other stats would be that seventy four
Speaker 9: percent of people thought that Generation Beta would work less
Speaker 9: than five days a week. Eighty percent of respondents thought
Speaker 9: that people would have three distinct career paths over time.
Speaker 9: So I think that there is this kind of emerging
Speaker 9: perspective that this idea of having kind of one job
Speaker 9: and one profession for you know, thirty or forty years,
Speaker 9: isn't the future of work based upon how things are changing?
Speaker 1: David?
Speaker 4: Is that because we're going to be living to one
Speaker 4: hundred and fifty.
Speaker 5: So yeah, we're going to have these many retirements, We're
Speaker 5: going to have these many you know, transformations in our careers.
Speaker 9: So I think that people will be living longer, you know,
Speaker 9: So I focus on retirement research and I don't think
Speaker 9: we're going to have most people living to one hundred
Speaker 9: and fifty, but we are going to see improvements in longevity, right,
Speaker 9: and those improvements kind of radically create complexity around me
Speaker 9: on how we plan for retirement. And so to me,
Speaker 9: it isn't all that surprising that there's this perspective that,
Speaker 9: you know, Generation Beta isn't going to retire right to
Speaker 9: the extent that we can. We can you know, create
Speaker 9: jobs and create abilities to work longer. Lots of folks
Speaker 9: that want to retire. Actually, personally, I don't love the
Speaker 9: word retirement out the word financial independence. What we want
Speaker 9: to be able to do is is to save money
Speaker 9: and eventually stop working. And I think that's where we're
Speaker 9: seeing this perspective around Generation Beta, where they're going to
Speaker 9: be this in theory, this group of individuals that doesn't
Speaker 9: have the same retirement as everyone else. That being said,
Speaker 9: you know, it's that that blows my mind, is that
Speaker 9: they're not going to be you know, eight seventy until
Speaker 9: the you're twenty ninety five, So retirement in seventy years
Speaker 9: is going to be very different than it is today.
Speaker 2: To be young born in twenty thirty nine, sure would
Speaker 2: be nice already, right, already, I'm thinking about it. One
Speaker 2: thing that I was surprised and you're reminding me about
Speaker 2: this is in a history class in college I remember studying.
Speaker 2: I believe it was in like the nineteen twenties, maybe
Speaker 2: the rise of leisure and the fact that people had
Speaker 2: they weren't stuck in the fields, you know, twelve hours
Speaker 2: a day, seven days a week, three hundred and sixty
Speaker 2: five days a year for the first time ever. So
Speaker 2: there are certain things started happening, and I could be
Speaker 2: getting the dates wrong, and I know I'm over generalizing here,
Speaker 2: but I think if they were to look at our
Speaker 2: lives now, they'd say that, oh wow, those people never work.
Speaker 2: But when are we going to have like a four
Speaker 2: day work week or a three day work week because
Speaker 2: automation is going to be doing such a good job.
Speaker 4: Are you asking for them or for you?
Speaker 3: I'm asking for me. One.
Speaker 2: Are the markets going to only be open four days
Speaker 2: a week and then we only have to work four
Speaker 2: days a week?
Speaker 3: That's what I want to know.
Speaker 9: So, you know, seventy four percent of respondence in the
Speaker 9: survey thought that Generation BETA would work less than five
Speaker 9: days a week, and so I think that again, there
Speaker 9: is this idea of work becoming more fluid versus this
Speaker 9: kind of structured nine to five thing. Obviously, we saw,
Speaker 9: you know, during COVID, a rise of remote work people
Speaker 9: and not even be in the office through their jobs,
Speaker 9: and a lot of companies going to pull people back
Speaker 9: into the office. I think that there is this emerging
Speaker 9: perspective that this requirement to be you know, in at
Speaker 9: a desk in an office five days a week, it's
Speaker 9: not gone, but it's kind of slowly evolving into something
Speaker 9: else that is a lot more flexible.
Speaker 4: One thing I want to talk about is healthcare.
Speaker 5: We talked about longevity, and I feel like there's a
Speaker 5: bunch of things here in terms of your findings. Half
Speaker 5: of adults believing that cancer will be cured by gen beta,
Speaker 5: percent predicting that gen beta will have individualized healthcare based
Speaker 5: on their DNA, And I feel like we continually are
Speaker 5: increasingly tim are having conversations about individualized medicine. Talk to
Speaker 5: us a little bit about more about that, because it's
Speaker 5: an incredible cost to society, it's an incredible cost to
Speaker 5: individuals that we still haven't figured out some of these
Speaker 5: major ailments. So pull that together for us.
Speaker 10: Yeah, I mean I think that that's kind of an
Speaker 10: optimistic perspective.
Speaker 9: You know, I too saw the fifty one percent stat
Speaker 9: of thinking that Generation made would cure cancer that I
Speaker 9: think that that to me, what what resonates looking across
Speaker 9: the response is just this idea again of kind of
Speaker 9: like the evolving state of healthcare. I think the idea
Speaker 9: of personalized medicine. You know, there's some questions about like
Speaker 9: AI things like that. I think the way that individuals
Speaker 9: can receive you know, treatment is going to change, and
Speaker 9: I think that that was a key theme among the
Speaker 9: responders in the survey.
Speaker 10: So healthcare.
Speaker 9: I think that people think it's going to evolve in
Speaker 9: the future and radically affect Generation MADA in terms of
Speaker 9: how they enjoy their lives and also when they eventually.
Speaker 2: Retire, okay, get better, get to work. I was kind
Speaker 2: of hoping cancer would be cured before then.
Speaker 5: Fingers crossed. I would love to see that. The other
Speaker 5: thing is just one more stat on all of this.
Speaker 5: Fifty nine percent think AI artificial intelligence will be able
Speaker 5: to predict and prevent health issues before symptoms appear. And
Speaker 5: you know, it's just as you know, where you have
Speaker 5: spent you're in the investment world the last two years
Speaker 5: talking about nothing but AI, generative AI, large language models,
Speaker 5: and so on. In the impact, although I think people
Speaker 5: are thinking it's going to take a while for all
Speaker 5: of this to pay off and be put to work.
Speaker 9: Yeah, I mean, I think one of the questions was,
Speaker 9: like sinctiorsent responds think that AI is going to raise
Speaker 9: their kids, and so I think that that there's a
Speaker 9: lot of a lot of a lot of positive expectations
Speaker 9: in here around artificial intelligence and how you know, it's
Speaker 9: role in terms of of of education, in terms of
Speaker 9: the role of kind of helping individuals have better personalized
Speaker 9: experiences based upon their unique preferences.
Speaker 2: I'm wondering about technology because and the folks you interviewed,
Speaker 2: how did their how did their answers vary based on
Speaker 2: who you talk to? Because you talked to doctors, you
Speaker 2: talk to parents, you talked to technologists, you talk to scientists.
Speaker 2: How did they think differently about different generations?
Speaker 9: Well, you know, it's funny, you know, one of the
Speaker 9: differences that I noticed with the responses was, like the
Speaker 9: like the older generations, like boomers, we're as optimistic about
Speaker 9: like the the possibilities the future of the Generation Beta,
Speaker 9: you know, beyond that, you know, if you look at
Speaker 9: just like maybe at a higher level, if you look
Speaker 9: at things like like like regrets and the things that that.
Speaker 10: People would change based upon their lifestyles.
Speaker 9: You know, you have things like like saving for retirement
Speaker 9: and spending time with kids, things like that, Like, you know,
Speaker 9: those those were very different for older Americans versus younger Americans.
Speaker 9: So a lot of the questions I didn't see big
Speaker 9: differences in in terms of you know, looking at like boomers, millennials,
Speaker 9: gen X, but you do see it in terms of
Speaker 9: things people say, well, like what I wish I had
Speaker 9: done differently looking back on my life.
Speaker 5: Yeah, I mean it happens all the time, right whatever
Speaker 5: generation it's called.
Speaker 2: Right, Like, I think there's a lot of like social
Speaker 2: media posts that go viral about that.
Speaker 10: Now.
Speaker 2: Yeah, you know, people who interview people at the end
Speaker 2: of their lives about what they regret, what they want
Speaker 2: to do more of, And it's never it's never let
Speaker 2: me just say, it's never tweeting more.
Speaker 3: That's what I'll tell you.
Speaker 2: They never say I wish I would have spent more
Speaker 2: time tweeting.
Speaker 4: That was a safe play. That was a safe play. Hey.
Speaker 5: Having said that, I was kind of drawn to a
Speaker 5: statistic that you shared with our producer and our team.
Speaker 5: The people surveyed estimate that Generation Beta will need approximately
Speaker 5: one point eighty eight million dollars to sustain in retirement.
Speaker 4: That seems like a low number.
Speaker 9: It's well, I think it's all it's all relative. It's
Speaker 9: it's a big number. But like I said, I mean,
Speaker 9: we're talking about people retiring, you know, seventy sixty five
Speaker 9: years from now. I think that I think there are
Speaker 9: some really important things here, Like there was one I
Speaker 9: think useful staff that like eighty percent you know, think
Speaker 9: that Generation BETA should, like in a perfect world, start
Speaker 9: saving for retirement as soon as the child's worn.
Speaker 10: And that's probably not realistic.
Speaker 9: I think most you know I have, I have, I
Speaker 9: have four alphas myself, no betas, And that's that's tough.
Speaker 3: Yeahta yet, no.
Speaker 10: Bady's I know. I think I think I think no
Speaker 10: Plan Beta is on our happ But I think.
Speaker 4: I think that there is this no David, your wife
Speaker 4: is calling.
Speaker 9: Like, retirement's tough, right, And so I think that that
Speaker 9: one thing that will make retirement tough is we talked
Speaker 9: about earlier is this increasing longevity. But I also don't
Speaker 9: love that word, Like I said, retirement. I think that
Speaker 9: I think that it's going to be more possible for
Speaker 9: us to do things that are economically additive at later ages, right,
Speaker 9: and and I mean along those lines, like you know,
Speaker 9: one of the important stats in the report was the
Speaker 9: number one regret of all respondents was that they didn't
Speaker 9: save enough for retirement. Okay, what's really interesting is is
Speaker 9: that is never the highest regret of any of the generations.
Speaker 9: So like not saving for retirement is this kind of
Speaker 9: regret that kind of echoes across generations, but it's.
Speaker 10: Never the biggest thing.
Speaker 9: Like if you look at like like boomers, for example,
Speaker 9: they wanted to you know, spend more time with their
Speaker 9: loved ones and take care of their health things like that.
Speaker 9: So that I think that, you know, we like there
Speaker 9: is that big number, that one point eight eight million,
Speaker 9: But I think what's important is is that is you know,
Speaker 9: things like not saving for retirement you know, was actually
Speaker 9: a bigger focus among younger respondents.
Speaker 10: But they're worried about.
Speaker 9: Like everything, like like they just have like regret scalore
Speaker 9: As individuals get older, those regrets spayed away. But to
Speaker 9: your question and point, retirement is very expensive. If we
Speaker 9: start living to age one hundred and ten hundred and twenty,
Speaker 9: it's even more expensive than today.
Speaker 5: But is it also something that's more top of mind
Speaker 5: maybe for younger generation because it's not like when my
Speaker 5: dad retired and there was pension and VA benefits and
Speaker 5: social security and investments. I mean, there was all these
Speaker 5: different pools and it's a very different environment for a
Speaker 5: lot of workers nowadays.
Speaker 10: What it is.
Speaker 9: I mean, so we've got I think, you know, like personally,
Speaker 9: I don't love the fact that the trust fund for
Speaker 9: Social Security is projected to go bankrupt in about about
Speaker 9: ten years. It creates a lot of uncertainty around around
Speaker 9: like the bedrock of our retirement being there. But also
Speaker 9: like like we've we've entered a world of personal responsibility
Speaker 9: for retirement savings. You've got to save your in your
Speaker 9: four oh and K and your I E. Very things
Speaker 9: like that. And I think that that's a really good
Speaker 9: way to help individuals accumulate money for retirement, but you
Speaker 9: need to make sure they have access to a plan.
Speaker 9: But you know, kind of a bigger problem to some
Speaker 9: extent is Okay, you get to retireronment and you have
Speaker 9: I don't know, half a million dollarsmars. It's like now
Speaker 9: what like you train these people to say for thirty
Speaker 9: or forty years, and all of a sudden you've got
Speaker 9: to figure out how you're going to spend down that
Speaker 9: money and you don't know how long you're going to live,
Speaker 9: what the markets are going to do, and associreaated bankrupt
Speaker 9: and so I think that we have we have a
Speaker 9: pretty good system, but it places a lot of responsibility
Speaker 9: on the shoulders of the average American. And that's where
Speaker 9: you know, having help, having an advisor, using certain tools
Speaker 9: resource I think that's really becoming more valuable because you
Speaker 9: only have one shot at retirement. You can't screw up,
Speaker 9: and so getting help to figure out what the best
Speaker 9: thing to do is is just becoming I think more
Speaker 9: important for all Americas.
Speaker 2: Hey, are you concerned at all about a lack of
Speaker 2: Generation BETA actually appearing? Because childcare has gotten so expensive
Speaker 2: and it's so expensive to have kids. I know, I
Speaker 2: don't need to tell you how much you have to
Speaker 2: say for college considering you have four of them, but
Speaker 2: it's just gotten so expensive, and I know my generation
Speaker 2: fewer and fear people are having kids. Is that a concern?
Speaker 10: It is? And so it was really interesting.
Speaker 9: Is one of the questions they asked was, you know,
Speaker 9: among those who aren't going to be having children, like
Speaker 9: why is that? And so my wife is a veterinarian
Speaker 9: and and you know, one of the top reasons was
Speaker 9: people are viewing their pets as a child. And you know,
Speaker 9: if you follow this trend in other countries, you see
Speaker 9: this in other places where individuals are kind of substituting
Speaker 9: having kids or having pets, and the number one sided
Speaker 9: reason often is just the costs and the time it
Speaker 9: takes to actually raise children.
Speaker 5: All right, So we've just got a couple of minutes
Speaker 5: left here, and I am curious with all that is
Speaker 5: said and done, all that we've talked about.
Speaker 4: You know what is kind of top.
Speaker 5: Of mind for you guys, pigim you guys invest Like,
Speaker 5: I don't know, what are you thinking about this next generation,
Speaker 5: this beta generation?
Speaker 9: So you know, to be perfectly honest, like, I'm not
Speaker 9: incredibly worried about about one year one year old saving
Speaker 9: for retirement, right, I think that it's gonna be it's
Speaker 9: gonna be an issue. I think I think what I
Speaker 9: am what I'm I'm more focused on as individuals who
Speaker 9: are investing for today. So I spent a ton of
Speaker 9: time thinking about, like, how do we create solutions for
Speaker 9: individuals who around retirement and and to me, it does
Speaker 9: get to this earlier point just about where you know,
Speaker 9: everyone's retirement is their own right and for better or
Speaker 9: for worse, we all have to worry about the markets
Speaker 9: misbehaving about living a long time, and it's just it's
Speaker 9: just really really complicated.
Speaker 10: So I think, you know, at a high.
Speaker 9: Level, the job of all of us needs to be
Speaker 9: when we're young to make good financial choices, to save
Speaker 9: in our four one K and invest well. But but
Speaker 9: but the decisions you've got to make when you get
Speaker 9: closer to your retirement just are really really complex. And
Speaker 9: you know, I'd like to think that things are gonna
Speaker 9: get easier for generation Beta, but it's probably the opposite.
Speaker 9: And so hopefully, you know, we can learn from a
Speaker 9: lot of the mistakes, for better or for worse, that
Speaker 9: individuals make today so that future generations as they retire
Speaker 9: have things a bit easy.
Speaker 2: I did a college calculator while I was away break, and.
Speaker 4: Oh, for what's going to cost you?
Speaker 2: For your kids.
Speaker 3: Not pretty.
Speaker 2: What's the number you came up with more than six
Speaker 2: hundred thousand dollars for a private if you want to
Speaker 2: go to private school.
Speaker 4: One or for both for one for one?
Speaker 5: Good luck, honey, all right, David, we got to leave
Speaker 5: it there. Hey, listen, Thanks so much. This was fun,
Speaker 5: interesting and enlightening. David Blanchett, Managing director, portfolio manager and
Speaker 5: head of Retirement Research at PGIM, joining us from Lexington, Kentucky. No, like,
Speaker 5: that's one of the things we talk about all the time, right,
Speaker 5: the cost of college.
Speaker 3: Yeah, it's uh, it just keeps coming up.
Speaker 4: And up and up. Intimidate.
Speaker 3: Well, see they can keep going up and up and up.
Speaker 2: I know twenty years ago you're probably saying that.
Speaker 4: Yeah, exactly. I don't know.
Speaker 5: I don't know that I ever thought it, but we've
Speaker 5: talked so many times, like over the years about how
Speaker 5: it's been outpacing inflation and it just continues to do so.
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