WEBVTT - The CEO Radar: The New Global Agenda (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 almost

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<v Speaker 1>forty seven hundred earnings calls worldwide to assess what topics

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<v Speaker 1>merit a CEO's time and attention. Here's a recent episode.

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<v Speaker 1>The CEO Radar is meant to be a tool for

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<v Speaker 1>CEOs to compare their own agendas to those of their peers,

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<v Speaker 1>as well as the market as a whole. To do so,

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<v Speaker 1>it took a look at the topics that were discussed

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<v Speaker 1>on almost forty seven hundred earnings calls in the fourth

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<v Speaker 1>quarter of twenty twenty four. I'm Edward Adams of Bloomberg

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<v Speaker 1>Media Studios on this first episode of the Ceo Radar

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<v Speaker 1>podcast to unpack the topics behind the numbers. I'm joined

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<v Speaker 1>by Christoph Schweitzer, CEO of BCG, and by Judith Wallenstein,

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<v Speaker 1>who heads the firm's CEO advisory practice. Between them, they

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<v Speaker 1>speak one on one to more than six hundred CEOs

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<v Speaker 1>in the course of a given year. Let's begin with AI.

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<v Speaker 1>It's clearly still a top ten topic for CEOs. And

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<v Speaker 1>we certainly saw a huge increase in the number of

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<v Speaker 1>mentions of it when chat GBT was released in twenty

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<v Speaker 1>twenty two. However, in twenty twenty four we did see

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<v Speaker 1>the number of mentions begin to plateau, and in fact,

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<v Speaker 1>there was about a seven percent dip in the number

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<v Speaker 1>of mentions of AI and machine learning in the fourth

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<v Speaker 1>quarter of last year. So while it remains a big topic,

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<v Speaker 1>it seems as if something is afoot here, something is

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<v Speaker 1>changing the way that it's being deployed in companies. What

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<v Speaker 1>are you hearing from the CEOs that you speak to.

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<v Speaker 2>About Overall, it's about three quarters of company data say

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<v Speaker 2>AI is a top strategic priority for them, but only

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<v Speaker 2>about one quarter feels that they are seeing the value

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<v Speaker 2>that they were hoping to see. So there's a meaningful

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<v Speaker 2>gap between ambition and reality. And I do think what

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<v Speaker 2>that in uces is you're just a bit more careful

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<v Speaker 2>in your earning call as you talk about it. I

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<v Speaker 2>think that's what the number suggests.

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<v Speaker 1>Judith, We've seen some regional differences in terms of the

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<v Speaker 1>mentions of AI and machine learning. It's held relatively constant

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<v Speaker 1>in North America, it's actually gone up in Asia, but

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<v Speaker 1>it's been down significantly in Europe. It was mentioned thirty

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<v Speaker 1>nine percent less in quarter four than in quarter three.

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<v Speaker 1>What do you make of that?

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<v Speaker 3>In general, we do see some topics that are fairly consistent.

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<v Speaker 3>The whole struggle and challenge too, from the proliferation of

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<v Speaker 3>use cases to real impactful programs is something we hear

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<v Speaker 3>from European CEOs and the same way we hear it

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<v Speaker 3>in other parts of the world.

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<v Speaker 2>It's an interesting window because companies are now in our observations,

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<v Speaker 2>separating into those that are real within us in THEI

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<v Speaker 2>space and others that are laggards and struggled to get

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<v Speaker 2>the value out of it. The winners, for sure, are

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<v Speaker 2>a lot more focused. They don't have one thousand flowers bloom.

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<v Speaker 2>They have fewer use cases, fewer functions that they focus on.

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<v Speaker 2>They invest significant money in a really focused, concentrated way,

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<v Speaker 2>and very importantly, they double down on upscaling their organization,

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<v Speaker 2>on upscaling their team so that they change the way

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<v Speaker 2>they really work in every single day, and then they

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<v Speaker 2>measure it in a quite systematic way operationally and financially.

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<v Speaker 2>That's what separates the winners from those that are lagging.

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<v Speaker 3>Probably three data points why I think the topic remains

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<v Speaker 3>as high on the agenda. One is the whole excitement

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<v Speaker 3>about agents is very consistently in the Bloomberg BCG radar

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<v Speaker 3>across all geographies. The second one, if you look at

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<v Speaker 3>the companies that have upskilled more than twenty five percent

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<v Speaker 3>of their workforce on AI, there's Japan and Singapore very

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<v Speaker 3>much on the top. But then actually you have a

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<v Speaker 3>number of European markets where these companies are headquartered. Before

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<v Speaker 3>even you have the US and European CEOs who were

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<v Speaker 3>surveyed on their willingness to invest find themselves pretty much

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<v Speaker 3>in the same ballpark range than other markets that that

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<v Speaker 3>are ready to invest. What is more pronounced is the

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<v Speaker 3>insecurity on regulation, and in a continent that's a lot

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<v Speaker 3>more where policymaking and regulation are more prominent and visible,

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<v Speaker 3>you actually see that CEO say, look, I have no

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<v Speaker 3>idea what to expect of this, like the EUAI Act,

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<v Speaker 3>and how is a company we're going to navigate.

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<v Speaker 2>My anticipation for twenty twenty five is that we are

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<v Speaker 2>actually going to see quite some bifocation. I think there

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<v Speaker 2>will be fantastic success stories. We are starting to see

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<v Speaker 2>some of those. For example in biopharma research and development.

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<v Speaker 2>We see it in some of the coding for big

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<v Speaker 2>software companies, but also for banks and insurance companies and

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<v Speaker 2>similar We also see some great examples in field services.

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<v Speaker 2>We see great example in customer service and kind of

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<v Speaker 2>customer interaction management of all sorts. So there are some

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<v Speaker 2>great success stories emerging, but it turns out it is

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<v Speaker 2>harder than many CEOs thought when they went on stage

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<v Speaker 2>in their earning scool year or eighteen months ago go

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<v Speaker 2>and make big promises.

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<v Speaker 1>So you mentioned AI agents, which is something that we

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<v Speaker 1>saw in uptick in mentions of this quarter. I think

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<v Speaker 1>quarter three there were about twenty four mentions of agents globally,

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<v Speaker 1>hardly on the radar at all, and this past quarter

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<v Speaker 1>there were one hundred and five. Is that sort of

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<v Speaker 1>the new flavor of the month for AI. AI agents

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<v Speaker 1>is going to be what we'll be talking about in

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<v Speaker 1>twenty twenty five.

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<v Speaker 2>Well, we believe that AI agents are going to be

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<v Speaker 2>an important next step of evolution of functionality and also

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<v Speaker 2>impact potentially for the companies that really adopted in a

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<v Speaker 2>productive way. So it's going to be sizeable. However, it's

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<v Speaker 2>also still very early days, and I think it's important

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<v Speaker 2>to calibrate, and we have about more than one hundred

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<v Speaker 2>mentions of AI agents, but we have about one thy

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<v Speaker 2>four hundred mentions of AI, So it's it's the next thing.

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<v Speaker 2>We believe in the potential. We expect that you will

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<v Speaker 2>hear it more frequently mentioned in twenty twenty five earnings releases.

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<v Speaker 2>But between that and the substance in the P and L,

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<v Speaker 2>I think there's quite a bridge to cross.

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<v Speaker 1>A lot of companies in recent years have been saying

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<v Speaker 1>that AI is not going to be a job killer,

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<v Speaker 1>that it's going to be something that changes the way

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<v Speaker 1>in which a lot of people work, but it's not

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<v Speaker 1>going to eliminate positions in their enterprises. I'm curious what

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<v Speaker 1>your view on that is.

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<v Speaker 2>Well, our observation is in line with what you just said.

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<v Speaker 2>There are not many companies, In fact, there are less

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<v Speaker 2>than ten percent of companies where AI deployment has led

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<v Speaker 2>to redundancies and people being let go. In fact, it's

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<v Speaker 2>a bit kind of the classical pattern, right, I mean

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<v Speaker 2>ten twenty years ago, we were all speculating that digital

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<v Speaker 2>and the iPhone and similar devices would completely make parts

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<v Speaker 2>of the workforce obsolete, and that has not happened. In fact,

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<v Speaker 2>it has created anti new industries, new functions, new things.

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<v Speaker 1>Let's certain of these new agendas that CEOs are facing,

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<v Speaker 1>As you guys know, the Radar found that CEO mentions

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<v Speaker 1>of environmental topics such as cloud exposure or greenhouse gas

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<v Speaker 1>emission targets and ESG topics as well like board independence

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<v Speaker 1>and diversity. All four of those topics declined in Q

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<v Speaker 1>four and that's really a continuation of a decline that

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<v Speaker 1>they have been seeing in recent quarters in prior years.

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<v Speaker 1>What do you think explains those declines?

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<v Speaker 3>Ju I think it useful that high water mark of

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<v Speaker 3>talking about climate emissions companies climate targets in twenty twenty,

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<v Speaker 3>and it has declined ever since. If we reflect what

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<v Speaker 3>we hear from CEOs, you frankly have the full spectrum.

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<v Speaker 3>You have those who say, thank god, I mean, my

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<v Speaker 3>board's letting me off the hook on this climate thing now.

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<v Speaker 3>And you have those who actually feel, in a moment

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<v Speaker 3>where the topic might have less public attention, it's a

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<v Speaker 3>fantastic moment to double down and invest to outcompete in

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<v Speaker 3>the long term, specifically in those areas in the energy

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<v Speaker 3>transition where CEOs feel they can invest in technologies where

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<v Speaker 3>scarcity will prevail in the to long term and where

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<v Speaker 3>they will be better positioned. You also see that in

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<v Speaker 3>the radar you see that mentions of individual green technologies

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<v Speaker 3>go up, such as clean hydrogen, but actually quite a

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<v Speaker 3>margin in all regions. You also see that climate risks

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<v Speaker 3>and natural hazards are one of the topics that have

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<v Speaker 3>risen to the top, actually grown by more than one

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<v Speaker 3>hundred and ten percent, probably not a big surprise. Eighty

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<v Speaker 3>percent of these mentions come from US CEOs, who also

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<v Speaker 3>have seen the highest number of the basically natural hazards

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<v Speaker 3>and weather phenomena happening in the past year that have

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<v Speaker 3>created damages of a billion plus in each and every case.

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<v Speaker 2>My observation, in line with what Judith said, is that

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<v Speaker 2>within the companies there is still largely a commitment to inclusion.

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<v Speaker 2>There's a commitment to managing climate risk, to decarbonizing and

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<v Speaker 2>setting up the company for the future. And so I

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<v Speaker 2>do think substantively CEOs and companies are continueing to steer

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<v Speaker 2>in that direction, but they do it in a much

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<v Speaker 2>more selective, in a more calibrated, and certainly in a

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<v Speaker 2>much less vocal way. It's one of the topics where

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<v Speaker 2>I think substantively behind doors, there's a lot more action,

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<v Speaker 2>a lot more commitment, as you also describe you to

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<v Speaker 2>than you hear in the earnings calls.

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<v Speaker 1>As environmental and cultural issues have declined in importance, trade

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<v Speaker 1>and taxes have seemed to have taken their place. Right.

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<v Speaker 1>There were over forty national elections last year around the globe,

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<v Speaker 1>and generally, if you were a challenger and you were

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<v Speaker 1>focused on economics, you won the day. In those elections,

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<v Speaker 1>CEOs mentioned supply chain shifts and tax policy. Those mentions

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<v Speaker 1>rose by almost double digits in Q four. But oddly

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<v Speaker 1>CEOs talked less about tariffs, which we know is going

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<v Speaker 1>to be a huge topic this year. They spoke about

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<v Speaker 1>sixteen percent less than they did in Q three, whereas

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<v Speaker 1>the analysts spoke about it one hundred percent more than

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<v Speaker 1>they did in Q three. Christoph, what's going on there?

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<v Speaker 2>I think the analysts understand that there will be meaningful

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<v Speaker 2>impact on the P and L of major multinational companies,

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<v Speaker 2>and they are starting to model that and put it

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<v Speaker 2>in a kind of their assessment of the quality and

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<v Speaker 2>rating of companies. I think CEOs are staring at tariffs

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<v Speaker 2>and they know something is going to happen, and they

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<v Speaker 2>watch as Q one evolves how it will impact their business,

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<v Speaker 2>and then they're going to talk about it. I expect

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<v Speaker 2>they will talk a lot about it in twenty twenty five.

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<v Speaker 2>But I mean, what could you say in twenty twenty

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<v Speaker 2>four You were waiting in anticipation of what the first

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<v Speaker 2>quarter would bring, and now here we are.

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<v Speaker 1>Right when we look forward to twenty twenty five. One

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<v Speaker 1>of the things that you were mentioning before we began

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<v Speaker 1>taping was a rise in M and A activity, and

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<v Speaker 1>certainly discussion about that on these calls. What's driving that?

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<v Speaker 1>What's behind the increase that you expect to see come

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<v Speaker 1>the first quarter this year?

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<v Speaker 2>Well, our own word at the moment, as BCG tells

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<v Speaker 2>us that there will be meaningfully more M and A

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<v Speaker 2>in twenty twenty five. It's not a topic that you

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<v Speaker 2>talk about in your earnings call until it happens, right,

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<v Speaker 2>Neither if you're an acquirer, nor if you're potentially a target.

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<v Speaker 2>You talk about this until the moment when it happens.

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<v Speaker 2>But fundamentally, we do believe there are some very important

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<v Speaker 2>factors that are going to drive activity. First of all,

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<v Speaker 2>we had a number of relatively low MNA years, there's

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<v Speaker 2>pent up demand. Number Two, we expect that private equity

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<v Speaker 2>is going to put some of its dry powder to

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<v Speaker 2>work in twenty twenty five, but also private equity are

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<v Speaker 2>going to exit some of the assets that they've been

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<v Speaker 2>holding longer than they anticipated. Third, there will presumably be

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<v Speaker 2>some moderation of interest rates. In fact, there has been

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<v Speaker 2>a decline in interest rates and important parts of the world.

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<v Speaker 2>A bit less in the US than people would have

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<v Speaker 2>thought last year, for sure, But I mean the trend

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<v Speaker 2>is the trend. And lastly, I think many companies do

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<v Speaker 2>anticipate that the regulatory environment from an anti trust perspective

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<v Speaker 2>is going to be easier to navigate. And you take

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<v Speaker 2>those factors together, we expect there will be meaningful M

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<v Speaker 2>and A and not only acquisition but also carve out

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<v Speaker 2>of business units and divisions in twenty twenty five. For sure.

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<v Speaker 2>It's one of the topics where we feel the demand

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<v Speaker 2>that we experience as PCG is ahead of what they

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<v Speaker 2>talk about in the ONEX cours.

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<v Speaker 1>Judith, when you think about the way in which CEO

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<v Speaker 1>roles have been changing in recent years, what's your census

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<v Speaker 1>to the way CEO should sort of approached their task

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<v Speaker 1>in twenty twenty five, if you had to give them

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<v Speaker 1>a sort of thirty thousand foot look at what the

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<v Speaker 1>way in which they should do things, perhaps differently in

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<v Speaker 1>the coming months than they have in prior months, or

0:12:37.960 --> 0:12:40.720
<v Speaker 1>be a recommendation if you look at.

0:12:40.600 --> 0:12:43.600
<v Speaker 3>The last years, I think CEOs have gone through these

0:12:43.679 --> 0:12:48.120
<v Speaker 3>waves of deciding where to take positions in a much

0:12:48.160 --> 0:12:53.079
<v Speaker 3>more divided, polarized world, often with very passionate workforces that

0:12:53.400 --> 0:12:56.560
<v Speaker 3>literally wanted their CEO to take positions on everything from

0:12:56.600 --> 0:13:00.000
<v Speaker 3>a local community issue too political turmoil in the world,

0:13:00.120 --> 0:13:02.839
<v Speaker 3>and a lot of CEOs have done so because they

0:13:02.960 --> 0:13:05.680
<v Speaker 3>felt this is what it meant to have the back

0:13:05.720 --> 0:13:09.160
<v Speaker 3>of their organization. And I think most of them have

0:13:09.320 --> 0:13:13.240
<v Speaker 3>realized that's a very very slippery slope. It's very difficult

0:13:13.280 --> 0:13:15.600
<v Speaker 3>because that could keep you busy the entire day. It

0:13:15.640 --> 0:13:18.760
<v Speaker 3>also exposes your business quite a bit. And I think

0:13:18.800 --> 0:13:21.240
<v Speaker 3>most of them have gone back to say, how do

0:13:21.320 --> 0:13:26.119
<v Speaker 3>I strike that subtle balance of empathizing with my workforce

0:13:26.559 --> 0:13:31.040
<v Speaker 3>where people live the exposure to hate speech, political division

0:13:31.240 --> 0:13:34.719
<v Speaker 3>a lot more every single day. How are you the

0:13:34.760 --> 0:13:38.640
<v Speaker 3>great unifier in a way internally where you promote the

0:13:38.720 --> 0:13:42.600
<v Speaker 3>values of the company's civil dialogue, the need to really

0:13:42.679 --> 0:13:46.800
<v Speaker 3>exchange and listen to each other while not taking positions

0:13:46.840 --> 0:13:48.920
<v Speaker 3>on everything and anything. And I think that's a very

0:13:48.960 --> 0:13:52.600
<v Speaker 3>fine line. I think it's also a really noble task

0:13:52.679 --> 0:13:57.080
<v Speaker 3>because even a more chaotic, more insecure world, you can

0:13:57.120 --> 0:14:01.600
<v Speaker 3>provide purpose and direction to organization, and if you can

0:14:01.760 --> 0:14:04.439
<v Speaker 3>give them the feeling that in a world where they

0:14:04.480 --> 0:14:07.760
<v Speaker 3>often feel powerless, they can contribute and have impact on

0:14:07.880 --> 0:14:11.600
<v Speaker 3>something that matters for the company, for the community, and

0:14:12.400 --> 0:14:15.320
<v Speaker 3>to larger society. In the end, I think that really

0:14:15.360 --> 0:14:18.840
<v Speaker 3>mobilizes an organization and that gives everyone a place to

0:14:18.920 --> 0:14:19.520
<v Speaker 3>rally around.

0:14:19.760 --> 0:14:22.280
<v Speaker 1>It's an interesting notion that they function as a unifier

0:14:22.320 --> 0:14:25.240
<v Speaker 1>in chief in a very divisive time. I mean, I

0:14:25.240 --> 0:14:28.240
<v Speaker 1>think it's clear that we're at an inflection point here.

0:14:28.360 --> 0:14:31.560
<v Speaker 1>We're not just changing years or not just changing quarters,

0:14:31.600 --> 0:14:35.280
<v Speaker 1>but business is headed in some kind of a different direction. Clearly,

0:14:35.320 --> 0:14:38.160
<v Speaker 1>twenty twenty five and beyond, these topics are going to

0:14:38.160 --> 0:14:40.920
<v Speaker 1>be playing out in it's very very interesting ways. I

0:14:40.920 --> 0:14:44.360
<v Speaker 1>want to thank you both for your insights today. For

0:14:44.400 --> 0:14:46.560
<v Speaker 1>those of you who would like to explore the CEO

0:14:46.640 --> 0:14:49.800
<v Speaker 1>radar in greater depth, you can see the entire report

0:14:49.840 --> 0:14:53.280
<v Speaker 1>at Bloomberg dot Com slash CEO Radar. If you like

0:14:53.360 --> 0:14:55.960
<v Speaker 1>what you're hear, we recommend that you subscribe on YouTube

0:14:56.080 --> 0:14:58.920
<v Speaker 1>or the podcast platform of your choice to get our

0:14:58.960 --> 0:15:02.560
<v Speaker 1>second episode, which will drop in early Q two with

0:15:02.640 --> 0:15:05.480
<v Speaker 1>an entirely new batch of data. I'm Edward adams On,

0:15:05.560 --> 0:15:09.760
<v Speaker 1>behalf of BCG and Bloomberg Media Studios. Thanks for listening.