July 2, 2020 • 13 mins
David Cote, Chairman at Vertiv Holdings and Former Honeywell CEO, discusses why overcoming “short-termism” is imperative for businesses. He says that it's important that people be thoughtful as reopenings continue. Cote also points out the importance of looking forwardly.
Hosts: Carol Massar and Jason Kelly. Producer: Doni Holloway.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
This is Bloomberg Business Week with Carol Masser and Jason
Kelly on Bloomberg Radio. So he is well known to
our listeners in the global business community. Named ce of
Honeywell in O to stay there until early former CEO
of tr W, senior exec at GE and today his
chairman Avertive Holdings. Also a senior adviser at the private
(00:23):
equity firm kk Are. He is out with a new book.
It's called Winning Now, Winning Later, How companies can succeed
in the short term while investing for the long term.
We're delighted to have with us David Cote, he joins
us on the phone from Atlanta. Dave, nice to have
you here with Jason and myself. How are you and
how is Atlanta? Oh, things are going pretty well and
(00:44):
we just tasked the short range stormage beautiful right now. Well,
I was talking to my folks down there day. They
live there in the Atlanta area, right in Buckhead, and
you know, they were saying, it's just it's kind of
a strange time because obviously the cases are arising a
little bit, but Atlanta it feels a little bit open.
I mean, I wonder as someone who understands so much
(01:06):
of this, especially from an economic and a business perspective.
You know, what's your short term and we're gonna talk
about short term and long term, but what's your short
term outlook for the local economy there? Well, I mean,
you're right, things are a little more subdued here as
they are everywhere. But when it comes to how do
we manage our way through this, it comes back to
(01:29):
me that same principle short term, long term, and that's
you have to figure out how do you accomplish two
seemingly conflicting things at the same time. And that's always
true in business, and I'd argue in life it's true
whether it's how do you accomplish short term and long
term but not mutually exclusive. The same is true with
(01:49):
how do you open the economy but keep everybody safe?
And everybody seems to human nature tends to want one thing.
You either keep everybody safe and stay at home, or
you just completely reopened. And we just need to be
thoughtful about how we how we do this. And you're
seeing different experiences everywhere because I don't think everybody is
(02:10):
always as careful as they ought to be, because they
start thinking, oh, well, everything's fine now, it's not something
that's a binary choice out of way to accomplish those Yeah,
and that's not tricky certainly, this as we've seen in
terms of how it plays out. You know, it's interesting though,
you know, this whole short term long term Jason and
I Dave have a lot of conversations, um about the
(02:32):
lack of long term planning. Certainly maybe on a government level, uh,
in terms of some of the needed programs around the country,
but even it's difficult, I think if you're a publicly
held company to think long term, um, tell us when
you were, you know, running your company's whether it was honeywell,
whether it's t r W, you know, constantly thinking about
that quarter to quarter, and I know we report on it. Um,
(02:55):
how that kind of ties your hands? Well, this is
where uh, my view is different, and it's not so
much that it ties your hands. It's that you need
to just think differently about how you run the company.
And that's why the title of the first chapter is
banishing intellectual laziness, because it's too easy to just say, well,
(03:18):
you know, markets demand it, you got to make the quarter,
so we have no money to do this stuff. But
instead if you look at start to look at your
business differently and say, all right, I have to accomplish both.
How do I make sure I start thinking about both
an accomplishing boat at the same time. So you start
planning differently, and instead of we'll say long range planning
(03:39):
or strategic planning, be an annual event. You start to
figure out, how do I make this more short term
so that I got these milestones or even better inch
stones to make sure I'm making progress. How do I
run my operations so that I generate enough money so
that I have the flexibility to provide the return and
(04:00):
my investors are looking for, but at the same time
invest in the future. If you take a look at Honeywall,
for example, we had an empty pipeline of everything in
the beginning, and we slightly outperformed the S and P
five dred the first four or five years, and I
used to get questions from investors about it. Why isn't
it better, And I'd say, well, I've got an empty pipeline.
(04:22):
I gotta put money into this stuff. And if you
take a look at the subsequent ten years, we just
blew away the S and P five hundred, so that
over sixteen years, we generated eight return two and a
half times the SNP five. Because all that long term
stuff pays off. So why don't more people do that?
David Um I think it's it. First of all, it
(04:46):
takes a lot of work, and you do have to
really think about your business differently, and it's not an
easy mindset for people to grasp having to do the
two conflicting things at the same time. Right, human nation
always wants one, you know, tell me, boss, what's the
one thing you want? It's it's too easy to gravitate
(05:07):
to that. Whether you've got ten people, thousand people, a
hundred thousand people, it's an easy refuge. Do you think
the companies that ultimately do well, like and I think about,
you know, are those that really do manage it well
and maybe give up some quarterly growth perhaps, but they
(05:27):
understand and they communicate it well to their investors about
what they're doing. Those are the companies that potentially and
ultimately survived. Like I think about a company like Ge.
You spend time at Ge. You know, they spent a
lot of money and a lot of different things, and
then you know they really got into a really rough spot. Yeah,
(05:48):
not all long term spending makes sense. Just because it's
long term doesn't mean it's gonna work. And this is
where I get to You've gotta have some kind of
short term milestone of inch stones, if you will, to
say okay, is this working? And I often say there's
three aspects of leadership. The first is mobilizing a large group,
(06:09):
which is the most visible, but it's five pc of
the job. The second one is picking the right direction,
and then the third one is making sure that the
entire organization moves in that direction. And I think we
get a pretty good job at Honeywell and saying, Okay,
what are these long term seeds that were planting and
are they going to pay? And if they've stopped paying
(06:31):
while we stopped working on it, my successor is doing
the same thing. So it makes you feel pretty good
about where that's going. And that's what we're doing Invertive
Holes were executive chairman. I gotta ask you about leadership
because we have gone through the last few months it
feels like waxing and waning as a society as a culture.
(06:53):
Um so many crises that we're facing. And you know,
you served at the top of number of companies you
also served on the board of the Federal Reserve Bank
of New York. I believe so you understand the workings
of government, UH and companies in the corporate world, what
do you make of leadership of the Let's just start
(07:14):
with the first crisis, the coronavirus crisis that we've seen
from both the government level and and maybe the state
and local level. Well, I think there's gonna be a
lot to learn when we do the post mortem of
how could we have handled this differently? The if we
take a look at the economic cost of how we
(07:35):
went about it, it's absolutely huge and we need to
be a lot more thoughsible about how we handle these
things in the future. UH. Supply chains for key medical
equipment is something that's gonna need to get revisited, making
sure we've got the capacity to handle issues that comp
(07:57):
in the future, and just getting better compliance across the country.
When it comes to what exactly everybody ought to be
doing this is we just weren't that prepared for it,
and nobody was. I mean there was no country that was.
So I don't fault anybody for this, but we sure
ought to learn from this on how to make sure
(08:20):
we have better early warning systems. UH, more money going
into some of the national organizations that understand what to
do with these crises and for forecast them a little better.
When you see a smidge of something happening, how do
you respond to it? So I think it's gonna be
hopefully a really good post mortem analysis done here on
(08:41):
after action report on what do we do, what do
we do with the next time it happens, Because we've
got to assume that was especially the population of the
planet going a ten billion people over the next thirty
five years according to the u N report, and it's
more expensive travel. This is gonna happen again. We need
to be a lot better prepared, flexible and responsive. We're
(09:04):
never going to be able to predict exactly what it is,
but we can sure make ourselves a lot more flexible
in terms of response. Yeah, exactly, And I do wonder
you know, it's interesting leadership this time around. You know,
if it wasn't coming necessarily on the federal level, we
certainly saw it on the local level. We also saw Dave,
you know, C E O S I feel like, step
(09:25):
up and whether it was taking care of their workers,
you know, when they needed to and I do wonder
you know how that you know if that change is
going forward, that you know companies understand that in some
cases they may be on their own with this. Yeah,
I'd say that's probably going to be pretty typical, just
because companies are smaller than governments, so you can respond faster.
(09:50):
You don't have to convince a lot of people to
do something, you can just go ahead and do it,
So you are going to be able to respond faster.
And yeah, I think everybody should be pretty proud of
how companies responded overall here, whether it's trying to get
the key uh supply things that were needed, the how
do they protect their workers. I think companies have been
(10:11):
a pretty good job. But everybody's gonna need to up
their game going forward because it's been a huge learning
experience for companies, state governments, federal governments, UH, medical uh,
whether they're hospitals, doctors, agencies, everybody is going to have
to up their game here we'll speak of upping their game, David.
(10:33):
There seems to be consensus that companies need to do
more and need to be more methodical and more proactive
and make real decisions and maybe some hard choices around
diversity and equality. Uh, you know you're there in Atlanta
where so many things have happened historically and of late
(10:56):
around questions of civil rights and and the gross in
equal all these that exists in our system, so much
of it is economic. As a leader, how do you
think about this, how do you think about it at
your company? And what are some of the conversations you're having. Well,
I'd say, uh, I have to preface all of this
a cars with I'm a sixty seven year old, white
(11:19):
male former CEO who grew up in New Hampshire, So
it's not Uh. The last thing I ever want to
pretend to is that I'm an expert in this area
or I've got it right, I would say, though, I
do think this is another area where both a short
term and a long term approach can make a difference.
(11:42):
On the short term side, there's all the stuff that
we need to just do better than we do today,
the hiring side of it, well, and I was pretty
proud of our track record at uh Honeywell, criminal justice reform,
policing tactics, those are all things we ought to address. However,
(12:03):
there's a big long term aspect to this that I
don't think gets talked about all that much. And that's okay.
What are some of the root causes for why minority
UH populations are overrepresented in the lower socioeconomic classes? And
if we take a look at one, I'd say education
(12:24):
and the way we fund education based on property taxes largely,
which means wealthy school districts have more money, better schools,
whole ones don't. And if unless we do something to
address that, we just perpetuate these class distinctions, which yes
sex minorities, but also affects UH white families that are
(12:48):
in the same boat. Now, I mus be more discussion
about some of those What are some of the longer
term things we need to do? All right, David Cody,
gotta leave it there, Thank you so much. Come back.
We would love to talk to war David Cody, of course,
former Honeywell CEO. Check out his book Winning Now, Winning Later.
This is Bloomberg Business Week with Carol Masser and Jason
Kelly on Bloomberg Radio. So he is well known to
our listeners in the global business community. Named ce of
Honeywell in O to stay there until early former CEO
of tr W, senior exec at GE and today his
chairman Avertive Holdings. Also a senior adviser at the private
(00:23):
equity firm kk Are. He is out with a new book.
It's called Winning Now, Winning Later, How companies can succeed
in the short term while investing for the long term.
We're delighted to have with us David Cote, he joins
us on the phone from Atlanta. Dave, nice to have
you here with Jason and myself. How are you and
how is Atlanta? Oh, things are going pretty well and
(00:44):
we just tasked the short range stormage beautiful right now. Well,
I was talking to my folks down there day. They
live there in the Atlanta area, right in Buckhead, and
you know, they were saying, it's just it's kind of
a strange time because obviously the cases are arising a
little bit, but Atlanta it feels a little bit open.
I mean, I wonder as someone who understands so much
(01:06):
of this, especially from an economic and a business perspective.
You know, what's your short term and we're gonna talk
about short term and long term, but what's your short
term outlook for the local economy there? Well, I mean,
you're right, things are a little more subdued here as
they are everywhere. But when it comes to how do
we manage our way through this, it comes back to
(01:29):
me that same principle short term, long term, and that's
you have to figure out how do you accomplish two
seemingly conflicting things at the same time. And that's always
true in business, and I'd argue in life it's true
whether it's how do you accomplish short term and long
term but not mutually exclusive. The same is true with
(01:49):
how do you open the economy but keep everybody safe?
And everybody seems to human nature tends to want one thing.
You either keep everybody safe and stay at home, or
you just completely reopened. And we just need to be
thoughtful about how we how we do this. And you're
seeing different experiences everywhere because I don't think everybody is
(02:10):
always as careful as they ought to be, because they
start thinking, oh, well, everything's fine now, it's not something
that's a binary choice out of way to accomplish those Yeah,
and that's not tricky certainly, this as we've seen in
terms of how it plays out. You know, it's interesting though,
you know, this whole short term long term Jason and
I Dave have a lot of conversations, um about the
(02:32):
lack of long term planning. Certainly maybe on a government level, uh,
in terms of some of the needed programs around the country,
but even it's difficult, I think if you're a publicly
held company to think long term, um, tell us when
you were, you know, running your company's whether it was honeywell,
whether it's t r W, you know, constantly thinking about
that quarter to quarter, and I know we report on it. Um,
(02:55):
how that kind of ties your hands? Well, this is
where uh, my view is different, and it's not so
much that it ties your hands. It's that you need
to just think differently about how you run the company.
And that's why the title of the first chapter is
banishing intellectual laziness, because it's too easy to just say, well,
(03:18):
you know, markets demand it, you got to make the quarter,
so we have no money to do this stuff. But
instead if you look at start to look at your
business differently and say, all right, I have to accomplish both.
How do I make sure I start thinking about both
an accomplishing boat at the same time. So you start
planning differently, and instead of we'll say long range planning
(03:39):
or strategic planning, be an annual event. You start to
figure out, how do I make this more short term
so that I got these milestones or even better inch
stones to make sure I'm making progress. How do I
run my operations so that I generate enough money so
that I have the flexibility to provide the return and
(04:00):
my investors are looking for, but at the same time
invest in the future. If you take a look at Honeywall,
for example, we had an empty pipeline of everything in
the beginning, and we slightly outperformed the S and P
five dred the first four or five years, and I
used to get questions from investors about it. Why isn't
it better, And I'd say, well, I've got an empty pipeline.
(04:22):
I gotta put money into this stuff. And if you
take a look at the subsequent ten years, we just
blew away the S and P five hundred, so that
over sixteen years, we generated eight return two and a
half times the SNP five. Because all that long term
stuff pays off. So why don't more people do that?
David Um I think it's it. First of all, it
(04:46):
takes a lot of work, and you do have to
really think about your business differently, and it's not an
easy mindset for people to grasp having to do the
two conflicting things at the same time. Right, human nation
always wants one, you know, tell me, boss, what's the
one thing you want? It's it's too easy to gravitate
(05:07):
to that. Whether you've got ten people, thousand people, a
hundred thousand people, it's an easy refuge. Do you think
the companies that ultimately do well, like and I think about,
you know, are those that really do manage it well
and maybe give up some quarterly growth perhaps, but they
(05:27):
understand and they communicate it well to their investors about
what they're doing. Those are the companies that potentially and
ultimately survived. Like I think about a company like Ge.
You spend time at Ge. You know, they spent a
lot of money and a lot of different things, and
then you know they really got into a really rough spot. Yeah,
(05:48):
not all long term spending makes sense. Just because it's
long term doesn't mean it's gonna work. And this is
where I get to You've gotta have some kind of
short term milestone of inch stones, if you will, to
say okay, is this working? And I often say there's
three aspects of leadership. The first is mobilizing a large group,
(06:09):
which is the most visible, but it's five pc of
the job. The second one is picking the right direction,
and then the third one is making sure that the
entire organization moves in that direction. And I think we
get a pretty good job at Honeywell and saying, Okay,
what are these long term seeds that were planting and
are they going to pay? And if they've stopped paying
(06:31):
while we stopped working on it, my successor is doing
the same thing. So it makes you feel pretty good
about where that's going. And that's what we're doing Invertive
Holes were executive chairman. I gotta ask you about leadership
because we have gone through the last few months it
feels like waxing and waning as a society as a culture.
(06:53):
Um so many crises that we're facing. And you know,
you served at the top of number of companies you
also served on the board of the Federal Reserve Bank
of New York. I believe so you understand the workings
of government, UH and companies in the corporate world, what
do you make of leadership of the Let's just start
(07:14):
with the first crisis, the coronavirus crisis that we've seen
from both the government level and and maybe the state
and local level. Well, I think there's gonna be a
lot to learn when we do the post mortem of
how could we have handled this differently? The if we
take a look at the economic cost of how we
(07:35):
went about it, it's absolutely huge and we need to
be a lot more thoughsible about how we handle these
things in the future. UH. Supply chains for key medical
equipment is something that's gonna need to get revisited, making
sure we've got the capacity to handle issues that comp
(07:57):
in the future, and just getting better compliance across the country.
When it comes to what exactly everybody ought to be
doing this is we just weren't that prepared for it,
and nobody was. I mean there was no country that was.
So I don't fault anybody for this, but we sure
ought to learn from this on how to make sure
(08:20):
we have better early warning systems. UH, more money going
into some of the national organizations that understand what to
do with these crises and for forecast them a little better.
When you see a smidge of something happening, how do
you respond to it? So I think it's gonna be
hopefully a really good post mortem analysis done here on
(08:41):
after action report on what do we do, what do
we do with the next time it happens, Because we've
got to assume that was especially the population of the
planet going a ten billion people over the next thirty
five years according to the u N report, and it's
more expensive travel. This is gonna happen again. We need
to be a lot better prepared, flexible and responsive. We're
(09:04):
never going to be able to predict exactly what it is,
but we can sure make ourselves a lot more flexible
in terms of response. Yeah, exactly, And I do wonder
you know, it's interesting leadership this time around. You know,
if it wasn't coming necessarily on the federal level, we
certainly saw it on the local level. We also saw Dave,
you know, C E O S I feel like, step
(09:25):
up and whether it was taking care of their workers,
you know, when they needed to and I do wonder
you know how that you know if that change is
going forward, that you know companies understand that in some
cases they may be on their own with this. Yeah,
I'd say that's probably going to be pretty typical, just
because companies are smaller than governments, so you can respond faster.
(09:50):
You don't have to convince a lot of people to
do something, you can just go ahead and do it,
So you are going to be able to respond faster.
And yeah, I think everybody should be pretty proud of
how companies responded overall here, whether it's trying to get
the key uh supply things that were needed, the how
do they protect their workers. I think companies have been
(10:11):
a pretty good job. But everybody's gonna need to up
their game going forward because it's been a huge learning
experience for companies, state governments, federal governments, UH, medical uh,
whether they're hospitals, doctors, agencies, everybody is going to have
to up their game here we'll speak of upping their game, David.
(10:33):
There seems to be consensus that companies need to do
more and need to be more methodical and more proactive
and make real decisions and maybe some hard choices around
diversity and equality. Uh, you know you're there in Atlanta
where so many things have happened historically and of late
(10:56):
around questions of civil rights and and the gross in
equal all these that exists in our system, so much
of it is economic. As a leader, how do you
think about this, how do you think about it at
your company? And what are some of the conversations you're having. Well,
I'd say, uh, I have to preface all of this
a cars with I'm a sixty seven year old, white
(11:19):
male former CEO who grew up in New Hampshire, So
it's not Uh. The last thing I ever want to
pretend to is that I'm an expert in this area
or I've got it right, I would say, though, I
do think this is another area where both a short
term and a long term approach can make a difference.
(11:42):
On the short term side, there's all the stuff that
we need to just do better than we do today,
the hiring side of it, well, and I was pretty
proud of our track record at uh Honeywell, criminal justice reform,
policing tactics, those are all things we ought to address. However,
(12:03):
there's a big long term aspect to this that I
don't think gets talked about all that much. And that's okay.
What are some of the root causes for why minority
UH populations are overrepresented in the lower socioeconomic classes? And
if we take a look at one, I'd say education
(12:24):
and the way we fund education based on property taxes largely,
which means wealthy school districts have more money, better schools,
whole ones don't. And if unless we do something to
address that, we just perpetuate these class distinctions, which yes
sex minorities, but also affects UH white families that are
(12:48):
in the same boat. Now, I mus be more discussion
about some of those What are some of the longer
term things we need to do? All right, David Cody,
gotta leave it there, Thank you so much. Come back.
We would love to talk to war David Cody, of course,
former Honeywell CEO. Check out his book Winning Now, Winning Later.
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.