WEBVTT - The CEO Radar: 'No Regret' Moves for CEOs Facing Uncertainty (Sponsored Content)

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<v Speaker 1>Because you're a subscriber to this Bloomberg podcast, we thought

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<v Speaker 1>you'd be interested in a sponsored podcast called The CEO Radar,

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<v Speaker 1>produced by BCG and Bloomberg Media Studios. It analyzes more

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<v Speaker 1>than forty five hundred Q two earnings calls worldwide to

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<v Speaker 1>assess what topics merit a CEO's time and attention. Here's

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<v Speaker 1>a recent episode. Discussions about tariffs have masked growing Concerned

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<v Speaker 1>by both CEOs and analysts about a possible economic downturn,

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<v Speaker 1>The CEO Radar has found The Radar is a tool

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<v Speaker 1>for chief executives to compare their own agendas to those

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<v Speaker 1>of their peers, as well as the market as a whole.

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<v Speaker 1>To do so, it took a look at the topics

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<v Speaker 1>that were discussed on more than forty five hundred earnings

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<v Speaker 1>calls in the second quarter of twenty twenty five. I'm

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<v Speaker 1>Edward Adams of Bloomberg Media Studios. On this episode, I'm

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<v Speaker 1>joined by BCG Global Chair Rich Lesser and Migret Poulson,

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<v Speaker 1>Global leader of BCG's Consumer and Retail practice. Rich and

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<v Speaker 1>my brit Welcome to the podcast.

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<v Speaker 2>Thanks, it's great to be with you again.

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<v Speaker 1>So to no One's surprised. This quarter, the topic of

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<v Speaker 1>tariffs dominated the conversations during earnings calls. The number of

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<v Speaker 1>mentions of it by both CEOs and by analysts, which

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<v Speaker 1>is our proxy for the market, rose by triple digits.

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<v Speaker 1>But we also saw this interesting other trend occurring, which

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<v Speaker 1>was CEOs were mentioning uncertainty and synonyms for that at

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<v Speaker 1>an all time high over the past decade, higher even

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<v Speaker 1>than they did during COVID. And when we saw the

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<v Speaker 1>mentions by analysts of things like economic slowdown, those rose

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<v Speaker 1>by four hundred and fifty percent quarter on quarter this year. Rich,

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<v Speaker 1>I'm curious whether the CEOs that you're speaking to are

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<v Speaker 1>saying to you that they think tariffs may tip us

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<v Speaker 1>over into a recession.

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<v Speaker 2>Well, so, first I have to say the uncertainty that

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<v Speaker 2>came up in the analyst calls is completely aligned with

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<v Speaker 2>what I hear in private discussions. The focus on uncertainty

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<v Speaker 2>when you talk to CEOs. Of course, the tariffs themselves

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<v Speaker 2>have a challenge, but just trying to navigate what is

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<v Speaker 2>going to happen, what does it mean, and what does

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<v Speaker 2>it mean for their business? It comes up all the time,

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<v Speaker 2>and I do think that CEOs are more anxious about

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<v Speaker 2>the economy. Honestly, I do think it's moderated a bit

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<v Speaker 2>in the last month or two, particularly as things with

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<v Speaker 2>China are not to the levels they were before, but

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<v Speaker 2>are now on a level that I think people can

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<v Speaker 2>plan and navigate around. But the level of economic uncertainty

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<v Speaker 2>is higher. Our own chief economists would say the odds

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<v Speaker 2>of a recession still remain well below fifty percent, but

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<v Speaker 2>the odds of a slowdown I think are quite likely,

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<v Speaker 2>assuming that the tariffs remain in force to some degree,

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<v Speaker 2>you know, in a way that's meaningfully higher than.

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<v Speaker 1>For migrant What does BCG's recent survey of consumer sentiment

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<v Speaker 1>tell us about which direction the economis had.

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<v Speaker 3>So recently we have looked into the US consumers and

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<v Speaker 3>also we have surveyed consumers in nine different European markets.

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<v Speaker 3>Let me start with the European sentiment compared to last year.

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<v Speaker 3>At the same time last year, consumers are turning more

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<v Speaker 3>cautious and they're worried about economic uncertainty. And you see

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<v Speaker 3>they are hunting much more. For Bardians, they want a

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<v Speaker 3>good deal, so they are trading down in the market

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<v Speaker 3>across many categories. Of course, there are some variants between

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<v Speaker 3>the European markets. The UK consumers are worried, France the same,

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<v Speaker 3>whereas the Scandinavian consumer are more optimistic or we have

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<v Speaker 3>less consumers that are worried. In the US. We also

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<v Speaker 3>had recently a survey. We also looked at actual spent data,

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<v Speaker 3>so we looked at whether what consumers are telling us

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<v Speaker 3>mirrors how they spent their money. What we can see

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<v Speaker 3>is the US consumers also worried. They talk about job certainty,

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<v Speaker 3>economic certainty, They quote inflation as a key reason for

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<v Speaker 3>more cautious spending, and they are trading down. They are

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<v Speaker 3>looking into private label, their own label from the retailers,

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<v Speaker 3>and also looking into two bargins. They still spend on

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<v Speaker 3>travel and technology that it has not changed, but on

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<v Speaker 3>other household purchases there is a tendency to trade down.

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<v Speaker 1>That's interesting because in the radar this quarter we found

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<v Speaker 1>that mentions of consumer sentiment and topics like oil prices

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<v Speaker 1>and margin rate were increasing. So that gives me an

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<v Speaker 1>indication that at least in the C suite and on

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<v Speaker 1>Wall Street, there's concern at least about whether or not

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<v Speaker 1>things are moving in the wrong direction economically. Rich I'm

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<v Speaker 1>curious what are some specific moves that CEOs can take,

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<v Speaker 1>say three things that they can do to try and

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<v Speaker 1>insulate themselves to a degree from the uncertainty that we're facing.

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<v Speaker 2>I think you need to think short, medium, and some

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<v Speaker 2>longer term. In the short term, this idea of a

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<v Speaker 2>tariff command center to build a muscle in an area

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<v Speaker 2>that historically you didn't think you needed muscle, I think

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<v Speaker 2>is now not just a no regret move. It's sort

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<v Speaker 2>of a requirement to be able to navigate a world

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<v Speaker 2>of heightened uncertainty and a new part of a cost

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<v Speaker 2>structure that historically didn't exist before, and one that we

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<v Speaker 2>don't know if it'll stabilize or it won't. So that's

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<v Speaker 2>almost immediate and most and it is both looking for

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<v Speaker 2>scenario planning and no regret actions, but it's also looking

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<v Speaker 2>deeply at supply chain and deeply at go to market.

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<v Speaker 2>I think the second thing that's more medium, but medium

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<v Speaker 2>meaning one to two years, is what can we do

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<v Speaker 2>to drive as much productivity as we can and to

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<v Speaker 2>develop the deepest customer relationships that we can The tools

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<v Speaker 2>with AI and analytics to build deeper customer relationships, to

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<v Speaker 2>build stickiness, to build trust, to bring new value to customers.

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<v Speaker 2>And then I think slightly longer term, but two to

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<v Speaker 2>five years, not ten years plus, is how do we

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<v Speaker 2>embrace AI, How do we think about where it's going

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<v Speaker 2>to add the most value. How do we take on

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<v Speaker 2>a couple really big things and really make them happen

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<v Speaker 2>and show that we can drive business value with it

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<v Speaker 2>and build a confidence and a muscle and an understanding

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<v Speaker 2>so that then we can take on more and more

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<v Speaker 2>areas over time, rather than saying we're going to do

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<v Speaker 2>everything at once, or we're just going to throw the

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<v Speaker 2>tech out there and see if it works. And I

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<v Speaker 2>think companies are going think in those three timeframes. I

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<v Speaker 2>think they're going to be in the best position and

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<v Speaker 2>navigate a challenging period. It's not a guarantee. There are

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<v Speaker 2>no guarantees, my Brad.

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<v Speaker 1>This is particularly important for consumer products company. I was

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<v Speaker 1>going to say, what are you seeing there?

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<v Speaker 3>Yeah, And I would argue, building on Rich's point in

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<v Speaker 3>in the pandemic, supply chain diversification already started. I think

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<v Speaker 3>there was a big wake up call to many companies,

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<v Speaker 3>whether it's a consumer products company or across sectors. Right, So,

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<v Speaker 3>already then we saw a lot of work by C

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<v Speaker 3>putting this on the agenda, optimizing the footprint dual sourcing

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<v Speaker 3>as a minimum and not only optimizing a global supply

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<v Speaker 3>chain for cost. So it has been on the way

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<v Speaker 3>for a long time. If you look at both the

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<v Speaker 3>retail segment and also consumer goods companies, there's a lot

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<v Speaker 3>of dual sourcing diversification of sourcing strategies taking place.

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<v Speaker 2>And the other supply chain topic that I do here

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<v Speaker 2>talked about in private that doesn't get as much discussion

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<v Speaker 2>in the public domain is the challenge of navigating the

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<v Speaker 2>US workforce environment because we focus a lot on what's

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<v Speaker 2>happening on the tariff and trade side, But the other

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<v Speaker 2>big change that's happening has been, you know, the President

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<v Speaker 2>coming through on his commitment to both stop illegal immigration

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<v Speaker 2>and to put people out of the country who were

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<v Speaker 2>here in an undocumented way. And I think that there

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<v Speaker 2>was already a pressured US workforce situation. This is not

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<v Speaker 2>a new issue. But I think many companies who know,

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<v Speaker 2>based on tariffs they want to put new production capacity

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<v Speaker 2>in the US that that's almost a no regret move.

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<v Speaker 2>Even if we don't know exactly where tariffs land, it

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<v Speaker 2>is hard to feel confident you're going to be able

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<v Speaker 2>to source the workforce quality you need, that you'll get

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<v Speaker 2>the workforce productivity you need when there's so much uncertainty

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<v Speaker 2>on the workforce side as well. So when I talk

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<v Speaker 2>in private to CEOs that issue around workforce challenges, they've

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<v Speaker 2>already experienced them tell really passionate stories about how hard

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<v Speaker 2>it's been to get a workforce that they need, particularly

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<v Speaker 2>for more classic blue collar jobs or infrastructure jobs, and

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<v Speaker 2>how they're worried about that going forward, and how that

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<v Speaker 2>adds complexity to an investment decision that might otherwise seem

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<v Speaker 2>pretty straightforward.

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<v Speaker 1>Rich I wonder whether there's anything positive that can come

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<v Speaker 1>out of this era of uncertainty.

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<v Speaker 2>So I continue to believe one of the biggest opportunities

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<v Speaker 2>in the business world is personalization. And I mean that

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<v Speaker 2>in a business to consumer relationship and in a business

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<v Speaker 2>to business relationship, the tools to do that have never

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<v Speaker 2>been more powerful. And actually, in an uncertainty we all

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<v Speaker 2>value relationships more, not less so not the main driver,

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<v Speaker 2>but the technologies that exist. I'm really excited about what

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<v Speaker 2>we can do on that front.

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<v Speaker 1>Is there any way in which you can use these

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<v Speaker 1>uncertain times perhaps to grow market share?

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<v Speaker 3>For instance, there's also a lot of opportunity pricing strategies.

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<v Speaker 3>AI and GENAI powered gives an enormous competitive advantage if

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<v Speaker 3>you get it right. So the insight from having enormous

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<v Speaker 3>amounts of data analyzed real time allows companies to price

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<v Speaker 3>in a very different way than before.

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<v Speaker 1>There were some regional differences in the radar when it

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<v Speaker 1>comes to trade and tear IFFs. We saw that mentions

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<v Speaker 1>increase three times as fast in Asia this quarter as

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<v Speaker 1>they did anywhere else in the world. Some people lay

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<v Speaker 1>that off to the idea that Asia will be more

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<v Speaker 1>negatively affected by US terraff regime than other places will.

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<v Speaker 1>There is a Bloomberg US tariff Impact Matrix which found

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<v Speaker 1>that the average Asian company will see its profits cut

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<v Speaker 1>by about ten percent under what at the beginning of

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<v Speaker 1>June was the US teriff regime in that region. My

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<v Speaker 1>brit I'm wondering whether or not you're seeing anything regionally

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<v Speaker 1>different about tariffs when it comes to Asia versus the

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<v Speaker 1>rest of the world.

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<v Speaker 3>I think we need to diaverage the Asia question. It

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<v Speaker 3>is true if you look at consumer goods companies, there

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<v Speaker 3>is who has a high exposure to raw materials and

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<v Speaker 3>packaging from China. They are looking into diversifying sourcing, but

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<v Speaker 3>not necessarily away from Asia. India is being mentioned, Vietnam

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<v Speaker 3>is being mentioned, So there are many other opportunities in

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<v Speaker 3>Asia to source where you're not necessarily hit by the

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<v Speaker 3>current thinking on the tariff regime. So I think we

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<v Speaker 3>need to de average the impact.

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<v Speaker 1>All three of us are old enough to have lived

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<v Speaker 1>through some business cycles and periods of uncertainty. I'm curious

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<v Speaker 1>for both of you, what are periods in the past

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<v Speaker 1>that remind you of what we're going through today.

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<v Speaker 3>So I think what makes this situation different than before

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<v Speaker 3>if you look at the dot com bubble, if you

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<v Speaker 3>look at the financial crisis in two thousand and eight,

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<v Speaker 3>is that there are so many factors at play. So

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<v Speaker 3>we look at energy prices, inflation, climate change, do you

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<v Speaker 3>political uncertainty, economic uncertainty. So there are many variables that

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<v Speaker 3>you need to navigate in as a CEO, and that

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<v Speaker 3>makes the situation complex, that's for sure.

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<v Speaker 2>I would say for me, this latest challenge is really

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<v Speaker 2>reflective of the decade we're living in. I mean the teens.

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<v Speaker 2>You know, we got through the Great Financial Crisis more

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<v Speaker 2>or less by twenty ten, or whatever. When that decade started,

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<v Speaker 2>it was a relatively stable period. It wasn't a particularly

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<v Speaker 2>exciting economic period. Growth wasn't great. We had challenges, but

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<v Speaker 2>the amount of shocks or uncertainty in that system more

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<v Speaker 2>relatively low. And this decade that literally started in January

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<v Speaker 2>twenty twenty when COVID first started expanding around the world,

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<v Speaker 2>has been one challenge for resilience after another after another.

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<v Speaker 2>COVID is supply chain shocks, inflation wars we hadn't seen

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<v Speaker 2>happening in a very long period of time. That created

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<v Speaker 2>other uncertainties, and of course now all the challenges of

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<v Speaker 2>tariffs and trade that we also hadn't seen for decades.

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<v Speaker 2>What I observe in CEOs is building a resilience muscle

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<v Speaker 2>that I think, frankly, people were ready to run their

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<v Speaker 2>businesses in a very brittle way at the end of

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<v Speaker 2>the teens, meaning push for performance, performance, performance, the risk

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<v Speaker 2>of activist investors coming in. Everybody was on the gas

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<v Speaker 2>pedal as much as they could to drive performance, and

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<v Speaker 2>the threat felt like if you didn't optimize for performance,

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<v Speaker 2>your company could be really pressured. This whole decade, I

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<v Speaker 2>think has taught CEOs and leaders and boards that yes,

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<v Speaker 2>you need performance. Of course, everybody's watching you. Guys are

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<v Speaker 2>monitoring everything. But if you're not also building for resilience,

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<v Speaker 2>and you are actually taking more risk than you realize.

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<v Speaker 2>And I think whether we talked supply chain earlier, I

0:13:06.360 --> 0:13:08.320
<v Speaker 2>think we're going to see it in other ways playing

0:13:08.320 --> 0:13:11.120
<v Speaker 2>out about how you think about your investment footprint, your

0:13:11.160 --> 0:13:16.000
<v Speaker 2>business footprint to create a broader base of revenues. I

0:13:16.280 --> 0:13:19.400
<v Speaker 2>just think companies are thinking about resilience and leaders to

0:13:19.480 --> 0:13:22.240
<v Speaker 2>a much higher degree. And so this is new in

0:13:22.280 --> 0:13:24.600
<v Speaker 2>many ways, and we've talked about that, but it also

0:13:24.679 --> 0:13:26.960
<v Speaker 2>builds on a trend that is very unique to this

0:13:27.040 --> 0:13:29.080
<v Speaker 2>decade versus the decades that came before.

0:13:29.679 --> 0:13:32.480
<v Speaker 3>Yeah, what I also think is different rich that I

0:13:32.480 --> 0:13:35.520
<v Speaker 3>thought about is the speed of change driven by technology.

0:13:35.600 --> 0:13:38.120
<v Speaker 3>So if we look at just the last eighteen months

0:13:38.200 --> 0:13:42.040
<v Speaker 3>and what has happened with open Ai Jinnai. Now we

0:13:42.160 --> 0:13:45.120
<v Speaker 3>talk a lot with CEOs around agents and how to

0:13:45.160 --> 0:13:48.600
<v Speaker 3>build agents, and how agents is going to change vertical

0:13:48.679 --> 0:13:52.840
<v Speaker 3>workflows across the organization, which roles will be obsolete. It's

0:13:52.880 --> 0:13:55.559
<v Speaker 3>a big struggle both to perform in the current environment,

0:13:55.600 --> 0:13:59.080
<v Speaker 3>as you say, with all the variables and continue to

0:13:59.120 --> 0:14:01.600
<v Speaker 3>win market share and transform the business. And the speed

0:14:01.640 --> 0:14:05.120
<v Speaker 3>of change is enormous because of technology. How do you

0:14:05.160 --> 0:14:08.640
<v Speaker 3>make sure you change fast enough entire functions as we

0:14:08.720 --> 0:14:13.120
<v Speaker 3>talked about before in multinational companies spanning many, many different

0:14:13.120 --> 0:14:16.960
<v Speaker 3>countries from around the world. The level of disruption also

0:14:17.000 --> 0:14:21.560
<v Speaker 3>from startups, especially driven by new technology, is It's an

0:14:21.680 --> 0:14:25.600
<v Speaker 3>enormous opportunity, but it's also a thread for an established player.

0:14:25.800 --> 0:14:27.880
<v Speaker 1>It seems like the only thing that was certain in

0:14:27.920 --> 0:14:30.600
<v Speaker 1>this last quarter was uncertainty, and it's going to be

0:14:30.600 --> 0:14:32.520
<v Speaker 1>interesting to see whether or not that changes in the

0:14:32.600 --> 0:14:36.480
<v Speaker 1>quarter upcoming with yet new terror decisions on the horizon.

0:14:36.600 --> 0:14:39.040
<v Speaker 1>So Rich and my Brett thank you very much for

0:14:39.080 --> 0:14:39.920
<v Speaker 1>your insights today.

0:14:40.200 --> 0:14:41.360
<v Speaker 2>It was a pleasure to be with you.

0:14:42.040 --> 0:14:43.360
<v Speaker 3>Great to be here with you today.

0:14:43.520 --> 0:14:45.560
<v Speaker 1>Those of you who'd like to learn more about the

0:14:45.600 --> 0:14:48.480
<v Speaker 1>CEO Radar, you can read the full report at Bloomberg

0:14:48.560 --> 0:14:52.360
<v Speaker 1>dot com slash CEO Radar. If you've liked what you've

0:14:52.360 --> 0:14:55.360
<v Speaker 1>heard today, you can subscribe to the podcast on YouTube

0:14:55.440 --> 0:14:58.680
<v Speaker 1>or any of the podcast platforms you use. Our next

0:14:58.720 --> 0:15:01.320
<v Speaker 1>episode will drop an early e Q four with a

0:15:01.320 --> 0:15:04.800
<v Speaker 1>whole new batch of data. I'm Edward Adams of Bloomberg

0:15:04.840 --> 0:15:06.920
<v Speaker 1>Media Studios. Thanks for listening,